Canadian Natural Resources Limited (CNQ) Earnings Call Transcript & Summary

Good morning. We would like to welcome everyone to the Canadian Natural Resources Limited 2024 Budget Conference Call and Webcast. Presentation slides for this conference call available to view with the webcast and in PDF format at www.cnrl.com. After the presentation, we'll conduct a question-and-answer sessions. Instructions will be given at that time. Please note that this call is being recorded today, December 14, 2023 at 9 a.m. Mountain Time. I would now like to turn the meeting over to your host for today's call, Lance Casson, Manager of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining Canadian Natural's 2024 budget conference call. Slide 2. As the operator mentioned, I will be your host today. Presenting this morning will be Tim McKay, President; Scott Stauth, Chief Operating Officer of Oil Sands; Mark Stainthorpe, Chief Financial Officer. First, Tim will provide an overview of the Canadian Natural Advantage, including strategy, the strength of reserves and balanced long life low decline asset base. Next, Scott will go through details of our 2024 budget and how they translate into long-term shareholder value. Mark will then summarize our shareholder returns, significant free cash flow generation before opening up the line for questions. Please note, the presentation on the webcast is user defined, and we will note slide numbers as we go so you can follow along. Slide 3. I'd like to remind you of our forward-looking statements, and it should be noted that in our reporting disclosures everything is in Canadian dollars, and we report our reserves and production before royalties unless otherwise stated. Additionally, I would suggest to review our comments on non-GAAP disclosures in our financial statements and in the advisory section of today's presentation. With that, I'll turn it over to you, Tim.

Good morning, everyone. Slide 5. Canadian Natural has a proven effective strategy. And as a result, we have sustainable free cash flow through all the cycles, ensuring we can deliver for shareholders. Our strategy is simply to optimize capital allocation to maximize value for our shareholders while ensuring we maintain a strong balance sheet. We have a defined growth value enhancement plan for every product and basin we operate in. Opportunistic acquisitions have always been a part of our strategy. However, we have no gaps in our portfolio and acquisitions need to make sense and add long-term value. We have a diverse balanced asset base across various product types, which we can manage time lines, including our long life low decline assets to grow production and maximize its value. This is a significant difference to most of our peers. This is driven by our safe, effective, efficient operations, our area knowledge, ownership and operatorship of infrastructure. We have a culture of continuous improvement, leveraging technology and innovation throughout the company, which gives us leading environmental, social and governance results. We have a history of capital discipline, operational excellence, low maintenance capital, all of which result in maximizing free cash flow, giving more value to our shareholders. Slide 6. Canadian Natural has a successful track record of balancing our 4 pillars of capital allocation with a focus on maximizing shareholder value. Our 4 pillars are balance sheet strength, return to shareholders, resource value growth and opportunistic acquisitions. Our ability to generate significant sustainable free cash flow ensures a strong balance sheet and sustainable returns to shareholders. We are prudent and disciplined in our allocation to resource development while maintaining flexibility to adjust when necessary. We have a strong track record of effective and efficient operations and low maintenance capital. Finally, our [ prudent ] acquisitions have always been a part of our strategy. We have no gaps and any acquisition must add long-term value. The balancing of these 4 pillars with a focus on value creation maximizes long-term shareholder value. Slide 7. For 2023, with our disciplined capital program, effective and efficient operations, we grew production by approximately 4% and generated significant free cash flow of approximately $6 billion after dividends. We are targeting year-end debt of less than $11 billion. Returns to shareholders have been significant, with the dividend increasing by 18% and total dividends paid approximately $4 billion, share repurchases over $3 billion. Canadian Natural Advantage that are effective and efficient operations, large, high-quality lands and long-life low-decline assets with low maintenance capital delivers significant free cash flow and value to our shareholders. Slide 8. Canadian Natural reserves can only be appreciated when you compare our total proven reserves to our global peers greater than 5 billion barrels BOE. Canadian Natural is the only Canadian company on this chart, and it clearly shows the magnitude and depth of our reserves. Slide 9. Our 1P reserves are the highest among Canadian peers, showing the strength and depth of our assets with approximately 32-year reserve life index, of which 60% of the reserves are high-value SCO, like crude oil and NGLs. Slide 10, Canadian Natural reserves are large and robust. Canadian conventional E&P, we have 2P reserves, approximately 22 Tcf of natural gas and approximately 1.6 billion barrels of NGL, light crude and heavy oil. Thermal and 2P reserves of approximately 5.2 billion barrels. Oil Sands mining and upgrading, 2P reserves of approximately 7.4 billion barrels. Canadian Natural has the depth and optionality, so we can develop our reserves in a pace and timing that gives us value growth, maximizing long-term value. Slide 11. As a result of our overall corporate [ decline ] being 58% being long life, low decline or 0-decline production, our corporate decline is low at approximately 11%, which requires less maintenance capital to maintain production, again, making our free cash flow more predictable and sustainable. Slide 12. Canadian Natural is targeting a balanced and diverse product mix in 2024 with approximately 45% that's high-value light crude oil, SCO and NGL on a BOE basis, 28% heavy oil and 27% natural gas, limiting our exposure to 1 product. For our liquids production, approximately 79% is from long-life, low-decline assets, which have low breakeven and deliver significant free cash flow. I will now turn it over to Scott for a detailed review of our 2024 budget.

