Canadian Natural Resources Ltd

TSX:CNQ

Earnings Call Analysis

Canadian Natural's Dividend Growth and Future

Year-to-date through November 1, 2023, Canadian Natural has returned $6.1 billion to shareholders via dividends and share repurchases. The Board increased the quarterly dividend by 11% to $1 per share, marking an 18% annual increase to $4, the 24th consecutive year of dividend growth, reflecting a 21% compound annual growth rate. The company's strong financial position is underscored by a low debt to EBITDA ratio of 0.7 times and $6.1 billion in liquidity. A focus on maintaining operational performance and debt reduction is set, with a target of returning 100% of free cash flow to shareholders once net debt hits $10 billion, expected in Q1 2024. The management is committed to continuing top-tier operations and environmental performance, with no significant business strategy changes anticipated, relying on a vast reserve base and potential for opportunistic acquisitions.

Canadian Natural Demonstrates Record Production and Strong Financials in Q3 2023

Canadian Natural Resources Limited, a leader in oil and gas production, held its third-quarter 2023 earnings call reflecting robust operations and financial outcomes. The company reported an exceptional quarter with record production levels attributed to stellar execution in operations and free cash flow generation. President Tim McKay emphasized Canadian Natural's world-class operations that contributed to this performance, while CFO Mark Stainthorpe highlighted the company's formidable financial results and commitment to increasing shareholder value.

Confidence in Sustainability Leads to Increase in Shareholder Returns

Canadian Natural backed its confidence in long-term sustainability and operational excellence with significant shareholder returns. Up to November 1, 2023, the company returned roughly $6.1 billion to its shareholders through dividends and share repurchases. The Board's assurance in the company's sustainable business model was underscored by the approval of an 11% increase in the base quarterly dividend from $0.90 to $1 per common share after quarter-end. This increase represents an 18% hike to an annual $4 per share and marks the 24th consecutive year of dividend growth, shining a light on the company's commendable track record and a compound annual growth rate of 21% over the period.

Strong Balance Sheet and Liquidity Position the Company for Further Growth

With a healthy financial state evident by a debt to EBITDA ratio of 0.7 times at quarter's end and liquidity reserves around $6.1 billion including bank facilities and short-term investments, Canadian Natural is poised for continuous efficient operations and shareholder benefits. Moreover, the company's near-term financial strategy aims to maintain this strong operational performance heading into Q4 2023 and projects reaching a net debt level of $10 billion by Q1 2024. Upon hitting this target, Canadian Natural plans to escalate shareholder returns to a full 100% of its free cash flow, reinforcing its pledge to reward investors for their support.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning. We would like to welcome everyone to the Canadian Natural Resources 2023 Third Quarter Earnings Conference Call and Webcast. [Operator Instructions] Please note that this call is being recorded today, November 2nd, 2023 at 9:00 a.m. Mountain Time.I would now like to turn the meeting over to your host for today's call, Lance Casson, Manager of Investor Relations.

[Lance Casson, executive]

Good morning everyone, and thank you for joining Canadian Natural's third quarter 2023 earnings conference call. As always, before we begin, I'd like to remind you of our forward-looking statements and it should be noted that in our reporting disclosures, everything is in Canadian dollars, unless otherwise stated, and we report our reserves and production before royalties. Additionally, I would suggest you review our comments on non-GAAP disclosures in our financial statements.Speaking on today's call will be Tim McKay, our President; and Mark Stainthorpe, our Chief Financial Officer. Tim will first speak to how strong execution has resulted in record quarterly production, and he will provide additional specifics on our safe, reliable, and world-class operations. Mark will then summarize our strong financial results, including significant free cash flow generation and increasing shareholder returns. To close, Tim will summarize our call prior to opening up the line for questions.With that, I'll turn it over to you, Tim.

