Cenovus Energy Inc. (NYSE:CVE) Q3 2023 Earnings Call Transcript

Cenovus Energy Inc. (NYSE:CVE) Q3 2023 Earnings Call Transcript November 2, 2023

Cenovus Energy Inc. beats earnings expectations. Reported EPS is $0.97, expectations were $0.59.

Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to Cenovus Energy’s Third Quarter Results. As a reminder, today’s call is being recorded. [Operator Instructions]. Please be advised that this conference call may not be recorded or rebroadcast without the expressed consent of Cenovus Energy. I would now like to turn the conference call over to Mr. Jason Abbate, Senior Vice President, Investor Relations. Please go ahead, Mr. Abbate.

Jason Abbate: Thank you, operator, and welcome everyone to Cenovus’s 2023 third quarter results conference call. Please refer to the 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. All figures are presented in Canadian dollars and before royalties unless otherwise stated. We have also posted our results on our website at cenovus.com. Jon McKenzie, our President and Chief Executive Officer will provide brief comments and then will take your questions.

We ask that you hold off on any detailed modeling questions. You can follow-up with those directly with our Investor Relations team after the call. And please also keep to one question with a maximum of one follow-up. You’re welcome to rejoin the queue for any other follow-up questions you may have. Jon, please go ahead.

Jonathan McKenzie: Great, and thank you, Jason, and good morning everybody. I’ll start this call with our top priority, which is always health and safety. At our offshore China operations, Liwan 3-1 recently achieved a significant milestone of producing 1 trillion standard cubic feet of natural gas sales with no serious incidents or safety events. This is truly an impressive record of safety, and the comprehensive pre-startup safety reviews conducted at our Toledo and Superior refineries resulted in strong process safety performance throughout the restart of these assets. These achievements underscore the importance of our values and safety commitments in the work that we do every day. And I’m proud of our staff for the hard work and effort, uh, that they put into achieving these milestones.

Now, we forecasted earlier this year that we would see strength of our operations and the value of our integrated strategy in the back half of the year. Our third quarter results are a demonstration of that with both upstream and downstream businesses delivering strong operational and financial results. Our upstream business saw an increase of production to nearly 800,000 BOE per day in the third quarter, and combined with higher commodity prices. We generated an operating margin of about $3.4 billion. In the conventional business, production volumes were impacted by wildfire activity in Q2, but returned to normal rates in the third quarter. Our production increased over 127,000 barrels per day versus a second quarter number of 105,000 BOE per day.

So, I’d again like to thank our staff and contractors that played an integral role in our ability to resume or safely resume our operations following the unprecedented wildfire events. As our oil sands assets continue to perform exceptionally while following the execution of redevelopment programs and the startup with new well pads, both of which support short and long-term production growth. Production increased over 600,000 barrels per day versus the second quarter number of 300 or 572,000 barrels per day. At our sunrise oil sands production, third quarter production row, 17% to about 55,000 barrels per day. The asset continues to perform well, as we apply Cenovus operating processes, including the implementation of redevelopment wells, adjusting well designs and operating parameters.

Now, I expect the oil sands assets to continue their positive performance through the remainder of 2023 and beyond. We’ll remain focused on operational reliability in the safe and efficient execution of our growth capital and optimization projects with the Narrows Lake tie-back, Foster Creek Steam Edition, and New well pads at Sunrise being a few key examples that support short to medium-term growth plans. In our offshore segment, our Asia Pacific assets performed extremely well. The company achieved first gas from the MAC Field in Indonesia in September. In the Atlantic, the Terra Nova FPSO has now returned to offshore Newfoundland and is expected to produce for first oil in the fourth quarter, while our West White Rose project is also progressing as planned with approximately 75% of the work completed to date.

And we’ll continue to advance the work for the regulatory dry dock of the CROs FPSO that will commence in January in preparation for the startup of the West White Rose project. So now, turning to the downstream business, the third quarter results generated much healthier operating margins from the refining and upgrading assets in our portfolio. Overall, our downstream business contributed over $900 million in operating margin with favorable crack spreads and five-foot tailwinds. Following a challenging first half of the year, the US manufacturing segment, we delivered on our expectations of getting the last of the refining assets online and running reliably. Following the purchase and startup of Toledo and the commissioning and startup of superior, crude utilization increased significantly from 70% in the prior quarter to 88% in this quarter.

