Suncor Energy Inc (SU) 2007 Q1 法說會逐字稿

Good morning, ladies and gentlemen.

Welcome to the Suncor Energy first-quarter results conference call.

Please be advised that this call is being recorded.

I would now like to turn the meeting over to Mr.

John Rogers, Vice President Investor Relations.

Please go ahead, Mr.

Rogers.

Great.

Thanks, Chris, and good morning everyone and thanks for listening in to our first-quarter conference call.

Rick George, President and CEO; Ken Alley, CFO; and [Brenda Cherry] and Rob Dawson from our Controllers department are here with me today.

We will have the usual start with Rick giving you a bit of an overview how he thought about the quarter and how he thinks about the rest of the year going forward.

Ken will give us a financial update and then I will talk about the outlook and then we'll go to Q&A.

So Rick, why don't I turn it over to you?

Thank you, John, and good morning.

Very pleased to be with you this morning, obviously relatively pleased with the first quarter financial.

We got off to a great start in the year with earnings of C$551 million and cash flow just short of C$800 million.

So very good, strong quarter particularly in the downstream.

Obviously that is one of the things that really helped the quarter.

Obviously one of the issues that we had in the quarter was an upset at the oilsands plant and so volumes were down there.

And not in a huge way but did impact the quarter slightly on the negative side.

For us, 2007 is about construction as much as it is operations.

It is about finishing our current major expansion, a project we call the MCU project and then obviously going on with the next one after that.

There never seems to be much of a pause here at Suncor.

The benefit of being the single and most dominant player in the oilsands is that you are able to kind of keep this continuous string of growth going and you've got lots of options in terms of which leverage you pull, what locations you put capital and how you apply the capital on a go forward basis.

Right now we are looking forward to the completion of the tie-in of the MCU during the second quarter this year and then we'll start commissioning it very late this year.

So what we are planning and obviously need our shareholders and the analysts need to take into account the fact that we will have a turnaround right at the end of the second quarter.

It will be about a 50-day turnaround, likely extend into the third quarter so it will have an impact on the second and third quarter.

It is a planned event and that is where we will tie in this MCU work that will enable us to get to our production capacity of 350,000 barrels a day in the second half of 2008.

And so this is all part of that planned expansion in a normal and planned event.

Do take that into account and what is really good about that particular project in this environment is very challenging as I know all of you on the phone know, is that currently that project is both on time and on budget.

And we are quite a long ways along with it.

The coker side of that project is over 90% complete.

The sulpher plant which is the part of the project that is going to be the last commission is about 65% to 70% complete and so we feel relatively good about where we are with this project and our ability to deliver that and obviously deliver good shareholder value as a result.

Now onto the next thing, we are going full throttle on our Voyageur project and that is the project that takes us up to over 0.5 million barrels a day in the 2011, 2012 timeframe.

We will actually be spending about C$2.5 billion on that this year alone.

And to date some of the highlights about what we are doing there is that we've completed about 36% of the engineering on Firebag Stage 3 and are actually broken ground there already.

We've ordered significant pieces of major equipment both on Firebag 3, some on Firebag 4 and obviously on the Upgrader as well.

We have also cleared the site of the Voyageur Upgrader and we are getting ready to install deep underground piping for water and sewer and the periphery around that particular construction project.

Now I know one of the things that the market is looking for is a date at which we are going to share our final cost estimate.

We do see that later this year either late third quarter or in the fourth quarter of this year and we will be able to share that in some detail with you in terms of what that cost estimate looks like.

Just so that our confidence level about what that cost estimate looks like compared to our competitors, it looks quite robust to us and obviously it is something that we continue to review as we go along.

But one of the reasons we don't want to give an early cost number is because we do not want to make a lot of adjustments as we go through that project.

We did the MCU project on that basis and that is why you see it coming in on time and on budget is kind of the process that we are going through this at the current time.

So there are also a number of other major construction projects that are completed or under way.

An example, at Firebag we completed the cogeneration facility which adds more steam capacity in the first quarter of 2007 and a construction on the expansion project.

