管理層發言
Good day, and welcome to the Imperial Oil Second 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, and welcome to our second 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, 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 and operating results can vary materially depending on the number of factors and assumptions. Forward-looking information and the risk factors and assumptions are described in further detail on our second quarter earnings release that we issued this morning as well as our most recent Form 10-K. All these documents are available on SEDAR+, EDGAR, and our website.
So I'd ask you to reference those. John is going to start with some opening comments and then hand it over to Dan, who's going to provide a financial update, and then John will provide an operations update. And once that's done, we will follow with a Q&A session. So with that, I will turn it over to John for his opening remarks.
Thank you, Peter. Good morning, everybody, and welcome to our second quarter earnings call. I hope everyone is doing well. I'm really pleased to kick off my first earnings call with strong results for the second quarter. We generated cash flow from operations of nearly $1.5 billion and ended the quarter with approximately $2.4 billion of cash on hand, and we achieved these results while successfully completing significant planned turnaround activity across our integrated portfolio. At the macro level, our upstream price realizations continued to benefit from improved egress in Western Canada. While in the downstream, margins were supported by higher crack spreads since the last quarter. Our resilient business model and strong financial position have allowed us to remain focused on delivering safe, reliable operations while executing on our business plans and strategy despite significant market volatility.
I also want to highlight some major project milestones we achieved in the quarter. At Kearl, we completed work that doubles the turnaround interval at one of our two trains. The next turnaround of the K2 train is now scheduled for 2029. At Cold Lake, we finished construction of the new SAGD redevelopment project at Leming and initiated steaming in the final days of the quarter, setting us up for first production late this year. At Strathcona, construction of the renewable diesel facility was completed, and I'm very pleased to share that first production of renewable diesel began in July. When I think broadly about the outlook for future investment, I'm very encouraged by the constructive dialogue and level of engagement with the federal government and the work that is now ongoing to potentially support industry and major projects in Canada. It's still early, but initial conversations have been encouraging.
And finally, our philosophy of returning surplus cash in a timely manner is unchanged. As such, I'm pleased to announce that we've chosen to accelerate share repurchases through our NCIB once again and plan to complete the program by year-end. And on that note, I'll turn it over to Dan to discuss our financial results in more detail.
Thanks, John. Starting with financial results for the second quarter, we reported net income of $949 million, down $184 million from the second quarter of 2024, primarily driven by lower upstream realizations, partly offset by higher production volumes. When comparing sequentially, second quarter net income is down $339 million from the first quarter of 2025, primarily driven by lower upstream realizations and downstream margin capture. Now shifting our attention to each business line and looking sequentially. Upstream earnings of $664 million are down $67 million from the first quarter, primarily due to lower realizations, partially offset by higher volumes. Downstream earnings of $322 million are down $262 million from the first quarter, mainly reflecting lower margin capture. Our Chemical business generated earnings of $21 million, down $10 million from the first quarter. Moving on to cash flow.
In the second quarter, we generated $1.465 billion in cash flows from operating activities. Excluding favorable working capital effects of $52 million, cash flows from operating activities for the second quarter were $1.413 billion, down $95 million from the second quarter of 2024, in line with earnings. As John mentioned, we ended the quarter in a strong position with about $2.4 billion of cash on hand. Shifting to CapEx. Capital expenditures totaled $473 million in the second quarter, $11 million higher than the second quarter of 2024, primarily due to project timing. In the upstream, second quarter spending of $353 million focused on sustaining capital at Kearl, Syncrude, and Cold Lake, and the downstream second quarter spending related primarily to our renewable diesel project at Strathcona. Now in terms of shareholder distributions, we paid $367 million of dividends in the second quarter of 2025.
On June 23, we announced the renewal of our normal course issuer bid, which allows us to purchase up to 5% of our outstanding common shares over the next 12 months. We started purchasing ratably in July. And as John noted, we plan to accelerate our purchases and complete the program prior to year-end, in line with our long-standing practice of returning surplus cash to shareholders. Lastly, this morning, we announced a third quarter dividend of $0.72 per share, in line with our second quarter dividend. Now I'll turn it back to John to discuss our operational performance.
