Cenovus Energy Inc. (CVE) Q1 2023 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Cenovus Energy’s First 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.

Thank you, operator, and welcome, everyone, to Cenovus’ 2023 First 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. Alex Pourbaix, our President and Chief Executive Officer, will provide brief comments, and then we will take your questions. We ask that you please hold off on any detailed modeling questions and follow-up on 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 are welcome to rejoin the queue for any follow-up questions you may have. Alex, please go ahead.

Thanks, Jason, and good morning, everyone. As I do every quarter, I’m going to start this morning’s call with our top priority, health and safety. The safe restart of the Superior and Toledo refineries is of the utmost importance to us and over the last few weeks, we have resumed operations at both refineries. On our Q4 conference call, we committed to start running crude at Superior in mid March, and we did that safely. The refinery is currently running between 24,000 and 30,000 barrels a day and you can expect it to ramp up to full rates through the second quarter. In Toledo, we successfully closed the transaction on February 28th, We have restarted the smaller 30,000 barrel a day east side of the refinery and expect the larger west side to be online in May, also ramping up to full rates through Q2. Both of these refineries are currently making on spec product. With the construction at Superior now complete and the restoration work of the impacted zone at Toledo complete, we expect these assets to generate significantly improved operating margins through the quarter approaching breakeven in June and achieving free cash flow by July. I would like to acknowledge and thank all the teams involved in achieving these significant milestones. These startups were done safely and methodically and we appreciate the focus by everyone involved. We apply the same attention to safety that we did with these start up to everything we do. Our safety journey is never complete, and we look to continue elevating our performance. Turning to our operating results. This was a challenging quarter and to be blunt, not up to the standard we have set for ourselves at Cenovus. I want to address this upfront. In the U.S. Downstream, the ongoing costs of getting Toledo and Superior restarted impacted our margins. Because of our vertically-integrated strategy not having these refineries running at full rates, while differentials widened as much as they did was especially impactful on our corporate cash flows. Our non-operated refineries Wood River and Borger ran below expectations during the quarter, which further impacted cash flow and earnings. This was mainly due to unplanned downtime at Wood River related to the December incident, which led to significant costs associated with fulfilling obligations for finished product as well as the remediation work itself. Wood River is now back up and operational with the exception of some planned maintenance scheduled to be complete in the middle of May. Given the operational performance in U.S. manufacturing so far this year, we have adjusted the throughput in our annual guidance down by 40,000 barrels per day at the midpoint, resulting in full-year throughput guidance for the Downstream to deliver between 580,000 to 610,000 barrels per day. However, with the many significant milestones now achieved, we are paving a path to successfully deliver on our integrated strategy. We have also updated our annual production guidance for the Atlantic region, reducing it by 10,000 barrels a day. We are taking a conservative view and have removed Terra Nova volumes from our 2023 guidance. Our full-year guidance for Upstream production is therefore 790,000 to 810,000 barrels equivalent per day. We continue to progress our strategy with conviction. Our management team is confident the plan will deliver in all areas of our business with the performance that you have come to expect of us and more importantly the performance we expect of ourselves. We believe you will clearly see the strength of our operations and integrated strategy in the back half of this year. Let me further speak to the actions we are taking as a company to improve our asset and financial performance. In the oil sands, production from Foster Creek and Christina Lake will benefit from three new pads, starting up at each asset and contributing to higher production volumes in the third and fourth quarters. At our Lloydminster Thermals and Sunrise projects, we will continue to optimize our development and operating strategy to support improved production volumes. At our Lloyd thermals, we have production solidly back over 100,000 barrels per day, while Sunrise will benefit from the first new well pad since 2017, when we start up a pad around the end of 2023. Conventional continues to impress with steady production rates and strong cash flows, even with AECO prices declining through the quarter. We have recently drilled some really prolific wells in the [indiscernible] area, which are testing at record rates. These were among the top Alberta gas wells in both January and February, giving us further confidence in our future development plans. Asia Pac continues to generate free cash flow and our offshore segment as a whole contributed 300 million in operating margin this quarter. Moving to our downstream operations, I want to reiterate what I previously mentioned. With superior Toledo and Wood River, we expect to see improvement and our overall throughput and utilization rates in Q2. The normalized margins and crack capture rates will become further evident in Q3. But not as robust as previous quarters we expect to see a strong market for refined products through the rest of the year and our U.S. refining network will be in a great position to take advantage of this. Canadian manufacturing performed well, with a Lloyd refinery operating at a 99% utilization rate and the overall segment contributing over 260 million in operating margin with a consistent high reliability of these assets we expect to be able to take advantage of strong product pricing through the year and are well positioned should the heavy oil dips widen. Turning to our financial performance, our net debt increased this quarter as expected. This was mainly due to the cash tax payment of about 1.2 billion for taxes accrued from last year. Now that we are cash taxable in all jurisdictions, taxes will be paid on a quarterly basis going forward. The increase in net debt also reflects approximately 460 million to close the Toledo deal in the first variable payment related to the Sunrise transaction. Given where we are today and assuming commodity prices remain around current levels, we expect net debt to fall below the $4 billion floor in the fourth quarter. Lastly, consistent with our ongoing strategy and commitment to shareholders, our board approved a 33% increase to the base dividend to $0.56 per share on an annual basis. This increase is a reflection of our commitment to assess the base dividend annually and provide our shareholders with a sustainable and growing dividend overtime. This dividend as well as our sustaining capital is well covered in a $45 U.S. per barrel WTI pricing environment. Today’s call is the last conference call I will be leading for Cenovus as I moved to my new role as Executive Chair of our Board. You will be in John’s steady hands for Q2. As he takes the helm, this company is positioned well for long-term success. And I know that John will lead Cenovus successfully and continue to execute the company’s long-term strategic plan. The strategy we set at the beginning of my tenure in 2017 was really simple. Optimize our cost structure, strengthen the balance sheet and ensure market access for our upstream production. I can confidently say that we have delivered on all three and then some and I would like to thank everyone who made it possible. Our staff and management team have been remarkable and I’m truly excited to see John lead this company forward. With that we are happy to take any questions you may have.

