Operator: Good morning, ladies and gentlemen. Welcome to the Canadian Natural Resources 2012 Fourth Quarter and Year-End Conference Call.
I would now like to turn the meeting over to Mr. John Langille, Vice Chairman of Canadian Natural Resources. Please go ahead, Mr. Langille.
John G. Langille - Vice Chairman: Thank you very much, operator, and good morning, everyone. Thank you for attending this conference call where we will discuss our 2012 fourth quarter results, review our planned activities for 2013 and in some cases beyond. Participating with me today will be Steve Laut, our President; Doug Proll, our Chief Financial Officer; and Lyle Stevens, our Senior Vice President overseeing reserves.
Before we start, I would refer you to the comments regarding forward-looking information contained in our press release and also note that all dollar amounts are in Canadian dollars and production and reserves are both expressed as before royalties, unless otherwise stated. I'd like to make some initial comments before I turn the call over to Steve Lyle and Doug for their in-depth discussion.
In 2012, our balance producing asset base continued to achieve significant cash flow of over $6 billion. We followed our disciplined balanced approach of allocating the disbursement of this cash flow in the following manners. We cost effectively continued to develop our large resource potential which resulted in growth of our 2P reserves to 7.9 billion barrels of oil equivalent, replacing 276% of our production with 95% of that addition being oil reserve.
We maintained our strong balance sheet and debt metrics. We returned funds to our shareholders through dividends, which increased 17% in 2012, followed up by a further 19% for this year, and we returned to our shareholders through share repurchases of over 11 million shares at an average price of $28.91 in 2012 and firm plans to continue a similar type of program depending on market conditions throughout 2013.
And 2013 has started out a strong operating results. Our production rates are all holding within our guidance, with particular emphasis in the first two months of 2013 on high production in our cyclic steaming Primrose thermal operations during this current production cycle continuing increased production from primary heavy oil and daily average SCO production from our horizon mining operations of over 110,000 barrels per day.
With that, I will now hand the meeting over to Steve.
Steve W. Laut - President: Thanks John, and good morning everyone. This morning most of my comments will be forward looking along with touching briefly on our strategy and highlighting each of our assets. There are five key points that you should listen for as we go through the talk this morning. First, our view on heavy oil differentials and market access, Horizon reliability, Kirby development update, our year-end reserves and the monetization of the portion of our Montney asset base, our land base.
As you know Canadian Natural has and will continue to build a premium value, define growth independent, we're one of the few companies in our peer group that has the assets that deliver free cash flow on a sustainable basis, a direct result of our ability to effectively execute our strategies.
Canadian Natural has the largest reserve base in our peer group, a reserve base that ranks of global industry players, it's balanced and it'd delivering significant cash flow. So, critical to our ability to continue to grow free cash flow is our very large undeveloped resources that we own and control, resources that are long life and low decline. Importantly, we acquired only a portion of our cash flow to grow current year production above 47% in 2013 reflecting the strength of our asset and Canadian Natural's tremendous capital flexibility.
The remaining Cash flow can be utilized to the increase the strength of our free cash and reserves by unlocking the value of our undeveloped resources, return to shareholders through increasing dividends and share buybacks, acquisitions or pay down debt. Probably most important of all, we had the people, the expertise and experience to execute our programs and operate effective efficient operations. Our balance sheet is strong with a capacity to capture opportunities and weather any commodity price volatility we might encounter.
Canadian Natural is in a very enviable position and has a clear advantage compared to many of our peers when it comes to unlocking the value of our free cash flow and our long-life low-decline resources.
Now, before I touch on our oil assets, I will comment on the current North American oil markets and Canadian Natural's view of that market. As you know, we are bullish on heavy oil pricing in 2013 as well as the mid and long-term. There's heavy oil conversion capacity on stream in PADD II, significant current under-utilized heavy oil refining capacity on the Gulf Coast and we see the infrastructure constraints to get to the Gulf Coast being removed.
Although there will be some headwinds for later production, we believe these are manageable. Cushing is on its way to be debottlenecked which will reduce the LLS to WTI differential. Although we expect light oil production to keep increasing, we believe the access to incremental light oil markets in North America will be realized.
