加拿大自然資源公司 (CNQ) 2022 Q2 法說會逐字稿

Good morning. We would like to welcome everyone to the Canadian Natural Resources 2022 Second Quarter Earnings Conference Call and Webcast. (Operator Instructions) Please note that this call is being recorded today, August 4, 2022 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, sir.

Thank you, operator. Good morning, everyone, and welcome to Canadian Natural Second Quarter 2022 Results Conference Call. 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 reported reserves and production before royalties. Additionally, I would suggest you review our comments on non-GAAP disclosures in our financial statements.

With me this morning is Tim McKay, our President; and Mark Stainthorpe, our Chief Financial Officer. Tim will first provide highlights of our ESG achievements evident in our 2021 stewardship report to stakeholders that was published today and how strong execution and efficiencies so far this year have put Canadian Natural in a unique position to maximize value for our shareholders by executing on additional strategic growth opportunities. This will be followed by an overview of the quarter, including specifics of our world-class assets and operations. Mark will then provide an update on our strong financial position, substantial free cash flow generation and increasing returns to shareholders. To close, Tim will summarize our call prior to opening up the line for questions. With that, I'll turn it over to you, Tim.

Thank you, Lance. Good morning, everyone. Canadian Natural delivered strong operational results in the second quarter of 2022 as we achieved quarterly production of approximately 1.21 million BOEs a day, which included record natural gas production of approximately 2.1 Bcf a day. Liquids production was strong at approximately 860,000 barrels a day as planned maintenance was completed on our [oil sands] mining assets. This, combined with our capital discipline, generated significant free cash flow as we continue to balance free cash flow to our 4 pillars of capital allocation, maximizing value to our shareholders as we have returned approximately $6.4 billion to our shareholders through dividends and share repurchases. We continue to apply that same drive to ESG, environmental, social and governance first, a significant factor in our long-term sustainability. As we move forward, we will continue to outline our path to lower carbon emissions across the asset base and our journey to achieve our goal of net 0 GHG emissions in the oil sands by 2050. Canadian Natural is an R&D investment leader. We have increased our investments in R&D and technology development by 33% over 2020 levels, with $450 million invested in 2021, and this is targeted to grow with our participation in the Pathways Alliance. As well, Canadian Natural continues to work together with 144 indigenous-owned businesses through which $572 million in contracts were awarded in 2021, a 17% increase from 2020 levels. The oil sands pathway to Net Zero initiative is now called the Pathway Alliance and was launched in June of 2021. We've clearly defined plan to achieve 22 megatons of annual emission reduction by 2030 and net 0 emissions by 2050. The federal government's announcement announced support through the investment tax credit as well as additional support from the Alberta government will be fundamental to achieving these reductions and the tax credit is a positive approach where industry and government can co-invest in CCUS infrastructure to materially reduce Canada's GHG commissions.

 Environment and Climate Change Canada has recently proposed a GHG emission cap on the oil and gas sector. In our view, this cap is unnecessary and overly ambitious in light of our stated preference for governments and industry to continue to work together to the pathways initiative to achieve an already announced emission target reduction. It's important for all parties to continue to work together. Canadian Natural will continue to provide input to the government on the importance of balancing environmental and economic objectives as well as being able to support Canada's allies with energy security. Canadian Natural has had a strong execution with its drilling program so far in 2022, resulting in the company drilling 22 net operated wells ahead of forecast, consisting of 11 net thermal in situ and 11 conventional E&P wells with drilling costs on a per well basis comparable budget with improved efficiencies, mitigating some of the inflationary cost pressures. As a result, the 2022 capital expenditures will be adjusted with the base capital has increased by approximately 5% or $200 million over the original 2022 levels and will now be targeted for approximately $3.845 billion primarily due to the forecasted inflationary pressures in all operating areas for items such as steel, manufactured goods, services and labor. Strategic growth capital will now target to be approximately $1,075 million, an increase of approximately $375 million over the original 2022 level.