[Timothy McKay, executive]

Thank you, Lance. Good morning everyone. In the third quarter, we achieved record quarterly production of approximately 1.39 million BOEs per day, which included both record liquid production at approximately 1,035,000 barrels a day, and natural gas production at approximately 2.15 Bcf a day as a result of effective and efficient operations across all our assets. This combined with our diverse product mix, we generated significant free cash flow, resulting in more shareholder returns through our sustainable, growing dividends, and significant share repurchases.As well, Canadian Natural continues to be a leader in environmental, social, and governance, and has made it a priority to work collaboratively with industry peers and governments to achieve meaningful GHG emission reduction in support of both Alberta and Canada's climate goals through our participation in the Pathways Alliance. As we move forward to lower our carbon emissions, with our target to reduce the absolute Scope 1, Scope 2 emissions by 40% by 2035 from our 2020 baseline on our journey to achieve our goal of net-zero GHG emissions in the oil sands by 2050.I'll now do a brief overview of the assets, starting with natural gas. Overall, Q3 natural gas production was a record at 2.15 Bcf a day, which was higher than Q3 2022 production. From North American operations, Q3 2023 natural gas production was also a record at approximately 2.14 Bcf a day versus Q3 2022. As well, we added volumes through our drill-to-fill strategy, adding low-cost, high-value liquids-rich production across the asset. During the quarter, the company drilled 10 net wells, all meeting expectations. Our North American Q3 natural gas operating cost was $1.22 per Mcf, a decrease of 8% compared to Q3 2022, an increase of 8% compared to Q3 2022 of $1.13, primarily due to higher service costs. Our teams will continue to focus on effective and efficient operations and cost control across all areas.For North American light oil and NGL Q3 production was approximately 109,000 barrels a day, comparable to Q3 2022 of 109,252 barrels a day. Q3 operating costs were $15.49 per barrel, a decrease of 7% from Q3 2022 operating costs of $16.68 per barrel, primarily due to lower power costs in the quarter. Our international assets in Q3 had oil production of 24,719 barrels a day, which is comparable to Q3 2022 levels of 24,493 barrels a day. Our international assets continue to generate good cash flow as we progress towards decommissioning of the Ninian assets.Moving to heavy oil, heavy oil production was 76,377 barrels a day in Q3 2023, up 11% from Q3 2022 operation of 68,933 barrels a day, primarily due to increased drilling activity, strong drilling results offsetting natural field declines. Operating costs in Q3 2023 were at $19.68 per barrel, down 8% compared to our Q3 2022 operating costs of $21.30 per barrel, primarily reflecting higher volumes in the quarter. During the quarter, the company drilled 34 net heavy oil wells, which were multilateral across our land base from Bonnyville, Lloydminster to Clearwater area with all meeting targeted results. A key component of our long-life, low-decline assets is our world-class Pelican Lake pool, where a leading-edge polymer flood continues to deliver significant value.Q3 production was 46,897 barrels a day down 6% versus Q3 2022 average of 50,051 barrels per day, reflecting the low decline nature of the property. The polymer injection grades, which were reinstated in February of 2023, have been successful in returning the field back to a more historical decline rate, which was approximately 5%. The team continues to focus on operational excellence and in – with Q3 operating costs of $8.02 per barrel, decreasing 10% from our Q3 2022 operating costs of $8.89, primarily reflecting effective and efficient operations, lower power costs offsetting the lower production volumes. With Pelican Lake low decline and very low operating costs, it continues to generate excellent netback.In our thermal in situ areas in Q3 2023, as a result of strong execution combined with effective and efficient operations, Q3 2023 thermal production was 287,085 barrels a day, up approximately 44,000 barrels a day from Q3 2022 production of 243,393 barrels a day. Q3 operating costs were $11.47 per barrel, down 27% when compared to Q3 2022 operating costs of $15.63, largely as a result of higher production and lower natural gas fuel costs. At Kirby, current production is approximately 65,000 barrels a day, as the company has grown by approximately 15,000 barrels a day from Q4 2022 level. This significant production growth is due to the development of four SAGD pads, the first which reached full capacity in Q3 2023. The remaining three targets are targeted to ramp up to full production over the next nine months of 2024, at a pace of one pad per quarter, maintaining this production level.At Jackfish, two SAGD pads were drilled in the first half of 2023 with production from these pads targeted to ramp up to full production capacity in Q3 2024 and Q4 2024, supporting continued high utilization. Oil sands mining, at the company's world-class oil sands mining and upgrading assets, we had Q3 production of averaging 490,853 barrels a day of SCO versus production of 487,553 in Q3 2022 with Q2 – with Q3 operating costs that were $22.12 per barrel versus Q2 – versus Q3 2022 of $22.35 per barrel. The reliability enhancement project continues to move forward, targeting to add approximately 14,000 barrels a day of additional SCO capacity in 2025, as a result of shifting the maintenance schedule from once per year to once every two years, reducing downtime for maintenance activities and increasing overall reliability at Horizon.Also here with me today, as part of our succession plan, I have Scott Stauth, Trevor Cassidy, Jay Froc and Robin Zabek. As part of my succession, Scott Stauth will be taking over the role of President effective February 28, 2024. Scott and I met a little over 26 years ago, and over the years, Scott has excelled in every role he has had with the company, and I know he will do a great job. Should anyone have any questions for Scott, feel free to ask when we move to the Q&A session. Jay Froc, currently our Senior Vice President of Oil Sands Mining, will replace Scott's previous role as COO of oil sands. As well, in Q4, Trevor Cassidy, after 24 years with Canadian Natural, will be retiring. We wish to thank Trevor for all his contribution over the many years, and Robin Zabek, who has been with the company 20 years and who is currently our Senior VP of Exploitation, will assume the role of COO, Exploration and Production.I will now turn it over to Mark for a financial review.

