Good day, ladies and gentlemen, and thank you for standing by. Welcome to Cenovus Energy's Second Quarter Results. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Please be advised that this conference call may not be recorded or rebroadcast without the express consent of Cenovus Energy. I would now like to turn the conference call over to Mr. Patrick Read, Vice President, Investor Relations. Please go ahead, Mr. Read.

Thank you, operator. Good morning, everyone, and welcome to Cenovus' 2024 second quarter results conference call. On the call this morning, our CEO, Jon McKenzie, will take you through our results. Then we'll open the line for Jon and other members of the Cenovus management team to take your questions. Before getting started, I'll refer you to our advisories located at the end of today's news release. These describe the forward-looking information, non-GAAP measures and oil and gas terms referred to today. They also outline the risk factors and assumptions relevant to this discussion. Additional information is available in Cenovus' annual MD&A and our most recent AIF and Form 40-F. And as a reminder, all figures we referenced on the call today will be in Canadian dollars unless otherwise indicated. You can view our results at cenovus.com. For the question-and-answer portion of the call, please keep to one question with a maximum of one follow-up. You are welcome to rejoin the queue for any other follow-up questions you may have. We also ask that you hold off on any detailed modeling questions. You can follow up on those directly with our Investor Relations team after the call. I will now turn the call over to Jon. Jon, please go ahead.

