Canadian Natural Resources Limited

Good morning. We would like to welcome everyone to the Canadian Natural Resources First Quarter 2021 Earnings Conference column webcast. Presentation slides are available to view with the webcast and in PDF format at www.cnrl.com. After the presentation, we will conduct a question and answer session. Instructions will be given at that time. Please note that this call is being recorded today, May 6th, 2021, at 9 a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call, Corey Beaver, Executive Advisor. Please go ahead, Mr. Beaver.

Thank you, Operator, and good morning, everyone, and welcome to Canadian Natural's first quarter 2021 Corporate Update Conference Call. As mentioned, to facilitate today's call, you'll find a copy of the presentation slides on our website at which I would encourage you to download now in order to follow along. Canadian Natural had a strong first quarter, financially and operationally. Our asset base is unique amongst our peer group, underpinned by long-life, low-decline assets, complemented by our conventional assets that allow significant flexibility, and all of which can generate significant free cash flow. Beyond our robust asset base, there is a corporate strategy that focuses on generating real returns for shareholders. and a driven management team and a corporate culture that focuses on being effective and efficient. Over the years, Canadian Natural has demonstrated its robustness, sustainability, and the strength of its business plan. For 2021 and beyond, I believe we are one of a few companies capable of delivering meaningful economic growth, increasing returns to shareholders, and reducing absolute debt in a responsible manner. For today's call, Tim McKay, our president, will first provide a corporate update, Mark Stainthorpe, our Chief Financial Officer, will then provide an update on our financial – 2021 financial outlook, as well as our strong financial position. Tim will then provide a summary prior to opening up for questions. Before we kick off, I'd like to remind you of our forward-looking statements shown on slide 3 and our reporting disclosures shown on slide 4. Of note in our reporting disclosures is that everything will be in Canadian dollars unless otherwise stated. and as well, we report our reserves and production before royalties. I would also suggest you review our comments on non-GAAP disclosures.

