Manav Gupta : Perfect. A quick follow-up here is you’re pursuing growth at fostering, you’re pursuing growth at Christina and some other projects you talked about, when we look at — it’s like 2026 and 2027, what would be a good way of thinking about the oil sands production level, just trying to understand, ballpark, how should we model 2026 and 2027 for the oil sands volumes.
Jon McKenzie : Sure. So the way you should think about our growth projects is we’ve been investing since 2023 in our growth projects. And that investment cycle kind of ends in 2025. So the money that we’re spending last year, this year and next year really facilitates the growth that you’re going to see in 2025 and beyond. As I mentioned in my call notes, the first project to come on will be the Christina Lake, Narrows tieback and that will add kind of 20,000 to 30,000 barrels a day starting in 2025, but more maturing in 2026. You’ll see the foster expansion come on in the 2026 time frame with full rates in 2027. You should see a continued growth in Sunrise production as we continue to bring on four well packages over the next two, three years.
And we believe again, that we can take that asset beyond the nameplate capacity of 65,000 barrels a day. Today, we’re kind of in the 45% to 50% range. So in those kind of time frames, that’s where you’ll see the growth in our oil sands production. And it’s really facilitated by having extra and incremental egress that we get from our refineries as well as TMX and having that underlevered balance sheet that we’ve been coveting for so long. The other project, Manav, and I think you’re aware of this, is our West White Rose project, and we expect to see first oil there in 2026.
Manav Gupta : Perfect. Thank you so much for all this. And look forward to meeting you in person in about three weeks.
Jon McKenzie : We look forward to it as well. Take care.
Operator: Thank you. [Operator Instructions] The next question comes from Lloyd Byrne at Jefferies. Please go ahead.
Lloyd Byrne: Hey, thanks guys for doing this. I have a bit of a philosophical question and maybe you want to address it on the Analyst Day coming up. But market has kind of gotten stuck on the $4 billion number at $45 oil — and the — your debt is already below a lot of your peers, depending on how you want to look at it. But — and then the second is your cost of equity is really high relative versus, obviously, your cost of debt. And so given the fact you have a lot of projects coming on Sunrise, Narrows, Foster Creek, West White Rose, it looks like your EBITDA is going to be $5 billion out in $26 to $45 anyway. So I guess my question is, would you ever consider accelerating the buyback at this point?
Jon McKenzie : Yes. I’ll take a crack at this, and then I’m going to turn it over to Kam. But I would — I think we’ve been really clear on what our financial framework was is, and how we think about capital structure, capital allocation, shareholder returns and the like. And we are absolutely of the view that companies like us that produce heavy oil in the Mid-Continent need to run underlevered balance sheets. And we need to have a balance sheet that’s sustainable at the bottom of the cycle, which we define as $45. We believe that’s the price where growth in hydrocarbons stop. So for us, achieving that $4 billion is kind of job one and getting to 100% shareholder returns beyond that is something that we’re absolutely looking forward to something that we’ve been covering for a long period of time.
As we go forward through time, we’re always evaluating the right level of debt for the company to have. We believe that 1x EBITDA at $45 is that right level of debt. But don’t look for us to stray from our financial framework and try and be overly opportunistic by buying back stock in today’s market at the expense of getting the balance sheet to that level of net debt.
Kam Sandhar: Yeah. And Lloyd, it’s Kam. I would just add a couple of things. I think number one is, look, this debt target is not a short-term target. This is something we wanted to strive for to get to for a period of time. We’ve been on this deleveraging journey now for the better part of five years, I would say, even going back to 2018 and I think the goal is, let’s have — we want a capital structure that allows us to have a resilient balance sheet gives us optionality to be opportunistic in times when others may not be able to. And I think I would also highlight, we are in a period of time right now where our capital is a little bit elevated just given that we are — got some big projects and commitments that we have ongoing, whether it’s West White Rose or the oil sands growth.
So I think that debt target is really important to us. We’re not going to deviate from it. And to John’s point, we’ll reassess it as the growth kind of comes through the business as we get into 2025 and 2026.
