Prepared remarks
Good day. And welcome to the Imperial Oil Third Quarter 2024 Earnings Call. As a reminder, today's conference is being recorded. At this time, I would like to turn the call over to Mr. Peter Shaw, Vice President of Investor Relations. Please go ahead.
Good morning, everybody. And welcome to our third quarter earnings conference call. I'm joined this morning by Imperial's senior management team, including Brad Corson, Chairman, President and CEO; Dan Lyons, Senior Vice President, Finance and Administration; Sherri Evers, Senior Vice President of Sustainability, Commercial Development and Product Solutions; and Cheryl Gomez-Smith, Senior Vice President of the Upstream. Today's comments include reference to non-GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment 6 of our most recent press release and are available on our website with a link to today's conference call. Today's comments may also contain forward-looking information. Any forward-looking information is not a guarantee of future performance and actual future performance and operating results can vary materially depending on a number of factors and assumptions.
Forward-looking information and the risk factors and assumptions are described in further detail on our third quarter earnings release that we issued this morning as well as our most recent Form 10-K. All these documents are available on SEDAR plus, EDGAR and our website. So I'd ask you to refer to those. Brad is going to start with some opening remarks and then hand it over to Dan, who's going to provide a financial update and then Brad will provide an operations update. Once that is done, we will follow with the Q&A session. So with that, I will turn it over to Brad for his opening remarks.
Thank you, Peter. Good morning, everybody. And welcome to our third quarter earnings call. I hope everyone is doing well. I'm really pleased to report another strong quarter for Imperial. We saw excellent operational performance across all of our assets, both Upstream and Downstream, which more than offset the impact of lower commodity prices on a sequential quarter-over-quarter basis. Despite the lower prices, net income was actually up nearly 10% versus the second quarter. I'm also happy to report that operational performance has remained strong as we’ve moved into the fourth quarter. Our Upstream once again saw record production and continued reduction in unit costs, which more than offset the reduction in price realizations due to the softening of WTI prices. And with TMX in operation, we're seeing the value of additional egress and narrower and more stable differentials that provide a significant net benefit to Imperial.
Our Downstream business also performed well over the quarter and contributed solid earnings despite significant planned turnaround activity and softening of refinery crack spreads. All three of our manufacturing assets continue to realize the structural benefits of advantaged feedstocks and import parity pricing in the Canadian market. So now let's review the third quarter results. Earnings for the quarter were $1,237 million with cash from operating activities of $1.797 billion when excluding the impact of working capital. I'm very proud of the organization's ability to deliver on what is within their control, namely strong operational results and structural cost improvements, which positions us to offset the moderation in crude prices and refining margins that I mentioned earlier. Earnings year-to-date are slightly higher than last year and up 10% on a per share basis. In the Upstream, we achieved total production of 447,000 gross oil equivalent barrels per day in the third quarter.
This marks the highest third quarter production over the past 30 years even when including the historical volumes associated with the divested XTO assets. Our focus on structural cost reductions, coupled with strategic volume growth, have driven a unit cost savings of over $3 a barrel when comparing to year-to-date 2023. Kearl continued the year with yet another fantastic quarter and matched the asset's record for highest third quarter production. And with record production now over the first nine months of the year and momentum carrying into the fourth quarter, we feel very confident in our ability to reach 280,000 barrels per day for the year on a gross basis. I'm also thrilled by the performance at Cold Lake. We had a very strong quarter that included the successful ramp-up of production from our Grand Rapids Phase 1 project, which is the industry's first solvent-assisted SAGD operation, which more than offset the impact of the planned turnaround activity.
In the Downstream, we continue to see strong operating performance as well, including the safe execution of turnarounds at both Nanticoke and Strathcona, which were below budget and ahead of schedule. Refinery throughput averaged 389,000 barrels per day, which equates to a refinery utilization in the quarter of 90% and a year-to-date utilization of 91%. With the last of our planned Upstream and Downstream turnaround activity completed in October, we are now well positioned for a strong finish to the year. Overall, we continue to deliver significant value to our shareholders through our reliable and growing dividend, which has now increased for the 30th consecutive year on a paid basis. We are also on track to complete the accelerated share repurchases under the normal course issuer bid by the end of this year, resulting in a 5% reduction in our share count and further returns to our shareholders. With that, I'll pass things over to Dan to discuss our financial results in more detail.