[Operator Instructions] We will now begin the question and answer session and go to our first caller. Dennis Fong with CIBC World Markets.

Hi good morning and thank you for taking my questions. Maybe just quickly, just want to say I guess again, congratulations to Jon and Alex for moving into your new roles later today. The first question I have may be directed towards John, just given your background and experience in the refining sector as maybe get your take and even maybe some examples of how Cenovus plan to change or improve on the maintenance of the refining assets versus maybe the previous operators? Especially now that they are kind of operated or for ramping up kind of throughout the portfolio.

Yes, sure. And thanks, Dennis, for those kind words and your question. When I kind of look at our portfolio, we are going to be running a portfolio of five operated refineries with two non operated refineries in Wood River border. And if you kind of look at the trajectory of the performance of the assets that we have had under our Stewardship, over the past couple of years, since we purchased from Husky, I think you will see that the Canadian assets have operated really quite well, and that we get high levels of utilization and reliability out of them. And similarly, there has been a step change in Lima. And I think that that is really a credit to the work that Keith and the group of people that we put into our manufacturing business have been able to do in relatively short order. So my expectation is that when we bring up Superior and Lima, not only will work very quickly - sorry, Superior in Toledo, not only will work very quickly to optimize and commercially, but you will see the same kind of operating performance, with the people that we brought in from outside as well as the people that we inherited from the Husky acquisition to bring in the same kind of maintenance processes and reliability processes there. But we have a high expectation for, what we are going to get out of those assets and high expectations internally of how they are going to run. And I think that that comes out of a level of confidence that we have from the assets that we have been running for the last couple of years already.

Great, I appreciate that color. My second question here is really around the, I guess, the current balance of upstream versus downstream within the portfolio. As we kind of look out over the next 12 to 18-months, there is the potential for additional egress, especially with the trans mountain expansion pipeline, eventually coming online. How do you look at the balanced portfolio between the upstream volumes and your downstream refining capacity? And do you view that to be we will call it I don’t think necessary, but how do you think about balancing those two items as you move forward, especially just given the nature of the assets and the availability of accessing global markets?