Thanks, Dan. Now I want to take the next few minutes to share the key highlights from our operating results. Upstream production for the quarter averaged 427,000 oil equivalent barrels per day, up 9,000 barrels per day versus the first quarter and up 23,000 barrels per day versus the second quarter of 2024. This marks the highest second quarter production in over 30 years. I am extremely pleased to see our asset teams deliver such strong results in the quarter that included turnaround activity at both Kearl and Cold Lake. For the first half of the year, we achieved the highest ever production from our heavy oil assets and are well-positioned for a strong second half of the year. Now moving to Kearl. Kearl set a record for second quarter production, averaging 275,000 barrels per day gross, up 19,000 barrels per day versus the first quarter, and we beat our previous second quarter record by 20,000 barrels per day gross.
This year's Kearl planned turnaround on the K2 train was a major success. The turnaround was completed safely and successfully in under 19 days. The team also completed work to enable a doubling of the turnaround interval. As we outlined at our Investor Day, turnaround optimization is one of the key components of our plan to increase production to 300,000 barrels per day. Turning to costs, Kearl's unit cash costs in the quarter were USD 18.86 per barrel. We realized a decrease of nearly USD 2 per barrel compared to the first quarter, including the expense of our planned turnaround. When compared to the second quarter last year, we achieved a decrease of over USD 3 per barrel. The second quarter's performance contributed to our year-to-date unit cash costs of USD 19.70 per barrel, nearly USD 2 per barrel lower versus the first half of 2024. With the turnaround behind us and our outlook for higher volumes in the second half of the year, we expect to make further progress on unit cash cost reductions.
Moving to Cold Lake, Cold Lake production averaged 145,000 barrels per day, including 23,000 barrels per day from Grand Rapids. Now this is down 9,000 barrels per day versus the first quarter of 2025, primarily driven by a planned turnaround at Mahkeses, which was completed safely and well ahead of schedule. Another highlight is reaching a key milestone at our Leming SAGD redevelopment project. The project started steam injection in June with first oil expected late this year and ramping up in 2026. The Leming SAGD project is an excellent example of how we are maximizing value from our existing assets. This is a niche opportunity for us to develop additional resource at the original Cold Lake pilot location with 9,000 barrels per day at peak production. I also want to take a moment to provide a brief update on the EBRT pilot project at our Aspen Lease, which utilizes transformative new solvent technology that's designed to unlock low-cost, low emissions volume growth from our significant high-quality undeveloped in-situ opportunities.
We completed several key construction milestones this quarter and remain on track for an early 2027 start-up. And next, I want to quickly cover Syncrude. Imperial's share of Syncrude production for the quarter averaged 77,000 barrels per day, which was up 4,000 barrels per day versus the first quarter and up 11,000 barrels per day versus the second quarter of 2024. Syncrude continued to utilize the interconnect pipeline to import bitumen and gas oil to ensure high upgrader utilization, and this enabled an additional 8,000 barrels per day, our share of Syncrude sweet premium production. In early September, I'll note that Syncrude will begin its 50-day coker turnaround with a forecasted annual impact of 6,000 barrels per day Imperial share. And now moving to the downstream. We refined an average of 376,000 barrels per day, reflecting a utilization of 87%. This compares to 387,000 barrels per day a year ago and 397,000 barrels per day in the first quarter.
Lower throughput reflects higher unplanned downtime and the impacts from planned turnarounds at Strathcona and Nanticoke compared to our first quarter of 2025. During the quarter, we completed construction and commissioning of the renewable diesel facility located at the Strathcona refinery. And I'm very excited to announce the successful start-up and first production in July. As we've said before, we now plan to optimize production around supplier capabilities. This project at its peak generated close to 600 jobs and was completed safely while achieving industry-leading cost and schedule performance. The project provides a new lower emissions offering to Canada's transportation sector and aligns with our long-term strategy of advancing responsible energy solutions while delivering strong returns. This project combines many of our competitive advantages, including integration, proprietary technology, scale, advantageous logistics, and proximity to feedstocks and markets.
