Good morning, ladies and gentlemen. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the MEG Energy's 2022 Q1 Results Conference Call. All lines have been placed on mute at this time to prevent any background noise. After the speaker's remarks, we will have a question-and-answer session. If you would like to ask a question during this time, please press star then the number one on your telephone keypad. If you would like to withdraw your question, please press the star followed by the two. I'd now like to turn the call over to Mr. Derek Evans, CEO. You may begin your conference, sir. Thank you, Michelle. Good morning, and thank you for joining us to review MEG Energy's first quarter operating and financial results. In the room with me this morning are Eric Toews, our Chief Financial Officer, Lyle Yuzdepski, our General Counsel and Corporate Secretary, and Darlene Gates, our Chief Operating Officer. I'd like to remind our listeners that this call contains forward-looking information. Please refer to the advisories in our disclosure documents filed on SEDAR and on our website. I would refer listeners to yesterday's press release for more detail beyond the comments we've prepared for this morning. MEG continues its priority of maintaining safe and reliable operations as we work through the ongoing COVID-19 environment. Our teams continue to respond to the impacts of the pandemic, prioritizing the health, and safety of our workforce and reliable operations at our Christina Lake facility. I commend our workforce for their efforts over the last two years. I look forward to our continued focus on safety as we execute this year's turnaround. We had a record quarter from both an operational, and a financial perspective. We continue to benefit from strong oil prices, and low heavy oil differentials. Additionally, our teams focus on safety, plant reliability, steam utilization, and ongoing well optimization have contributed to a record quarter in terms of production. Highlights from the first quarter include record funds flow from operating activities, and adjusted funds flow of CAD 587 million or CAD 1.87 a share. Record free cash flow of CAD 499 million. Record debt reduction having completed or announced the repayment of $396 million or approximately CAD 499 million of outstanding indebtedness. Record bitumen production volumes of 101,128 barrels a day. We exited the quarter with $1.72 billion of net debt. Total expenditures of CAD 88 million were primarily directed towards sustaining and maintenance activities in the quarter. Net operating costs averaged CAD 8.98 per barrel, including non-energy operating costs of CAD 4.74 a barrel. Power revenue offset energy operating costs by 38%, resulting in energy operating costs net of power revenue of CAD 4.24 per barrel. We received approval from the Toronto Stock Exchange on March seventh for a normal course issuer bid, which will allow MEG to buy back up to 10% of its public float as defined by the TSX over a one-year period. On March 16, 2022, MEG announced the planned retirement of its Chief Financial Officer, Eric Toews, effective September 1, 2022. MEG is conducting an external search for our next Chief Financial Officer and will provide an update upon the successful completion of that search. MEG realized an average AWB blend sales price of $83.55 per barrel during the first quarter of 2022, compared to $65.42 per barrel in the fourth quarter of 2021. The increase in the average AWB blend sales price quarter-over-quarter was primarily a result of the average WTI price increasing by $17.10 per barrel. MEG sold 58% of its sales volumes in the premium-priced US Gulf Coast market in the first quarter of 2022, compared to 48% during the fourth quarter of 2021, as a result of apportionment on the Enbridge Mainline decreasing from 21% in the fourth quarter of 2021 to 10% in the first quarter of 2022. MEG invested CAD 88 million in the first quarter compared to CAD 106 million in the fourth quarter of 2021. Capital invested in the quarter was primarily directed towards sustaining and maintenance activity, and included incremental capital to allow the corporation to fully utilize the Christina Lake facility's oil processing capacity of approximately 100,000 barrels a day. Last month has also provided important developments relating to our continued involvement in the Oil Sands Pathways to Net Zero Alliance, which aims to achieve net zero emissions from our operations by 2050. On April 7, 2022, the Canadian federal government announced an investment tax credit for carbon capture and storage projects for industries across Canada. MEG believes this announcement is a positive step in the Oil Sands Pathways to Net Zero Alliance efforts to work collaboratively with governments to help Canada achieve its climate goals and ensure our country can be the world's preferred supplier of responsible oil. The Pathways Alliance anticipates that this tax credit, together with support from the Alberta government, will help advance the Pathways Alliance's unprecedented plan to achieve meaningful emissions reductions by 2030 and ultimately the goal of net zero