Imperial Oil Stock

Good day, and welcome to the Imperial Oil Third Quarter 2026 Earnings Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Peter Shaw, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone, and welcome to our third quarter earnings conference call. I am joined this morning by Imperial's senior management team, including John Whelan, Chairman, President and CEO; Dan Lyons, Senior Vice President, Finance and Administration; Cheryl Gomez-Smith, Senior Vice President of the Upstream; and Scott Maloney, Vice President of the Downstream.

Today's comments include reference to non-GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment 6 of our most recent press release and are available on our website, which relates to this conference call.

Today's comments may contain forward-looking information. Any forward-looking information is not a guarantee of future performance and actual future performance and operating results can vary materially depending on a number of factors and assumptions. Forward-looking information and the risk factors and assumptions are described in further detail on our third quarter earnings release that we issued this morning as well as our most recent Form 10-K. All these documents are available on SEDAR+, EDGAR and our website. So I'd ask you to refer to those.

John is going to start this morning with some opening remarks, and then hand it over to Dan, who is going to provide a financial update, and then John will provide an operational update. Once that is done, we will follow with a Q&A session.

With that, I will turn it over to John for his opening remarks.

Thank you, Peter. Good morning, everybody, and welcome to our third quarter earnings call. I hope everybody is doing well. And as always, we appreciate you taking the time to join us this morning.

Since our last earnings call, we've seen continued volatility in commodity markets driven by geopolitical events, highlighting the important role Canada plays as a reliable supplier of energy and the additional opportunity for Canada to play an even larger role going forward. We have also seen policy announcements to support growth in Canada, such as the productivity mega deduction and regulatory reforms to improve project approval time lines. Governments and industry continue to work closely together to put in place the conditions needed to support a globally competitive, growing and lower emissions Canadian oil sands sector.

I remain encouraged by the progress to date. Further fiscal certainty and regulatory reform can unlock significant industry investment, improving our economy and creating jobs. And Imperial is uniquely positioned with our advantaged portfolio of high-quality, undeveloped resource that underpins the opportunity to materially grow, with the potential to double our gross operated production.

Looking at the current quarter, our results benefited from our integrated business model. In particular, our Downstream segment, which delivered record earnings, reflecting tightness in refined product markets as we continue to reliably deliver the fuels Canadians need. We generated over $3.2 billion of cash flow from operations in the quarter. Excluding the impact of working capital, cash flows from operating activities were nearly $3 billion.

In the quarter, we increased our cash balance to $2.9 billion, even after funding our capital expenditures, dividend payment and accelerated share repurchases. And we continue to see strong market conditions in October. We're on pace to complete our NCIB by year-end and are well positioned to return additional surplus cash to shareholders in the new year.

As we continue to maximize the value of our existing assets, I want to highlight a few key achievements. In the Downstream, I'm particularly pleased with the team's progress in achieving record renewable diesel production, allowing us to provide low-carbon, locally produced renewable diesel fuel to the tight Canadian market while capturing significant ongoing value from this strategic investment.

In the Upstream, we recognize the third quarter was below expectations. The team at Kearl was challenged this quarter with a third-party pipeline outage caused by a transformer failure that resulted in a full production shutdown for a few days. Last quarter, I shared that we were expecting to end the year at the low end of Upstream production guidance range, and we still remain on track at Cold Lake and Syncrude to achieve that. However, as we disclosed in the press release this morning, given the impacts of third-party events on Kearl's year-to-date production, we are now targeting gross annual production of 280,000 barrels per day at Kearl.

Stepping back from the quarter for a moment, I'd like to recognize the team at Kearl for achieving an important milestone: 1 billion barrels of cumulative production in the third quarter. I'm very proud of this accomplishment and the team, and I'm excited for what's to come.

We continue to target higher volumes in the fourth quarter and remain confident in our strategy to maximize value at Kearl and Cold Lake, including previously shared higher volumes and lowering unit cash costs. Overall we feel really good about our strategy and the investments we're making to grow free cash flow, progress long-term growth and return substantial surplus cash to shareholders.

And on that note, I'll pass it over to Dan to talk about our financial performance.

Thanks, John. Starting with financial results for the third quarter, we recorded net income of $2.454 billion, up $1.915 billion from the third quarter of 2025, primarily driven by higher commodity prices. Excluding the impact of $555 million of identified items in the third quarter of 2025, net income increased by $1.360 billion. When comparing sequentially, third quarter net income is up $264 million from the second quarter of 2026, primarily driven by higher margins and volumes in the Downstream, partially offset by lower crude prices.

Now shifting our attention to each business segment and looking sequentially. Upstream earnings of $941 million are down $358 million from the second quarter, primarily due to lower realizations. Downstream earnings of $1.555 billion are up $768 million from the second quarter due to higher margins and volumes. Our Chemical business generated earnings of $52 million, down $13 million from the second quarter.

Moving to cash flow. In the third quarter, we generated about $3.2 billion in cash flows from operating activities. Excluding working capital effects, cash flows from operating activities for the third quarter were nearly $3 billion, up about $1.4 billion from the third quarter of 2025. We ended the quarter in a strong cash position with about $2.9 billion of cash on hand.

Now shifting to CapEx, capital expenditures in the third quarter totaled $668 million, $163 million higher than the third quarter of 2025 and $137 million higher than the second quarter of 2026, driven by timing impacts in the Upstream. In the Upstream, third quarter spending of $514 million focused on sustaining capital at Kearl, Syncrude and Cold Lake. Increases in the quarter were associated with heavy equipment deliveries and project milestones at Kearl as well as mine progression activities at Syncrude. In the Downstream, third quarter CapEx was primarily spent on sustaining capital projects across our refinery network.

Another item of note regarding capital, if the Productivity Mega Deduction becomes law as expected, eligible CapEx associated with assets acquired and available for use after September 14 will provide accelerated tax benefits. This will support added free cash flow generation going forward.

Shifting to shareholder distributions. In the third quarter, we continue to demonstrate our long-standing philosophy of returning free cash flow to shareholders paying $420 million of dividends and returning almost $2.1 billion through accelerated share repurchases under our normal course issuer bid program. We anticipate completing our accelerated NCIB program by year-end.

Commodity prices have remained strong over the first month of the fourth quarter, positioning us for continued robust free cash flow generation as we close the year. We also ended the quarter with a healthy cash balance, as was already stated. These factors, as John noted, leave us well positioned to return additional surplus cash to shareholders in the new year.

Finally, this morning, we declared a fourth quarter dividend of $0.87 per share, in line with our third quarter dividend. Imperial remains committed to shareholder returns as demonstrated by 32 consecutive years of annual dividend growth.

I'll now turn it back to John to discuss the company's operational performance.

Thanks, Dan. I want to take the next few minutes to share key highlights from our operating results.

Upstream production for the quarter averaged 418,000 gross oil equivalent barrels per day, up 4,000 oil equivalent barrels per day versus the second quarter of 2026. This was primarily driven by the absence of the planned Kearl turnaround, partially offset by a third-party pipeline outage, which resulted in a full production shutdown at Kearl for multiple days and the planned turnaround work at Cold Lake and Syncrude.

I'll now cover highlights from each of these assets, starting with Kearl. Kearl's quarterly production was 282,000 barrels per day gross, up 25,000 barrels per day versus the second quarter of 2026. The increase was primarily driven by the absence of the planned turnaround work, partially offset by a third-party pipeline outage caused by an electrical transformer failure. The transformer failure affecting the Woodland Pipeline resulted in a temporary production outage in mid-September. Production was impacted for several days before takeaway capacity was restored.

While the outage impacted production during the quarter, we continued to progress key initiatives on the path to growing Kearl's production to 300,000 barrels per day in 2028. A great example is the successful start-up of our flotation column secondary recovery project. The project adds incremental production by recovering additional bitumen from the ore already being processed through the plant. So this is a highly capital-efficient project with minimal incremental operating cost.

As we look to next year, we're looking forward to realizing the full benefits of the secondary recovery units I just discussed, but also the volume growth that will be supported as we realize the benefits from our prior investments in extending plant turnaround intervals. We have no planned major turnarounds at Kearl in 2027 or 2028. Our next planned major turnaround will be in 2029.

Moving next to Cold Lake highlights. Cold Lake's quarterly production averaged 139,000 barrels per day, down 10,000 barrels per day versus the second quarter of 2026, primarily driven by the planned Mahihkan turnaround work that started in September and was recently completed in October, ahead of schedule and on budget.

In addition, we remain focused on the transformation at Cold Lake, with Leming SAGD ramping up through the quarter and currently producing 10,000 barrels per day. Our Grand Rapids SA-SAGD project continues to exceed expectations with production in excess of 21,000 barrels per day.

Now in terms of future in-situ growth opportunities, on our Aspen lease, we continue to progress the enhanced bitumen recovery technology pilot with startup remaining on track for early 2027. As I look to the future, we've got 3 key high-quality in-situ development opportunities in our portfolio, where we're focused on solvent recovery technology to maximize value. Our Aspen, Clark Creek and Corner assets, together with our advantaged technology, underpin our long-term growth opportunities with the potential over time to double our gross operated upstream prevention.

To round out the Upstream, I'll cover Syncrude results. Imperial share of Syncrude production for the quarter averaged 70,000 barrels per day, down 3,000 barrels per day versus the second quarter of 2026, mainly due to the [ Coker 8-2 ] turnaround, which is now complete. Syncrude continued to utilize the interconnect pipeline to import bitumen and gas oil to ensure high upgrader utilization. This enabled approximately 10,000 barrels per day our share of additional Syncrude suite premium production.

Now let's move to the Downstream. In the third quarter, we refined an average of 381,000 barrels per day, representing a utilization of 88%. Compared to the second quarter of 2026, refinery throughput was up 50,000 barrels per day, mainly driven by the absence of planned turnaround work at Strathcona, partially offset by an unplanned third-party pipeline outage.

At Strathcona, we continued to increase renewable diesel production and reached our highest production to date. Given that renewable diesel is produced from canola feedstocks rather than crude oil, does not contribute to our reported refinery throughput, but it provides a margin uplift, supporting significant ongoing incremental earnings, as reflected in our positive Downstream product mix factor of $170 million in the third quarter and $400 million year-to-date. Work associated with debottlenecking rail logistics at Strathcona to enable higher crude runs while supporting continued growth in canola throughput is progressing well and is anticipated to enhance refinery crude utilization by year-end.

We experienced an 18-day unplanned third-party pipeline outage beginning in late August. The outage reduced feedstock availability across the Downstream and resulted in overall refinery throughput being curtailed approximately 12,000 barrels per day during the quarter. Despite that third-party outage, we remain confident in our Downstream guidance range.

At Sarnia, the team recently completed a planned turnaround that ran from mid-September through late October. The work was completed safely and successfully, ahead of schedule and on budget. With our planned turnarounds now complete, the market conditions -- and market conditions remaining very favorable, we are entering the final months of the year well positioned to maximize available capacity and deliver a strong finish to 2026.

Petroleum product sales were 474,000 barrels per day, up 28,000 barrels per day compared to the second quarter of 2026, primarily driven by opportunistic domestic sales and higher exports. And overall, across our Canadian network, we saw very similar demand for each of our primary petroleum products in the third quarter of '26 relative to 2025.

Turning now to Chemicals. Earnings in the third quarter were $52 million, down from $65 million in the second quarter of 2026, but up $31 million from the third quarter of 2025 due to higher product pricing.

In closing, despite a dynamic external environment, our priorities remain unchanged. We are focused on capturing the full value of our advantaged integrated business, growing profitable volumes, advancing structural cost improvements and increasing cash flow generation. With all our plant turnaround activity complete, we're focused on delivering a strong finish to the year. With the accelerated normal course issuer bid expected to wrap up by year-end, we are well positioned to return additional surplus cash to shareholders in the new year.

We continue to advance our restructuring plans firmly in the implementation phase, guided by a robust and disciplined approach and things are progressing well. And as shared previously, we will capture significant long-term efficiency and effectiveness benefits as we further transform our business, leveraging rapidly advancing technology and ExxonMobil's global capability centers.

Operationally, our focus remains on execution excellence, and we remain confident in our plans to achieve 300,000 barrels per day and a unit cost of $18 per barrel at Kearl and 165,000 barrels per day and a unit cash cost of $13 per barrel at Cold Lake. Through disciplined implementation, we will continue to strengthen the competitiveness of our operations, maximize the value of our asset base and deliver superior long-term returns to our shareholders.

I'm very encouraged by the progress made by governments and industry to improve the investment climate and support global competitiveness for our industry. As I mentioned earlier, further fiscal certainty and regulatory reform can unlock significant opportunities, especially for Imperial, which is uniquely positioned with very material growth potential.

As always, I want to thank our employees for their commitment, expertise, professionalism and teamwork. Their dedication to safe operations, execution excellence and customer and community service is what makes our achievements possible. And I'd like to thank all of you once again for your continued interest and confidence in Imperial.

And with that, we'll move to the Q&A portion of the call, and I'll hand it back to Peter.

Thank you, John. As always, we'd appreciate it if you could limit yourself to one question plus a follow-up so that we can get to all the questions. So with that, operator, could you please open up the lines for questions?

[Operator Instructions] Our first question comes from Greg Pardy from RBC Capital Markets.

John, I wanted to maybe just come back to your comments around -- just around Upstream growth, potentially doubling over time. So the question is as follows, how much appetite does IMO have for Upstream growth? How connected is that to finalization of the MOU? And would any -- essentially, would any of these projects now perhaps start to coincide, like Corner and so forth, start to coincide with the timing on Aspen? So there's a bunch in there, but that's the gist of it, is how much do you want to grow?

Well, thanks for the question, Greg. I think the -- clearly, what's happening externally in the investment climate is really important, and the framework that we put in place with governments, industry put in place with governments through the trilateral nonbinding trilateral MOU, and the work we're doing today to turn that into a definitive agreement and the -- all of the things that we put in there to ensure our businesses are globally competitive, that is really important work.

And again, I'm really pleased with the progress we've made. We continue to work very closely with the government. And you've seen some of the conditions that were in that, or things that we felt needed to be put in place, you see progress made on those already like the accelerated capital cost allowance, the Impact Assessment Act improvements and project time lines. Those were things that we felt we needed to improve the competitive environment, and we see government acting on those. So I feel very encouraged about it.

But I think for us, I mean, we still think about, ultimately, our decision is going to be driven by technology readiness, project economics and, again, that broader fiscal and regulatory environment. I think with all this, our preferred -- of course, as we talked about, we're doing the enhanced bitumen recovery technology pilot. It's going to start up early next year. We've said that's going to take 2 or 3 years to prove out the technology and we'd be in a position to FID Aspen at the end of the decade.

I will tell you though, with everything that's going on in the -- we funded Aspen with SA-SAGD back in 2018. And we've got, I would say, reinforced even further confidence in that technology because of our experience at Grand Rapids. It's probably -- it's performed beyond our expectations. And we've learned things from that, that we can build into it to make SA-SAGD even better.

So I will say with our enhanced understanding, confidence and improvements around SA-SAGD, and looking at the timing for the Ebert technology, which is still our preferred long-term development, we will look at, is there -- do we want to bring Aspen forward? So instead of that FID at the end of the decade, we are looking at, do we want to bring it forward? And we have options, I think, in the technology we may use for an initial phase. Again, Ebert is still our preferred long-term development.

So we're going to certainly test that optionality. But ultimately, we'll be driven by technology, project economics in the fiscal environment. I'm really encouraged by what I'm seeing. I still -- I don't see us doing Aspen, Clark Creek and Corner all in parallel. I still see us sequencing those things where we kind of get into a program of work. If you think about all the work that has to be done, I think we still see the benefits of kind of design one, build many, and a program of work where you can ramp up to a rate and execute efficiently.

So I don't see kind of bringing them all forward, doing them all in parallel. I do see the possibility that we'll look at Aspen and the timing of that, and then we'll try to execute this as a program. So I hope that covers what you think about that.

Yes. No, no. I think that's a very, very fair answer. I mean there's a lot of moving pieces and so on. So I'm glad, secondly, just glad you brought up your unit cost targets with Cold Lake and then with Kearl. So as you reflect maybe on [ CAL 26 ] operating performance, like not Imperial's finest, but that being said, it certainly appears as though a lot of the factors have been external and to some extent, one-offs. Is that a fair characterization?

And then as you think about it and talk to your team and so forth in terms of the achievements that you have on unit OpEx, like the objectives you have at unit OpEx, are those -- do those numbers continue to be, in your view, pretty highly achievable in part because of the volume growth you see? I'm putting words in your mouth, but I just want to make sure I'm characterizing the right way.

No, you are, Greg, exactly as we see it. We have -- our volumes were a little lower this year than we were looking for. And you're right, a number of third-party impacts on us. As we've looked across the performance of the assets, we don't see systemic issues. We see one-offs that we're going to learn from. We dig into, we learn from those. We see nothing in the underlying performance that causes us any doubt whatsoever on our future targets around volumes growth and unit cost reduction.

And all the fundamentals that were in place to get to those rates and unit cost numbers are in place: the secondary recovery projects, the longer time between shutdowns, the improvement of productivity and recovery. All of those fundamentals are in place. So we remain very, very confident on those plans. And there's nothing in the performance this year that causes us any doubt whatsoever on that.

Our next question is from Manav Gupta from UBS.

My quick question, I'll have 2 questions, and I'll ask them upfront. First, your cash is building, you're generating a lot of cash. And I'm just trying to understand, once the NCIB finishes, are there more ways you can return more cash to the shareholders?

And my second question, I asked the same question to your parent, your outlook on your global refining? And when do you see -- how long do you see these margins elevated? If you could talk a little bit about that.

I'm going to start with the refinery and the Downstream margins, and then I'm going to come back to the capital allocation question. First off, we feel really good about our Downstream business, and you saw it in the results in the quarter. But we've got a very strong business here with high margins in the base case, extremely high margins at the moment, lots of barriers to entry. So we feel good about our logistics, low-cost, Western Canada crude at export parity, import parity in terms of our products that we sell, and very strong brands with Esso and Mobil. So it's a business we feel really good about and the structural advantages that we have in place there.

With the current geopolitical situation, which started with a supply shock in the environment and elevated refining margins, we do feel -- it's hard to say for sure how long it will persist, but we do feel that it could persist for longer. I mean it started with the supply shock, but kind of what we're seeing right now is, interestingly, the crude supply has, not fully, but significantly recovered. But the refining capacity recovered much more slowly.

And 3 aspects of that. We've got Russia with running at about 50% utilization of their refinery network. So if you look at that versus the crisis in Ukraine, they've got about 1.3 million barrels a day of refining capacity off-line. We see Middle East shipping. While the crude shipments are now at about 70% of the pre-conflict period, maybe even a little higher, the refined products coming out of -- through the strait are only about 35% of what they were before. So there's limited refined capacity there. And then we have China with export restrictions on their refined products.

So it does appear that refining capacity, it has been more slow to recover. It's a little uncertain how all those things play out, and the pace of recovery will be an important factor on it. But there's a lot of things that have to recover to see the margins -- to see the margins go back to where they were before. So we feel very good about the business, and I think we're probably going to see margins to a degree into the future as well.

