Canadian Natural Resources - Q4 2023

Transcript

Moderator (participant)

Good morning. We would like to welcome everyone to Canadian Natural's 2023 fourth quarter and year-end earnings conference call and webcast. After the presentation, we will conduct a question-and-answer session. Instructions will be given at that time. Please note that this call is being recorded today, February 29, 2024, at 9:00 A.M. Mountain Time. I would now like to turn the meeting over to your host for today's call, Lance Casson, Manager of Investor Relations. Please go ahead.

Lance Casson (Manager of Investor Relations)

Thank you, operator. Good morning, everyone, and thank you for joining Canadian Natural's fourth quarter and annual 2023 earnings conference call. As always, before we begin, I'd like to remind you of our forward-looking statements, and it should be noted that in our reporting disclosures, everything is in Canadian dollars unless otherwise stated, and we report our reserves and production before royalties. Additionally, I would suggest review our comments on non-GAAP disclosures in our financial statements. Speaking on today's call with me today are Tim McKay, Vice Chairman; Scott Stauth, President; Robin Zabek, Chief Operating Officer, Conventional E&P; and Mark Stainthorpe, our Chief Financial Officer. Tim will first speak to how our strategy and execution has resulted in strong corporate results. Scott will deliver specifics on our record production and additional details on our safe, reliable, and world-class operations. Next, Robin will provide highlights of our growing, high-value reserves.

And then Mark will summarize our strong financial results, including increasing shareholder returns as we reached an important net debt milestone. To close, Scott will summarize prior to open up the line for questions. With that, I'll turn it over to you, Tim.

Tim McKay (Vice Chairman)

Thank you, Lance. Good morning, everyone. Canadian Natural has a proven, effective strategy, and as a result, in 2023, we delivered on our capital allocation strategy. We strengthened our balance sheet. We provided significant returns to shareholders. As well, we were strategic in developing our assets, achieving record annual production, as well as growing our reserves organically on a both total-proven and total-proven-plus-probable basis, with reserve replacement ratios of 166% and 194%, respectively. This strong execution in 2023 sets us up to continue to deliver on our capital allocation strategy through our disciplined 2024 capital budget of approximately $5.4 billion. This budget is strategically weighted to longer-cycle thermal development in the first half of 2024 and shorter growth in the second half of the year, targeting strong exit production levels.

As well, it provides us the flexibility to adjust to changing market egress and evolving market conditions, ensuring we are allocating capital effectively and maximizing value for our shareholders. Canadian Natural is committed to supporting Canada's and Alberta's climate goals, and we continue to reduce our environmental footprint with our robust environmental targets, including net-zero GHG emissions in the oil sands by 2050. We are uniquely positioned with a diverse, long-life, low-decline asset, which are ideal to apply technologies to reduce GHG emissions and provide industry-leading environmental performance. We believe it's important to continue to work together with the Canadian and Alberta governments to make pathways aligned at transformative industry collaboration and achieve meaningful GHG reductions in Canada. We believe Canadian energy is one of the most responsibly produced sources of energy in the world and should be a preferred energy choice.

I will now turn it over to Scott for a detailed review.

Scott Stauth (President)

Thank you, Tim, and good morning, everyone. 2023 was a solid year for us, with strong execution in our operations and record production levels across our diverse product mix, generated significant free cash flow, resulting in strong shareholder returns through our sustainable and growing dividend and significant share repurchases. We achieved record annual production of approximately 1.33 million BOEs per day, which included both record liquids production of 973,500 barrels per day and record total natural gas production of approximately 2.15 BCF per day, as a result of effective and efficient operations across all assets. Strong production in the second half of the year mitigated the impacts of wildfires, an unplanned pipeline outage, and natural field declines, as annual production is up 4% from 2022 levels or up 7% on a production-per-share basis. I will now run through our asset highlights, starting with our robust natural gas assets.