Thanks, Tim. I'll now go into some details on our 2024 budget. Slide 14. Our strategy for the 2024 budget is to remain disciplined in our capital investments, and we are in an enviable position with low maintenance capital and top-tier high-value opportunities to execute in the near term while setting up for the future. We are focused on returns on capital and executing on projects that drive the highest returns in our portfolio, while managing while maintaining flexibility based on commodity pricing. The 2024 budget also provides for significant free cash flow generation at current strip pricing, resulting in further returns to shareholders. Slide 15. Our 2024 capital budget is targeted at approximately $5.4 billion, with approximately $2.5 billion on our conventional E&P business and $2.9 billion on our long-life, low-decline thermal and long-life, no decline Oil Sands Mining and Upgrading assets. The company's 2024 budget ensures we have the flexibility to manage effective capital allocation throughout the year. First half of the year will be weighted towards longer cycle projects, primarily thermal in situ and in the second half of the year will shift to shorter cycle development opportunities to better align with the incremental market egress maximizing value for our shareholders. Slide 16. In 2024, our production guidance range is 1.33 million to 1.38 million BOEs per day with a breakdown shown on this slide. This represents targeted production per share growth of between 3% and 7% when compared to 2023 production per share levels based on recent strip pricing. The production growth in 2024 is weighted towards the latter half of the year, and we are targeted to exit 2024 at approximately 1.455 million BOEs per day, an increase of approximately 40,000 BOEs per day from forecasted 2023 exit rates. The activity we are doing in 2024 will drive targeted 2025 annual production growth of approximately 4% to 5% compared to 2024 targeted annual average production level. Slide 17, we've outlined our targeted drilling activity levels. In the first half of the year, the drilling program is weighted more towards longer cycle projects with 5 rigs on thermal in situ assets, 5 on light crude oil and natural gas and 2 on conventional heavy crude oil. It takes approximately 1 year from the time we start drilling the thermal pad to when production is brought online. So these are longer cycle drilling activity. In the second half of the year, assuming commodity prices do not have material price declines, the program will shift more towards shorter cycle development opportunities to better align with incremental market egress with the thermal rigs dropping to 2, the light crude oil and natural gas rigs increasing from 5 to 7, primarily targeting the liquid-rich Montney and the primary heavy crude oil increasing from 2 to 7 as we wrap up the multilateral Mannville heavy oil program and Clearwater in the later half of the year. This will result in higher exit rate growth versus annual average production growth. Slide 18. Our conventional E&P activity is disciplined, focused on capital-efficient drill-to-fill opportunities. Approximately 65% of total convention wells are targeted to be drilled in the second half of the year. Across extensive liquid-rich natural gas and light crude oil assets in British Columbia and Alberta, we are targeting to drill 134 net wells. The program consists of 91 net natural gas wells, of which approximately 70% are targeting liquid-rich Montney formations and 43 net light crude oil wells. We're continuing with our successful heavy crude oil program with 135 of 154 total wells to be drilled as multilaterals, targeting the Mannville and Clearwater formations. Approximately 80% of the multilateral heavy crude oil program is weighted to the second half of the year. As I outlined earlier, we believe this program allows us to better align with incremental market egress and potentially improved commodity pricing, maximizing value for our shareholders. Slide 19. Under thermal in situ assets, we are continuing to develop the resource with capital-efficient drill-to-fill pad adds. In 2024, we will be drilling 4 additional pads that will add production in 2025. At Primrose, we are targeting to drill 2 CSS pads, which are targeted to come online in Q2 of '25 and 1 SAGD pad at Wolf Lake, which is targeted to come online in production in Q1 of '25. At Jackfish, we are targeting to drill 1 SAGD pad in 2024 with production from this pad targeted to come on in Q3 of '25. At Kirby, we are targeting to begin solvent injection in Q2 on the commercial scale solvent SAGD pad development with the objective to reduce steam oil ratio by up to 50% and reduce the greenhouse gas intensity by approximately 40% to 50%, while realizing high solid recoveries. This commercial solvent pad project will help us further evaluate our drill-to-fill growth opportunities in our thermal SAGD areas. As part of our long-term thermal in situ development plan at Pike, we are planning to start drilling activities late in Q4 '24, which is targeted to add low-cost drill to fill production of approximately 25,000 barrels per day targeted for 2027, utilizing the Jackfish facilities. Slide 20, Oil Sands Mining and Upgrading. In 2024, we continue our growth opportunities to debottleneck and increase production at both Horizon and at the Athabasca Oil Sands Project, AOSP. At Horizon, the company plans to complete the remaining components and tie-ins related to the reliability enhancement project during the planned turnaround in Q2 of '24. This project targets to increase capacity of 0 decline high-value SCO production at Horizon over a 2-year time frame by shifting to planned turnarounds to once every 2 years from the current annual [ circle ]. 2025 will be the first nonturnaround year. Horizon's annual production is targeted to increase approximately 28,000 barrels per day in 2025 with a 2-year average annual SCO capacity at Horizon targeted to increase by approximately 14,000 barrels per day. At the Scotford upgrader during the 49-day turnaround in Q4 of '24, a debottlenecking project will be completed, which targets to add incremental capacity at AOSP of approximately 5,600 barrels per day net to Canadian Natural. Slide 21. Our next long-term incremental growth opportunity at Horizon will come from increased SCO production by recovering bitumen and diluent in the tailings. We call this process NRUTT, which stands for Naphtha Recovery Unit Tailings Treatment. This tailings treatment projects target significant environmental improvement benefits while adding incremental production of approximately 6,300 barrels per day of SCO for the life of the mine operation once the project is complete. By recovering the bitumen and naphtha in the tailings stream from the existing froth treatment facility, we will target to reduce greenhouse gas emissions by approximately 308,000 tons of CO2 equivalent per year. This represents an estimated 6% of Horizon Scope 1 emissions. Future reclamation costs of approximately $700 million over the life of the project are targeted to be avoided with the addition of this new unit. This project is targeted for completion in Q3 of 2027 as a total capital investment of approximately $350 million, of which $48 million is in our 2024 budget. This project is a good example of our focus on adding shareholder value and reducing our environmental footprint. Slide 22. Lastly, before I hand it over to Mark, on Slide 22, we show strong production per share growth over the past 5 years with a CAGR of approximately 7%. We are targeting to grow production by approximately 40,000 BOEs per day from 2023 exit rates to 2024 exit rates as we are better aligned with incremental market egress, all of which sets us up for a strong production growth in 2025 across all of our assets. Now over to you, Mark, to highlight our shareholder returns.