And when you couple these advantages with the growing demand for renewable diesel in Canada, driven by layered provincial and federal regulations and increasing demand from customers to meet their own emissions reduction goals, we are confident in robust margin uplift as we ramp up in line with third-party hydrogen supplies. I would just like to thank our planning, project, and operations teams that have worked extremely hard to get this project across the finish line. And I'd also like to thank the governments of Alberta and British Columbia as well as Strathcona County for all of their support. Moving to petroleum product sales. Petroleum product sales in the quarter were 480,000 barrels per day, which is up 25,000 barrels per day versus the first quarter of 2025 and up 10,000 barrels per day versus the second quarter of 2024, enabled by the Trans Mountain pipeline expansion. Turning to Chemicals, earnings in the second quarter were $21 million, down $10 million versus the first quarter.
And compared to the second quarter of 2024, earnings were down $44 million, driven primarily by soft polyethylene margins and the aromatics reporting shift to our downstream segment, which occurred in the third quarter of 2024. Now while we're at the bottom of the cycle, we see bottom of cycle conditions, and those have persisted, the business continues to contribute positively given strong operational performance and the integration with the Sarnia refinery. So to wrap up, I'm very pleased with the quarter. We generated about $1.5 billion of cash from operating activities while successfully executing on significant planned maintenance, and we set a new second quarter production record in our upstream. Since my return to Imperial, it's been wonderful to reconnect with the organization and the initiatives across the business that will drive continued momentum and growth, specifically the disciplined development and deployment of technology to support the execution of our strategy, maximizing value from our existing assets and supporting our growth investment opportunities.
This quarter was a great example of the team finding ways to win, and winning starts with taking full advantage of our unique competitive advantages, advantages others do not have. During the quarter, it was fantastic to achieve a significant milestone in our downstream with the completion of the renewable diesel facility and first production just a couple of weeks ago. And at Cold Lake, we completed, as I mentioned, the Leming SAGD project and have begun steaming the reservoir. I'm looking forward to first oil late this year. It was great to meet many of you at our Investor Day in mid-April, and I've really enjoyed connecting with more of you in recent meetings and conferences, and I'm very excited about the path forward for Imperial, and I'm looking forward to further engagement with you in the coming months. As I look ahead to the second quarter of the year, we've got momentum with significant turnaround work behind us, and we'll continue to focus on safe and reliable operating performance while progressing our growth initiatives.
As we announced this morning, we plan on accelerating share repurchases under the normal course issuer bid. I'm pleased to say that our strategy of responsibly increasing cash flow and delivering unmatched shareholder returns remains alive and well. To wrap up, I'm extremely proud of what our team has delivered, and I want to recognize and thank them. And as always, I'd like to thank you for your continued interest and support. And with that now, we'll move to the Q&A session. I'll pass it back to Peter.
Thank you, John. As always, we'd appreciate 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 lines for questions.
分析師問答
Our first question comes from Manav Gupta with UBS.
My first question, it relates to the decision to accelerate the NCIB, can you help us understand why this decision was taken? And in terms of cash balances, how confident are you that you can complete this entire NCIB without leveraging up before year-end?
Thank you, Manav. We appreciate your question. We feel very comfortable and confident about our position. We have examined commodity prices, our business performance, the cash we have available, and our projections for free cash flow. We are confident in our ability to accelerate the NCIB without leveraging our balance sheet, relying solely on free cash flow. This approach aligns with our strong commitment to shareholder returns, which is reflected in our track record. Since 2020, we have returned $20 billion to shareholders, with $15 billion coming from share buybacks. We are extremely confident that we will continue this practice using free cash flow.
My follow-up is a bit challenging, but I will ask it anyway. Looking at the year-to-date relative outperformance, you have significantly surpassed your peers. You are both an absolute and relative winner. Sometimes, this leads people to question how long this can last. I would like to understand, in your opinion, why the management believes the conditions remain strong for our investment case for Imperial, and how it could continue performing well both absolutely and relatively as we move forward, despite the strong outperformance so far this year.