We had strong execution, including achieving record North American natural gas production, averaging approximately 2.14 BCF in 2023. While this is up 3% on an annual basis from 2022, the increase on a Q4 to Q4 basis is over 100 million MCF per day. Operating costs on our natural gas averaged $1.27 per MCF in 2023, which is up 7% from 2022, primarily as a result of higher service costs. We continue to focus on cost control and effective and efficient operations to offset cost pressures. North American light oil and NGL production averaged over 109,000 barrels per day in 2023, comparable to 2022 levels. Operating costs on our North American light crude oil and NGL operations averaged $16.28 per barrel in 2023, an increase of 2% over 2022 levels, reflecting higher service costs.

Our light oil, NGL, and natural gas production was impacted by wildfires and a third-party pipeline outage in the early part of the year, which partially offset the growth from our capital-efficient drill-to-fill strategy on our liquids-rich Montney in Deep Basin assets. Primary heavy oil production of approximately 77,700 barrels per day in 2023, which is up 15% from 2022, reflecting strong results from our multilateral heavy oil wells in both the Mannville and Clearwater fairways. Primary heavy oil operating costs averaged $19.85 per barrel in 2023, which is down 9% from 2022 levels, primarily reflecting lower energy costs. Our Pelican Lake production averaged just over 46,000 barrels per day in 2023, which is down 5% from 2022, reflecting the long-life, low-decline nature of this world-class polymer flood asset. Our operating costs at Pelican Lake remain strong, averaging $8.58 per barrel in 2023.

In our thermal operations, we achieved record thermal in-situ production in 2023, averaging 262,000 barrels per day, an increase of 4% from 2022. Thermal production also finished the year strong, averaging approximately 278,000 barrels per day in Q4. The growth in our thermal production was driven by strong execution on our thermal development plan, including capital-efficient pad additions in the Primrose and Kirby that came on production in 2023, partially offset by natural field declines. 2023 operating costs averaged CAD 13.17 per barrel, which is down 20% compared to 2022, primarily on lower energy costs. At Primrose, we are drilling two cyclic steam pads this year, which are targeted to come on in production in Q2 2025. We are also drilling a SAGD pad at Wolf Lake, which is targeted to come on production in Q1 of 2025.

At Kirby, two of the four previously drilled SAGD pads have now reached their full production capacities, with the two remaining pads targeted to wrap up their full production capacities in mid-2024. At Jackfish, two SAGD pads that were drilled in 2023 are targeted to wrap up to their full production capacities in Q3 and Q4 of this year, supporting continued high utilization rates at the Jackfish facilities. We are targeting to drill an additional SAGD pad in Jackfish in the second half of this year, with production from this pad targeted to come on production in Q3 of 2025. We also have a commercial-scale solvent SAGD pad development in Kirby North, which is approximately 80% complete now, and we are targeting to begin solvent injection mid-2024.

We continue to use solvent enhanced recovery pilot in the steam flood area at Primrose to optimize solvent efficiency and to further evaluate the commercial development opportunity. We have planned turnarounds in Jackfish and Kirby in the second quarter, which are targeted to impact Q2 2024 production by approximately 17,100 barrels per day, which is included in our production guidance disclosed with our 2024 capital budget. In our oil sands mining operations, we achieved strong results in 2023 at our world-class oil sands mining and upgrading assets, hitting new annual record production levels, with SCO production averaging approximately 451,000 barrels per day in 2023 and just over 500,000 barrels per day in Q4. We've been able to achieve these strong record production levels as we focus on continuous improvement and increased overall reliability through safe, reliable, and effective and efficient operations.