If you look at the infrastructure issues first, the Cushing bottlenecks are well on their way to being removed. Seaway has been expanded to 400,000 barrels a day of takeaway capacity in Q1 and an additional 450,000 barrels a day in mid-2014 with the Seaway Twin project coming on.
(Plus, here) the Keystone Cushing market link will add 700,000 barrels a day capacity by the second half of 2013. As a result, we expect to see the WTI to LLS differentials to narrow as each of these projects are completed. Once completed, we expect the LLS to WTI differential to be essentially the transportation costs between Cushing and the Gulf, about $5 a barrel.
In the mid to long-term, access to the Gulf Coast for light and heavy oil will come from the Enbridge Flanagan South expansion of 585,000 barrels a day which is slated to come on stream in Q2 2014. This pipeline does not require Presidential permit and has required producer and refiner support to proceed. It will also come from the Keystone XL project, which does needs a presidential permit, and is slated to add 830,000 barrels a day of capacity in Q1 2015, if approved in Q2 2013.
In addition, there'll be 220,000 to 300,000 barrels a day of access to the Line 9 Reversal and longer-term via Gateway at 525,000 barrels a day or TMX at 550,000 barrels a day on the West Coast or via the East Coast with the TCPL Option for 800,000 barrels a day. These last three options face their own unique regulatory and stakeholder challenges and provide export capacity to new markets.
In the meantime, we expect significant movement of light oil and to a lesser degree heavy oil via rail to access refinery capacity currently being supplied from foreign offshore sources. There is 2 million barrels a day of capacity on East Coast and 350,000 barrels a day on the West Coast. These markets could be supplied via rail as the rail infrastructure gets built out and there is a strong economic incentive for both refiners and producers to ensure these offloading facilities get built.
Now, there is significant increase in heavy oil demand for Canadian heavy oil producers on the way. As a result, the PADD II supply demand balance is about to change dramatically. With 80,000 barrels a day additional capacity now on, but still working out some minor infrastructure issues and the new capacity coming on by Q2, Q3 2013, we will see an additional 260,000 barrels a day of heavy oil conversion capacity come on stream. So, the total will add up to 340,000 barrels a day and on the Canadian heavy oil market of 1.5 million barrels a day that will add over 20% heavy oil capacity for Canadian heavy oil.
Once heavy oil gains market access to Flanagan in 2014 and we expect Keystone in 2015, there is significant demand for heavy oil in the Gulf Coast. Once connecting, we have 1 million barrels a day of heavy oil demand that today, it is not satisfied.
In addition, over time, and it will take some time for Canadian heavy oil to fill that 1 million barrels of Gulf Coast demand. We'll be able to push our foreign heavy oil enforcing the Gulf Coast. What this means for heavy oil pricing in our view is with the increasing refining conversion capacity coming on, the Flanagan and Keystone access to the Gulf Coast, we expect Cold Lake heavy oil differentials to (Ni) heavy crude to narrow to reflect the spreads which will be capacitation cost between Hardisty and the Gulf Coast. Heavy oil diffs in January were 34%, February 39% and we see March come down to 29%, an indication for April although early are 27%.
Turning to our gas assets, Canadian Natural is the second largest gas producer in Canada with a very large land base and effective and efficient operations. When gas prices strengthen, Canadian Natural is in great shape. Our vast asset base in conventional and unconventional gas and our dominant infrastructure position allows us to maximize the benefits of higher gas prices and if we choose allow us to quickly and efficiently increase gas drilling and production at very effective costs.
Canadian Natural has a dominant Montney land position with over 1 million high quality net acres, the largest in the industry. In order to maximize the value of this very important asset, Canadian Natural has begun the process to monetize approximately 250,000 net acres or roughly 390 net section of our Montney land base in the liquids rich fairway in the Graham Kobes area of North East B.C.
Under this process Canadian Natural consider either an outright sale of the lands or a joint venture partner with LNG expertise to jointly develop the lands. If this process meets our internal targets and a transaction is completed, Canadian Natural will continue to have one of the largest undeveloped Montney land bases in Canada with lands contained in the two major areas of Septimus in B.C. and North West Alberta.