Thanks, Scott. Starting on Slide 24. You see the significant returns to shareholders we have been able to deliver in 2023. We have returned a total of $6.75 per share to shareholders through dividends totaling $3.55 per share and share repurchases amounting to approximately $3.20 per share, all while continuing to reduce net debt and strengthen the balance sheet. In 2024, we remain focused on increasing returns to shareholders as demonstrated with the most recent increase to the quarterly dividend to $1 per share payable in January as well as increasing the percentage of free cash flow allocated to shareholders to 100% when net debt reaches $10 billion, which is currently targeted for Q1 2024. Slide 25 demonstrates the long history of growing returns to shareholders through share repurchases and the dividend with 24 consecutive years of dividend increases, representing a 21% CAGR over that time period. We are able to sustain our dividend through commodity price cycles given our high-value, long-life low-decline production base, effective and efficient operations and low-cost structure that provide low breakeven costs. These are significant advantages, which drive sustainable free cash flow. On Slide 26, the sustainability of our business model and the ability to deliver returns to shareholders over the long term is proven in our dividend history, particularly when you compare to a global peer group. Canadian Natural dividend has not only been sustainable, but our compound annual growth rate over the last 10 years is leading, significantly higher than the peer average and more than double our nearest competitor. This demonstrates the uniqueness of our asset base that provides a long-term competitive advantage. On Slide 27, when you look at our free cash flow sensitivity from USD 65 to USD 95 WTI, it climbs very rapidly as a result of Canadian Natural having high-quality assets, effective and efficient operations and a top-tier cost structure and our continuous improvement culture. This provides significant free cash flow at lower commodity prices while also providing upside in higher commodity environments, driven by our strategic and disciplined capital programs with large diverse opportunities in our portfolio. So in summary, on Slide 28, as we enter 2024, our financial position is very strong and getting stronger. For 2024, we have a disciplined pattern for value growth with our strong and diverse asset base. As a result of this asset base, we can manage the timing of our growth projects to ensure the best opportunity for value creation. This is evident in the 2024 as we weight our drilling program to the long-life assets in thermal in the first half of the year that will deliver production after 2024 and short-cycle opportunities in the second half of the year. This optionality better aligns with market egress and most importantly, provides flexibility to manage the 2024 capital program effectively should commodity prices change. Our teams will continue to focus on effective and efficient operations and drive continuous improvement in all aspects of our business, supported by their area expertise, extensive infrastructure and available facility capacity. Our environmental, social and governance stewardship is industry-leading, and in 2024, we will continue to drive these initiatives. Finally, our unique asset base has low maintenance capital compared to a typical E&P company and facilitates maximizing free cash flow in 2024 as we target to move to 100% of free cash flow allocated to shareholders at the end of Q1 '24. This sets Canadian Natural apart from the peer group and drives more long-term value to our shareholders. That concludes our presentation. We'll now open it up for questions.