Thanks, Brad. Starting with financial results for the third quarter. We recorded net income of $1,237 million. This represents a decrease of $364 million from the third quarter of 2023, primarily as a result of lower margins in our Downstream business. When comparing sequentially, third quarter net income is up $104 million from the second quarter of 2024, with strong operating performance on volumes and operating expenses more than offsetting lower prices. Now shifting our attention to each business line and looking sequentially. Upstream earnings of $1,027 million are up $228 million from the second quarter, primarily due to higher volumes and lower OpEx, partially offset by lower realizations. Downstream earnings of $205 million are down $89 million from the second quarter, mainly reflecting lower refining margins. Finally, our Chemical business generated earnings of $28 million, down $37 million from the second quarter, primarily driven by a business segmentation shift of aromatics products from our Chemical segment to our Downstream segment.
There is no impact on our consolidated financial results but there is a one-time shift at the segment level in the third quarter of 2024, with nine months of after-tax earnings of $31 million and nine months of sales volumes of 120 kt moving from the Chemicals segment to the Downstream segment. We made this shift because we now see aromatics as more closely aligned with our Downstream finished products than with our Chemical business. We will steward and report our business on this basis going forward. Moving on to cash flow. In the third quarter, we generated $1,487 million in cash flows from operating activities, excluding unfavorable working capital tax of $310 million cash flows from operating activities for the third quarter were about $1.8 billion, up $289 million from the second quarter of this year, which brought our ending cash balance to about $1.5 billion. Shifting to CapEx. Capital expenditures totaled $486 million in the third quarter, up $99 million from the third quarter of 2023.
In the Upstream, third quarter spending focused on sustaining and growing production at Kearl, Syncrude, and Cold Lake. In the Downstream, third quarter spending mainly included progressing our renewable diesel project at Strathcona. Year-to-date 2024 capital expenditures of $1,444 million are $135 million higher than the comparable period in 2023. To support the momentum in our business, we've chosen to spend somewhat more than we initially anticipated. As such, we expect to finish this year modestly higher than the $1.7 billion guidance we provided in December of last year. Shifting to shareholder distributions. In the third quarter of 2024, we continued to demonstrate our long-standing commitment to return surplus cash to our shareholders. We paid $322 million of dividends and returned an additional $1.2 billion through accelerated share repurchases under our normal course issuer bid program.
We remain on track to fully complete the program by year-end. Finally, this morning, we announced a fourth quarter dividend of $0.60 per share, consistent with our third quarter dividend. Now I'll turn it back to Brad to discuss our operational performance.
Thanks, Dan. Upstream production for the quarter averaged 447,000 oil equivalent barrels per day. And as I mentioned earlier, this represents the highest third quarter production in over 30 years. Production was up 43,000 barrels per day versus the second quarter and up 24,000 barrels per day versus the third quarter of 2023. Year-to-date production is on a record pace and is 25,000 barrels per day or about 6% higher than 2023 year-to-date. So now let's move on and talk specifically about Kearl. Kearl's production in the third quarter averaged 295,000 barrels per day gross, which is up 40,000 barrels per day versus the second quarter and matched the third quarter record previously set in 2023. We are off to a very strong start to the fourth quarter with gross production around 310,000 barrels per day in October, which is looking like another record for the month. Turning to operating costs.
I'm extremely pleased to share the progress Kearl continues to make on its journey to achieving our annual unit cash cost target of $20 per barrel. Kearl's unit cash operating costs in the quarter were $17.51 per barrel. With higher volumes, greater mine productivity, favorable energy costs, and the absence of turnaround activities, unit costs decreased by almost $5 per barrel versus the second quarter. Compared to the third quarter of 2023, where we essentially had the same volumes, unit costs are almost $3 per barrel lower, a reduction of over 13%. And on a year-to-date basis, our unit cash cost of $20.21 per barrel is nearly $4 per barrel lower than last year and well on track to achieve $20 per barrel or lower for the full year. I would like to acknowledge the hard work and effort that the Kearl team delivered and continues to deliver in improving our unit costs. So now turning to Cold Lake.