So with that, I'll turn it over to you, Tim. Thank you, Corey. Good morning, everyone. Starting with slide five, Canadian Natural is in a very strong position. We have great assets, operating excellence, and with our capital, the ability to strengthen our balance sheet and deliver returns to our shareholders. This also applies... to an environmental, social, and governance side of the business, ESG, where we are delivering industry-leading performance across the board, a significant factor in our long-term sustainability. Jada Natural takes a long-term view on ESG, aimed at creating long-term value, ensuring we identify, assess, quantify, adapt, and align ourselves, and then execute. We are developing plans to address these risks by applying technology and innovation. so we can continuously improve our performance in the near, mid, and long term, always ensuring it's adding value. Moving to slide six, if you look at the overall ESG performance in terms of investment priority, it's very clear that Canada is the world leader and scores the highest in every category and should be an investment priority. Slide seven, a few weeks ago, our federal government had two announcements. The first, on April 19th, was the federal budget, which recognizes that carbon capture, utilization, and storage, CCUS, is an important pathway for Canada to achieve its environmental goals. As well, a few days later, the federal government announced that Canada will be increasing its goal from 40% to 45% reduction in GHG emissions by 2030. As part of the federal government budget announcement, we will participate in the consultation process with respect to CCUS. As well, we'll work to align with these new goals. Next slide. Canada Natural and the Canadian Canada's oil and gas sector recognize the need to reduce GHG emissions, and we have been able to leverage technology and Canadian ingenuity to deliver impressive results. Canada Natural has invested approximately $3.9 billion in R&D since 2009. Using this investment to reduce our environmental footprint, unlock reserves, and drive ever more effective, efficient operations, investing now to do even better in the future. As we've seen on slide nine, a third party has reviewed our oil sands emissions and determined that for scope one emissions, Canadian natural was 35% lower than our peer average. While this is a good starting point, we're still progressing projects that will continue to drive our GHG intensity down. Slide 10, for CCUS, Canadian Natural is using state-of-the-art carbon capture reduction technologies and is a leader in the oil and gas industry in the world. With this infrastructure in place, we can leverage them to capture more CO2. These three facilities are currently operating and are capturing approximately 2.7 million tons of CO2 per year, equivalent to taking approximately 576,000 cars off the road annually. Next slide. Another promising technology is solvent in both side B and the potential at Primrose in the steam flood area. At Kirby South, the pilot continues to perform well with GHG intensity reduction of approximately 45% within the targeted range and will continue to monitor its performance in 2021. The pilot at Primrose is targeted for commencement in Q4 2021, and similar to Kirby South, it will take a few years to evaluate its performance. In both cases, this technology can be applied to similar properties and can reduce our GHG intensity up to 50% and have targeted operating cost savings of approximately a dollar per barrel. Moving to slide 12, getting to net zero takes the ability to leverage technology, be innovative, and using Canadian industry. As well, we have defined actions in the near, mid, and long term. Canadian Natural has a huge technology funnel with just a few of those activities listed here as we progress our journey to net zero. Slide 13, we have a track record of continuously improving our GHG intensity. Since 2012, we have pathetically improved our GHG intensity by 32%, equivalent to taking approximately 1.9 million cars off the road annually, and we are progressing projects to continue that trend of reducing our GHG intensity. Moving to the next slide, in summary, Canadian Natural is delivering leading ESG performance. Our long-life, low-decline assets are advantaged as we can leverage technology, innovation, and continuous improvement to deliver ever-improving environmental performance, delivering results over the long term with a pathway to attaining net zero in the oil sands. As we work with governments, it's clear that Canadian Naturals should be an ESG investment priority. Moving to our corporate update, slide 16. TN Natural continues to deliver strong operational results, and we are focused on delivering value for our shareholders. In the first quarter, we delivered record production of approximately 1.246 million BUEs, record liquids production of approximately 979,000 barrels a day, an increase of 6% and 4% respectively over Q1 2020, primarily as a result of our record oil sands mining FCO production of approximately 468,800 barrels a day, and strong North American EMP production, including thermal, of approximately 478,700 barrels a day. Our natural gas production was strong at approximately 1.6 BCF, an 11% increase over Q1-20. Operating performance in all areas was strong, with oil sands mining being top tier at 1982 per barrel Canadian. 5% lower than a year ago. And if you look at it from a macro perspective, it's even more impressive. Compared to a year ago, we're about 41,000 barrels a day higher, and when you exclude the cost of natural gas, the absolute dollar basis is very comparable to Q1 2020. A great job done by our oil sands mining team. Slide 17. Naya Natural has robust economic, long-life, low-decline assets. and relative to most of our peers, the ability to enhance our margins and grow production, which results in more long-term value. We have a diversified asset base with value enhancement plans for every product and basin we operate. This is driven by our effective and efficient operations, our area knowledge, ownership, and operatorship of infrastructure. KM Natural has a history of capital discipline, which includes a flexible and effective capital allocation, and our ability to be nimble to capture opportunities. We continue to simply optimize capital allocation to maximize value for our shareholders. We're ensuring we're maintaining a strong balance sheet. With our low maintenance capital and our culture of leveraging technology, innovation, and driving continuous improvement throughout the company gives us ever-improving operations. For these reasons, Canadian Natural has a leading free cash flow generation. Next slide. Canadian Natural has a balanced and diverse product mix with approximately 48% that is high value, like crude oil, SUO, and NGL on a BUE basis, limiting our exposure to one product. For liquids production, approximately 81% is from long-life, low-decline assets, which requires less maintenance capital than our peers. As well, we have approximately 1.6 BCF of natural gas production for approximately 22% of our BUEs, well-positioned to capture additional value as natural gas prices strengthen. Slide 19. As a result of our unique asset base, Canadian natural corporate decline is low at approximately 10%. With approximately 63% of our BUE production being long life, low decline, or zero decline production. Because of this, we require less maintenance staff capital to maintain production than our peers. Next slide. We are executing our 2021 budget The total budget of $3.2 billion, of which only $200 million, is for growth capital, and we're growing our production by approximately 5%. Strong performance given that KN Natural is over 1 million BUEs a day. With the first quarter behind us, we are on track and will continue to be disciplined in 2021. With improved pricing that we are seeing today, we will generate significant free cash flow and pay down our debt very quickly. Slide 21, Canadian natural one-fee reserves are world-class among our global peers, which includes the supermajors. A strong indicator of the strength and depth of our assets with approximately 30-year reserve life index, of which approximately 61% represents long-life, no-decline SCO reserves that has lower attribution risk than many of our peers. As well, I remind you that 100% of Canadian natural reserves are externally evaluated, reviewed by an independent, qualified reserve evaluators. Moving to the next slide. When you look at net debt to 1P reserves, they're the lowest among global peers. As well, as you saw earlier, with two-thirds being long-life, no-decline SEO reserves, we have a lower cost structure and reserve risk. As you can see here on slide 23, Canadian National has the highest free cash flow yield among our global peers, an indicator of the strength of our assets, our effective and efficient operations, and low-maintenance capital. Slide 24. Net debt-to-cash flow. We're well-positioned compared to our global peers with less debt-to-cash flow than our peer average. It's coming down very quickly given our free cash flow profile for 2021. Slide 25. There are many positive factors ahead for the Canadian oil and gas industry, and in our opinion, the discount to global peers should disappear. Egress is improving. Heavy oil differentials are back to historical levels in the low 20%. ESG is a priority, and Canada, being a leader, will be recognized. Canadian natural has much lower operating and maintenance capital compared to our global peers and should not be undervalued when compared to these peers. It is for these reasons it's clear Canadian Natural should be an investment opportunity. We have a sustainable business model, a growing sustainable dividend track record of 21 years, and a 20% GAGR, which is top tier compared to our global peers. Slide 26, Canadian Natural is a world-class investment opportunity. We have world-class reserves, much of it being long life, low-decline assets, gives us a low decline of approximately 10%, meaning low maintenance capital as compared to our peers. Our top-tier, effective and efficient operations and our drive for continuous improvement will ensure our balance sheet will strengthen very quickly in 2021, as Mark will show you here shortly. As you saw earlier, this gives us the largest free cash flow yield percentage, nearly double our global peer average. Finally, we are focused on value creation, as we have grown our sustainable dividend for 21 years at 20% CAGR, impressive when compared to our global peers. We will now turn it over to Mark for a financial review.