emissions from oil sands operations by 2050. MEG continues to execute on its deleveraging and shareholder return strategy. MEG's redemption of the remaining $171 million outstanding of its second lien notes was completed on April fourth. Post this redemption, MEG will have paid approximately $2 billion of outstanding indebtedness since 2018. MEG exited the quarter with $1.72 billion of net debt. As MEG expects to soon reach its previously announced near-term debt target of $1.7 billion, MEG's NCIB, which became effective on March 10, allows the corporation to initiate a share buyback program whereby 10% of the corporation's public float, as defined by the TSX, Toronto Stock Exchange, may be bought back, up to a maximum of approximately 27.2 million common shares of MEG. MEG intends to allocate approximately 25% of free cash flow generated to share buybacks, with the remaining being allocated to debt reduction until the corporation net debt balance reaches $1.2 billion. In the current commodity price environment, MEG expects to reach its $1.2 billion net debt target in the third quarter of 2022. Once MEG reaches its $1.2 billion net debt target, the corporation intends to increase the percentage of free cash flow allocated to share buybacks to approximately 50%, with the remainder being applied to, excuse me, further debt reduction until the corporation reaches net debt floor of $600 million, at which time 100% of free cash flow will be returned to shareholders. At current production levels, this net debt floor implies a net debt to EBITDA multiple of approximately 1x at a long-term $50 per barrel US oil price. As I bring my remarks to a close, I once again want to extend my thanks to our team for their commitment and perseverance. I'm proud of what we've been able to accomplish, and am confident in our future and our commitment to sustainable, innovative, and responsible energy development. On behalf of the board of directors and our management team, I want to thank you all for your support. With that, I will turn the call to our operator to begin the Q&A. Thank you, Mr. Evans. Ladies and gentlemen, we will now conduct the question-and-answer session. If you would like to ask a question, please press star one. If you would like to withdraw your question, please press star two. One moment please, for your first question. Your first question comes from Phil Gresh of J.P. Morgan. Please go ahead. Hey, good morning, guys. This is John Royall sitting in for Phil. The CAD 600 million net debt floor I think is a new concept for you guys in terms of the framework you laid out in the prior quarter. Can you just talk about the decision to put in a floor and why CAD 600 million is ultimately the right number? I know you talked about 1x leverage. Maybe just a little more color there. Sure, John. It's Eric Toews speaking. You know, we spent a lot of time thinking about that net debt floor. The key drivers for us were. There's basically threefold. One is, you know, we've always prided ourselves on financial liquidity, and we think at a U.S. $600 million floor, when you couple that with the structure of our credit facility, which is a modified covenant light structure, which continues to provide us with, you know, if we needed it, liquidity unencumbered by covenants up to CAD 400 million. So that was an important factor. The other thing was, we looked at our term structure of our debt. We've always tried to maintain very balanced term structure. In this concept, the first maturity we have is 2029, so that is well out into the future. The third piece, which I think is important, is the ability to actually refinance that debt when it came due, that $600 million. We think at that level, given the credit quality of MEG, we will not have an issue in rolling that debt, whether that's in the capital markets, whether it's in the bank market, wherever that market is. From that perspective, we feel very comfortable that that's sort of a bulletproof debt number. It's the one we want to apply against that 1x at 50-dollar WTI. Maybe I'd just jump in and say it's entirely consistent with where we were before at 2x net to EBITDA at a $50 WTI price. You know, we pointed to that as being one of our first stopping off points. Now we've laid out our final landing spot at CAD 600 million at that $50 WTI price. Thank you. That's really helpful. If we can switch up just to speak a little bit to inflationary pressures you're seeing out there. I know you maintained your guidance, but what are you seeing on the OpEx and CapEx side, and how does that compare to what you expected going into the year? Darlene? Okay. Thanks. It's Darlene Gates. We're definitely seeing inflationary pressures and continue to watch this space very closely. We've budgeted about 10% in the 2022 budget, but we're seeing pressure, upward pressure on labor, steel, fuel, and chemicals. This is probably pushing us closer to about 15%. As we continue to watch the market and how things are evolving, working very closely with the contractors, we'll see how that evolves through the year. As we look ahead into 2023, we continue to expect upward pressure on