Great and thank you, Patrick. Good morning, everybody. I'm going to start this call by highlighting some safety achievements in our second quarter. We completed the largest turnaround in the history of the Lloydminster Upgrader. The turnaround was completed with approximately 1 million man hours and a peak mobilized workforce of about 3,200 contractors. This was no small feat. And what I'm most impressed about was our safety performance. Our planned 49-day turnaround was done with no incidents, and I want to acknowledge all of our staff and contractors for their incredible commitment to the safety and success of this turnaround. We've also seen a number of wildfires recently across Northern Alberta and, in some cases, in close proximity to our oil sand sites. We are prioritizing the safety of people working on the site and are closely monitoring the evolving situations. While we had limited our staff at the Sunrise asset for a short period of time, with the recent rainfall and firefighting efforts, we're in a better place. We have now returned all our staff to the Sunrise site and all of our assets continue to operate at normal rates. So today marks a significant milestone for Cenovus and our shareholders. In the month of July, we achieved our net debt target of $4 billion, and we are now moving to return 100% of excess free funds flow to shareholders as per our framework. I'm very proud that we'll be delivering a substantial increase in shareholder returns going forward. And while this company has been on a deleveraging journey for a number of years, achieving the target is a direct result of our financial discipline and resilience. It really sets the stage for continued growth in our shareholder returns over time. Our second quarter results are underpinned by the strength of our operating performance and continued focus on controlling costs and our ability to deliver on our plans and drive value for shareholders. Our upstream business continued to deliver very strong operating results with production of over 800,000 BOE per day, in line with the prior quarter. Production for the first half of 2024 continues to trend at the higher end of our guidance range. In particular, the operating performance at our oil sands assets continued to be exceptional in the second quarter. This was achieved while completing some initial work scope on the Christina Lake turnaround and taking a short outage at Sunrise in May for well pad tie-ins. In the second quarter, oil sands produced around 610,000 barrels a day and generated an operating margin of approximately $2.7 billion, an increase of over $500 million from the prior quarter. Looking to the third quarter, we're ready to execute the turnover of Christina Lake beginning in September. The turnaround is anticipated to reduce third quarter production by about 45,000 barrels a day. We also remain on track with our execution of our oil sands growth projects. This includes the Narrows Lake tie-back to Christina Lake, which continues to track on schedule. The pipeline is now 88% constructed with the first segment hydro-tested and mechanical completion expected to be finished by the end of the year. We've also completed the drilling of the first two well pads at the Narrows Lake resource area and we're on schedule to deliver first oil in mid-2025. In addition, the Foster Creek Optimization Project remains on schedule for our targeted 2026 start-up, with most modules or major pieces of equipment in place and piping installation well underway. At Sunrise, the first of four new well packages is nearly complete. Within the first well package, we've ramped up one well pad, and we're expecting to bring on two new well pads later this year in the fourth and early 2025. The remaining three well packages continue to progress as per schedule. In our conventional and gas business, production volumes were around 123,000 BOE per day, an increase of 2,400 BOE per day relative to the prior quarter. Our conventional business also reduced per barrel operating costs, primarily as a result of focused efforts to improve the cost efficiency of the business. In our offshore business segment, production was approximately 66,000 BOE per day, an increase of 1,300 BOE per day compared with the prior quarter. In Asia, the operating margin was $264 million, and we continue to see the benefit from strong regional gas demand. In the Atlantic region, production from the non-operated Terra Nova asset increased by about 1,200 barrels per day relative to the prior quarter, and the operator continues to work towards ramping up towards full rates. Now the SeaRose FPSO is currently in dry dock for its regulatory maintenance. This work is progressing well, and we are fast approaching project completion. We expect the SeaRose to return to the field late in the third quarter of this year and resume production in the fourth quarter. We also achieved a significant milestone for the West White Rose project in the second quarter, with the concrete gravity structure reaching its final height and structural completion of the topsides. The West White Rose project is now 80% complete and remains on track for first oil in 2026. With our upstream businesses continuing to produce at the higher end of our guidance range, we've updated our full year upstream production guidance. We've increased the lower end of the range by 15,000 BOE per day for an overall upstream guidance range of 785,000 to 810,000 BOE per day. I'm very pleased with the performance we've seen year-to-date and remain confident in executing the work that remains ahead of us for 2024. We expect to exit this year well above 800,000 BOE per day following the Christina Lake turnaround. In addition to increasing our production guidance for the year, we've also reduced our operating cost guidance in several of our business segments, based on year-to-date performance and our continued focus on cost leadership across this company. The guidance for capital spend of $4.5 billion to $5 billion remains unchanged, with planned spending for our growth and optimization projects ramping up slightly in the second half of the year. Now moving to our downstream segment. In the second quarter, Canadian refining results were impacted by the planned turnaround at the Lloydminster Upgrader. As I mentioned earlier, safety and operational execution of the turnaround was outstanding amidst some of the weather-related delays that impacted productivity and schedule by about a week and elevated the overall cost. The Upgrader since completed its ramp-up to normal rates and is operating steadily. In addition to regulatory and maintenance work undertaken during the turnaround, we also implemented seven large projects at around $50 million of capital spending that enable us to further enhance reliability at the asset, including advancing automation of our systems. In the U.S. refining segment, combined crude utilization across the assets was about 93% in the second quarter. We have made some progress on reliability and there is more work to do. We are continuing to focus on the reliability, cost structure, and profitability of the downstream business going forward. In our U.S. refining businesses, the narrower light-heavy differential combined with some planned and unplanned outages impacted operating margin in the quarter. The continued focus on driving value in our downstream business has led the company to optimize planned turnaround activity in the second half of the year. During the Lima turnaround this fall, we'll be leveraging the integration of Lima and Toledo to minimize crude unit downtime. Additionally, some planned maintenance has been deferred to 2025. As a result of the performance in the U.S. Refining business year-to-date and the optimization of the turnaround activity going forward, we've updated our full year downstream throughput guidance to 640,000 to 670,000 barrels a day. This is an increase of about 10,000 barrels a day to the lower end of the range. Now to our corporate and financial performance. Cenovus generated $2.9 billion of operating margin in the second quarter, approximately $2.4 billion of adjusted funds flow and $1.2 billion of free funds flow, which reflects higher benchmark crude oil prices and a narrowing light-heavy differential. Through our base dividend, share buyback program, and variable dividend, we paid over $1 billion in shareholder returns. At the end of the second quarter, net debt was approximately $4.26 billion, and as I mentioned, in the month of July, we achieved our $4 billion net debt target. This is a significant milestone, and overall, this has been another strong quarter for the company. We have a clear view of the work in front of us, and we're looking forward to delivering on the growth projects we've set out to accomplish and increase production guidance for the 2024 that we shared with you today. Now with that, we're happy to take your questions.

Thank you. Your first question comes from Neil Mehta from Goldman Sachs. Please go ahead.

Yes, thank you so much, and congratulations on achieving the net debt target here in July, Jon and team. The first question is actually around West White Rose. It's an unbelievably important project as we think about the free cash flow progression. So can you just talk about what are the gating items here and as we move towards impact in 2025?

Sure. So maybe I'll start and then I'll let Keith chime in on this. You're absolutely right. Hitting the $4 billion net debt target has been something this organization has been really focused on for a number of years, and it's a great day for this company and a great day for our shareholders. I think as it relates to West White Rose, we mentioned that we're about 80% complete. We've really largely completed the work on the gravity-based structure in the topsides, and we now move into the marine-based part of the project. But maybe, Keith, you can talk a little bit more detail about where we are with that project.