Hey, Dennis, it is Alex, I will maybe just give a couple of comments, and then I will pass it over to Jon. But, I would say right now, we feel pretty comfortable with the portfolio we have in the mix we have between upstream, upstream and downstream. You have heard us talk in the past about our plans to modestly grow our upstream. But we think we have a really good portfolio of downstream assets that are largely directly connected, and have the ability to run our heavy oil molecules. And we will always be opportunistic, and if something really compelling came forward, we would obviously have to take a look at it. But I think right now, we feel pretty good. And maybe I will pass it over to Jon.

Yes, maybe I will just add a couple of points on to that, Dennis. Because it really, it really cuts to the heart of everything we are trying to do here in terms of creating that heavy oil value chain. But if you think about what we have created here, we have built an Upstream heavy oil portfolio that produces about 800,000 barrels a day of heavy oil blend. And once we get Superior and Toledo up and running, we are going to have takeaway capacity for about 600,000 barrels of that heavy oil so we will eliminate the location risk on that and then within the portfolio, we can consume about 400,000 barrels a day of heavy. So we really like the way that we put this together and we have been able to kind of mitigate a large portion of the location in heavy oil differentials that we see in the portfolio. And then on top of that, we have about 740,000 barrels a day refining capacity, which we get the crack value on top of it. So in terms of what we built, getting these two refineries up really completes the asset portfolio that we envisioned when we bought Husky, and we think we built a pretty powerful heavy oil value chain with the assets that we have got. So I don’t think there is anything really missing from that that we need to kind of look at above and beyond it today. But as Alex mentioned, we do have a desire to incrementally grow the Upstream and we will have to look at the Downstream in concert with that. But today, we feel like we have got a really nice - trap.

Great. Appreciate you answering my questions. I will turn it back. Thank you.

Thanks Dennis.

Thank you. Next, we will go to Menno Hulshof with TD Securities.

Hi. Good morning, everyone. And congrats to the both of you on your new roles. Maybe I will just follow-up on Dennis’s Downstream questions. Are there any specific learnings that have come out of the last couple of quarters with U.S. refining, that you can speak to today and give you more confidence going forward?

Hey, Menno. It is Keith. What I would say is, maybe we will just take build on what John said. We are pretty happy with the improvements we have seen at Lima. Lima performed in 2022 producing almost $1 billion of out margin through the year. Safety performance was down kind of world class performance around 0.1 on a trip. So really happy with kind of the improvements we are seeing there. Obviously, we are not overly happy with kind of the restarts of both Superior and Toledo and working very diligently on that. Maybe I will just hit on each of those separately. On Toledo, on March 1st, we took over operatorship. The refinery wasn’t running at the time. We basically performed a couple of additional assessments prior to restarting the refinery. We have completed the repairs associated with the fire impacted area back in September. We then restarted the East side of the refinery, which is about 30,000 barrels a day. We have that lined out and producing products. And now we are turning our focus to the larger part of the asset is the additional 120,000 barrels a day, which we will work to bring on through May and ramp up to full rates by the end of the quarter. Obviously, through this period of time when you are not operating, you have a pretty significant impact on free funds flow. You are consuming a lot of OpEx, but you are not generating any revenue. So we do look to kind of Q3 being a really transformational time for the Toledo refinery. On Superior, we are demobilizing the construction project. It is essentially complete teams are ramping down and we are actively working on the commissioning of the FCC. We were able to commission and start-up the crude units. So we are currently processing in the 20,000 to 30,000 barrels a day of crude on the crude unit, and producing finished product out of that asset. And then we will quickly move over to the FCC and start commissioning that and similar to Toledo, it is been consuming both capital and OpEx in the first quarter without generating any revenue. And so looking forward to kind of the April May timeframe to get that asset up fully running, and into the end of June time period to start realizing the full value of those two assets. So, a lot of focus on safely getting these two assets back up and running. They do complete the heavy oil value chain that John alluded to, and are a big part of the ongoing strategy, and we are happy with the teams we have in place, and we are confident in their capability to safely restart and run these reliably.