For the third quarter, Cold Lake production averaged 147,000 barrels per day, which was flat versus the second quarter and up 19,000 barrels per day versus the third quarter of 2023. During the quarter, strong production from the new Grand Rapids project and the better-than-planned Maskwa turnaround performance allowed us to sustain high production levels. The turnaround was safely completed two weeks ahead of schedule, resulting in about 4,000 barrels per day of incremental production over our quarterly turnaround guidance. Strong production, along with lower energy costs, resulted in unit cash costs of $12.85 per barrel, which is a decrease of over $5 per barrel compared to the same quarter last year. On a year-to-date basis, our unit cash cost of $15.07 per barrel is more than $2 per barrel lower than last year. The ramp-up of Grand Rapids Phase 1 has exceeded our expectations. At the end of July, we were producing 10,000 barrels per day and we're well on our way to reaching the expected 15,000 barrels per day as the final pumps were being installed.
For the third quarter, Grand Rapids achieved an average of 15,000 barrels per day while realizing an average of 20,000 barrels per day for the month of September. And on an instantaneous basis, we have seen peak rates of 22,000 barrels per day. We're continuing to monitor the field performance but are very encouraged by the initial production and are confident in the project basis of 15,000 barrels per day. This marks an important milestone in our strategy to transform our production at Cold Lake, and I appreciate all the work by the project team to successfully accelerate this project by a year. As we have noted before, by utilizing the industry's first commercial application of solvent-assisted SAGD, we expect Phase 1 alone will lower Cold Lake's unit cost by around $1 per barrel while also reducing our emissions intensity. Our Cold Lake strategy includes additional phases of Grand Rapids development alongside other opportunities, such as the Leming SAGD redevelopment project.
Leming is another great example of our strategy to maximize value from our existing assets. This project is returning to Cold Lake's initial pilot location, which was started up over 40 years ago to further develop that resource using SAGD technology. Construction of the new facilities continued throughout the quarter and we are progressing on plan to begin steam injection at Leming in late 2025 with peak production expected to average about 9,000 barrels per day in 2026. Now a few comments on Syncrude. Imperial's share of Syncrude production for the quarter averaged 81,000 barrels per day, which is up 15,000 barrels per day versus the second quarter and up 6,000 barrels per day versus the third quarter of 2023. During the quarter, Syncrude utilized the interconnect pipeline to import bitumen driving higher upgrader utilization rates and producing about 9,000 barrels per day, our share of incremental Syncrude Suite premium.
At the end of October, Syncrude completed a hydrotreater turnaround, which started at the beginning of September and was completed on time and on budget. Now let's move on and talk about the Downstream, which also had strong operations in the third quarter. Overall, we refined an average of 389,000 barrels per day, reflecting a utilization of 90%. Compared to the second quarter, when we had turnarounds at Strathcona and Sarnia, we processed an additional 2,000 barrels a day in the third quarter. Refining throughput was partially offset by additional planned turnaround work at Strathcona and Nanticoke, both of which are now complete. Our year-to-date utilization of 91% positions us well to achieve the high end of our full year guidance of 89% to 92%. With the completion of the Strathcona turnaround, we added additional operational flexibility to co-process plant-based feedstocks at that refinery.
By co-processing these feedstocks, we can help our customers reduce their emissions and further enhance Imperial's low carbon product offering. The Nanticoke turnaround was the largest turnaround across the company this year. And I'm extremely proud of the team for executing the site's most successful large turnaround event in decades with completion ahead of schedule and below budget. This achievement leveraged refining capabilities within the Imperial and ExxonMobil network, bringing people in from Imperial and ExxonMobil refineries across North America to provide assistance. From a financial perspective, our structurally advantaged downstream business remained profitable in the quarter despite significant turnaround activities and the impact of lower refining margins. We continue to progress the construction of Canada's largest renewable diesel facility at our Strathcona refinery that will add 20,000 barrels a day of throughput capacity when completed in the first half of 2025.