As you know, the main theme of Canadian Natural's strategy is to maximize the value of our assets by optimizing our capital allocation. And historically, we have not been keen on JVs as we believe having a high degree of control of our capital allocation allows us to maximize value. We also believe the efforts of our strong team should be directed to creating value for our shareholders not working interest partners. That is still the case. However, in this situation when we look aside to our Montney land base and balancing our capital allocation going forward combined with the strong demand we see for this type of high quality asset plus the fact that (Graham caused) as some of them move from our core Montney asset base, it is prudent to monetize a portion of our Montney asset base at this time. Our overall strategy remains unchanged and in this case, because of our very large Montney land base we see a unique opportunity to maximize value today in a different approach from what we have done in the past, while still ensuring we have a strong land base which we can create significant long-term value for shareholders as we go forward.
Turning to our assets, on Canadian Natural's thermal heavy oil lands, we have 79 billion barrels in place and we expect to recover 8.8 billion barrels from our vast thermal heavy oil resource. Canadian Natural is executing a disciplined stepwise plan to unlock the huge value of this asset by bringing on 40,000 to 60,000 barrels a day every two to three years taking production facility capacity to 510,000 barrels a day or 0.5 million barrels a day, all at a 100% working interest.
Our Primrose to (indiscernible) pads had a very effective cost rate of roughly $13,000 a flowing barrel and op costs under $10 a barrel making Primrose one of the most robust thermal projects in the industry. Primrose's production was very strong in Q4 at 120,000 barrels a day and exit rates over 128,000 barrels a day setting us up for a strong first quarter. Primrose is a cyclic process, so we have seen strong rates in January and February with rates beginning to drop in March with much lower rates expected in Q2. The production (indiscernible) higher with stronger rates in Q3 and Q4, as a result production guidance for the year is a 100,000 to 107,000 barrels a day, up 5% over 2012.
At Kirby South, we are on track. We're slightly ahead of schedule and on cost with first team scheduled for November of this year and then production ramping up to 40,000 barrels a day by late 2014 at a cost of 30,000 per following barrel.
Kirby South is the first step of a stepwise development to take overall production to 140,000 barrels a day of high quality high value barrels. With additional lands acquired in 2012, we will evaluate 2013 the optimum production level for Kirby area, potentially increasing it to 180,000 barrels a day range.
Canadian Natural is the largest primary heavy oil producer in Canada. We dominate the land base and the infrastructure. We have 8,500 locations in inventory, and due in part to our dominance we have excellent capital efficiencies and low operating costs, making primary heavy oil one of the highest return on capital projects in our portfolio and generate significant free cash flow.
Canadian Natural delivered a strong fourth quarter with 886 wells drilled in 2012 and we will continue the very strong program in 2013 with 890 wells. We expect to deliver 12% production growth to just over 140,000 barrels a day at the midpoint of guidance.
At our world class Pelican Lake Pool, our leading-edge polymer flood is driving significant reserves and value growth. We have over 550 million barrels to develop on the polymer flood. Our plan in 2013 at Pelican is to continue development at polymer flood with 56% of the pool converted to polymer flood by the end of 2013. We're seeing good production response from the polymer flood and we see production increases of 19% in 2013.
In the fourth quarter, production averaged roughly 36,400 barrels a day as volumes at Pelican Lake were restricted due to temporary produced polymer treatment and facility constraints. In addition, production volumes at Woodenhouse were also restricted as they utilize the Pelican Lake facilities.
The new Pelican Lake facility with a capacity of 20,000 barrels a day is expected on stream in early June, and at that time we expect a step increase in production volumes. We're currently holding back in the field today roughly 4,000 barrels a day of production at Pelican Lake and another 8,000 barrels a day at Woodenhouse for a total of 12,000 barrels a day of field production capacity which will come on in June.
Turning to light oil in Canada, we continue to optimize our existing water floods and leverage technology over extensive land base. We expect solid production growth of 5% to 67,000 barrels a day at midpoint of our guidance with cash equivalent rates targeted at 10%. We will continue to progress our secondary recovery projects and drill 40 net in new play development that were initiated in 2012.