With this increase, Canadian Natural targets to drill an additional 41 net conventional E&P wells and 15 net thermal in situ wells, which is essentially fast fills the latter half of the drilling program, which includes pipelines, facility and additional non-op activity. We'll progress liquid-rich Montney natural gas projects that will add capacity of approximately 140 million cubic feet of natural gas and 25,500 barrels a day of liquids in the future years as well, long leads for thermal in situ offshore Africa as well as incremental shovels and tailings pipe for Horizon. As a result, our guidance has been increased to 129,500 to 133,500 BOEs a day as a result of efficiencies gained and the increased capital in both conventional natural gas and E&P crude oil liquids. I will now do a brief overview of the assets, starting with natural gas. Overall, Q2 2022, natural gas production was 2.1 Bcf, which was a record for the company, a 5% increase over Q1 2022. For North American operations Q2 natural gas production was 2.05 Bcf versus the 1.99 Bcf in Q1. Primarily results of the company's strategic decision to invest in our drill and fill strategy, adding low-cost, high-value, liquid-rich natural gas production volumes as well as opportunistic acquisitions.

Our Q2 2022 natural gas operating cost was strong at $1.15 an Mcf, which is down 10% compared to Q1 '22 of $1.28. Good operating performance as our teams continue to focus on operational excellence. A couple area highlights are at Townsend, a 6-well pad came on production in Q2 2022, with a strong capital efficiency of approximately $4,500 per BOE/d with July monthly production of approximately 54 million cubic feet per day. At [Essence], 3 wells came on late in Q1 of 2022 at about $2,800 per BOED with total July production of approximately 32 million cubic feet per day and 560 barrels a day of liquids. Canadian Natural's diversified sales for our natural gas realized natural gas pricing of $7.93 per Mcf in Q2, a 51% increase above Q1 2022 levels and approximately 30% higher than the [AKO] Benchmark price in Q2, further improving the economics of our low-cost, drill-to-field, liquid-rich natural gas projects. For North American light oil and NGL, Q2 production was 109,997 barrels, up 2% from Q1 2022, primarily a result of strong drilling results and previous acquisitions. Q2 2022 operating costs were $15.19 per barrel comparable to Q1 2022 operating costs of $15.24. At Wembley, 9 liquid-rich Montney wells who are on production, with July production approximately 8,200 barrels a day of liquids and 27 million cubic feet of natural gas, exceeding budget and maximizing the existing facility capacity with a capital efficiency of approximately $3,400 per BOED. Our international assets in Q2 had oil production of 25,097 barrels, which is down from Q1 2022 levels, primarily due to unsigned maintenance in the New York Sea. Offshore Africa annual production, offshore Q2 production was 15,119 barrels per day versus Q1 of '22 15,742 barrels with operating costs in Q2 at $15.73 per barrel. In the North Sea, production averaged only 10,788 barrels a day in Q2 versus Q1 of 15,961 barrels a day and had operating costs of $84.38 per barrel. Our international assets continue to generate free cash flow and value for the company.

Moving to heavy oil. Production was 66,521 barrels a day in Q2, up 5% from Q1, primarily due to strong drilling results and increased development activity. Operating costs in Q2 were higher at $22.86 per barrel versus our Q1 operating cost of $22 a barrel, primarily a result of higher trucking related costs. At Smith in the Clearwater play, Canadian Natural drilled 12 horizontal multilateral wells on 4 pads. Current production from these wells is approximately 4,400 barrels a day with a strong capital efficiency of approximately $6,300 per BOE/d. Canadian Natural has now drilled a total of 19 wells in 2022, with the company, Clearwater with total company Clearwater production now in excess of 10,000 barrels a day, up from approximately 3,900 barrels a day at the start of 2022.

As part of our strategic growth capital, we are delineating additional opportunities on our large undeveloped Clearwater land base of approximately 940,000 net acres. The key component of our long-life, low-decline assets is our world-class Pelican Lake pool, where leading-edge polymer flood continues to deliver significant value. Q2 production was 51,112 barrels a day versus Q1 22 average of 51,991 barrels a day, reflecting the low decline nature of this property.