Thanks, Jim, and good morning, everyone. I'll start on slide 28 with the Q1 financial highlights. Q1 was a very strong financial quarter, as effective and efficient operations, along with the improved commodity price backdrop, led to adjusted funds flow over $2.7 billion. The free cash flow generated was over $1.4 billion after the prudent capital program and dividends in the quarter. This led to substantial balance sheet deleveraging as absolute debt was reduced by $1.4 billion compared to Q420 levels. This represents $2.9 billion of debt reduction since June of 2020, further underscoring the ability of our long-life low-decline assets combined with safe, effective, and efficient operations to generate leading free cash flow. The sustainability of our funds flow allows for consistent and increasing returns to shareholders. In March of this year, we increased our quarterly dividend by 11% to 47 cents per share, which contributed to a year-to-date shareholder return of about $1.1 billion. This year's dividend increase represents the 21st consecutive year of dividend increases at Canadian Natural. Canadian Natural's balanced approach to capital allocation, coupled with our sustainable free cash flow, allows for increasing returns to shareholders. while paying down absolute debt and growing our diverse asset base, something that sets Canadian Natural apart. This can be seen on slide 29. The ability to deliver significant and sustainable free cash flow. As you can see, in 2020, we generated strong free cash flow in a lower commodity price environment. Now, with the economic rebound and increased demand and pricing for commodities at approximately US $60 WTI, Canadian Natural is targeted to deliver substantial free cash flow in the range of $5.7 to $6.2 billion after budgeted capital and dividends. And as Tim mentioned, our free cash flow yields are tracking higher than global peers. Our long-life, low-decline, low-risk assets continue to demonstrate why CMQ should be an investment priority. On slide 30, you can see the results and the forecast showing the impact of our free cash flow generation. As for pricing, our absolute debt is targeted to decline significantly, while returns to shareholders over the same period are targeted to be approximately $3.2 billion. Few peers, if any, have the ability to generate and balance this level of free cash flow and create long-term shareholder value. The impact of leverage metrics is shown on slide 31. Debt to EBITDA is targeted to exit 2021 at 1.1 times, and debt to book capital is targeted to be under 30%. With a purposeful maturity profile that facilitates paying down absolute debt, you can see that so far in 2021, we have repaid and canceled over $1.6 billion of non-revolving facilities. Our history and commitment to balance free cash flow allocation is seen on slide 32. Notwithstanding the challenging commodity environment in 2020, our assets and business model delivered. We were able to essentially maintain our net debt levels through the year while executing an accretive natural gas acquisition. Maintained our March 2020 dividend increase, followed by a further 11% increase in March 2021. We repurchased shares and increased both reserves and production. These are top-tier results. Improve the resilience of the Canadian natural business model and our commitment to financial discipline. On slide 33, you can see the sustainability of the dividend at Canadian Natural. Dividend levels are continually evaluated against internal forecasts for cash flow, capital, free cash flow generation, and our ability to remain nimble and adjust our plans if conditions warrant. This results in a business that can support a sustainable and increasing dividend over time and creates consistent value for shareholders over the long term. Slide 34 shows the five-year compound annual change in our dividend compared to global peers. Slide 35 displays this growth over 10 years. And slide 36 shows this growth over a 20-year timeframe. All these slides illustrate the sustainability of our free cash flow generation and the company's priority to ensure ever-increasing returns to shareholders, including sustainable and growing dividends, as well as the prudent capital allocation at Canadian Natural. Slide 37 displays the history of dividend increases. As you can see, increases have varied depending on our position as it relates to cash flow and capital flexibility at any point in time, with the focus on sustainable increases. So in summary, on slide 38, Canadian Natural has built an asset base that is unique and sustainable, and has developed a resilient business model that is flexible and can quickly adapt to changing environments. The assets and business model provide protection in challenging environments like we saw in 2020, Additionally, we are positioned to benefit exponentially when commodity prices and markets are more favorable, like what we are seeing now in 2021. Our emphasis on balancing our four pillars, our enviable and diverse asset base, and our execution-focused teams with a history of strong results are all focused on driving long-term and increasing shareholder value. With that, I'll turn it back to you, Tim. Thanks, Mark.