In the North Sea production was relatively flat in Q4 to Q3, and in 2013, we'll rent two rigs in North Sea and drill 3.6 net wells as well perform a number of workovers and safety critical work on the platforms. We have a rig on Espoir, an infill drilling program is underway. When completed in 2013, we'll add 6,500 BOE a day of light oil at a cost of C$24,000 flowing barrel. We're also prepared for the infill program at Baobab in 2014 with the purchase of long-lead items.
In South Africa, we're tracking to plan and our plan is to process, we bring in partner for a big exploration project. As reminder, this development has up to five significant structures on our lands, billion barrels type of structure that we currently own 100%. We are in the final stages completing the paperwork with a partner and will then need to complete all the necessary documentation with the South African government before we disclose our path forward. We anticipate the completion of the necessary documentation and required South African approvals will be somewhat lengthy process based on the similar third-party approvals obtained and our own experience in obtaining the exploration right with the South African government. We are targeting a period of up to six months to get that done. The earliest likely drilling day for the South African exploration well would be late 2013 or early 2014. Long lead equipment for this well has been ordered and will be delivered on time.
At Horizon production, the fourth quarter was over 83,000 barrels a day. Our more conservative approach saw us take 12 days downtime in October to fix the leaking exchangers. In addition, we had a conveyor and apron feeder maintenance issues in the second half of December. It was turned out to be one of the coldest spells in the winter combined with the Christmas season caused production to be curtailed.
Some of you may have heard me discuss the change in our maintenance strategy which we have undertaken to address the issues we've seen in December. And so far, they have been very effective. First quarter production has been solid so far. January production was 113,000 barrels a day and 107,000 barrels a day produced in February. We expect March also to be a very solid month in the 110,000 barrel a day range.
Over the course of 2012 we have made significant strides in improving reliability at Horizon. Improving the reliability will continue through 2013 and we expect to see a step change in reliability after we complete the May turnaround. We have increased the turnaround outage from 18 days to 24 days to address additional scope which we believe will enhance our reliability going forward. (Indiscernible) to the turnaround our production guidance for the year remains unchanged and reflects our confidence in our ability to deliver increased reliability after the turnaround.
Expansion at Horizon is on track and we continue to see good cost being delivered. Currently, we are running under our cost estimate and we are continuing to see bidders sharpen their pencils as we laid out additional work. Today, we are roughly 18% complete on the overall combined Phase 2/3 expansion. We're 86% complete on reliability, 16% complete on Directive 74 and 47% on Phase 2B, which will add 10,000 barrels a day in 2015; 8% on Phase 2B, which will add 45,000 barrels a day in 2016; and 8% on Phase 3, which will add 80,000 barrels a day in 2017.
Before I make some concluding remarks, I'll turn it over to Lyle now to comment on our strong 2012 year-end reserves.
Lyle G. Stevens - SVP, Exploitation: Thanks Steve. Good morning, ladies and gentlemen. To start our reserve's review, I'd like to point out that as in previous years, 100% of our reserves are externally evaluated and reviewed by independent qualified reserve evaluators. Our 2012 reserves disclosure is presented in accordance with Canadian reporting requirements using forecast prices and escalated costs. The Canadian standards also require the disclosure of reserves on a company gross working interest share before royalties.
Moving on to our results, in 2012, we had another very strong year, replacing a 178% of our production on a proved basis, with 245% for crude oil, NGLs, bitumen and synthetic crude oil and 30% for natural gas, reflecting our capital allocation to higher return crude oil projects. On a proved plus probable basis, we replaced 246% of our production, 342% for crude oil, NGLs bitumen and synthetic crude and 30% for natural gas. Total corporate proved reserves increased by 4% to 5.0 billion BOEs. Proved additions and revisions excluding production totaled 426 million BOEs. Of the 426 million BOEs, 95% were liquids, primarily North American crude oil, bitumen and synthetic crude oil. On a proved plus probable basis, total Company reserves increased by 5% to 7.9 billion BOEs.
On a 2P basis, additions and revisions excluding production totaled 587 million BOEs, 96% of those 587 million BOEs were liquids additions. The most significant reserves increases were in synthetic crude at Horizon in thermal bitumen and in primary heavy crude oil. On the Horizon mining side, proved synthetic crude oil reserves increased 6% to 2.3 billion barrels. This is primarily result of the continued strat well drilling to father delineate the north pit.
