Prepared remarks
Good day, and welcome to the Imperial Oil Fourth Quarter 2025 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Peter Shaw, Vice President of Investor Relations. Please go ahead.
Good morning, everyone. Welcome to our fourth quarter earnings conference call. I am joined this morning by Imperial's senior management team, including John Whelan, Chairman, President and CEO; Dan Lyons, Senior Vice President of Finance and Administration; Cheryl Gomez-Smith, Senior Vice President of the Upstream; and Scott Maloney, Vice President of the Downstream. 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 this conference call. Today's comments may contain forward-looking information. Any forward-looking information is not a guarantee of future performance and actual future performance, 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 fourth quarter earnings release that had been issued this morning as well as our most recent 10-K. All these documents are available on SEDAR+, EDGAR, and our website. I would ask you to refer to those. John is going to start this morning with some opening remarks and then hand it over to Dan, who's going to go through the financial update, and then John will provide an operations update. Once that is done, we will follow with the Q&A. So with that, I will turn it over to John for his opening remarks.
Thank you, Peter. Good morning, everybody, and welcome to our fourth quarter and full year earnings call. I hope everyone is doing well, and that your year is off to a good start. And as always, we appreciate you taking the time to join us this morning. Let me start by saying I'm very pleased to report another strong quarter. We generated just over $1.9 billion in cash flow from operations in the quarter and $6.7 billion for the full year. At year-end 2025, our cash on hand exceeded $1.1 billion after funding our capital program and returning $2.1 billion to shareholders in the quarter and $4.6 billion over the year including dividends and the completion of our normal course issuer bid. Our integrated business model continued to demonstrate resilience with stronger downstream profitability in the quarter, and we continue to generate substantial free cash flow over a range of oil price environments with nearly $1.4 billion generated in the fourth quarter when WTI averaged less than USD 60 and $4.8 billion generated throughout 2025. While our financial results in the quarter were very strong, operationally, we encountered extremely wet conditions at Kearl in October and additional maintenance in our Eastern manufacturing hub in December. I'll touch further on these events and how we've moved past them during the asset updates. On the project front, we achieved first production from the Cold Lake Leming SAGD project in the beginning of November. As expected, production is currently ramping up to a peak of around 9,000 barrels per day. Now I'd like to briefly highlight two identified items that affected the quarter's results. First, we announced our decision to cease production at our Norman Wells asset in the Northwest Territories by the end of the third quarter of 2026, as it reaches the end of economic life after several decades of successful operations. This somewhat accelerated end of field life versus the end of the decade resulted in a one-time charge of $320 million after tax, which is included in our fourth quarter identified items. I would like to take a moment to thank our Imperial team members and our partners that have continued to and are still supporting our efforts at Norman Wells. As we continue to supply central energy products to the North and as we move forward with the decommissioning at Norman Wells, our focus will remain on strong relationships and working closely with local communities. Separately, we completed a comprehensive review of our inventory practices across the company, informed by external benchmarking and inventory management best practices. Based on the review, we identified opportunities to further enhance our inventory management such that we can run more efficiently with optimized inventory levels while maintaining critical supplies. While we have recognized a one-time charge of $156 million after tax in our fourth quarter earnings to reflect the optimization of materials and supplies inventory, we expect to realize significant operating and working capital efficiencies going forward. Moving back to the overall results. The fourth quarter saw us continue our long track record of delivering industry-leading returns to shareholders. We paid $361 million in dividends and completed the accelerated share repurchases under the NCIB in mid-December, with share repurchases totaling $1.7 billion in the quarter. In total, we returned $4.6 billion of cash to shareholders in 2025, exceeding $23 billion over the past five years. I'm also pleased to share that this morning, we declared a dividend of $0.87 per share, payable on April 1, 2026. The increase of $0.15 per share is the largest nominal dividend increase in company history. To provide some context, 10 years ago, our quarterly dividend was $0.14 per share. As we move into 2026, we remain focused on our core strategy of being the most responsible operator, maximizing the value of existing assets, progressing our restructuring plan, and continuing to deliver industry-leading shareholder returns. This strategy has allowed us to increase our quarterly dividend per share by 295% and repurchase 34% of our outstanding shares since 2020. With that, I'll now pass things over to Dan to walk through the financial results in more detail.