Thank you, Neil. To think about the project, it consists of four main components. One is the SeaRose life extension project, which is currently in dry dock and nearing the end of its maintenance work. We expect it to return to production at the end of the third quarter, starting again in the fourth quarter. This will help extend the asset's life into the late 2030s. Regarding the West White Rose project, we visited the gravity base structure last week, and I'm pleased to report that it is progressing very well, approaching mechanical completion. They are preparing to flood the graving dock, allowing us to tow the gravity base structure out and connect it with the topsides. In Ingleside, the topsides are also nearing mechanical completion and are already in commissioning, with plans to tow out in the second quarter of 2025. A lot of marine work is underway, which will connect the West White Rose project to the SeaRose, all scheduled for completion by summer 2025. We anticipate beginning drilling at the end of 2025 and starting production with a ramp-up in 2026 and 2027. Overall, things are moving along well. We still have some work ahead of us, budgeting about $700 million to $800 million this year and next to complete the project. As you noted, we will then transition into the cash flow stage as we begin production in 2026.

Yes, that's the good stuff. Yes. All right. So, thank you. And then the follow-up is just on Canadian refining performance in the quarter. U.S. manufacturing inflected operationally, but it was a little bit of a tougher quarter in Canadian refinery. Can you remind us the environment up there? And how much of that was one-time in nature? And how do you see that part of the business progressing from here?

Yes. So in Canadian manufacturing, we had the Upgrader down the first week in May for its 49-day turnaround. That extended into the first week of July. So the major asset in Canadian refining wasn't operating. It was down for turnaround during the quarter. Also, remember that we expense all of our turnaround costs. And I think we expensed about $211 million, $220 million during the quarter. So all of that is one-time. We have a turnaround schedule with that Upgrader once every four years. This was, as I mentioned, the largest that we had done. So it's more of a reflection of the turnaround than it is the operating performance of the Canadian Downstream.

Thank you. Your next question comes from Greg Pardy from RBC. Please go ahead.

Yes, thanks. Good morning. Thank you, Jon, for the detailed overview as always. I have a couple of questions. The first one is more at the macro level. As a significant shipper on Trans Mountain, I would like to hear your perspective on its performance and your thoughts on marketing. Additionally, how should we view the trajectory of WCS spreads in the coming months?

I'll tell you, Greg, I could answer that question, but Geoff Murray lives and breathes that every day. So maybe I'll just turn it over to Geoff to answer.

Thanks, Greg. I mean, I think the important thing around Trans Mountain is we've seen the facility come on. It's up, it's operating and it's operating well. We've then provided relatively exciting access to the globe and that's had its impact back into Alberta. And we've seen the heavy differential in Alberta tighten if you compare Q1 to Q2, that's in the order of US$6 better. We can't obviously attribute all of that to any one thing because markets are a little more exciting and interesting than that. However, I would say, we've seen Trans Mountain have the impact that when we took the contract, we were looking for it to deliver. As of late, perhaps in the months after Q2 has ended, we've seen the heavy differential in Alberta move out a little bit wider by $1 or $2. Many questions have come our way regarding what's going on with Trans Mountain and why that is happening. I would direct you to look at the U.S. Gulf Coast, which really is where prices are originally set. We've seen that to be a little bit wider by $1 or $2, which we've attributed to refinery outages in the area as well as in the Mid-Continent. Over the next little while, I would say we expect Trans Mountain to continue to have its intended impact in Alberta and differentials to be as narrow as it's been in a long time.

Thank you. Your next question comes from Dennis Fong from CIBC World Markets. Please go ahead.

Hi, good morning, and thanks for taking my questions. The first one, and I guess also, congratulations on achieving the $4 billion net debt floor. My first question, there have been some news reports on some operational hiccups with some of your U.S. refineries, namely Lima and Toledo. And I also appreciate the comments that you made in the prepared remarks around progress being made around improving profitability of the operations. My question here is, can you comment on the current operations of all of the U.S. refineries as well as discuss some of the projects that are ongoing? And when you think some of these best practices improving margins and so forth can potentially bear fruit.

Hi, Dennis. It's Keith. Thanks for the question. Maybe I'll get to your specific question in a minute, but I just want to reflect on a little bit of the progress that's being made. In 2023, there was a lot of work on restarting the Superior refinery and the Toledo refinery and driving improvement across the fleet to improve crude utilizations. We're starting to see some of that bear fruit as we head into 2024 with higher utilizations. But by no means are we done. There's still lots of work we have available to us to improve reliability, profitability and drive down our costs. Interestingly, sometimes it takes a turnaround to be able to drive those reliability improvements. So we do have the Lima turnaround coming up here in the fall, which will allow us to advance some additional reliability improvement as we progress down this journey. Specifically, today on Toledo and Lima, both went through a couple of process upsets which brought the refineries down in a controlled manner. Some work is progressing as we speak on maintenance. That should be wrapping up in the next day or two, and we'll be progressing with restarts of both those refineries. And then maybe to the back end of your question, just specifically, we are seeing some of those reliability initiatives bear fruit. Jon just talked about the Lloyd Upgrader turnaround. That's another opportunity for us to go in there and reduce the bad actors that we had at the Upgrader to help drive that longer-term reliability improvement that we expect. So there's lots of work underway, but by no means are we declaring victory. There's still room to improve and room to go on all aspects, reliability, profitability, and our operating costs.