The team continues to do a great job. We had good Q2 operating costs of $7.99 per barrel, an increase from our Q1 2022 operating costs of $7.48 per barrel. With our low decline and very low operating costs, Pelican Lake continues to have excellent netbacks. In our thermal in situ operations, in 2022, we continue to leverage continuous improvement culture and our expertise to deliver effective and efficient operations. Q2 2022 production was 249,938 barrels a day, down from the Q1 2022 production of 261,743 barrels a day, with Q2 operating costs of $18.93 per barrel, which is up when compared to Q1 of 2022 operating costs of $14.35, primarily as a result of increased related costs -- increased energy-related costs. As part of our original thermal in situ strategy growth plan released in January and as a result of efficiencies realized to date, we are now targeting an additional 15 net in situ wells originally targeted for 2023, totaling approximately $45 million in capital spend, which includes pipelines and facilities.

Canadian Natural now targets to drill a total of 117 net in situ wells in 2022. As well as part of our capital update, we are targeting to progress engineering and long leads for 2 thermal in situ pads additions at pike, targeting to add approximately 28,000 barrels a day of capacity by 2026. In the company's world-class oil sands mining and upgrading assets, we had Q2 production averaging 356,953 barrels a day of SCO, down from Q1 of 2022 levels, primarily as a result of the Scotford and Horizon planned major turnarounds in the quarter. Q2 operating costs were at $33.76 per barrel of SCO. This increase was primarily driven by decreased production volumes due to turnarounds and increased energy-related costs.

The planned turnaround at Horizon went very well, completed 8 days ahead of our 32-day budgeted and at the non-op Scotford Upgrader, it went 17 days longer than the original target of 65 days. At Horizon, the reliability enhancement project is progressing as planned and as part of the capital update, we target to add additional shovels, tailings pipe at Horizon, supporting the reliability project. I'll now turn it over to Mark for a financial review.

Thanks, Tim. Good morning, everyone. Our second quarter financial results were very strong on the back of safe, effective and efficient operations and a robust pricing environment, including a strong SCO premium to WTI. In Q2, net earnings were $3.5 billion and adjusted funds flow were $5.4 billion, allowing for significant allocation to shareholder returns through dividends and share buy-backs, further debt repayment and to strategic growth opportunities, all providing long-term shareholder value. Returns to shareholders have been significant and increasing through 2022 as we have returned a total of approximately $6.4 billion to shareholders through $2.4 billion in dividends and $4 billion through share repurchases, equaling about 56 million shares year-to-date, up to and including August 3. Our base dividend is growing and sustainable and is supported by our long life low decline assets. On March 2, 2022, the Board of Directors approved a 28% increase to our quarterly dividend to $0.75 per share or $3 per share annually. This continues the company's leading track record of 22 consecutive years of dividend increases with a significant compound annual growth rate of 22% over that period of time. Strong execution across the company's operations has resulted in substantial free cash flow generation driven by our large and balanced asset base with a top-tier cost structure.

As a result, our financial position continues to strengthen with net debt balances targeted to continue to decrease, and we remain committed to being balanced on allocation to our 4 pillars. This includes incremental strategic capital to growth opportunities that provide incremental production and to increasing returns to shareholders, where the Board of Directors approved a special dividend of $1.50 per share payable on August 31, 2022, to shareholders of record on August 23, 2022, which is in addition to our regular quarterly dividend. At the same time, shareholder returns have significantly increased in 2022, our strong financial position continues to get stronger. Net debt decreased to $12.4 billion in Q2, down $1.4 billion in the quarter and is targeted to decline further through the year. As part of our financial strength, we continue to maintain strong liquidity, including revolving bank facilities, cash and short-term investments, liquidity at the end of Q2 was approximately $6.1 billion. We remain committed to our balanced approach to capital allocation as the uniqueness of our high-quality reserve base, long life low decline production and leading cost structure drives substantial and sustainable free cash flow. This provides significant opportunity for value growth, increasing returns to shareholders and further financial strength, setting Canadian Natural apart from the global peer group. With that, I'll turn it back to you, Tim.

