Canadian Natural Resources Ltd

TSX:CNQ

Earnings Call Analysis

Canadian Natural's Strong Q3 Performance and Strategic Acquisitions

In Q3 2024, Canadian Natural achieved record production levels, averaging 1.363 million BOEs per day, with significant operational efficiencies reducing operating costs to $20.67 per barrel, a 7% decrease year-over-year. The company announced two strategic acquisitions from Chevron, projected to add 62,500 barrels of light oil and 60,000 BOEs per day, enhancing long-term growth. They also plan to increase the quarterly dividend by 7% to $0.5625 per share, marking 25 consecutive years of increases. With a robust liquidity position of $6.2 billion and net debt at $9.3 billion, the company expects sustainable growth despite market fluctuations.

Overview of a Strong Quarter

Canadian Natural Resources Limited reported robust operational and financial results for the third quarter of 2024. The company achieved an impressive average production of approximately 1.363 million barrels of oil equivalent per day (BOE/d), with liquid production reaching about 1.022 million barrels and natural gas exceeding 2 billion cubic feet. This reflects Canadian Natural's strength in diversifying its asset base, allowing for capital allocation to high-return projects. The quarter showcased operational efficiency, including a record monthly production of 529,000 barrels per day of synthetic crude oil (SCO) in August, indicating strong utilization rates.

Financial Performance Highlights

Canadian Natural generated adjusted funds flow of $3.9 billion and adjusted net earnings from operations of $2.1 billion. Returns to shareholders totaled $1.9 billion, with $1.1 billion allocated to dividends and $740 million to share buybacks through a Normal Course Issuer Bid (NCIB) program. Importantly, the Board of Directors has approved a 7% increase in the quarterly dividend to $0.5625 per share, indicative of the company's strong cash flow generation capabilities and commitment to returning value to shareholders.

Sustainable Free Cash Flow Generation

The company has emphasized its unique ability to deliver top-tier free cash flow, which is sustainable. As of the end of Q3 2024, Canadian Natural held net debt of $9.3 billion and showcased a robust debt-to-EBITDA ratio of 0.6x, reflecting a strong financial foundation. This liquidity position is bolstered by approximately $6.2 billion, including revolving bank facilities and cash. In light of its upcoming acquisitions, Canadian Natural secured a $4 billion non-revolving term loan facility and extended its revolving credit facility's maturity to June 2028.

Strategic Acquisitions and Growth Opportunities

In a significant development, Canadian Natural announced an agreement to acquire Chevron Canada's 20% interest in the Athabasca Oil Sands Project (AOSP). This acquisition will increase the company's net capacity to 7,200 barrels per day and is expected to add 62,500 barrels per day of long-term, no-decline SCO production. Additionally, the company is set to acquire Chevron's 70% working interest in the Duvernay play, targeting approximately 60,000 BOE/d in production by 2025. Both acquisitions are projected to close in Q4 2024, enhancing Canadian Natural's production profile and free cash flow generation.

Operational Efficiency and Cost Management

Canadian Natural's operations demonstrated strong cost management, with operating costs at top-tier levels. In oil sands mining and upgrading, operating costs averaged $20.67 per barrel, a 7% decrease year-over-year. The company successfully completed a turnaround at the Scotford Upgrader in 40 days, significantly ahead of the budgeted timeline, which translates into improved production outcomes. Continuous improvement initiatives are underway to further optimize production efficiency, contributing to the company's ability to navigate low commodity price environments.

2025 Outlook and Capital Allocation Strategies

Looking towards 2025, Canadian Natural remains committed to capitalizing on its diverse asset portfolio. The company will increase its crude oil transportation capacity on Trans Mountain Expansion (TMX) by 75,000 barrels per day, enhancing its ability to leverage refined markets. In terms of capital allocation, Canadian Natural intends to focus on optimizing production costs and maintaining low operating expenses through continued project enhancements and vendor collaborations. The overall breakeven for WTI is projected to be in the low $40s, reflecting the company's robust operating structure.