Lloyd Byrne: Great. Makes sense. And your sustainable EBITDA is going up, though, too. So I have one more question. How about exports out of PADD II going forward? I mean, last time I think I saw you guys we were talking about potentially looking into different options going forward. Do you think there’s an opportunity to get more product out — so this doesn’t happen, the kind of margins you saw this year don’t happen again in the future?
Drew Zieglgansberger: Yeah. Hi, Lloyd, it’s Drew. Yeah, you are correct that, that is going into PADD I is a nice market. And we’ve got about 20,000 barrels a day of takeaway capacity there to get into the premium market. We’re also using some storage and sell our products in later months right now, if we just think about summer versus winter gas spreads, and we are doing that right now because of the ARB that’s there. It is on our radar. There are some things we are looking at to be able to access our refined products into better markets that are a little more structured and probably have a little bit more global consistency to being a little more stable. We’re seeing that volatility in PADD II right now, and we’ve talked about it today, and we’re seeing it in our results. So it is — it is part of some of our strategy and our thinking and it’s something that we’re working on.
Lloyd Byrne: Awesome. Great. Nice job guys. Thanks.
Jon McKenzie: Thanks Lloyd.
Operator: Thank you. The next question comes from Chris Varcoe at Calgary Herald. Please go ahead.
Jon McKenzie: Morning Chris.
Chris Varcoe: Morning Jon. In November, the Alberta government announced its carbon capture incentive program, which I believe is a 12% grant for CCUS projects. And that obviously comes out of Ottawa announced its investment tax credit for CCUS projects. Now, that those pieces are in place, what does Cenovus need to see in order to progress the CCS foundational project? Or maybe looking at it another way, what is still lacking?
Rhona Delfrari: Hey Chris, it’s Rhona. So, we’re still — I mean, there’s still a lot of details that have to be ironed out with both the investment tax credit federally and the ACIP and the province. These are really good steps towards what needs to happen for decarbonization to progress. But I mean the ITC was announced a long time ago, and it’s still not finalized things like the carbon credits for difference that have been announced by the Federal government a long time ago. We still don’t have any details there. And so all along, we’ve been saying that we continue to work with both governments, and those discussions are ongoing and have been for a long time. But this is a really — this is very and it cannot just be figured out overnight.
And so it just takes a little bit longer than I think a lot of people would like it to. But I think you have to look at that as being somewhat a positive thing that this needs to be right because multibillion-dollar decarbonization projects for our sector, but for other sectors as well. And they take a lot of thoughtful discussion in order for them to progress. The thing that’s really positive is that the industry and the Alberta government and the federal government all have a shared goal of decarbonizing because it’s — good for the province. It’s good for Canada. It’s good for our sector. And we — but we need to make sure that we have the right fiscal support in place because around the world, these decarbonization projects do not go ahead without significant investment from governments.
And so that’s what we continue to have discussions with. In the meantime, with the Pathways CCS project, there’s a ton of work that’s been ongoing. And we’re getting ready over the next few months here to submit the regulatory application for the pipeline and for the port space. So, that’s really, really positive. Lots of engineering work has gone into that loss of consultation with communities and we’re continuing to work on a whole bunch of other projects. So, feasibility studies for the capture as it’s been announced, Cenovus is working on a feasibility study for small modular reactors. Their solvents work going ahead. There’s — other companies are looking at fuel switching. So, tons of work is going forward, and we’re still working with governments on the details of what the funding support will be.
Chris Varcoe: And just a follow-up in December, the Federal government announced its framework for the emissions cap for the industry, which looks at — I believe it’s a 35% to 38% reduction by 2030. Do you think this is a doable target? And I’m wondering just separately, does the emission cap impact the desire of pathways to invest in CCUS, do you think?
Jon McKenzie: Yes, one of the things we’ve seen, Chris, is a real increase in complexity and density and velocity of proposed regulation coming out of Ottawa. And our view on all of this is it’s largely unnecessary and that the right incentives already exist, assuming that we can get a framework together for financial support that incentivizes investment in this basin, not just for decarbonization, but for the business as a whole. So our view on these things is that they are necessarily complex and they cloud the issue of trying to get to a place where we have some certainty as to what the financial incentive framework is going to look like that allows us to invest not just in the business, but in the decarbonization of this business as well.