Thank you, John. I'll begin by covering the fourth quarter identified items that John just mentioned and provide additional context. First, consistent with our economic decision to accelerate the cessation of production at Norman Wells by several years, we have booked an earnings charge of $320 million. This charge includes a $108 million impairment charge to reduce the net book value of the asset to zero; the remaining $212 million reflects related contractual obligations, with about half expected to be paid later in 2026 and the other half payable over a number of years going forward. Second, the optimization of our materials and supplies inventory resulted in an unfavorable earnings impact of $156 million after tax. While this one-time charge in the fourth quarter did not impact our operating cash flow, it did impact our simplified non-GAAP measures of unit cash operating cost at Kearl and Cold Lake. John will discuss these impacts in his asset updates. Turning to our underlying fourth quarter results. We recorded net income of $492 million. Excluding the two identified items I just described, net income for the quarter was $968 million, down $257 million from the fourth quarter of 2024, driven primarily by lower upstream realizations. When comparing sequentially, fourth quarter net income is down $47 million from the third quarter of 2025. When excluding identified items, net income is down $126 million, again, primarily due to lower upstream realizations. Now shifting our attention to each business line and looking sequentially. Upstream lost $2 million, down $730 million from the third quarter. However, excluding identified items, net income of $418 million is down $310 million, primarily due to lower realizations. Downstream earnings of $519 million are up $75 million from the third quarter. Excluding identified items, net income of $564 million was up $121 million, mainly due to higher margins. Our Chemical business generated earnings of $9 million, down $12 million from the third quarter. Excluding identified items, net income of $20 million is essentially flat as we continue to operate in bottom cycle margin conditions. Moving to cash flow. In the fourth quarter, we generated $1.918 billion in cash flows from operating activities. Excluding working capital effects, cash flows from operating activities for the fourth quarter were $1.260 billion, which included an unfavorable $325 million related to the identified items previously discussed. Taking this into account, normalized cash flow from operating activities, excluding working capital effects, was about $1.585 billion in the quarter. As John mentioned, we ended the quarter in a strong cash position with over $1.1 billion of cash on hand. Shifting to CapEx. Capital expenditures in the quarter totaled $651 million, $228 million higher than the fourth quarter of 2024 and $146 million higher than the third quarter of 2025. Full-year CapEx was $2 billion, consistent with our guidance, up from $1.9 billion in 2024. In the upstream, fourth quarter spending of $508 million focused on sustaining capital at Kearl, Syncrude, and Cold Lake. In the downstream, fourth quarter CapEx was primarily spent on sustaining capital projects across our refinery network. Shifting to shareholder distributions, we continue to demonstrate our long-standing commitment to distribute surplus cash to shareholders, returning $4.6 billion over the course of 2025, including $1.4 billion of dividends and $3.2 billion in share repurchases. Looking ahead to 2026, and as John already mentioned, we announced a first quarter dividend of $0.87 per share this morning. This increase of just over 20% reflects our confidence going forward and demonstrates our long-standing commitment to deliver a reliable and growing dividend. Now I'll turn it back to John to discuss the company's operational performance.