Magnitude and quality of our thermal assets continue to have a significant impact on our reserves. On approved basis, bitumen reserves increased by 9% to 1.1 billion barrels. This increase is primarily due to an enlarged development plans for one our Clearwater sands at Primrose South and our Grand Rapids development at Wolf Lake, both of which were defined through strat well drilling.
On a proved plus probable basis, bitumen reserves increased 23% to 2.1 billion barrels largely due to the addition of bitumen reserves associated with the growth project coupled with our Primrose, Wolf Lake additions. In primary and heavy crude oil, proved reserves increased 17% to 204 million barrels. This was largely driven by the excellent results of our record heavy oil drilling program.
Crude oil, NGLs, bitumen and SCO now account for 86% of our proved reserves and 88% on a proved plus probable basis. Our reserve life index for the Company is now 23 years using proved reserves and 36 years using 2P reserves. Even if Horizon is excluded, we still have long reserve life indices which reflect the strength of our asset base. It's 15 years using proved reserves and 25 years using 2P reserves.
In summary, these excellent results reflect the strength, balance and opportunities that we have in our asset base. I'd now like to turn the call back to Steve.
Steve W. Laut - President: Thank Lyle. As you can see, our reserves are strong. Our reserve replacement was excellent at 246% in 2012 as we continue to transition to longer-life, low-decline asset base that's weighted towards oil.
In summary, Canadian Natural is in great shape. Our balanced reserve base is largest in our peer group. Our reserve base has ranks with global industry players and delivers significant cash flow. Importantly, we are able to effectively allocate a portion of our free cash flow to our very large undeveloped resources that own and control, resources that are long life and low decline, which further strengthens our ability to generate even greater amounts of free cash flow in the future. Providing every amounts of free cash flow for allocation outside the development of our vast resource as well as to increase our ability to withstand potential commodity price downturns in the future. Probably most important of all, we have the people, the expertise and the experience to exceed our programs and operate effective efficient operations.
As Doug will point out, our balance sheet is strong with the capacity to capture opportunities and weather prominent commodity price volatility. Now, before I turn it over to John, I'd just like to take a minute to thank John for his tremendous contribution to Canadian Natural over the years. As you have read the press release, I'm going actually turn it over to Doug (for a speech) to do this. How is that Doug?
Douglas A. Proll - CFO and SVP, Finance: Perfect. Because we should always save John for last.
Steve W. Laut - President: Save the best to last.
Douglas A. Proll - CFO and SVP, Finance: Thank you, Steve, and good morning. On balance, 2012 was a successful year both financially and operational for Canadian Natural. Cash flow from operations was $6 billion or $5.48 per share and adjusted net earnings amounted to $1.6 billion or $1.48 per share. While we saw a decrease in our netback realizations for crude oil and SCO due largely to widening heavy oil differentials and lower SCO benchmark pricing, we increased oil production from our diverse asset base to 451,000 barrels per day.
As overall pricing remained relatively strong, crude oil was a positive story. 69% of our BOE production was oil related in 2012 and we are very well-positioned in North America and internationally. Due to continuing low natural gas prices in 2012, our natural gas production declined 3% to $1.22 Bcf per day at our natural gas netback realizations declined 56% to $1.04 per Mcf. As 31% of our production mix is natural gas, the impact on cash flow was approximately $625 million accounting for much of the year-over-year decline in cash flow.
In midyear, we responded to these lower natural gas prices and we downsized our capital expenditure budget in response to the pricing and we exited the year spending $6.3 billion. In addition to our active dividend program, we purchased for cancellation over 11 million common shares for $318 million, reducing our outstanding common shares year-over-year by over 4 million shares. The end result was we exited 2012 long-term debt of $8.7 billion, a small increase from the $8.6 billion at the end of 2011. Our debt metrics remains solid with debt to EBITDA at 1.2 times and debt to booked capitalization at 26%. Our available lines of credit at the end of 2012 were $3.7 billion.