And then in terms of capital allocation, the main thing I would tell you is nothing has changed in our philosophy on capital allocation. We're sitting on a strong cash balance today. We're going into the fourth quarter with what looks like strong margins at this point in time as well. And obviously, we'll look at the options for returning surplus cash in the new year. But our philosophy hasn't changed. We have a track record of returning surplus cash to shareholders. We're comfortable with where our debt is. We're not trying to allocate capital to that. Our goal is to return 100% of our surplus cash to shareholders. If you look back over the last 5 years, we generated $25 billion of free cash flow and we returned $24 billion.

And so I think we're well -- that philosophy hasn't changed, and it will always depend on commodity prices and things, but I think we're in a strong position to continue to return surplus cash flow in the new year.

Dan, do you want to add to that?

Maybe I'll just add a little bit because you said, do we have tools other than the NCIB? Obviously, we, as I said, we plan to wrap up our NCIB this quarter. And we can't renew the NCIB until the end of late June in 2027. So if -- share buybacks earlier in the year would have to be through a substantial issuer bid, which is the tool we've used in the past on numerous occasions. So yes, we do have tools.

And as John said, our cash is strong now. I mean with commodity prices where they are, despite doing the accelerated NCIB in the fourth quarter, there's every chance that our cash balance will actually grow. So it looks like -- we'll see what happens, it looks like we'll have a substantial cash balance at year-end, and our long-standing philosophy is to return that timely to shareholders. So just a little more color.

Our next question is from Aayush Gupta from Wolfe Research.

This is Aayush Gupta on behalf of Doug Leggate and Wolfe Research. Congrats on a solid quarter. I was wondering about the WCI -- WCS discount. Where do you see the WCS discount heading into 2027? And what's really driving that? And how do you manage that exposure?

Yes. Thank you, Aayush. And I'm getting used to the technology as well. I think, Manav, the last question was from you, and I indicated it was Aayush.

All good.

Well, certainly, we have seen the WCS differential widen. We have seen that over the last number of months. And a number of things causing that. Obviously, a strong pull on light barrels globally relative to heavy barrels when you look at the refining utilization and cracks around distillates. So we have seen that widen, and then some increased supply on heavy oil, both from Canada, Venezuela and the Middle East. So those things have contributed to that.

We do anticipate that the differential will widen in the fourth quarter. We're starting to see that. And most of that is driven by the sharp increase in freight rates out of the Gulf Coast. Transportation costs are up significantly, 8 to 10x. And VLCCs are going for close to USD 1 million a day in freight rates. So we do see that contributing to higher differentials in the fourth quarter.

That said, the absolute price of WCS remains extremely constructive. When you look at where WTI is, yes, the WTI is up, the differential has widened, but the WCS price remains very constructive. And at the end of the day, we recognize we don't control those things, and our focus is on, as you've heard from us before, low-price resiliency in the business. We have very low cash breakevens, less than $25 a barrel WTI for the business. When you include the dividend and sustaining capital, less than $35 a barrel. So again, we've got a business that's designed across a broad range of price forecasts. But even with these higher differentials, WCS remains very constructive.

Our next question comes from Menno Hulshof also from TD Securities.

I'll just start with one on the Upstream outlook to the end of the year, which you did touch on in your opening remarks. Can you maybe just give us sort of a sense of what the book ends on Q4 production could look like? And where could we see the sort of the biggest increases or decreases at the asset level through the end of the year?

Well, I mean, I think, again, we look to finish the year strong on all our assets. We've got all of our planned turnarounds behind us. We don't -- so -- and the signal is very clear, to maximize production. So I think when you look across all of them, we've got a clean run coming into the fourth quarter and good conditions to have a good, strong fourth quarter. I can't be very specific on all of them, other than the kind of commentary we've provided. We did indicate the last quarter, we thought we'd be at the low end of the upstream guidance. We've shared that Cold Lake and Syncrude kind of remain in that area. And then we indicated where Kearl, where we thought the outlook, the target for us for the total year for Kearl is now, below the low end of the Kearl specific guidance by about 5 kbd at 280 kbd for the year.

But we're in a good place, I think, Menno, for a strong fourth quarter. No planned shutdowns, and that's what we're looking to do.

Great, John. And then the second question, it probably ties a bit into what Greg was asking, just conversion to the MOU into definitive agreements. Is there anything you can share in terms of confidence swell in hitting the November 15 deadline since it's only a couple of weeks away? And then, I guess, as a follow-up to that, is it fair to assume that we won't get an announcement on royalty concessions until all of that gets nailed down?

Yes. I mean I think one piece of this, obviously, is growth royalty incentives, which we're working with the province, and I can't really speak to when the province will feel comfortable to make announcements around that.

What I can really say is, look, I remain really optimistic and encouraged by the progress that we've made. And we've got our federal government, provincial government in Alberta looking to, as their stated objectives, energy superpower for Canada, doubling production in Alberta. That's very constructive.

And then I will tell you, industry, our Oil Sands Alliance, myself and my counterparts in the Oil Sands Alliance. We continue to meet every single week on this topic. And we have people on our teams working with both the federal and provincial government every day to progress what we put together in the nonbinding MOU. We're all targeting towards November 15. I would tell you there's a lot of work -- there's still a lot of work left to do. You're right, it's only a couple of weeks away. But there's no lack of energy or desire to get to a definitive agreement. The exact timing, we're going to make sure we do all the things that -- the right things that enable us to execute on the definitive agreement. So most importantly is, for me, is the shared ambition to make this happen and the work that's going into that. And I remain really encouraged about where we are.

Our next question is from Patrick O'Rourke from ATB Cormark Capital Markets.

I guess maybe just a little bit more on the question asked by Menno, but in particular with Kearl. If you look at the new guidance implies a pretty strong end of the year for that particular asset that would be within a rounding error of record performance for the asset. We're 1/3 of the way into the quarter here. Can you maybe comment on how that particular asset is performing? I know one of the benchmarks you look at is the sort of high output days above 300,000 barrels per day.

Yes. I'll say a few words and then ask Cheryl to chime in as well. But you're right, and we -- the 280 does -- the numbers that you described are correct. And that's exactly the target we put out for our team. And we've done it before, and we feel confident about where we are with all of our scheduled work behind us.

As we talked about in some of the other questions, you look at some of the things that we've experienced, including in this quarter, third-party-related outages. So when we look at the fundamentals of the assets, we feel we are capable of putting record performance on the board. We have to deliver that, but we feel the capability is there to do it. And I'll ask Cheryl to chime in with a little more color.

Sure. I'll add a little bit more in terms of our confidence to get there. One of the few things, and this really gets to the how we're going to do that. We've already advanced our mine sequencing, and that's really to increase the tonnage to the plant to do exactly what you're talking about. The interesting part, of course, is we're heading into winter, so we're already staging more ripping dozers. When you get to these open mine faces, you want to have those ripping dozers as well as [indiscernible] active shovel face. So that's just getting ourselves set up.

The other help in this space is we have more engineered roads than we've had in history. And what we know about that is our trucks like to run better on those engineered routes. The final thing I'll tell you is that with our 797s, they have built-in features, which improve wheel traction. So in the upcoming weather, they run better. So all of this in mind sets us up for how we're going to deliver, which, to your point, is going to be one of our best ever fourth quarters, but setting ourselves up to deliver that.

Okay. Great. And another question here, just with respect to the RD, things look like they're going really, really well. It looks like the federal government is considering some changes to the CFR and some of the credits associated with renewable diesel domestically produced. What sort of impact would that have from a financial perspective? And from the way at least I'm reading, you can correct me if I'm wrong, some of those enhancements to the credit factor would be retroactive back to the start of the year in how that would be recognized by Imperial?

Yes, Patrick, I'll say a few words, then I'll hand over to Scott. But I would just at the highest level when I think about this project, which we feel really good about, and the stronger performance that we're now seeing enables us to better able to capture higher margins driven by the tightening in the U.S. market fundamentals and so on. What I would tell you overall is that we've evaluated this project over a broad range of market and policy scenarios, and we're very comfortable with the resilience of the project over those, over a broad range of those. It's not a single regulation in a single jurisdiction that we're reliant on. So there's a number of things that make this project work, and it is working for us.

In terms of this specific -- the clean fuels regulation, I will tell you, we're working very closely with the government. We provide input to that. And so we're not uncomfortable with where this is headed. And I'll ask Scott to say a few more words about it.

Sure. Yes, John. Thanks for your question, Patrick. Yes, as John mentioned, we worked really closely with the government on the what I would call tweaks to the clean fuels regulation that's being proposed now. Really, the objective behind that is try to make sure that the program is balanced with the amount of credits that can be generated with the obligation that continues to increase as we go year-on-year, to really reduce the carbon intensity in the market of these fuels.

And so that balance is what's helpful for that program to remain effective, and we're very confident in our renewable diesel project will continue to be a key contributor to generate credits to maintain that balance. And so we're pretty confident about the outlook today, as John mentioned, but even in the future scenario with these potential tweaks coming into play.

Our next question is from Dennis Fong from CIBC.

I would say the first one that I have here is focused a little bit on the downstream flexibility, and maybe follows along the lines of a couple of the predecessor questions. Can you remind us as the flexibility Imperial has in terms of processing their own barrels or flexing towards more heavy, again, in light of the wider WCS differentials as well as the preferences in terms of obviously capturing a greater amount of diesel output just again given the refined product pricing in the market?

Yes. Thanks for the question, Dennis. And again, I'll say a few words, then I'm going to pass it over to Scott. I mean we do have -- I'll let Scott talk about the specifics. We do have some flexibility on the amount of heavy we run, there's some limits to that, but we do have some flexibility on the amount of heavy. And we do have some flexibility on the products we generate.

And obviously, right now, we're -- Scott's team is looking at that every day, every hour and optimizing what product -- what feedstock we take in and what products we develop -- we produce, within the range of -- there are some limits, clearly. These are big refineries and they are piped up a certain way. But we do have flexibility and we optimize that on a daily basis. But I'll let Scott talk about a little more of the details around that.

Sure. Yes. Thanks for the question, Dennis. As we think about the downstream business, we think about flexibility in a few different ways. The first one is getting the right feedstocks to run in our refineries to make the products with the highest uplift. And I've kind of shared that on a couple of prior quarters, about how we're targeting the most profitable barrels that we can run and then produce finished products in.

In our specific business, we do have some uniqueness with the [indiscernible] unit in our Sarnia refinery that allows us to ramp up some of those heavier crudes. That supports us taking advantage of some of these market considerations. And then when you think about finished product production, we also have the ability to ramp up what we call maximum distillate signals versus maximum gasoline signals as we're thinking about producing products in our refineries.

And so the way we're thinking about it in this current environment is we're running our refineries to make enough gasoline to meet all of the needs for the Canadian consumers. And then what we're doing with the refinery is tuning up to go from a maximum distillate signal on top of that, so we can actually get more access to the diesel and jet barrels that are more profitable in the market right now. And so that's how we run our refineries.

And then thinking about flexibility, we also think about it quite a bit in our midstream logistics network as well. And so I've shared that before, that once you have these products, then we utilize that coast-to-coast logistics setup that we have to most efficiently get the product to the market that need it the most. And so that also gives us an advantage and the full value share of the fuels business.

And so that's how we think about it. And we set our teams up to run efficiently in the base case. And then that allows us to have access to higher margins when they're available in the marketplace.

Great. Thank you for that color and commentary. My second question here shifts the focus back to the Upstream. And Cheryl, I really appreciate some of the comments that you made around Q4 and your readiness for a stronger throughput, specifically at Kearl, going to the end of the year. I was hoping if you could provide us some incremental color just on the thoughts around mine progression. I know in John's prepared remarks, he discussed a little bit around the completion of some of the mine planned development and progression and kind of opening up of that capacity in the 2028 time frame. But really, as it also relates to ore quality as that was one of the key items that was cited as kind of a year-over-year change as well.

Sure. And thank you for that question, Dennis. And I'm going to go back to a couple of things that John mentioned before, which is really what's underpinning our confidence in the future. So I'm looking more towards beyond 2024. If I think about it, a step back, we've made significant optimizations over the past few years. So as we think about that going forward, that cumulative effect will be happening next year and beyond.

John mentioned about our recovery projects that we just brought online, KFCC, which are additional flow cell columns, those will contribute next year, of course, without a turnaround, that will be a help. Kind of the underpinning in the foundation here is around our continued focus on productivity and reliability, which really talks to our digital, our technology and so forth. I mentioned that several times, but we continue to unleash that really just as a kind of foundational table stakes.

Now to answer your question, in 2027, we'll be shifting from not only producing from our North pit, that 2027, we'll begin to produce from our new East pit. When we look in terms of ore quality, everything that we've done with delineating the wells and so forth, we anticipate and looking forward to East pit being stronger from that perspective.

The other thing that East pit will bring along with it as well is a strong engineered road network as well as fewer routes. So if I take all that into account and where we're going to see in 2027, it will be that increased diversity of ore headings and then all of the positive impacts that I've just shared in terms of productivity and reliability. This is really that. And the equation I continue to emphasize, which will be all of the setting in place that we've been working on for years that will come forward next year.

Our next question is from Travis Wood from National Bank.

Question, it goes back to the MOU, and I'm just trying to get an understanding of what that critical path looks like for the group, you guys specifically, as it relates to the carbon capture segment. Any kind of spending cadence that you can help us understand?

And then as it relates to Pacific Link, is the goal here and maybe the delay from November 15, is the goal to work with the federal and provincial governments to effectively try to get that carbon capture cost to net-zero, meaning with the help of this mega tax reduction, potentially royalty savings, maybe there's some tolling negotiation that can go on in the pipeline itself? Is that the right way to think of it longer term in terms of net cost to the Oil Sands Alliance group.

Well, I think, Travis, I think -- I mean, what we're trying to do with the trilateral, what we've put in place in the trilateral MOU, we're trying to do really 3 things -- or 3 interconnected things here. We're trying to create an environment where it's more globally competitive to invest in production growth. And that's where you get into growth royalty incentives, accelerated capital cost allowances. You get into time lines around project approvals that are best in -- world-class and predictable. So part of it is production, growing the production.

Now the other parts are a pipeline to the West Coast, so we have egress to take away that increased production. And then another part that's important for the government and for us, if you think about our company, we talk about the and equation of providing reliable, affordable energy and reducing emissions, is the pathways project to capture carbon. So those are the 3 elements of what we're trying to make work, what some have coined as the Grand Bargain. That's what we're working through.

And what we've committed -- what's in the trilateral MOU, which is actually not binding, and we're moving towards a definitive, what industry has said we would commit to is a 6-megaton per annum pathways project. And the governments have said they will commit to a pipeline to the West Coast at 1 million barrels a day, and then setting in place the fiscal and regulatory framework to incentivize the investment that needs to go in to production growth to fill that pipeline and support the pathways project, which is a cost to the industry.

So that's the components of it that we're trying to get in the right balance. So all of those things work together. And that's really what we're trying to do. And obviously, the -- if we look at the carbon capture storage side of it, it is a cost to the industry, and we're looking at other aspects that will be benefits to the industry, like the capital cost allowance acceleration and growth royalties. So overall, you have a collective environment that is globally competitive and will incentivize investment. And that's -- that's pretty complex. So that's why I think -- but again, I'm encouraged. We're working really well together to try to get that marriage of all those things in place that works for everybody.

Okay. No, that makes sense. I appreciate the detailed color there. My second question would be you talked about, and kind of it marries with the growth prospect, potentially accelerating Aspen depending on probably how this MOU shakes out. How would Aspen rank, and maybe this is too strategic, and you might not want to answer this, but how would Aspen rank as you look at this upcoming land sale and the potential ease of surface access to some of these [ Caribou ] lands. Is there anything that could leapfrog Aspen in terms of future development from the thermal perspective? Or would Aspen, given the pilot and the data that you guys have, would that still rank at the top of the list as we think about future growth? .

Well, when we just look at our portfolio, I would tell you, Aspen is -- and we've been very clear about this, we feel very bullish about the quality of the resource, very bullish about the technology that we're developing, Ebert, or even SA-SAGD to apply there. And then we have other opportunities like Mahihkan SA-SAGD at Cold Lake, getting Kearl to 300, getting Cold Lake to 165. Those are very attractive opportunities that we have, very low flowing, very capital efficient.

Then the next in terms of organic growth, Aspen is the next best thing in our portfolio. And it is extremely advantaged given the technology and the quality of the resource. We're very bullish on it.

Okay. And would there be potential with this land sale to expand the resource adjacent to the projects already in the pipeline?

I would just say for us, look, we are very pleased with the existing portfolio of organic opportunities we have with Aspen, Clear Creek, Corner and the opportunities we have at our existing assets. So we're focused on unlocking the potential of those opportunities that we have today. And we feel extremely bullish about them, positive about them.

That concludes today's question-and-answer session at this time. I will turn the conference back to Mr. Peter Shaw for any additional or closing remarks.

Thank you. And so on behalf of the management team, I'd like to thank everyone for joining us this morning, and navigating through the new technology. If there are any further questions, please don't hesitate to reach out to Investor Relations team, and we'll be happy to answer your questions. With that, enjoy the rest of your day, and have a great weekend.

This concludes our conference for today. Thank you for participating. You may now disconnect.

Good day, and welcome to the Imperial Oil Second Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Peter Shaw, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone. Welcome to our second quarter earnings conference call. I'm joined this morning by Imperial's senior management team, including John Whelan, Chairman, President and CEO; and Dan Lyons, Senior Vice President, Finance and Administration; Cheryl Gomez-Smith, Senior Vice President of the Upstream; and Scott Maloney, Vice President of the Downstream.

Today's comments include reference and non-GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment 6 of our most recent press release and are available on our website with a link to this conference call.

Today's comments may contain forward-looking information. Any forward-looking information is not a guarantee of future performance and actual future performance and operating results can vary materially depending on a number of factors and assumptions. Forward-looking information and the risk factors and assumptions are described in further detail on our second quarter earnings release that we issued this morning as well as our most recent Form 10-K.

All of these documents are available on SEDAR, EDGAR and our website. So I would ask you to reference those. John is going to start with some opening remarks and then hand it over to Dan, who is going to provide a financial update and then John will provide an operations update. Once that is done, we will follow with the Q&A session.

So with that, I will turn it over to John for his opening remarks.

Thank you, Peter. Good morning, everybody, and welcome to our second quarter earnings call. I hope everybody is doing well. And as always, we appreciate you taking the time to join us this morning. Since our last earnings call, we've seen ongoing volatility in commodity markets, driven by geopolitical events, reinforcing the strategic importance of commodity and product supply from Canada to the rest of the world.

For Imperial, our advantaged long-standing business model uniquely provides significant leverage to upside conditions while also protecting against downside scenarios. This is a substantial long-term structural benefit that allows us to return additional surplus cash to shareholders at higher prices, while adhering to our investment plans and strategic priorities over a range of price scenarios. As you will have seen with the recent trilateral MoU signing, governments and industry through the Oil Sands Alliance continue to collaborate on creating the conditions needed to support a more competitive, growing and lower emissions Canadian oil sands sector.

The MOU is a positive step. And while there is definitely more work to do, I'm encouraged and optimistic about the potential for Canadians, for Albertans, for the industry and for Imperial. With a supportive fiscal and regulatory framework, Imperial has the potential to double our gross operated upstream production over time with the development of our high-quality oil sands leases using our advantaged technology.