I'm very pleased with the progress of the construction, which will continue into next year. The Strathcona renewable diesel project is a highly attractive and strategic opportunity within our portfolio and one that leverages the numerous competitive advantages we have including location, scale, expertise, and technology. Petroleum product sales in the quarter were 487,000 barrels per day which is up 17,000 barrels per day versus the second quarter and up 9,000 barrels per day versus the third quarter of 2023, inclusive of the business segmentation shift that Dan mentioned earlier. Overall, we continue to see resilient demand in Canada with gasoline and diesel at approximately 90% and Jet at about 100% compared to 2019. Turning now to Chemicals. Earnings in the third quarter were $28 million, which was down $37 million versus the second quarter. The lower earnings in the third quarter is mainly due to the $31 million shift to include earnings from the aromatics business in the Downstream segment.
Chemical earnings for the third quarter, excluding the shift would have been $59 million, down $6 million from the prior quarter. Earnings in the quarter were up $5 million versus the third quarter in 2023 due to stronger margin environment and absence of the major turnaround in the third and fourth quarter last year. Adjusting for the same shift Dan and I have mentioned, earnings were up $36 million versus the third quarter of 2023. As always, I'd like to wrap up by highlighting a few other items of note. First, the Pathways Alliance is continuing to progress the design and engineering for the proposed carbon capture and storage pipeline project. During the quarter, Pathways issued the request for proposals to the pipe manufacturers for the proposed transportation pipeline as early engineering and regulatory work continues. Along with consultation and engagement with indigenous communities.
In parallel, we continue to have constructive discussions with the federal and provincial governments to finalize the fiscal frameworks necessary for this important project to proceed. And finally, we are proud to be included on this year's TSX30 list. We were recognized as one of the top 30 companies on the TSX based on our dividend, adjusted share performance of 167% over a three-year period. This is great recognition that our business strategy and execution is delivering significant value for shareholders and a great recognition for the contribution of our workforce who are working hard every day to grow shareholder value while delivering affordable and reliable energy for societal needs. In closing, we had another excellent quarter. We achieved record volumes in our upstream, significantly reduced upstream unit costs and delivered high downstream utilization while safely executing multiple planned turnarounds.
I'm pleased to have shared the very encouraging initial production from our Grand Rapids project and look forward to the completion of the Strathcona renewable diesel project next year. We will continue to bring you updates on these attractive opportunities as we remain focused on maximizing the value of our existing businesses while at the same time responding to the changing needs of our customers and while maintaining reliable and affordable energy for Canadian consumers. As I look ahead to the end of the year, with all of our planned turnaround activity completed now, we're very focused on a strong finish and continuing to return surplus cash to our shareholders by completing the accelerated normal course issuer bid by the end of the year. I would also like to share that we are planning to host a conference call on December 12th as we issue our annual guidance for 2025 and we are also planning an Investor Day with a longer-term outlook in the spring of 2025. And as always, I'd like to thank you once again for your continued interest and support. So now we'll move to the Q&A session, and I'll pass it back to Peter.
Thank you, Brad. As always, we'd appreciate it if you could limit yourself to one question plus a follow-up so that we can get to as many questions as possible. So with that, operator, could you please open up the phone line for questions.
Questions and answers
We will take our first question from Manav Gupta with UBS.
My question here is basically on the Syncrude strong performance there. Just help us understand what are the realized benefits you are seeing on this bidirectional pipeline, how is it helping you deliver stronger results at Syncrude?
And as you'll recall, we've had this bidirectional pipeline in service for a couple of years now. And we see multiple benefits in that it allows us flexibility to both import bitumen at times when we have the need for additional volumes. We have additional capacity to process downstream. We can keep those downstream facilities full. And similarly, if we have any constraints in those downstream facilities, we can shift that bitumen over to Suncor's operation. And fundamentally, it just provides broader redundancy in how we optimize the operation of those units. And we continue to see several thousand barrels a day of uplift year-over-year as a result of that. So it's been a very value-accretive investment that we've made and we continue to feel quite good about it.
My second question is about Grand Rapids Phase 1, which seems to be performing even better than expected. How should we consider additional similar opportunities at that asset?