I believe our strategy to succeed is centered on responsibly increasing cash flow and delivering exceptional shareholder returns. We have a solid foundation for this and have proven it through our past performance. Our focus is on maximizing the value of our current assets. We're making improvements at Kearl and Cold Lake and selectively investing in growth opportunities at those sites, including Kearl, Cold Lake transformation, and Strathcona renewable diesel. We're also advancing future strategic growth, particularly with our EBRT pilot, which we are optimistic will yield significant results alongside our portfolio of heavy oil in situ assets. Our winning strategy remains strong, and we have competitive advantages in terms of scale, integration, technology execution, and having the best team in the business. Combining these advantages with our favored assets leads to future value creation, which allows us to continue delivering exceptional shareholder returns. We are confident that our past performance is rooted in this strategy, along with our teams and technologies, and we intend to maintain this momentum moving forward.
And just for the record, we completely agree with you. We believe the setup is very strong for your stock to continue to work.
And the next question comes from Dennis Fong with CIBC World Markets.
Congratulations on a strong operational quarter despite planned maintenance. My first question goes a little bit into the technology side. You've been operating an autonomous fleet now for a little while. And I was hoping to dive into some of the insights that you might have gained from running and deploying this technology. Can you outline some of maybe the surprising benefits you've observed thus far with AHS deployment on your existing asset base?
Thank you for your question, Dennis. When I think about the autonomous haul system, I'm really proud of what the team has achieved. It’s part of our broader technology strategy, and technology is one of our key competitive advantages. For us, technology is fundamental to our operations; we consider ourselves more than just an oil and gas company or an energy company—we are a technology company that manages molecules. The success of the autonomous haul system fits into our larger technology approach and our ongoing digital and automation journeys. We've implemented technologies like EBRT, making it part of our broader ecosystem and core to our operations. Specifically, the autonomous haul system has been an incredible success. It's amazing to see over 80 trucks operating autonomously. We had high hopes for reducing our unit cash cost by about $1 a barrel, and it has met those expectations. We're not surprised by its success. We're anticipating even further optimization as we continue to refine the fleet. Additionally, we're exploring other autonomous opportunities like robotic fueling and inspection of the trucks, as well as considering automation for other equipment in our fleet. We initially focused on heavy haul trucks, but there’s definitely more potential to explore.
Great. John, I really appreciate that color. My second question stays on Kearl and focuses a little bit on, I guess, unlocking the full potential of the equipment that you're using at site. I wanted to kind of dive a little bit into hydro transport lines and what you guys are doing there to improve, again, run time and maybe space between turnarounds. And if you wouldn't mind also touching on what also drives confidence in moving towards a 4-year interval rather than the 2-year interval?
Thank you for the question, Dennis. We're currently aiming to enhance Kearl's performance, moving from $280 to $300 and reducing our unit costs to $18 per barrel. We are focusing on three main areas: enhancing recovery, improving productivity, and achieving reliability gains through technology and turnaround efficiency. Enhancing recovery means maximizing bitumen extraction from both the mine and the plant. Improving productivity involves optimizing our trucks, shovels, dozers, and hydrotransport lines. Regarding turnaround efficiency, we've made improvements by interconnecting our crushers for better flexibility, enhancing the metallurgy of the hydrotransport lines to increase their lifespan, and upsizing the lines to handle more product. This configuration allows us to manage downtime more effectively. Our goal is to be the most responsible operator, which encompasses safety, environmental considerations, and a strong cost structure. Our approach to reducing turnaround durations while extending intervals exemplifies this commitment, as we prioritize safety, integrity, and reliability. We're continuously improving by integrating learnings from our operations and our major shareholders, utilizing new technology, managing asset wear, and enhancing efficiency through methods like using abseilers instead of scaffolding, all without compromising safety or asset integrity.
And we'll take a question from Greg Pardy with RBC Capital Markets.