Consistent with that, we continue to construct the enhanced bitumen recovery technology pilot at our Aspen lease, which is scheduled to start up early next year. We also continue to maximize the value of our existing assets, leveraging our competitive advantages of technology, scale, integration, execution excellence and most importantly, our people.

From a financial perspective, cash flows from operating activities were over $2.7 billion in the quarter. Excluding the impact of working capital, cash flows from operating activities were over $2.5 billion. Moving to operations. I want to highlight several key achievements. At Kearl, Production was in line with our second best second quarter ever. We also successfully completed our planned turnaround work ahead of schedule and below budget.

At Coal Lake, we continue to see strong results from our Grand Rapids solvent-assisted SAGD project and the ramp-up of our Leming SAGD project. These projects support our strategy of transforming Coal Lake with advantaged technology. In the Downstream, we completed the planned turnaround at our Strathcona refinery, following a record 10-year interval for the crude unit, and we expect the turnaround to be ranked in the first quartile for cost and duration against industry benchmarks.

Overall, we feel really good about our strategy and the investments we're making to grow free cash flow and to continue to deliver unmatched industry-leading total shareholder return. However, we have had some short-term challenges in the downstream, and I'll talk to a bit more detail as we go through the operations. And as a result, we've lowered our downstream throughput guidance by approximately 6%. That said, I would highlight that we still expect higher volumes and throughput across our entire business in the second half now that our significant turnaround activity is behind us.

In terms of capital allocation, our approach remains consistent with our long-standing priorities, which begins with investing in the business to sustain and grow value. Next, a reliable and growing dividend remains a key priority. Our annual dividend has now grown for 31 consecutive years. And then as we generate surplus cash above and beyond our commitments, we look to return that to shareholders in a timely manner.

As you've seen in the release and given our strong financial performance and confidence going forward, we plan to accelerate the share repurchases under the NCIB program and anticipate repurchasing all remaining allowable shares prior to year-end.

And on that note, I'll pass it over to Dan to talk about our financial performance.

Thanks, John. Starting with financial results for the second quarter. We recorded net income of $2 billion -- sorry, $2.190 billion, up $1.241 billion from the second quarter of 2025, driven primarily by higher commodity prices. Similarly, when comparing sequentially, second quarter net income is up $1.250 billion from the first quarter of 2026, primarily driven by higher commodity prices. .

Now shifting our attention to each business line and looking sequentially, Upstream earnings of $1.299 billion are up $829 million from the first quarter primarily due to higher crude prices. Downstream earnings of $787 million are up $176 million from the first quarter due to higher margins partially offset by planned turnaround impacts at the Strathcona refinery.

Our Chemical business generated earnings of $65 million, up $41 million from the first quarter due to higher polyethylene margins. Moving to cash flow. In the second quarter, we generated about $2.7 billion in cash flows from operating activities. Excluding working capital effects, Cash flows from operating activities for the second quarter were $2.522 billion, up about $1.1 billion from the second quarter of 2025.

We ended the quarter in a strong cash position with over $2.8 billion of cash on hand. Shifting to CapEx. Capital expenditures in the second quarter totaled $531 million, $58 million higher than the second quarter of 2025 and $53 million higher than the first quarter of 2026. In the Upstream, second quarter spending of $359 million focused on sustaining capital at Kearl, Cold Lake and Syncrude. In the Downstream, second quarter CapEx was primarily spent on sustaining capital projects across our refinery network.

Shifting to shareholder distributions. In the second quarter, we paid $421 million of dividends. And earlier this morning, we declared a third quarter dividend of $0.87 per share, and as John noted, we also announced plans to accelerate our NCIB with a target of completing the program by year-end, in line with our long-standing philosophy of returning surplus cash to our shareholders.

Now I'll turn it back to John to discuss the company's operational performance.

Thanks, Dan. I want to take the next few minutes to share key highlights from our operating results. Upstream production for the quarter averaged 414,000 gross oil equivalent barrels per day, down 5,000 oil equivalent barrels per day versus the first quarter of 2026. This was driven by planned turnaround activity at Kearl, some unplanned maintenance at Cold Lake in May and extreme rainfall at Syncrude partially offset by higher overall reliability and the absence of the third-party regional gas supply outage.

While our gross production guidance for 2026 still stands, given the results of the first half of the year, we now expect full year upstream production to be towards the low end of the guidance range. I'll now cover highlights for each of the assets starting with Pearl. Pearl's quarterly production was 257,000 barrels per day, down 2,000 barrels per day versus the first quarter of 2026, primarily driven by the successful execution of the planned tariff turnaround work partially offset by the absence of the third-party regional gas supply outage. Pearl also experienced extreme rainfall in early June. But I'm pleased to say our team was able to significantly limit the overall impact on site performance through robust severe weather protocols and contingency plans.

Turning to the completed turnaround on K1 train -- the team delivered the work ahead of schedule and under budget. This achievement completes the program to extend Kearl's turnaround intervals to an industry-leading 4 years and advances plans to reduce maintenance costs and lower downtime. With this work now complete, our next planned turnaround is not until 2029 when we return to the K2 train where we successfully executed a planned turnaround last year.

When I think about maximizing value at Kearl, this is exactly it. Higher volumes with less downtime and lower absolute costs resulting in materially lower unit cash costs. Consistent with the approach we shared at our 2025 Investor Day, we continue to advance multiple growth initiatives at Kearl, including recovery, productivity and reliability enhancements. For example, construction continues on the flotation columns, which is one of the secondary recovery projects we are advancing to support incremental capital-efficient production by capturing additional bitumen from or already processed through the plant.

With construction nearing completion, commissioning activities will be starting in the third quarter, and production is expected to start up in the fourth quarter of this year. Moving next to Cold Lake highlights. Cold Lake's quarterly production averaged 149,000 barrels per day, down 6,000 barrels per day versus the first quarter of 2026, due to unplanned maintenance that was completed in May. This quarter, we completed a key planned optimization at Cold Lake, transferring volumes from the lemming plant, our oldest plant, which processed approximately 5% of Cold Lake's production into existing spare capacity at Masco and Makise plants.

This optimization of infrastructure allows us to decommission the lemming plant, reducing our cost structure and further advancing our strategy to maximize value of our existing assets. In addition, we remain focused on continued ramp-up of our Leming SAGD project through the balance of the year. Now looking to the future, we have 3 high-quality in-situ opportunities in our portfolio, where we are focused on solving technology to maximize value. Our Aspen, Park Creek and Corner assets, together with our advantaged technology underpin our long-term growth opportunity with the potential over time to double our gross operated upstream production.

As mentioned, we continue to progress the enhanced bitumen recovery technology pilot with startup remaining on track for 2027. To round out the Upstream, I'll now cover Syncros. [indiscernible] share of Syncrude production for the quarter averaged 73,000 barrels per day, up 1,000 barrels per day versus the first quarter of 2026, mainly due to the absence of the coker 83 unplanned downtime, which was largely offset by extreme rainfall impacts. Syncrude continued to utilize the interconnect pipeline to import bitumen and gas oil to ensure high upgrader utilization. This enabled approximately 11,000 barrels per day, our share of additional Syncrude suite premium production.

As a reminder, due to the unplanned maintenance required on Coker 83 at Syncrude last quarter, the decision was made to defer the planned second quarter turnaround work on Coker 82. We expect that turnaround to now start in the latter half of August and take approximately 50 days to complete.

So let's move to the Downstream. In the second quarter, we refined an average of 331,000 barrels per day, representing a utilization of 76% compared to the first quarter of 2026, refinery throughput was down 53,000 barrels a day, mainly driven by the planned turnaround work at Strathcona. Our team successfully completed the planned turnaround on the Strathcona crude unit, which had achieved its longest ever run length of 10 years. We forecast the turnaround to rank in the first quartile when compared against industry benchmarking. Our renewable diesel facility at Strathcona, the largest in Canada, continues to generate highly attractive economics relative to more costly imports.

Now as we discussed in our earnings press release this morning, we've lowered our downstream throughput guidance by approximately 6%. This is due to 3 key factors. First, and while behind us now, we had higher unplanned downtime in the first half of the year. Second, at Strathcona, we have prioritized renewable diesel production due to strong economics. This has improved margins but reduced crude throughput. And as we ramped up renewable diesel, we also identified congestion in some areas of our rail year.

We are now adding additional rail handling capacity to alleviate that congestion and are targeting completion by year-end. And finally, in mid-July, Nanticoke experienced unplanned downtime impacting crude units. Other units continue to run, and we expect to resume full operation by early August. These items have now been fully factored into the updated downstream guidance range. The overall downstream outlook remains positive for the balance of the year with higher volumes, structural advantages and a supportive market environment.

Petroleum product sales were 446,000 barrels per day, down 5,000 barrels per day compared to the first quarter of 2026. Overall, across our Canadian network, we saw very similar demand for each of our primary petroleum products in the second quarter of 2026 relative to 2025.

Turning now to Chemicals. Earnings in the second quarter were $65 million, up $41 million from the second quarter of 2025 due to higher product pricing.

In closing, while the external environment continues to be dynamic, our priorities remain unchanged. We are focused on capturing the full value of our advantaged integrated business. growing profitable volumes, advancing structural cost improvements and increasing cash flow generation. Further to that, we continue to advance our restructuring plans. We are firmly in the implementation phase, guided by a robust and disciplined approach and things are progressing well.

As shared previously, we will capture significant long-term efficiency and effectiveness benefits as we further transform our business, leveraging rapidly advancing technology and ExxonMobil's global capability centers. Through disciplined implementation, we will continue to strengthen the competitiveness of our operations, maximize the value of our asset base and deliver superior long-term returns to shareholders.

Operationally, our focus remains on execution excellence and being the most responsible operator. This includes a safe and effective execution of upcoming planned turnaround activities at Cold Lake and Sarnia. Given global supply challenges, the external environment continues to support strong cash flow generation with notable tightness in refined product markets.

With the heaviest turnaround quarter behind us, we are well positioned to deliver higher volumes and throughput in the second half, capturing significant value and continuing to deliver industry-leading shareholder returns.

As noted earlier, we also announced today our intention to accelerate share repurchases under the renewed NCIB and expect to repurchase all remaining allowable shares before year-end. As always, I want to thank our employees for their commitment, expertise, professionalism and teamwork. Their dedication to safe operations, execution excellence and customer and community service is what makes our achievements possible. And I would like to thank all of you once again for your continued interest and confidence in Imperial.

And with that, we'll move to the Q&A portion of the call, and I'll hand it back to Peter.

[Operator Instructions] We'd appreciate it if you could limit yourself to 1 question, plus a follow-up so that we can get to all the questions. So with that, operator, could you please open up the line for questions.

[Operator Instructions] We will now go with your first question coming from the line of Greg Pardy with RBC Capital Markets.

For the rundown. Just in the release, probably what jumped out is at Kearl and just not only the downtime impacting production rates, but also just -- I think you referred to it as the lack of exceptional work rate. So just curious there is as to whether you're moving into a different area of the mine or a new payer, what have you, and then whether you expect to move back into, I guess, higher ore grades as we move along.

Thanks for your question. It was really interesting. It isn't a case of moving into the lower ore grade. We remain extremely confident of our quality. It really was at the second quarter of 2025 had we experienced exceptional ore grade material. So -- the exception was the second quarter and a little bit into the third quarter of 2025. We hit the highest sweetest portion of the mine at that time. That was the anomaly, was last year's second quarter and the third quarter.

We're now back into really the ore grade that we've been seeing over the last 2 or 3 years. And on average, I would just really stress that our -- we have very high relative oil sands oil grade compared to other oil sands mines, and we benefit from that going forward. So again, the exception what really was truly the second quarter of '25 and not where we are now and not where we see ourselves going in the future.

And John, just -- as I look at our model, right, in 2027, even if we don't really make big changes on volumes, like the margins get so much better? And I guess this comes back to your -- and just correct me if I'm wrong, but your 2025 Investor Day -- and then you've got different unit OpEx targets. So I think it's USD 18 at Kearl and 13 at Cold Lake. And I'm just curious, are those numbers achievable? And am I working with the right numbers in the right time frame.

Yes, absolutely. That is our clear goal for 2027 is that we're going to get to $18 a barrel. And we've been marching down our unit cost towards that. Last year, we were below $20 a barrel and we expect to be lower again this year and $18 a barrel next year. And we continue to be very focused on getting the asset to 300,000 barrels per day production, and we feel all of our plans that we've put in place around improved recovery, improved reliability and availability, the turnaround going to the 4-year interval that I just spoke about.

All those things are on track. -- to get us to $300 million. And as we've talked about before, when we get there, we don't necessarily -- that's not a hard and fast kind of barrier. We're going to look at what opportunities we have beyond that once we get there. So you can feel good about $18 a barrel for next year.

We will now take your next question. coming from the line of Menno Hulshof with TD Cowen.

Thanks, and good morning, everyone. I'll start with a question on G&A. -- or selling in general in the financials, which came down a lot quarter-on-quarter. Presumably, it falls further from here as you work through the workforce reduction. But can you just remind us of what that number could look like? -- on a run rate basis on completion?

Well, I'm going to hand that over to Dan. Well, Man, what we said is by 2028, once we're through our restructuring program, we expect $150 million lower cash OpEx going forward. So that's I think that still holds. And going through, as we go through the restructuring, obviously, you don't see all that. But once we get lined out by 2028, that's what we expect to see.

Terrific. And then I guess the second question is on growth, just given your reference to having the resources to potentially double production theoretically over time. I think we have a pretty good sense of what's going on at Aspen and with the Rio EBRD pilot. But is anything going on with Corner and Clark Creek right now?

I think -- it's John here. Thanks for the question. I think there, we're doing some delineation drilling, make sure we understand the resource. We have a very good handle on that. But that's the main focus there right now is understanding the resource that we have there and the best way to develop that. We do anticipate enhanced bitumen recovery technology with the technology we are looking to prove out and apply to all 3 of those assets.

Of course, we're doing that pilot at Aspen. We see Aspen as the first part of that development. And then depending on the investment climate and everything else, -- we have a -- we kind of have a lot of flexibility in how we pace the further developments at Corner and Claro Creek. But we all have done the work to fully understand the resource and move forward there in a timely way.

Your next question will come from the line of Dennis Fong with CIBC.

My first 1 here follows along the line of what Greg was discussing maybe a little bit on Kearl. As we think about the work that you guys are doing on mine progression, especially to make enough feedstock available for production at a 300,000 barrel a day plus level. Can you talk towards how that is progressing? I'm hearing, obviously, from your prepared remarks, around the work that you're doing to optimize and improve secondary recovery here. But I was hoping to get a little bit of a better sense as to how you think about mine progression?

And again, maybe going back towards higher grades of ore as you move to the east pit in terms of more full development.

Yes. Thanks, Dennis. I'll say a few words about that, and I'm going to hand over to Cheryl to share a bit more detail, but the bottom line of that, you're right, we're kind of finishing up in the north pit. We're getting ready to go into the east pit. .

Again, the quality of ore that we're in today is what we expect. And again, Karl continue -- it does have or quality that is better than other oil sands mines. So we're blessed with that. And the work that's now going on to be prepared to move into the East pit is progressing per plan. We talked about that was a little bit of the reason why we had a little higher capital this year as we started to prepare for that and open up that mine. But it's going as per plan. We look forward to getting there into the East pit as well. But we feel, overall, again, the ore quality is exactly where we expect it to be. And I'll hand over to Cheryl to share a bit more about the east pit.

Sure. Thanks, John, and thanks, Nik, for the question. Maybe a little bit more as I think about the second half 2026 as John mentioned, which is we expect higher production in our second half and what's going to make that difference. We're increasing the throughput in short, that means we're sending more ore to the plant. John mentioned about optimizing our plant recovery and we've got secondary projects with our KFC project coming online by the end of this year.

But behind that, we've also got some projects, 1 of them we call is SPA, which is a secondary process at really adding some chemical to help us manage fines. So this in mind, these projects that are already in motion, we remain confident in our long-term production potential.

In terms of ore quality, what I would say is, as we advance mine infrastructure, we're continuing to comprehend the mix of ore quality as well as halt instance. John highlighted, we're really in a unique position that Kirlin's very good ore quality throughout, and there's going to be variability over time. And that being said, we do -- we are progressing with the mine are heading into East pit. We anticipate we're going to start seeing the first production in November, December. Based on the delineation information, we would expect to see some of that higher ore quality as we move into East pit, so again, this is what's really underpinning our outlook and the confidence in 300-plus [indiscernible].

Great. Thank you for the color from both of you. My next question shifts towards the downstream in your press release and I think a little bit in your earlier remarks -- our prepared remarks, you talked a little bit around the short-term rail logistics challenge at CatCon -- can you talk towards how you're looking to optimize call it, value from the operations of that facility, again, as you work through some of the logistical challenges and then maybe optimizer debottleneck that part of your facility?

Yes. Let me -- I'll say a few words about that, and then Scott can chime in if there's more to add. But if I step back from this and you think about this our crude throughput and choices we make, first, I would say, we've prioritized renewable diesel because of the improved margins that, that provides us. And we've prioritized that and it has required us to reduce crude throughput to some degree. But -- and while crude throughput is a very important metric, and we keep a very close eye on that. And of course, we talk about it with all of you externally. Our overall goal, our overall metric is maximizing value and improving margin and improving cash flow. .

So when we saw the opportunity to do that through prioritizing renewable diesel over crude throughput, we made that choice. It was an easy choice. It's a choice we make every day of the week. So that's kind of one piece of it. And then we built out the rail terminal with the anticipation of renewable diesel. And -- but of course, it's a very busy rail yard right now, just the way we like it. We want it to be busy. But we have more inputs coming in with canola feed coming in, more outputs with renewable diesel going out. So we have ramped up the activity in the rail yard with these multiple products coming in and out.

And what we've seen is we're having a little higher wait times for the railcars to load and offload than we would like. So what we're really doing, this is actually not very complicated. We're laying some extra track providing some additional laydown areas so we can more quickly load and offload railcars. It's not a large project. We have the real estate to do it. It's not going to require us to take the rail yard, slow it down or take it off-line. -- we can do it while the rail yard is fully operational. And we'll have that work done by the end of the year to relieve some of this congestion that we identified when we had more product coming in and out.

So not concerned about it. Project is underway. It's not that complicated, and we'll have it done by the end of the year. Scott, any other color you'd like to add to that?

Yes. Perhaps just 1 additional comment on that is, as you get to the mix of products that we're making, John, kind of referred to the value and the renewable diesel, we're also seeing that across just the distillate products in general. And so as we've talked about flexibility in our refineries in prior sessions and certainly at our IR Day last year. So as we see opportunities to ramp up additional diesel and jet production, we certainly are doing that in this higher-margin environment, and that's all baked into our plans, even with some of the near-term rail limitations.

Your final question is coming from Lydia Gold with Goldman Sachs. .

How are you thinking about shareholder returns given the acceleration of the NCIB and where commodity prices are and what your appetite and flexibility is like for a potential future SIB.

Thank you, Lydia. It's -- our whole approach around capital allocation is unchanged. From a shareholder returns perspective, we're going to continue to prioritize a reliable and growing dividend. And when it comes to surplus cash beyond our capital needs and dividend, our go to, based on discussions we've had with investors has been buybacks via the NCIB. And of course, we just announced the acceleration of the current and look to wrap that up by the end of the year. But earlier completion of that by year-end does give us the flexibility for additional share buybacks beyond the 5% that were limited to in the NCIB via an SIB.