Operating costs in our oil sands mining and upgrading assets are top tier and average $24.32 in 2023, which is down 7% from 2022, primarily reflecting higher production volumes and lower energy costs. As previously noted in our 2024 budget, at Horizon, we have a turnaround planned in Q2 2024 with a full plant outage targeted for approximately 30 days. The estimated impact to Q2 quarterly average production is approximately 89,000 barrels per day and remains unchanged from budget. We will be completing the remainder of the tie-ins on the reliability enhancement project during the planned turnaround at Horizon in Q2 of this year. This project will allow us to skip a turnaround in 2025 as we shift the downtime related to maintenance activities to once every two years instead of once every year.

So in 2025, we are targeting to increase capacity by approximately 28,000 barrels per day or approximately 14,000 barrels per day on a two-year average basis of incremental high-value SCO production. At AOSP, we have two turnarounds this year at the non-operated Scotford upgrader, where the upgrader will operate at reduced rates. The first turnaround was originally targeted for 10 days in April 2024 but has now been moved into March. Some additional scope has been added, which will extend the duration of this maintenance period to 17 days, but there's no change to the estimated production impact of approximately 10,000 barrels per day as production rates are targeted to run higher with the scope additions compared to the original targeted 10-day production rate. This change will now shift the production impact into Q1 2024 instead of Q2.

The second turnaround at the Scotford upgrader is targeted to begin in September 2024 and progress for a duration of 49 days, no change from what was previously announced with our budget. Total combined annual impact from production from the turnarounds at Scotford and AOSP will remain unchanged from the budget at approximately 12,400 barrels per day. We also have a bottlenecking project at the Scotford upgrader, which is planned to be completed during the Q4 2024 turnaround and is targeted to add incremental capacity of approximately 5,600 barrels per day net to Canadian Natural. Beyond this, as previously announced with our 2024 budget, we have the naphtha recovery unit tailings treatment project, which is targeted to add approximately 6,300 barrels per day of SCO in late 2027.

This project also provides environmental benefits, including a 6% reduction in Horizon's Scope 1 Emissions and lower reclamation costs over the life of the Horizon project. Now I will turn it over to Robin to speak to our year-end reserves.

Robin Zabek (COO of Conventional E&P)

Thank you, Scott, and good morning, everyone. As in previous years, 100% of Canadian Natural's reserves are externally evaluated and reviewed by independent, qualified reserve evaluators. Our 2023 reserves disclosure is presented in accordance with Canadian reporting requirements using forecast prices and escalated costs on a before royalties company-working interest basis. As you just heard from Scott, Canadian Natural had another strong year, which is also demonstrated by the company's reserves. For 2023, total proved reserves increased by 2% to 13.9 billion BOE, of which 8.8 billion BOE are proved developed producing reserves. Total proved plus probable reserves increased by 3% to 18.5 billion BOE. The strength and depth of Canadian Natural's assets are a competitive advantage, which is evidenced by our reserves life.

Notably, approximately 75% of total proved reserves are from long-life, low-decline assets, with approximately 50% of total proved reserves consisting of high-value synthetic crude oil with zero decline and a reserve life index of 44 years. As a result of Canadian Natural's unique world-class assets, our corporate total proved reserve life index is 32 years, and our total proved plus probable reserve life index is 43 years. In 2023, the strength of Canadian Natural's assets and results also continued to be reflected in the key indicators of finding and development costs and reserve replacement. Corporate finding, development, and acquisition costs, including changes in future development cost, are $9.25 per BOE for total proved reserves and $8.28 per BOE for total proved plus probable reserves. Additionally, as Tim noted, in 2023, Canadian Natural replaced production by 166% on a total proved basis and 194% on a total proved plus probable basis.

The net present value of future net revenue before income tax using a 10% discount rate and including the full company asset retirement obligation is approximately CAD 154 billion for total proved reserves and approximately CAD 186 billion for total proved plus probable reserves. In summary, our 2023 reserves reflect the strength and depth of Canadian Natural's assets, the value of the company's long-life, low-decline reserves, and our proven ability to execute. I will now hand over to Mark for the financial highlights.