inflation and believe this could translate into an additional 15%. Again, those are perspectives, probably will change with time, but just to give you a little bit of what we're seeing. Strong dialogue, though, with our community and with our contractors to manage this space. Good. Very helpful. Thank you very much. Thank you. Your next question comes from Greg Pardy of RBC. Please go ahead. Thanks. Good morning. Thanks for the rundown. Derek and Eric, the $600 million net debt for the latter on that is shareholder returns as opposed to buyback, right? Which is attached to the other two. I'm just curious, would that begin to include you know concept around a dividend or not? Yeah. Greg, it's Eric. I think right now it's too early to tell. That's from a modeling perspective, that's the way. We'll consider all avenues that make sense for shareholders. Right now, our focus is on buybacks. Okay. Thanks for that. Just a couple of quick ones. Have you moved into turnaround, Christina, and how should we sort of think about the path of utilization on the Flanagan South Pipeline through the balance of the year? Darlene, you wanna talk about turnaround? All right. Thanks, Darlene. We have started on April 28th. We're in the process of the execution of the turnaround. So far, we've got a very experienced team, and they're managing very well. Every day is a new day, but they're prepared and have plans in place to manage the changes that may occur. All is going well so far. Keep our fingers crossed. Pretty confident in the team, and it's about a 30-day turnaround. Do you expect to be done the end of April? From the end of May. May, sorry. Yeah. Yeah, Flanagan. Sorry, Greg, you were asking about the utilization on Flanagan South? Yeah. You ran 58%, right, in Q1. Obviously, with the turnaround, you're, you know, you're not gonna have the volumes. As I sort of think about the back half of the year with very limited apportionment, I'm assuming that you'll be using probably a good chunk or all of your capacity. Absolutely. You know, obviously, through turnarounds, we'll be pulling volumes out of storage to utilize that space, and we've all made some alternative arrangements to make that space available to other people on a discounted basis. You should expect us to be running with effectively zero apportionment through the remainder of the year. Perfect. Thanks a lot. Great. Your next question comes from Neil Mehta of Goldman Sachs. Please go ahead. Yeah. Congratulations on good results, and the continued progress around capital returns. I wanted to get an early flavor. I recognize that we're early here in 2022, but your thoughts around 2023, and whether it makes sense to build out capacity at Christina Lake and have growth be a bigger part of your CapEx budget? Or do you feel like you're still in relative sustaining investment mode as you go into 2023 as well? Tying that into your capital budget, which, you know, do you see that moving higher as if there is a growth component to it? Neil, I mean, I think we should be asking you the question, what you're hearing from our shareholders with respect to growth. You know, fundamentally, as we drive forward, we are, you know, very, very focused on debt reduction. That is our primary goal and responsibility in return of capital to shareholders. You know, that has been sort of the major focus. We haven't turned our mind to growth or to optimization other than to say, you know, it's an ongoing part of Darlene's responsibilities, is to find ways to make our central processing facility and our capital dollars go further in terms of expanding the capacity and, you know, adding to our production capabilities. I'll tell you, at this point, we have no plans to, you know, spend capital above and beyond what we consider our sustaining capital at this point. But, you know, I think if we got a strong message from our shareholders that, you know, once we were at certain debt levels or whether they were, they saw the level of commitment to, debt reduction, and that share buybacks, starting to happen, if there was a change in the tone and, there was an opportunity to put more capital to work, you know, in sort of a small percentage of free cash flow, that's something we'd definitely look at, trying to achieve on their behalf. Mm-hmm. As you think about the CAD 375 million capital budget next year or this year, what are all the moving pieces as you go into next year? What are things that are gonna be rolling off, and what are potentially inflationary factors we should be watching? We haven't talked about this, nor have we landed on a number. If we're thinking about capital for 2023, notionally, I think we're thinking of that sort of in the CAD 400 million range at this point. Obviously, there's a big inflationary impact that we're seeing this year. As you heard Darlene a little bit earlier talking about, we expect that inflationary impact to continue. In the 375 this year, there was CAD 50 million for ongoing sort of facility and well work to keep us at that 100,000 barrels a day. Next year, we've got some fairly significant pipelines that we're going to be moving, that we've