Thanks, Dan. I'll now take the next few minutes to share the key highlights from our operating results. Upstream production for the quarter averaged 444,000 oil equivalent barrels per day, down 18,000 oil equivalent barrels per day versus the third quarter and down 16,000 versus the fourth quarter of 2024. That said, for the full year, we achieved the highest annual production in over 30 years at 438,000 oil equivalent barrels per day. And in fact, our liquids production was the highest ever. I'll now cover each of the assets, starting with Kearl. Kearl's quarterly production was 274,000 barrels per day gross, down 42,000 barrels per day versus the record quarterly production in the third quarter. As I mentioned in my opening comments, we experienced some extremely wet conditions in October that prevented us from mining per the optimized sequence in our plan. This temporarily impacted our ability to access some of the higher quality ore we were planning to mine in the quarter. However, as conditions improved, the team was able to return to normal operations. In December, Kearl produced 298,000 barrels per day, achieving its second highest monthly production ever. I was pleased to see those production levels even as temperatures dropped for the last two weeks of the year. Given the performance in December, the fact that 2025 had more days over 300,000 barrels per day than any previous year and the good start to 2026, I have high confidence in our annual guidance for the year and in the path to our target of 300,000 barrels per day. Turning to Kearl's unit costs. Kearl's fourth quarter unit cash cost of USD 23.84 included approximately USD 4.50 impact due to the inventory optimization. Kearl's 2025 full year unit cash costs of $19.50 was also impacted by the inventory optimization by about USD 1. Excluding these impacts, Kearl's unit cash costs were well below USD 20 for the year and well on our path of achieving USD 18 per barrel. This year, we completed the K2 turnaround, advancing our plan to double our turnaround intervals to an industry-leading four years. In 2026, we will complete the program by undertaking comparable work on the other train at K1. In turnaround interval extension, along with other initiatives such as the productivity and reliability projects and secondary recovery investments underpin our strategy to maximize value from our existing assets. Moving next to Cold Lake highlights. Cold Lake's quarterly production averaged 153,000 barrels per day, up 3,000 barrels per day versus the third quarter of 2025. First production from the Leming SAGD project was achieved in November. As we speak, the project is producing approximately 4,000 barrels per day, which gives us confidence in the ramp towards 9,000 barrels per day over the course of the year. Moving to Cold Lake unit cash costs, which were USD 16 during the fourth quarter and impacted by approximately USD 1 per barrel due to the inventory optimization. On a full-year basis, Cold Lake achieved a unit cash cost of USD 14.67, which was impacted about $0.25 due to inventory optimization. The Grand Rapids SA-SAGD continues to perform well, Leming SAGD is ramping up, and continuous efforts to improve our unit cost structure give us the confidence in reaching our unit cash cost target of USD 13 per barrel in 2027. Activities in Cold Lake in 2026 include high-value infill drilling and early development of our next SAGD project, which will be at Mahihkan. This will be our second commercial solvent-assisted SAGD operation and follows the successful startup of Grand Rapids in 2024. Mahihkan SA-SAGD start-up is anticipated in 2029 with a peak production of 30,000 barrels per day. And to round out our Upstream, I'll cover Syncrude results. Imperial's share of Syncrude production for the quarter averaged 87,000 barrels per day, which was up 9,000 barrels per day versus the third quarter and up 6,000 barrels per day versus the fourth quarter of 2024. Higher volumes reflect turnaround optimization and stronger mine performance. This quarter, the interconnect pipeline enabled Syncrude to produce approximately 7,000 additional barrels per day, our share of Syncrude's suite premium production. Now let's move on and talk about the Downstream. In the fourth quarter, we refined an average of 408,000 barrels per day, equating to a utilization of 94%. Compared to the third quarter, refinery throughput was down 17,000 barrels a day due to additional maintenance in our Eastern manufacturing hub in December. The maintenance was completed in December and will have no impact on our 2026 throughput. For the full year, our refineries achieved a throughput of 402,000 barrels per day, equating to a utilization of 93%. That throughput was up versus the 399,000 barrels per day achieved in 2024. With the successful completion of the Sarnia turnaround in the fourth quarter, the execution of all downstream turnarounds in 2025 occurred ahead of schedule and below budget. We also started the Strathcona renewable diesel facility midyear. The facility is running well and has reduced our reliance on high-cost imported products and strengthened our competitive domestic supply. We continue to optimize production at the facility based on hydrogen availability. Looking ahead, we remain focused on delivering industry-leading operational performance while enhancing logistics and processing flexibility to further improve our competitive position and the long-term results. Turning now to Chemicals. Earnings in the fourth quarter were $9 million, down $12 million from the fourth quarter of 2024, impacted by the inventory optimization. Excluding this impact, earnings were consistent with the fourth quarter of 2024. And although market conditions remain challenging, our integration with the Sarnia refinery continues to add value and provides resilience in a low price environment. In closing, 2025 was another strong year for Imperial. We generated approximately $4.8 billion in free cash flow and returned $4.6 billion to shareholders through dividends and buybacks. Operationally, we achieved record annual volumes in our upstream and made further progress on our unit cash costs at Kearl and Cold Lake. We also successfully completed our planned turnarounds across all business lines. As we look to 2026, our priorities remain clear and consistent, continue to profitably grow volumes, further lower unit cash costs, and increase cash flow generation. We remain committed to optimizing production across our asset base, progressing towards our volume and cap cost targets, driving greater efficiency, and delivering unmatched industry-leading shareholder returns. We continue to prioritize a reliable and growing dividend, and we will continue to return surplus cash in a timely manner. Our restructuring that was announced in September is progressing on plan and will advance our long-standing strategy of maximizing the value of our existing assets. In closing, let me say, the combination of our financial position, strong operating results and our strategic initiatives to further strengthen efficiency and effectiveness gives me confidence in the future of Imperial and our ability to further enhance our industry-leading position. As always, I want to thank our employees for their hard work and dedication throughout the year. And I would like to thank all of you once again for your continued interest and support. And now we'll move to the Q&A session. I'll pass it back to Peter.