Now whether or not we're in a position to do that and have the capacity to do that, will depend on commodity prices. But I would say, from our integrated business model, we have good exposure both to oil prices and refining margins. We feel very good about that. But we'll have to see kind of how commodity prices play out over the second half of the year here. But what I can say is you can expect from us that we will return surplus cash to shareholders in a timely manner. And if you look at 2025, we had free cash flow of $4.8 billion. We returned $4.6 billion to shareholders. And you look back over the last 5 years, 2020 through 2025, we had free cash flow of $25 billion, and we returned $24 billion to shareholders. So that philosophy is unchanged and and you can rely on us to return surplus cash flow to shareholders in a timely manner.

That concludes today's question-and-answer session. At this time, I will turn the conference back to Mr. Peter for any additional or closing remarks.

Thank you very much. And on behalf of the management team, I'd like to thank everyone for joining us this morning. If there are any further questions, please don't hesitate to reach out to the Investor Relations team, and we'll be happy to answer your questions. With that, thank you very much, and have a great day and a great weekend.

This concludes today's call. Thank you for your participation. You may now disconnect.

Good day, and welcome to the Imperial Oil First Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Peter Shaw, Vice President of Investor Relations. Please go ahead.

Good morning, everyone. Welcome to our first quarter earnings conference call. I am joined this morning by Imperial Senior Management Team, including John Whelan, Chairman, President and CEO; and Dan Lyons, Senior Vice President, Finance and Administration; Cheryl Gomez-Smith, Senior Vice President of the Upstream; and Scott Maloney, Vice President of the Downstream.

Today's comments include reference to non-GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment 6 of our most recent press release and are available on our website with the link to this conference call.

Today's comments may contain forward-looking information. Any forward-looking information is not a guarantee of future performance and actual future performance and operating results can vary materially depending on a number of factors and assumptions. Forward-looking information and the risk factors and assumptions are described in further detail on our first quarter earnings release that we issued earlier this morning as well as our most recent Form 10-K.

All these documents are available on SEDAR+, EDGAR and our website. So I'd ask you to refer to those. John is going to start this morning with some opening remarks and then hand it over to Dan, who is going to provide the financial update, and then John will provide his operations update. Once that is done, we will follow with the Q&A session.

So with that, I will turn it over to John for his opening remarks.

Thank you, Peter. Good morning, everybody, and welcome to our first quarter earnings call. I hope everyone is doing well. And as always, we appreciate you taking the time to join us this morning.

Since our last earnings call, we've seen significant volatility in commodity markets, driven by geopolitical events in the Middle East. This has served to tighten the supply-demand balance for a range of commodities globally, resulting in a materially different outlook for this year and potentially beyond.

It also reinforces the strategic importance of commodity and product supply from Canada to the rest of the world. Our long-standing business model uniquely provides significant leverage to upside conditions, while also protecting against downside scenarios. This is a substantial long-term structural benefit that allows us to return additional surplus cash to shareholders at higher prices, while adhering to our investment plans and strategic priorities over a range of price scenarios.

There continues to be a dynamic global backdrop. However, our corporate strategy and investment plans remain consistent. We continue to maximize the value of our existing assets and progress material, high-quality organic growth opportunities, leveraging our competitive advantages of technology, scale, integration, execution excellence, and very importantly, our people.

Speaking of technology and scale, we also continue to advance our business transformation restructuring plans. As a reminder, we expect to capture significant long-term efficiency and effectiveness benefits as we further leverage rapidly advancing technology and ExxonMobil's global capability centers.

Now from a financial perspective, cash flows from operating activities were $756 million in the quarter. Excluding the impact of working capital, cash flows from operating activities were over $1.2 billion.

Moving to operations. I want to highlight several achievements. At Kearl, production was in line with our second best first quarter ever despite the impact of a third-party natural gas supply outage. At Cold Lake, we achieved our highest first quarter production in over 8 years, supported by new technology-advantaged low-cost volume that is transforming the asset.

In the Downstream, our renewable diesel facility at Strathcona captured significant value compared to more costly imports. In terms of capital allocation, our approach remains consistent with our long-standing priorities, which begins with investing in the business to sustain and grow value. Next, a reliable and growing dividend remains a key priority. Our annual dividend has grown for 31 years. And then as we generate surplus cash above and beyond our commitments, we look to return that to shareholders in a timely manner.

And as you've seen in the release, we intend to renew our Normal Course Issuer Bid at the end of June. Overall, I'm excited about the opportunities in front of us, including our long-term in situ growth potential. We continue to construct the Enhanced Bitumen Recovery Technology pilot at our Aspen lease which can unlock significant new low-cost volume growth for Imperial and its shareholders.

With that, I'll pass things over to Dan to walk through the financial results in more detail.

Thanks, John. Starting with financial results for the first quarter, we recorded net income of $940 million, down $348 million from the first quarter of 2025, primarily driven by higher incentive compensation charges as a result of our higher share price and unfavorable upstream realizations based on lower average prices across the quarter.

Elaborating on the incentive compensation item, the total charge in the quarter was $143 million after tax. This mark-to-market charge was driven by a historic share price increase of almost $65, over 50% in the quarter. When comparing sequentially, first quarter net income is up $448 million from the fourth quarter of 2025 primarily driven by the absence of identified items and by higher prices, partially offset by lower volumes and the incentive compensation charge I just mentioned.

Now shifting our attention to each business line and looking sequentially. Upstream earnings of $470 million are up $472 million from fourth quarter due to the absence of identified items when those items -- when excluding those items, net income is up $52 million, primarily due to higher prices. Downstream earnings of $611 million are up $92 million from fourth quarter. Excluding identified items in the fourth quarter, net income is up $47 million, mainly due to lower operating expenses.

Our Chemical business generated earnings of $24 million, up $15 million from the fourth quarter. Excluding identified items in the fourth quarter, net income is up $4 million.

Moving to cash flow. In the first quarter, we generated $756 million in cash flow from operating activities, excluding working capital effects. Cash flows from operating activities for the first quarter were $1,239 million, down $521 million from the first quarter of '25. Cash flows from operating activities were also impacted by unfavorable deferred tax effects of about $350 million, primarily driven by much higher commodity prices late in the first quarter as compared to the fourth quarter of 2025.

As a U.S. GAAP LIFO reporter, we tend to see transitory negative inventory-driven deferred tax impacts when prices rise and transitory positive impacts when prices fall. This is driven by our reporting earnings on a LIFO inventory basis, while our deferred taxes are calculated on a weighted average cost inventory basis consistent with Canadian tax regulations.

Now shifting to CapEx. Capital expenditures in the first quarter were $478 million, $80 million higher than the first quarter of 2025 and $173 million lower than the fourth quarter of 2025. In the Upstream, first quarter spending of $362 million focused on sustaining capital at Kearl, Cold Lake and Syncrude. In the Downstream, first quarter CapEx was primarily spent on sustaining capital projects across our refinery network.

Shifting to shareholder distributions. In the first quarter, we paid $350 million of dividends. And earlier this morning, as John noted, we announced our intention to renew our NCIB in June, and we declared a second quarter dividend of $0.87 per share, in line with our long-standing philosophy of returning surplus cash to shareholders.

Now I'll turn it back to John to discuss the company's operational performance.

Thanks, Dan. I want to take the next few minutes to share key highlights from our operating results. Upstream production for the quarter averaged 419,000 gross oil equivalent barrels per day, up 1,000 oil equivalent barrels per day versus the first quarter of 2025. First quarter crude production was the second highest quarter -- first quarter result in company history, just 1,000 barrels per day below the all-time first quarter record set in 2024.

I'll now cover highlights for each of the assets, starting with Kearl. Kearl's quarterly production was 259,000 barrels per day gross, up 3,000 barrels per day versus the first quarter of 2025. As a reminder, first quarter volumes at Kearl tend to be lower on a seasonal basis relative to the second half of the year. In addition, during March a third-party regional gas supply outage required us to temporarily reduce production levels to match lower natural gas availability.

Now that we're in the second quarter, the team is focused on the planned turnaround at Kearl. Work this year will extend the turnaround interval at the K1 train from 2 to 4 years, similar to the work completed last year at K2 train. This is a great example of the work we're doing to maximize the value at Kearl, leading to higher volumes and lower unit cash costs.

Consistent with the framework we outlined at our 2025 Investor Day, we are advancing growth at Kearl across multiple fronts, including higher recovery, productivity and reliability enhancements, and the turnaround optimization work I just mentioned. Later this year, we're adding a secondary recovery project at Kearl, designed to capture additional bitumen from the ore already being processed through the plant, supporting incremental capital-efficient volumes growth.

Moving next to Cold Lake highlights. Cold Lake's quarterly production averaged 155,000 barrels per day, up 1,000 barrels per day versus the first quarter of 2025. We continue to see the benefits of our strategy of transforming Cold Lake production to advantaged technolog,y, with ongoing strong results from our Grand Rapids solvent-assisted SAGD project and continued ramp-up of the Leming SAGD project.

We remain confident in our strategy at Cold Lake to deliver advantaged volumes at lower unit cash costs by leveraging technology. To round out the upstream, I'll cover Syncrude.

Imperial's share of Syncrude production for the quarter averaged 72,000 barrels per day, which was down 1,000 barrels per day versus the first quarter of 2025. During the quarter, Syncrude experienced unplanned downtime associated with Coker 8-3, resulting in lower volumes and additional maintenance. The interconnect pipeline was utilized to enable the export of an additional 8,000 barrels per day of bitumen and other products over the quarter. With the additional maintenance required at Syncrude this quarter, the decision was made to postpone the planned second quarter turnaround work on Coker 8-2 until the summer.

Now let's move to the Downstream. In the first quarter, we refined an average of 384,000 barrels per day, equating to utilization of 88%. Compared to the first quarter of 2025, refinery throughput was down 13,000 barrels a day. During the quarter, we experienced unplanned downtime, and Strathcona was impacted by the disruption of synthetic crude feedstock caused by the Syncrude Coker outage until alternative supply was put in place.

As I mentioned in my opening remarks, our renewable diesel facility at Strathcona captured significant value compared to more costly imports during the first quarter, even as we continue to optimize around hydrogen availability. We are now executing the planned turnaround at Strathcona that began in early April and is scheduled to be completed in just over a week's time. The work is focused on the crude unit, which achieved the longest ever run length of 10 years before this planned turnaround.

From a strategic perspective, we continue to invest in our structurally advantaged downstream business with a view to maximizing earnings and cash flow across the value chain. Investment in 2026 includes digital infrastructure enhancements and targeted projects to strengthen logistics and feedstock flexibility.

Petroleum product sales were 441,000 barrels per day, down 14,000 barrels per day compared to the first quarter of 2025 due primarily to a reduction in opportunistic supply sales, partially offset by increased retail sales.

Overall, across our Canadian network, we saw very similar demand for each of our primary petroleum products in the first quarter of 2026 relative to 2025.

Turning now to Chemicals. Earnings in the first quarter were $24 million, down $7 million from the first quarter of 2025 due to lower product pricing, partially offset by reduced feedstock costs.

In closing, I would like to reiterate that despite the dynamic geopolitical environment, our priorities remain clear and consistent. We are focused on continuing to profitably grow volumes, further lowering unit cash costs and increasing cash flow generation. We remain committed to maximizing the value of our existing asset base, progressing our volume and cost targets, driving greater efficiency and effectiveness, and delivering unmatched industry-leading shareholder returns.

Operationally, our focus remains on execution excellence and being the most responsible operator. This includes safely and effectively completing the planned turnaround at Strathcona as well as the planned turnaround at Kearl in May. Both are important to sustaining reliability, capturing value from our assets and supporting long-term performance.

Looking ahead, our restructuring is firmly in the implementation phase and progressing well. We are taking a robust and disciplined approach with a focus on maintaining safe, reliable operations. This work is being advanced in an orderly manner with clear line of sight to the expected benefits over time, including improved efficiency, improved effectiveness, competitiveness and long-term value creation.

Finally, our capital allocation priorities remain unchanged. We expect to continue generating cash beyond the needs of our capital plan and our dividend, and our commitment remains to return that cash to shareholders in a timely manner. As noted in the press release this morning, we intend to renew our Normal Course Issuer Bid in late June.

As always, I want to thank our employees for their commitment, professionalism and teamwork. Their dedication to safe operations, execution excellence, and customer and community service is what makes our achievements possible. And I'd like to thank all of you once again for your continued interest and support.

Now we'll move to the Q&A session. I'll pass it back to Peter.

Thank you, John. [Operator Instructions] So with that, operator, could you please open up the lines for questions?

[Operator Instructions] And the first question is from Dennis Fong with CIBC World Markets.

The first one for me is just really around the Upstream. Can you maybe discuss, we'll call it the progress around the pipeline of SA-SAGD projects at Cold Lake? I know that there's kind of a long duration strategy around kind of growing or layering in projects between now and 2050. As the world kind of obviously evolves in terms of diversifying supply chains globally, can you talk about opportunities to maybe accelerate some of that pipeline of projects as well as your appetite for that?

Thanks, Dennis. I can -- I'll make a few comments on that. I think maybe I'll step back first and talk about our capital plans in light, as you say, of the current situation and commodity prices. Every year, we review our corporate plan, and we consider that over a range of inputs and a range of price scenarios. And we pace our investment strategy to maximize value at the end of the day. And looking at that both in terms of our existing assets and progressing advantaged growth.

So we are -- remain very focused on Kearl getting it to 300,000, Cold Lake getting it to 165,000 barrels per day, and in the downstream flexibility and logistics projects. And of course, we're advancing our EBRT pilot. So I think at the high level, I wouldn't -- you shouldn't expect or anticipate major changes. We weren't waiting for a price signal to drive pace. We're looking at maximizing value for shareholders over a long-term view, and we believe we're progressing our growth opportunities at the appropriate pace to do just that. So that's kind of at the highest level.

If you think at Cold Lake, I mean, we continue to work through this transformation of the asset. As I mentioned, Grand Rapids SA-SAGD is continuing to perform very well, above 20,000 barrels a day. We're ramping up the Leming SAGD, which is going back into the -- where the original pilot was, that's ramping up towards 9,000 barrels per day. And then in the future plans, we have Mahihkan, which we've started to invest in, and that's still on track to bring on 30,000 barrels a day of advantaged technology volumes starting up in 2029. So we continue to progress those at a pace we think that makes sense.

And stepping back from that at Cold Lake, if you think about the percentage, we talk about this transforming the asset. In 2020, all of our production there was coming from CSS and steam flood and not from what we're today characterizing as advantaged technology. In 2025, that was 20% was coming from advantaged technology, largely the SA-SAGD at Grand Rapids. You go ahead 5 more years, that's going to be up to 45%. 5 years after that, it's going to be 60%. And by the time you get to 2040, which is less than 15 years from now, about 2/3 of our production will come from advantaged technology at Cold Lake. So we continue to progress at a pace we think that makes sense.

Great. Really appreciate that color and context there, John. My second question shifts the focus back towards the downstream. And I was hoping you could provide us or at least remind us about the flexibility in terms of your refining assets, as well as kind of revealing any opportunities to capitalize on dislocations in the market, whether it be locally or globally, as well -- and kind of maybe specifically focusing around distillates and jet fuel, just given how desirable those products happen to be.

Yes. I'll make a few comments. I'm going to ask Scott to chime in as well. We feel really good about the -- obviously, our downstream business, the margin capture that we're able to get. Canada remains advantaged globally in terms of margin that we get. And then Imperial remains advantaged within Canada. So we really like our position. We do -- so we're really looking to maximize sales locally. However, given the current environment, we do look at the export market as well and look to overall maximize the margin, our margin capture in that regard.

So there are some constraints about what we can export when you look at logistics and so on. But we do continue to look across the whole portfolio and how to maximize overall capture, but we're really pleased with the advantage we have in Canada. And I think you saw us do that in the first quarter in terms of margin capture as we benefit from producing renewable diesel, the flexibility we've had to produce into the highest value products and into the highest value markets. So kind of high level, that's how I think about it, and I'll ask Scott to add some color to that.

Sure. Thanks, John. I appreciate the question, Dennis. First, on the gas to diesel and jet splits within our refineries, we look at that from an optimization standpoint every single month. And so as we think about the feedstocks we're sending to our refineries, we're doing that based on the value we can achieve on the finished products that are manufactured. And so certainly, in this time period, we've been maximizing our production of diesel and jet molecules over gasoline. And that is a balance because a large portion of our production goes to supply customers within the Canadian marketplace, and we can efficiently supply those customers within the Canadian marketplace with our coast-to-coast logistics network, moving the barrels from our refineries in Eastern and Western Canada to those customers. And so that's where we see the highest uplift. And as John mentioned, we do opportunistically look at exporting additional production on top of that. And certainly, that is an opportunity in this sort of marketplace when you're seeing margins increase in other markets.

And the next question will come from Greg Pardy with RBC Capital Markets.

And as always, thanks for the detailed rundown. John, I wanted to come back to the -- just the progress in terms of the restructuring that's going on. Maybe to better understand perhaps at what stage you're at in terms of transferring workflows from IMO into some of the ExxonMobil excellence centers and so forth.

And then also, just in terms of the technology we're talking about in terms of those advancements and how that's being incorporated, maybe what stage are we at? And what are the things that you're looking for in terms of key benchmarks of success?

Thanks, Greg. Yes, as we -- if I step back in from this restructuring, it's all driven around, as you pointed to, leveraging rapidly advancing technology environment and the growth that we've seen in these global capability centers that ExxonMobil has. And that basis, that case for action remains really strong. And both of those things that drove the decision, and we feel very good about that. And it advances our long-standing strategy about maximizing value and leaning into technology and leaning into our relationship with ExxonMobil.

I would say I feel very good about the progress we're making, and we are advancing that transition on track today. If I think about that, if you look at it, we're basically -- it's pretty ratable in terms of the -- we're doing 2 things. We're outsourcing work and we're capturing efficiencies. And as I've mentioned before, about 40% of the reduction in positions or the value is actually pure efficiency. And about 60% is outsourcing work to these global capability centers where we already have work being done for us today.

So we have very rigorous plans on the transfer of that work to those global capability centers and the positions where we will capture efficiencies. And each department and group within Imperial has detailed road maps on how they're progressing that. It's going to be pretty ratable. We have had people leave the organization late last year. We've had people leave the organization in the first quarter of this year in the range of about 130 people in the first quarter of this year. And that's going to continue pretty ratably quarter-by-quarter and year-by-year this year and next year. So that's progressing well and on track, and you'll see it kind of pretty ratably over that period.

The technology, I think a couple of things. There -- part of it is what we put in place that has enabled us to move at this pace. And then the second part of it is, as you move that into these global capability centers, we're going to be able to deploy technology more quickly at scale in the future. So a lot of it was putting the digital programs that we've spoken about in the past, putting in place digital -- our data lakes, getting our data organized and in a structure that could be used in an efficient way regardless where the work is being done, putting digital twins in place and then automating some of our work. So that enabled us to continue on this path.