That adds water treating and oil treating facilities is about 64% complete.

We will have productive capacity at Firebag in excess of 80,000 barrels a day once we complete this project.

And during the quarter, we averaged over 40,000 barrels a day from Firebag.

So it is coming along and in pretty good shape.

Again, the reservoir itself is still performing very well so that looks good.

If we've got issues they tend to be on the surface in the facility side.

At Sarnia we did increase the overall budget for the diesel desulferization and oilsands integration project.

We do fully expect that project will be complete in the fourth quarter of this year.

At that time Sarnia will be able to take 45,000 barrels a day of the sour crude from our own oilsands plant and the input cost of that to that refinery will drop considerably.

And you'll see the economics on that refinery.

Even though it was quite good in the first quarter this year starting about the fourth quarter this year you're going to it continue to even improve from there.

And quite -- we'll be quite happy to get that particular project finished.

With all this construction, we have not lost sight of operational excellence.

During the quarter we announced Steve Williams has moved from oilsands to become the Chief Operating Officer.

His charge is really in charge of operations in terms of running these operations safely, reliably and as low a cost manner as they can be.

Mike Ashar has moved -- is in the process of moving from Denver to Calgary and he will be really focused on a number of things, marketing, trading, but also is in charge of our whole look and what we're going to do post 2012 and our whole strategy based on a go-forward bases.

And we are working a lot of details there about what Suncor looks like in the post 2012 world.

I would just say it is not a given exactly what that is going to look like, that we are looking at all options.

The one nice thing about Suncor is we probably have more options than other players in terms of how we play this in the post 2012 period.

So I know there will be a number of questions.

I'm going to pass it to Ken.

I think he's going to pass it back to John and then we will open the floor but I look forward to talking to you.

Ken?

Thanks, Rick, and good morning everyone.

You know as Rick said, financially we are very pleased.

We've had a strong start to the year.

If we exclude insurance proceeds and foreign exchange on our long-term debt, earnings were actually higher in the first quarter this year than they were in the first quarter last year and that is despite lower benchmark crude and natural gas prices.

A couple of factors really drove earnings in the quarter; Rick mentioned the strong downstream performance.

Remember that traditionally for us the first quarter is not a strong quarter for us in the downstream business so we are very pleased with the impressive start in that business with earnings of C$99 million.

We also saw strong pricing for our oilsands production relative to benchmark prices so differentials were strong for sweet synthetic crude, our sour crude pricing as well as diesel.

So that helped to offset some of the lower benchmark crude oil prices.

Capital spending was in line with expectations so we still anticipate capital spending to be in the range of C$5.3 billion.

Debt levels were up slightly.

That's also in line with our plans and expectations with our level of capital spending this year.

No additional hedges put on in the quarter.

We are continuing to evaluate the market as crude prices strengthen and we still will look at opportunities to add more hedges if we see opportunities to lay in cost as collars with a high floor and a high ceiling to buy some inexpensive insurance for the balance sheet.

So with that, John, I think I will pass it back to you.

Great.

Thanks, Ken, thanks, Rick for those.

I'll give you a quick update on the outlook.

I'll just try to highlight where we had changes; the outlook obviously is part of the quarterly release.

We did slightly adjust the production target for the year down to 255 to 265.

This has everything to do with where we came out of the first -quarter in terms of where those production volumes are so we continued to have the same mindset for the rest of the year.

It's just with the production in the first quarter we just felt that it was prudent to put a minor modification in there.

The second piece is the realizations.

I know we were only off about C$3 off of WTI during the first quarter.

We are expecting that that will go back to the range of the 750 to 850 that we had predicted and so we will just have to get through the second quarter and see where we are on that.

But there are some things happening in the second quarter, i.e., Syncrude and Suncor will be producing more synthetic into the market which may cause that differential to widen just a bit.

I think the good news -- I've been waiting to say this for awhile -- the good news is the cash cost.

I know they were C$26 in the quarter.