Mark Stainthorpe (CFO)

Thanks, Robin, and good morning, everyone. The fourth quarter of 2023 was a strong financial quarter as we generated adjusted funds flow of CAD 4.4 billion and adjusted net earnings of operations of CAD 2.5 billion. The fourth quarter contributed to what was a very strong year in 2023 with impressive results as we achieved record production with disciplined capital allocation and robust financial results. For example, in 2023, we grew our production by 7% per share, grew our 2P reserves by 7% per share, paid just under 5% in dividend yield, purchased CAD 3.3 billion in shares under our NCIB program, and reached CAD 10 billion in net debt earlier than originally targeted. This shifts our free cash flow allocation to now target 100% of free cash flow in 2024 being returned to shareholders in the form of dividends and share buybacks.

These results are driven by safe, effective, and efficient operations and a unique asset base that delivers significant free cash flow. Subsequent to quarter end, the board of directors has approved a 5% increase to our base quarterly dividend to CAD 1.05 per common share, demonstrating the confidence the board has in the sustainability of our business model, our strong balance sheet, and the strength of our diverse, long-life, low-decline reserves and asset base. We have increased our dividend for 24 consecutive years with a compound annual growth rate of 21% over that time. Additionally, the board has approved, subject to shareholder and regulatory approval at our May annual meeting, a proposal to split the company shares on a 2-for-1 basis. Our financial position is very strong with debt to EBITDA at 0.6x at the end of 2023, and we continue to maintain strong liquidity.

Including revolving bank facilities, cash, and short-term investments, liquidity at the end of 2023 was approximately CAD 6.9 billion. With our disciplined 2024 capital budget, low maintenance capital requirements, and a long-life, low-decline asset base, we target to deliver strong returns on capital with robust free cash flow while continuing to provide significant returns to shareholders in 2024. With that, I'll turn it over to you, Scott, for some final comments.

Scott Stauth (President)

Thanks, Mark. In closing, 2023 was a strong year for Canadian Natural, both operationally and financially, providing significant returns to our shareholders. We will continue to focus on safe, reliable operations as well as enhancing our top-tier operations, and we will continue to drive top-tier environmental performance. I would also like to say a special thank you to Tim McKay for all his outstanding service and leadership at Canadian Natural, and in his new role as Vice Chairman, Tim will continue to support the management team. As you all know, Canadian Natural has a history of well-established leadership succession plans that ensures we are maintaining our culture and delivering top-tier performance. With that, I will turn it over for questions.

Moderator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question is from Doug Leggett from Bank of America. Please ask your question.

Doug Leggett (Managing Director and Senior Research Analyst)

Thanks, gentlemen. Good morning. Thanks for taking my question. Impressive by any measure. But I wonder if I could just poke a little bit on the capital budget. So CAD 5.4 billion for the year, obviously, that comes with growth not only for this year but also for 2025. If I had to transcribe that back to growth versus sustaining capital, what would that look like?

Mark Stainthorpe (CFO)

Hey, Doug. It's Mark here. On a base capital or maintenance capital to growth capital, we're probably running in the neighborhood of CAD 1 billion of growth capital. But it varies because of the nature of the asset base, right? Because what you're doing is, for example, in 2024, we're drilling some of the longer-life asset earlier in the year. So we're doing the thermal production here, and we're doing the conventional type lower capital exposure opportunities later in the year. And that's really to match up with that egress opportunity. So year-over-year, it's going to change what you think of or how you classify, I guess, growth capital on that basis because we are doing growth capital in thermal, for example, but you don't see some of that production until next year.

Doug Leggett (Managing Director and Senior Research Analyst)

That's very clear, Mark. I guess my follow-up is kind of a related question, and it really goes to that issue of egress. I mean, there's a lot of things, obviously, going on in Canada. TMX is perhaps front of mind, but there's also Canada LNG down the road, and you've got 7% exit growth this year on gas in your plan. So my question is, is there any—I mean, would you anticipate any flex in the growth plan specifically as it relates to gas in the second half of the year given where AECO is trading? I'm just curious if there's a risk that the CapEx budget ends up being lighter with lower gas production growth for 2024.