Great. Thanks. I appreciate that color there, Keith. Shifting gears for my second question. On your thermal heavy oil assets have frankly not only remained resilient but also shown growth over the past few years. Can you talk towards the work that you've been focused on there to help bolster production without any incremental steam generation capacity? And also, what do you view as the inventory or the ability to maintain that either flat or even higher over the next few years? Thanks.

Yes. Thanks, Dennis. And yes, we're really happy with the progress we're making, obviously, in our oil sands business and the resiliency of it and the continuous improvement demonstrated across that business. Some things I would point to, obviously, after taking over the Lloyd thermal assets and the Sunrise assets, we are able to deploy some of the Cenovus technology into those assets and immediately improve production. We do execute resource delineation and happy to report that we're finding additional resource to maintain those levels of production out into the future. So lots of activity going on, on assessing where it is and making sure that we can continue to produce. I think the other thing is obviously our NCG, or non-compressible gas, into the reservoir and the timing of that. It's really, for us, a steam-oil ratio game. So the more we can drive down our steam-oil ratio, the more production we can achieve. And you're seeing some of those improvements across the various assets. And then maybe I'd point to Sunrise. When we took over Sunrise, it hadn't had a pad drilled and tied in since the early 2020s. We've since added three pads. They're now in the process of either operating or ramping up. Obviously, we're deploying some of the new technologies in those pads. But also, we're starting to utilize the spare steam capacity that we had at that asset. So we're pretty excited about the growth profile that we have at Sunrise over the coming couple of years as we continue to add pads and grow. And then maybe I'll just touch on some of the other growth that we have in the oil sands portfolio. On Narrows, we're approaching mechanical completion at the end of this year, and we will start steaming, the pads are drilled and in place. So we'll be able to progress that steaming in the first half of 2025 to see production coming out of Narrows in 2026 and remind people that that’s going to be about a 20,000 to 25,000 barrel-a-day increase. And then on Foster Creek, we have an optimization project underway, which is essentially a steam addition project. That project is progressing well, on track for completion at the back end of 2025, early 2026, which will then allow us to steam new pads and bring on an additional 30,000 barrels a day at Foster. So lots of exciting things happening across the oil sands, and it just demonstrates the continuous improvement that's happening every day in that business to make it better.

Great. Really appreciate all that context there, Keith. I can turn it back now.

Your next question comes from Menno Hulshof from TD Cowen. Please go ahead.

Thanks and good morning everyone. I'll start with a question on the positive OpEx guidance revisions for the oil sands and Asia Pac in particular. My understanding is that some of the oil sands improvement is probably lower fuel cost and maybe even slightly higher volumes. But beyond that, can you just elaborate on what's driving those improvements?

Yes. I think, Dennis, you hit on the two really big things in that. We're working on both the numerator and the denominator of that ratio. So Keith had kind of outlined that we are seeing better production right across the portfolio than we would have had in our internal budgets, and a lot of that is related to the activities that we're taking on with the redevs and redrills, and seeing the productivity from non-condensable gas and the like. So first and foremost, I guess, it's a production story. Secondly, we are seeing improvements in our cost per energy and our use of energy. Those continue to be areas of focus for us. So managing that cost and obviously a lot of that is commodity price-driven, but also managing energy use is something that we're constantly looking at. Things like chemicals, people and those kind of things that make up operating costs are other areas that we are constantly managing. But it gets back to what Keith talked about, is just having that mindset of continuous improvement and being dogged on, going after these things on a day-to-day basis. So that's what we're seeing really right across the portfolio and seeing some success not just in the oil sands, but also in the deep basin and our conventional assets and in refining as well.

Thanks for that Jon. And then my second question is on the upcoming Lima turnaround. You mentioned that it's been optimized and you plan to leverage the expanded refinery network. Can you maybe just elaborate on what's getting done there? And then the follow-on to that is somewhat related. What was the rationale for pushing out some of the downstream turnaround work to 2025? Thank you.