We had mentioned that to you a number of times that the first quarter and the second quarter were going to be somewhat problematic; the first quarter with the fire and the rebuild, the second quarter with the turnaround.

Coming out of the turnaround, we have done a fair amount of work on this, coming out of the turnaround, we will expect that the cash cost will in the C$21.50 to C$22.50 range.

So coming out of the turnaround which will be some time in the third quarter, we will be back to that C$21.50 to C$22.50.

Of course it's going to be high in the second quarter because of the turnaround itself, but coming out of that we are very confident with the C$21.50 to C$22.50.

We increased the guidance to C$23.50 to C$24.50 just to show the reality of the where the cash cost will be in the first and second quarter.

Natural gas, [250] to [220], I think as you had expected.

Now I will give you a couple of modeling things and then we will open it up for questions.

We do expect our corporate tax rate to be in the range of about 30%, so corporate tax of about 30%.

We do expect corporate charges in the P&L to be around C$35 million a quarter.

Firebag is currently producing about 45,000 barrels a day.

That is the average production right now.

And in the downstream currently, and that's into the second quarter, we continue to see very strong refining margins.

The last piece and we were going to give this to you but we don't have them in the statement so I will give it to you over the phone here is the stock-based compensation numbers in oilsands and the cash cost is about C$20 million; in natural gas, it's about C$1 million; and R&M, it's about C$8 million; and the corporate charges it's C$4 million.

So for Q1 2007, there's C$33 million and that's where the numbers are.

So that's all the modeling questions we were going to deal with hopefully in this call.

If you do have other modeling questions, Brenda, Rob, and will be sticking around right after the call and we will be happy to answer them then.

So if you have any questions, strategic questions that you'd like answered, why don't go ahead and have you ask them.

So, Chris, if you could open up the phone lines.

(OPERATOR INSTRUCTIONS) Brian Singer, Goldman Sachs.

Thank you.

Good morning.

In your release you mentioned trying to focus on prudent debt management and with that debt having come up a bit here, how do you balance that with where current costs are as you look to expand in the next five years?

And does equity issuance at all become a consideration?

Yes, Brian, it is Ken Alley here.

We were very comfortable with our ability to finance our growth plans going forward.

If you think about capital spending expectation in that C$5 billion plus range annually going forward, you know, with cash flow and with the balance sheet flexibility we have in our credit rating, we are very comfortable that we can finance this with the balance sheet.

So we are not anticipating that we would issue or agree to finance our growth plans going forward.

Great.

You made a reference I think Rick made a reference to some of the growth projects you are thinking of beyond 2012.

Is there anything you could share with us on that?

Yes, Brian, it's Rick here.

Not yet.

I think you've got to give us here at least 12 to 18 months.

We are looking at the full spectrum as you would expect Suncor to do, everything from a fourth Upgrader to the fact that maybe the best option for us is to down tools and return the cash to the shareholder.

And so those are the two bookends.

There's lots of options in between those two and what I would say is we will fully explore all of those options.

And it is really around, again, our whole strategy is around being the low-cost producer and lowest-cost installed capacity in the second largest oil basin in the world.

If we can maintain that position that would be good.

If we are not comfortable with that then we'll look at other options on a go-forward basis.

Thanks.

Lastly what are your current expectations in terms of the slew of different federal and provincial legislation with regard to emissions costs, royalties and how does that impact your thoughts on longer-term growth?

That is a great question.

We are supposed to get the release of the federal plan on the environment this afternoon.

I don't really want to speculate on that at all because a lot of times the details are very important around this.

And even though there has been some leaks and other things, I really want to hold off until I see the details of that.

And we really don't know where the royalty review is going.

So there's two pieces that are left for us to look at.

The one is the shoe that drops this afternoon after the market closes and the second one is the royalty review which we are not anticipating will get settled until September.

And so for me to speculate about that is not really very productive.

But by the way, my guesses are usually wrong anyway so I don't think it would do you much good.

So I think what we've got to do is we've got to wait and wait until we see that details and then all of us do our homework about what that impact is on the industry and then individual companies as well?

Great.

Thank you.