Yes Menno, I would just I agree with all of Keith’s comments. And I would just observe that for the various reasons we have talked about, particularly with respect to superior in Toledo. We have not been in a position to demonstrate the full capability of this machine, when we have all of our downstream assets running and our upstream assets and the incredible impact that having all of that together, gives to our operating margin. And you have heard me say in my prepared comments, I think everybody should really look forward to the second half of the year, because I believe we will see the full value of that engine operating both downstream and upstream. And I think we are all very happy to be getting through this construction phase and moving into that, bringing everything online and getting everything lined out.

Thank you, it is very helpful. Maybe I will flip over to Upstream and Sunrise in particular, I’m just eyeballing the slide here. It looks like the incremental 15,000 to 20,000 barrels per day of new capacity is slated for give or take the middle of next year. Can you just remind us of the scope of work for that incremental capacity and maybe even capital efficiency and if we take it to a higher level, is there anything jumping out in terms of best practices from Foster Creek and Christina Lake currently being applied at Sunrise?

Yes, hi Norrie Ramsay here. I mean, notionally, this year, our production at Sunrise is flat. And there haven’t been any new pods drilled since 2017. So what we have is three parts actually been developed at the moment. And as you said, we plan to have production beamed up really early next year, as we start to actually bring on those parts. What we have been doing is applying our Foster Creek, Christina Lake, subsurface strategies, and what we have been doing our drilling longer locked wells within the reservoir, and actually been able to deploy steam more efficiently across the reservoir as we do that. So our SOR, steam oil ratio, which is one of the measures of our operating costs, we see that continuously have been driven down the way. And similarly, we are applying our low cost strategies from operating viewpoint across the surface facilities. And we see our OpEx coming down as we do this. So going forward, as we drill more wells into the reservoir, we actually plan to get to nameplate within the next 18 months. And from there, we are actually looking at debottlenecking going forward.

Thanks Norrie. I will turn it back.

Thanks Menno.

And moving on, we will go to Greg Pardy with RBC Capital Markets.

Thanks. Good morning and indeed congratulations on the moves to both of you. Lot of focus on the U.S. and I recognize why but then you have got this great asset called the Lloydminster upgrader. And I wonder whether that one holds further promise for you either in reducing your condensate costs on a go forward basis, or what have you. But I’m just wondering what the perhaps the medium to longer term plans might be for Lloydminster?

Hey, Greg, it is Keith. Yes, great question. We are obviously spending a fair amount of time looking at the opportunities to integrator our world class upstream assets with the Lloydminster area and complex. We actually are advancing at the refinery bottleneck opportunity right now. And that will expand the capacity of the refinery, we are also looking at a second bottleneck that will essentially increase throughput by almost 60% over the next few years at the refinery. The refinery is also a feed into our upgrade or so we are pretty excited about to your point, being able to bring over some of our higher condensate upstream DilBit and processing it at this asset, because then we can recycle that condensate, but also looking at the upgrader and pulling out additional diesel production out of the asset, as we process more DilBit through the through the combined infrastructure that we have there. So pretty exciting opportunities that we are seeing there. A robust list of opportunities that we are progressing and ongoing debottlenecking, and improvements in those assets.

And, Greg, it is Alex. I mean, I know this kind of goes without saying but, all of those projects that Keith is talking about, as always, with this company will return their cost of capital at a $45 WTI price environment.

Sorry, I missed that Keith.

Yes, I just going to say relatively low capital to kind of get those the bottlenecks done too.

Okay, got it. No thanks for that. And then this is, if I look at your first quarter, you built five and a half 1000 barrels a day in terms of inventory. Aiko prices were high, but they dropped significantly. And then the timing on your condensate purchases would have meant that your blending costs were that much higher, and so your driving realizations were that much lower. Is it fair to say, though, that as you go through the second, as we go through the second quarter here, that all of those headwinds are essentially turning into tailwinds whether it is operating costs or even from the standpoint of realizations?

