We’ve seen some really good rates at places like Lloydminster, where we had some daily production records in December and early January. So it’s kind of right across the business, and I think it really sets us up well for the growth projects and integration of those growth projects starting in 2025, with Narrows Lake tieback. But Keith, maybe you want to run through the portfolio and talk about where we are on the individual assets.
Keith Chiasson: Yeah, sure, Jon. Thanks for the question, Greg. It’s actually been pretty impressive watching the ramp up in the back half of 2023 and into 2024 with, as Jon indicated, kind of the second best quarter ever in Q4. That performance has persisted into January. And I would also like to commend the teams. We went through minus 45 degrees Celsius weather in January and the winterization programs we have across the asset base allowed us to weather through that without any hiccup. So, really happy to see. We have put in some new well pads at Foster and Christina, and we’re starting to see the success of those well pads with strong production starting into January and continuing — that will continue through the quarter.
As Jon indicated, the Lloyd thermals, we’re actually above our expectation a little bit there as some of the redrills and redevelopments that we’ve done in the region as well as implementing some of our subsurface technologies has allowed us to increment up production in the Lloyd Thermal. So pretty happy with the combination of the Lloyd Thermals and the conventional heavy oil. You may recall that on the East Coast, we do have the life extension happening on our SeaRose. So the boat has come off station and it’s in the dry dock going through that life extension project. And that will persist out to the back end of Q3. Happy to note though that, Terranova came back on station in the middle of last year and started production in November, and we’re starting to see production from Terranova ramp-up.
And then our Asia business has been very strong for us as well, and that has continued into the New Year. And then when I look back at conventional, it’s been performing well. And similarly to our oil sands assets, whether through the real cold snap as well. So all in all, across the portfolio in the upstream really happy with the performance in Q4 and that’s continuing early into Q1 of 2024.
Greg Pardy: Okay. Terrific. And completely, maybe they’re shifting over the financials because in your opening remarks, I mean, you pretty much answered the question, which is, i.e., hitting that elusive $4 billion net debt target. I’m curious, maybe it’s a question for Kam, just is there any more — maybe a bit more precision around that. Is that possible to get there by midyear? Or would that be jinxing it? And then kind of related to that, is the upstream portfolio sufficiently streamlined? Or are there still aspects of the portfolio that could be, i.e., non-core asset sales and so on? Or are we pretty much done this?
Jon McKenzie: I’m going to answer the last question for Kam. We’re very happy with the portfolio, Greg. This is probably the first quarter that we’ve had full access to all our assets. And I’d tell you, they’re all investable. They all fit within our strategy, and they are all things that are part of our plan going forward. So, we’re very happy with the portfolio that we have today.
Kam Sandhar : Hey, Greg, it’s Kam. So I think you’re looking for a hard date on the date the debt target, to be honest.
Greg Pardy: Soft date will be fine. Yes, the soft date will be fine.
Kam Sandhar : It would be hard to give that. So a couple of things, I would highlight. Look, we’re continuing to see a lot of volatility in commodity prices. So obviously, even with differentials widening out in Q4 and then now starting to see a bit of a narrowing into the first quarter and going into the back half of the year. And then obviously, cracks have improved. So I would say the pricing environment we’re in is quite constructive. I think, we’re really focused on the things that are in our control. And as you heard Keith and Jon talk about, operationally, I think things are going really well. So I think the goal is to get there as quickly as we can. I think — it’s the number one priority for us as an organization. So I think when you look at the actions we’re taking around the business, whether it’s controlling our cost to working capital and then obviously running the assets, I think the goal is to try to get there in a reasonable time frame.
So the focus of the whole organization is to get to that debt target. I would say in this price environment, I’m optimistic we can get there in a reasonable time frame. Whether that’s in Q2 or Q4, it’s really going to depend on commodity prices.
Greg Pardy: No, I think it’s a good answer. Thanks very much.
Jon McKenzie: Thanks, Greg.
Operator: Thank you. The next question comes from John Royall from JPMorgan. Please go ahead.
John Royall : Hi. Good morning. Thanks for taking my question.
Jon McKenzie: Hi, John.
John Royall : I had another one on downstream. I was just hoping for some details on — I think you had mentioned in the release and unplanned some unplanned downtime at Lima and how impactful that was the 4Q results? And then you also mentioned in the release what sounded like maybe some economic downtime you took in downstream. Could you just give a little detail around that? And did that continue into the early part of 1Q before cracks improved?
Jon McKenzie: Yes. I’ll speak to Lima and then Keith can answer your question more broadly. But the only unplanned downtime that we had in Lima was a short outage that we had on the ISO cracker. And as you John, the iso cracker is your biggest diesel-making unit. And when diesel is really your only product that’s making money in the crack environment that we saw in late November, early December or all through December really. It does impact your financial results. But that all being said, that was dealt with quickly and the Lima Refinery today is at full rate is operating very, very well. So Keith, maybe you can just touch on any other aspects you wanted to mention?
Keith Chiasson : Yes. Thanks for the question, John. So you will recall, cracks really collapsed in the December time period. So we did reduce rate on kind of our lighter oil refinery, which is Lima. A little bit into December as well as some of our non-operated refineries took some economic run cuts. That did persist in the January, but you also probably are well aware on February 1, we saw cracks really improve, and we quickly ramped up all of our assets to get the full rates to capture money in that market. I think it was about a $15 to $20 move on the crack, which incented us to go to full rates, where we continue to operate and looking forward, we’re anticipating — we’re starting to get in the driving season. And I believe there’s some forecasted outages in the pad as well that should help sustain those cracks for the foreseeable future.