So, Brian, over the next few days after there is some clarification, we of course will be happy to be clear in terms of have how we see that impact us over the next few days.

So the good thing is it will start to be cleared up over the next few days.

Great, thanks a lot.

Greg Pardy, Scotia Capital.

Good morning.

Mobile crushers.

Rick, can you give us an update on that in terms of what your plans are?

And the other thing is, can you be specific just in terms of what kind of requirements you would actually need for a mobile crusher both for the operating and the maintenance and how that might compare to what you are using with dump trucks now?

Yes, I can give you the overview and I think John will kind of fill you in on the details and numbers on that.

So, yes, we have the first prototype, full scale model which we tested through parts of last year.

It is in production in the first quarter in full production and so we've been very pleased with that.

We are just getting in a position to put the next two units on order.

And the advantage of this is several fold, but first of all, we should be able to increase productivity, in other words the throughput per manpower should improve.

The other part of this is a reduction of NOx, SOx, VOx and CO2 emissions as a result of this.

So very pleased with the tests that ran very well last year to the test.

But we actually have the unit online and working in production.

So quite comfortable with that.

We're obviously going to change some things as we design the second and third one that we order and the effort here is that over time, this will not happen instantly, is that we will deploy more and more of this new technology.

When we start talking about what can we do on the environmental side, and you know Suncor has been really on top of the file in terms of both our reduction of CO2 on a unit production basis down some 27% since 1990 on a companywide basis but also our investment.

We are the largest producer of ethanol in Canada and a significant wind power producer as well.

That our best leverage here is technology.

This is just one piece of the technology picture that we are looking at to help make a difference in our own case.

Greg, on the mobile crushers, we would anticipate that there would be a net reduction of about four or five people per unit.

And that will take into account the reduction of truck drivers versus the amount of people that we need to run the mobile crushers.

Could do a little bit better than that but let's stick with that.

The one thing we do want to say is we're not anticipating layoffs as a result of this as we continue to grow as we go to 550,000 barrels a date, we clearly need all the people we can get.

So we are not anticipating this is going to result in any layoffs at all.

That is certainly not the intention here.

It is just to give us a more competitive cost structure as we go forward.

Well, thanks for that.

Rick, when would the next two units be in place?

When would you start using them?

They are about 18 month deliveries and so they would be staged out over the first one, 18 months from when the order goes in which should be in the next quarter or so and then the next one I think is staged six months later.

Okay.

Fantastic.

Thank you.

Paul Cheng, Lehman Brothers.

Good morning, gentlemen.

Rick, with the tie-in with the coker, I presume that by the upcoming turnaround -- should we assume that you will be able to raise your production up to the 350,000 barrel per day either in the first quarter of next year or the second quarter?

Yes, it's the middle of 2008.

We haven't gotten too specific beyond that.

You can definitely I think model that in in the last six months of the year.

But I think first of all, you've got to give us a chance to line this stuff out.

One is that we've learned and I know Steve Williams will climb all over me, is that this stuff usually takes a little bit longer to line out than we anticipate.

So we are trying to leave ourselves some room to make sure that if we've got bugs in the system that we've got to be able to work it out.

I think we've always talked about the middle of 2008 so this is not news.

It's just that's the schedule I want to stick to and I don't want to overpressure our operating people.

We are trying to work very hard in this company on reliability, so you've got to give them a little room to do that.

Sure.

Rick, in the oil industry we have seen a lot of delay when you order equipment and all that because of every one activity is full steam ahead.

When you order I think that you are ordering two more units in the mobile crusher, are we facing any similar issue on that piece -- on that part of the equation?

Or that I mean does not have really any backlog or any delay?

Yes, Paul.

All of the equipment that we are ordering and this is the generalization so it is not -- no generalization is ever true -- but firstly on most of the equipment we are ordering, we are seeing longer leadtimes than we would have seen two or three years ago.

There may be some exceptions these days because as you know rig rates are dropping in Alberta particularly on shallow gas rigs.

So on that end of the business, there are some things that you can probably pick off the shelf today that you couldn't have gotten six months or a year ago.