Hi Menno, it's Keith. Since we began operating Toledo, we have been continuously looking for ways to optimize the connection between Lima and Toledo. The team developed a unique method to keep Lima running during the turnaround by utilizing some of Toledo's facilities to process intermediate barrels that would have either gone into storage or forced us to lower the rate at Lima. This optimization is possible because we now own and manage both refineries and there are connections between them, enabling us to improve the turnaround. Regarding the delayed turnaround, we conducted maintenance and inspections that revealed we could extend the timeline for the turnaround we had originally planned at one of our joint ventures. As a result, we anticipate that will now take place in 2025. Overall, this is the optimization occurring in the U.S. downstream, which is why we've been able to raise the lower end of our throughput guidance for the year.

Appreciate the thoughts, Keith. I'll turn it back.

Your next question comes from John Royall from JPMorgan. Please go ahead.

Hi, good morning. Thanks for taking my question. So great to hear that you hit the 100% here with returns of capital. Can you just talk a little bit about the mechanical approach to the buyback from here? Will you forecast the full year cash flows and try to get a more ratable approach and kind of correct as you? Or should we expect it to be a little bit more variable quarter-to-quarter depending on the actual cash flow in that quarter?

Good morning, John. It's Kam. A couple of things I would highlight there. I think number one, we've obviously been on this net debt reduction journey for quite a while, and we're there now. So I think one of the first things that's really important is that we want to make sure we stay as close to that $4 billion as possible going forward, and looking at how we return cash to shareholders. So that's the first thing you should think about. Secondly, I would say, clearly, now that the debt reduction is behind us, there will be no more cash directed towards further deleveraging, and so all of our cash will go towards returning cash back to shareholders, most likely in the form of buybacks. I think given where the share price is today, and what we see as intrinsic value, that is what people should expect, that 100% of that excess free cash flow will probably be returned in the form of share repurchases. In terms of the mechanics month by month, quarter by quarter, I think the thing to watch is we will be making sure that we are allocating as close to 100% as possible. Obviously, movements like working capital will move our debt around, but that's something we'll be watching month by month. But I think the goal is to stay as close to that 100% as possible while trying to hold the debt at that $4 billion level.

Great. Thanks, Kam. And then my follow-up is a macro-type question that I don't think has been asked yet. Can you talk about the supply-demand fundamentals in refining in the Mid-Con right now? We've had what looked like a tighter market than some other regions in the U.S. that certainly also appears to have been impacted by the unplanned downtime at Joliette? What are your expectations for the Mid-Con market in the second half, particularly with Joliette coming back now?

Thanks, John. It's a great question. Maybe start at the top and work more regionally from there. From a more macro perspective, what we've seen is very similar circumstances as recent years. So that percolates through into both gas crack and diesel cracks. So it isn't any meaningful change on a macro perspective. As of late, regionally, we've seen a regular strong summer gasoline season. But what we have seen is some volatility, and it's all been supply-driven, as you pointed out. And that has resulted in some very big moves in price. For the region, which has become relatively balanced to occasionally a little bit long, we're going to see these periods of volatility as supply moves around, particularly given that demand is just persisting at where it's been. The story on a minute-by-minute, week-by-week basis is going to be all supply-driven. Looking out over the next months, I mean you can't predict what unplanned outages are going to be. They will come as they come. However, the thing that we do know is that we head into fall turnaround season, and that's going to match through the period of time where we switch from gasoline season to diesel season and distillate. We anticipate that this turnaround will be of a similar type of levels. If there are any supply-demand imbalances, it will tighten it up and we could probably see a little bit more of a narrow tighter supply-demand balance through that period of time.

Thank you.

Great, thanks, John.

Your next question comes from Manav Gupta from UBS. Please go ahead.

Hi, everyone. I have a question following up on John Royall. It's clear that the surplus cash will be returned to shareholders with no funds allocated for debt reduction. I'm curious about your preference between buybacks and variable dividends. Should we expect a combination of both, or do you lean strongly towards one? I definitely favor buybacks over variable dividends, but I'd appreciate your thoughts on this.

Yes, good morning, Manav. I kind of alluded to this when I answered John's question. But I think, number one, the principles around how we return cash, none of that has changed. So you're going to continue to see us ratably, predictably grow the base dividend over time. We've typically done that kind of in that April, May timeframe, obviously driven by the Board discretion. But as the business grows, you're going to continue to see us target double-digit growth in the base dividend over time. That's the first thing. I think the second is, as I said, given where the share price is today and what we see as value and intrinsic value and the return on acquiring our shares back, we see that as an attractive value proposition. So the variable dividend we paid in May was more a function of us under allocating our shareholder returns in the first quarter. That's not a reflection, I would say, of the value that we see in the buyback. So going forward, to the extent that you continue to see an attractive share price, which we do, you should expect most, if not all, of our excess returns will be done in the form of share repurchases.