Earnings Call Transcript 2024-Q3

[Operator]

Good morning. We would like to welcome everyone to Canadian Natural's 2024 Third Quarter Earnings Conference Call and Webcast. After the presentation, we will conduct a question-and-answer session. Instructions will be given at that time. Please note that this call is being recorded today, October 31, 2024, 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]

Thank you, operator. Good morning, everyone, and thank you for joining Canadian Natural's Third Quarter 2024 Earnings Conference Call. Before we begin, I'd like to remind you our forward-looking statements, and it should be noted that in our reporting disclosures evident in Canadian dollars, unless otherwise stated, and we report our reserves and production before royalties. Also, I would suggest to review our advisory section in our financial statements that include comments on non-GAAP disclosures.

Speaking on today's call will be Scott Stauth, our President; and Mark Stainthorpe, our Chief Financial Officer. Scott will provide highlights of our strong operational quarter and include some asset-specific production records and top-tier operating costs. Mark will then summarize our financial results and includes robust adjusted funds flow, earnings and returns to shareholders.

To close, Scott will summarize prior to opening up the line for your questions.

With that, over to you, Scott.

[Scott Stauth, executive]

Thank you, Lance, and good morning, everyone. Our unique and diverse asset base provides us with a competitive advantage as we can allocate capital to the highest return projects without being reliant on any one commodity. Our consistent and top-tier results are driven by safe and reliable operations. Our commitment to continuous improvement is supported by a strong team culture in all areas of our company that focus on improving our cost, driving execution of growth opportunities and increasing value to shareholders.

We achieved strong average production of approximately 1.363 million BOEs in the third quarter, consisting of 1.022 million barrels of liquids and over 2 Bcf of natural gas. Our world-class oil sands mining and upgrading assets delivered strong results in the quarter, including a record monthly production of approximately 529,000 barrels per day of SCO in August. Importantly, these assets continue to deliver strong operational performance and high utilization rates, which resulted in top-tier quarterly operating cost of $20.67 per barrel in the third quarter.

Subsequent to the quarter end, on October 7, we announced an agreement with Chevron Canada Limited to acquire their 20% interest in AOSP, which includes the Muskeg River and Jackpine mines, the Scotford Upgrader and the Quest Carbon Capture and Storage facility. This acquisition will bring Canadian Natural's total current working interest in AOSP to 90% with targeted to add approximately 62,500 barrels per day of long-life, no-decline SCO production to the company.

In addition, Canadian Natural also agreed to acquire Chevron's 70% operated working interest of light crude oil and liquid-rich assets in the Duvernay play in Alberta. These assets are targeted to average approximately 60,000 BOEs per day in 2025 and provide the opportunity for meaningful near-term growth while contributing additional free cash flow. The effective date for these acquisitions is September 1, 2024 and are targeted to close in the fourth quarter of 2024.

Additionally, commencing December 1, 2024, in support of our long-term strategy of targeting expanded refining markets, driving stronger netbacks and reducing exposure to crude oil egress constraints, we will increase our contracted crude oil transportation capacity on TMX by 75,000 barrels per day to 169,000 barrels per day.

I will now run through our Q3 operational results. On the conventional side of the business, primary heavy oil production averaged approximately 76,800 barrels per day in the third quarter, which is a 1% increase compared to the production volumes in the third quarter of 2023, reflecting strong results for multilateral wells on our extensive heavy oil land base, which is the largest in Canada and includes the Mannville and Clearwater fairways. As a result of optimized longer well design and the technical expertise of our teams, we continue to see excellent results from our multilateral wells, driven by our culture of continuous improvement.

In the first 9 months of 2024, we drilled 76 net multilateral wells maintaining top-tier average initial peak rates of approximately 230 barrels per day per well, an increase of approximately 30% compared to our budget average initial peak rates of 175 barrels per day per well. Primary heavy oil operating costs averaged $18.69 in the quarter, which is down 5% from the third quarter of '23, primarily reflecting lower operating costs.

Our Pelican Lake production averaged approximately 45,100 barrels per day in the quarter, which is down 4% from the third quarter of '23, reflecting low field declines from this long-life asset. Operating costs at Pelican were $8.74 per barrel in the third quarter, a 9% increase compared to the third quarter of 2023, which was primarily due to higher maintenance activities in the quarter, partially offset by lower energy costs.