And then as we move these workflows into global capability centers, we see greater opportunity, AI, machine learning and so on to further automate those workflows. And we're going to be able to do that more quickly and at scale when that work is being at a global capability center and being done in a broader sense across ExxonMobil's network. Hope that answers the question for you.

No, no, it does. I mean I think it's usually these announcements, they come out and then the focus is on cost of the future. But obviously, there's a transition to go through. So it's good to understand some of the context there. So let me just pose maybe a related question. Then in terms -- from your perspective as the CEO, the capability of Imperial to go execute Aspen in the future and recognizing there's a pilot there and there's a bunch of work to do and so forth. It certainly sounds from where you're sitting that the only change in terms of where corporate strategy might be headed is not necessarily in terms of what you're going to deliver, but just where it's going to be delivered from and at what cost. Is that the right way to think about it?

Absolutely. That's exactly the way to think about it. Nothing is changing in our company in terms of the governance of our company, the skill sets we will have on the ground to support the assets we have today to support growth into the future. We will have -- we're still going to be an organization of 4,000 people after we go through this transition. And our growth plans, I really believe this sets us up to continue to deliver industry-leading performance and actually builds the foundation for us to grow.

And of course, if you think about an Aspen project, we're not sitting here today with the project team waiting for that project to come, right? We build up capability when we see those projects coming in. Of course, a lot of it is done by contractors, but we will need additional capability. We're going to be in a better position to build up that capability because we're going to have support networks globally that are there that we can leverage and ramp up. So it doesn't change anything with our governance, doesn't change anything with our strategy. I'm as bullish or more bullish than I've ever been on our future in situ portfolio, the technology, and we have the ability to double our production with that future in situ portfolio. And when the time is right, when the technology is ready and the investment environment is there, we have the capability to do that.

And moving on to Menno Hulshof with TD Cowen.

I'll start with a question on Kearl. In your opening remarks, you touched on some of the initiatives you're pursuing to drive production above 300,000 barrels a day on a sustained basis. And you talked about turnaround optimization. But can you elaborate on where things stand on the key pieces within enhanced bitumen recovery and the overall performance of the equipment?

Yes. That's right, Menno. I mean I'm going to ask Cheryl to chime in here, but we've got these three focus areas that we've had, which is around productivity and reliability improvement, the turnarounds and then the one you mentioned around enhanced recovery. And we have specific projects focused on enhanced recovery. And so we're working all three of those components. Those are the things that will unlock and get us to 300,000 barrels a day, $18 a barrel. And I'm going to let Cheryl talk about a couple of the enhanced recovery projects that we have -- that we're progressing right now.

Sure. Thanks, John, and thank you for the question, Menno. John references three items. I'd probably say there are more. This is a space where this is kind of our ultimate end equation. So when I think about Kearl and where we're headed with 300 kbd, I have very strong confidence in our future. And you've heard me say this before, which is we're anchored and we're building on a strong foundation. We're leveraging scale, such that our incremental production really leverages this fixed high-cost structure.

We're doing recovery projects. We've got two in the hopper right now. One is called KFCC, and that's going to come online at the end of the year, and that captures additional bitumen from ore already processed. The second one is called CST or coarse sand tailings, that's in development. Think of this as where you get aeration in the system and it makes bubbles so the bitumen droplets, you're able to recover more bitumen.

The other end in this space is the turnaround optimization that John mentioned and then technology solutions. And this really hits on that productivity and reliability space. You've heard me mention about we're continuing to upsize our hydro transport lines. We're looking at mine automation where we're looking for more remote, semi- and automated mining that really takes the physical operations out, continuing with our fleet optimizations on the autonomous side.

And then the other thing I find is interesting with Kearl is just by design, your haul distances get longer as mine develops. So there's cost headwinds. Our intent is to more than offset those via scale optimization and technology solutions. And the final thing I'll leave you with, and this is one of the key milestones I'm very proud of. By late this summer, Kearl is on target to hit our 1 billion barrels of production. So this is a significant milestone and very much looking forward to it.

Yes. Thanks, Cheryl. That is a big number. Second question, maybe on the recent increase to the SCO premium. What is your marketing team seeing day-to-day in terms of rising SCO demand to meet diesel and jet supply shortfalls? And how long do you think premium pricing could persist?

I'm going to ask Scott to take that one.

Yes. So I mentioned before that certainly, we're optimizing our refineries to manage additional diesel and jet production. We feel like there's ample feedstocks in the marketplace to do that. And with the demand profile within Canada in particular, there's even some imported jet from other markets into portions of Western Canada. So we see some ongoing ability to continue pushing jet production and sales into the Canadian marketplace and believe we have enough feedstocks to do that.

Yes. And I would just add, obviously, synthetics are trading higher because they're a good way to make diesel and jet. And that's probably -- we're not going to predict the future synthetic premium, but that may persist for a little bit as these margins stay quite high.

And we'll take a question from Neil Mehta with Goldman Sachs.

Yes. And this might be for you, Dan, just your perspective on return of capital, which has really been the hallmark of Imperial over the last couple of years. And as we've gotten into a firmer commodity environment, certainly, the NCIB will get turned on, but how do you think about buying back stock here and the potential for an SIB and if there's any price sensitivity around shrinking the share count because the stock has done really well. So any perspective around that would be great.

Sure, Neil. Bottom line is no change in the way we look at this, consistent with John's kind of remarks and earlier on. We're committed, obviously, to the reliable and growing dividend. We paid our April 1 dividend at the higher rate of $0.87, which is a 20% increase from the prior. And as you noted, we said we're going to renew our NCIB at the end of June when we can. And we'll certainly plan to proceed with that.

And then the question is, okay, is there an SIB in there somewhere, too? And the answer is it's just going to depend on where cash goes, right? I mean, right now, at current prices, if those persist, we'll have a lot of cash, right? So that would certainly be a possibility. But we'll just have to see what happens. So I'd say no change in our philosophy. We remain committed to returning cash to shareholders. And as we generate the cash based on commodity prices, we'll continue to return that really as we have in the past.

So no change to our philosophy. I would say we're not really set -- our prices has a great run. And as I said in my opening remarks, it had this -- the mark-to-market was so big. It showed up as a factor because of the rapid rise in the share price. But we believe that reflects value, and we see the share buybacks as an efficient way to return cash. So we'll continue to return cash.

Yes. Thanks, Dan. It's been a great run. So just a follow-up on the questions about what you want to accomplish during the turnarounds that you referenced earlier for both Strathcona and Kearl. Can you talk -- can you give us pull back a little bit and talk about specifically what are the 2 or 3 things you want to accomplish at both of those turnarounds and that we should be focused on?

I mean I'll make a few high-level comments and then Cheryl and Scott can chime in. But being at Strathcona with the turnaround of the crude unit, again, it's had a 10-year run. So there are some -- we monitor obviously the integrity of the unit. And there are some elements, components that need to be changed out at that point. They've come to the -- towards the end of their life. So part of that is just the maintenance that comes with it.

But 10 years is a long time to run a unit, and we look to continue to optimize that. There's that. But at certain point, you do need to go in and make some adjustments. Then at Kearl, I mean there is, again, the same thing. We've been -- there are some elements that components and things that we do need to change out. They come to end of life. In general, we try to have redundancy when we do that. We don't have that full redundancy to do it everywhere. But a big part is some of the upgrades that we're doing. Cheryl mentioned it already, I mentioned it, but it's some of the upgrades we're doing to allow us to get that turnaround to go from a 2-year interval to a 4-year. So that's metallurgy improvement, size of transport lines and things like that, that will allow us to go longer. So that's at the high level. Maybe, Scott, anything further on the Strathcona?

Maybe just one other comment. Yes, just to confirm, it is an extended turnaround interval length. So that is something that we're pretty proud of actually getting the units to run this long. But it is a normal turnaround from a work scope perspective. We don't plan to add any new equipment or things like that. The one other comment I'd share is that with our new renewable diesel unit located at our Strathcona refinery, that continues to run during this turnaround. And so we continue to manufacture renewable diesel, and that's really been a bright spot for us in the first quarter. And so that has not been impacted by the turnaround activity in Strathcona in the first quarter to date.

Sure. And I'll answer -- I'll give a little bit of context for Kearl. So the K1 scope that we've got this year is essentially the same scope that we had for K2 last year. So the work we completed on K2 gives us confidence that we head into the turnaround in May. And a couple of key items there, we have some modifications on the primary separation cell and then we've got some hardening on our surge bin. And those are really the key items to enable the 4-year turnaround. We do have a couple of incremental items to work for K1 around the flare. But in general, I would say the majority of the scope is exactly what we did last year for K2.

And we'll take a question from Doug Leggate with Wolfe Research.

I guess this might be for Dan. Dan, royalties in Canada are typically priced off WTI, which obviously has gone into overdrive here. And WCS has blowed out quite a bit. I wonder if you could walk us through how we should think about that. You're getting obviously, royalties priced on one number, but you're getting realizing prices at a different number, particularly on the heavy oil and the [ WCS ]. Obviously, your production is more heavy than light. So can you walk us through that?

And I guess if I could ask a follow-up here. This is a really -- I know it's a stupid question before I ask it, but I'm going to ask it anyway. And it's about technology on things like SAGD, where does it sit? Does it sit at ExxonMobil? Or does it sit at Imperial? And the stupid bit of my question is, one can't help feeling that we're coming into a very different era for oil prices with UAE pulling out of OPEC and maybe there's a restocking cycle and underinvestment and all the rest of it. Imperial has never operated outside of the U.S. -- outside of Canada, my apologies. Is there ever a situation where the heavy oil opportunities in places like Venezuela might change that? Or does it all sit with ExxonMobil?

Okay. So maybe I'll take the first one on royalties. You're right. I mean it's pegged -- the royalties are pegged. The royalty rates, I should say, are pegged to WTI, but the actual royalty payment is tied to your realizations on bitumen. And that's been the case for a long time. And I would say, on balance, we feel the royalty regime in Canada is attractive. And in particular, for Kearl, which is pre-payout, even at the very highest royalty rate, which is over 120 Canadian WTI, we cap out at 9% gross, which -- so we have really great leverage to the upside on prices.

So yes, we don't see it as a significant issue. I mean the spread has widened out a bit. It's like maybe $15. I haven't looked today, but 15-ish, so which is historically not very wide. So it's the rates that are set on the WTI, but the actual payments are based on your realizations of bitumen actual prices. So it's really to us, overall, given the way the rates work, a good regime, and we don't see it as a headwind. We see it as more of a tailwind in a high price environment, especially for an asset like Kearl.

And let me take the technology question, Doug. I think -- here's how I think about it. We basically have access to all of ExxonMobil's technology and they have access to ours. So in terms of -- at the high level, is Imperial looking to expand its footprint beyond Canada? We're not. We're focused on Canada. But we basically have sharing agreements on the technology. And Imperial has largely the heavy oil-related technologies, SAGD, SA-SAGD, the technologies we use at Kearl, the paraffinic froth treatment and so on. That has been developed by Imperial.

So Imperial has kind of been the center of excellence around heavy oil technology. So if ExxonMobil were to decide to look at Venezuela or whatever, they could utilize some of our heavy oil technology involved in that. Right now, we at Imperial are not looking to go outside of Canada. The flip side of that is we get to take advantage of ExxonMobil's technology. So we talked a lot about renewable diesel here today. We're using a low-temperature proprietary technology that allows us to use that our renewable diesel can be used year-round in cold weather environment. That's an ExxonMobil-developed technology that we have full access to and we're able to use to give us a competitive advantage with our renewable diesel project.

Some of the metallurgy we use at Kearl on our hydro transport lines has come from metallurgical technology advancements that ExxonMobil has developed. We just used the ExxonMobil Proxima carbon fiber material in one of our bridges at Kearl. So we have full access, and we use much of their process optimization technology in our downstream and in our upstream as well. So we have full and free access to their technology. We use it in areas when it comes to heavy oil, that technology development has largely occurred through Imperial and will continue to occur.

We just announced last year how we donated our technology center here to SAIT, which was a $37 million donation, the largest ever donation to an educational institution in Alberta. But we'll continue to have research at that research center going forward in specific to heavy oil optimization as well as tailings work and so on. So that's kind of how we see that.

Maybe not such a dumb question, John. That's very informative.

We love your questions, Doug, just for the record.

And that does conclude the question-and-answer session. I will now turn the conference back over to Peter Shaw, Vice President of Investor Relations for closing remarks.

Thank you. So on behalf of the management team, I'd like to thank everyone for joining us this morning. If there are any other further questions, please don't hesitate to reach out to the Investor Relations team, and we'll be happy to answer your questions. With that, thank you very much, and have a great day.

Good day, and welcome to the Imperial Oil Fourth Quarter 2025 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Peter Shaw, Vice President of Investor Relations. Please go ahead.

Good morning, everyone. Welcome to our fourth quarter earnings conference call. I am joined this morning by Imperial's senior management team, including John Whelan, Chairman, President and CEO; Dan Lyons, Senior Vice President of Finance and Administration; Cheryl Gomez-Smith, Senior Vice President of the Upstream; and Scott Maloney, Vice President of the Downstream.

Today's comments include reference to non-GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment 6 of our most recent press release and are available on our website with a link to this conference call. Today's comments may contain forward-looking information. Any forward-looking information is not a guarantee of future performance and actual future performance, operating results can vary materially depending on a number of factors and assumptions.

Forward-looking information and the risk factors and assumptions are described in further detail on our fourth quarter earnings release that had be issued this morning as well as our most recent 10-K. All these documents are available on SEDAR+, EDGAR and our website. I would ask you to refer to those.

John is going to start this morning with some opening remarks and then hand it over to Dan, who's going to go through the financial update, and then John will provide an operations update. Once that is done, we will follow with the Q&A. So with that, I will turn it over to John for his opening remarks.

Thank you, Peter. Good morning, everybody, and welcome to our fourth quarter and full year earnings call. I hope everyone is doing well and that your year is off to a good start. And as always, we appreciate you taking the time to join us this morning.

Let me start by saying I'm very pleased to report another strong quarter. We generated just over $1.9 billion in cash flow from operations in the quarter and $6.7 billion for the full year. At year-end 2025, our cash on hand exceeded $1.1 billion after funding our capital program and returning $2.1 billion to shareholders in the quarter and $4.6 billion over the year including dividends and the completion of our normal course issuer bid. Our integrated business model continued to demonstrate resilience with stronger downstream profitability in the quarter, and we continue to generate substantial free cash flow over a range of oil price environments with nearly $1.4 billion generated in the fourth quarter when WTI averaged less than USD 60 and $4.8 billion generated throughout 2025. While our financial results in the quarter were very strong, operationally, we encountered extremely wet conditions at Kearl in October and additional maintenance in our Eastern manufacturing hub in December. I'll touch further on these events and how we've moved past them during the asset updates. On the project front, we achieved first production from the Cold Lake Leming SAGD project in the beginning of November. As expected, production is currently ramping up to a peak of around 9,000 barrels per day.

Now I'd like to briefly highlight 2 identified items that affected the quarter's results. First, we announced our decision to cease production at our Norman Wells asset in the Northwest territories, by the end of the third quarter of 2026, as it reaches the end of economic life after several decades of successful operations. This somewhat accelerated end of field life versus the end of the decade, resulted in a onetime charge of $320 million after tax, which is included in our fourth quarter identified items. I would like to take a moment to thank our Imperial team members and our partners that have continued to and are still supporting our efforts at Norman Wells. As we continue to supply central energy products to the North and as we move forward with the decommissioning at Norman Wells, our focus will remain on strong relationships and working closely with local communities.

Separately, we completed a comprehensive review of our inventory practices across the company, informed by external benchmarking and inventory management best practices. Based on the review, we identified opportunities to further enhance our inventory management such that we can run more efficiently with optimized inventory levels while maintaining critical supplies. While we have recognized a onetime charge of $156 million after tax in our fourth quarter earnings to reflect the optimization of materials and supplies inventory, we expect to realize significant operating and working capital efficiencies going forward.

Moving back to the overall results. The fourth quarter saw us continue our long track record of delivering industry-leading returns to shareholders. We paid $361 million in dividends and completed the accelerated share repurchases under the NCIB in mid-December, with share repurchases totaling $1.7 billion in the quarter. In total, we returned $4.6 billion of cash to shareholders in 2025. We and exceeded $23 billion over the past 5 years. I'm also pleased to share that this morning, we declared a dividend of $0.87 per share, payable on April 1, 2026. The increase of $0.15 per share is the largest nominal dividend increase in company history. To provide some context, 10 years ago, our quarterly dividend was $0.14 per share.

As we move into 2026, we remain focused on our core strategy of being the most responsible operator, maximizing the value of existing assets, progressing our restructuring plan and continuing to deliver industry-leading shareholder returns. This strategy has allowed us to increase our quarterly dividend per share by 295% and repurchased 34% of our outstanding shares since 2020.

With that, I'll now pass things over to Dan to walk through the financial results in more detail.

Thank you, John. I'll begin by covering the fourth quarter identified items that John just mentioned and provides additional context. First, consistent with our economic decision to accelerate the cessation of production at Norman Wells by several years, we have booked an earnings charge of $320 million. This charge includes a $108 million impairment charge to reduce the net book value of the asset to 0, the remaining $212 million reflects related contractual obligations with about half expected to be paid later in 2026 and the other half payable over a number of years going forward.

Second, the optimization of our materials and supplies inventory resulted in an unfavorable earnings impact of $156 million after tax. While this onetime charge in the fourth quarter did not impact our operating cash flow, it did impact our simplified non-GAAP measures of unit cash operating cost at Kearl and Cold Lake. John will discuss these impacts in his asset updates.

Turning to our underlying fourth quarter results. We recorded net income of $492 million. Excluding the 2 identified items I just described, net income for the quarter was $968 million, down $257 million from the fourth quarter of 2024, driven primarily by lower upstream realizations. When comparing sequentially, fourth quarter net income is down $47 million from the third quarter of 2025. When excluding identified items, net income is down $126 million, again, primarily due to lower upstream realizations.

Now shifting our attention to each business line and looking sequentially. Upstream lost $2 million, down $730 million from the third quarter. However, excluding identified items, net income of $418 million is down $310 million, primarily due to lower realizations. Downstream earnings of $519 million are up $75 million from the third quarter. Excluding identified items, net income of $564 million was up $121 million, mainly due to higher margins. Our Chemical business generated earnings of $9 million, down $12 million from the third quarter. Excluding identified items, net income of $20 million is essentially flat as we continue to operate in bottom cycle margin conditions.

Moving to cash flow. In the fourth quarter, we generated $1.918 billion in cash flows from operating activities. Excluding working capital effects, cash flows from operating activities for the fourth quarter were $1.260 billion, which included an unfavorable $325 million related to the identified items previously discussed. Taking this into account, normalized cash flow from operating activities, excluding working capital effects, was about $1.585 billion in the quarter. As John mentioned, we ended the quarter in a strong cash position with over $1.1 billion of cash on hand.

Shifting to CapEx. Capital expenditures in the quarter totaled $651 million, $228 million higher than the fourth quarter of 2024 and $146 million higher than the third quarter of 2025. Full year CapEx was $2 billion, consistent with our guidance, up from $1.9 billion in 2024. In the upstream, fourth quarter spending of $508 million focused on sustaining capital at Kearl, Syncrude and Cold Lake. In the downstream fourth quarter CapEx was primarily spent on sustaining capital projects across our refinery network.