John, I was hoping maybe to dig into some of your opening remarks. I'm going to try and shoehorn three questions in here with Peter not noticing. But just with renewable diesel, I know you were talking about just optimization in terms of suppliers. So does that mean then that you will be likely producing more renewable diesel in kind of the summer and fall versus the winter months? And then does that kind of tie into fuel specs? Just curious as to how you'd be running that new unit?
Yes, thanks, Greg. I'll begin, and then I might ask Scott to add some comments as well. To provide some context, we are very pleased with the launch of this project. The team is currently focused on optimizing production. We see this project having three main components. First is the manufacturing facility we established at the Strathcona refinery, which is now complete and operational. The ramp-up has been going excellently, exceeding our expectations. The second significant component involves the vegetable and agricultural oil feedstock necessary for the project, for which all arrangements are set, and we feel confident about the supply. The third aspect is the supply of hydrogen. When we refer to optimizing inputs, we mean ensuring effective feedstock and hydrogen supply for facility operations. Currently, we have enough gray hydrogen for startup and operation. However, the availability of additional hydrogen, particularly blue hydrogen, will affect how quickly we can ramp up this asset. This is what we meant regarding ramp-up, depending on hydrogen supply availability and market conditions. I'll turn it over to Scott for any further insights.
Yes, yes. Thanks, John. Just one additional point for you, Greg. Your comment around when we'd like to operate the facility. We'll absolutely be operating this facility year-round. And in fact, we'll especially like to be operating in the winter months as we take advantage of the proprietary catalyst technology that we have as part of this project that enables a lower pour, lower cloud product that can be run and operational year-round. So we'll be blending this product into diesel products that we sell into the market year-round, and that's one of the advantages we have as part of this project.
Okay. Terrific. Two other maybe just more or less footnotes. John, did you say there was a little more unplanned downtime just in refining in 2Q? I'm just curious if there's any color around that? And then are you still producing 4,000 to 5,000 barrels a day of solvent at your new solvent-assisted project at Cold Lake? That's it for me.
Yes, you're correct. We did experience a bit more unplanned and planned downtime in the downstream during the second quarter. However, the planned shutdown work went extremely well, finishing ahead of schedule and at a lower cost, which we are very pleased about. We did notice a slight increase in unplanned downtime this quarter, but it wasn't significant and doesn't concern me. It's actually behind us now, so there's nothing specific to address there. Could you please repeat your question about the solvent?
Yes. Are you still producing around 23,000 from Grand Rapids? Is 4,000 to 5,000 of that still solvent that you're injecting?
No, that 23,000 is bitumen. That's on a bitumen basis. So we're producing 23,000 barrels a day of bitumen from that project.
And we'll take a question from Menno Hulshof with TD Securities.
I just have one question on the CapEx side of things. You were quite a bit lower in the quarter than we were modeling. What drove that? And given that you're trending below last year in the quarterly run rate implied in your full year guidance, what should we expect the cadence of spending to look like in Q3 and Q4? And finally, is it possible that we see Imperial test the lower end of the guidance range of $1.9 billion to $2.1 billion?
Thanks, Menno. I'll make a few comments, and maybe I'll ask Dan to kind of chime in as well. But what we're really seeing here is just timing. It's really a timing effect on the capital. So at this stage, there is no change to our guidance in the $1.9 billion to $2.1 billion, as you stated. We do expect spend to be modestly higher rate in '25 and '26, as you know as well. But it's just from what you're seeing in '25, it's just the timing of milestone payments and things like that and the time which they hit. But right now, we're still consistent with our guidance. Anything Daniel?
Yes, that's exactly right. It really is just timing. We're comfortable with our guidance. So we'll have a little bit more spend over the back half of the year.
Terrific. And I just thought of another one. Just on the EBRT side of things, just to dig a little deeper. What is the status of the three horizontal well pairs that you recently drilled? Are they already in the early stages of activation? And if not, what is the time line that you're targeting?
