Imperial Oil Ltd Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Manav Gupta - UBS Investment Bank - Analyst : Congrats on another strong quarter. My question here is basically on the Syncrude strong performance there. Just help us understand what are the realized benefits you are seeing on this bidirectional pipeline? How is it helping you deliver stronger results at Syncrude?

Question: Manav Gupta - UBS Investment Bank - Analyst : My second question is, looks like Grand Rapids Phase 1 is even going better than planned. So how should we think about further opportunities -- further similar opportunities at that asset? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 3:00PM, IMO.TO - Q3 2024 Imperial Oil Ltd Earnings Call

Question: Menno Hulshof - TD Cowen - Analyst : I'll maybe start with a question on digitization since it it feels like we haven't talked about it in a while. Can we just get a refresh on where you're currently focusing your digitization efforts? And what is a reasonable expectation for annual investment in 2025 and beyond?

Question: Menno Hulshof - TD Cowen - Analyst : Thanks, Brad. That was really helpful. The second question is on basin egress and the Enbridge mainline specifically. It looks like we're starting to see low single-digit apportionment again for November. So the question is, do you know what is driving that? And are you surprised to see it with TMX just having ramped up?

Question: Greg Pardy - RBC Capital Markets - Analyst : Thanks for the rundown as always, Brad, the only thing I wanted to dig into is maybe what Dan was talking about just on the CapEx we were getting a question or two in terms of it being maybe a little higher this quarter than expected. And then in terms of being mildly higher, can you give us any idea that like still under [$1.8 billion] or so or what have you? Any color there would be great. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 3:00PM, IMO.TO - Q3 2024 Imperial Oil Ltd Earnings Call

Question: Greg Pardy - RBC Capital Markets - Analyst : Yeah. No, no. I mean you're a super low capital intensity business to begin with.

Question: Greg Pardy - RBC Capital Markets - Analyst : Yeah. No, no, agreed. Okay. Maybe just a follow-up, a little bit about what Menno was asking about. But everybody has got a growth project now, right, in Western Canada. So we're long pipe and so on. I'm just curious as to how you guys are thinking on two fronts. One is, when do we start to see more of a balance in egress maybe coming out of Western Canada. And is there anything that might mitigate that, i.e., expansions on the mainline or what have you? And then the other thing is, is that just from your own egress perspective, how are you managing that medium- to longer-term risk here?

Question: Doug Leggate - Wolf Research, LLC - Analyst : I'm guessing you've got some competition on the US majors today. So thanks for getting me on. So clearly, you're itching to give us an update on the operations with the Analyst Day and the call you're going to do in December. But I'm not trying to get ahead of that too much. But when you say that Kearl is doing 310,000 barrels a day in October and your operating costs are below $18, it kind of seems that the writing is on the wall as to where this is headed. That 300,000 barrel a day average in your 2022 Analyst Day was a stretch goal for the future. Is it too much of a stretch to say that you're there and there's an upside case to that? In which case, maybe you could frame for us how do you see sustainable capacity on an annualized basis and operating costs below $18 would put you best-in-class. Maybe frame it for us a little bit, if you could? And I've got a follow-up for Dan, please.

Question: Doug Leggate - Wolf Research, LLC - Analyst : As far as getting on the call, Brad, it's amazing to think your stock in the last five years has been the best performer of the entire energy space in that period, at least in our coverage. And so congratulations on that. However, a big part of that has obviously been your dividend strategy, your dividend policy. And I wanted to try and touch on what happens at $70 oil, I guess, where oil has been fleeting. And it really relates to -- you had a little bit of a cash burn this quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 3:00PM, IMO.TO - Q3 2024 Imperial Oil Ltd Earnings Call Your SIB, I guess, depends on oil being north of $70, at least beyond the NCIB. So I guess my question is, would you be -- for an underlevered balance sheet, would you be prepared to lean in your balance sheet to maintain some element of SIB in your buyback? And how does the -- how do you think about the dividend growth story going forward? It's maybe a Dan question, but I'll leave it there? Thank you.

Question: Travis Wood - National Bank Financial, Inc. - Analyst : You guys have talked a lot about the opportunities at Kearl, you're on a pretty short cycle turnaround activity there. But are there opportunities to step in to a larger maintenance program and come out of the back end of that was more of a step function on potential output at Kearl. And then I have a quick follow-up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 3:00PM, IMO.TO - Q3 2024 Imperial Oil Ltd Earnings Call

Question: Travis Wood - National Bank Financial, Inc. - Analyst : Yeah. No, it does, Brad. Thank you. And so, basically, just kind of staying with the shorter cycle times on the planned maintenance schedule. And then I mean I think it's alluded to on the modest CapEx increase here to the tail end of the year. But how should we -- and I think you've dangled the Kearl for December 12, but I think we're all trying to get at the same thing. I mean the assets and the portfolio is performing strong kind of across the board, Grand Rapids maybe kind of quietly there as well. How do we think about the growth plans, the capital spend in comparison to the five-year plan that was laid out previously, which was effectively no growth. And obviously, that's not really what the assets are doing here through year-to-date. So can you try to get us to kind of a cadence of how we should think about volumes into 2025?

Question: Travis Wood - National Bank Financial, Inc. - Analyst : Okay. I appreciate that. I tried. And I'll hand it back and maybe you can bring the Spot to the day in the spring.

Question: Neil Mehta - Goldman Sachs Group, Inc. - Analyst : Yeah. Sorry about that earlier. Thanks for the comments. I just had a couple on the low carbon stuff, which is, first, on renewable diesel with Strathcona coming online, we've seen in the United States really challenging economics of the assets that have come into service, and a lot of that is, I think, could be idiosyncratic to the US. But I'm just curious on your perspective on how the mid-cycle economics of renewable diesel have evolved in Canada -- and what are the market conditions as you bring that asset into service?

Question: Neil Mehta - Goldman Sachs Group, Inc. - Analyst : And no, that's helpful. And Brad, you wouldn't put a $1 -- be comfortable putting $1 per gallon kind of view of what mid-cycle economics would be on an EBITDA basis for renewable diesel with you?

Question: Neil Mehta - Goldman Sachs Group, Inc. - Analyst : Okay. I know we're over time. But one last one for me, which is the latest on Pathways, what -- can you just help us understand the latest in terms of the state of play, what the gating items are, and what we can expect as the next key milestone around this initiative?