North American light crude oil and NGL production averaged approximately 106,300 barrels per day in the third quarter, which is down 3% from the third quarter of '23. The decrease was primarily the result of temporary processing facility outages and rail transportation restrictions, offset by strong drilling results. Operating costs in our light crude oil and NGLs averaged $13.73 in the third quarter, a decrease of 11% compared to the third quarter of '23 due to lower energy costs.

North American natural gas production averaged 2 Bcf during the third quarter, a decrease of 5% compared to the third quarter '23, primarily reflecting previous announced deferrals of natural gas onstream timing in response to natural gas pricing, the impacts of heat and wildfire conditions in Q3 of '24 and natural field declines. This decrease in production was partially offset by strong results from our Montney and Deep Basin malls. Operating costs on our North American natural gas averaged $1.23 per Mcf in the third quarter comparable to the third quarter a year ago.

As we outlined in the first quarter results, we reallocated capital from certain dry natural gas development activity to multilateral heavy oil wells. Due to continued low natural gas prices in '24, we are further reducing dry natural gas drilling capital. We now target drilling a total of 74 net natural gas wells, 17 fewer compared to the 2024 budget. Our 2024 corporate annual natural gas guidance of 2.12 Bcf to 2.23 Bcf remains unchanged.

In our thermal in situ operations, we achieved strong federal production in the quarter, averaging just over 271,500 barrels per day. This is down 5% from the third quarter of '23, primarily due to the cyclical nature of production from CSS pads at Primrose and natural field declines, partially offset by thermal pad ad developments at Kirby and Jackfish. Third quarter thermal in situ operating costs averaged $10.52 a barrel, which is down 8% compared to the third quarter of '23, primarily reflecting lower energy costs.

At Jackfish, we achieved record quarterly production of approximately 128,000 barrels a day in Q3, primarily due to strong results from pad additions and effective and efficient operations. Additionally, we are currently drilling the SAGD pad at Jackfish with production from this targeted to come on in Q3 of next year.

At Primrose, we were targeting to bring up a CSS pad on production in Q4 of '24 which is ahead of schedule. A second CSS pad has been drilled and is also targeted to come on production ahead of schedule in Q1 '25. This pad was originally budgeted to come on in Q2 of 2025.

At Kirby North, we began a solvent injection in June of 2024 and all 8 wells are now injecting solvent. Early results have been positive, with SOR reductions of approximately 30% trending towards a targeted reduction of 40% to 50%. Solvent recoveries are in excess of 85% and our meeting expectations. As a project advances, we will continue to monitor SORs, solid recovery and production trends.

In our oil sands mining and upgrading operations, third quarter SCO production averaged approximately 498,000 barrels per day an increase of approximately 7,000 barrels per day compared to the third quarter of '23. The increase in production for the third quarter included planned turnaround activities at the non-operated Scotford Upgrader, which began on September 9, and were successfully completed on October 18. Oil sands mining and upgrading achieved a new monthly production record of approximately 529,000 barrels per day of SCO in August of this year. This was primarily due to high utilization at both Horizon and AOSP as well as the completion of the reliability enhancement project at Horizon during our planned turnaround in the second quarter.

Operating cost in oil sands mining and upgrading assets are top tier, averaging $20.67 per barrel in the third quarter, a 7% decrease compared to the third quarter of 2023. This primarily reflects higher production volumes from reduced planned turnaround activity and lower energy costs.

The Scotford Upgrader, the planned turnaround was executed in 40 days relative to the original budget of 49 days while achieving higher utilization rates during that 40-day window. As a result of the annual net production impact from AOSP from the third quarter turnaround activities is 5,400 barrels per day, a significant improvement compared to the budgeted annual net production impact of 11,000 barrels per day. A debottleneck project was completed during the Scotford turnaround, which increases the total gross capacity by 8,000 barrels a day. Upon closing of the acquisition of Chevron's 20% interest at AOSP, the capacity net to Canadian Natural increases to 7,200 barrels per day. The debottleneck project was completed during the Scotford turnaround, which increases gross capacity of 8,000 barrels per day. Upon closing, Chevron's 20% interest, capacity net to Canadian Natural increases to 7,200 barrels per day.

Canadian Natural is delivering top-tier free cash flow generation, which is unique and sustainable and robust and clearly demonstrates our ability to both economically grow the business and deliver returns to shareholders by balancing our 4 pillars of capital allocation.

With that, I will now turn it over to Mark for a financial review.