Thank you, Mark. Canadian Natural's advantage is our ability to effectively allocate cash flow to our 4 pillars. We have a well-balanced, diverse, large asset base with a significant portion, long-life, low decline, which requires less capital to maintain. We continue to allocate cash flow to our 4 pillars in a disciplined manner to maximize value for our shareholders, which is all driven by effective capital allocation, effective efficient operations and by our teams who deliver top-tier results.

We have a robust, sustainable free cash flow. Through our free cash flow allocation policy, returns to shareholders are significant. Our dividend was increased by 28% for the 22nd consecutive year in March and has a CAGR of over 22% over that time. Year-to-date, and up to including August 3, Canadian Natural has returned approximately $6.4 billion to shareholders through approximately $2.4 billion in dividends and $4 billion through share repurchases. In August, the Board of Directors approved an increase to returns to shareholders by declaring a special dividend of $1.50 per share payable on August 31 to shareholders of record on August 23, 2022.

In summary, we'll continue to focus on our safe, reliable operations and enhancing our top-tier operations. We'll continue to drive our environmental performance. We are in a very strong position being nimble and enhances our ability to create value for our shareholders. Canadian Natural is delivering top-tier free cash flow generation, which is unique, sustainable, robust and clearly demonstrates our ability to both economically grow the business and deliver returns to shareholders by balancing our 4 pillars. With that, I'll now open up the call for questions.

(Operator Instructions) Your first question comes from Dennis Fong of CIBC World Markets.

I think I'm going to start with just the capital allocation perspective of things. Having announced this $1.50 per share special. How should we be thinking about -- and I understand that you continue to allocate 50-50 between buy-backs and debt repayment. How should we be thinking about potential future special dividends? And what was kind of some of the prior catalysts that drove this decision here today?

Dennis, it's Mark. I think the best way to answer that is we are committed to our balanced allocation, as Tim and I talked about today on the free cash flow, and that includes shareholder returns. And that's shown in our track record. And as you mentioned, our free cash flow allocation policy. And our Board will continue to review incremental returns to shareholders going forward as part of our quarterly process and as part of our free cash flow allocation policy.

Great. Maybe the follow-up that I have here is around the pipe asset. You discussed 2 thermal in situ adds a [pike]. Obviously, now that you've consolidated the working interest [type of] assets. Is it more along the lines of that you're sourcing steam from one of your existing either Kirby South or Jackfish? Or is there kind of a new central processing facility and steam generation capacity in that region to kind of tackle that 28,000 barrels a day?

Yes, Dennis, it's Tim McKay here. Yes, with the pipe assets, as you indicated, we've consolidated that, and we're now 100%. And so with that, we're able to leverage the Jackfish and Kirby facilities to basically use existing assets to increase the production. So yes, it's very cost effective, as you know, doing pad add versus a greenfield facility. So yes, with the facilities we have in the area, we're able to leverage that and do these pad adds into those various facilities.

The next question comes from Greg Pardy of RBC.

A couple of operating questions. Tim, probably more aimed at you. But I guess the first one is just on your in-pit extraction just reading the release, it looks as though you're a bit more serious on that. And then also interested in whether you're pursuing autonomous haul trucks just in AOSP Horizon.

Yes. The in-pit, it's just work in progress. Obviously, with most of these projects, you have to do a lot of engineering work upfront. And so to me, it's just normal course, if there's an opportunity there, we'll bring it forward to the Board -- for their blessing and right now it's not in our plans. But the teams at both mining sites are looking at a lot of different options to increase our production. And whether it's [parafinic] or increasing the SCO production on both sides, the teams are always looking for creative ways to increase production and lower costs. So that's really what it's all about in terms of our jobs.

Okay. And then -- and just related to that, just autonomous haul trucks, are you going down that road?

It may be an option in the future. But if you look at our efficiencies on our trucks and the way we operate, it's not necessarily a good option today. Our people are very safe. We have a very high efficiency on our trucks. So at this time, it's an option. It's available maybe in the future. But right now, our teams are doing such a great job. It really doesn't make sense at this time.