Yes, they are not activated yet. We have drilled the wells as part of our preparations at the site. While the wells are ready, we still need to construct the surface facilities necessary for solvent injection. We plan to start that process in early 2027 when we will begin injecting solvent and a small amount of steam into the wells.
And our next question will come from Patrick O'Rourke with ATB Capital Markets.
I guess the first question, you talked about refined product sales going up to 480,000 a day here being enabled by the Trans Mountain expansion. If you could maybe unpack that a little bit more? And then I'd be curious to know sort of from a margin perspective, what the impact here would be on the margins at the refinery level from that?
Yes, I'll start. Thank you for your question, Patrick. I'll kick off and probably ask Scott to add some details. What we were referring to is our ongoing efforts to strengthen our position in the downstream market and improve our ability to supply customers efficiently. We gained additional flexibility in refined product supply with Trans Mountain, and we utilized that in the second quarter. Overall, our sales are driven by demand, and we've observed consistent demand in Canada year over year for all the products we supply. We're seeing that steady demand. We took advantage of extra capacity on Trans Mountain this quarter, which included a mix of local sales and profitable export opportunities. It's all about efficient logistics and possessing the flexibility and market expertise to seize demand when it arises, and that's exactly what we did this quarter. I'll invite Scott to elaborate further if he wishes.
Sure. Yes. I'd just add to that, that our primary route to market is the manufactured products that our refineries move through our proprietary midstream logistics systems to supply primarily domestic demand across the Canadian marketplace. And so the comment there was just reflecting the fact that as we see opportunities with some spot space available on that Trans Mountain expansion pipeline, we always consider utilizing logistics that are out there to move product to different markets to take advantage of demand and uplift potential. And so that's really what that comment referred to.
And sorry, back to the second part, is there a margin enhancement there? Or is it just purely volumetric?
Yes. So all of our movements are meant to generate margins. So all that's a positive return for us. But as I mentioned before, we're primarily placing our sales into the domestic market, and that's where we see the higher uplift.
Okay. You mentioned Kearl a bit earlier. I think the results there were somewhat better than what we had expected for the quarter. From what I understand of consensus, it seems to have surpassed most of my peers' expectations as well. If you could break down the outperformance compared to last year for this quarter, specifically attributing it to improved turnaround efficiency and high output days exceeding 300,000, how would you analyze that? Also, what implications does this have for the second half of the year, considering the 285 midpoint of the guidance?
I want to make a few comments and then invite Cheryl to share her thoughts. In the second quarter, the turnaround was somewhat better than we had anticipated, which contributed to our results. Additionally, we experienced improved reliability and recovery in our assets during this period, which is encouraging. We are maintaining our guidance and do not plan to change it at this time. We experienced slightly lower unplanned downtime than we had forecasted for the second quarter and a better recovery. The enhanced turnaround results also played a role in our favorable second quarter, which we are happy to report. Overall, our guidance remains consistent, and Cheryl may want to provide more details on this.
Sure. As John mentioned, we had exceptional performance in May and July, with some of our strongest production months between May and June. During that time, we saw improved ore grades and increased material movement due to our AHS truck productivity. Additionally, we upsized or debottlenecked our hydrotransport lines during the turnaround, which is providing us with additional throughput. John also noted the shorter duration turnarounds. Regarding your question about days above 300, year-to-date, we're tracking similarly to last year. We're halfway through the year, so there's still a lot of work ahead. However, we've made significant progress in the first half, and we look forward to a strong third and fourth quarter.
And the next question will come from Doug Leggate with Wolfe Research.
John, earlier in the call, you discussed the investment case and the accelerated NCIB. I want to frame my question a bit differently, focusing on what we believe contributes to market recognition of value for your stock, particularly in terms of dividend growth. You currently have the lowest dividend breakeven in the industry, not just within Canada. Your dividend growth potential could increase significantly without needing to depend on buybacks to manage the burden, given your low breakeven. So, my question is, why not enhance your dividends? Additionally, Dan, is there a target or ideal leverage level for your balance sheet's capital structure that you consider normal, as opposed to one that has gained from several years of high oil prices?