[Mark Stainthorpe, executive]

Thanks, Scott, and good morning, everyone. In the third quarter, our strong operational execution led to excellent financial results. We generated adjusted funds flow of $3.9 billion and adjusted net earnings from operations of $2.1 billion. This drove significant returns to shareholders in the quarter, totaling $1.9 billion with approximately $1.1 billion in dividends and $740 million in share buybacks through our NCIB program. Year-to-date, up to and including yesterday, October 30, we have distributed significant value to shareholders, totaling approximately $6.7 billion, including our sustainable and growing dividend and share buybacks.

Given our strong financial position and significant and sustainable free cash flow generation, as previously announced, the Board of Directors has agreed to increase the quarterly dividend by 7% to $0.5625 per share payable at the next regular quarterly dividend payment in January 2025. This will mark 2025 as the 25th consecutive year of dividend increases by Canadian Natural, with a compound annual growth rate of 21% over that time. This increase in the quarterly dividend demonstrates the confidence the Board of Directors has in the company's world-class assets and its ability to generate significant and sustainable free cash flow.

Our financial position is very strong with net debt at $9.3 billion and debt-to-EBITDA at 0.6x at the end of Q3 '24. Liquidity remains strong and including revolving bank facilities and cash, liquidity at the end of the quarter was approximately $6.2 billion.

Subsequent to quarter end and as previously announced, in connection with the agreement to acquire assets from Chevron, we obtained a fully committed $4 billion non revolving term loan facility. We have also extended the maturity of our $2.425 billion revolving credit facility from June 2025 to June 2028. Our asset base is underpinned by top-tier, long-life low-decline assets, a strong balance sheet and safe, effective and efficient operations, all of which combined to provide us with unique competitive advantages in terms of capital efficiency, flexibility and sustainability, driving strong returns on capital.

With that, I'll turn it back to you, Scott, for some final comments.

[Scott Stauth, executive]

Thanks, Mark. In summary, our consistent and reliable results are underpinned by safe and reliable operations. Our commitment to continuous improvement is driven by a strong team culture in all areas of our company that focus on improving our cost, strong execution of growth opportunities and increasing value to shareholders.

So with that, I'll turn it over for questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Dennis Fong with CIBC World Markets.

[Dennis Fong, analyst]

Congratulations on another strong quarter. First question here is just on Horizon and frankly, the oil sands mining and operations. Obviously, a really strong August, as you highlighted in your comments. Just curious as to -- as we go into next year in 2025, can you talk towards a little bit of the potential of cost savings with the lack of turnaround at Horizon as well as some of the improvements in terms of run time and production capacity that you've been able to unlock with the 2 assets?

[Scott Stauth, executive]

Right. Well, in terms of cost at Horizon, you could look at that when we're doing in a non-turnaround year, you'd estimate the savings to be in around $75 million, Dennis. In terms of the utilization, we can see that we're having strong production results coming out of that completion of the reliability project. We'll continue to focus on that going into next year. In terms of other costs at Horizon and AOSP, our teams continuously focus on areas for improvement through basic continuous improvement projects. So we're just going to stay focused on our base business there in oil sands mining, Dennis, optimizing production and working to reduce costs.

[Dennis Fong, analyst]

Great. Great. I appreciate that context there. My second question is just turning my attention towards the thermal [ in situ ] project. Obviously, a lot of things going on there and obviously, strong production at Jackfish. I was just curious, I know in the 2024 budget, you guys mentioned Pike as Phase 1 is an opportunity that you guys were looking into a little bit more. Can you talk towards any progress you've made? I think drilling and pipeline work was starting late 2024. Is that still on the docket? And how are you thinking about that project?

[Scott Stauth, executive]

Yes. Good question, Dennis. And yes, the Pike 1 project involves the pipeline running from the Pike 1 area to be tied back into our Jackfish facilities. That work has commenced. We'll continue on with pipeline activity into 2025, along with drilling our first pads, and that's the plan for 2025.

[Operator]

Your next question comes from the line of Neil Mehta with Goldman Sachs. Please go ahead.

[Neil Mehta, analyst]

And one of the keys to the CNQ story over time has been continuous progress around costs. And so just curious, in a lower commodity price environment, what are the opportunities to capture cost and capital efficiency in that spirit, any early thoughts on how '25 budgets could play out?