But in terms of the big equipment, because you know in this big vessel, big equipment type of category, you are competing against refinery projects worldwide, LNG projects worldwide, and maybe even maybe the start of nuclear.

I mean if there is nuclear building going on around the world, we are all using the same (multiple speakers) --

Actually I see that already, Rick?

Sorry?

You actually see that already -- nuclear?

Well, I'm not talking about here but it is going on in other places of the world.

You've got to remember there are only so many manufacturing sites that can manufacture one of these big vessels around the world.

I'm just saying it's a worldwide phenomenon, not a single basis.

And then final question I think for Ken.

Ken, what is the remaining insurance reimbursement you may be able to receive?

And also why did total corporate tax rate would be 30% that low for this year?

And do you have a breakdown by division -- let's oilsands, R&M and natural gas that each one how the effective tax rate may look like for this year?

Okay, Paul.

So the first part of the question, first if you are referring to any proceeds from the loss from the fire back in 2005, those all have been received so there is no additional insurance proceeds expected.

We are done already.

Fully closed out, yes.

Insurance rates really reflect the change in the tax rates that were enacted last year so that is just flowing through the effective tax rates this year.

And John can get back to you with the breakdown by business unit.

I just don't have it handy, Paul, but I will be happy to get that for you.

That would be great.

Thank you.

Brian Dutton, Credit Suisse.

Yes, good morning.

Rick, you were mentioning that the coker unit will be in place with the turnaround in the second quarter, early into the third quarter.

What about the power utilities?

What is your thoughts there as to when you will be in a position to start commissioning the power utilities?

Brian, could you elaborate a bit?

Well, the -- as you -- I think in the last conference call, you mentioned that while the coker will be in place --

Oh, the associated utilities --

The associated utilities for it.

Oh, got you.

Got you.

Yes, and this just comes on in various pieces between after the turnaround all the way through into the first quarter of 2008.

And so it is just -- it is a system by system handover literally and there are literally 100 systems in the utility where you will be turning those systems from construction over to operations on a daily basis.

By the way some of those systems are already turned over.

But it is just a long detailed list of literally somewhere between 100 and 200 individual utility systems that have been modified and then turned back over to operations.

When do you think you will be in the -- I guess the maximum commissioning window?

Are you anticipating it in the winter or will you be pushing it out into the spring?

Well, one of the reasons we are heading into this turnaround when we are which is scheduled for very late May in terms of the start, why that has some flexibility to manpower availability and other factors is we would hope to get that cokers themselves commissioned before the start of winter.

And so we've got some other work to do in there but that work will go on.

The sulpher plant itself will be more likely late fourth quarter or early first quarter kind of start-up.

So again various pieces starting up at various times.

But the big portion of this is the cokers, we would see those kind of commissioned before the end of the year.

And I guess last question.

What is your ability to throttle the mine up-and-down in terms of bitumen feed as these various units come onstream for the upgrading?

Yes, we have some flexibility on that and we are continuing to expand capacity.

But much of the increased fee that is coming into those units is going to come from Firebag as we continue to ramp up Stage 2 and we have the additional steam from the cogeneration plant and additional facilities that I mentioned from the expansion plant.

Okay, thank you.

Martin Molyneaux, FirstEnergy Capital.

Good morning, gentlemen.

Two questions.

Number one, the refining marketing side, you don't segment out the U.S.

operations from the Canadian operations anymore.

I just wonder on a -- like obviously the aggregate numbers are very strong but if you look quarter over quarter, -- was it the U.S.

that outperformed or was it the Ontario market?

I suspect it was Ontario but which area or was it both?

You know, we knew we were going get some questions around not segmenting that out.

You know listen, if you look at most oil companies, they don't segment out refinery by refinery.

And I think that is the right direction for us to head.

Listen, on an earnings basis, it was roughly 50-50.

In fact it's almost exactly 50-50.

So a pretty even split between the two for different reasons.

They are very different markets so the only thing I would say is that that Denver market surprised us in the first quarter.