Greg, I think a few things. We will be building a little bit of inventory as we and we are seeing it already, as we start the refineries, in that infrastructure. We were able to send some additional barrels down to the Gulf Coast to capture some additional margin that we saw kind of coming out of the December and January time periods when differentials were wider. But to your point differentials have now really narrowed in and the spread between condensate and WCS has also narrowed. So, all of those are now moving over into tail winds. And we have seen the realizations significantly improve over the past couple of months.

And Greg, just on the condensate side, I mean, one of the things that we have seen through the first quarter and continuing is condensate on the Gulf Coast has been really discounted relative to Fort Saskatchewan. So we have been taking full advantage of our assets to bring condensate up to bring condensate up to the Gulf Coast into Alberta to meet our condensate demand with our heavy oil assets as well. So those arms are still wide open for us.

Okay. Understood. Thanks again.

[Operator Instructions]. And next, we will go to Neil Mehta with Goldman Sachs.

Congrats, Jon, and congrats Alex on both of your new role, and wish you lots of luck. My first question is around the net debt levels in the quarter were $6.6 billion. But I think in your script, you talked about how you still have a lot of confidence in being able to get to under $4 billion by the fourth quarter. Can you kind of walk through some of the assumptions, I would imagine you will have some working capital release that should help in addition to the organic free cash flow as refining ramps, but give the market a little more confidence to your ability to achieve that sub $4 billion levels.

Yes, Neil. It is Jeff here and I will give some color on that. I wouldn’t expect a significant working capital release. That being said, you did see the build this quarter and that was really driven as we talked about the cash tax payment of $1.2 billion. But that is really underpinned as Keith talked about is our organic cash flow. We do, as Norrie talked about, we have pads coming on here at the end of the year - back half of the year. We also have the ramp up in Superior and Toledo. And it is really that organic cash flow that will be driving in the generation. We are not relying on significant working capital releases. So it is the operations deal.

And remind us the commodity price assumptions that are embedded in getting to that $4 billion dollars number.

Yes, we are around 80.

No please, go ahead.

Yes. So the commodity price assumptions we are talking about there is $75-ish WTI. And a Chicago crack of $28 pre rinse and you are probably in around the $20, $21 mark for the crack go forward for the residual part of the year.

Okay. That is great. And then the follow-up is as you get to that sub $4 billion level and given the stock is underperformed to start the year, how do you think about the return of capital dynamics and how do you take advantage of moving through the volatility in the stock?

Neil, it is Alex. And I have said this many times and I think this view is shared by the management team and the Board. But all things being equal, we do prefer share buybacks than variable dividends. And right now at this kind of share price, we are well below our target level for share buyback and we would be alive to the opportunity that would present as long as we are at this kind of share price level.

Thank you.

I think we might have lost Neil.

Mr. Mehta, was there anything further?

No, very clear. Thank you.

Thank you. And moving on, we will go to John Royall with JPMorgan.

Hi. Good morning. Thanks for taking my question. So my first question is just on the variable payments to BP on the Sunrise acquisition. Can you remind us how those work and what are the expectations going forward, I know its potential for another 600 million on the variable piece of how much do you ultimately expect to pay in the current environment?

Hey John it is Kam. So the way that the transaction was structured is we would pay every quarter based on where WCS pricing is above $52 for every quarter and effectively take the price difference between $52 and where WCS and multiply it by 2.8 million. So that payment is does not have a quarterly cap, but it does have an aggregate cap of $500 million. So you should expect there will be payments under those terms of those agreements, until we hit that 500 million. There is also a term so two years, after two years, the payments stop irrespective of whether we get to that cap or not.

Okay, thank you. And then maybe you can speak to just if you have any broad expectations for there are a lot of moving pieces that maybe where do you think refinery utilizations will end up in 2Q. And then another thing we noticed is that the Wood River went into turn around 4Q and there was previously no maintenance in the schedule for 4Q. Was this just pushed out from 1Q or is it incremental to overall guidance?