[Scott Stauth, executive]

Well, I think it's just really important, as we always do, Neil, to focus on overall optimization of our production, the more we can optimize the production the better impact that has on our overall operating costs. Our low operating cost structure is top tier, and it certainly allows for significant free cash flow and low commodity cycles.

In terms of continuous improvement activities, I can tell you that every single year, our teams come up with projects that are new to work on finding efficiencies, working with our vendors and our suppliers to help reduce cost, become more efficient and effective. So it's an ongoing program that we've been utilizing for many, many years, and we're going to continue to focus on that, Neil.

[Neil Mehta, analyst]

And just thoughts on '25 as we kind of bridge from the 5,400 this year into next year, what are some moving pieces that we need to keep in mind, recognizing you can give us some more clarity here in the coming days?

[Scott Stauth, executive]

Yes. I think, Neil, you can look for us to come out closer to year-end here with our budget for next year. So we're still working through all the details, prioritizing our projects that drive the best returns. So we're going to be focused on that, and we're working through that right now. So I don't have any additional details to provide you at this time.

[Operator]

Your next question comes from the line of Greg Pardy with RBC Capital Markets.

[Greg Pardy, analyst]

I was wondering if you could just maybe dig a little bit into the solvent pilot, commercial pilot, I guess, you're running at Kirby North. And so I guess you're seeing -- as you indicate, you're seeing great results and so on. If this is successful, is this something that you would sort of apply on a go-forward basis? I'm trying to get a sense as to how much of broader application? Is this something that you could use at Jackfish on new pads and so forth? Or how limited maybe is the scope of this if it is commercial?

[Scott Stauth, executive]

Yes, Greg. So again, still early stages in terms of seeing the results. So far, I agree. And as we stated, they're very positive. We still need some time to work through that. I'm expecting that we'll feel more confident in terms of the overall results as time goes on here, looking into June of 2025, it will be a full year of run time. So we'll have a lot more meaningful numbers.

If you look forward to the future under your circumstance that looking for adding solvent to future pad adds. It fits well with future development, because it helps the total steam requirements of the area. And so you'd apply that -- we'd look at applying that to future pad adds in Kirby and Jackfish as we move forward and look towards bringing -- potentially bringing reserves forward with that type of concept of solvent injection.

[Greg Pardy, analyst]

Okay. Okay. And then haven't really dug into the numbers on some of this, but just with respect to OpEx at Horizon, AOSP, very good operating costs. I'm just wondering how much of that was due to just very high run rates versus the pullback in AECO pricing? Just trying to get a sense as to how enduring the operating cost that we saw in the third quarter.

[Scott Stauth, executive]

Yes, Greg, it's a bit of both, actually. So very strong volumes. As you noted, AECO prices are certainly lower. And as you know, we -- great thing about Canadian Natural, we do have a natural hedge in terms of our overall gas production because of our fuel gas requirements in our thermal and oil sands mining developments. So it's a little bit of both, Greg. I don't have the exact breakdown here for you at this moment, but they're both significant.

[Operator]

Next question comes from the line of Manav Gupta with UBS.

[Manav Gupta, analyst]

So my first question is, can you help us remind what's your all-in breakeven for WTI with dividend? And then if you could provide some insights as you get the Chevron assets and integrate them and there are synergy benefits, does that move that breakeven in any direction once those assets are fully integrated?

[Mark Stainthorpe, executive]

Manav, it's Mark. There's a lot of different assumptions that go into the breakeven. But when I look at it, we're somewhere in the low 40s WTI in that neighborhood. Of course, when you bring on these new assets with free cash flow coming with them, you probably have a modest benefit to it. When you look at the overall decline rate of the company, today, we set out probably 11%. And of course, that's what drives low maintenance capital and ability to cover that as well as a dividend -- as well as our dividend in a lower commodity price environment.

[Manav Gupta, analyst]

Perfect. My second question is a little more on the international side. Sometimes we tend to bucket them together. But the portfolio on the offshore Africa actually has growth and stuff while North Sea is kind of more in a decline. So how would you say those 2 assets are slightly different from each other, one has growth and other one is kind of more in a decline?