Shifting to shareholder distributions. We continue to demonstrate our long-standing commitment to distribute surplus cash to shareholders returning $4.6 billion over the course of 2025, including $1.4 billion of dividends and $3.2 billion in share repurchases. Looking ahead to 2026, and as John already mentioned, we announced a first quarter dividend of $0.87 per share this morning. This increase of just over 20% reflects our confidence going forward and demonstrates our long-standing commitment to deliver a reliable and growing dividend.

Now I'll turn it back to John to discuss the company's operational performance.

Thanks, Dan. I'll now take the next few minutes to share the key highlights from our operating results. Upstream production for the quarter averaged 444,000 oil equivalent barrels per day, down 18,000 oil equivalent barrels per day versus the third quarter and down 16,000 versus the fourth quarter of 2024. That said, for the full year, we achieved the highest annual production in over 30 years at 438,000 oil equivalent barrels per day. And in fact, our liquids production was the highest ever.

I'll now cover each of the assets, starting with Kearl. Kearl's quarterly production was 274,000 barrels per day gross, down 42,000 barrels per day versus the record quarterly production in the third quarter. As I mentioned in my opening comments, we experienced some extremely wet conditions in October that prevented us from mining per the optimized sequence in our plan. This temporarily impacted our ability to access some of the higher quality ore we were planning to mine in the quarter. However, as conditions improved, the team was able to return to normal operations. In December, Kearl produced 298,000 barrels per day, achieving its second highest monthly production ever. I was pleased to see those production levels even as temperatures dropped for the last 2 weeks of the year. Given the performance in December, the fact that 2025 had more days over 300,000 barrels per day than any previous year and the good start to 2026, I have high confidence in our annual guidance for the year and in the path to our target of 300,000 barrels per day.

Turning to Kearl's unit costs. Kearl's fourth quarter unit cash cost of USD 23.84 included approximately USD 4.50 impact due to the inventory optimization. Kearl's 2025 full year unit cash costs of $19.50 was also impacted by the inventory optimization by about USD 1. Excluding these impacts, Kearl's unit cash costs were well below USD 20 for the year, and well on our path of achieving USD 18 per barrel. This year, we completed the K2 turnaround, advancing our plan to double our turnaround intervals to an industry-leading 4 years. In 2026, we will complete the program by undertaking comparable work on the other train at K1. In turnaround, interval extension, along with other initiatives such as the productivity and reliability projects and secondary recovery investments underpin our strategy to maximize value from our existing assets.

Moving next to Cold Lake highlights. Cold Lake's quarterly production averaged 153,000 barrels per day, up 3,000 barrels per day versus the third quarter of 2025. First production from the Leming SAGD project was achieved in November. As we speak, the project is producing approximately 4,000 barrels per day, which gives us confidence in the ramp towards 9,000 barrels per day over the course of the year.

Moving to Cold Lake unit cash costs, which were USD 16 during the fourth quarter, and impacted by approximately USD 1 per barrel due to the inventory optimization. On a full year basis, Cold Lake achieved a unit cash cost of USD 14.67, which was impacted about $0.25 due to inventory optimization. The Grand Rapids SA-SAGD continues to perform well, Leming SAGD is ramping up and continuous efforts to improve our unit cost structure, give us the confidence in reaching our unit cash cost target of USD 13 per barrel in 2027. Activities in Cold Lake in 2026 include high-value infill drilling and early development of our next SAGD project, which will be at Mahihkan. This will be our second commercial solvent-assisted SAGD operation and follows the successful startup of Grand Rapids in 2024. Mahihkan SA-SAGD start-up is anticipated in 2029 with a peak production of 30,000 barrels per day.

And to round out our Upstream, I'll cover Syncrude results. Imperial share of Syncrude production for the quarter averaged 87,000 barrels per day, which was up 9,000 barrels per day versus the third quarter and up 6,000 barrels per day versus the fourth quarter of 2024. Higher volumes reflect turnaround optimization and stronger mine performance. This quarter, the interconnect pipeline enabled Syncrude to produce approximately 7,000 additional barrels per day, our share of Syncrude suite premium production.

Now let's move on and talk about the Downstream. In the fourth quarter, we refined an average of 408,000 barrels per day, equating to a utilization of 94%. Compared to the third quarter, refinery throughput was down 17,000 barrels a day due to additional maintenance in our Eastern manufacturing hub in December. The maintenance was completed in December and will have no impact on our 2026 throughput. For the full year, our refineries achieved a throughput of 402,000 barrels per day, equating to a utilization of 93%. That throughput was up versus the 399,000 barrels per day achieved in 2024. With the successful completion of the Sarnia turnaround in the fourth quarter, the execution of all downstream turnarounds in 2025 occurred ahead of schedule and below budget.

We also started the Strathcona renewable diesel facility midyear. The facility is running well and has reduced our reliance on high-cost imported products and strengthened our competitive domestic supply. We continue to optimize production at the facility based on hydrogen availability. Looking ahead, we remain focused on delivering industry-leading operational performance while enhancing logistics and processing flexibility to further improve our competitive position and the long-term results.

Turning now to Chemicals. Earnings in the fourth quarter were $9 million, down $12 million from the fourth quarter of 2024, impacted by the inventory optimization. Excluding this impact, earnings were consistent with the fourth quarter of 2024. And although market conditions remain challenging, our integration with the Sarnia refinery continues to add value and provides resilience in low price environment.

In closing, 2025 was another strong year for Imperial. We generated approximately $4.8 billion in free cash flow and returned $4.6 billion to shareholders through dividends and buybacks. Operationally, we achieved record annual volumes in our upstream and made further progress on our unit cash costs at Kearl and Cold Lake. We also successfully completed our planned turnarounds across all business lines. As we look to 2026, our priorities remain clear and consistent, continue to profitably grow volumes, further lower unit cash costs and increased cash flow generation. We remain committed to optimizing production across our asset base, progressing towards our volume and cap cost targets, driving greater efficiency and delivering unmatched industry-leading shareholder returns. We continue to prioritize a reliable and growing dividend, and we will continue to return surplus cash in a timely manner. Our restructuring that was announced in September is progressing on plan and will advance our long-standing strategy of maximizing the value of our existing assets.

In closing, let me say, the combination of our financial position, strong operating results and our strategic initiatives to further strengthen efficiency and effectiveness, gives me confidence in the future of Imperial, and our ability to further enhance our leading -- our industry-leading position. As always, I want to thank our employees for their hard work and dedication throughout the year. And I would like to thank all of you once again for your continued interest and support.

And now we'll move to the Q&A session. I'll pass it back to Peter.

Thank you, John. As always, we'd appreciate it if you could limit yourself to one question plus a follow-up. And with that, operator, could you please open up the line for questions.

[Operator Instructions] Our first question will come from Dennis Fong with CIBC World Markets.

I appreciate the thorough ops update in the prepared commentary. My first question is focused on Kearl. So you highlighted obviously wet conditions driving some of the production impacts early in the quarter. Do you mind discussing some of the learnings or even implementation of different, we'll call it, maintenance or standard operating procedures that could help mitigate kind of such, call it, downtime or inaccessibility to certain regions in the mine on a go-forward basis, especially as we think about obviously continued operations?

Sure. Thanks, Dennis. Maybe let me step back a little bit. And I think you're right. I mean if you think about our winter operations and the steps we've made to improve performance in winter, and then wet conditions, it falls in the same category for us. So it is a good question. We look at all of these. Weather is a reality, and we need to operate efficiently and effectively through that. But let me step back a little bit to what happened in the fourth quarter. The root cause of that lower production, as we talked about, was these exceptionally wet conditions in the fourth quarter. And to give you a sense, we experienced more rain in a few days in October than we typically get all summer. So it was a significant event. And what happened there was that impacted the mobility of the equipment in the mine and it delayed accessing high-quality ore that we had planned to get to. And unfortunately, it took a little time to recover to that -- recover from that. So part of it did creep into November as well. But as I said, we recovered strongly in December with our second highest production of the -- in the assets -- monthly production in the assets history. And despite cold weather in the second half of December as well.

And I would say there's no carryover from this event, but we will be stepping back for sure and looking at are there other things we can do around the way we design our roads, the drainage of our roads and those type of things to make sure that even in -- this was an extreme event, but even in those events that we can weather those better and continue to produce. But overall, I'd say still, it was an extreme event. We will learn from it. I feel really good about our plans at Kearl. Our guidance between 285,000 and 295,000 this year is -- we're very confident of that. Our path to 300,000 and the things we're doing around turnaround optimization, productivity and reliability improvements and higher recovery. And again, it was encouraging to see 2025, we had more days again above 300,000 barrels a day than we've experienced in the past. So we continue to see that metric improve, which is one we watch closely. So we'll definitely step down and learn from it, but we remain highly confident in Kearl and the path forward.

Great. Really appreciate that, that thorough answer. My second question turns my attention, frankly, over to Cold Lake. You mentioned Mahihkan as the next project for SA-SAGD. Can you give us a little bit more of a background there? Are you targeting a similar reservoir to the Grand Rapids operation? How are you thinking about production ramp-up? And then what is the impact potentially to field SOR and operating costs once that project is wrapped up?

Yes. Thanks, Dennis. I mean -- so a couple of things. I think the -- if you think about the Grand Rapids, SA-SAGD, that was a different reservoir. That was the Grand Rapids reservoir, which is shallower than the Clearwater where we've been producing for almost 50 years from at Cold Lake. So the beauty of that project was it was opening up a new reservoir and it was testing a new technology. And as we've talked about, that's gone extremely well. And it ramped up quicker than we anticipated and went to a higher plateau and that plateau is hanging in longer than anticipated. So that one kind of -- we're seeing the benefit of the technology, and we opened up a new reservoir. We talked about Leming SAGD. Of course, that goes back into the Clearwater back into the original reservoir that we started to produce from and where we produce most of our production from today. Beauty of that is, it's going back -- right back to where we've started the pilot at Cold Lake 50 years ago and capturing the remaining resource in that part of the field.

Now Mahihkan, it uses the same SA-SAGD that Grand Rapids uses, but it will be in the Clearwater reservoir that will produce that. We're very encouraged by, of course, what we've seen from Grand Rapids and how the technology is playing out. We know the Clearwater reservoir extremely well, so we feel good about that. So we're highly confident when I think about Mahihkan SA-SAGD. We're starting to invest in that now. We plan to start up in 2029 and produce 30,000 barrels a day. So we feel very good about that and glad to see that we're getting started on that project.

And our next question will come from Manav Gupta with UBS.

Congrats on that almost 21% dividend hike, better than expected. So my first question is more on how you're thinking about shareholder returns and does that leave you enough cash for a possible NCIB later in the year? And then a quick second follow-up, which I'll ask straight up is refining came in much stronger than expected. Your refining earnings have been very resilient. And if you can talk a little bit about Imperial and the overall refining macro, and I'll turn it over.

Thank you, Manav. First, so if we think about the dividend -- and thank you for the feedback on that. First and foremost, when we thought about that dividend, it reflects management and the board's confidence in the company's strategies and plans to create value. So as you know, we're working to maximize value and to grow profitability and lower our unit cost and increase our cash flow, and we are highly confident we will do that, and that's what you see reflected in the, as you say, a 21% dividend increase. And we're doing, of course, a lot of things to focus on that, and that's going to be -- and why could we do that? Well, I think it's -- we've consistently increased the dividend over the last 2 years. It reflects our financial strength, our low breakeven of our business. And of course, the use of surplus cash to buy back shares. And as we mentioned earlier, that's reduced our outstanding shares by 34% since 2020. We did a -- as you can imagine, a full range of tests against low price scenarios, and we continue to feel very good about this level of dividend and the resilience that's in our business. So our capital allocation approach won't change. This is consistent with that, growing -- a reliable and growing dividend remains a priority. And of course, we've been doing that for over 100 years, and this is a 32nd year of growth. And then we're going to continue to -- our plans see us generating with these low breakeven substantial free cash flow over a range of prices and scenarios, and we're going to continue to return that surplus cash flow in a timely manner, as we've demonstrated this year where we generated $4.8 billion of free cash flow and returned $4.6 billion to shareholders. So that approach and strategy continues.

Maybe I'll just add, Manav, we don't really see -- I mean, the dividend increase is a few hundred million over the course of the year. And the dividend increase is not really based on current market conditions. As John explained, it's a longer-term outlook and confidence in our business. It's not really driven by what's happening in the short term. The NCIB, obviously, our surplus cash is a result of what happens in the short term where prices, commodity prices are. So we still remain committed to the NCIB and expect to be able -- we renew that program at the end of June, and we expect to commence on that. The level of that and the level of additional cash distributions beyond that will be depending on what commodity prices do. But we don't see the dividend and NCIB is competing. We see them as quite complementary.

And I'll jump over to your -- thanks for that, and I'll jump over to your downstream question. We feel really good about that part of our business. And we saw it in the results in the quarter. Overall, we continue to focus on further improving and maximizing the profitability of our downstream, leveraging our, as we've talked about before, our coast-to-coast network, our advantaged assets, our strong brand loyalty programs that enable us to move products into high-value markets. And we're continuing to invest in our flexibility and our logistics to continue to improve on our position and capture high-value markets.

And when we look at the demand in the future, we see strong liquid demand in Canada as we go forward. The mix may change a little bit. Biofuels demand is growing. Of course, we feel really well positioned for that given our Strathcona renewable diesel project and the coprocessing of vegetable oil feedstocks at our refinery. So we feel good about that. We see a stable jet and distillate market moving forward, and we're well positioned for that. Gasoline, that could -- demand could moderate with EVs and things, but we've got plans to grow our gasoline market share in that regard. So overall, we feel really well positioned with the assets we have and really well positioned as fuel demand kind of evolves over time. So feel good about that. I'll hand it over to maybe to Scott, if just specifically on the quarter and your question around the performance in the quarter.

Yes. Thanks, John, and thanks, Manav, for the downstream question. Yes, it's specifically just a couple of additional specific comments for the fourth quarter. We saw refining margins in general, fluctuate throughout the quarter. But generally, they were strong, and they were especially strong in the month of November. And that's when we had our highest utilization months. So that really helped generate some returns for us.

The other notable item for the fourth quarter was not just strong refining margins, but we noticed that the distillate refining margins were actually quite strong. And so we used, as John mentioned, our flexibility and our operational capability to tweak our refining output to maximize our distillate production. So that allowed us to take advantage of the especially high distillate margins that we experienced in the fourth quarter. So those -- combination of those 2 events really enabled a strong refining earnings for us in the fourth quarter.

And the next question will come from Menno Hulshof with TD Cowen.

My question. Maybe I'll just start with one on optimization of materials and supplies inventory. Can you maybe elaborate on the scope of this optimization work? And what practically changes in terms of procurement and inventory management looking forward?

Thanks, Menno. Yes, thanks for that question. As you know, we did report this charge around inventory optimization in the quarter. I'll tell you, we see the optimization that we're doing here provides a significant opportunity for us in how we manage our materials and supplies across the company, doing that in a consistent approach and better leveraging technology. So we -- and this has all been informed by external benchmarking and a review of best practices, not just across the energy business, but beyond the energy business as well. So we took a very deep dive and based on that benchmarking and best practices review, we studied our inventory utilization, the movement of our inventory, the age of what we have in the inventory, the cost of maintaining each part versus the benefit of having it and what technology solutions were out there for us to better manage our inventory. And we found an opportunity for significant efficiency, capture and effectiveness to position ourselves to be industry-leading. So these improvements are the improvements we made. They involve enhanced analysis better optimization of materials that should be held in inventory while still maintaining the critical supplies that we need.

So we're implementing this standardized approach across all of our sites, that's going to improve visibility of what's in inventory for our operations and improve the utilization of inventory, and it's going to be a simpler, more efficient process to run. We'll have fewer storage requirements, fewer warehouse requirements, fewer material accounts and that's enabled by technology and best practices because we have better improved visibility of the material, and it's going to reduce the overall complexity of the system, without losing in any way the reliability and integrity of having those that inventory available. So for me, this is kind of what we do. This is applying technology, best practices looking outside of our industry to drive us to be industry-leading and best-in-class.

Terrific. That's very helpful. And then maybe the second question, more so related to the outlook for Western Canadian heavy oil. There's clearly a lot of moving parts at the moment, including increased risk of Venezuelan supply and rising apportionment on the Enbridge Mainline, which is catching a lot of people by surprise. But what are you seeing on the ground in terms of shifting fundamentals for Canadian heavies since the Venezuelan news first broke, if anything at all?

We are not seeing any big changes, to be honest. Of course, we're staying very well informed around everything that's happening in Venezuela. We're watching that closely. But we're not seeing any significant -- I mean the differential did kind of widen a bit originally when there was this talk at the 50 million barrels coming to the Gulf Coast, seem to be a little bit of overreaction that kind of came back down. It's pretty marginal, if any, impact that we're seeing right now.

And then if we think longer term about this, obviously, I think the outlook around Venezuela does remain uncertain. There's a lot of things that need to happen before we probably see longer-term production increases there, stability, investment conditions like the legal and commercial constructs in the country, infrastructure and supply chain improvements and things. But we do -- we are watching that. We'll continue to watch that closely. But our real focus is when I think about Imperial is again, our balanced integrated business model, low breakevens that keep us resilient across a range of macro environments. And of course, we're not standing still. We're continuing to improve our competitive position, growing profitable volumes, lowering unit cost, increasing cash flow. And that's what we focus on. That's the part we control, and that's where we're putting our position. And as I look forward, I see Imperial being in a very strong competitive position. And I see a huge role, of course, for Canada when you think about global supply-demand balance as well, kind of regardless of what happens with Venezuela over time.

And the next question will come from Patrick O'Rourke with ATB Capital Markets.

Maybe just to go back to Kearl here and you talked about the high output in December. How that has sort of continued on into January here? I know whether from time to time impacted this quarter, it's impacted quarters in the past. I think Fort McMurray has had about a 50-degree swing in temperature this month. And then if you could sort of benchmark those 300,000 barrels a day high output days, what's sort of the goal as a percentage of the days for 2026 or total nominal days you would be looking to hit this year?

Thanks, Patrick. I'm going to -- I've got Cheryl here with me, and she's the expert on all things, Kearl. I'm going to pass this one over to Cheryl.

Sure. So thank you for the question. And let me hit the first one, Patrick, around cold weather protocols. And we talked to you about this before and what I would start out saying is, we're applying those learnings and we're seeing the benefits. You heard John mention in December. We're seeing the same thing with January. So the protocols are working as intended. If I sit back and I think about what allowed us to recover in fourth quarter and as we're heading into the first quarter, technology. And what we're leveraging is our ore selectivity process. We're making sure we're being very deliberate and thoughtful in terms of prioritizing our shovels and making sure we're getting to that good ore.

The other thing I'll highlight that we did in the fourth quarter is we did obtain regulatory approval to use a secondary process at chemical for fines management. So as we look forward, we're going to be looking for the secondary and tertiary recovery. So what gives me confidence as I look forward in the 300 days? So first of all, we've got a well-defined path. The second thing, and you've heard me mention this before, which is we're building on a strong foundation, and this goes back to being a culture of continuous improvement as well as most responsible operators. So continued focus on facility integrity, risk management, environmental stewardship.

