Keith Chiasson: Yes. Thanks for the question, Dennis. I think in our guidance, you’ll see a noticeable step-up in our utilization in the downstream, US downstream in 2024 versus 2023. And 2023 was really a year of restarting the refineries and 2024 is a year of running the refineries. We are pretty happy with — you may remember the — a little bit of cold snap in January that we had the refiners ran through that reasonably well. So we’re really focused on now running these well and capturing the margin out of the back end of them. And reliability improvements will persist and continue. But in general, the kit is running well. Obviously, in January, cracks were still pretty weak, as Jon alluded to in his opening remarks, but we saw that change in February and the kit ramped up the MAX throughput and did it reliably.
So, we’re pretty happy with what we’re seeing. We’ll continue to focus on ensuring long-term reliability of these assets and full integration with over 110,000 barrels a day of increased heavy conversion capacity in this kit now that it’s running. We have lots of opportunity and optionality to move our barrels down into this PADD 2 network and capture the margins out of the back end.
Dennis Fong: Great. I appreciate that color there. My second question here, maybe shifting gears a little bit. It seems like there was obviously significant progress made on lowering outstanding leverage. I guess, that progress, as you alluded to in the prepared remarks, was driven a little bit by the changes or the unwinding of working capital. As we think about this going forward, can we — or can you provide maybe a little bit of a structure or an idea as to what may be a normalized rate of like net debt paydown might be and are there any one-time items we should watch out for in the next couple of quarters?
Kam Sandhar: Morning Dennis, it’s Kam. So, a couple of things I would highlight. Yes, you did notice we had a working capital release through the fourth quarter. And that’s really a combination of, I would say, slightly lower absolute levels of inventory and also the change that you saw in pricing. When you think about, I guess, anything unusual coming, I think we’ve articulated this previously. I think the only change that’s really I would highlight is — we’re obviously continuing to wait for a lion fill on TMX. We’ve had a small portion called, but we’ve got amounts still that’s — we still owe them to fill that line on the timing that they start up that line. So, you should expect probably about 1 million barrels increment as a result of that.
So, that will be a that will likely happen here between now and kind of middle of this year. So, other than that, I would say, you shouldn’t expect anything else material. I think, generally speaking, the trajectory you saw in the debt in the fourth quarter is really strong. I think given the pricing environment we see today, both on the upstream and the downstream improving out of January into February, I think you’re going to continue to see us make progress on the debt through this year.
Rob Schwartz: Dennis, I’d just add to that. I think we’ve been pretty clear with the value chains that we’ve built, whether it be condensate or the value change that we’ve built to move our heavy oil out of Hardisty and into our refineries. You should expect us to be carrying somewhere around 45 million to 50 million barrels in inventory. And we’re always going to be optimizing that through time. And with the refineries running more stably and predictably, there’s an opportunity maybe to optimize that some more and take a few more barrels out of inventory. The other thing that we do pretty consistently is we run that value chain for the optimum cash flow and where we have opportunities to store barrels and sell them in future periods at higher prices, we’ll do that as well.
But what you should count on us is kind of that 45 million to 50 million barrels, as Kam mentioned, there will be about one million barrels coming into that. related to the start-up of TMX, but we’re always going to be optimizing that depending on the pricing scenarios that we see going forward and the opportunities that this value chain gives us.
Dennis Fong: Great. I really appreciate the additional color there, Jon, and Kam. I’ll turn it back. Thanks.
Operator: Thank you. The next question comes from Menno Hulshof at TD Securities. Please go ahead.
Menno Hulshof : Good morning, everyone, and thanks for taking my question. I’m just going to start with a quick follow-up on Superior and Toledo. You did answer quite a bit of it already. But can you just guide us on what current utilization for the two refineries looks like today. And then Jon, you talked about potentially seeing a bigger ramp in Superior in Q2. Like what are the risks that you see in and successfully being able to rent Superior within that time frame?
Rob Schwartz: Yeah. I’m going to let Keith answer the first question last, and I’ll start with your last question, and I’m sure Keith will have some thoughts there, too. There’s no doubt Superior has been a bit of a fist bite for us in starting a refinery that hasn’t run in five years and rebuilding it has been a bit of an issue. And any time you take a new set of kit in a refinery that hasn’t run for that length of time through its first winter, you do find some deficiencies and sure enough, we found some deficiencies. But there’s nothing mechanically process or technically wrong with this refinery, it’s just taken us a bit longer to get to where we wanted to get to. I’d also kind of point to the strategy of why we have these two refineries.