Scott Stauth (President)

Yeah, that's a good question. I think that's the great part about the robust nature of our assets. And so for us, we're able to, as we move forward here throughout the year, continue to monitor the pricing. And of course, we will allocate our capital to those areas that are going to provide us with the best return. So we have our heavy oil properties. Yes, we have our gas properties, but we're just going to continue to monitor the prices as we go forward, and we'll react accordingly. But to your point, the LNG Canada project should bring some relief to the ecosystem, and that's what we're thinking of as well.

Doug Leggett (Managing Director and Senior Research Analyst)

Terrific. Great, Scott. Thanks so much, guys.

Mark Stainthorpe (CFO)

Thanks, Doug.

Moderator (participant)

Thank you. Your next question is from Greg Pardy from RBC Capital Markets. Please ask your question.

Greg Pardy (Managing Director and Head of Global Energy Research)

Yeah, thanks. Good morning. And I guess big congrats to Tim, and thanks so much for the support over the year. So looking forward to your role as Vice Chairman. There are not a lot of questions to ask, I think, with results like this. But one that might come up is just what your operating performance has looked like thus far in the first quarter. And there were one or two questions in terms of that cold snap we had, I think, back in January as to whether there was any impact on the business or, by and large, things are as expected.

Scott Stauth (President)

Yeah, thanks, Greg. It's Scott here. So yeah, you're right. In those extreme cold weather stretches like what we saw in January, there's always short-term challenges in our conventional and oil sands mining assets. But generally, in this case, they're short-lived, and the teams did a great job of managing through them, so no material impact.

Greg Pardy (Managing Director and Head of Global Energy Research)

Okay, great. That was the question. That was the answer I was looking for. And maybe a question for Mark. With respect to the shareholder returns and the framework you have now, given that you effectively flipped over January 1st, and I believe you mentioned your buybacks are circa CAD 350 million or so up until about now. Hopefully, I've got that number right. Can we sort of expect a catch-up in March, and to what extent might variable dividends kind of come into the mix? Because typically, you guys aren't super you adhere to your plan, but you're not super rigid. So I'm just trying to better understand that.

Mark Stainthorpe (CFO)

Yeah, great. Good question. Let me try and explain how we're thinking about this. So when we look at where we are today, of course, we're now at the net debt of CAD 10 billion, which means 100% of free cash flow to shareholders through dividends and share buybacks. So we have our base dividend that was just increased by the board this quarter here. But what we're doing here is we're looking at this on an annual forward-looking basis. So it's not going to be a quarter-to-quarter basis. The reason for that is to make sure you're managing working capital and those things. So what's going to happen is debt may fluctuate around the CAD 10 billion on a quarter-to-quarter basis, but we're looking at this on a forward-looking annual basis to make sure we're managing those outcomes properly.

So you will see, like you saw in 2023, changes in how much buyback is happening in each quarter, but the plan is to manage that forward-looking on what that free cash flow looks like. And then on the special dividend, I mean, I think today the lever is the buyback program. We see lots of value there still. And kind of that's after the current base dividend. That's currently the plan. And then go forward, we'll always look at other opportunities with the board going forward on returns to shareholders.

Greg Pardy (Managing Director and Head of Global Energy Research)

Okay. Thanks to both.

Moderator (participant)

Thank you. From Goldman Sachs, please ask your question.

Neil Mehta (Managing Director)

Yeah, good morning, team, and congrats, Tim, and congrats, Scott, on your responsibilities. My first question is on Horizon. You got a pretty decent debottlenecking plan by 2025 and then also some at AOSP. So just we would love your perspective on how that's tracking and remind us what you're looking to get out of both of those projects.