[Mark Stainthorpe, executive]

Thanks, Tim, and good morning everyone. The third quarter of 2023 was a strong financial quarter as we generated adjusted funds flow of $4.7 billion and adjusted debt earnings from operations of $2.9 billion. This was due to strong pricing and good cost control, which contributed to robust netbacks on record quarterly production. Our diversified portfolio, including our long-life, low-decline assets, combined with effective and efficient operations, allowed us to continue to deliver robust returns to shareholders through dividends, repurchasing shares and reducing debt. Year-to-date, up to and including November 1, 2023, we have returned approximately $6.1 billion to shareholders through dividends and share repurchases.Subsequent to quarter-end, the Board of Directors has approved an 11% increase to our base quarterly dividend to $1 per common share from $0.90 per common share, demonstrating the confidence the Board has in the sustainability of our business model, our strong balance sheet and the strength of our diverse long-life, low-decline reserves and asset base. This dividend increase, combined with the increase in March 2023, results in an 18% increase to $4 per share annually meaning 2024 will be the 24th consecutive year of dividend increases with a compound annual growth rate of 21% over that time.Our financial position is very strong today with debt to EBITDA at 0.7 times at the end of Q3, and we continue to maintain strong liquidity, including revolving bank facilities, cash and short-term investments. Liquidity at the end of the quarter was approximately $6.1 billion. We target to continue strong operational performance in Q4 2023 and beyond, and based on current strip pricing, we are quickly approaching our net debt level of $10 billion, which we forecast to achieve in Q1 2024, at which time we target to increase returns to shareholders to 100% of free cash flow. When you combine our leading execution with our large, balanced, low-risk, high-value reserves and production, effective and efficient operations, and flexible capital allocation, we are able to generate material free cash flow and deliver strong returns on capital.With that, I'll return it back to you, Tim, for some final comments.

[Jay Froc, executive]

Thanks Mark. Canadian Natural's advantage is our ability to effectively allocate cash flow to our four pillars. We have a well-balanced, diverse and large asset base, which a significant portion is long-life, low-decline assets, which require less capital to maintain volumes. We are delivering top-tier free cash flow generation, which is unique, sustainable, robust and clearly demonstrates our ability to both economically grow the business and deliver returns to shareholders by balancing our four pillars. With our robust, sustainable free cash flow through our free cash flow allocation policy, returns to shareholders continue to be significant, which includes our growing dividend that will be increased for 24 consecutive years in 2024. In summary, we continue to focus on safe, reliable operations, enhancing our top-tier operations, and we will continue to drive top-tier environmental performance.With that, I will now open it up for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Dennis Fong.

[Dennis Fong, analyst]

And I guess first off, congrats Tim on your upcoming retirement and to Scott on the promotion. My first question here just is related to, obviously, we're entering the winter here. There's a little bit of cooler weather. I know that there's been a focus on remediating some of the potential impacts of harsher operating environments, given the cooler weather. Can you just remind us about what has been changed or completed in operations as well as equipment to show kind of strong uptime through January and February?

[Timothy McKay, executive]

Yes, Dennis. Well, in general, every fall, the teams start to make sure that all areas of potential freeze-up are insulated, heat traced, is checked. As you can appreciate, in a lot of areas, the heat tracing basically gets turned off during the summer months, so we've got to make sure that all works. So, generally, it's just what I would consider routine business to make sure that we have methanol, heat tracing and insulation covering all the areas of potential freeze-ups. So – and generally, we monitor it quite rigorously as we move towards winter.