Perfect. Just a quick follow-up. You raised the upstream volume guidance for the year. Could you talk about the thought process behind that decision at this time?

Sure. Manav, what we typically do through the years, we watch our performance and tighten up the range in our guidance as we get into midyear. Today's guidance range reflects some really strong performance that we've had through the first six months of the year, and our expectations for the back half of the year. So we're trying to guide the market to the midpoint of that range that we've put out publicly today. So it really is, I think, a reflection of what we've been able to accomplish and how we see the back half of the year unfolding, particularly, I guess, in Q4, where coming through the Christina turnaround, we expect to have very strong Q4 performance.

Thank you so much.

Great. Thanks, Manav.

Your question comes from Patrick O'Rourke from ATB Markets. Please go ahead.

Hi. Good morning, guys and congratulations on hitting the net debt target there. Just first question here. So you sort of unpacked what's going operationally in the thermal unit. Some of our recent monthly well scrubs have turned up some pretty intriguing multilateral cold flow wells that you guys have drilled. Maybe if you could walk us through sort of the evolution of your view on the play and the potential scope that that could have?

Hi, Patrick, it's Keith. Yes, thanks for the question. Probably the one growth project that I didn't touch on before, but we're really excited about what we're seeing. We have a very significant land mass basis. We have midstream infrastructure there. Obviously, it all connects right into our Upgrader in Lloyd refinery. So a very integrated value chain. We were pretty active drillers in 2023 and saw some good results. The way we set up our program, we will do our winter program around all of the assets and then we'll deploy the rigs over into conventional heavy oil. So you'll see us, our drilling activity in that basin pick up here in the back half of the year. You'll start seeing the production growth through the back half coming out of that basin. We're pretty excited because we see lots of opportunity to continue to grow. As per our Investor Day pack, easily an additional 20,000 barrels a day of growth over the next three to five years. So that's what we're focused on. We're seeing pretty good results. We're working to contain and get our costs down even further, and the netbacks at strip price are really attractive.

Okay. Great. And then maybe moving back over to the macro side. You guys touched on the weakness in heavy high TAN oil in the Gulf, and that's sort of driven some of the performance in the WCS differential. But as a physical shipper on TMX, what's a little bit less sort of clear or transparent to us is sort of how these heavy high TAN barrels are what the opportunity set is in PADD V, and what the pricing is looking like there and the marketing opportunity. Can you maybe speak to that a little bit and the potential for some value creation there?

Great. Thank you, Patrick. It's Geoff. It's a really great question. As that market continues to develop, it is quite a puzzle to be solved over time. We have found as the facility just started up, a relatively interesting split between volume with the bulk of the volume just slightly greater than half heading towards Asia rather than PADD V. We've also seen demand move back and forth between heavy high TAN and light. I would say that early days here. PADD V is testing it out and trying the high TAN barrels, and that may be really high TAN or that may be lower TAN over time. They do, obviously, continue to like light where they can get it. So it's been an interesting start. The biggest thing, as I started with, is that this has driven the differential in Alberta in the order of dollars. I think we continue to see that persist. There will be movement back and forth between Asia and PADD V, and that actually ends up in the rebalancing of global trade flows and the pricing difference between AFRAs and VLCCs has really played into this. It's an early day's thing that started quite quickly where we have seen reverse lightering off the West Coast to find the most effective, efficient move through to Asia. I would kind of point in that direction as you look to the overall balances.

Okay, thank you.

Yes, thanks, Patrick.

Your next question comes from Harry Mateer from Barclays. Please go ahead.

Hi, thanks. Good morning. You've talked a lot about the shareholder return angle now you're at the $4 million net debt target. But I'm curious whether reaching that long-time goal changes anything or opens up anything for you on the strategic front in terms of priorities? Whether that's upstream M&A or potential JV simplifications like you've talked about in the past?

Yes. I think, Harry, nothing really changes on the strategic front. We've had a business model that hasn't changed over time. We're definitely looking forward to flipping over to 100% shareholder returns. But what we're really focused on right now is the growth projects that we've got underway, and we need to deliver on those. That spending started in 2023 and is largely done by the end of 2025. So that's something where we're focused on. Other areas we're obviously focused on is continuing to build out our refining business and getting that operating the way we want it to operate, and managing our cost control. So as we kind of think about what's in front of us, it's just going to be good to run this business model at 100% shareholder returns going forward. And that's really what we're focused on today is just sticking to executing on what's in front of us versus trying to take on new challenges or modifying the strategy in some way going forward.