And it’s important to remember when we get Superior up to nameplate capacity in that 49,000 barrel a day range, it’s going to consume about 35,000 barrels a day of heavy and we can get that from Hardisty to superior for about US$4 with no take-or-pay commitment, Enbridge that is the strategic rationale for wanting that refinery. It’s not only going to make profits on its own, but it really does give us egress from Hardisty to Superior. Similarly on Toledo, of the 150,000 to 160,000 barrels a day of throughput capacity, about 90% to 95% of that is heavy oil and we can get our oil from Hardisty to Toledo for about US$6 a barrel. So these are really important assets for us not just on a stand-alone basis, but on an integrated basis. So getting them up to full rates and demonstrating the full strategic value that we’ve seen for some time is really important to us.
But maybe I’ll turn it over to Keith, and he can talk to you more about the fintechs [ph] of the path forward with those two.
Keith Chiasson: I think your question probably gears on the 76% utilization in the US downstream in the fourth quarter. In that period of time, we had a pretty large turnaround at Borger refinery and the operator had a little bit of challenge starting that refinery back up. It’s now back up and running at full rates. Toledo ran well through there. But you will recall in December, we saw cracks diminish in PADD II in Chicago region, and we took the opportunity to optimize the kit and run it down. Heading into this quarter, though, we are back up north of 90% utilization across the kit, including Toledo and Superior. Superior though, you should expect through the first several months of this year to run more in the 65% to 70% utilization.
All of the kit is running. And to Jon’s point about the heavy oil integration, we’re able to run kind of that 30,000 barrels a day of heavy but we’re just running off a bunch of intermediates that we built during start-up and shutdowns over the past six months that limits kind of getting the full utilization as we run those intermediates through the processes and fill out those process units. So the kits running, but you won’t see that top line utilization number go up until the second quarter.
Menno Hulshof: Terrific. Appreciate all of the detail. And I’ll follow up with a question on solvent Assisted SAGD, we’ve seen quite a bit of news flow of late with Imperial being the first to bring a commercial SAGD project online a couple of months ago, and I believe CNQ was talking about commercial activity towards mid-year. And I’m just going over past presentations. I believe it was that your last Investor Day, you talked about solvent assisted pilot activity within the five-year plan. And you may want to hold back on this for the Investor Day, but if not, where does SA-SAGD rank on the excitement scale right now? What’s getting done in the background? And would you be willing to fine-tune the time line to commercial development? Thank you.
Keith Chiasson: Hey, Menno, yes, it’s Keith, again. The way we look at SA-SAGD for Cenovus is we’re pretty gifted with very thick clean reservoirs that allow for the actual recovery process to use SAGD and be very effective and very efficient over the years, probably dating back 15 years, we’ve piloted all kinds of solvent recovery technology. So I would say those are, in our mind, commercialized, and they are waiting for the resource and opportunity to deploy them at. But right now, we have resource and capability to utilize our steam most effectively and most economically to drive the highest shareholder return. So that’s kind of where we’re focused. But we do have that technology in our back pocket should we see an opportunity to deploy it in the future.
Menno Hulshof: Perfect. Thanks, Keith. I’ll turn it back.
Operator: Thank you. [Operator Instructions] Next question comes from Greg Pardy at RBC Capital Markets. Please go ahead.
Greg Pardy: Yes, thanks. Good morning. So lots of emphasis on the downstream, which makes sense. Jon, the upstream has had good momentum. I’m just wondering if you can give us a little bit of an ops update there, including maybe where current production rates are roughly where production rates are right now?
Jon McKenzie: Sure. I’ll get Keith to give you the detail on a property-by-property basis. But we entered this year, again, as I mentioned, with the kind of the second-highest production quarter that we’ve ever had. But December was probably the second highest production month that we’ve ever had as a company. All that needs to be tempered as you go into the summer months and we have a turnaround schedule that’s all part of our guidance that we’ve given you. And as I mentioned, we expect Q4 to be even bigger next year than it was this year, particularly as we kind of bring on more well pads right across the business, but I feel really good about how we’ve paced and stage the capital right across the upstream to ensure that those rates that, we put into our guidance are very achievable.