Our pro forma available lines of credit amounted $2.9 billion after repaying $400 million off maturing Canadian medium term notes and $400 million of U.S. debt securities early in 2013. We have no further debt maturities until the fourth quarter of 2014. We have expanded our actively managed crude oil commodity hedge program for 2013 to ensure the protection of our capital expenditure program. We have hedged 48% of our forecasted crude oil production for 2013 with price collars on 2,000 barrels a day for Q1 and 250,000 barrels a day for the remainder of the year all with a floor of $80 per barrel.
As a result, our balance sheet and liquid resources are strong. We are very well positioned as we continue to develop our diverse asset base including our strategic project at Horizon and Kirby. This financial strength complements our management strategies and the Company's disciplined approach to execution and operation excellence.
In addition to adherence of – to maintain a strong balance sheet, having available liquid resources and structuring our risk management programs to protect against short-term negative commodity price movements, we've focused on sustainable returns to our shareholders. For 2013, we have increased the dividend to C$0.125 per common share payable quarter which is C$0.50 a share paid on annual basis representing as John mentioned a 19% increase. This is the 13th year of consecutive dividend increases and represents a 21% CAGR over the period.
In addition, we have reaffirmed our commitment to the continued active management of our normal course issuer bid for 2013.
Thank you and I will turn you back to Steve.
Steve W. Laut - President: Thanks Doug. As I've said, I'd like to take a minute to thank John for his tremendous contribution to Canadian Natural over the years. As you've read in the press release, John will be retiring at the Annual Meeting in May. Many of you may not know this, but John is the longest serving member of the Canadian team, joining Canadian Natural in 1986 or 37 years with the Company. During this time, John has been an important member of our team and has provided strong leadership and wisdom as the Company has grown from a very small junior to the large independent we are today. John has been a steady and calming influence throughout this period and has been a mentor to many of us, myself included. Personally I'd like to thank you John for all the help and advice you have given me over the years. Thanks a lot for that and all of us at Canadian Natural wish you all the best when you retire at the Annual Meeting.
You'll have also read that Doug Proll has decided to take on a somewhat less demanding role with the Company as Executive Vice President. As a result, you'll be seeing more of Doug on road shows and investor conferences along with other members of the management committed. As you know, Doug has done an outstanding job for us as CFO and has built a very strong financial team. As a result of this change, Corey Bieber has been promoted to Chief Financial Officer. Many of you know Corey who is a very talented individual with strong financial and leadership skills and having been mentored by both John and Doug over the last 10 to 12 years I am very confident will do a great job leading the strong financial team. Of course, Doug will still be around to provide Corey any help he needs in his new role.
I believe these changes reflect the depth and strength of the Canadian Natural team and allows us the strengthen the team and still benefit from the wisdom and experience when John was transitioned from President to Vice Chairman and now as Doug transitions out of the CFO role.
So, with that, John, some concluding remarks?
John G. Langille - Vice Chairman: Thank you very much, Steve, Lyle and Doug for your comments and thank you Steve for those additional comments, much appreciated. So, never an easy decision to decide to retire, but unfortunately age does gets up to you and I still have a number of personal interest that I want to pursue and so that's why I have made the decision to retire, makes it equally difficult because Canadian Natural continues to be in a very strong position with large reserves, producing significant cash flow and many, many excellent opportunities to expand their reserve base.
Just to reiterate a couple of the points I think that Steve made, our time tested management and operating principles provide the right checks for determining economic capital spending for balancing activities to mitigate as much as possible against extreme volatility in commodity pricing, and at the end of the day ensuring our shareholders of which I will certainly still be a major member of have the opportunity to realize an increase in value from their holdings.
With that operator, I'd like to open up the call to questions.
Operator: George Toriola, UBS.
George Toriola - UBS: My best wishes to John as he retires as well. A couple of questions here, the first on the Montney monetization, could you provide some more clarity, as to what drove this decision. It's quite a departure from what you have done in the past, so is it pure economics, are you trying to accelerate sort of value from the asset base or – sort of the thinking behind that together with how much work have you done on this assets, the 250,000 net acres here, have you – you have wells in there, do you understand the potential here, that will be helpful. That's the first question, and then the second question is on the reserve, year-over-year reserve change in the North Sea and in Africa. So, sort of looking for some clarity as to what has driven the year-over-year decline in this region?