This is largely due to Toledo having performed well at 90% utilization through the quarter. You also would’ve seen a sizable reduction in the unit operating costs in our US manufacturing segment with the majority of our refining assets running at or near full rates in the third quarter, and a reduction in the overall operating costs associated with the startup of Toledo and superior. At the superior refinery, we achieved a safe startup of the fluid cat cracker in early October, while the startup with this unit was delayed. The business unit completed this complex work without compromising the safety of our staff and assets. And you will know that the Borger refinery is now undergoing planned maintenance, which will impact Q4 throughput. We were really pleased with the Canadian manufacturing segment.

Crew utilization was 98% in the quarter with the Lloydminster upgrader and Refinery demonstrating strong and stable performance in the ability to capture margins as heavy oil differentials widen. With the seasonally weaker crack spreads in the recent weakness in gasoline cracks, we’re focused on optimizing our assets to maximize the economic result. We will continue to build on solid operational execution and reliability. We’ve demonstrated this quarter going through year end. And I’d like to highlight our corporate and financial performance. In the third quarter, Cenovus delivered approximately $3.4 billion of adjusted funds flow with both upstream and downstream, businesses demonstrating strong performance and contributions to operating margin.

Through our base dividend share buybacks and partial payment of common share warrant obligation we distribute over $1.2 billion directly to shareholders. In addition, the company’s net debt was approximately $6 billion at the end of the third quarter. Long-term debt decreased to $7.2 billion after we purchased $1 billion of notes that were due between 2029 and 2047. We did see an increase in our working capital as compared to Q2. Although this was driven by largely higher commodity prices. Looking forward, we remain focused on achieving our $4 billion net debt target and delivering a hundred percent of excess free funds flow to shareholders at that time. So, in closing, we believe we’ve delivered a stronger third quarter in line with our expectations.

We’re focused on furthering the operational successes that we’ve achieved in the quarter and continuing to progress both short and long-term goals of the company. And with that, we’re happy to take your questions.

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Q&A Session

Operator: [Operator Instructions]. Your first question is from Dennis Fong from CIBC.

Dennis Fong : Hi, good morning, and thank you, for taking my question. My first one is just around the, I guess the pay down of the warrant obligation. So, in the quarter as you highlighted, you did about $600 million. When you think about what’s remaining for that, that obligation, as well as your cash returns back going into the fourth quarter, how should we be thinking about I guess share buyback cadence, as well as any other considerations you’re taking into going into the end of the year around the buyback? Thanks.

Jonathan McKenzie: Yes, I’ll turn that question over to Kam to answer, but you remember we did those warrant buybacks, I think around $22 and we did take the opportunity in the quarter to pay down about $600 million of that. So, I think there’s about $111 million left that we need to pay. I think the deadline is early January, but maybe Kam you could talk a little bit about our thinking around share buybacks.

Kam Sandhar: Thanks, Jon. Hey, Dennis. So, I think, a couple things I would highlight. First off, Jon alluded to this, but the price at which we had transacted on those warrants that obviously a lot lower than where our share prices today. So, we made a very conscious decision to proactively pay that warrant obligation down in Q3 in relative to continue to buy back stock. So, I’d say the principles around that aren’t going to change, we’ll continue to look at probably paying down that warrant liability in the fourth quarter. I think given where, even our share price sits today, I think it’s not an unreasonable assumption to assume that we would pay the rest of that obligation in Q4. And then when you think about the rest of the buyback program and potential for variables, the approach for us has not changed.

We’re going to continue to test intrinsic value of the share price at a sort of flat $60 WTI price. If we continue to see opportunity in buying back stock, you should see us active in the market, and the goal is always to fulfill that 50% of excess refunds flow in any particular quarter, either through buybacks or through variable dividends. But we’ve been continuing to buy back stock through Q3. You’re continue to see us active in Q4, and I think part of that will also include payment of that warrant obligation.

Dennis Fong: Great. I appreciate that color, Kam and Jon. My second question here or just follow-up is shifting gears a little bit more to the operations side. Appreciate the color that you provided Jon on the flexibility of your downstream operations. I just wanted to ask a quick question about superior in the FCC unit. As I recall that FCC unit is generally used to help finish gasoline. And that through the third quarter, you were building some intermediate product. How should we be thinking about the opportunity set or how you’re going to manage that inventory again, just given where gasoline cracks happen to sit at and your ability to maintain flexibility within that particular refinery? Thanks.