So on utilizations as we kind of alluded to, the Canadian part of the business is running well. And in the U.S., we would expect utilizations to continue to improve through the quarter, and then be at full utilizations in third quarter. On Wood River, you are spot on, there was a plan turnaround early in Q1 that got deferred to Q2, as they repaired and restarted from the incident back in December. All of that is progressing, well, that should wrap up here towards mid-May, and then all of our joint venture assets will be running through the remainder of the second quarter and into the third quarter as well.

Thank you.

Thanks John.

[Operator Instructions] And we do have a follow-up from Dennis Fong with CIBC World Markets.

Just as a curiosity now that you are operating, obviously, the three refining assets in the U.S. Can you maybe make a comment on how you plan - I know operating costs have kind of decreased a little bit through the start of this year. But I know that happened to be kind of maybe a pinch point in years prior. How do you plan on managing RVO requirements as well as reduce costs within your refining assets now that you operate the refineries? Thanks.

Hey Dennis, Keith here. Obviously, we are relieved to the fact of our blending requirements and we are a participant obviously in the market and kind of readably offset our requirements kind of quarterly. Obviously, we are continuing to look at are there any additional opportunities to further impact that, but the way our where our assets are structured and where they are located, there is no evident, easy opportunities to do that. So we will continue to look at it, but right now, we are just randomly offsetting those through the quarters.

Yes Dennis, it is Jon. I mean, that is the important piece that Keith just highlighted is we randomly buy and we don’t really take position on RINs outside of just managing that RVO requirement.

Great, thank you.

[Operator Instructions] and we will next go to Chris Varcoe with Calgary Herald.

Hi, this is a question for either Jon or Alex, we heard just a couple of weeks ago that the trans mountain costs to complete that project have now gone up to about $30.9 billion. I’m wondering what kind of impact that is going to have upon your tolls on that project and the economics of it and can you remind us how many barrels you will be moving on? And once the expansion is completed?

Hey, Chris, it is Alex. All have the shippers, we obviously all have long-term shipping agreements, that provide for some level of sharing. I’m not sure that number or that formula is public. But what I would tell you is that even at the price we are at now, that this still represents a good egress asset for us. And I think it is really going to help the situation in the province. So over the long-term.

And just on a separate topic, we saw the federal budget come out a couple of weeks ago, with some changes to respond to the U.S. IRA, I’m wondering whether you thought those changes were sufficient enough for pathway company to move ahead on your carbon capture projects in some of your other decarbonisation projects?

You know, Chris, and this is something I have said many times, I mean, you know, look, we appreciate the words that the government had, in the budget, for example, about the investment tax credit. We are right now, in an ongoing discussion with the Federal Government and the Provincial Government. The ITC was a welcome addition, we very much appreciate that the government stepping out, to help us in that way. But I think at the end of the day, we are going to need more support from governments. This is an incredibly - just an incredible undertaking that the industry is proposing to do to reduce and ultimately move towards net zero by 2050. There is going to be, we estimate just for the oil sands, that is going to be a $75 billion cost. But you have to put that against the value that this industry brings to Alberta brings to the country. I think the last I saw, we employ directly or indirectly about a half a million workers in this country and just this year, we are going to pay somewhere in the range of $50 billion in taxes and royalties to all level of governments. And we are going to do our part. We are going to fund tens of billions of dollars of this transition. But we are going to need more help to do it, especially if we have any kind of hope to remain competitive with other oil producing jurisdictions around the world, that I would point out are largely doing nothing to address their emissions.

And I just wanted to ask you about - we are talking about the federal but I’m wondering where the discussions are sitting right now with the province. They have had some discussion about maybe expanding their APIB grant to include CCUS. Is that enough or are you looking for something else as it relates to the Provincial Government’s involvement?

I mean, as always the devil is in the details, Chris. We are well continuing in discussions with the Alberta government. I think those discussions have been productive. I think both the industry and government appreciates what we are trying to achieve. And I think they are going in the right direction. And there is many ways that the province could support this work, we are trying to do. The APIB idea is one of them. But I would probably just hold off on being specific about it until we have more discussions with the province and the feds.