[Dennis Fong, analyst]

And then my second question is just related to the optimization that you're driving to at the oil sands mining business unit. As you see higher and higher production levels, how should we be thinking about the ability to kind of lower unit OpEx? And what's maybe your target once you are able to line up the facility at an even higher level?

[Timothy McKay, executive]

So obviously, through the reliability project, the key there is that you're not taking a shutdown. And so typically, in the oil sands, the shutdowns are usually about a month per year. So as you can appreciate, during that one month that we're down, all the fixed costs are still, so we say, adding to the account. So that includes your mining trucks and such. So to me, the way to think about it is by keeping it running, you basically get that one month of same cost per se, but you're getting all that extra volume. So that's the way I would look at it, because the mines, as you're seeing with the operating costs, are pretty steady in terms of overall costs. And to me, it's all about making those extra barrels each and every day.

[Operator]

The next question comes from Neil Mehta at Goldman Sachs.

[Neil Mehta, analyst]

Congrats, Scott, and congrats, Tim, on your retirement, too. I guess maybe that's where I'll start, which is, over the last five years, stock has done really well. It's a $100 billion Canadian company at this point in terms of market cap. And Scott, as you transition into this new role and as Tim as you retire, how do you think about the next five years? What's the next leg of value creation? Is it the same playbook? Or is there any strategic change that you see as necessary to get to the next level?

[Timothy McKay, executive]

Canadian Natural is very fortunate and that we have a huge reserve base. So I look at it going forward, we've got to continue to do what we do best, drive top-tier operations, high reliability, controlling our costs, be disciplined and we're very fortunate in that we have that huge reserve base that we can basically grow production methodically should we decide to grow over time. And if you look at something like Horizon, we've talked about that we could easily double Horizon at some point. There's also been the dilbit, the paraffinic dilbit that we could do there. There is opportunities in the thermal side, gas, and the Montney.So to me we just have to keep doing what we do well. And on top of that, as always, there always is opportunistic acquisitions that can come our way and we're very good at doing those should – that opportunity come that way. So I don't really see any real change to our business. I think it's – if you look at our succession, everybody is well-engrained in the company and understands all the opportunities that we have, and we constantly work on those opportunities to make sure we're ready to exercise those opportunities should that time happen. Now, Scott?

[Scott Stauth, analyst]

Yes, yes. Neil, I agree with everything Tim said, and just the robust nature of our assets, free cash flow generation that the company has been able to develop over the years and continue to work on and improve, and I don't see our focus changing. Tim outlined everything that that we've done in the past and we're going to continue to work on in the future. So I think that you should see much the same in the future as what you've seen in the past.

[Neil Mehta, analyst]

Tim and Scott. The follow-up is just on consolidation. South of the border, we've seen some really big deals here over the last couple of weeks in the E&P space by the majors, and I'm just curious on your views on whether there is room for further consolidation in Canada and perspectives on CNQ's potential role there.

[Timothy McKay, executive]

Yes, I mean, consolidation could happen here in Canada as well, but the key is that, for us anyways, is we have a huge reserve base. And so we don't have to do any acquisitions to create or find more reserves, so we have that part in the bag. To me, we can sit back, do what we do best, and that's just exploit those opportunities, be methodical with our growth plan, and should something opportunistic happen our way that that may happen, but to me we've got one of the largest reserve opportunities in the world, so that's the key for us.

[Operator]

The next question comes from Greg Pardy at RBC Capital Markets.

[Greg Pardy, analyst]

So, first off, Tim, congratulations. You have been great to work with, and we're glad you're not going until the summer. And absolutely welcome Scott and others as well.So, I wanted to stay a little bit on the successorship. I was going through your info circular recently, and it looks as though there is a very-- I mean, there's a strong culture of promoting within, but there is also almost like a defined game plan for folks on the management committee in terms of how successorship works and so forth. Could you talk about that a little bit?

[Timothy McKay, executive]

Well, I don't know really how I could talk more to it. Every year we do a very thorough job of our succession plan. And so to me it's never a surprise, it's well thought out. People are generally moved to different positions for grooming or learning, however, you want to call it. And as people grow at the company and they perform, they generally move right along. So, to me the longevity of the people that come here, they love the culture, they love working with people, and they love the opportunities the company has before it. So, to me, it's just a great place to work and a great place that we can develop our own people internally and promote within.