Jonathan McKenzie : Yes, I’ll let Keith give you a fuller picture on that, but you’re exactly right. The FCC, and it is a big gasoline-producing asset and one of the things we always look at is the forward markets and our ability to move the sales of that gasoline into higher netback periods. And so, we’re always watching sort of the winter-summer spreads and looking at that with an eye on containment as well. But maybe Keith, you got some additional thoughts on how we’re managing gasoline at Superior in particular.

Keith Chiasson : Yes. Thanks, Dennis. Obviously, superior being the first stop on kind of the mainline system, and the current rate of differentials, it does provide a significant crude advantage and something different than we had online at the end of 2022. So pretty, pretty excited to have this asset up and running and fully operational. So, we will continue to look at the economics and obviously, we will make economic decisions on when we run that inventory off. But in today’s environment, we’re still seeing relatively robust returns to do that. I think the other thing I’d offer up, Dennis, now that we have the integrated network up and running and the other assets up and running, we’ve been moving some of that intermediate inventory to other assets to run off those products and make finished product. And we’ve been doing that for a period of time. So, it’s not just that we have to run it through the existing asset.

Operator: Your next question is from Neil Mehta from Goldman Sachs.

Neil Mehta : Just some early thoughts on 2024 capital would be great. I think, you guys do have some interesting growth projects in flight, and so can you help us think about framing this out, recognizing we’re going to get a little more clarity on this year over the next couple of months?

Jonathan McKenzie: You’re exactly right. We are going to come up with a more formal budget release in December. But what we’ve been really trying to communicate to the market is that our capital spending over the next number of years is going to be between the $4.5 billion to $5 billion range. So very similar to what you saw in 2023. In 2023, we made a conscious decision to put some capital to work on some growth projects that we have in the portfolio. These are very high-return, very efficient projects that we started funding in ‘23, and we’ll continue to fund through next year and really through the planning period that we’re looking at. But don’t think that the capital budget is going to look much different than what you’ve seen this year in that $4.5 billion to $5 billion range.

Neil Mehta : And then to build off that, can you talk about what some of those key growth projects are in 2024 and that maybe that higher spend than maybe some were expecting a couple years ago? Some of it’s because of differentiated projects, not just because of higher sustaining capital levels. So, providing a little more color on what those are could be helpful.

Jonathan McKenzie: Again, we’ve been hopefully clear on differentiating what we consider to be sustaining capital and that’s the capital keep production flat in our fixed assets in a safe and stable condition from the growth capital. But again, these projects we started funding them in ‘23 and we’ll continue through ‘24, ’25, and ‘26. But maybe Keith, you might want to talk about the big four projects that we’ve got going on in particular.

Keith Chiasson: Yes, shore Jon. And thanks for the question Neil. I just want to anchor first on the fact that we look at investments in these growth projects at the bottom of the cycle, and they all obviously chin the bar and are relatively low capital to get the growth that we’re going to be talking about. And as Jon indicated, we’ve kind of kicked these off through the 2023 period and they’ll continue through 2024. But we’re pretty excited about the Foster Creek, the Christina Lake Sunrise, and West White Rose Projects all contributing about north of a hundred thousand barrels a day of growth. So, at Foster Creek, we’re doing a steam expansion, we’ll be able to kind of wrap that up in the 2025 time period and start ramping up steam and production that will add about 30,000 barrels a day of production in the 2026, 2027 time period.

Christina Lake, we’ve been talking about this one for a little bit, but really, it’s building a pipeline up into the Narrows resource and bringing that back and processing it at Christina Lake, which is a much different concept than we had probably five, six years ago in a way to access this resource at a much lower capital cost. So, by doing that, we’ll drop our SORs and we will see kind of an incremental 20,000 to 30,000 barrels a day of production at Christina Lake. Again, that kind of starts ramping up in the 2025 time period and full production kind of in the 2026 time period. At Sunrise, we’ve been actively working on applying the Cenovus technology since acquiring the asset. We’ve spent a bit of time with infills and re drills and redevelopment wells this year, and so you’re seeing production kind of north of that 50,000 barrels a day.

But we’re adding pads. So, the last time a pad was added at sunrise was in the 2017 timeframe. So, we have a whole pad development program. The first one we’ll be steaming at the back end of 2023 here and through 2024. But we’re also adding additional pads. So, through kind of that 2025, 2026 timeframe, you can see us fully getting the full utilization of all the steam capacity at the asset. And that should drive our production up into that mid-60s type range. So, we’re kind of going to see a 20,015 to 20,000 barrel-a-day growth at sunrise. And then on our East Coast project, the West White Rose Project this is where a bit more capital will be going in 2024 and 2025 time periods. As we finish that project. We’re north of 70% complete. We hit some milestones on our gravity-based structure in the quarter.