Okay, thanks. And then just a follow-up on the balance sheet. So you've indicated in the past that you're comfortable kind of running cash around the CAD3 billion level, gross debt around CAD7 billion, for the $4 billion net debt. So the expectation we should have is that as maturities come up in the next few years, you'll just plan to refinance those in regular course and maintain that cash balance around the current level.

Harry, it's Kam. I would say a couple of things. I think number one, right now, I'd say we're in a very good position financially where we don't really have a lot of maturities coming at us here in the next little while. Our next maturity is a really small one in that $150 million range in 2025. Then we're free and clear through to 2027. So I think in the short term, you'll probably see us just continue to put that cash on the balance sheet and that mix that you referenced around cash and gross debt, I don't envision you're going to see any material changes. Obviously, as market conditions change and move, we'll always look at opportunities if they're there for refinancing. But right now, I'd say we're in a really comfortable position considering the maturity profile we've got and the coupon and the tenor that we've got in our debt is quite optimal given the environment we're in.

Okay, thank you.

Good. Thanks, Harry.

Your next question comes from Alex Bill from allNewfoundlandLabrador. Please go ahead.

Hi, sorry. I should be grouped with media questions. Good morning. On the SeaRose turnaround, you talked about return of production in Q4, which is the change from prior quarters when it was expected in Q3. Is that just the nature of dry docking today? Or are there specific delays there that you can speak to?

Hi, Alex. Yes, the dry dock is going well. I would say, the start to the steel replacement on the hull was a little delayed but now is progressing extremely well. We're anticipating having the vessel sail out of the dry dock towards the end of August, early September and be back on station. Then the rehook up and restart of production is expected early in the fourth quarter. So a little bit delayed, a couple of weeks to four weeks, but all in all, the work is progressing well now and as expected. So we'll be back on station and restart production in the fourth quarter.

Okay, thanks for that. And as you're probably aware, Upstream reported a few weeks ago about potential sales of some of your South Asian assets and just wondered if you could potentially speak to that. And if not, taking into note, you're sticking to your net line earlier, how you might look at other acquisition or sale opportunities as you sort of balanced your debt and where you want it now?

Yes, Alex, it's Jon. We really like our portfolio today, and we're not looking to change it. To be honest, I haven’t seen that report. But we are confident in our portfolio. Currently, we are focused on our netting and continuing to drive efficiencies across our business while delivering on our growth projects. I can't comment on the specific report you mentioned. I haven’t seen it, but from our perspective, there is nothing of concern in it.

Okay, thank you.

Thanks, Alex.

Your next question comes from Emma Graney from The Globe and Mail. Please go ahead.

Yes, good day. Thanks for taking my question. I want to ask you in your press release where you talked about the ESG report that was going to be coming out end of June, obviously, a lot of uncertainty because of Bill C-59. When can we expect to kind of see that report? And what are you hearing from the competition bureau there on how those bills are going to pan out?

Hi, Emma. It's Jeff Lawson here. First of all, on the competition bureau, I guess we'd like to commend the commissioner of the Competition Bureau for acting quickly and coming out with a consultation process. I don't know if you're aware of that, but a lot of consternation around uncertainty in the wording, in the legislation, which is why people have pulled back on disclosure. The Competition Bureau has launched a consultation where everyone is now proactively commenting to try to clean up the guidance around what will be presented and what won't. That consultation period is through till September, and we should have all of our comments in and expect some further clarity as we go through the fall. In terms of what will be done, I guess, we like to make a few points. Everything we were doing prior to the enactment of the legislation, we continue to do. So any environmental work, emissions reduction, land reclamation, on the governance side, indigenous reconciliation activities, just being good stewards of capital in our communities, we're absolutely continuing to do. On the social governance side, we have our report almost ready to go. We should get it out within the next month, paired back on the environmental side until the legislation is cleaned up a bit on that front. Everything we can do to figure out what an internationally recognized standard is, is something we'll continue to do alongside the Competition Bureau and the producers here. When we have further clarity, we'll come up with something, and we just don't have that clarity yet.

Okay, great. I mean, in the scale of things, how annoying is that whole C-59 thing?

It's been a significant distraction and has required a lot of effort from many people who are simply trying to do the right thing. It has indeed distracted us and consumed a tremendous amount of time and resources. What is frustrating is that people in this industry, and particularly within our company, want to highlight all the positive work we're doing. We want to inform others about our efforts, and that is our long-term goal and strategy. We will approach it in that manner. While unexpected challenges arise, the best course is to work through them without getting overly frustrated. We should collaborate with the government and the Bureau, and we believe we will emerge from this situation in a better position.