Thank you, John. As always, we'd appreciate it if you could limit yourself to one question plus a follow-up. And with that, operator, could you please open up the line for questions?
Questions and answers
Our first question will come from Dennis Fong with CIBC World Markets.
I appreciate the thorough ops update in the prepared commentary. My first question is focused on Kearl. So you highlighted obviously wet conditions driving some of the production impacts early in the quarter. Do you mind discussing some of the learnings or even implementation of different, we'll call it, maintenance or standard operating procedures that could help mitigate kind of such, call it, downtime or inaccessibility to certain regions in the mine on a go-forward basis, especially as we think about obviously continued operations?
Thanks, Dennis. Let me take a step back. You are correct in highlighting our winter operations and the improvements we've made. Wet conditions also fall into this category. Weather is a reality we must navigate efficiently. Referring to the fourth quarter, the primary reason for lower production was the unusually wet weather during that time. In fact, we experienced more rain in just a few days in October than we typically do all summer. This significantly affected our equipment mobility in the mine and delayed our access to high-quality ore. We took some time to recover from this situation, which carried into November. However, we saw a strong recovery in December, achieving our second-highest monthly production in the asset's history, despite colder weather at the end of the month. There should be no lasting impact from this event, but we will certainly examine ways to enhance the design and drainage of our roads to better handle extreme conditions in the future. Overall, it was indeed an extreme event, and we'll learn from it. I'm very optimistic about our plans at Kearl, and we are confident in our production guidance of 285,000 to 295,000 this year. We are on a path to reach 300,000, focusing on turnaround optimization, productivity, reliability improvements, and higher recovery rates. It was also encouraging to see that in 2025, we had more days surpassing 300,000 barrels a day than in the past. We will take time to learn from this, but we remain very confident about Kearl and our future plans.
Great. Really appreciate that, that thorough answer. My second question turns my attention, frankly, over to Cold Lake. You mentioned Mahihkan as the next project for SA-SAGD. Can you give us a little bit more of a background there? Are you targeting a similar reservoir to the Grand Rapids operation? How are you thinking about production ramp-up? And then what is the impact potentially to field SOR and operating costs once that project is wrapped up?
Yes. Thanks, Dennis. There are a couple of points to consider. The Grand Rapids SA-SAGD operates in a different reservoir, specifically the Grand Rapids reservoir, which is shallower than the Clearwater where we've produced for nearly 50 years at Cold Lake. The advantage of that project was the opportunity to explore a new reservoir and test a new technology, which, as we've mentioned, has performed exceptionally well. The ramp-up was quicker than we expected, and it's maintained a higher production level for longer than anticipated. We're benefiting from the technology and have opened a new reservoir. Regarding Leming SAGD, this project returns to the Clearwater, the original reservoir where we started production and where most of our output currently comes from. The beauty of this is it goes back to where we initiated our pilot project at Cold Lake 50 years ago, allowing us to capture the remaining resources in that area. Mahihkan also utilizes the same SA-SAGD technology as Grand Rapids but operates within the Clearwater reservoir. We are very encouraged by the results from Grand Rapids and the performance of the technology. Our familiarity with the Clearwater reservoir gives us confidence in Mahihkan SA-SAGD. We are beginning to invest in that now, with plans to start production in 2029 at a rate of 30,000 barrels per day. We are optimistic about this project and pleased to see progress in getting it underway.