[Operator Instructions] Your first question comes from Dennis Fong from CIBC World Markets.

I really appreciate you providing the context and details throughout the presentation. My first question is related to the strategic development in your Oil Sands Mining and Upgrading business. You've outlined the production benefit from these number of projects. But I was hoping you could provide some commentary and also help us quantify some of the cash cost savings as well as kind of capital cost savings you're seeing through these reliability projects that extend timing between turnarounds and even in that recovery unit tailings treatment project. I understand the $700 million that you outlined in the presentation.

Sure. It's Scott here, Dennis. So I think as an example of the opportunity you're talking about, when you skip a turnaround over a second year of Horizon with the reliability project here, you're saving in the order of $75-plus million a year. And essentially, in those assets, all the operating costs are fixed. And so even the project that we're talking about for the diluent and bitumen recovery project, the same thing, basically the operating costs are essentially fixed. So those barrels come online at very small incremental operating costs. So it all helps to reduce the overall operating cost per barrel. So those are significant incremental operating cost reduction projects.

Great. I appreciate the context there. Shifting gears and maybe staying within operations. You highlighted current production in around 95,000 barrels a day at Wolf Lake Primrose. And in the 2024 budget, you outlined additional CSS pads at Primrose as well as the SAGD pad at Wolf Lake coming on stream in 2025. Will those be enough to get you to backfill total capacity of about 140,000 barrels a day? And how are you thinking about managing that asset in a drill-to-fill program kind of ongoing?

Yes, Dennis, we'll continue to work with our drill-to-fill opportunities at Primrose, those 2 pads that we'll be adding in 2024 will not fill the capacity of the total oil fleet processing capacity. But we certainly have the inventory to be able to continue to add pads where we're grateful we got the opportunity to have that additional capacity. We don't have to build it out to increase our pads as we move along in the program here, but it won't reach the 140,000 barrels per day with the 2024 program.

Your next question comes from Greg Pardy from RBC Capital Markets.

It's Justin Ho on for Greg Pardy. First of all, I just wanted to ask about the $635 million of expected abandonment expenditures next year. It seems like this moved up quite meaningfully year-over-year and the classification did change from now being excluded in CapEx. So I was just wondering if you could provide any additional color on that figure.