The second item, continued focus on productivity and reliability. So specifically, what that means is enhanced mine planning and fleet optimization. Third thing is turnaround interval optimization, so not only shortening the duration of each turnaround, but making sure we're advancing and getting to this one turnaround every 4 years schedule. The third thing -- or the fourth thing I'll mention is recovery projects. And in particular, at the end of this year, we're going to bring on our float column cell projects. So that will allow us, again, from a secondary recovery standpoint to get these -- the fines management and improve our bitumen recovery. The other thing I'll tell you is we don't see 300 barrels -- 300,000 barrels a day of the end state. So we always challenge our organization to do better. We do see opportunity for more than 300,000 barrels. We've got a road map. We have credibility, and we built the history at Kearl to outperform. So what I would say is this is the continuation of our journey.

Okay. Great. And then just on the downstream. I looked at, at least on my numbers, like market capture was up a little bit. You talked about the flexibility of the [ kit ]. As we roll into 2026 here, maybe if diesel and distillate gets a little bit softer. Just what you're seeing boots on the ground in terms of those local markets today looking out into 2026.

Thanks, Patrick. I will hand that one off over to Scott.

Sure. Yes. Thanks, Patrick. Yes, we have -- even throughout the fourth quarter, we saw some fluctuation in the refining margin. So it's down a little bit from the peak that we saw in November. But we're still seeing positive margins out there and running our units full to capture that margin. We've shared in the past with our Downstream business, in particular, we feel like we have assets located throughout the country to be able to go after the demand and especially demand where the margin presents itself in each of the markets across the country. And so that combined with our logistics network that allow us to efficiently get the product to the marketplace. We feel like that's a resilient business for us. And so even when the margins ticked down a little bit, we still feel like that's a profitable business that we will continue to generate positive returns. And then when the market based on global supply demand balances kind of blows out a little bit, we'll be there, and we'll be able to capture that enhanced margin like we did in the fourth quarter of this year.

And the next question comes from Neil Mehta with Goldman Sachs.

The first question I had is just around Syncrude. It was a good quarter here from a production standpoint. Just for perspective, on where we are on the journey at Syncrude. Any things that you and your partner are focused on there? And while we're on the topic of Syncrude, any thoughts on realizations in a pretty good distillate market right now?

Yes. Not a lot to say on Syncrude. I mean, we're pleased to see the performance improvement over the last couple of years at Syncrude. And I feel that as a partner in that, we contribute to that. I think we look at the learnings we have at Kearl, and we contribute that to -- we kind of bring those learnings to bear at Syncrude. And I think the operator has been improving their performance. And of course, we've been involved in Syncrude from the beginning. The only owners that are in there today that have been. So we've learned from Syncrude over the years as well and been able to apply those things at Kearl. So I'm pleased to see the performance improvement, and we're a big part of that and supporting that going forward. And -- and maybe I'll ask Scott on the diesel question.

Yes. Sure. Yes. As we look at the distillates market, the global supply-demand balance is really created supply/demand imbalances in certain locations. And so that's really what's pushed up a little bit more on the distillate margin even versus the gasoline margins that we've seen over the last several months. And so as I mentioned before, we're uniquely advantaged to be able to tune our refinery to make sure we're putting the output, matching the margins that are available in the marketplace and then leveraging our logistics to get there. The other factor that is starting to play into the Canadian marketplace is the onset of additional renewable diesel and our unique position there by producing renewable diesel at our Strathcona refinery has enabled us to bring that locally produced product to market and blend into our diesel sales throughout the year with our technology to be able to blend that year round. And so we're seeing the benefit of that versus having to import additional renewable diesel from other markets. And so that's the other thing that's supporting our distillate plans and margin capture in the downstream.

That's helpful. And John, I'd love your perspective on where you stand in terms of continuing to drive efficiency and reduce costs, that's something that Exxon talked about this morning. But I think since the last call, you announced an update of the sale of the campus and relocation of some of the staff. And so just talk about organizationally some of the changes that you are making and how that fits into it in terms of driving some of the cost calls you have.

Well, that -- yes, that is a big part of it. But I would say everything we've been doing over the last number of years to reduce our cost structure, we talked about the Kearl journey we're on and Cold Lake and so on, all of those things contribute to that as well. So it's not -- we've been part of that moving our cost structure down, and you see that in our results. The restructuring piece that we announced in September, of course, that really is consistent with our strategy to maximize value, use technology and leverage our relationship with Exxon Mobil. And so as we talked about at the time, that with data availability, processing capabilities, technology in general growing, and we see that all around us. It's moving in leaps and bounds at an accelerating pace. So with that kind of that aspect of it.

And then in addition to that, we see these global capability centers growing both in terms of not just capacity but capability, the type of work that those global capability centers were doing. We saw an opportunity to move through a transformation, and we announced the reduction about 20% of our staff with a focus on our above field staff. And that -- so that's going to be a 2-year process. And then we said when we get down to that smaller size, we'll move the majority of our folks to sites, predominantly Strathcona and Edmonton. And we see that efficiency capture to be $150 million a year starting in 2028. That's the annual savings we would get from that just from the efficiency side of things, which is we are capturing efficiencies and getting smaller and then we're also outsourcing work to these global capability centers. The net effect of that is $150 million per year. But as we talked about, we also believe as we do that, we're going to be able to further accelerate the application of technology and leverage more a broader global fleet of learning that we can learn from, that's going to improve our effectiveness as well. So I would say it's -- we announced it in September. We're currently going through the staffing of the future organization. We're starting to outsource work to those -- more work because we've already been outsourcing work in the past, continuing to outsource work to those global centers. The restructuring is going to take place over a couple of years. We're going to manage that in a very rigorous orderly fashion to migrate work and capture the planned efficiencies, and it's going as per plan. And so it is going to contribute significantly to our -- again, our leading position and our foundation for growth going forward.

And the next question will come from Doug Leggate with Wolfe Research.

I know a lot of stuff has been hit, so I want to try and come back to a couple of things to get some clarification. Obviously, a lot of focus on Kearl today. Maybe you could just help us with -- if you strip away weather, what do you think today is the sustainable production capacity, gross production capacity at Kearl?

Thanks, Doug. And I mean, of course, our guidance is for -- 2026 is where we're focused, the 285,000 to 295,000 barrels per day. But I'll pass off to Cheryl to kind of put a little more color to that.

Sure. And I'll go back to the 300 kbd is our target, for this year 285,000. Obviously, we're going to continue to focus on winterization and maybe a little bit more color on that, which is really around maximizing the reliability of our existing kit and closing the gap to targeted areas. One of the areas I've mentioned before is we're continuing to debottleneck our hydro transport line. That's building capacity on the front end.

The other thing, as I think about mining and specifically for 2026, at the end of this year, we'll be moving into the East pit. So we've got opportunity both from the front end, we're debottlenecking the facilities and, of course, working on water management and tailings throughout this process. So what I would say is we've got good line of sight and a well-defined path to get to 300 kbd. I said that will be our target for this year. But like I said, at 285,000 and continue to grow 300,000 plus.

So to be clear, there's nothing terminal or it was very much just a one-off weather in the fourth quarter? No reason to be [ yourself ] or anything like this.

That's right. So wet weather in October is behind us. Yes, sir.

No, we remain very confident, Doug. We remain very confident in the 285,000 to 295,000 target for this year, the path to 300,000. And as Cheryl said, we see potential upside beyond that.

Yes. We're just trying to understand why the market has been so short cycled, I guess, is my issue, but thank you for the clarification. My follow-up, I'm afraid, Mr. Lyons, you're up. So 20% dividend bump, I think, Manav hit on it earlier. But -- so I've asked you this question multiple times, multiple different ways. Are you prepared to leave in your balance sheet? Are you prepared to allow your dividend breakeven to move up? Well, based on today's decision, you don't -- maybe I'm wrong in this, but you don't have a big step change in free cash flow capacity outside of what the commodity gives you. So can you help us reconcile which of those 2 is supporting the dividend growth? Is that the breakeven creeping up? Or is it the balance sheet a little bit or is there something in the outlook that we don't currently have into -- we're not currently taken into account?

Okay. Thanks, Doug. I appreciate the recurring question. I would say when we look at the dividend, we're not -- as I said a little bit earlier, we're not looking at the short-term environment or even the current strip, we're looking at a long-term outlook. And our goal is to grow the dividend robustly, but sustainably. So we obviously do stress tests and things. But what affects that long-term outlook is the work we're doing to reduce unit OpEx, the incremental volume growth we're pursuing at Kearl and Cold Lake, so the growth capital, the secondary recovery that Cheryl talked about and also the restructuring, which is improving our cost structure as well as generating more revenue over time. We roll all of those things into our outlook, then we run various cases, and we see what we think is we can handle sustainably. And that's how we get to the dividend. So we're committed to continue that process. And so, yes, you're right. As you increase the dividend, if nothing else happens, the breakeven moves up. But if you're running down your unit cost, as we are at Kearl and Cold Lake, that kind of offsets that. But we don't have a specific breakeven target, right? So if we have to go above a certain dollar breakeven, we won't increase the dividend. That's not really -- there's no set number of breakeven that we're trying to achieve. We're trying to grow the dividend sustainably robustly over time. So I don't know if it's a satisfying answer. And of course, the whole buyback is really about returning surplus cash as we generate it over time, which we'll continue to do.

Yes. I think -- it does indeed. I'll congratulate you on lulling the market into a false sense of sub-10% dividend growth because I think this surprised a lot of people and it seems that a low dividend growth per share does correlate extremely well with your share performance. One month of wet weather seems to have overlook this very significant move you made today. So we'll continue to watch it. I'll continue to ask it, but a very impressive move, I guess, would be our conclusion.

And that does conclude the question-and-answer session. I'll now turn the conference back over to Peter Shaw, Vice President of Investor Relations for closing remarks.

Thank you. And so on behalf of the management team, I'd like to thank everyone for joining us this morning. If there are any further questions, please don't hesitate to reach out to the Investor Relations team. We'll be happy to answer your questions. With that, thank you very much, and have a great day.

Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.

Good day, and welcome to the Imperial Oil Third Quarter 2025 Earnings Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Peter Shaw, Vice President of Investor Relations.

Good morning, everyone, and welcome to our third quarter earnings conference call. I am joined this morning by Imperial's senior management team, including John Whelan, Chairman, President and CEO; Dan Lyons, Senior Vice President, Finance and Administration; Cheryl Gomez-Smith, Senior Vice President of the Upstream; and Scott Maloney, Vice President of the Downstream.

Today's comments include reference to non-GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment 6 of our most recent press release and are available on our website with a link to this conference call. Today's comments may contain forward-looking information. Any forward-looking information is not a guarantee of future performance and actual future performance and operating results can vary materially depending on a number of factors and assumptions.

Forward-looking information and the risk factors and assumptions are described in further detail on our third quarter's earnings release that we issued this morning as well as our most recent Form 10-K. All these documents are available on SEDAR+, EDGAR and our website. So I'd ask you to refer to those.

John is going to start this morning with some opening remarks and then hand it over to Dan, who is going to provide the financial update, and then John will provide an operations update. And once we've done that, we'll allow time for Q&A. So with that, I will turn it over to John for his opening remarks.

Thank you, Peter. Good morning, everybody, and welcome to our third quarter earnings call. I hope everyone is doing well. And as always, we appreciate you taking the time to join us this morning. I'm really pleased to report another strong quarter. We generated cash flow from operations of nearly $1.8 billion and ended the quarter with approximately $1.9 billion of cash on hand. To our shareholders, we delivered over $1.8 billion through dividends and buybacks.

Our strong financial performance and ability to return significant cash to shareholders was underpinned by higher volumes, including record crude production and high refinery utilization.

With planned turnaround activity now complete, we're positioned for a strong finish to the year across all of our assets. While crude has softened of late, our integrated business model is very resilient and we generate substantial free cash flow over a range of oil price environments. As such, we will continue executing on our strategy and the plans we provided at our Investor Day earlier this year.

During the quarter, we also announced a restructuring effort that is aligned with our well-established strategy and will further strengthen our leading position and our foundation for future growth. I'll come back to this in more detail shortly.

Now let me share some highlights from the quarter. At Kearl, the bar has been raised again with the team delivering 316,000 barrels per day gross, the highest quarterly production in the asset's history, a great step on our path towards reaching annual production of 300,000 barrels per day.

At Cold Lake, Grand Rapids continued to perform well, and the new Leming SAGD development finished steaming and we expect first production shortly. These projects support transformation at Cold Lake, where we continue to expect more than 40% of production by 2030 to come from advantaged technologies.

Downstream utilization of 98% was significantly higher quarter-over-quarter even with planned turnaround activity at Sarnia beginning in September. That turnaround is now complete and was executed below cost and ahead of schedule.

Now I'd like to share more on our restructuring plans. On September 29, we announced restructuring plans to further advance our well-established strategy of increasing cash flow and delivering unmatched industry-leading shareholder returns. We plan to further improve our industry-leading performance, by centralizing additional corporate and technical activities in global business and technology centers realizing substantial efficiency and effectiveness benefits from scale, integration and technology. This restructuring is consistent with our long-standing strategy to maximize the value of our existing assets, using technology, and leveraging our relationship with ExxonMobil.

With data availability and processing capabilities growing at an accelerating pace, the changes are designed to fully leverage global available expertise to maximize the benefits of current technology and accelerate the cost-effective deployment of new technologies to drive value and enhance financial resilience.

Our world is evolving quickly. Technology is advancing in leaps and bounds. We see it all around us. And there's been huge growth in global capability centers, and we have to move with it. As a company, our legacy is defined by change and adaptation to ever-evolving business environments, technology and customer needs.

That ability to evolve is one of our greatest strengths. We have done it time and time again, and it is key to our success and leading position. These restructuring actions will further enhance our foundation for future growth and position us to continue delivering unmatched industry-leading returns and long-term value for our shareholders. At the same time, we remain fully committed to meet or beat the medium-term growth and expense reduction plans communicated at our Investor Day in April. Additionally, as a result of the restructuring, we have recorded a onetime restructuring charge and expect to achieve a reduction in annual expenses of $150 million by 2028.

Larger benefits are expected over the long term. As more fully leveraging the global scale and expertise of ExxonMobil will enable us to further enhance cash flow growth by driving productivity improvements across our operations, including higher production, reduced downtime, lower unit operating costs as well as project planning and execution excellence.

Our relationship with ExxonMobil is an advantage that others don't have and can't replicate. Now we will manage this transition through a rigorous process. We will be restructuring our corporate workforce, what we call above field, which will result in a reduction in the number of employee roles by the end of 2027.

Then in the second half of 2028, we will further consolidate activities at our operating sites, primarily the Strathcona refinery in Edmonton, to enhance collaboration, ,operational focus and execution excellence. Through this transition, our focus remains on supporting our employees, operating with integrity, putting safety first, and executing our business strategy.

Additionally, in view of the restructuring and our reduced office space requirements, we have signed an agreement to sell our Calgary campus, resulting in a noncash impairment charge.

And on that note, I'll turn it over to Dan to discuss our financial results in more detail.

Thanks, John. We had 2 identified items in the third quarter in our corporate segment. First, restructuring plans that John mentioned resulted in a charge of $330 million before tax in the quarter with an unfavorable earnings impact of $249 million after tax. This charge largely consists of employee severance costs, which will be paid out over the next 2 years as we migrate activities to business and technology centers and achieve efficiencies.

Second, following an extensive marketing effort and after careful consideration of the current status in the anticipated outlook for large properties in the Calgary real estate market, we signed a sales and purchase agreement to sell our Calgary campus, which is expected to close in the coming months. Consistent with this, we recorded a noncash impairment charge of $406 million before tax with an unfavorable earnings impact of $306 million after tax in the quarter. The sales and purchase agreement includes a leaseback arrangement to support Imperial's needs over the next several years.

Turning to our underlying third quarter results. We recorded net income of $539 million. However, excluding identified items, the ones I just described, net income from the quarter is $1.094 billion, down $143 million from the third quarter of 2024, driven by lower upstream realizations, partially offset by higher refining margins. When comparing sequentially, third quarter net income is down $410 million from the second quarter of 2025. But again, excluding identified items, net income is up $145 million, primarily due to strong operational performance.

Now shifting our attention to each business line and looking sequentially. Upstream earnings $728 million are up $64 million from the second quarter, primarily due to higher volumes and realizations. Downstream earnings of $444 million are up $122 million from the second quarter, mainly reflecting higher margins and volumes. Our Chemical business generated earnings of $21 million, consistent with the second quarter.

Moving on to cash flow. In the third quarter, we generated $1.798 billion in cash flows from operating activities, excluding working capital effects, cash flows from operating activities for the third quarter were $1.600 billion, which includes a $149 million unfavorable impact from the previously mentioned restructuring charge. Taking this into account, normalized cash flow was about $1.750 billion in the quarter. As John mentioned, we ended the quarter in a strong position with about $1.9 billion of cash on hand.

Now shifting to CapEx. Capital expenditures in the third quarter totaled $505 million, $19 million higher than the third quarter of 2024. In the Upstream, third quarter spending of $353 million focused on sustaining capital at Kearl, Cold Lake and Syncrude. In the Downstream, third quarter CapEx was primarily spent on sustaining capital projects across our refining network. Our full year outlook remains consistent with our previously issued guidance.

Shifting to shareholder distributions. In the third quarter, we continued to demonstrate our long-standing commitment to return surplus cash to our shareholders, paying $366 million in dividends and returning almost $1.5 billion through our accelerated share repurchase program under our normal course issuer bid. We anticipate completing our NCIB program before year-end.

Finally, this morning, we announced the fourth quarter dividend of $0.72 per share, in line with our third quarter dividend. Imperial remains committed to a reliable and growing dividend, as demonstrated by 31 consecutive years of annual dividend growth.

Now I'll turn it back to John to discuss our operational performance.

Thanks, Dan. I want to take the next few minutes to share the key highlights from our operating results. Upstream production for the quarter averaged 462,000 oil equivalent barrels per day, up 35,000 barrels per day versus the second quarter and up 15,000 barrels per day versus the third quarter of 2024. This quarter marks a new crude production record for the company.

Now I'll cover highlights for each of the assets, starting with Kearl. Kearl set a quarterly production record averaging 316,000 barrels per day, up 41,000 barrels per day versus the second quarter and up 21,000 barrels per day versus the third quarter of 2024. This marks the highest quarterly production ever for Kearl, surpassing our previous best set in the fourth quarter of 2023.

The strong volumes were driven by a combination of high ore quality and our optimization efforts associated with ore selectivity and we're also realizing reliability gains from upsizing and design improvements of the hydrotransport lines.

Kearl continued to progress on unit cash costs and that is quickly becoming one of my favorite parts of our story. Unit cash costs at Kearl were USD 15.13 per barrel this quarter, a decrease of nearly USD 4 per barrel compared to the second quarter, helped by the absence of our planned turnaround, but also improved reliability, recovery and/or selectivity. When compared to the third quarter of last year, we achieved a decrease of over USD 2 per barrel. The third quarter's strong performance contributed to our year-to-date unit cash cost of USD 17.89 per barrel.

With year-to-date unit cash costs down over USD 2 per barrel, we are realizing the benefit of our strategy that is focused on growing volumes with lower unit cash costs.