And our next question will come from Manav Gupta with UBS.
Congrats on that almost 21% dividend hike, better than expected. So my first question is more on how you're thinking about shareholder returns and does that leave you enough cash for a possible NCIB later in the year? And then a quick second follow-up, which I'll ask straight up is refining came in much stronger than expected. Your refining earnings have been very resilient. And if you can talk a little bit about Imperial and the overall refining macro, and I'll turn it over.
Thank you, Manav. Regarding the dividend, I appreciate your feedback. The dividend reflects the management and board's confidence in the company’s strategies and plans to create value. We are focused on maximizing value, growing profitability, lowering our unit costs, and increasing cash flow, and we are very confident in achieving these goals, which is evident in the 21% dividend increase. We have been consistently increasing the dividend over the past two years, demonstrating our financial strength, the low breakeven of our business, and our strategy of using surplus cash to buy back shares, which has reduced our outstanding shares by 34% since 2020. We have conducted thorough testing against low price scenarios and remain confident in our ability to sustain this level of dividend and the resilience of our business. Our capital allocation strategy will remain unchanged, prioritizing a reliable and growing dividend. We have a proven track record of over 100 years of dividends, marking our 32nd year of growth. Our plans foresee generating substantial free cash flow across various prices and scenarios, and we will continue to return surplus cash flow promptly, as evidenced this year when we generated $4.8 billion in free cash flow and returned $4.6 billion to shareholders. This approach and strategy will persist.
I want to add that we don’t really consider the dividend increase—which amounts to a few hundred million over the year—as influenced by current market conditions. As John mentioned, it reflects a longer-term outlook and our confidence in the business, rather than short-term events. Our surplus cash is affected by short-term price fluctuations, particularly in commodity prices, but we remain dedicated to the NCIB and plan to renew that program at the end of June. The extent of that program and any additional cash distributions will depend on commodity price movements. However, we don’t view the dividend and NCIB as competing interests; instead, we see them as complementary.
I appreciate your question regarding our downstream operations. We are confident in this segment of our business, as evidenced by our quarterly results. Our focus remains on enhancing and maximizing profitability in our downstream area, utilizing our coast-to-coast network, our advantageous assets, and our strong brand loyalty programs that help us distribute products into high-value markets. We are also investing in our logistical flexibility to improve our position and capture more high-value markets. Looking ahead, we anticipate strong liquid demand in Canada. The demand mix may shift somewhat, especially as biofuels demand rises, and we are well-positioned to meet that need with our Strathcona renewable diesel project and the co-processing of vegetable oil feedstocks at our refinery. We expect a stable market for jet fuel and distillates moving forward, and we are also prepared for that. While gasoline demand may moderate due to electric vehicles, we have strategies in place to increase our gasoline market share. Overall, we are confident in the assets we possess and our ability to adapt as fuel demand evolves over time. Now, I will pass it to Scott to discuss the performance in the quarter specifically.
Thank you, John, and thank you, Manav, for the question about the downstream segment. I want to share a couple of specific insights regarding the fourth quarter. Throughout the quarter, refining margins varied, but they remained robust overall, with particularly strong performance in November, which coincided with our highest utilization rates. This significantly boosted our returns. Additionally, we observed that distillate refining margins were notably high. As John pointed out, we leveraged our operational flexibility to adjust refining output and enhance distillate production, allowing us to capitalize on the favorable distillate margins during the fourth quarter. The combination of these factors contributed to strong refining earnings for us in that period.
And the next question will come from Menno Hulshof with TD Cowen.
My question. Maybe I'll just start with one on optimization of materials and supplies inventory. Can you maybe elaborate on the scope of this optimization work? And what practically changes in terms of procurement and inventory management looking forward?