And certainly, we share your optimism. It is going better than planned. I have to caution that it's still early days. We've only been producing crude for a few months. I think first oil was back in May, as I recall. So we're continuing to ramp it up. We're continuing to optimize kind of the reservoir performance, optimizing the injection rates of steam and diluent, but all the indicators are looking very positive. And so what that means looking ahead is, again, further validation of our strategy with SA-SAGD. We've mentioned in the past that we have up to 10 phases of potential Grand Rapids development. So maybe not surprisingly with these encouraging results. I’m continuing to challenge the team for what opportunities do we have to bring those future phases forward on a more accelerated basis so we can leverage these early successes. So the team is evaluating those options. But safe to say that we do see multiple more phases of development and we're going to be advancing those. And I think that's one of the exciting things about our Investor Day planned for the spring of 2025 is we'll be in a position to lay out more of those plans. But again, I think the bottom line is we're feeling really good about it and that will have implications not just for this year or next year but subsequent years longer term.
We will take our next question from Neil Mehta with Goldman Sachs.
Neil, can you hear us? Operator, maybe we could go to the next question and we can come back to Neil.
We will take our next question from Menno Hulshof with TD Securities.
I'll maybe start with a question on digitization since it feels like we haven't talked about it in a while. Can we just get a refresh on where you're currently focusing your digitization efforts? And what is a reasonable expectation for annual investment in 2025 and beyond?
You're right, maybe we haven't talked about it much recently but that's no reflection on kind of the business focus on it. There's a lot of work going on to continue to leverage technologies available to us, to continue to explore applications of new technologies. What we shared at our last Investor Day was the potential value of well over $1 billion that we could anticipate from further digital technologies. And at the time, I believe we had indicated that we had captured maybe about $500 million of those and the journey continues. The one that we have been talking a lot about lately is what we've done with autonomous haul trucks. And that's just a great achievement for us that we now operate a fully autonomous mine with all of our heavy haul trucks. We're the only operator in our industry that has been able to achieve that. And from that, we are seeing both cost and productivity benefits and also kind of underlying that is improved safety performance or lower risk of safety incidents.
So we feel quite good about that. I've talked now over the last two quarters about completing really everyone of our turnarounds ahead of schedule and below budget, and digital technology is a key enabler there as we employ technologies in advance of shutdowns to allow us better predictive capabilities to anticipate when we open up pieces of equipment, allowing us to defer opening up other units that don't have any indications of issues. And we're inside of large tanks and vessels being able to use drone technologies to inspect those. We just had our out to Cold Lake to really showcase what we're doing with Grand Rapids. But as part of that, we also featured what we're doing with kind of a robotic dog and who we named Spot. And Spot is helping supplement our operations staff by regular monitoring of equipment performance, allowing us to have more real-time data and also gathering that data in a more efficient way.
And so those are just a few examples but there's many of them. When it comes to digital technologies, it's not a short list of three, four, five things. It's more like 30, 40, 50 things that the organization is pursuing. And when we have our Investor Day in the spring of next year, I'm sure we will showcase many digital advancements that we're pursuing, because again, we do see it being very accretive to our business.
The second question is on basin egress and the Enbridge mainline specifically. It looks like we're starting to see low single-digit apportionment again for November. So the question is, do you know what is driving that and are you surprised to see it with TMX just having ramped up?
We're not surprised at all by the lower apportionment. What it reflects, I think, is some rebalancing of volumes between the Enbridge system and the TMX system based on producers' volume commitments on TMX. Overall, I think it's a great story for the industry that TMX has now been started up. We have more egress capacity from the basin through Enbridge and through TMX. The producers are all leveraging that to move their products to what they see as the highest value markets and they have more flexibility. And that also has provided stability to the market, such that we are now seeing a narrower WCS differential and we're seeing that differential be more stable. So I think it's a great result for Canada, it's a great result for our industry, and it's a great result for Imperial. And it has contributed to the earnings I've just announced.
We will take our next question from Greg Pardy with RBC Capital Markets.
Brad, the only thing I wanted to dig into is maybe what Dan was talking about just on the CapEx. We were getting a question or two in terms of it being maybe a little higher this quarter than expected. And then in terms of being mildly higher, can you give us any idea that like still under $1.8 billion or so or what have you? Any color there would be great.