Moving next to Cold Lake. Cold Lake's production averaged 150,000 barrels per day, up 5,000 barrels per day versus the second quarter of 2025 and up 3,000 barrels per day versus the third quarter of 2024.

I would like to take a moment to draw your attention to unit cash costs at Cold Lake. The current cost in the third quarter was USD 13.38 per barrel. And that is supporting year-to-date costs of USD 14, which is down USD 1 per barrel versus the same period last year.

Consistent with that, our Leming SAGD project remains on track. Having recently completed steam circulation, we expect to see first oil in the coming weeks, with production ramping up over the next year.

And looking to the future, we have an abundance of high-quality in-situ opportunities in our portfolio. At Aspen, we continue to progress the EBRT pilot with start-up remaining on track for early 2027. In addition, our Clarke Creek and Corner assets provide us with further long-term growth opportunities. These 3 assets have the potential to support up to 150,000 barrels per day each of advantaged production during their estimated 25- to 50-year operating life.

And to round out the upstream, I'll cover Syncrude. Imperial's share of Syncrude production for the quarter averaged 78,000 barrels per day, which was up 1,000 barrels per day versus the second quarter and down 3,000 barrels per day versus the third quarter of 2024. In early September, Syncrude began its planned 50-day corporate turnaround and was able to complete it ahead of schedule and under budget, with work wrapping up at the beginning of last week. Syncrude also continued to utilize the interconnect pipeline to import bitumen and gas oil to ensure high upgrader utilization. And this enabled an additional 6,000 barrels per day, our share of Syncrude suite premium production.

Now moving to the Downstream. We delivered strong operational results while progressing our planned turnaround at Sarnia. Refinery throughput averaged 425,000 barrels per day, equating to a refinery utilization of 98%. This exceeded last year's third quarter throughput by 36,000 barrels per day, and it exceeded the second quarter 2025 throughput by 49,000 barrels per primarily driven by lower turnaround impacts and strong reliability at all sites.

As we mentioned in the second quarter earnings call, we started up the Strathcona renewable diesel facility and are already realizing benefits of backing out more expensive imported products and replacing them with our own low cost of supply. We continue to optimize production based on hydrogen availability.

Earlier this week, we successfully completed our turnaround at Sarnia, ahead of schedule and below budget. With our turnaround activity complete for the year, we are expecting a strong fourth quarter. Petroleum product sales in the quarter were 464,000 barrels per day, which is down 16,000 barrels per day versus the second quarter of 2025, driven by lower export volumes, partially offset by higher jet and asphalt sales. Overall, we continue to see robust demand in Canada with gas and diesel comparable to the third quarter of 2024 levels and jet showing stronger event.

Turning now to Chemicals. Earnings in the third quarter were $21 million, consistent with the second quarter. Compared to the third quarter of 2024, earnings were down $7 million, driven by weaker polyethylene margins. While challenging market conditions persist, our integration with the Sarnia refinery continues to add value and provides resilience in low-price environments.

So to wrap up, I'm very pleased with the strong operational and financial performance in the quarter, highlighted by the record quarterly liquids production in our Upstream best-ever quarterly production at Kearl and strong refinery utilization of 98% in our Downstream.

With our planned turnaround activity complete, we're focused on a strong finish and remain confident in our guidance. We continue to return surplus cash to our shareholders in a timely manner and still expect to complete the accelerated normal course issuer bid by the end of the year.

As mentioned earlier, our restructuring plan advances our long-standing strategy of maximizing the value of our existing assets. The planned positions Imperial to continue delivering industry-leading shareholder returns over a range of market conditions. We are transforming from a position of strength, leveraging the rapidly advancing technology environment, the growth in global capability centers and our relationship with Exxon Mobil.

I've described what is changing as part of our restructuring. It is equally important to highlight what is not. Our governance and leadership structure is not changing. What we are doing is fully aligned with our strategy. Our strategy is not changing, and our growth plans are not changing.

We remain a proud Canadian company, and industry-leading technology-focused energy company contributing significantly to the country and our shareholders. And throughout this transition, we remain committed to supporting our employees, the communities where we operate and responsibly producing the energy and products Canadians rely on.

In closing, let me say the combination of our financial position, strong operating results and our strategic initiatives to further strengthen our efficiency and effectiveness give me confidence in the future of Imperial and our ability to further enhance our industry-leading position.

I am very pleased with the strong results our team has delivered and I want to thank them. And as always, I'd like to thank you once again for your continued interest and support. Looking ahead, we are planning to issue our annual guidance for 2026 in mid-December.

And with that, we will now -- I will now move to our Q&A session and pass the floor back to Pete.

Thank you, John. As always, we'd appreciate if you could limit yourself to one question, plus a follow-up so that we can get to all the questions. So with that operator, could you please open up the line for questions?

[Operator Instructions] And the first question will come from Manav Gupta with UBS.

Kearl keeps setting new milestones. I mean production volume was significantly better than our expectations. And I don't think I've seen a $15 op cost out there. So help us understand what's driving these improvements? And how is this asset positioning Imperial extremely well for times to come ahead?

Thank you, Manav, and I may make a few comments and I'll -- Cheryl can chime in as well. Thank you for that comment. And as I said, Kearl, the unit cost performance there, the reliability, the performance of the asset has certainly become one of my favorite parts of the story. It is very key to our success and our future for sure. And as we look at where we are right now, I think we're really well positioned to meet the midpoint of our annual guidance.

The team continues to set new records. We had a best second quarter, best ever second quarter. Now we've had the best ever quarter in the third quarter. But it is important to note, there's variability quarter-to-quarter, and we need to keep that in mind as we go forward as well. But this quarter, we had very strong volumes with our high ore quality, our optimization efforts and as well as reliability gains.

I couldn't be more -- I couldn't be prouder of this team and have -- be more optimistic about this asset and the importance of it to our business. We're on track to deliver on our commitments and around a future of 300,000 barrels a day for this asset and a unit cost target is up $18 a barrel in 2027.

Cheryl can comment a bit more, but thank you for the comments. This is a very important part of our business for sure, and we're very pleased with the performance of this asset.

Thanks, John. So a little bit more in terms of what's made the difference. And I'm going to go back to some of the messages that I shared when we had Investor Day. Kearl continues to have a relentless focus on optimizing scope and collaborating lesson learned, and this is including implementing creative ideas. We continue to integrate lessons learned and technology, drive better decisions via data and analytics as well as leverage our global earnings and benchmarking. In short, we're maintaining this continuous improvement mindset. The work and the success that we've had to date gives me confidence continue to outperform while maintaining our facility integrity as well as our strong risk management.

My quick follow-up is on the refining macro. It looks like the diesel markets are very tight and whatever channel checks you are doing is indicating that the Russian refineries have taken a significant hit and it'll take a long time for those markets to normalize. And so I wanted to understand in the next 3 to 6 months, how do you see the refining market out there? Do you think the strength in diesel cracks can continue? Because if that's the case, your fourth quarter numbers in the refining side have definite upside from where we are. So if you could comment on that.

Sure. I'll jump in and take that. Yes, we have certainly seen the same things right out the door right now with the global supply/demand balances and then the sanctions out there propping up diesel margins. And so we -- as long as those sanctions continue and the disruptions occur in the global market, we think that, that's a possible outcome for us. The way we manage our business is making the products that we see margins out the door on. And with all of our maintenance work behind us this year, we see high utilization numbers for the balance of the fourth quarter. And combined with the margins that we're seeing, especially in the diesel channel, we're seeing -- we're looking forward to a positive fourth quarter.

And we'll take a question from Greg Pardy with RBC Capital Markets.

Thanks for the rundown, John and Dan. I wanted to come back to the restructuring, just to better understand how the transition is going to work. So you done a sale leaseback from the building, which means that the staff that will be retained presumably is going to be a Quarry Park. It sounds like you'll be a Quarry Park. And then I'm just trying to understand that if the transition is going to occur over essentially '26 and '27, have the folks that no longer have a role, are they still in the building? Or has that transition kind of move? I'm just trying to better understand how the dynamics are going to shake out?

Well, thanks, Greg. Let me cover that. This -- if you step back from this, what we're doing, I would say, and I'll get to the specifics of your question. This is -- we've been assessing this opportunity over a couple of years, and it really builds on the transformation journey that we've been on for more than a decade, frankly, of gradually outsourcing work to global capability centers and leveraging technology to improve efficiency.

In the past, you've seen that over the last decade in terms of our organization size, we are doing just as much or more in terms of what we're operating, what we're executing, but with less people doing it in a more efficient manner. So in the past, we did this opportunity by opportunity based -- on an opportunity-by-opportunity basis or organization by organization.

Now we've looked at this from a company-wide perspective. And as we've kind of crawled and walked, we see the opportunity to run as we move forward. And I share that just to highlight, there's been a tremendous amount of planning put into this, and we have a detailed plan for how we will execute this over the next 2 years.

So in terms of -- you're right, this transition will occur over a 2-year period in terms of the workforce transformation piece of it. And then the consolidation of operating sites will happen after that in 2028. So an overall a 3-year period. We have detailed plans in place for the outsourcing of this -- of work to global capability centers.

But another important part to consider is part of this efficiency gain is outsourcing work, but there's also about 40% of the reduction is pure efficiency gain. There will be less people required to do the work as we capture the scale that we can get in these global capability centers. So we have a 2-year transition for how we'll capture those efficiencies and outsource the work to these global capability centers.

Our organization, we are right, the office while we are -- we have entered into a sale and purchase agreement on the office that includes a leaseback for us where we will stay in Quarry Park through 2026 and 2027 and the first part of 2028 until we move staff to our consolidate them at operating sites at that time. So nobody will have to move.

And we will -- you will see a transitioning a reduction in our workforce over that 2-year period, '26 and '27. The end of '27, we will get to the outcome, the desired outcome that we have communicated. And then in '28, we will move people after we've achieved that reduction. I hope that answers your question, but...

Oh, my goodness. Yes. No I mean, John, you're always well prepared. No, no, that's incredibly thorough. Maybe just to come back to what Cheryl was talking about with respect to Kearl. So in C dollars, a little over $20 is looking very, very good. I'm wondering if you could just maybe break it down between kind of volume versus input costs versus just perhaps the elimination of absolute costs or structural costs that have now been taken out of Kearl as a consequence of fewer people, digitalization and so forth. Because obviously, we had very weak natural gas prices in the third quarter, but not sure that's really a factor at all in terms of performance you put out.

I mean I'll start and then I will hand over to Cheryl, Greg. Thanks for the question. I mean -- and it is a really good point to make. It is a combination of both. We are working both the denominator and the numerator in that. So we have been reducing our absolute costs in what we call capturing structural efficiencies. So not just reducing in the short term, not pushing things out, but actually structurally reducing our costs that we can reduce and will remain reduced.

And we do that with a very laser-like focus on maintaining integrity, safety and all of those things that are most important to us. You've heard me talk about in the past being the most responsible operator. And that involves safety performance, your integrity, your reliability, but also your cost structure. So we do those things in concert, ensuring that we maintain integrity, reliability and safety, but also reducing our structural costs.

So there has been millions and millions of dollars structural savings identified. But obviously, you have seen the barrels go up as well. And so it is the combination of both and the team continues to work on both parts of that equation, which is really important given the magnitude of the improvements we've seen and what we want to continue to do as we go forward.

I'll pass it over to Cheryl to elaborate a little more.

Sure. Thanks, John. And Greg, what I would say is this is a very good example of the and equation, as John mentioned. So in this space where we're looking at unit cash costs were leverage scale, looking at structural cost savings as well as incremental production. When I think about incremental production, it leverages the relatively high fixed cost structure at Kearl. So this is a powerful lever in terms of lowering our unit cash costs.

And as John mentioned, we continue to focus on reliability maintenance optimization, deployment of digital solutions to improve our productivity and lower absolute costs. Several of the things we highlighted at our Investment Day in terms of automation, robotics, remote activities. So it's a yes and in terms of how we get there.

We'll take a question from Dennis Fong with CIBC.

My first one is just related to your in situ pipeline, Aspen, Clark Creek and Corner. Thank you for the kind of the rundown. Obviously, EBRT is a focal point in terms of the go-forward strategy. Is just kind of solidifying and understanding the development potential and the results for the pilot, the primary driver for kind of moving on to the next steps? And maybe what else would you like to see beyond kind of further prove out of the technology for you to feel comfortable moving forward with Aspen, I guess, first or any of these 3 in situ projects?

Thank you. Thank you, Dennis, for the question. I'll start again, and I may ask Cheryl to chime in as well. I think if we look at these future -- this future in situ portfolio, we remain very bullish about it. The resource base is significant and of high quality. And we believe we have the technology and EBRT to unlock that resource base at lower unit cost, lower emissions than even the technology we're using today. So we have decided to do the pilot.

We feel quite confident in the technology. We've done a lot of lab testing on it. But given the scale at which we want to deploy it, we felt it was valuable to do the pilot. The main things we're going to be looking for in the pilot is the solvent recovery and the production uplift that comes from those. So that's the main thing. And that we'll start off the pilot in 2027. So that's from a technology perspective.

But we're going in pretty positive about it, but it's important to prove that up, I think, through a real-life pilot in the field. We feel very good about the resource. We will continue to do some delineation work around that, but we've done a lot already, and we feel very comfortable in that space.

And I think the other part is just the overall investment environment. You've heard us and industry talk about that, the importance and we've been on record with that at the government and we are working closely with the government around that, simplifying regulation, shortening project approval time lines and those type of things. That's important as we consider future investment and growth in production.

And then the other aspect is egress, and we feel very good about that, particularly for Aspen. As we look out the next decade and we listen to what the pipeline companies are talking about in terms of debottlenecking projects with Trans Mountain, Enbridge's announced projects that they've been talking about, we feel very good that there's egress going to be available for the next decade or so. So we're doing some work on the technology. There's an investment climate piece that we continue to involve work with the government on. We think there's egress. So overall, we're very bullish about the opportunities.

Add I'll just add a couple of other comments, Dennis. We drilled the 3 wells. And as John mentioned, we're on target for an early 2027 start-up. We're going to run a pilot to validate production uplift here, John mentioned solvent recovery as well as overall operability.

The other thing I'd highlight is the pilot is intended to derisk this technology, and it's a very similar approach to what we took for SA-SAGD. So I think we're well on track there. And I'd echo which the comments that John made, which is we're very -- we're looking forward to EBRT technology. This is what we're looking for in terms of being a game changer for institution developments going forward.

Great. Really appreciate that contacts from both of you. I wanted to shift focus back maybe towards Cold Lake. Obviously, you have the Leming SAGD project with the targeted start-up here. And I just wanted to think a little bit more how should we be thinking about the Mahihkan SA-SAGD project as well as if you wouldn't mind highlighting any of the future SA-SAGD project opportunities that exist within that field and maybe what that potentially looks like, both from an op cost perspective as well as a production perspective and level, if there's any further updates from what you guys highlighted at the Investor Day?

I'll make a few broader comments, Dennis, and then Cheryl can come in again as well. Our plan that we laid out for 165,000 barrels per day at Cold Lake in the next few years, we still feel very good about that plan. We're committed to that plan. And there's a number of things that contribute to that. There's low-cost base optimization projects such as our laser technology. There's infill drilling using the unique compact rig that we have there to do infill drilling. That's a part of it.

We are applying warm flow in a number of areas. We've got the Leming SAGD project that I just spoke about. Grand Rapids is going extremely well as well. So it's all of these building blocks and components that contribute to our confidence of getting to 165,000 barrels per day.

Now the Mahihkan SA-SAGD, I'll let Cheryl come back and talk more about that. That's obviously very important. But that's a 2029 startup with a peak production of about 30,000 barrels a day. But it's all of these building blocks that contribute to it and also the transition, the transformation really that we're making at Cold Lake moving to these advantaged technologies and seeing ourselves continue to see in 2030 with about 40% of our production coming from that advantage technology.

And I'll let Cheryl say a bit more specifically on Mahihkan and so on.

Sure. Maybe I'll cycle back with Grand Rapids. We're very pleased, Dennis, with our results from Grand Rapids thus far. Specific to that effort, the next 3 pads are currently in development and this will fully leverage our plant capacity and offer inventory to sustain production at low capital. Now switching to Mahihkan, this will be our first commercial Clearwater SA-SAGD development.

John mentioned a 2029 startup. And one of the things that's an enabler and projects take time in the development is we have to convert the Mahihkan plant, which is currently a cyclic steam facility to a solvent-enabled SA-SAGD plant. All that in mind, we're on track to deliver, I'd say, more than about 50,000 barrels per day from SA-SAGD advantage production by the 2030 time frame. The other thing maybe I'll leave with is we do have a pipeline of future SA-SAGD projects as I look at 2040, 2050, and we'll take those in due course.

And we have a question from Doug Leggate with Wolfe Research.

John, I wonder if I could ask a really simple follow-up on Carol. Given the sustained efficiency improvements you've seen the consistent production performance, what would you say today is the production capacity trajectory for Carol in terms of where it is now and where you think you can get to? That's my first one.

My follow-up is a quick one. It's probably for Dan. It's always for Dan, same question every quarter. You leaned on your balance sheet a little bit this quarter, and you've accelerated the time line for your buyback. Is there any intention in the current environment for an SIB before the middle of next year?

Thanks, Doug. Yes, let me take the Kearl one. Again, I couldn't be more proud of this team and the improvements that have been made at Kearl over a number of years. And I remain confident that we'll continue to make improvements at Kearl in terms of unit cost reductions and volumes uplift. I think our story is very consistent though with -- right now, the way we think about it. It's very consistent with our Investor Day.

We believe we have a strong foundation that supports potential for 300,000 plus barrels per day. We talked about at that time, the number of days that we're seeing a greater than 300,000 barrel a day days. You see the quarter that we just had in the quarter, that also builds that confidence. Right now, our focus is really how do we move it to 300,000 barrels a day.

And that -- I would just say the confidence in that is growing all the time. And we do -- and we talked about that in Investor Day. So we have a pretty clear path to get the asset to 300,000 barrels a day with bitumen recovery projects, continued focus on individual equipment performance, extending our turnaround intervals reduction duration.

I feel very good about that. But we're not done at 300,000. We're very much focused on what's the potential beyond that. We believe there is potential beyond that. And we're continuing to work and develop those plans and we'll share them as those get matured.

Do you want me to take the second? Doug, -- so just to kind of address your question, as you said -- as we've said here, we fully plan to complete our accelerated NCIB by year by year-end, consistent with what we said few times. And then, of course, looking into next year, the soonest we can renew that is late June of '26. And of course, we plan to renew our NCIB and then your question is really around the first half of '26.

And as I said before, our ability to return cash in that period really just depends on commodity prices, right? It depends on the crude prices and cracks, and what we've said for a long time is as we generate surplus cash, we'll return it in a timely way. That still remains our principle. So it's really just going to be dependent on what the commodity markets give us in the first half of next year.

And that does conclude the question-and-answer session. I'll now turn the conference back over to Peter Shaw for closing remarks.

Thank you. And on behalf of the management team, I'd like to thank everyone for joining us this morning. If you have any further questions, please don't hesitate to reach out to the IR team, and we'll be happy to answer those. With that, I'll say thank you very much, and have a great day.

Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.