Justin, it's Mark. Really, there's a few points to make on why the change and the size of the abandonment program. So first off, it's really the $5.4 billion capital program that reflects and drives our business and our growth. and the abandonment of expenditures are somewhat discretionary, although we do want to continue to remain committed to our environmental stewardship. And then when we look at the peer group, it appears that our peers don't include it as well. So we want to make sure there's some consistency there. And finally, we do book these costs as an ARO liability already on our balance sheet. And the final comment there just around the program at $635 million. We, of course, have North Sea spending. So there's about $200 million of that is in the North Sea in 2024. And recall, we've had previous paid corporate tax and BRT tax and interest that will be recoverable from those expenditures in the 70% to 75% area. So if you put it in your capital program, you don't really reflect the net amount. So it makes more sense to exclude it and the $5.4 billion is really what is driving our business growth.

Okay. That's great. Just switching gears here, if I can. Given the exit rate of about 1.455 million BOEs per day at the end of 2024, I just wanted to ask if it would be reasonable to think of that as a run rate for 2025 production volumes? And what could that mix of production look like in 2025?

Yes. I think you'd look at a similar mix there. And I think we've...

I think, Justin, the one thing to think about is we have a bit of a setup here for 2024 going into 2025, and we've provided some indication of that. So when you look at the average 2024 volumes, we expect to grow somewhere in that 4% to 5% into 2025. Of course, that will depend what goes on in the latter half of 2024, but that's currently kind of the target given this program today going into next year.

Your next question comes from Neil Mehta from Goldman Sachs.

This is Nicolette Slusser on for Neil Mehta. So just a bit of a clarification question on the CapEx point. If we're thinking about 2023 versus 2024 ex abandonment, that would really mean 2023 CapEx going from about $5 billion to 2024 going to about $5.4 billion. And then maybe as we think about 2024 and beyond, is there any sort of sense you can give us as base production grows, what the split might look like between sustaining CapEx and then growth going forward?

Yes. So it's Mark. So I think you're very close there, about $5 billion in 2023, roughly before the abandonment expenditures. So that's correct. I think when you think about maintenance capital and base capital for us, particularly for us, you have to think of it over a longer time period. just because of the nature of the timing of the turnarounds in particular, when you look at Horizon now moving from every year type of 2 years, we've always had that long-term maintenance capital of about $8 to $9 a barrel. Certain years, it will be a little bit higher than that. 2024 would be slightly higher than that, given some of the turnaround activity going on.

Pretty clear. And then I just wanted to get some sense on TMX. I know some of the projects coming online in the back half of 2024 are not somewhat dependent, but are just thoughtful of TMX coming online next year. Any color on the timing for that? And then just no change to the 1Q '24 expected net debt target regardless of kind of the WCS outlook?

Yes. So it's Scott here. Just in terms of TMX, there's no new information. They announced on December 5, they were 97.8% complete. That's the information we have. We know that they went in front of the CER with the variance on the pipeline side, that was denied by the CER. We're waiting to hear back from Trans Mountain just in terms of the next steps from here. And we think we've got our timing set appropriately in terms of our capital development to match up with that how TMX is going to come online.

And then just on your second question around the net debt being achievable. Of course, it will be impacted by changing in prices as it changes in our cash flow. But as we look at it today, we still target that Q1 '24 time frame.

Your next question comes from Manav Gupta from UBS.

I was wondering you do a lot of extensive macro work. We know that. And if I could pick your brain a little on the crude market, do you expect the markets to tighten as we go into 2024 with opaque or stuff? Or do you expect the current status to continue in 2024. If you could help us understand your perspective on crude macro a little?

Yes. Good question, Manav. I think if you look at the way the market is going, OPEC is working to keep the market balanced. We don't see that changing significantly. And so really no, I don't see anything changing from where the current status is going forward here. And the one thing about our company is we're able to manage flexibility based on commodity prices, and we'll adjust accordingly if we have to, but we don't see anything significantly change in the overall market.

Perfect. The other question we are getting from investors is, again, you have a lot more insight into this. So WCS spread kind of moved out to that 27, 28 and they have started to come back towards 20%. But the [indiscernible] crude spread is still pretty wide. So people trying to understand why is one spread narrowing and the other one is still holding out? Is this something very temporary, if any, you have any insights into that?

Yes, Manav, if you look at the SCO volumes, they're strong in the quarter. And if you look at some of the activity from the refining perspective, some of the facilities are still ramping up to higher processing numbers. And so I think as those refineries ramp up their rates that will help move some of the crude a little bit more. But I think the basis on your question in terms of the spread is very high strong volumes coming out of the total SCO production areas.

Your next question comes from the Doug Leggate from Bank of America.