John Royall: Okay, great. Thank you. That’s helpful. And then just sticking with the downstream is when I look at this year’s guidance, is the 30 to 35 kbd of maintenance. Is that kind of a good level to think about going forward? Or is there some extra maintenance in there, given you had some restarts last year? Just trying to think about sort of how to model kind of the earnings now we’re in refining and just the maintenance impacts there.
Keith Chiasson: Yes. They’re sometimes a little bit lumpy with major turnarounds. But I think in general, John, that’s a pretty good number to model, but you can probably follow-up with our IR folks off the call, and they can give a little bit more detail.
John Royall: Thank you.
Jon McKenzie: Great. Thanks John.
Operator: Thank you. The next question comes from Neil Mehta at Goldman Sachs. Please go ahead.
Jon McKenzie: Hey Neil.
Unidentified Analyst: Hey, this is [indiscernible]. Sorry about that. Lots of earnings calls going on today. But on for Neil, and thank you for taking our question. I guess the first question will be on downstream. I know there’s been a lot, but ours is a bit longer term in nature, which is assuming we get kind of all the assets up and running, and maybe it’s 2024 and beyond. Is there any sort of initiatives we should be on the lookout for either on the cost side that you see as low-hanging fruit in the downstream in US in particular or on the capture rate side that you see could be improved upon over time?
Jon McKenzie: Yes, there’s nothing that we have that we need to address that relates to vessel retirement that relates to regulatory obligation of any kind of consequence. Our focus today is continuing to run these assets will integrate them with the upstream and drive the value from this integrated value chain that we’ve put together. So, don’t think going forward that there’s big lumps of capital that are coming in your direction to address those kind of big two issues that I talked about. Where we do have some capital that we’ve allocated to the downstream is more for projects that are economic in nature and allow us to expand margins and increase our heavy oil capacity throughput, but they’re relatively modest. So, what you can expect from us as a company over the next couple of years is we’re going to continue on the investments that we have in the upstream, and we’ve talked about those at Superior Foster Creek, Christina Lake and our West White Rose project with modest capital investment in the downstream to capture some incremental margin but really looking to run our refineries well and integrate them with our upstream on a more sustained basis.
Unidentified Analyst: All right. Thank you. Very helpful. And then not to get ahead of ourselves, but just curious, are there any themes we should be on the lookout for? I know it’s going to be a longer term view at the upcoming March Investor Day. But any updates we should be looking out for, whether it’s on pathways, low carbon. I know you’re going to talk a lot about these upstream projects that you’ve been investing in, but also if there’s anything on the capital return side of things we should be looking out for, but any early thoughts would be very helpful.
Jon McKenzie: Well, one of the things, I think, is we’ve been pretty consistent on what our strategy is since Alex and I arrived here in 2018. So please don’t believe that Investor Day is going to mark any kind of a left-hand turn from what’s been really important to this company for the last five, six years, which is steady operations, driving to an underlevered balance sheet getting to 100% shareholder returns and investing profitably in this business at the margin. So what we’re really going to do at Investor Day is reinforce the strategy and the trajectory that we’ve been on, but give you a lot more detail as to what the next five years is going to look like.
Unidentified Analyst: Great. That’s very helpful. Thank you so much.
Operator: Thank you. The next question comes from Jason Bouvier at Scotiabank. Please go ahead.
Jason Bouvier: Thanks, and good morning, everyone. Quick question on the preferreds. My understanding is they become redeemable later this year and in the first half of next year, assuming you guys hit your net debt target in the back half this year. Are those next on the plate, or would you look for your shareholder returns to come through like share buybacks or dividends?
Kam Sandhar: Hey, Jason, it’s Kam. So you’re right, we do have some of our pressures coming due ones at the end of this year and some in 2024, sorry, 2025. So we’ll look at all of those things as we do, whether it’s our debt portfolio, our buyback program and the pref. So I think we’re evaluating always what the right economical decision is for the company and what the capital structure looks like. So we’ll — no different than any of those other decisions. We’ll look at those as they come to maturity.
Jason Bouvier: Great. Thank you.
Jon McKenzie: Thanks Jason.
Operator: Thank you. [Operator Instructions] Next question comes from Manav Gupta at UBS. Please go ahead.
Manav Gupta: Good morning guys. I have a quick macro question first. Every now and then, we hear that TMX has cleared the last hurdle and the line is already set to come on and then there is another hurdle, like, is there any update you guys have, you’re much closer to it? When do you think line hits the mechanical completion linefill? And when do the stiff [ph] start actually coming in?
Jon McKenzie: Manav, you hear is what we hear as well. So we’ve heard all of the starts and stops and starts again. But Drew you’re very cautious, why don’t you answer where we are on TMX and our latest thinking there?
Drew Zieglgansberger: Sure. Yeah. Thanks, Manav. To Jon’s point, it’s sometimes daily and weekly here. I think we’re getting so close to being at the point where we can utilize a very important piece of infrastructure for the Western Canadian basin. So we’re all very, very excited to see that come on. Maybe just to back up, when we looked at our 2024 budget and when we planned when we would see this and what we would take into account, we always anticipated mid-year, and so I still think that’s very reasonable. And I think we talked about this on the last call, even when it does come on and we get it full and it starts to operate, it’s going to be a little bumpy probably out of the gate. So we’ve taken a lot of that into account in our guidance when we’ve looked at it.
But we still see and believe that it will come on here sometime in mid to late Q2. We expect the linefill call for the remaining volumes to come here in the next number of weeks and early Q2. And — but again, we also expect it to be a little bumpy as it kind of comes off start-up. So we’re still planning for midyear, and we’re looking forward to it like everyone else.