Steve W. Laut - President: I'll answer the first question and I'll get Lyle to give a comment on the reserves changes in Africa and the North Sea. So, as you know it maybe – that seems like a departure for us, but it really isn't. It's a case of – we're trying to maximize value. As I said in the call, we have the largest Montney land base in Canada, a million undeveloped acres. This is a very high quality portion of the land base. It's somewhat removed from the core of our land base at Septimus and in Northern Alberta – Northwestern Alberta. So, we see this as an opportunity to maybe to say accelerate some value, but increase some value, and the asset we think is high quality, it's in liquids rich fairway and we're not going to give you all the details about it here today. Obviously we're in the process now and that will come out when we put the package together. But, there is significant penetration in the area. I think there is 105 penetrations in the Montney ourselves, and there is about 1,000 penetrations in the overall area. So, this is not moose pasture by any means. This is high quality. There is wells in the area that have rates, massive rates in the 25 million a day range. So, this is clearly a high quality portion of the land base. We think it will be a while before we get there because the other part of the land base is even higher quality in our mind and it's a way to capture some value, so that's a rationale for and it's all about maximizing value which we are always trying to do.
George Toriola - UBS: Can I just quickly follow-up on that? As you look to rationalize that would you be looking to – would you be looking for cash or you'd be looking for an interest in some sort of JV, some sort of LNG project? What's the preferred outcome from this process?
Steve W. Laut - President: So, George, we're looking at all options. We're open to them all. So, I guess if you say in a sort of macro level, we are looking to maximize the value of this asset and so we would look at outright sale. We'd look at a joint venture. We'd look at different types of joint ventures and we are always that open here as the process goes and we are not going to preclude anything at this point in time.
Lyle G. Stevens - SVP, Exploitation: On your reserves question, George, as you know, we had no drilling activity internationally, so that's both in the North Sea and offshore Africa. The change in reserves on the oil side is really on the U.K. side. We had a little bit longer life in one of the Ninian hubs, so that extended the total proved reserves there. At Baobab, we had improved well performance, so that increased the reserves there. And Olowi reserves, we had sort of a write-down there reflecting poor performance of the Olowi wells. The largest changes on the international total reserve side were actually related to natural gas both in North Sea and offshore Africa and that's really a reflection of an update in the fuel usage and the shrinkage in both areas.
Operator: Arjun. Murti, Goldman Sachs.
Arjun Murti - Goldman Sachs: Let me offer my best wishes and congratulations to John Langille as well and certainly appreciate all his help over the years and helping us understand CNQ. We'll miss talking to him. My question was a follow-up to you Steve on your comments on the infrastructure. I think we certainly agree that over some very long period of time, there is no doubt transportation bottlenecks get alleviated. I think the issue is some of the real solutions here XL, the West Coast Pipelines, all have the numerous stakeholder issues or presidential issues as you mentioned, and I think what we are starting to wonder as Keystone XL continues to face delays in the event it doesn't happen, should we start worrying about your 2015 to 2017 growth profiles. You guys have an outstanding resource base that you've highlighted, significant growth plans. In the event, you continue to get delays in deferrals, what is your plan B to getting the oil out of Canada in the event XL faces issues and some of these West Coast option face I think local Canadian issues.
Steve W. Laut - President: That's actually a very good question and that's something we take a lot of time thinking about. I would say our view is – firstly we'd agree, Keystone will get approved, but you're right it may not get approved. I think the West Coast options are facing some strong hurdles and so it might be tougher to get those approved. We actually think the East Coast option with TCPL to comeback, which already has a pipe in the ground. It's a gas pipeline and then taking up to Quebec City maybe the most likely option, obviously the pipes in the ground, it's an elegant solution, because I guess that gas pipeline (indiscernible) the rate base for the toll base, and we believe that the opposition to that would be somewhat less than going to West Coast. So, our view is that Keystone will get approved most likely and we believe that we can get to the East Coast. Other than that you will need to look at real options to do that. At this point in time, we have enough flexibility, particularly in our thermal program, we can dial up or dial down to a certain degree how fast we develop these resources if we have any issues with pipeline access.