As you're, I'm sure, well aware, when we look at our capital program, we have multiple projects that span multiple years. And so there's always some shifting of capital from one year to the next as we optimize execution. I think what we're also seeing and I view it as a great positive is there's a lot of momentum in our organization right now about maximizing profitable volumes. And with that we are pursuing all economic opportunities that allow us to increase production and those economic opportunities, some of them are OpEx related, some of them are CapEx related. And so you're seeing that. But on balance, I think it's a really good thing. Dan, I guess, used the word modest increase. We finished out last year close to $1.8 billion of capital. This year, we're trending slightly above that rate. And so I'd say where we are year-to-date is somewhat reflective relative to our $1.7 billion guidance, again I kind of hate to put out an exact number. But you can look at the trends, the projections. We're going to be somewhere between 1.8 and 1.9, somewhere in that range. I think it's a good thing because, again, it's translating to profitable volumes…
I mean you're a super low capital intensity business to begin with...
Right, exactly. When we think about the sustaining capital of around $5 per barrel, we're producing more barrels, which brings some sustaining capital requirements. But overall, it's a really positive thing.
No, agreed. Maybe just a follow-up, a little bit about what Menno was asking about. But everybody's dog has got a growth project now, right, in Western Canada. So we're long pipe and so on. I'm just curious as to how you guys are thinking on, two fronts. One is, when do we start to see more of a balance in egress maybe coming out of Western Canada? And is there anything that might mitigate that, i.e., expansions on the mainline or what have you? And then the other thing is, is that just from your own egress perspective, how are you managing that medium to longer term risk here?
There does seem to be a lot of discussion and interest in that, I know as I travel around and meet with investors and analysts. From our perspective, we feel really good about the amount of capacity that's available for egress. We see that there are several years of run room based on existing capacity but we also feel like there will likely be additional capacity that will be achieved both in the Enbridge system and in the TMX system as those operators look for further debottlenecking. And so that's going to extend even longer the capacity available to the industry. As we look at individual growth projects, both in the near term and the long term, looking much further down the road like Aspen, we don't have any concerns about egress. And so whereas a few years ago that was a significant consideration as we thought about new greenfield growth projects that is not a concern for us today. We'll continue to monitor it, obviously, but we feel really good about egress.
We will take our next question from Doug Leggate with Wolfe Research.
I'm guessing you've got some competition on the US majors today. So thanks for getting me on. So clearly, you're itching to give us an update on the operations with the Analyst Day and the call you're going to do in December. But I'm not trying to get ahead of that too much. But when you say that Kearl is doing 310,000 barrels a day in October and your operating costs are below $18, it kind of seems that the writing is on the wall as to where this is headed, that 300,000 barrel a day average your 2022 Analyst Day was a stretch goal for the future. Is it too much of a stretch to say that you're there and there's an upside case to that? In which case, maybe you could frame for us how do you see sustainable capacity on an annualized basis and operating costs below 18 would put you best-in-class? And so maybe frame it for us a little bit, if you could and I've got a follow-up for Dan, please.
There's a lot happening with earnings releases and calls today, and I appreciate you taking the time to join ours. Thank you for your question. We're excited to spend some time on December 12th discussing our guidance for 2025 and our upcoming Investor Day in the spring. We've made significant progress across all our assets in fundamental areas like volume, cost, and efficiency, all aimed at achieving best-in-class status and resilience for our portfolio. Kearl will definitely be part of those discussions. A few years ago, many people were skeptical about our ability to reach 280,000 barrels a day and $20, but we have confidently proven we can achieve that. At our last Investor Day, I hinted at the potential for 300,000 barrels a day in the future. Since then, our teams have been actively working on specific plans to reach that goal. I remain optimistic that we will achieve 300,000 barrels a day within a reasonable timeframe, and we will outline that timeframe at Investor Day.
I'm glad you brought up costs because we haven't discussed anything beyond $20, which we've been focused on. This quarter's results and this year's results show that we are managing to stay below $20, with the last quarter being $17.50. We know how to deliver below $20, and we will present plans for the next milestone towards achieving something significantly less than $20. I won't announce a new number today; we'll save that for our call. However, it will represent a material improvement and help us reach best-in-class status, translating into greater value for our shareholders and increased cash flow from higher volumes at lower costs. It's truly an exciting time.