In summary, slide 40, Canadian natural's ability to deliver significant free cash flow in today's environment starts with our large reserve base, of which 83% be in long-life, low-decline. Of our approximately 1.246 million BWEs a day, long-life, low-decline asset base make up approximately 770,000 barrels a day, of which approximately 455,000 barrels a day is no-decline, high-value SEO production. We have a diversified product and asset base that are driven by our effective and efficient operations, our area knowledge, our ownership and operatorship of infrastructure, and we have a low sustainable maintenance capital. We have 1.6 BCF of natural gas, and with our diverse assets, ability to add to low-cost production. We have flexible and effective capital allocation and our ability to be nimble to capture opportunities. We simply optimize capital allocations to maximize value for our shareholders. Our culture of continuous improvement is unique among our peers as our teams are focused on delivering safe, reliable, effective, and efficient operations across our asset base. Next slide. With oil at approximately $60 US per barrel, in 2021, Canadian Natural can deliver leading free cash flow generation of approximately $5.7 to $6.2 billion. which supports a sustainable growing dividend of 21 years. We have significant debt reduction, improving our already strong balance sheet. Finally, across the company, our teams are focused on reducing our environmental footprint through technology and innovation, and we look forward to participating in the federal government consultation period. With that, I'll turn it over for questions. Thank you.

At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Menno Holshoff from TD Securities. Your line is open.

