Dow Spotlight Energy Stock Earnings Call Insights You Must Know
Short-Term Production Delays
Evan Calio – Morgan Stanley: My question on production is for Kearl, is that weather the driver in the short-term delay in the production ramp? And should we be considering a three-quarter ramp-up to 110,000 barrels a day, I guess, exiting the year at that capacity? And then I have a second question, please.
David S. Rosenthal – VP, IR and Secretary: Got it. The weather situation was a major factor in the startup, moving from what we had originally said by the end of the year to the first quarter. We had two things actually. One, weather came earlier than normal and then it has been just brutally cold up there, and so we’ve had to adjust accordingly. As we move through the quarter and continue progressing some of the activities I mentioned in my prepared remarks, we do expect as that first froth treatment process comes up, that’ll give us about 37,000 barrels of bitumen a day and then we’ll bring up the next two froth treatment trains kind of in sequence, and that’ll get us up to 110,000.
I don’t have a specific date for achieving the 110,000, but it’ll be later in the year as a function of progress that we make here across the winter, getting things started up safely. So the focus is getting the project up and running, getting that first production online and then moving forward and getting up to the full capacity that we’ve mentioned. And we are making really good progress this quarter, but again it’s a deliberate diligent effort to get this thing up safely, recognizing that this is a multi-decade project and we really want to focus on getting it up right.
Evan Calio – Morgan Stanley: My second question really relates to the use of rail for oil movement in North America. I know that Exxon has a large existing railcar fleet, a diversified and growing liquid footprint. Yet, I also read a report recently that Exxon’s placed a significant railcar order, recently. I’m just wondering if you see rail as a potential solution for Canadian barrel production in the event maybe the Keystone is delayed or denied or if you have other kind of specified or contemplated use for rail as a bit more permanent solution for oil movement in North America?
David S. Rosenthal – VP, IR and Secretary: That’s an all-encompassing question, so I’ll probably step back here for just a second and put it in perspective. First of all, with relation or with regard to the Kearl project, we have worked all of the logistics out and we can place all of our barrels and we have the capability to run all those barrels in our own refineries for that first 110,000 barrels a day. We may elect to put some into third-party refineries but we do not have an issue in terms of logistics, moving those barrels out of the Kearl project and into the market. As you look a little more broadly, both at the Canadian heavy crude as well as a lot of the crude such as Bakken, Intel pipelines are built and some of the things that you mentioned actually come to fruition. There are today bottlenecks across the industry and there is a lot of different modes of transportation being used to move that product to market.
Of which, railcar is certainly one of them waiting for some of these pipelines to come in. As you mentioned, we have – as you would expect with the size of our business, we have a very large fleet of railcars, both across all of our businesses and so that it is already a primary mode of transportation for us. We are always looking at that. We are always looking at the logistics and how we can optimize both the placement of our production into the market as well as obtaining advantage feedstocks for our refining circuit. So, that is an ongoing effort and there is nothing unusual in that. In regards to the rumor that you heard, I would just say that’s a rumor. We wouldn’t have a comment on it specifically, but I can say there is nothing out of the ordinary in terms of what our organization; our supply organization is working on. Again, getting our crudes to market for the best value and getting the lowest cost advantage feedstocks into our refineries and Chemical plants.
The Capture Rate
Doug Leggate – Bank of America Merrill Lynch: I’ve got a couple also. I’ll try and be fairly quick on these. Can I deal first with the capture rate? We used to look at this quite a lot. I guess it’s now become a bit of an issue again. I’m talking about the net income as a proportion of your weighted realizations, not just in this quarter, but last two or three quarters, it looks like it’s been sliding a little bit. I’m just wondering if there is a particular trend that you can observe there or if there’s something that you’re seeing as well, what might be behind that? Then I’ve got a quick follow-up, please.
David S. Rosenthal – VP, IR and Secretary: Yes, I know the trend you’re talking about over the last couple of quarters. Of course, there’s a lot of things working in there, some of the price differentials that you’re seeing, some of the mix effects of where our production’s coming from, some of the entitlement effects that you see there. And again, U.S. gas production and that sort of thing. So I wouldn’t read anything into a couple of quarters’ worth of data. We are very focused on unit profitability and working that very hard, getting some of these projects up. We have seen some increased operating expense as we brought some of these new projects up. But again, I think if you look over the longer trend and you look at the projects we’ve got coming on, I think that’ll sort itself out, but lot of ups and downs across the year here.
Doug Leggate – Bank of America Merrill Lynch: Okay, I’ll keep an eye on that one. The other one is really, I know you are not going to give me a great answer on this, at least I’m presuming so, buybacks and dividends, David, there’s some chatter in the market that the sustainability of your buybacks may not be realistic to assume $5 billion on a quarterly basis. But you have still got very, very low net debt to cap. So I’m just curious about how management is thinking about where the (balance sheet) ought to be for a company given the level of your capital spending and what the priorities would be potentially for, again, for the rebound?
David S. Rosenthal – VP, IR and Secretary: Yeah, I mentioned in the prepared remarks that we’re looking at another $5 billion of buybacks for the quarter. I don’t have any guidance going forward. That’ll be depending on a number of things, including commodity prices and margins. In terms of the balance sheet structure and use of debt and our cash flows, Doug, there’s really no change in what we have been doing for very long time, which is making sure we pay consistent increasing dividend overtime. We find that very robust capital program that we have and get these projects, as you know we have some very large projects starting up between now and into 2016, getting all of that funded as well as our pipeline of portfolio projects.
And then the balance of the cash we returned to the shareholders via the buyback. In terms of target leverage or any of that sort of thing, I really wouldn’t have a comment on that other than we do have an objective of maintaining a very strong balance sheet, keeping that flexibility to take advantage of opportunities. And so although there is wide variability in prices and margins as we go through the cycles in a business, those constants will remain just that and we really don’t – really wouldn’t have any change that I could foresee coming.
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