Okay. And just an original second question then, I guess, would have been on just your oil sands mining OpEx, I mean the plan a few years ago when the numbers you hit before have been around CAD 20 a barrel. Gas prices are a lot higher, Diesel is higher and everything else. Like when you're kind of running down the fairway with Horizon, AOSP, in the world we're living in now, how should we think about OpEx?

Well, when you look at the underlying efficiencies, the teams are actually doing a very good job in managing the costs we can control. And so I look at it, we'll probably be in the low 20s as an average. But really, if you look at the underlying fuel cost that they're basically doubled. They were $1.50. Now they're close to $3 just in that piece. But the underlying costs the teams are doing very good. And if we get the production volumes, keep it reliable on both sides, it really is down in the low 20s.

The next question comes from Doug Leggate from Bank of America.

This is David Fernandez in for Doug. Just wanted to touch on first on the realization front on the gas side, particularly robust in the quarter. Can you provide maybe some color around the mix with regard to like the diversified point of sales and your ability to kind of optimize the portfolio to redirect the volumes to premium pricing locations?

Yes, Dave, we've always -- on the natural gas side, taking a diverse product diversification portfolio. So if you look at our total portfolio, 37% is set for exports. So that's really all it is, as we've diversified our portfolio, which we've always indicated, it was the best way to maximize value, not [indiscernible] just for the fact that markets do change at times. And as a result, we're seeing those benefits this last quarter.

Got it. And on the capital raise, the increase in Montney, that activity, can you maybe perhaps speak beyond kind of just like the broader supportive natural gas price environment. Are there any underlying takeaways with regard to your view around the regulatory front, particularly as it relates to your Montney acreage in D.C. versus Alberta and how that might have into your plans?

The BC issue there, we're confident that the (inaudible) out here over the next while here. But at this time, it's not impacting us. The Ferro Creek piece that we have, it's all on site, and it's really just liquids handling so that they can handle the liquid-rich Montney. So really, there will be no impact in the short term. The [nopstic] is a grassroots facility, which leverages our Montney Grande Prairie acreage. So right now, it has no impact to us so far, and we're confident that BC government will have it sorted up.

The next question comes from Menno Hulshof, TD Securities.

I'll start with a question on the Clearwater. You mentioned that you have a ton of runway with 940,000 net acres, current production, that 10,000 barrel per day range at the moment, which is obviously very small in the context of the broader portfolio. But what is your plan for the asset for the next couple of years? And how much do you realistically think you can scale it up with TMX becoming fully available in 2024?

Yes. The -- well, you never want to speculate on the future in terms of pricing and that piece. But for the Clearwater, what's really nice about it is we have a lot of acres, a lot of it very consolidated. So really, during the winter here, late fall, winter, we have a program to delineate various areas, which we think are comparable to what we have at Smiths. So it's just early days. The teams have been working behind the scenes on various opportunities. And what's really also unique about it is we're able to leverage our facilities in the Pelican area . So between the Smith Pelican area, we have a very good infrastructure that we can leverage off of. So it's just -- it's just a great opportunity. It's just one of those another opportunity in our portfolio.

Okay. So it's fair to say it's the first call on capital within your conventional oil-weighted business?

It looks to be a very good opportunity.

Okay. And just to wrap things up on -- sorry. Just on the turnarounds, you just completed Scotford and the Horizon. And so my question is, what should we be expecting for turnaround activity in 2023? And more specifically, are there any out-of-cycle larger turnarounds that we should be aware of? And I'm thinking along the lines of the tie-in of the VDU and DRU furnaces at the Horizon as an example.

Yes. It's certainly to say, but I would suspect Horizon would be very similar to this year, and that -- so that 24- to 30-day outage. And you're right, that will be doing the final tie-ins and work related to the BDU there. And then at Scotford, they should be really on a -- it should be off cycle for next year. So it should be pretty minor of what they need to do at Scotford.

The next question comes from Neil Mehta of Goldman Sachs.

This is Carly Davenport on for Neil. I wanted to just start on the CapEx side. Can you talk a little bit about the $200 million add that was mainly due to inflation and any read across for how those pressures could evolve into next year? And then what kind of steps you're taking to mitigate inflation more broadly across the portfolio?