And we’ll be spending 2024 in 2025 to finish construction tow it off offshore, made up the top sides and the gravity-based structure, and commence drilling in 2025. So, we’ll start seeing production growing in 2026 and peaking kind of in that 2028 timeframe at about an incremental 45,000 barrels a day. So, really excited about the growth projects the volume it adds at relatively modest or low capital. And to Jon’s point, doing all this in that $4.5 billion to $5 billion capital range over the next couple years. So, Shane, Neil, just what you should be thinking about just for your model, Neil, you should be thinking kind of in two, nine to three range for sustaining capital and then the residual being growth.

Operator: Your next question is from Menno Hulshof from TD Securities.

Menno Hulshof : Good morning. So, I’ve got a couple of follow-up questions from some of the prior questions. So maybe I’ll start with a high-level one on the operational outlook for downstream. Scale of one to 10, where do you think you are today on a downstream performance from a pure operational perspective relative to where you’d like to get to, and then where else do you see wound for improvement within US refining?

Jonathan McKenzie: Well, I’m going to let Keith answer the specifics on this, but what I would tell you — is refining is a core part of our business. We have built a heavy oil value chain that we think has significant value to the shareholders. And we think it’s actually quite unique in its construct. But our goal is to be as good at running the downstream as we are — our thermal assets. And that’s not necessarily going to happen overnight, but that’s the trajectory that we’re on and that’s where we want to take this piece of business refining and upgrading is absolutely core to this business. So, what you’ll see from us over the coming years is a continued focus on sweating these assets, grinding out value, not just on the operating side in terms of reliability, throughput, and the like, but also on the commercial side of this business and making sure that we’re making all the right decisions and capturing as much margin as possible.

But maybe I’ll turn it over to Keith. I don’t know that he’s going to give you an answer on one to 10, but I think he’ll give you some indication on where we think we are.

Keith Chiasson: And I think I just got some direction. So, basically, you got to think about kind of what the downstream organization has been through superiors down for about five years and we’ve now safely restarted that refinery and pretty excited about it. Toledo kind of came through an event and then a winter freeze event as well. And the team there has successfully restarted and has ran that refinery reliably since kind of the June timeframe. So, pretty excited about kind of where we are. I think we do continue to have opportunity though, and part of that opportunity is around the integrated nature of that value chain. Now that we’re up and running and running reliably, we are actively looking at integration opportunities between Lyman, Toledo and ways to capture additional margin.

Obviously, having around 120,000 barrels a day of heavy conversion capacity in today’s differential market provides a lot of opportunity and flexibility to capture additional crude advantage at those two refineries. So, we’re going to continue to you would’ve seen our unit OpEx drop substantially in the US downstream in the quarter. We’re going to continue to work to grind that even lower, over the next several quarters and continue to work on our reliability and continue to improve that. So, we’re not stopping, but we think we have additional opportunity to drive down unit OpEx, improve reliability, and really extract additional margin, but the assets are up and running and performing well today.

Menno Hulshof: Maybe I’ll just circle back on West White Rose. It’s 75% complete. You’ve got $440 million invested on a net basis since restart. How is that project generally tracking relative to your internal targets? And given that it’s offshore where do you see the most risk between now and 2026? Is it in the timeline or the budget?

Jonathan McKenzie: Menno, we’re pretty happy with where we’re at. When we picked up this project the gravity-based structure had kind of the base of the structure port. And over the past, six months to eight months, we’ve finished — predominantly finished that gravity-based structure. We have all the necessary contracts in place for the remainder of the project. The top sides are essentially mechanically complete down in Texas. And we’re going to start progressing through the commissioning phase. So, all in all things are lining up. I will remind folks though, we do have an asset life extension on — FPSO and that will take about nine months here in 2024. So, we will come off station in early January and come back on production in late August, early September.

And that extension really is setting us up for kind of the drilling activity that will happen in 2026 and making sure the asset can stay in place to kind of end of life. So, all in all, I would say, it’s a big project, but it’s trending well kind of as per our expectations on both cost and schedule.

Operator: Your next question is from John Royall from JP Morgan. Please ask your question.

John Royall: Hi, good morning. Thanks for taking my question. So, just wanted to clarify one thing on the capital allocation. You are — it sounds like concluding the Warren pay-down in your calculation for the 50% allocation. And then any update you can give us on potential timing of getting to that floor, it would be helpful. Thanks.