Thanks very much.

Great. Thanks, Emma.

Your next question comes from Chris Varcoe from Calgary Herald. Please go ahead.

Hi. Hi, Jon. With oil sands producers, including Cenovus planning more production increases here in the next couple of years, how quickly do you see Western Canada getting back into a situation where the pipelines are running full again and potentially impacting differentials?

Yes, we receive that question frequently, Chris, and there are various opinions on the matter. Some of the pipeline operators believe it will take a short amount of time, while producers expect a longer timeline. We have our own perspective. Historically, we have filled available pipeline capacity in this basin, and we also have several alternative methods to transport more barrels out of this province to maintain the differential. I would like to point out that for major oil producers in Western Canada, we have mostly addressed the differential, as we now have either upgraded capacity or export capacity for most of the volumes we send out. Whether we fill these pipelines in a couple of years, as Enbridge has suggested, or if it takes five or six years, the impact on our business models is less significant than it was five or ten years ago. While I don’t have a specific timeline for you, Chris, I can say that at some point, we will fill these lines, and the effect on our business model, along with our other options for egress, is currently manageable.

Just following up on TMX. You talked about the fact that it's going to have an impact upon the industry and upon Alberta. I guess, what are you seeing? It's not just immediate impacts but the longer term impacts. And ultimately, do you think it's going to be worthwhile or worth it for Canadian taxpayers, who obviously put a lot of money into a project which has run well over budget?

I mean, absolutely, Chris. The construction and commissioning and running of the TMX pipeline is a great day for Canadians. Admittedly, it was over budget, and admittedly, it was probably more expensive than it needed to be. That being said, this will generate a huge amount of revenue for Canadians in the form of royalties and tax dollars that go towards the public purse, in my view, increasing the standard of living for all Canadians. So short, medium, and long-term, this is a great asset for Canada and it's an important piece of infrastructure for the country.

Finally, I just wanted to follow up on the question that Emma asked and that's regarding Bill C-58. There were obviously a lot of concerns expressed by both pathways and individual producers but realistically, how great was the threat that you felt that the bill was imposing on the industry that you needed to pull back on sharing the information you felt you needed to share?

So I think beyond the intended consequence of Bill C-59 is that it's stifled the discussion. In Canada, we need to have robust discussion on energy because it's such an important part of our economic fabric of this country. Not having certainty over things like what our international standards are and what we are being held to has kind of stifled that debate. Now, as Jeff mentioned, we see a process in place to try and get some clarity around that. My hope is that will happen sooner rather than later, which will allow us to again start talking about the good things this industry is doing with regard to carbon dioxide emissions and environmental performance.

Thank you.

Thanks, Chris.

Your next question comes from Robert Tuttle from Bloomberg News. Please go ahead.

Yes, hi. You've kind of answered my question in the last just a moment ago, but I wanted to just follow up on the TMX question. When do you see that spot capacity filled up on that? Is it going to take until all the pipelines are filled? Or do you think it's going to be competitive before that time?

Yes, Robert, I'll let Geoff answer the question. He's much closer to that than I am.

Hi, Robert, it's Geoff. That's a good question in terms of the racking and stacking of various forms of egress from Alberta. I would say two things. Currently, the overall tariff around that pipeline is still to be settled. However, based on current projections and currently where it is set, we then have to look to the prices of commodity at the end of the pipe. We do see Gulf Coast deliveries, Mid-Continent deliveries and West Coast deliveries, all intrinsically linked through global pricing. Given that if those relationships hold, and that's predominantly set by shipping, we do believe that the cost of spot will see Trans Mountain be one of the last to fill. So it is on a cost basis, relatively higher than other alternatives. And so it will fill towards the end of filling all available capacity. Again, that's forward-looking, and what we don't know is what will come along next to create the egress that Jon was speaking about. Markets are fluid, and they continue to move around, and that can impact everything I've just said.

So the TMX, you don't see it being utilized at full capacity for what, a couple of years, maybe two or three years, something like that?

I think that comes to individual supply-demand forecasts and how quickly many various producers come along. You look to the future of how does operability go and where various other pieces of infrastructure and how they are running. I think reasonably, we're not going to expect to see all of current egress filled in the next year. I think Jon really put it well. Is it two years? Is it three years? Is it five years? Time is going to tell. But you've got it well bounded in that range.

I will now turn the call back over to Jon for closing remarks.

Listen, thank you very much for participating in the call today. We certainly appreciate the interest in the company. Thank you for your questions, and take care, and have a great rest of your day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.