Thanks, and thanks for taking my question, and good morning. I'll start with a question on the balance sheet. So your debt metrics, as you talked about, they're coming down really quickly, and you've made it very clear that the balance sheet will continue to attract the vast majority of free cash flow over the near term. So my question is, what is the endgame in terms of the leveraging process? Pre-COVID, I believe you were targeting one and a half times and $15 billion of total debt. So do those targets still apply today? And at what point can we reasonably expect buybacks to ramp back up again?

Yeah. Hey, Menno. Thanks. Good morning. It's Mark. You know, I think that when you look at the free cash flow generation, there is lots of optionality going forward here. As you have recognized, the focus, though, is going to be on the balance sheet or on absolute debt repayment in the near term. We evaluate this all the time and we'll continue to go forward. As far as the buyback, right now we're We're looking at really just offsetting our dilution, you know, through the rest of this year, and that's the target today.

Okay, thanks, Mark. And then my follow-up would be on base and egress. Maybe we could just get your thoughts on current market access, including any thoughts on apportionment and inventories and how that is impacting your very early thoughts, I suppose, on pure maintenance versus growth into 2022?

Boy, there's a lot of speculation on that one because there's a lot of different items going in the news here today. But, you know, I think we're just going to step through it. You know, we expect egress to continue to improve. You know, line three looks like it will be Q4, you know, TMX may be a little late, but still moving forward. Obviously, you know, there are issues with Line 5 and potentially the Dakota access, but, you know, it's too early to speculate. I mean, you know, if you look at in Alberta today, the light oil side has zero apportionment, and so, you know, it's hard to speculate what that impact of those two items will be. Obviously, it'll hurt Alberta to some extent if there's a apportionment and a discount. And as well with the Dakota Access, again, you know, if oil starts to come back in through Cromer, it may or may not impact us because I would suspect the people that are on the Dakota Access are making their own arrangements, you know, ahead of time if they need to. So it's just really, there's a lot of different issues there. I'm still very bullish in terms of that a lot of these egress issues will continue to move forward.

So far to say that you're in a holding pattern through the end of the year?

Well, we're not changing our capital. We're basically just staying with the status quo.

Perfect. Thanks, Tim. Your next question comes from the line of Greg Pardee from RBC Capital Markets. Your line is open.

Thanks. Thanks. Good morning. Thanks for the rundown, guys. Tim, just to hear, I guess it was Corey in the opening remarks, you talked about solvents and so forth. And I'm just wondering if you can maybe give us an update on where you'd expect to apply, you know, the solvent technology and then just anything you might have to say on infant extraction and then also just potentially on autonomous haul trucks. Just interested where you're going with that technology.

Sure. So for the solvents, obviously the pilot at Kirby South is very advanced. And, you know, if we look across our asset base, you know, both the Kirby sites and the Jackfish sites could be very amenable to that technology. So, you know, we're very happy with the results today, and now it's just trying to work out a plan of going forward. In terms of primroses, The steam flood area, that's a little more experimental. We obviously have to pilot it for a couple of years to see if that can be applied to the primrose area and the steam flood pieces. So too early to say primrose, but I would say for the SAGD, it looks very promising. IPEP, we continue to advance our commercial engineering. It's, you know, there's a lot of benefits to IPEP. but there's also a lot of capital costs up front. So our teams are still evaluating it, and we hope to have something this year to say whether we're moving forward with it or not. It obviously is a leading technology, but again, one of the things we pride ourselves on is doing the detailed work and ensuring that the capital forecast that we use is correct. And then... I guess, what was the last question there, Greg?

Autonomous hot trucks, I was throwing everything in there.

Oh, the trucks, yeah. You know what? The autonomous trucks, you know, some operators have more benefit because of, you know, the way they operate and that, and we have less benefit. But having said that, I mean, our teams are looking at, you know, electric and hydrogen technologies as well. to reduce their environmental footprint. That's probably the biggest thing we see for our benefit is reducing our GHG and how to do it with either electric or hydrogen. But, you know, the autonomous trucks, you know, there is a bit of a cost piece there to that, and it really depends how efficient you are. And our teams do a great job. They measure our performance down to the seconds, so it's – I'm really proud of the way our teams have operated in the all sets.

