Cenovus Energy Inc

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Synovus Energy's third quarter results conference call. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. You can join the queue at any time by pressing star 1. Members of the investment community will have the opportunity to ask questions first. At the conclusion of that session, members of the media may then ask questions. Please be advised that this conference call may not be recorded or rebroadcast without the express consent of Synovus Energy. I would now like to turn the conference call over to Ms. Sherry Wendt, Director, Investor Relations. Please go ahead, Ms. Wendt.

Thank you, Operator, and welcome everyone to our third quarter 2020 results conference call. Here with me is our President and Chief Executive Officer, Alex Porbet, our Chief Financial Officer, John McKenzie, our Executive Vice President Upstream, Nori Ramsey, and our Executive Vice President, Downstream, Keith Chesson. I refer you to the advisories located at the end of today's news release. These advisories describe the forward-looking information, non-GAAP measures, and oil and gas terms referred to today, and outline the risk factors and assumptions relevant to this discussion. Additional information is available in our annual MD&A and our most recent annual information forum and Forum 40F. The quarterly results have been presented in Canadian dollars and on a before royalties basis. We have also posted our results on our website at synovus.com. Alex will provide brief comments, and then we will turn to the Q&A portion of the call. Please go ahead, Alex.

Thanks, Sherry, and good morning, everybody. As you know, on Sunday we announced a strategic combination between Synovus and Husky to create a resilient, integrated energy leader. This transaction optimizes our cost structure, expands our market access, and strengthens our balance sheet. It positions us as a more resilient company with increased and more stable free funds flow. It also gives us opportunities to expand margins across the value chain, lowering our break-even, and accelerating deleveraging and returns to shareholders. You have already seen us drive significant costs out of our business through corporate and operating optimizations. I'm extremely confident that we will achieve the goals we have set with the transaction and realize the potential of the combined company. But today I'm here to talk about our third quarter results. I want to start by giving credit to our staff at Synovus for keeping our operations running safely and reliably and for continuing to adapt to all the additional measures we've put in place in response to this pandemic. I continue to be impressed with the dedication of each and every one of our employees and how they continue to support each other through this time. Through all of this, our teams remain focused on delivering safe and reliable operating performance. We've had zero significant incidents across our operations to date in 2020. Our teams have successfully navigated the health and wellness challenges of the pandemic while increasing production and executing planned turnarounds at our two oil sands facilities as well as in our conventional operations. As well, this quarter we saw some significant health and safety milestones across our operations. At Christina Lake, our drilling operations as well as completions and well services teams achieved one year without a recordable incident, and our conventional operations marked a one-year milestone since recording a significant process safety event. This third quarter once again demonstrated our flexibility and ability to utilize our full suite of assets to maximize the price received for every barrel. It reinforced our commitment to disciplined spending, maintaining our low operating and capital cost structure, and deleveraging our balance sheet. As crude oil prices showed signs of a gradual recovery through the summer, we were able to increase our crude oil production and clear our inventory of stored barrels to capitalize on the significantly improved benchmark price for Western Canadian Select. We continued purchasing low-cost production credits from peers so we could produce above our curtailment limit. That allowed us to produce high quarterly volumes at our Christina Lake facility. This increase was partially offset by planned turnaround and maintenance activities. Our oil sands operation this quarter averaged almost 386,000 barrels a day, up from 373,000 barrels a day in the previous quarter, and a 9% increase from the third quarter of 2019. We recorded adjusted funds flow of $414 million, which was a significant increase from the second quarter of 2020, when the unprecedented drop in oil prices resulted in adjusted funds flow of negative $462 million. And we generated free funds flow of $266 million in the third quarter and made meaningful progress on reducing our net debt. At the end of the third quarter, net debt declined to approximately $7.5 billion from $8.2 billion at the end of the second quarter of 2020. We had an operating loss of $452 million and a net loss of $194 million in the third quarter of 2020. The operating loss was largely due to an impairment charge of $450 million on the border refinery and negative operating margin from the refining and marketing segment. While we are pleased with our performance in this quarter, we expect commodity prices volatility for the foreseeable future. That's why we look forward to the increased cash flow stability and enhanced free funds flow the transaction with Husky will provide. With that, I'm happy to take your questions.