[Scott Stauth, executive]

Great. Yes. So as you're alluding to, the North Sea is on a decline production and we'll continue to work towards cessation of production as time goes on here. We have an extensive abandonment programs in place over the next several years. And in offshore West Africa, yes, potential future development opportunities exist in that area as well. And yes, so it's -- again, it's not a significant portion of our portfolio in terms of production, but we certainly have benefited from the significant cash flow that's come from those areas over the past few decades.

[Operator]

Your next question comes from the line of Menno Hulshof with [ Tony David Securities ].

[Menno Hulshof, analyst]

I'll start with a question on the Chevron transaction where you talked about the Duvernay competing for capital with the Montney, which didn't surprise everybody, but it did surprise some people. So the question is, were there specific parts of the Montney that you had in mind is competing head-to-head with the Duvernay for capital? And on a related note, how does the Clearwater currently stack at those [indiscernible]?

[Scott Stauth, executive]

Yes, if you look at the Duvernay, Menno, in terms of the acquisition, the average liquids rates is in the range of 46%. So from that perspective, it's very comparable with the Montney because of the high liquids production, so resulting in strong capital efficiency numbers. And if you're looking at in terms of comparison to Clearwater and the Mannville, very comparable in terms of overall economics from our Mannville and our Clearwater as well. So the great thing about Canadian Natural is we have these great assets that can deliver significant free cash flow. And so certainly where our focus is going to be going forward here.

[Menno Hulshof, analyst]

Okay. And then the second question is on basin egress, you've made a pretty big push on that front. You have new commitments on TMX, Flanagan South, which was announced a while back and even a bit more in Keystone. How much of that is a function of your own internal growth aspirations versus opportunistically taking it on simply because it's available like we probably saw with PetroChina? And more generally, how are you thinking about the West Coast and Gulf Coast is competing markets for your barrels given current market dynamics?

[Scott Stauth, executive]

I think it's a little bit of both, Menno. But certainly, when you take a look at the opportunities off the West Coast to further expand and diversify to additional refining destinations that provides a significant forward-looking opportunity for us. So it helps the basin maintain very competitive heavy oil netbacks, stabilizes the market more so than it ever was before. And then just in terms if you look at our portfolio of development, it certainly helps secure those barrels, which would otherwise be potentially in egress constraint situation under all circumstances. So it's a really good opportunity for us, strategic from that perspective, and we look to further enhance our netbacks as we go forward.

[Operator]

Your next question comes from the line of Patrick O'Rourke with ATB Capital Markets.

[Patrick O'Rourke, analyst]

I guess maybe a little bit further to Menno's question there, specific to 75,000 on TMX. If I were to look at that Pike today, and it's just based on the fiscal broker reports, we see transport is slightly off market relative to the regulated toll. And I'm just wondering if you can give any more color with respect to that deal? Is it sort of at the market at the regulated tool? Or are there any other aspects to that?

[Scott Stauth, executive]

Yes, Patrick. So I can tell you that it is very similar to our existing contract that we have for 94,000 barrels a day, so turns essentially same from that perspective. So that's why it was a good fit for us, but probably more importantly, securing those barrels, the opportunity to have achieve stronger pricing either through deliveries to West Coast California or for the Asian markets. So it's a good opportunity for us from those perspectives in total.

[Patrick O'Rourke, analyst]

Great. And then sort of shifting gears and thinking about capital allocation here. Obviously, you've taken on a little bit more leverage to get the AOSP Chevron and Duvernay assets in there. Just wondering with where the balance sheet sits today with your view on sort of the opportunity set out there, what would the appetite for further M&A be from here for CNQ?

[Scott Stauth, executive]

Yes. Patrick, it's a good question. But I think if you look at overall position of our company, we do have great assets, and we'll continue to look at opportunities as we have in the past in areas where assets may come up for sale, they're good fit into our core areas. We will look at them like we always have in the past, and history states that. So we'll remain with that forward-looking view and just ensuring that any acquisition we do, Patrick, we do a really good job of maximizing the value for the company and our shareholders.

[Operator]

I'll now turn the call back over to Lance Casson for closing remarks. Please go ahead.

[Lance Casson, executive]

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

[Operator]

Ladies and gentlemen, this concludes today's conference. Thank you all for joining, and you may now disconnect.