It's impressive to see that your stock has been the top performer in the energy sector over the past five years, at least based on our coverage, so congratulations on that. A significant factor in this success has been your dividend strategy. I'm curious about the implications of oil prices around $70, especially since there has been some cash burn this quarter. Your strategic investment plan seems reliant on oil remaining above $70, at least in relation to the normal course issuer bid. Would you consider adjusting your balance sheet to support some level of strategic investment in your buyback? Also, how do you view the outlook for dividend growth going forward? This might be more of a question for Dan, but I’ll leave it there.
Dan is ready to answer that question, so I will pass it on to him. However, I want to remind you that our corporate breakeven point to cover all our sustaining capital and our dividend is approximately $35 a barrel. This indicates a significant opportunity for value accretion between $35 and $70 a barrel, and our goal will be to return surplus cash to shareholders. With that, I'll let Dan discuss some of those details.
First, regarding our dividend philosophy, a reliable and growing dividend is fundamental to our overall cash return approach. We're currently at $0.60 a share, up from $0.16 when I arrived in 2018. Our goal is to continue growing this sustainably and robustly. On the topic of free cash flow, our policy is to return that to shareholders promptly through the NCIB and SIBs. As for borrowing money to fund an SIB, that hasn't been our practice before. We're comfortable with our current debt level and not looking to reduce it further. While our leverage levels are low, we typically do not borrow to execute SIBs. That said, we consider all options, but based on our history, that wouldn't be our first choice. Therefore, we plan to continue the NCIB as long as it's price-dependent. For surplus cash, we've historically focused on SIBs as our primary approach, but we will consider all avenues for returning excess cash moving forward. Based on past practices, you should have a good sense of where our priorities lie.
We will take our next question from Travis Wood with National Bank Financial.
You guys have talked a lot about the opportunities at Kearl, you're on a pretty short cycle turnaround activity there. But are there opportunities to step into a larger maintenance program and come out of the back end of that was more of a step function on potential output at Kearl? And then I have a quick follow-up.
I would like to address that from a slightly different perspective. Our capacity to increase volumes at Kearl is not solely reliant on additional maintenance. It primarily involves having the right equipment and maintenance practices in place to minimize downtime. There isn’t a backlog of activities that would create a significant improvement if we conducted a longer turnaround. Instead, we are focused on how to reduce downtime during turnarounds. In previous years, we conducted two turnarounds annually at Kearl, each lasting about 35 days, totaling approximately 70 days of turnaround time per year. We have since shifted to one turnaround per year, reducing that figure to 35 days. This year, we executed the turnaround in less than 20 days. Therefore, we have decreased our turnaround time from 70 days to 20 days. Each reduction in downtime naturally results in increased annual production. Our goal remains to further minimize scheduled downtime, while also addressing unscheduled downtime. To achieve a step change from 280 to 290, and then to 300, we are actively working on specific capital projects aimed at reaching those targets, which will entail some incremental costs. Depending on the project, certain adjustments may need to be synchronized with our regular planned turnarounds. I hope this provides some insight into our approach.
We are focusing on maintaining shorter cycle times in our planned maintenance schedule. There's a moderate increase in capital expenditures expected towards the end of the year. We're all trying to understand the growth plans and capital spending in light of the previously outlined five-year plan, which indicated no growth. However, the current performance of our assets suggests otherwise through the year-to-date. Could you clarify how we should anticipate volumes progressing into 2025?
I think we should hold off discussing specific guidance for 2025 until our call on December 12th. However, based on our track record in recent years, you can expect us to continue pushing our individual assets to achieve higher performance levels, which translates to increased volume and reduced costs. You will see these improvements reflected in our guidance for 2025 when we share it in December. Additionally, we are updating our five-year plan to capture these developments. Regarding Kearl, we aim to increase production from 280 to 300 over a certain timeline—it won't happen in just one year, but rather over several years, during which we intend to reduce costs to below $20. Cold Lake has a similar story; for example, we're ramping up Grand Rapids to potentially 15,000 to 20,000 barrels a day, while lending aims for 9,000 barrels per day next year. These initiatives will also help lower our unit costs. So the overarching theme is increasing volume while decreasing costs, but I will provide the specific figures on December 12th.