Scott Stauth (President)

Sure. Yeah, so it's Scott here. And as you mentioned, the Horizon debottleneck project is nearing its end. We have one more installation to do, tie-in during the turnaround in Q2, and that'll essentially wrap up that project. Results from that will allow us to go towards a non-turnaround year in 2025 and then a turnaround year in 2026. And so year after year, that's how it'll look, a turnaround every second year. I also talked earlier about the tailings project. So that adds 6,300 barrels a day of SCO after 2027, and that's in the early stages. And you guys will hear more from that as we go on and get towards near the completion of that project. At Scotford, talked about the debottleneck project that'll take place during it'll finish during the turnaround later on this year at Scotford.

That'll be adding 5,600 barrels per day net to Canadian Natural. Those are the assets, and that's the details on that production.

Neil Mehta (Managing Director)

That's helpful, Scott. And then just follow up, I'd just love your perspective on the macro. We've seen a lot of volatility in Syncrude prices and WCS prices. Hopefully, things start to get better seasonally and also when TMX comes online. So maybe you could talk about your thoughts on the timing of TMX and how you think about both light and heavy crude diffs as we work our way through the year.

Scott Stauth (President)

Yeah, you bet. And so as we go forward here with TMX, we understand the timing of completion of the project and startup in Q2 of this year. And so you will see that help alleviate the differentials on WCS, also help that see the SCO premium go back towards more of a premium than it's been in the past few months. So both those products will benefit from TMX coming online.

Neil Mehta (Managing Director)

Thanks, Scott.

Moderator (participant)

Thank you. Your next question is from Menno Hulshof from TD Cowen. Please ask your question.

Menno Hulshof (Managing Director and Senior Equity Analyst)

Thanks, and good morning, everyone. I'll start with a question on your thermal drilling program, which you talked about being front-end loaded. And just looking at your latest guidance, you point to most of those pads coming online in the first three quarters of 2025. Can you give us a sense of what the production ramp could look like through the middle of 2025? And maybe more specifically, could you give us a sense of what the production growth rate could look like on an exit 2025 over exit 2024 basis? Thanks.

Scott Stauth (President)

Yeah, good question. I don't have the exact profile of what it'll look like in 2025 on the thermal pads, but based on our discussions on the 2024 budget, we had looked at 2025 over 2024 at about 4%.

Menno Hulshof (Managing Director and Senior Equity Analyst)

Terrific. Thanks, Scott. And then maybe I'll just follow up with sort of a refresher question on the inflationary outlook. It seems to me like everything is largely moderated. But are you seeing anything new or noteworthy as you look across the various line items within the cost structure? And do you still think that something in the range of 3%-5% is still a reasonable expectation for this year?

Scott Stauth (President)

Yeah, I think largely the increases that we saw in the past have stabilized on a go-forward basis. I believe we said this on the last call, that we would expect 2024 to resemble mostly labor increases looking like in that 3%-5% range. So you're bang on.

Menno Hulshof (Managing Director and Senior Equity Analyst)

Terrific. Thanks, Scott. I'll turn it back.

Moderator (participant)

Thank you. Your next question is from Patrick O'Rourke from ATB Capital Markets. Please ask your question.

Patrick O'Rourke (Managing Director and Analyst)

Oh, hey. Good morning, guys, and thank you for taking my question. I guess you've covered a lot of ground here, but my first question is really with respect to the primary heavy oil results, which have been very, very impressive to date. Just wondering if you can speak to the potential scope of those assets and where it could go to. Then I wonder about potential with gas prices. You talked a little bit about flexibility here, but is this a specific asset where if gas prices remain low, you do have the flexibility to sort of increase the capital allocation?

Scott Stauth (President)

Good question, Patrick. And yes, you're bang on. It is an area where we can focus our capital allocation on. As you know and have seen, multilateral drilling programs have proven to be very effective. We have a very large land base in our primary heavy oil lands and multiple zones as well. So we're able to really look at adding potential drilling in those areas. Again, if gas prices are not favorable as we originally planned, I could see us increasing potentially our multilateral primary heavy oil drilling program.