Usually the first quarter is a very slow quarter for that refinery in terms of margins.

Obviously both markets were impacted by other events.

You know in the Denver market, the Colorado market is fed -- the southern part of that market is fed from the Panhandle refineries.

Of course Valero had their problem in the Panhandle, their Panhandle refinery, but of course the Ontario market was impacted by the upset at Nanacoke.

So both of them for different reasons but very good strong quarter.

Okay.

Second question, obviously you've seen relatively tight, heavy differentials, very strong market for bitumen out there.

I know you guys can out-mine what you can upgrade at the moment.

Any thoughts of taking the bitumen output up somewhat and feeding what seems to be a fairly hungry market?

Yes, absolutely.

You will see some of that particularly when we get through the turnaround.

Our biggest problem through the turnaround period will be diluent and the ability to move it out but absolutely you are right.

We do have some capacities especially in the summertime because of course the mine operates a little bit easier and of course Firebag is ramping up as well.

And so you will see that periodically.

We have not been shipping a lot of bitumen in the last month for specific diluent and market reasons but you are going to see that ramp up say the turn -- during the turnaround period as we go forward.

Great.

Thank you very much.

Louis Gagliardi, John S.

Herold.

Good morning, Rick and a John.

Good quarter.

I just got a quick cash tax question.

Maybe if you can answer it briefly otherwise we will take it off-line.

I'm just a little bit confused on page 8 of the release, what will be the effective cash tax position for Suncor for the year?

Well, we are anticipating -- I'm just turning to the page, we are anticipating that we will have to pay anywhere between 70% to 100% of our total tax provision so if your tax [provision] was as an example C$100, we will pay somewhere in the neighborhood of C$70 to C$100 in cash taxes, Louis.

And that is really all that was intended to be.

The other thing is is there might have been an expectation that we would not start booking cash taxes until a, we paid it, which won't be until next year.

But we actually started accruing it in each quarter so there is an accrual for the cash taxes.

So in other words in the first quarter, it looks like at about 60% of your income tax provision could be cash taxable.

I think that is right, yes.

Okay.

Thank you, gentlemen.

(OPERATOR INSTRUCTIONS) Robert Plexman, CIBC World Markets.

Good morning, Rick.

Hi, John.

I wanted to come at this issue of the new environmental legislation that we're going to be seeing later from a difference direction because I presume that Suncor has been involved in the process leading up to today.

And we've seen a couple of things announced by the government so far like the 20% reduction in greenhouse gas emissions, the emissions trading and the technology [fund].

I'm just wondering, Rick, if what you are seeing with those items and the other items is that consistent with what the government had been talking about or are there some new things in there?

You know, listen, I -- that's -- it's a really good question, Robert, and the answer is I don't know.

Certainly the industry tried to give input to the government but I would not necessarily say that was a full consultation in the sense of complete feedback loop.

And so I'm a little bit just flying blind here.

So we definitely as all other industries did in Canada fed their thoughts into the government.

But until we see the details of what comes out in terms of where are they on Co2 collections sequestration -- you know Suncor has been one of the leaders with the industry in terms of real backbone of infrastructure that is required there.

Also there seems to be at least in the rumors an issue around the fact you get credit for early action which of course would be something else Suncor would be very interested in given our progressive stance over the last decade -- almost a decade and a half, by the way.

So it is really hard to speculate.

I think the one thing that I can say on a positive side that is going to come out of this is I think C02 collection sequestration will be on both the federal and the provincial agenda.

That is something that's Suncor has been for a long period of time and would be very supportive of on a go-forward basis.

Okay, thanks for that one.

I wanted to also ask you about the investment at the Sarnia refinery because we're up to C$960 million.

I mean Suncor invested to generate attractive returns and I'm just wondering with the increase in costs, would you still expect to get a double-digit return out of that investment in this environment?

Yes, we would still expect a double-digit return.

I'm not necessarily saying we're going to get the 15%, but I think you have to take a long-term view of this also, Rob, in the sense we are not just trying to drive profitability at the refinery but we're also trying to protect margins in terms of the oilsands.