Thank you for the question. We reported a charge related to inventory optimization this quarter. The optimization efforts we are implementing present a significant opportunity for us to manage our materials and supplies more effectively across the company by using a consistent approach and leveraging technology. Our strategy is informed by external benchmarking and best practices not just from the energy sector, but from other industries as well. We conducted a thorough analysis of our inventory utilization, including the movement and age of items in stock, the costs of maintenance versus the benefits of holding them, and the available technology solutions for managing inventory better. This has revealed a significant opportunity for increased efficiency and effectiveness, positioning us as an industry leader. The improvements we are making include enhanced analysis and better optimization of materials that need to be in inventory while still ensuring we maintain critical supplies. We are rolling out a standardized approach across all our sites, which will enhance visibility into inventory for our operations and improve how we utilize it. This will lead to simpler and more efficient processes, with fewer storage and warehouse requirements, as well as fewer material accounts. The use of technology and best practices allows for better visibility and reduces overall system complexity while maintaining the reliability and integrity of our inventory. Ultimately, this reflects our commitment to applying technology and looking beyond our industry to achieve best-in-class standards.
Terrific. That's very helpful. And then maybe the second question, more so related to the outlook for Western Canadian heavy oil. There's clearly a lot of moving parts at the moment, including increased risk of Venezuelan supply and rising apportionment on the Enbridge Mainline, which is catching a lot of people by surprise. But what are you seeing on the ground in terms of shifting fundamentals for Canadian heavies since the Venezuelan news first broke, if anything at all?
We are not observing any significant changes, to be honest. We are staying well informed about the situation in Venezuela and monitoring it closely. However, we are not seeing any substantial impact right now. There was a slight widening of the differential initially due to discussions about the 50 million barrels heading to the Gulf Coast, which appeared to be an overreaction that has since stabilized. In terms of the long-term outlook for Venezuela, it remains uncertain, as several factors must be addressed before we can expect any significant production increases, such as stability, investment conditions, legal and commercial frameworks, and infrastructure improvements. We are keeping a close eye on that. Our primary focus is on Imperial and our balanced integrated business model, which has a low breakeven point that ensures our resilience in various macroeconomic environments. We are not staying idle; we are working on enhancing our competitive position by increasing profitable volumes, reducing costs, and boosting cash flow. That is our area of control, and that is where we are concentrating our efforts. Looking ahead, I believe Imperial will hold a strong competitive position, and Canada will play a significant role in the global supply-demand balance, regardless of the developments in Venezuela over time.
And the next question will come from Patrick O'Rourke with ATB Capital Markets.
Maybe just to go back to Kearl here and you talked about the high output in December. How that has sort of continued on into January here? I know whether from time to time impacted this quarter; it's impacted quarters in the past. I think Fort McMurray has had about a 50-degree swing in temperature this month. And then if you could sort of benchmark those 300,000 barrels a day high output days, what's sort of the goal as a percentage of the days for 2026 or total nominal days you would be looking to hit this year?
Thanks, Patrick. I have Cheryl here with me, and she is the expert on all things Kearl. I'm going to hand this over to Cheryl.
Thank you for the question. I'll address the first part regarding cold weather protocols. We have discussed this before, and I want to emphasize that we are applying those lessons and observing the benefits. In December, and similarly in January, the protocols are functioning as expected. Reflecting on our recovery in the fourth quarter as we move into the first quarter, technology has been key. We are utilizing our ore selectivity process to ensure we are strategically prioritizing our shovels and accessing high-quality ore. Additionally, in the fourth quarter, we secured regulatory approval for a secondary process at our chemical facility for fines management. Looking ahead, we aim to focus on secondary and tertiary recovery. I am confident because we have a clear path forward, and as I've mentioned before, we are building on a solid foundation rooted in a culture of continuous improvement and responsible operation. Our ongoing emphasis on facility integrity, risk management, and environmental stewardship remains critical. We are also concentrating on productivity and reliability through enhanced mine planning and fleet optimization. Another focus is on shortening turnaround times while progressing toward achieving a turnaround every four years. Furthermore, we will introduce our float column cell projects by the end of this year, which will enhance fines management and improve bitumen recovery. Importantly, we anticipate that our end goal will exceed 300,000 barrels per day. We constantly challenge our organization to improve, and we believe there is potential for output above that figure. We have a roadmap in place, established credibility, and a history of outperforming expectations at Kearl, indicating that this is just the continuation of our ongoing journey.
Okay. Great. And then just on the downstream. I noticed that market capture was up slightly. You mentioned the flexibility of the kit. As we approach 2026, if diesel and distillate prices soften a bit, I’m curious about what you're observing on the ground in those local markets looking ahead to 2026.