[Greg Pardy, analyst]

And then I'll completely switch gears maybe and just fire one at Mark, but in terms, I mean, huge cash flow generation, working capital impacts, obviously, in the quarter. I am curious how you sort of see the balance of the year going or the fourth quarter going in terms of net working capital changes?And then just with respect to Trans Mountain, I know you've got just under 100,000 barrels a day on that. When you go into line pack, is that going to materially increase working capital as you go into the first quarter? It's something that Cenovus just flagged on their call. I was just curious how much it impacted you guys.

[Mark Stainthorpe, executive]

In Q4, like I kind of mentioned earlier, we're targeting strong operational performance, so given this pricing environment and our net packs, we're looking at strong cash flow generation and free cash flow generation in the quarter. When you look at working capital, I mean, to me, the biggest thing is look, think about receivables. So, in September, very strong operational month, pricing month, but we don't get paid for that until October. So, that's really, one of the main drivers of the working capital. The other being, of course, when you have turnaround activity in one quarter, you tend to have the payables happen in the following quarter. So, those are just natural ways the business runs.So, to comment on exactly what working capital will be like in the fourth quarter is somewhat difficult, but you can just kind of take that away that the receivables are one of the big things. And then as far as TMX, yes, there will be a working capital bill for TMX line fill, but that is not going to be significant to us at all.

[Timothy McKay, executive]

And, of course, right now, we don't know if that'll happen here in the fourth quarter or early into next year. Obviously, if it happens earlier this year, between now and the end of the year, that's actually very positive in the sense that that should start to tighten in the WCS diffs and such. But we haven't yet to be getting the information that they would be doing that, but we hope that we'll hear from them soon on that.

[Operator]

The next question comes from Menno Hulshof at TD Securities.

[Menno Hulshof, analyst]

I will start with a question on autonomous haul trucking. One of your peers just achieved full fleet conversion with reasonable cost savings. And just going through the transcripts, I understand that you haven't shown much of an interest in the past. But has your thinking changed at all? And if so, what could the staging for deployment of autonomous hauling look like at Horizon or even the AOSP? I believe you had a pilot going there at Jack Pine a number of years ago. Any color there would be helpful.

[Timothy McKay, executive]

Sure. I'll just have Scott, because that's a perfect lead-in for that's his area of expertise. So, Scott, talk to that.

[Scott Stauth, analyst]

Tim, so we continue to evaluate the opportunities for autonomous haul on our equipment in the mines. We have looked at it in the past number of years, we pay close attention to what our peers are doing and what's going on in the rest of the hard-rock mining world. But at this time we've looked through it and reviewed it, and with a lot of the efficiencies that we've been able to achieve in our mining operation, we have very close to the equivalent of autonomous haul. In fact, we believe we're at the equivalency of autonomous haul efficiencies.So from our perspective, we'll continue to watch the technology as it improves over the years and stay abreast from the vendors of anything breaking through from news from that perspective. But really, we are quite strong in terms of our efficiencies that our folks in the mining operations have been able to deliver. So we like what we see from that perspective.

[Menno Hulshof, analyst]

Scott and just to clarify, is that pilot at Jackpine still running, or did you wind that down?

[Scott Stauth, analyst]

There was an original pilot years ago, but it was more from collision avoidance that Shell had carried on before our time that we took over in 2017.

[Menno Hulshof, analyst]

And then maybe just moving on to the heavy oil program and the Lloydminster, Manville, given the re-emergence of that play, what is old is new. It looks like you drilled 34 multilaterals in the quarter. Can you just update us on what you are seeing in terms of performance? And how is the Manville competing for capital with your other liquids growth opportunities?

[Timothy McKay, executive]

I mean, the multilaterals is working out very well. Obviously, as you step out, you will find areas where the viscosity is a little bit too thick, I would say, or too viscous, and the productivities aren't as good. But generally, we're in the generally lower viscosity areas, and the productivities have been excellent. And from a capital perspective, when we look overall, they are basically very similar to whether you're drilling in the clear water, which is, in my mind, kind of the same thing. To me, it's all about the areas you pick, your drilling costs and how your access costs can be lower.So in the Bonnyville-Lloydminster area, we see lower cost of entrants because of the access, and they compete very well against the Clearwater.

