Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record upstream production with 404,000 gross oil equivalent barrels per day, the highest second-quarter production in 30 years.
- Successful start-up of TMX in May, bringing additional egress capacity for Western Canadian crudes.
- Strong financial performance with earnings per share up over 80% year over year.
- Downstream business performed well despite significant turnaround activity and softening of refinery crack spreads.
- Continued progress on major projects like the Strathcona renewable diesel facility and Grand Rapids Phase 1.
Negative Points
- Second-quarter net income down $62 million from the first quarter of 2024 due to lower margins in the downstream and lower volumes in the upstream.
- Significant planned turnaround activities impacted both upstream and downstream operations.
- Wildfires in Western Canada posed a risk to operations, although no production impacts were reported.
- Downstream earnings of $294 million were down $337 million from the first quarter, mainly reflecting lower refining margins and turnaround impacts.
- Refinery utilization was at 89%, down from the first quarter due to month-long turnarounds at Strathcona and Sarnia.
Q & A Highlights
Q: What kind of recovery rate are you targeting from the Grand Rapids reservoir, and how much solvent recycling is involved?
A: Bradley Corson, Chairman, President, and CEO: We don't have specific details on the reservoir performance yet, but early data shows production ramping up as planned. We saw 3,000 barrels per day in the quarter, 8,000 barrels per day in June, and now 10,000 to 12,000 barrels per day. We are encouraged by these results and will provide more data in the coming quarters.
Q: Can you provide an update on the partnership with Suncor regarding the PBRT pilot and its potential impact on Aspen?
A: Bradley Corson, Chairman, President, and CEO: The partnership with Suncor is limited to the PBRT pilot, which could enable new technology for Aspen, lowering capital and operating costs and emissions intensity. Working with Suncor allows us to expedite progress, share costs, and leverage technology insights.
Q: What is your current thinking on the next potential growth phase in the Grand Rapids project?
A: Bradley Corson, Chairman, President, and CEO: It's premature to discuss specifics, but we see significant running room beyond the first phase. We will gather data from the current phase to inform our long-term development strategy and share more details in future investor updates.
Q: What is the expected timeline for first volumes from the Strathcona renewable diesel facility?
A: Bradley Corson, Chairman, President, and CEO: Construction is progressing well, with completion expected in spring next year. Commissioning will follow in the second quarter around midyear. We are coordinating with our hydrogen supplier to bring the product to market as soon as possible.
Q: How does the strong performance at Kearl impact your targets for achieving 300,000 barrels per day?
A: Bradley Corson, Chairman, President, and CEO: We are confident in achieving 280,000 barrels per day this year, with plans to reach 300,000 barrels per day in the future. Our technical and operations teams are defining projects and timelines, and we will share more details at our next Investor Day.
Q: What are you seeing in the product demand market, and where are the best opportunities for capturing value?
A: Bradley Corson, Chairman, President, and CEO: We see stable demand across product streams and some strengthening in crack spreads due to low inventory levels and refinery outages in the US. This positions us well as we move into the third quarter.
Q: How do you view the impact of wildfires on your operations and guidance for the year?
A: Bradley Corson, Chairman, President, and CEO: We have not seen any impact on production so far, thanks to the great work by emergency response services. While we can't predict future wildfires, we hope the situation remains stable for the rest of the summer.
Q: Does completing the NCIB this year leave room for a potential SIB early next year?
A: Bradley Corson, Chairman, President, and CEO: Completing the NCIB gives us flexibility for future decisions around an SIB. We could potentially do an SIB in the first half of next year or even before this year ends, depending on our surplus cash levels and market conditions.
Q: What are your comfort levels around holding cash, given your strong operational performance and project completions?
A: Daniel Lyons, Senior Vice President - Finance and Administration, Controller: We don't have an explicit cash target but felt comfortable with last year's balance. Our goal is to return surplus cash in a timely manner, and we will make decisions based on our cash balances and market conditions.
Q: What is your dividend breakeven today, and how does it support sustainable growth?
A: Daniel Lyons, Senior Vice President - Finance and Administration, Controller: Our breakeven with sustaining capital and dividend is around USD35 WTI. We aim for reliable and growing dividends, supported by stronger structural free cash flow from volume growth and lower unit OpEx.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
