So, there are some opportunities in the dollar per barrel OpEx side of things, but our bigger opportunity is our ability to capture value. And that’s really where we are focused and our team is really excited about it. We are building plans to capture value in a number of key areas. And that value will turn into cash. And it’s all about cash, which to the bottom line of the enterprise, which overall helps our breakeven for the enterprise. We are looking at structural reliability improvements at all of our assets in the refining business. We are looking at supply and logistics opportunities. We are taking a look in the supply side at a lot of our contracts that maybe we haven’t looked at in a number of years and checking whether they still have service well.
And we are seeing some opportunities in that space. We spend a lot of money in logistics, moving large volumes of our product all across North America and even at export. There is vessel leases. There is rail car leases. There is pipeline contracts. All of that stuff, there is a lot of money being spent there. We think there is some opportunity to squeeze some of that and find some really good value there. Our trading organization is world class, and we have been growing that over the last few years. And we continue to see opportunity to capture more value through that organization. On the refining side, we have a number of kind of really small investment opportunities, low CapEx, high return that we are going to look at each of our assets to continue to grow that.
And of course, folks are aware of our retail growth strategy. We began implementing that in 2023, and that’s going to – that is actually delivering very well for us. We are seeing some really promising signals on some of the early sites that we have developed, and we are going to continue that through the next few years. So, we see a lot of opportunity to contribute, upwards of a couple dollars a barrel to that $5 a barrel challenge over the next number of years through downstream value capture.
Rich Kruger: I just wrote that down, Dave. Thank you.
Dave Oldreive: That’s for the bank, Rich.
Manav Gupta: My quick follow-up – and thank you for the detailed response. My quick follow-up is, it looks like the net debt just went up a little because of the Fort Hills. I think you took on some more debt for that transaction, and maybe there was some lease liability things. I am just trying to understand now that Fort Hills is in there, that you are crossing higher volumes, like what would be an optimal debt level after which you would say, we are very comfortable holding to this amount of debt, and then most of the other proceeds can just go to buybacks?
Kris Smith: Hi Manav, it’s Kris here. Similar to the question we had earlier from Neil Mehta, our capital allocation framework is quite clear. So, we are driving to $12 billion net debt as our next target, and then we will change the capital allocation framework from 50-50 to 75-25. And we are on our – and our goal is to get down to $9 billion net debt, including capitalized leases. So, that’s the framework we have in place. And as I have said earlier in the call, this is all about people. As you have listened for the last period of time, we are looking to release as much free cash flow as we can so that we can actually drive to that net debt target and return more cash to shareholders.
Manav Gupta: And the net debt only went up because of the Fort Hills transaction, right? I just want to clarify that, in the quarter?
Kris Smith: Yes, that’s right. I mean our net debt at the end of the day was flat year-over-year, and we had the acquisition, which was CAD1.5 billion plus closing adjustments and closing costs. And as you pointed out, there were some capitalized leases that came with that. So, when you look at that on that basis, we did the transaction, we kept the net debt level. Our debt excluding capitalized leases actually went down.
Manav Gupta: Thank you so much.
Kris Smith: Thanks.
Operator: Thank you. [Operator Instructions] And that will come from the line of Roger Read with Wells Fargo.
Roger Read: Yes, good morning. I’d like to just follow-up on one thing, as you mentioned, being able to supply Fort Hills and Firebag, kind of – against Base Plant and others. Does it matter what you’re putting through the upgraders in terms of bitumen and bitumen quality? What’s the flexibility there as we think about the long-term question of replacing Base Plant production? I know it’s a next decade kind of question, but it’s out there. And so I’m just curious, are you learning something about the ability to be more flexible with the feedstock?
Rich Kruger: The upgraders have the capability of handling whatever the feed is, but the cocktail that comes from Firebag is not exactly the same as the cocktail that comes from Fort Hills. And what we’ve learned with the paraffinic froth treatment at Fort Hills that basically is taking the heavier asphaltenes out of it before it comes. What Peter is getting at Base Plant when he runs that through. We’ve talked in the past about getting an uplift in volume that when it goes through there, but literally we’ve been testing that long and hard and with more Fort Hills barrels going through. Peter, keep me honest, we’ve talked about the volumetric uplift of bringing a Fort Hills barrel in on kind of the 4% range. Increasingly, we’re thinking it’s more than 6%.
And what we think is we’re getting that 4%. But as you stir those Fort Hills barrels in with all the other barrels, they have a synergistic effect that get an uplift from a larger volume. And so, there again lies what’s the value proposition when you can look at where a paraffinic froth treatment bitumen gets in the market versus a Firebag. We have the ability to move barrels literally day-to-day, week-to-week to get the highest value. So, all barrels are not created equal. Peter, you have anything you’d add to that or I love this topic. This is awesome.
Peter Zebedee: And actually that is what the results are showing north 6% yield uplift on those paraffinic froth treatment barrels from Fort Hills. Again, we can bring those into the upgrader at a maximum of 60,000 a day right now. And that’s one of the things the teams do is look every day on where we are going to generate the most value for the company and what the mix is, what the cocktail is so we are bringing it to those upgraders.
Roger Read: So I guess just as a follow-up on that, I mean, does that imply as you’re looking out 10 plus years that there is actually a lot more flexibility in the way to think about bitumen [Technical Difficulty] being laser focused on particular mine or something?
Rich Kruger: Absolutely. Yes, no, no doubt about it. We will look at the most holistic way so that we ensure we can accurately see what value can be captured. And here again, I think this is part of what makes us a bit different than others is the way we can look at a barrel of bitumen and what we can do with it. We have options and that will be part of as we look forward on whatever the best long-term sources of bitumen. That will be very much a consideration as we look at where value can be created.
Roger Read: Alright. Appreciate it. Thank you.
Operator: Thank you. I am showing no further questions in the queue at this time. I would now like to turn the call over to Mr. Rich Kruger for any closing remarks.
Rich Kruger: Yes, I’ll just wrap up very quickly before giving it back to Troy. Thank you for the time, the questions today. We had a lot to cover. I’ll just reiterate really where Greg started us. Where we are right now as we get into 2024, I believe we’ve got the right leadership, the right people. We’re focused on the right work. We have an inventory of things that can make a good operation great and that’s exactly what we intend to do. So with that, I’ll just turn it back to Troy.
Troy Little: Thank you, everyone, for joining our call this morning. If you have any follow-up questions, please don’t hesitate to reach out to our team. Operator, you can end the call.
Operator: Thank you. This concludes today’s program. Thank you all for participating. You may now disconnect.