We will take our next question from Neil Mehta with Goldman Sachs.
I just had a couple on the low carbon stuff, which is, first, on renewable diesel with Strathcona coming online, we've seen in the United States really challenging economics of the assets that have come into service, and a lot of that is, I think, could be idiosyncratic to the US. But just curious on your perspective on how the mid-cycle economics of renewable diesel have evolved in Canada and what are the market conditions as you bring that asset into service?
As we talk about our renewable diesel project at Strathcona, I do like to differentiate the underlying economics of our project versus what you see or read about in the US or maybe other projects. We continue to feel very good about the economic fundamentals of our renewable diesel project. We expect to deliver solid economic returns that are accretive to our portfolio. And why is that, what's different? Well, several things. One is we are leveraging our existing scale of Strathcona refinery to allow us lower capital cost and lower operating costs once we started up, because we're constructing that project literally in the middle of the Strathcona refinery. So we're leveraging the utilities, we're leveraging rail infrastructure, we're leveraging existing staff, all that thing results in lower capital, lower operating costs. Then on top of that, the crop that we're going to be using for the feedstock oils are all locally available.
So the cost of transportation for that crop are relatively low versus what others may see in the US, for example. And then on top of that, we are using some proprietary technology from ExxonMobil, a specific catalyst that will allow us to produce a drop-in diesel product that is effective over a much wider range of temperature conditions than existing bio-diesels in the US. And so what that means is our purchasers can use this diesel, not just in the summer months, which is what's common historically, but they can run it in the winter months as well. And we'll be doing the same. We plan to use this renewable diesel at Kearl, for example, and we're planning to use it year-round. And so having that greater degree of operating flexibility allows it to not only be in higher demand because it's unique but also allows us to see a premium value for. And then lastly, I would say is the support of regulation.
We in Canada, and this is different than the US, we have the federal fuel regulations and there are other provincial considerations like in British Columbia, they have a clean fuel standard. And all of those underlying regulations also provide additional economic support. So when you put all that together, very different than in the US but quite economic for us.
And Brad, would you consider a $1 per gallon estimate for mid-cycle economics on an EBITDA basis for renewable diesel?
I'm not comfortable sharing that kind of number today, and possibly not even in the future due to commercial considerations. However, I can say that we plan to dedicate a significant amount of time at Investor Day to discuss this project in detail, including the economic aspects. We understand that what we offer is quite unique, and it may be challenging for the market and analysts to fully grasp the value proposition until we are operational. Once we are up and running, you'll read about it quarterly and observe the incremental value. Before that, we want to present a more comprehensive narrative on the subject, so stay tuned for more information.
I know we're over time but one last one for me, which is the latest on pathways. Can you just help us understand the latest in terms of the state of play, what the gating items are and what we can expect as the next key milestone around this initiative?
I outlined some summary updates earlier. The key focus now is for the pathways companies to hopefully reach an agreement with federal and provincial governments regarding the overall fiscal package and framework. Once we establish the right economic framework, we can proceed with ordering the line pipe needed for the 400-kilometer pipeline. We have already approached potential pipe suppliers for proposals on cost and timing, as this is a crucial step moving forward. We aim to advance this process as much as possible, but we need the right fiscal framework certainty to make significant investments. What you should watch for is when we finalize the terms with the governments and when we place the order for the pipe. There are many other important aspects related to the long-term success of the project. Each company is working on their individual capture projects, and there is considerable engineering and permitting work necessary for the pipeline, which includes building strong relationships with indigenous communities along the route. These discussions are ongoing. However, the most critical aspect right now is the pipe order. I remain optimistic that we will secure those terms and keep the project on track, but there is still much work ahead.
We do not have any further questions. I would like to turn the call back to Mr. Peter Shaw, Vice President of Investor Relations, for closing remarks.
Great. Thank you. So on behalf of the management team, I would like to thank everyone for joining us this morning. If there are any further questions, please don't hesitate to reach out to the IR team and we'll be happy to answer those questions. So with that, thank you, and have a great day.
This concludes today's call. Thank you for your participation. You may now disconnect.