Arjun Murti - Goldman Sachs: Just to foster that and thanks for your response so far, but can you talk about how much you have committed to XL and/or the West Coast options and does – but to me it kind of feels like the worst case out come which is it's neither rejected nor approved. It sits in the this purgatory and therefore could preclude you from being willing to commit to other projects and there clearly are other alternatives, but how tied up are you to XL and then if it, again if it remains in this limbo, does that preclude you from being able to sign up for whether it's Enbridge or TCPL or some of the other options that you mentioned?
Steve W. Laut - President: So, Arjun, you know we have roughly today 500,000 barrels a day of oil production. We have signed up for 120,000 barrels a day on Keystone, we have 75,000 a day committed on TMX to the West Coast and one other point I make on opportunities, there is significant number of opportunities. I won't go through in detail with the other pipeline operator to get capacity including Flanagan South to increase, to give access to the Gulf Coast for heavy oil. So, we think other options will pop up. They will be smaller, smaller in size, but may not need Presidential permit to have happened. So, there will be a lot of – you know, you've seen all the industry is very driven to develop opportunities to (talent) these issues and I expect the source will pop up probably through the Enbridge system. So, we are not too tied up. If Keystone doesn't get approved – obviously, we're not committed – but even if it does, we still have room to commit to other the pipelines.
Arjun Murti - Goldman Sachs: Just lastly to round it out, on the rail, I believe that's more suitable for later oil production and maybe more of a challenge for heavier, does that – A, is that true and then if it is, does it make you want to do additional upgrading type within Canada?
Steve W. Laut - President: So, you could say rail is more suited for light, but there is also another benefit for railing heavy. If you rail heavy and you have some steam closed in those railcars, you don't need (indiscernible), so that reduce a bunch of the cost on your heavy oil transportation and also there is an opportunity rail back on the backhaul (dealing on) for the rest of your heavy oil production. So, there are some advantages in both ways. As far as upgrading goes, as you know, we are working with Redwater building that refinery here in Edmonton. It's on track in terms of engineering. So, at this point in time, we don't see doing anymore.
Operator: John Herrlin, Societe Generale.
John Herrlin - Societe Generale: Just a quick one for you Steve on South Africa. You mentioned that we could have news this year on the partnership. Were you looking for carry or are you using this again to other exploration opportunities?
Steve W. Laut - President: I guess, the answer will the same as with just the Montney. We are not going to disclose how good the deal is until we got it all approved through the South African governments. We'll go through due process with them before we announce it and just – so it's the due process. But obviously, we are open to everything.
Operator: (Carl Preston, National Bank).
Carl Preston - National Bank: You guys talk about seeing a step change in Horizon reliability once you come off the May turnaround. Is that just a function of coming off a fresh turnaround or is there something different that you are doing there?
Steve W. Laut - President: In a part, Carl, it is coming out of the turnaround. You expect it to have great reliability. Obviously, you've addressed all the issues. But the other reason we think we'll have a step change is by then we'll have your full – implemented our change and maintenance philosophy on the ore preparation plant which is the big thing there, our most unreliable part of the whole process. The other part that will happen here is as it is our first turnaround, as you know, process engineers, they all design, where are the corrosions going to be, where the erosion will be and when you get in real life, sometimes that's not always right. We open up all the vessels and inspect everything. We expect to see places where corrosion was happening where we didn't expect and places where corrosion is less than we expect and that allows us to take mitigating actions. In some cases, we may replace some piping or we will put in different corrosion inhibitors or different programs to address that. So, going forward after the turnaround in essence we'll find out where our weak spots are, where our weak issues could be going forward and be able to address that, so we won't get any surprises as we sort of had last October with those exchanger leaks in the (DRU). So, that's why we say we'll have a step change in reliability because we have a better feel for what's really going on inside our plant. Even though we have tremendous amount of corrosion monitors throughout the plant, this is will give us even greater feel and allow us to be that much more reliable going forward.
Operator: There are no further questions registered at this time. I'd like to turn the meeting back over to Mr. Langille.
John G. Langille - Vice Chairman: Thank you very much operator, and thank you ladies and gentlemen for attending our call. As usual if you have any further questions, you would like clarity on, please do not hesitate to get a hold of us. And thank you and have a good day. Bye-bye.
Operator: Thank you. The conference has now ended. Please disconnect you lines. We thank you for your participation.