[Menno Hulshof, analyst]

Congratulations, and I'll turn it back.

[Operator]

The next question comes from Patrick O'Rourke at ATB Capital Markets.

[Patrick O'Rourke, analyst]

And first off, obviously, congratulations to Tim and Scott on everything that's gone on here with the transition. Just first question with respect to TMX here on the cusp of line fill, whether it's in Q4 or Q1. And maybe if you can give us some sort of view of how you think about extracting value through marketing barrels on this asset and maybe break down, you've got a lot of synthetic barrels there, you've got dilbit. How do you anticipate you'll break that down when that pipe comes on?

[Scott Stauth, analyst]

Yes, TMX does call for oil and it's operational. First of all, it's going to take roughly about 4.5 million barrels out of the market. So that will be a positive for differentials and gives Western Canada more egress. So I look at that as very constructive for Western Canada.As far as the marketing of the barrels, just like any area, what will happen is, and you alluded to, we have quite a slate of different varieties of oil that we can supply to that market. So, when it does come up and running, our marketing group has got some ideas in terms of the types of slate that will be opportune in those areas. But as the market develops, there may be certain markets that want certain types of crudes, like let's say it may be more advantageous for synthetic to move to that market versus where it's going today.So, part of that is going to be how the market develops and how different customers want or would like certain slates that we have available. So it's pretty early to say, but I would look at it that as TMX gets up and running, we'll optimize our slates to maximize the net back of those barrels.

[Patrick O'Rourke, analyst]

And just a second question, kind of shifting gears a little bit, but maybe a bit interrelated here. You talked about the ebbs and flows of sort of working capital builds from quarter-to-quarter here. I'm just wondering how that is impacting sort of the projections and philosophies around the return of capital structure in particular with share buybacks going forward over say the next two, three, four quarters.

[Mark Stainthorpe, executive]

The impact to the share returns is minimal. I mean, we've got a policy in place that we have our funds for lesser dividend, and currently until we get to the $10 billion, 50% is going to buybacks and 50% to the balance sheet. And that will turn to 100% here as we forecast currently to get to that $10 billion in Q1.The working capital moves in my view are just regular business that happen because you have accounting closes on certain months. So to me, there is very little impact for that going forward as we manage that increasing returns to shareholders

[Operator]

The next question comes from John Royall at JPMorgan.

[John Royall, analyst]

So, I have a question on capital allocation. I think you are tracking a little under your 50% allocation year-to-date. If I did the math right, it's about 40%. Should we expect a catch up in 4Q or conversely, does it make more sense to pull back a little in 4Q and get to that floor more quickly?

[Mark Stainthorpe, executive]

Yes, we'll evaluate as we go through the quarter here. We're going to get close. We try and manage as close as we can to the policy. Of course, you've seen based on the numbers reported here this morning that in October, the buyback program has increased from the pace we've gone through for the rest of the year. Yes, so we'll manage as best we can to close to that 50% for now until, again, we get to that $10 billion and then it moves to 100%.

[John Royall, analyst]

And then just another on capital allocation. This one is on the dividend hike. Can you talk about why the 11% is the right level for the hike and also the frequency? I think it's been three hikes now. I think up 33% over the past five quarters. Should we think about this as kind of a gradual reset on a view of structurally higher earnings or is it simply maybe your policy was a little bit more conservative than it needed to be before and you're catching that up or some combination? Just any color there would be helpful.

[Mark Stainthorpe, executive]

Yes, I mean, every quarter, of course, the board reviews the dividend and we evaluate the level based largely on sustainability through cycles. When we look at the significant free cash flow generation, how well the effect of operations, the sustainable dividend is there at lower commodity prices. And we take that and look at the balance sheet and how we're approaching that $10 billion of net debt along with the ongoing buyback program. The dividend increase made sense at this time and at that level.I can't necessarily speak for the board on cadence and when those happen, but I know the dividend level will be reviewed at every meeting, like I said, and with low breakevens, low decline production, our business can support further dividend increases. So, it's got to just be taken in context with all the share over term profile, given the significant buyback program going on as well.

[Operator]

Next question comes from Manav Gupta from UBS.