Yes. So there is cost pressures primarily if I look ahead here, it's on the manufacturing side where you use a lot of steel. So your vessels, pipe equipment manufacturing. So we see probably the highest pressure in that part and then less pressures on, of course, labor pieces and nets and beds there. So it's kind of broadly across more focused, I would say, to the facility side at this point. Having said that, I look at our drilling, completions, pipelines and facility teams. They're doing a great job finding efficiencies and opportunities to mitigate a lot of the pressures. And so I look at the drilling costs for the first half of the year. They were within kind of 1%, 2% of the per well cost. So while they're over, they've done a lot of work to try and mitigate those costs. So it's just -- it's really broad-brush. It's always hard looking ahead what that number will be by going into next year. But today, I think our teams are doing a really good job mitigating as much of the inflationary pressures as they can.

Great. That's really helpful color. And then the follow-up would just be on the outlook for the incremental production adds that you talked about in 2023 and 2025. Could you just talk a bit about how you arrived at the optimal split between the liquids versus gas production adds and how we should think about the split of spend between the 2 more broadly going forward?

Yes. What we always do is we just rank our projects from the highest return opportunities. And that is what -- and then, of course, with that, we had essentially 15 rigs working. So what there was, is it just a combination of what's the capability of the rigs? Where are they in their locations? And how could we optimize that to keep our costs down and maximize value in terms of that commodity in that area. So let's say, for example, in the heavy oil area, there are certain rigs that only can do certain types of work and therefore, what maximize value. So it's really kind of a twofold opportunity. One is to understand what the rigs capable of proximity and how to -- what's the maximum value we could get out of those rigs.

The next question comes from John Royall, JPMorgan.

So just a follow-up on the OpEx of the mine in the second quarter. Just looking at a dollar million basis, not on the per barrel. It looks like it's up about 10% over 1Q, and you guys mentioned energy costs, but I'm wondering if there's any portion of that that's related to the maintenance overruns. And I'm just trying to think through kind of how to think about the second half from a total OpEx perspective at the mine. I don't know if anything kind of hit in 2Q that wouldn't repeat.

No. Really, what it is, is it's all barrels. And as you recall, one of our mantras is safe and reliable operations. And so if you look at it, if the facilities are running reliably, we're in excess of 480,000 barrels a day. So in that quarter, with the downtime, for the planned maintenance. A lot of those costs will still -- are fixed, so you carry them through your turnaround. So in the case of Verizon, they did a great job in terms of getting through the turnaround very efficiently. And then on Scotford, they had a few issues and [around longer]. But no, really, on the oil sands mining, it's a huge portion is just efficiencies and maximizing value barrels.

Okay. And then just curious on your thoughts on the SCO premium to WTI right now. I know there's been some maintenance and synthetics which has a high distillate cut. Just any other drivers that I should be thinking about there? And how do you expect that to shape up in the back half of the year?

Yes. I think you're exactly right with cracks beds and the distillate. So there -- we've got an extremely good premium here this last quarter. It is softening with the crack spreads tightening. So September, I believe, is closer to about $7 to $8 premium. But yes, it's all -- to me, it's just the supply-demand equation. And with the synthetic -- with the cuts being so high, that it was receiving a premium. So I suspect it will tighten a bit. And at the same time, heavy oil could tighten a little bit as well.

The next question comes from Manav Gupta of Credit Suisse.

Mike, first question here is if you could help us a little more on how to model the royalty rate for the oil sands now that Horizon is in post-payout. I think this quarter was a little bit of anomaly given the number of barrels produced. So anything you could help us out with how we can model the royalty rate per barrel on a go-forward basis.

Manav, it's Mark. You're right now that Horizons in payout -- was in payout for the whole quarter in Q2. I think a good way to look at it, although the royalty is based on a bitumen price, which we do publish in our MD&A, a good way to look at it is from Q2 to Q3, I would expect the rate -- the royalty rate based on sort of gross pricing to be about consistent as you go through. Now of course, the sliding scale rate will change with WTI pricing. In the current environment, I guess, we've come off a little bit in the recent environment, we've been at the maximum rates. So I think as a starting point, if you look at the rate based on SEO or gross revenue, you'll see that it's pretty consistent now from Q2 to Q3. And we can help with that, but that's kind of a good starting point.