This is [ Kalein ] for Doug. My question is on your production per share comments. And I guess I'm looking for a little bit of definition here. Obviously, there's 2 pieces. There's a production growth piece and a share repurchase piece. And from our perspective and using strip the low end of your 3% to 7% target looks achieved through a flat production and the buybacks and the high end reflects obviously the high end of your production guide. So I guess, first off, can you confirm what price deck you guys used? And maybe second, can you perhaps call out any calls on cash that may not be obvious next year, be it debt repayments or tax payments or et cetera, because that adds implications for your free cash.

Yes. Sure. It's Mark here. You'll find some of the pricing assumptions that was done here and we used late November pricing at the time we we're building. So it's in the $75 WTI range, and you'll find some of the other commodities there as well. So I think you've understood it correctly, we're taking the range and looking at what the cash flow and buyback program might be. Now of course, there is several different factors that go into later modeling, depending on what you use. And then as far as any significant sort of outflows or payments, not to the same extent we've seen in previous years. So for example, tax installment in Q1 2023 will not be there in 2024 because we've already installed at the right amount. So really that's it.

Got it. Second question, I just want to follow up on the '25 ramp question. So as you guys think about '25, you'll likely have a tailwind from those shorter-cycle projects from the second half of 2024. I guess I'm trying to think about how that trends into '25. Would the plan be to keep those shorter-cycle asset classes flatter as you get into '25? Or does it get backfilled by the in situ pads that are coming online in '25?

So I think if you look at just where we've guided towards for 2025 of that 4% to 5%, in terms of the activity levels for short cycle for 2025, it will be completely based on our returns that we're getting on those short-cycle projects at the time. So too early to say how exactly 2025 would be laid out in terms of activities in the first half of next year versus the second half of '25. And we'll make those decisions and we move along here based on what the commodity prices are.

That's helpful.

Yes. And please just contact or group if you have any kind of detailed modeling questions.

[Operator Instructions] Your next question comes from Mike Dunn from Stifel.

I just had a question on the Scotford debottleneck project you announced here. Is that incremental capacity? Is that essentially all of the light sweet variety? Or is there a lot of the heavier grade in that? And any sense orders of magnitude for what that cost is for you guys? I mean, I guess the initial look at your guidance this morning had the spending higher than consensus and maybe the production more or less the same. But back in the day, upgraded Oil Sands expansions used to cost about $100,000 of flowing. So it might be kind of a net-net wash in that regard.

Yes. I think in terms of the 5,600 barrels, we've been working on that project with Scotford and the operator there over the past couple of years is just simply an increase in some pump size and some piping capacities. And so most of the spend there is actually already behind us. There's not a lot of spend left in 2024. So it's basically waiting for the timing to come down for a cycle of a turnaround to basically tie everything in there.

Your next question comes from John Edelman from Jefferies.

I just had one on the increase in E&P conventional spending. It seems like it's kind of counter to what a lot of the U.S. E&Ps have kind of talked about in terms of looking at a bit of deflation next year. I was just trying to get any color around what you think some of the biggest impacts are on spending in Canada right now kind of creating that inflationary tailwind or headwind? And kind of what could call on that going forward or if we're kind of at a peak, I guess?

Well, the one thing you have to remember about our program, sorry, it's Mark here. The program is set up for those conventional, little largest amount of the conventional spend being done in the second half of the year. And really, that's going to provide us a lot of flexibility to manage the right product at the right time, depending on where cost structures are and with the returns on capital. When we look at inflation, I think we're starting to see a plateau. And what will bring it down will depend on activity in our areas. And we have our teams working very hard on continuous improvement to make sure we find ways to offset those inflationary pressures, increase our reliability and drive down our costs overall.

Okay. Great. And I guess also, I noticed the AECO deck is on a flat kind of $4.20-ish low $4 deck and you're looking at some pretty good increases in natural gas production going forward. Is on a flat deck, is that something that you would continue to look for beyond 2024 where natural gas production should increase at a pretty substantial clip.

Yes, I don't know where the $4 AECO is coming from. But when we look at our programs, when you look at the natural gas spending, it's all liquids-rich Montney spending. So a lot of that is driven by liquids volumes.

And there are no further questions at this time. I will turn the call back over to Lance for closing remarks.

Thank you, operator. If you have any follow-up questions, please give us a call. We'd like to wish everyone the best over the holidays. Thanks, and have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for joining, and you may now disconnect your lines. Thank you.