And so this is a matter of whether you hydrotreated at Fort McMurray or you are hydrotreated at the refinery.

This combination will give us the maximum flexibility so that in the marketplace, we will be able to improve profitability.

Now it may not all show up at the refinery.

Some of it may show up back in increased margins and oilsands.

And that will vary over time.

I mean that is not a steady-state issue as you know as these things fluctuate around.

So this is really I think deals a lot with the long-range strategy and our ability to move product around differently than other players.

Thanks, Rick.

Andrew Fairbanks, Merrill Lynch.

Good morning, guys.

Rick, no one has asked a downstream integration question with some of the plans on offer out there and I just wanted to get your current thoughts.

And then also as you look at this whole issue of where you do the upgrading, where do you do some of the Hydro treating, do you have a strong view as to whether it does still make the most sense to expand in Alberta or if you can get some backbone assets in the U.S.

or elsewhere if the overall returns would be better taking that approach?

Andrew, that is a great question and I thought you were going to lead into what a brilliant decision buying Denver was, you know.

I'm joking about that -- it was a fortunate kind of timing in terms of what we were able to do there.

And we've been looking for additional downstream assets, there was no question about that.

I would love to buy another one.

I will just say -- I just don't like the prices that we are seeing right now for the quality of assets.

If you chart out what refining margins have done in North America, it has been a very steep rise over the last three years.

I think what we'd like to do here is continue to look, hold our powder dry until we see the other side of the cycle.

And I think it will come.

It is only a matter of -- it is only a matter of time and patience.

If you remember now before we picked up the two Denver refineries that we now combined into one unit, we looked for at least five years.

You can't say that we are not a patient kind of company.

What I wouldn't do is -- you are right, you've got to be somewhere close to the peak of these refining margins.

By and right, the peak, I just don't if that makes a lot of sense to me.

We are not really pressured to do that.

So this is about patient money.

Things do go in cycles.

This industry always has and I still believe we are.

I just can't believe -- I just don't know when the cycle will change.

But with a 50 to 100 year horizon, I think we can wait it out.

Having said that we continued to look at assets, there is no question about that.

If I could follow up, how far do you cast your net in terms of looking at opportunities?

Because I mean clearly over 10 to 20 years probably more of the global oil demand growth is going to be outside North America.

Would you be open to doing some kind of downstream upgrading refining JV in Asia or elsewhere?

Yes, we certainly have as all the players have here talked to downstream owners in North America in particular and look for opportunities to do joint ventures or other things that may make sense.

We are a kind of company that loves control 100 of our destiny.

I will say that.

But we do continue to talk and work on that.

I think looking at joint ventures outside North America is just a very big stretch.

Our view of the market here is that virtually most of this oil production increase that comes out of Canada will feed into the U.S.

market and that is the most likely home unless Asia -- one of the Asian players comes in and builds a big pipeline to the West Coast.

And you know, given how difficult it is to get assets in the ground right now for a whole host of reasons, I think that that is a long ways off.

So our focus is going to be in North America.

I would say that it is further south than we initially started looking as you see more and more of this Canadian crude get as far south as Cushing and in the Conoco EnCana deal even into the Panhandle of Texas which not many of us would have guessed even five years ago.

So you do see a more open set of markets and more refineries that Canadian crudes are able to reach which means there should be more of an opportunity set on a go-forward basis.

That is great.

Thanks, Rick.

Thank you.

(OPERATOR INSTRUCTIONS) There are no further questions.

I would like to return the meeting back to Mr.

Rogers.

Great.

Thanks, Chris.

And again, I wanted to thank everybody for listening in and Brenda, Rob, and I will be around to answer any of your modeling questions so please give me a call.

It's 403-269-8670 and of course we will be happy to spend whatever time we need with you.

The other thing I'll mention for those of you who are in Calgary, our AGM is today.

I think it is a 10:30 this morning so we'd be delighted to see you all there.

So other than that, everybody have a great day.

Thanks, buy.

Thank you.

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