Jonathan McKenzie: Sure. Maybe we get that question just about every quarter, so why don’t I — Kam, I think you’re well practiced at this one.

Kam Sandhar: Sure. So just on the warrant, so I think, John, I would just highlight, so when you remember the time when we announced the transaction on the warrant port purchase, we did remind everybody that the warrant pay down, we’ll be included as part of our shareholder framework. So, to the extent that we pay that liability down, it will be included as part of that 50% of excess refunds flow that we allocate to shareholder returns. So as Jon mentioned, we paid $600 million of that through Q3 on top of the $360 million of buybacks we did. And so, going to Q4, you should expect us to probably pay that warrant liability completely, the remaining $111 million with the incremental, either going back to share buybacks or variable dividends.

And then on your second question, just around the debt, I think what I would just say is right now the focus for us as the team has talked about is executing the base business, focusing on continuing to progress these growth projects moving the downstream to continued improvement on reliability and sustained throughput. And the — a function of our debt is really going to be dependent on that, and commodity prices. So, I think we’ll get there when we get there. I don’t — you don’t think I can give you a timeline just given we’ve seen a lot of volatility in commodity pricing even in the last month or two. So, that timing is going to move around, but I would tell you the focus is absolutely in getting there as quickly as we can.

Jonathan McKenzie: Yes, and John, I think that’s the important piece is we are just operating this business with a focus of getting to $4 billion as quickly and as prudently as we can. One of the things that you can count on us is that we will on that trajectory unimpeded until we get there.

John Royall: Great. Thank you. Fair enough. And then you’ve also — you’ve talked about being happy kind of with your portfolio as is — but you’ve also talked about not wanting to be in 50/50 JVs. You still have the one JV on the downstream side that’s hanging out there, and your partner is now rolled out an asset sale target. So how are you thinking about that structure right now with WRB?

Jonathan McKenzie : Yes, we’ve been really clear on that set of assets for years now. And we have been clear that we want to own and operate those assets that we see as core. We’ve been also clear that we are more likely sellers of those assets than buyers of those assets. And we’ve also been clear there’s a fairly healthy bid ask spread or that has persisted through time. So, I don’t want to comment on what Phillips is proposing within their portfolio what we’re focused on is running the business and we’re quite happy with holding that JV, through the long term if that’s required.

Operator: Your next question is from Gregory Pardy from RBC Capital Markets. Please ask your question.

Greg Pardy: You’ve got lots of capacity on Trans Mountain. Just curious how you’re thinking about timing, but perhaps more importantly, how will your marketing strategy work? So, will you sort of look to sell at the dock then to tankers? Or are you looking at something perhaps more integrated with markets in Asia and so on?

Jonathan McKenzie: Yeah, I know, it’s a great question, Greg. It’s something we’re spending a lot of time on, so I’m going to turn this one over to Drew because Drew’s right in the middle of this right now.

Drew Zieglgansberger: Maybe to kind of speak on kind of the premise of TMX. We’re really pleased that it’s still continuing and progressing and I think even with these latest route change approvals and whatnot, I think it’s still pretty positive that that line is going to come into service here in Q2. So, what you can expect from us is that we’re probably going to get a call online, Phil, early in the New Year. So, with that we’re going to see a working capital build in order to fulfill our kind of volume commitment there. And then how we’re thinking about that being one of the biggest shippers on that line is that we’re also planning for some obvious startup variability. I mean, a line like that, it’s pretty substantive in getting that operation up and running it to a smooth rate is likely to also take some time.

So, we expect through 2024 to kind of manage that with probably a little bit of bumpiness in all realities. So, how we’re thinking from a marketing strategy is that we are going to initially be looking to secure some agreements and supply FOB at the dock itself. We’re going to want to see that get up to a good stable rate. However, we do have some intention to get into new markets. It gives us another great tool and a suite potentially into global markets. We’ve obviously got some good connections and access into Asian markets with some of our offshore work over in Indonesia and China. So, we are looking at that as a full suite of a new market access for us. But we’re going to do the right thing as we go into 2024, make sure that once they get up and operating that we can see the reliability of that get there, which I think will take a bit of time and we’ll step our self into FOB going onto the water at some point and accessing those new markets that TMX is going to allow us all to go after.