Patrick O'Rourke (Managing Director and Analyst)

Okay, thank you. Just to follow up and sort of on the other side, on the gas side of the equation, because drought has become very topical, it's been on a number of your peers' conference calls recently. Just wondering because I would suspect that drought conditions would primarily impact the potential to operate in your Montney assets. How things sit today and sort of what the scope of your water reservoirs are relative to your 2024 program?

Scott Stauth (President)

Yeah, good question. I think we're in pretty good shape overall here. We continue to monitor river levels, draw levels, and all of our access to water. Our teams are continually monitoring that and being prepared. But as it stands currently, we see our program not affected at this point. We'll just continue to monitor it as it goes along throughout the year here.

Patrick O'Rourke (Managing Director and Analyst)

Okay, thank you very much.

Moderator (participant)

Thank you. Your next question is from John Royall from JP Morgan. Please ask your question.

John Royall (Executive Director)

Hi, good morning. Thanks for taking my question. So my first question is a bit hypothetical, and forgive me for that, but I'm just trying to understand, how should we think about the framework on return of capital and the goalposts around capital returns going forward now that you've hit the 100% level? And so let's just say you did an acquisition and your net debt went above CAD 10 billion as a result. Would you dial back to the 50% here and keep your framework in place, or was the framework sort of a thing of the past and you're at 100% and it was just kind of a means to getting you there? Just trying to understand if this framework is more long-term or just kind of how you got to that 100%.

Mark Stainthorpe (CFO)

Yeah, I mean, well, looking back, we got to the 100% when we looked at the net debt level of CAD 10 billion was quite conservative when you think about the size of our company, the nature of the assets, the long-life reserves, the low decline, low maintenance capital. So to us, it's quite a conservative debt level. But coming out of 2020 and those years, it was prudent to make sure we had a strong, strong balance sheet. So that's where we've got to now, and the 100% makes sense to us.

Of course, we've had the base dividend increasing, and that's part of that returns to shareholders. And we've had three increases over the last year, over 20% returns there or additional returns there. So that gives us that opportunity. And back to your question, if something more material was to happen I don't like speculating on those things.

If you have an acquisition, it comes with cash flow, and it comes with all those different things. We'd have to evaluate that. But for today, we've hit our CAD 10 billion. We're focused on the 100% returns to shareholders through dividends and share repurchases. And it's a pretty big milestone, and the reason for it has been a very strong, safe, reliable operations over the last couple of years.

John Royall (Executive Director)

Got it. Thank you. And then my follow-up is just on OpEx in mining. 4Q was the lowest level, I think, in two years in both per barrel terms but also in dollar millions. Can you talk about the OpEx side? Are gas prices a factor, or is there some other kind of sustainability to these lower numbers? I know you're doing a lot of work to extend the turnaround cycle, and that's the general focus. But I'm just trying to understand if there are kind of structural OpEx dollars that have come out there.

Scott Stauth (President)

Yeah, as you know, on oil sands mining, the costs are largely fixed. The variables will be in natural gas and diesel pricing, but they're largely fixed. So obviously, as you have higher production levels, the cost remains about the same. So your cost per dollar will be lower as you have those higher volumes.

John Royall (Executive Director)

Yeah, the question was on the absolute. Dollar millions went down, but I think you answered it on the gas and diesel. Thank you.

Scott Stauth (President)

Great.

Moderator (participant)

Thank you. Your next question is from Mike Dunn from Stifel. Please ask your question.

Mike Dunn (Managing Director)

Hi, thanks, everyone. Just one question from me, guys. On Trans Mountain, you've got 94,000 barrels a day committed capacity. Once that starts up, are you able to use some or even all that capacity for light crudes? I know the assumption has been that you would use it for heavy crudes, but I'm just wondering about your flexibility with that capacity. Thank you.