And my quick follow-up here is, when we look at the [egress] situation like in your opinion, are we like 4 or 5 quarters away from the point where TMX expansion could still come online? Is that the time frame we should be looking at?

Really, if it's for Trans Mountain, you need to speak to them. We are just like you, we get the updates from time to time. And as far as I know, it's still on for that Q4 2023.

The next question comes from Roger Read of Wells Fargo.

Just wanted to -- and I apologize, I missed the beginning of the call because of some conflicts in other coverage. So if you addressed it or the question has been asked, I apologize. But I just wanted to understand is you've set up for some modest production growth. There's obviously been some pipeline constraints adjusted for some pipeline improvements. Just wondering how you're set up for the ability to export as needed and whether or not you see a situation developing here where you could actually end up with some excess as an overall statement between Canada and the lower 48.

Is that in terms of the natural gas piece, Roger?

Oil only was my main focus.

Okay. It's always a little difficult to forecast every individual company's forecast in terms of how it will impact the export pieces. But if I look ahead, it looks pretty reasonable for this year. Going into 2023, depending on the commodity prices, it'd be very good timing to have Trans Mountain come on. So a lot of our projects, if you look on the thermal side, they take kind of really 1 to 2 years for the [oil] to start to ramp up and peak. If the biggest piece is [lumped] at the thermal side, we'll see that ramp up over the next few years. And hopefully, by then, TMX is on and covers off that growth.

Okay. And then one other question along the production side as you've come through the various turnarounds and some of the other maintenance. A lot of these facilities are fairly young still. Just curious, are you seeing operational improvements post turnaround or debottlenecking at sorting out?

Yes. The teams on the oil sands mining side, I've been really impressed with how they keep looking for opportunities to improve our operations and find incremental capacities. And yes, through the reliability project, we'll see an incremental 5,000 barrels a day next year, which goes to 14,000 in 2025. And underlying that, there are looking at more opportunities to keep that up. So as the teams do the work and do the engineering and -- which is a lot of work, I shouldn't underestimate the work that these guys do on both sites to find those opportunities. But as they work through the details, the teams push them forward for sanction, and we'd look to -- obviously, every barrel is a low-cost barrel in addition. So they're very economic provided the costs we get.

(Operator Instructions) Our next question comes from Patrick O'Rourke of RBC Capital Markets.

A lot of what I had to ask has already been covered off. But I'm wondering, in terms of the M&A markets and the outlook for potential acquisitions, I know there's no real gaps in the portfolio in any way, but you've been pretty acquisitive over the last several years. Are there any opportunities out there? And what's your sort of overall feel for the M&A market? I know we saw a pretty large transaction this week on the private side.

Yes. The M&A market is always interesting. Obviously, with the volatility of pricing, there's always a what I would call a bid-ask disconnect because it is very difficult to look forward and say what is a good price and what is a good opportunity. So currently, I don't really see anything that we have no gaps. And in general, we try and find good opportunities to have a lot of growth potential for the future to maximize value. So I really don't see too much there. And I think the bid-ask today is not that great environment to do any M&A.

Okay. Great. And then a lot of folks on the liquid side. But in terms of the gas side here, obviously, LNG markets and waterborne prices are pretty strong. Any intent to look, to participate in those in the future with your large gas portfolio?

There are opportunities once they're up and running, and our gas marketing folks generally are talking with a lot of different groups and a lot of different ways and always looking for some diversification as long as it maximizes the value of the product. So they're always working with different parties to look for opportunities on the natural gas side. And as you saw with our realized pricing in the second quarter, they've done a really good job.

There are no further questions at this time. I will turn the call back to Mr. Casson for closing remarks.

Thank you, operator, and thank you to those who joined us this morning. If you do have any follow-up questions, please give us a call. Thanks, and have a great day.

Thank you. This does conclude our conference call for today. We thank you for your participation and ask that you please disconnect your lines.