Okay. And just as a second question, you touched on carbon capture storage at the outset. You guys had done this very early on, I think, with Horizon, and obviously you've mentioned AOST and the Northwest Upgrader as well. But maybe just focusing on Horizon for a moment, I think you've got that carbon capture surge right off the hydrogen plant. Would there be scope for you to increase how much of the CO2 you're capturing off of that, off of the Verizon facility overall? Or are you doing much of that now? Just trying to get a sense there.

Sure. What we did early on, and part of it was the sequestering the CO2 and the tailings, is So off of one of the hydrogen plants, we have capture. It's not fully utilized because there's only so much CO2 that we can put into the tailings. And so there is available capacity there, as well as on the second hydrogen unit, that we could expand capture and obviously increase more CO2 capture at horizon. So there is those opportunities for sure.

Okay, terrific. Thanks very much.

Thanks, Greg.

Your next question comes from the line of Dennis Fong from CIBC World Markets. Your line is open.

Hi, good morning, and thank you for taking my question. The first thing is just to follow along with the solvent strategy. I appreciate that you kind of gave us a little bit more context as to the stage of development for your work at Primrose versus the SAGD component of things. And obviously, you guys have been doing quite a bit in terms of lowering your GHG intensity as well. I'm just curious as to how much of the implementation of solvent technology at Kirby and Jackfish are currently potentially within your 2025 goals of reducing GHG intensity across your platform? And secondarily, how much do you think could be incremental to that with a successful pilot out of Primrose?

Yeah, I would say it depends on, obviously, on how aggressive you want to be on that target. So, you know, if you look at just a normal approval building and that, you're probably looking in that 2025 timeframe for something like the safety piece here to really start to get into service. But, yeah, That would be, in my mind, pretty aggressive. Obviously, I think the best thing for our company is to step through it and make sure that we do the right homework. But just from a construction point of view, considering that we're basically halfway through 2021, that would be, in my mind, kind of on the aggressive side to start. We would have to start almost today to get it in place by 2025.

Okay, so the idea then would be that any of these technologies could provide incremental benefit versus your existing 2025 goal of GSE intensity reduction, i.e., the benefits are not currently included in your goals as of yet.

Yes, that's correct. If you look at what – there's a number of technologies we're working on. Obviously, in the meantime – There's a lot of other work being done to reduce our GHG emissions. But yes, carbon capture, the solvents are all future technologies. Same with the molten fuel carbonate cells. They're all future technologies that will actually help us to reduce the absolute CO2 emissions.

Perfect. And then just following on from Menno's question there just around, capital allocation, obviously the primary focus here is around reducing the absolute debt number and getting to a lower leverage situation. How should we be thinking about kind of the longer term strategy, obviously balancing between the four pillars, thinking about returning value back to shareholders, but also there are a number of projects that are fairly low capital intensity and actually have fairly significant economic upsides. how should we be thinking about maybe some of the criteria from a leverage perspective that you would consider before, as well as egress, before you would consider moving forward on things like IPAP, obviously, versus what you kind of described before, or even the bottlenecking projects at Horizon or some of the other low-cost projects that you've kind of discussed at AOSP as well?

That's a very... You know, the hard part of that is that you would have to kind of speculate on certain conditions, whether it's seagrass or pricing, and it's really difficult to say. What I can say is, if you look out, I can't see us doing a major project in terms of capital expenditure, in terms of, you know, a horizon expansion. You know, if we do anything, I suspect it will be very small. We'll leverage off our... Our facilities, we're doing drill-to-fill, you know, on the gas side. You know, with the oil side, it would be essentially, you know, brownfield small developments. I just don't see really any industry, anybody in the industry really being aggressive on any kind of major capital program.

Perfect. Thank you.

Your next question comes from the line of Neil Mehta from Goldman Sachs. Your line is open.

Thank you so much. You guys have proven out M&A is a core competency for your business. Tim, I just wanted your perspective on how you're seeing the A&D market at this point, and are there attractive opportunities either to buy or to sell?