Scott Stauth (President)

Yeah, you bet, Mike. So really, with TMX, we'll be looking to maximize the value of those committed barrels. So whether that's through some of our light volumes or heavy volumes, we're just looking at the opportunities to give us the best value back there. So it could be a mixture of both, and I wouldn't lean for it to be all one way or the other way. So we're just going to look at. Our teams are reviewing what the best opportunities are and planning from there.

Mike Dunn (Managing Director)

Great, thanks. That's all from me.

Moderator (participant)

Thank you. Once again, ladies and gentlemen, should you wish to ask a question, please press star one on your telephone keypad. Your next question is from Dennis Fong from CIBC. Please ask your question.

Dennis Fong (Equity Research Analyst)

Hi, good morning, and thanks for taking my question. My first one here is just related to the buybacks. I just wanted to hopefully understand a little bit better in terms of how you judge the return of buying back a share of stock versus that of kind of investing in your own asset base. I understand the desire to remain strategic and disciplined on capital deployment, and I know you just updated or provided kind of 1P net asset value from a third-party evaluator at $139.07 a share. So how do you balance the return or the allocation of capital between buybacks and reinvesting in the asset base?

Mark Stainthorpe (CFO)

Hey, Dennis, it's Mark. When we look at reinvesting in our asset base versus the returns to shareholders, it is kind of what you said. It's a little bit of looking at the balance. We want to make sure we have a prudent capital program that can deliver growth in a prudent stage, but we also want to provide that on a per-share basis. We've historically been very, in my view, very good at that capital allocation and being prudent and making sure it's delivering value, not just production growth. So we're really looking at value growth. So it's a matter of balancing what is efficient in any one year from a capital program perspective. The advantage for Canadian Natural, of course, is the diversity of the asset base.

So as Scott talked a little bit about, we've got a lot of opportunity, no gaps in the portfolio, so it's all right there to allocate. It's just a matter of driving the best value in that year. And given where we are today, that's going to leave a lot of free cash flow in the year. And we have now the ability to balance that between our dividend that's been ever increasing and the now share buyback program where we see a lot of value still for some of the reasons you mentioned.

Dennis Fong (Equity Research Analyst)

Great, great. I appreciate that context. Switching gears for my second question is really focusing in on Kirby and the continuation of the Solvent project there. Can you discuss a little bit about the applicability to some of your other in-situ assets in the region and maybe how you think about it with respect to, I know, kind of early stage, but the development of Pike as well?

Mark Stainthorpe (CFO)

Yeah, you bet you, Dennis. So from a Solvent opportunity perspective, essentially what you're doing is reducing your steam requirements by about half. So as you look and we go through this project and we see the results that we're expecting and again, we're going to monitor that, and it's just going to be starting up in terms of the Solvent injection in Q2 here. But we'll monitor as we go forward. But it gives us, if it's successful, like we believe it will be, then it gives us success or gives us the opportunity in the Jackfish and Kirby areas to continue with more pad development and not necessarily having to increase the capital to build more steam facilities. So the advantage there is lower overall capital and better capital efficiency for drill-to-fill opportunities.

Dennis Fong (Equity Research Analyst)

Great. And maybe just so the thought process behind that, then, is that could be leveraged to showcase additional growth or redeploy the steam to other regions within that project or those specific projects.

Mark Stainthorpe (CFO)

That's right. Yeah.

Dennis Fong (Equity Research Analyst)

Great, thanks. I'll turn it back.

Moderator (participant)

Thank you. There are no further questions at this time. I will now hand the call back to Lance Casson for the closing remarks.

Lance Casson (Manager of Investor Relations)

Thank you, operator, and thanks, everyone, for joining us this morning. If you have any follow-up questions, please give us a call. Thanks and have a great day.

Moderator (participant)

Thank you. Ladies and gentlemen, the conference has ended. Thank you all for joining. You may all disconnect.