Greg Pardy: And we look forward to hearing more about it as we go. And it’s kind of a good segue into networking capital. I guess question for Cam is good cash flow generation, obviously, there’s a headwind and there’s an increasing pricing as Jon alluded to. What does the balance of the year look like? And the reason I ask that obviously is $65,000 question with you guys is when do they — when does the company get to $4 billion? Just curious what your thinking is there.

Jonathan McKenzie: So just on the working capital, so a couple things I would highlight. When you look at Q2 relative to where we ended Q3, first off, we did remember we did book the liability associated with the warrant purchase, which was that full $711 million. So, we drew that down at the end of Q3 for $600 million. So that was partly what drove working capital up in Q3 relative to Q2. The second piece I would just say is when you look at our inventory, didn’t see a lot of change from a volume perspective relative to where we’re in Q2, but obviously prices moved up significantly quarter-over-quarter, which is the lion’s share of the increase that you’ve seen in the working capital. But as we move into the fourth quarter, it’s obviously things continue to move around as we look at our marketing strategy on selling our barrels, but I don’t expect a big change.

And Drew kind of highlighted the one sort of more structural change that you’ll see in Q1 when we add more barrels into the system for the line fill associated with TMX.

Operator: [Operator Instructions]. Your next question is from Manav Gupta from UBS. Please ask your question.

Manav Gupta: A little bit of a macro question here. We have seen some widening of WCS here, Kelp — can you help us understand what’s exactly going on, and then where do you see the spread once, as you said, TMX does come online in 2Q? If you can help us understand some of those things.

Drew Zieglgansberger: Sure. Good morning, Manav, its Drew. Great question, as you’ve alluded to the crack or the diff has widened here, and that was not unexpected. We’ve had some incremental growth come out of the basin here over the course of this year. And with condensate pricing and whatnot being quite attractive, people are really moving a lot of sales volumes. So, we expected this to widen out. And as I alluded to with TMX coming on, I think, in the near-term people also probably saw some of those potential delays in construction issues that have kind of come out as of late. And I think people probably shifted some of their positions on timing, but we fully expect as the line fill even starts here early in the new year, I think, you’ll start to see things already start to head down the path of tightening back up.

And then as it comes into full operation into Q2 sometime, we do expect in the second half of next year for it to kind of tighten back up to what we saw when we had some egress space here earlier this year and in late last year. So, we would expect it to come down substantially from where it is, probably in the order of half of what we’re seeing today. But that probably will, we won’t show itself till it’s actually up and operational and probably gets through some of its bumpiness as it starts up.

Jonathan McKenzie: Manav, I’d say one of the big differences this year from last year, and we certainly saw differentials widen last year when we had the keystone outage and the like, but with the upstream, or sorry, with the downstream up and running and performing the way it is does insulate us from a lot of those wider spreads that we were exposed to last year. So, while at a corporate level, uh, we’d still like to see narrower spreads we’re much less exposed to that kind of widening through the fourth and fourth first quarter this year than we were last year. So, we’re again, really pleased to have those refining assets up running and performing well.

Manav Gupta: Perfect. I’m going to ask a follow-up question, based on the response you provided to John. I got a whole bunch of questions on my Bloomberg, so I’m going to follow-up on this, as it relates to those two assets, sir, is it more of a case of a price or is it more of a case that you always thought of Toledo as a core asset you want to operate, and these two don’t actually fit that picture. Which one is it more? Is it price or is it more of they don’t fit?

Jonathan McKenzie: What I want to tell you is, is Toledo’s an absolutely core asset for us. It consumes 90,000 barrels a day of heavy, and it consumes the molecules that we produce inside our upstream. It consumes Christina Lake and it consumes sunrise heavy oil and provides us insulation against heavy oil differentials and location differential. So, it’s an absolutely core asset for us and a key piece of infrastructure. What I don’t want to do is give anybody the impression that we’re doing anything other than focusing on our base business right now. And our core set of assets that we have our intention is to continue to build on the operating momentum. We have drive our debt down to $4 billion, move to a hundred percent shareholder payout. That is our focus right now. And I understand there’s rumor swirling, but they shouldn’t be.

Manav Gupta: Thank you. Congrats on a great quarter and good to see downstream make a material big contribution.

Operator: [Operator Instructions]. There are no further questions that includes our question and answer session. I’ll hand a call back to Mr. McKenzie for the closing remarks.

Jonathan McKenzie: Okay. Well, thank you very much, everybody. We certainly appreciate your interest in the company and wish you the best, and we’ll talk to you again in the New Year. Thank you.

Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.