Thank you, Doug. I want to take a step back and reiterate that we maintain a disciplined approach to capital allocation, and that philosophy hasn't changed. We prioritize a reliable and growing dividend, which is our primary way of returning cash to shareholders. Over the past five years, we've returned $20 billion, including $5 billion in dividends. We've maintained a reliable and growing dividend for over 30 years, with a 23% annual growth rate in the last five years. While our focus remains on dividends, we are also comfortable with the balance between dividends and share buybacks. The feedback we’ve received from investors about our share buyback approach has been very positive. However, after ensuring we address our free cash flow and investments, our top priority continues to be the dividend.
Yes, to add to that, we see that the share buyback and dividend growth complement each other. The share buyback does lower the absolute level of the dividend, but we have experienced strong growth in the dividend, which is our objective, and we aim to maintain that as reliable and sustainable while continuing strong growth. We'll monitor the market conditions, but our perspective on this has not changed. Regarding leverage, we have maintained $4 billion of gross debt for some time and are comfortable with that level. Net debt will fluctuate; when we are not engaged in buybacks or in the NCIB market because it has been fully utilized, our cash tends to increase, thus reducing net debt. However, once we start the NCIB, cash levels will decrease again. We do not focus much on net debt as it is somewhat trivial. We are satisfied with our overall debt level and, as John mentioned, our focus is on a reliable and growing dividend along with surplus cash, which we intend to return to shareholders promptly, reflected in our NCIBs and the acceleration of those programs when market conditions allow, including SIBs as well.
And the next question will come from Lydia Gould with Goldman Sachs.
I just wanted to dive more into the SAGD projects queued up at Cold Lake. Could you talk a bit more about these opportunities and remind us of the timing and the next steps to get these online? And maybe as a follow-up, talk about how this technology gives you a competitive advantage relative to peers.
Thank you, Lydia. I'll start over and may ask Cheryl to contribute. First, I believe this gives us a significant competitive advantage. While many are utilizing SAGD, we are implementing a solvent-assisted SAGD technology at Cold Lake as we modernize the asset. This is also what we’re successfully applying at Grand Rapids. We have additional solvent-related technologies that we plan to introduce at Cold Lake in the future. We previously discussed the Leming project, which is traditional SAGD and represents a unique niche opportunity for us. The pilot location at Cold Lake began operations in 1975, and we're returning there to apply SAGD technology, which we originated, to extract the remaining resources. Currently, our SA-SAGD at Grand Rapids is exceeding our expectations, which is promising for future prospects. We have additional development plans in that area. Next, we aim to start the Mahkeses SA-SAGD project in 2029 with a target peak production of 30,000 barrels per day.
The key point is we are transforming the technology and recovery processes at Cold Lake, which we've been improving for 50 years. This approach is reducing costs and emissions in production. The exciting part about Cold Lake is that, after 50 years, we still have decades of inventory to explore. This is truly a thrilling development for us and certainly provides a competitive edge. I'll invite Cheryl to add any further insights if she wishes.
Yes. In terms of timing, we're pleased with the results from Grand Rapids Phase 1. Our next three plants are currently in development, and we will be utilizing our existing plant capacity, which will provide significant inventory to sustain production at a lower capital cost. Additionally, the Mahkeses SA-SAGD will be our first commercial Clearwater SA-SAGD development, with an expected start-up around 2029. We anticipate reaching about 30,000 peak production from that Clearwater initiative. Overall, we are on track to achieve approximately 50,000 barrels per day of SA-SAGD production by the 2030 timeframe.
And this concludes the question-and-answer session. I'll now turn the call back over to Peter Shaw for closing remarks.
Great. Thank you. And so on behalf of the management team, I'd like to thank you, everyone, for joining this morning. If there's any further questions, please reach out to the IR team, and we'll be happy to answer your questions. With that, thanks very much. And for those in Canada, enjoy the long weekend.
Thank you. This concludes today's conference. Thank you for your participation. You may now disconnect.