[Manav Gupta, analyst]

Good morning, guys. My question is on the oil sands mining upgrade volumes, a very strong rebound versus 3Q. What's kind of expected but still a pretty strong number? Can you share some data around October and then how should we think about the fourth quarter versus the third quarter as it relates to oil sands volumes?

[Scott Stauth, analyst]

In terms of – well, I would say that after the turnaround, we should be pretty steady. So to me, I feel a good run is between the kind of that 490 to 500 range is what I would call top tier RINs. And so that's always our target is to be within that kind of range. Obviously, there is always your turnarounds that you have to make sure you model in, but that to me is, from my perspective, I like to see a number that's 490 plus.

[Manav Gupta, analyst]

And also, if you could give us some of your views on the both near and medium term differentials. We have seen some widening on the WCS side, and then I think, synthetic is now below TI, it was trading over TI.So in your view, when the line actually does start to fill, should we expect these diffs to narrow or when the line actually – I mean, I am trying to understand, will the line fill actually impact the differentials or the line would have to flow to impact the differentials? What's your view over there?

[Scott Stauth, analyst]

Yes, well, I'll give you my opinion on it. To me, when TMX calls, the differentials will shrink again. I think this is a short-term lift. Obviously, many companies, including ourselves, had incremental volumes coming on in the fall here based on TMX being up and running. So, I look at it as a short-term pressure on the differentials. Also, the refineries were doing some maintenance. Those refinery programs are pretty much wrapped up, so that pressure will come off.As far as crack spreads, again, the differential is kind of wide, so I see that putting a little pressure on synthetic in the short-term, but in general, crack spreads are strong and synthetic will probably stay at a little bit of a premium.So I just think this is just a short-term pressure because the nominations were higher. You've seen apportionment move up about 24%. And really, once TMX calls for oil and starts moving it, that pressure will come off the apportionment.

[Operator]

[Operator Instructions] Next question comes from Doug Leggate from Bank of America.

[Douglas Leggate, analyst]

This is Kalei on for Doug. I guess this one is a follow-up to Manav's question, you've addressed some of the tension between the volumes and the WCS pricing, but I guess I am thinking about this more in the context of 2024 planning, because it looks like the industry is trying to ramp up into TMX, but start-up still looks fairly uncertain.So I'm wondering, as you're going through that budgeting process, what does the scenario planning look like?

[Mark Stainthorpe, executive]

Yes, you know what, for me, it doesn't change our 2024 plan. When I look at it, the TMX is coming very quickly. Last reports, they were 97% done. So to me, it's just a matter of which month it will start the line fill and then start to ramp up its operations. So if you look at Western Canada, the storage levels are 30% or whatever it is and pretty steady. So as long as the Egress pipelines run reasonably well, Egress the storage piece is not climbing that high, I mean, we've had much higher storage levels in Western Canada in the past.So I just look at it as it's just more of a timing issue and it will not impact 2024 in fact at all in my mind.

[Douglas Leggate, analyst]

Maybe for the next one, I'm hoping that I can get you to comment on your long-term outlook for natural gas pricing. And it's really in the context of LNG Canada starting up sometime in the near future. So as that comes up, do you see a new dynamic for Canadian natural gas emerging, or do you think that the scale of the Canadian gas resource sort of keeps returns for gas at a more modest premium? And how does that play into your views of gas M&A in the basin?

[Timothy McKay, executive]

Yes, that's a fairly tough question to say. I mean, I look at Western Canada, it does have Egress issues in terms of whether it's oil or natural gas. And so, it's very important that these incremental Egress operations run reliably and consistently. So, I really do not know the timing of LNG Canada. I've heard it looks like into next year, mid-next year.So, I think it will still – because there are so many good opportunities in natural gas, Montney primarily in Western Canada, that any Egress that does open up, I think, that the companies here in Western Canada are very efficient in terms of filling that space, provided that the pricing is right.So, difficult to say, where we'll all level out, but I do know that the Montney in all areas is quite prolific. And we've had very good results in our Montney operations, both on the oil side and natural gas side. So I just see that incremental Egress will be filled in short time.

[Douglas Leggate, analyst]

And we look forward to seeing Mark in Houston for a conference in a couple of weeks. Take care, guys.

[Operator]

There are no further questions. I will turn the call back over for closing comments.

[Lance Casson, executive]

Thank you, operator. And thanks, everyone, for joining us this morning. If you have any follow-up questions, please give us a call. Thanks. And have a great day.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.