got to be able to move from one of our producing areas into our next. You know, that likely will take us, will cost us somewhere in the neighborhood of CAD 30-40 million. That CAD 400 million number is not a bad place, but you know, that's right off the top of my head. That is not something that, you know, we've got any precision to. The biggest part of that, and the most concerning part, is going to be the impact of inflation in 2023, which at this juncture, we're having, we've talked about it in that 15% range. We hope that that's where it's gonna land, but it could be, you know, it's obviously been significant this year and could be significant next year. Thanks. The follow-up is just around royalties. Can you just talk about how we should be thinking about this? It's a good problem to have, as the cash flow continues to ramp, but any modeling considerations that we should take into account as we think about when the project goes into post payout? You know, I think it's at these sorts of commodity prices, we expect to hit payout sometime in the fourth quarter. Neil, it's Eric. I mean, it's consistent with the last quarter. If you assume sort of 10%-15% for this year and 20%-25% next year to affect the royalty rate, that's good from a modeling perspective. All right. Thanks, guys. Appreciate it. Thanks, Neil. Your next question comes from Menno Hulshof of TD Securities. Please go ahead. Good morning, everyone, and thanks for taking my question. I've just got a two-part question on CCUS and the Pathways Alliance, given the news from the feds. You mentioned the province. When can we expect news from the province in terms of what they would be prepared to chip in? What are you thinking in terms of the possible outcomes there? The second part of the question relates to the CCUS spend profile over the next several years. When do you expect that to start to show through in your own budget? You mentioned the sort of rough numbers, CAD 400 million for next year, so I don't think it's next year. Is it 2024, 2025? Is that a reasonable expectation? Menno, thanks for the question on Pathways. You know, we are extraordinarily pleased that the federal government stepped up with their 50% investment tax credit. That's a huge start to getting us over the line. We are very interested and are waiting with bated breath when the province is going to step up. You know, we have talked publicly about the need for 75% support at the capital level. Obviously we'd love to see the province finding a way to bridge that gap. You know, that 75% is not a number we picked out of the air. 75%, sort of, is a number that, you know, other constituencies that we need to be competitive with, be it the Netherlands or Norway or the U.S., have received in terms of capital support for this. I think that the province is we expect to hear from the province sometime before, you know, in late May with respect to we know they're looking at the various different ways that finance could potentially help to make this happen. At this juncture, we don't have any firm handle on what the timing would be. We're very hopeful that they will find a way to step to the table and help us make this happen. On the So- Sorry. On the spend profile. No, I'll stop interrupting you. No, I was gonna follow up on, yeah, the spend profile, so you were good. Apologies. Yeah. You know, it's very hard to predict what the spend profile is until we know we have a project. You know, obviously the provincial support is important, but also we don't have the pore space as of yet. The pore space application went in at the end of April. We expect to hear sometime throughout the summer, but at the very latest by the end of October. Fundamentally, the most important part for us is once we've got that, then we would go to work on putting the pipeline in. We don't expect that pipeline, and pore space or storage facility would be available till likely late 2028. You would start to back into your own carve. Well, you know, obviously there'd be some capital associated with that, but I don't think you're gonna see significant spending, much before 2025, 2026. When you do see that spending, that capital spending, we're hoping that it is going to be at, gonna have the 75% sort of investment tax credit type of impact. Our contribution would be in that 25% of the capital. Terrific. Thanks, Derek. That's all I have. Thanks, Menno. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one now. Mr. Evans, there are no more questions from the phone lines. I'll turn the conference back to you for closing remarks. Thank you, Michelle, and thank you everybody that joined us this morning for our first quarter call. As I said a little bit earlier, we're very excited about what we've been able to achieve and very confident in what the remainder of the year is going to bring forward. We look forward to reporting on that at our next when we release Q2 on July 27th. Have a great day, everyone. Thank you for your attention. Ladies and gentlemen, this concludes the conference for this morning. We would like to thank you all for participating and ask that you please disconnect your lines.