Thank you.

No worries. Thanks Chris.

And moving on we will go to [Peter Cassie with Duluth News Tribune] (Ph).

Well, congratulations, gentlemen on finishing work on the refinery in Superior. I’m curious, you said I think that, that you are running about 20,000 to 30,000 gallons of crude through the facility right now. Can you talk a little bit about what the throughput will look like when you are at full capacity and when you expect to reach that if that is likely to be second or third quarter?

Peter, it is Alexander Pourbaix. Those were barrels, not gallons. But I think what I will do is I will turn - no worries. I will turn you over to Keith Chiasson, who is our EVP Downstream and he can give you the detail.

Hey Peter. It is pretty exciting to talk about this asset. Since we have taken over the asset in January 2021, we have we have been in the middle of a construction project and rebuilding and it is nice to be coming out of the back end of that. I would tell you that, our staff that have been through this whole period of time are really excited to restart the refinery. So through this month, we have been able to bring on crude to the tune of 24,000 or 25,000 barrels a day and ramping the 30,000 barrels a day. And then we will start commissioning the FCC imminently here to bring on the remainder, which will take it up to its nameplate capacity of 49,000 today. The teams have spent a lot of time on training, community involvement and making sure everybody is ready for this restart. So pretty exciting times. And Cenovus may not be that well known in the area yet, but we are working on building our reputation. In Canada, we have a reputation as world-class operators and we are definitely planning to replicate that south of the border at our U.S. assets, including Superior.

Can you tell me how that capacity, the 49,000 barrels a day, compares to the facility you inherited before the fire.

It is roughly similar, Peter, the only differences prior to the incident, they were in batch operations. So you would run a batch and then slow down and change over your crude slate. We have made a lot of improvements in the control systems and the equipment to be able to now run continuously. So you should see us having higher utilization rates because of that at a similar nameplate capacity.

I understand the workforce is also growing. It had been about 200 people, I think you are looking at roughly 350 with this new facility. Can you talk a little bit about why this is more labor intensive? Or is it about safety or a number of factors?

Yes. I think, Peter, when you are quoting that type of number, you are also including some of the contract workforce that we have and we are also planning on growing our asphalt business in the region. And because we are running continuously, we will be producing more product. So it just requires a little bit larger of a workforce. And I would tell you, as we onboard the people, they have been really excited to join the company and get ready for safe, reliable operations.

Thank you.

Thanks Peter.

And next, we will go to Patrick Butler with Radio-Canada.

Hi. You mentioned, you are taking a conservative view on the Terra Nova and removing Terra Nova from your corporate guidance. Why is that and can you provide a bit the current timeline for return to production at turnover has that changed?

Hi it is Norrie Ramsay. I mean, a lot of these questions, you probably have to direct to the operator. The operator has informed us that you have delayed taking the facility back offshore. We are continuing some maintenance work at [indiscernible] which is in Newfoundland. So I just refer you to the operator in this case, they have the information on when they plan to restart.

And could you also provide an update on West White Rose? I know there is been a major pool started recently. Can you talk about the operations and agenda right now?

We are actually very excited about it. There is two big pieces of work on West White Rose at the moment. We have on each shift we have I mean, literally thousand people on three shifts working in [indiscernible]. We are actually doing a pool, which will complete the bulk of the gravity base structure that I will take 60-days and notionally in the next 40-days or so that part will be finished. The other thing is we have completed putting together the topsides facilities, which are down in Texas. So the projects coming together, but there is obviously a long way to go before we finally see safe production.

Alright, thank you. And can I ask who was speaking just now?

Sorry. Norrie Ramsay. I run the upstream part of our business.

Thank you.

Thanks Patrick.

I will now turn it over to Mr. Pourbaix for final comments.

Well thanks very much operator and I would encourage everyone who’s interested to tune into our annual meeting of shareholders at 11 this morning Calgary time. You can find the link to access a call on our website. With that our call is now complete, thanks for joining us and have a great day.

Thank you and that does conclude today’s call. We would like to thank everyone for their participation. You may now disconnect.