Thanks, Patrick. I will hand that one off over to Scott.
Sure. Thanks, Patrick. Throughout the fourth quarter, we experienced some fluctuations in refining margin, which has decreased slightly from the peak we reached in November. However, we are still seeing positive margins and are running our units at full capacity to take advantage of that margin. As we've mentioned before, our Downstream business benefits from assets located across the country, enabling us to address demand, particularly where margins are favorable in various markets. Coupled with our logistics network, which allows us to efficiently deliver products to the marketplace, we believe this is a resilient business. Even with the slight decline in margins, we continue to see it as a profitable venture that will generate positive returns. When the market shifts based on global supply and demand dynamics, we will be positioned to capture enhanced margins, similar to what we achieved in the fourth quarter of this year.
And the next question comes from Neil Mehta with Goldman Sachs.
The first question I had is just around Syncrude. It was a good quarter here from a production standpoint. Just for perspective, on where we are on the journey at Syncrude. Any things that you and your partner are focused on there? And while we're on the topic of Syncrude, any thoughts on realizations in a pretty good distillate market right now?
We don't have much to add about Syncrude. We are happy to see the performance improvements there over the past few years, and we believe we have contributed to that as a partner. We apply what we've learned at Kearl to our work at Syncrude, and it's clear that the operator has been enhancing their performance. We have been involved with Syncrude since the beginning, being the only owners still present, and we've gained valuable insights from it that we've applied at Kearl. I'm glad to see these performance improvements and our significant role in supporting this progress moving forward. Now, I'll turn it over to Scott regarding the diesel question.
Yes. As we look at the distillates market, the global supply-demand balance is really created supply/demand imbalances in certain locations. And so that's really what's pushed up a little bit more on the distillate margin even versus the gasoline margins that we've seen over the last several months. And so as I mentioned before, we're uniquely advantaged to be able to tune our refinery to make sure we're putting the output, matching the margins that are available in the marketplace and leveraging our logistics to get there. The other factor that is starting to play into the Canadian marketplace is the onset of additional renewable diesel, and our unique position there by producing renewable diesel at our Strathcona refinery has enabled us to bring that locally produced product to market and blend into our diesel sales throughout the year with our technology to be able to blend that year-round. And so we're seeing the benefit of that versus having to import additional renewable diesel from other markets. And so that's the other thing that's supporting our distillate plans and margin capture in the downstream.
And the next question will come from Doug Leggate with Wolfe Research.
I understand there have been many challenges, so I want to revisit a few points for clarification. There is a lot of focus on Kearl today. Could you help us understand the sustainable production capacity at Kearl, excluding weather impacts?
Thanks, Doug. Our guidance is focused on 2026, aiming for 285,000 to 295,000 barrels per day. I'll pass it over to Cheryl for further details.
Sure. And I'll go back to the 300 kbd is our target for this year 285,000. Obviously, we're going to continue to focus on winterization and maybe a little bit more color on that, which is really around maximizing the reliability of our existing kit and closing the gap to targeted areas. One of the areas I've mentioned before is we're continuing to debottleneck our hydro transport line. That's building capacity on the front end. The other thing, as I think about mining and specifically for 2026, at the end of this year, we'll be moving into the East pit. So we've got opportunity both from the front end, we're debottlenecking the facilities and, of course, working on water management and tailings throughout this process. So what I would say is we've got good line of sight and a well-defined path to get to 300 kbd. I said that will be our target for this year. But like I said, at 285,000 and continue to grow 300,000 plus.
To clarify, there’s nothing critical happening; it was just an isolated weather event in the fourth quarter. There’s no need for concern.
That's right. So wet weather in October is behind us. Yes, sir.
No, we remain very confident, Doug. We remain very confident in the 285,000 to 295,000 target for this year, the path to 300,000. And as Cheryl said, we see potential upside beyond that.
And that does conclude the question-and-answer session. I'll now turn the conference back over to Peter Shaw, Vice President of Investor Relations for closing remarks.
Thank you. And so on behalf of the management team, I'd like to thank everyone for joining us this morning. If there are any further questions, please don't hesitate to reach out to the Investor Relations team. We'll be happy to answer your questions. With that, thank you very much, and have a great day.
Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day.