You know, What we see in that market today is that a lot of the smaller entities are doing deals, merging and that, and I think they need to. On a bigger scale, I really don't see anything. If I look at ourselves, we have no gaps. We have lots of opportunities within our own portfolio today. What I see is there will probably be a little more consolidation, but it will still continue at the smaller companies level.

Okay, that's helpful. And you guys did the Painted Pony acquisition. You're a large natural gas producer. I'm just curious what your thoughts are on the eco market here and any comments on how the natural gas part of your business is contributing to the cash flow in 2021.

Well, the Painted Pony assets was really an opportunistic acquisition about a year ago. gas prices were obviously quite a bit different, and even the forecast was quite a bit different at that time. With it, gas prices have strengthened. I think everybody is being, for the most part, significantly more capital disciplined now than they ever have been. I don't see any big concerns on the egress here in the short term, but I think people are getting their balance sheets in order, and the ACO price has been strong. In our budget, we had about a $250. I think we're up around $270, maybe $275 for the year now. So it's a little bit stronger, but obviously we're continuing with our gas program as it seems to be holding in. Thanks, Kenneth.

Once again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from the line of Phil Gresh from J.P. Morgan. Your line is open.

Yes, hi. Good morning. I wanted to try just the balance sheet follow-up question and maybe just word it a little bit of a different way. The 1.5 times leverage target has historically been it was something around $15 billion of net debt. Your target for the end of the year at these prices would be below that. It looked like closer to $14 billion. So I was just curious, has the net debt target, having gone through COVID and things like that, has that longer-term target changed at all in your view? Do you still think it's a fair bogey for us to be thinking about, recognizing that even moving forward, if you shifted the mix, that there'd still be a debt pay down element to it, I would think.

Yeah, I mean, when we were going into 2020, we were obviously forecasting some large debt reductions in that year. Things changed a little bit. We were able to kind of enter and exit pretty much flat and do that acquisition at the end of the year, which was strong. And now as we go into 2021, we're just back on that track of paying down absolute debt. And as I mentioned, with that maturity profile to actually facilitate being able to do that on an absolute basis. So I think, yeah, as we track down lower, there's always going to be opportunity to look at that free cash flow and the optionality there to balance the four pillars. But just here in the near term, we're focused on that absolute debt reduction.

Okay. My second question is just around the sustaining capex of the business. Coming into the downturn, I think it was around a $3.7 billion forecast, now it's $3.0. And I was just wondering how much of that, in retrospect, do you view as cyclical versus structural factors that you've just improved in taking costs out? And just with your updates here around GHG, do you think that there will be incremental changes capital spending required to achieve these objectives that maybe would be considered sustaining capital?

Yeah, the sustained capital, I mean, obviously, there's a lot of factors that change from year to year. Obviously, the cost, the absolute cost of doing business changes, you know, the cost of steel and everything else. So, you know, today, you know, we're at the $3 billion It's based on a balance of pretty much equal oil and gas growth. So to me, it depends on what kind of program we do in the future. A lot of times it depends on where our sustained capital would be. In terms of the GHG piece, it's too early to say in terms of what that capital profile would be. Obviously, A big part of it is going to come out of what the federal government has in mind after this consultation period. And so today I think we'll just look at, you know, participate in that process, and then we'll figure out, you know, what that capital profile could look like. Obviously, you know, carbon capture, the way they had it, obviously lends itself, very good for the bigger facilities, whether they're cement plants or oil sands plants or fertilizer companies. It seems to be targeting some of the larger vendors. So, you know, a lot to see what that whole program looks like here in the future.

Okay. Thank you.

There are no further questions at this time. I turn the call back to management for closing remarks.

Thank you, Operator, and that wraps up our formal presentations. I'd like to thank all of you for your participation this morning. If you do have any questions or follow-ups, please don't hesitate to give us a shout at the IRT. Thank you very much. Take care. Bye.

That concludes today's conference call. Thank you, everybody, for joining. You may now disconnect.