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Energy - Oil & Gas Integrated - NYSE - CA
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EARNINGS CALL TRANSCRIPT
EARNINGS CALL TRANSCRIPT 2017 - Q2
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Executives

Kam Sandhar - VP, IR Brian Ferguson - President & Chief Executive Officer Drew Zieglgansberger - Executive Vice-President, Deep Basin Bob Pease - Executive Vice-President, Strategic Planning & President, Downstream Ivor Ruste - Executive Vice-President & Chief Financial Officer Kieron McFadyen - Executive Vice-President & President, Upstream Oil & Gas Alan Reid - Executive Vice-President, Environment, Corporate Affairs, Legal & General Counsel Harbir Chhina - Executive Vice-President & Chief Technology Officer.

Analysts

Neil Mehta - Goldman Sachs Group Inc. Philip Gresh - JPMorgan Chase & Co. Paul Cheng - Barclays Amir Arif - Cormark Securities Harry Mateer - Barclays Geoff Morgan - Financial Post Jeff Jones - Globe and Mail Ethan Lou - Reuters.

Operator

Good day, ladies and gentlemen and thank you for standing by. Welcome to Cenovus Energy's Second Quarter 2017 Financial and Operating Results. As a reminder, today's call is being recorded. [Operator Instructions]. Please be advised that this conference call may not be recorded or rebroadcast without the expressed consent of Cenovus Energy.

I would now like to turn the conference call over to Mr. Kam Sandhar, Vice President, Investor Relations and Corporate Development. Please go ahead, Mr. Sandhar..

Kam Sandhar Executive Vice President of Strategy & Chief Financial Officer

Thank you, operator and welcome everyone to our second quarter of 2017 results conference call. I would like to refer you to the advisories located at the end of today's news release.

These advisories describe the forward-looking information, non-GAAP measures and oil and gas terms referred to today and outline the risk factors and assumptions relevant to this discussion. Additional information is available in our Q2 MD&A and our most recent annual information form or Form 40-F.

The quarterly results have been presented in Canadian dollars and on a before-royalties basis. We've also posted a link to our quarterly results on our website at cenovus.com. Brian Ferguson, our President and CEO, will provide brief comments and then we'll turn to the Q&A portion of the call with Cenovus leadership team. Please go ahead, Brian..

Brian Ferguson

Thanks, Kam. Good morning. I'm pleased to report another solid operational quarter for Cenovus. This strong performance includes an initial contribution from the assets we have acquired from ConocoPhillips and the transaction which closed on May 17.

In a volatile commodity price environment, economies of scale are important and the acquisition has roughly doubled the scale of our company and improved our sustainability. This is demonstrated by the CAD465 million of free funds flow that we generated in the second quarter.

Despite the acquired assets contributing only 45 days to the results, this is a strong start and we believe it underscores the value and potential in these assets and in our company. Christina Lake continues to be best-in-class.

Production in the second quarter averaged more than 153,000 barrels per day and over 205,000 barrels per day in June based on our 100% ownership. As we have previously discussed, phase F started up in the fourth quarter of last year and ramped up within 4 months contributing strong volumes in 2017.

Foster Creek production averaged 108,000 barrels per day in the second quarter. During the quarter, we safely and successfully executed the largest turnaround in the company's history within budget.

Phases A through E representing approximately 120,000 barrels per day of production capacity was successfully brought down for 20 days including several days of ramp down and ramp back up.

Following completion of the turnaround, production returned to normal levels averaging approximately 166,000 barrels per day in June, again based on 100% ownership which is about 92% capacity utilization.

Non-fuel operating costs at Christina Lake were CAD4.66 per barrel, about 5% lower in the second quarter compared with the same quarter of last year. This was primarily driven by the increase in production. At Foster Creek, non-fuel operating cost averaged CAD9.42 per barrel, up about 11% from the second quarter of 2016.

This was due to the planned turnaround activities I talked about earlier. Late last year, we announced our plans to resume investment in the Christina Lake phase G expansion. Construction has resumed and we expect field activity to ramp up through the second half of 2017.

Today we remain on track and we continue to anticipate first oil in the second half of 2019. The integration of the Deep Basin assets is going extremely well. The teams are excited to be part of Cenovus and we've recently spudded a 4-well pad. This is the beginning of the 28 net wells we expect to drill through to the end of this year.

We're being disciplined with our capital and expect to spend approximately CAD170 million in the Deep Basin during 2017, nearly all of which will be associated with drilling and completions activity.

We're pleased with the initial progress that we've made in this area and are on track to deliver on our target of an average of 126,000 BOE per day from the Deep Basin in the fourth quarter of 2017.

Refining and marketing segment generated CAD20 million in operating margin in the second quarter of 2017 compared with an operating margin of CAD193 million in the second quarter of last year. Our second quarter 2017 results were impacted by narrower light-heavy differentials and lower crack spreads in a well-supplied market for end products.

LIFO to FIFO adjustments were the other major contributor to lower reported earnings as operational performance remained strong.

We continue to view the refining and marketing segment as a core component of our strategy in order to protect against periods of wider light-heavy differentials and help to maximize the margin on the barrels that we produce.

Concurrent with our announcement to divest of the majority of our legacy conventional oil and natural gas portfolio, we have classified these assets as held for sale in our financial statements and reported their earnings as discontinued operations. These are proven high-quality assets that are attracting considerable interest.

Our first 2 asset dispositions, Suffield and Pelican Lake, commenced in late March and we expect to be able to announce sale agreements during the third quarter of 2017. In addition, data rooms for the Weyburn and Palliser properties are now open with a target to have sale agreements announced in the fourth quarter of this year.

The proceeds from the divestitures will be used to pay down our outstanding CAD3.6 billion asset-sale bridge facility. We have updated our capital expenditure guidance to reflect additional capital cuts and cost improvements which at the midpoint totaled approximately CAD200 million.

We have suspended our drilling program at Palliser for the balance of the year and reduced capital there by approximately CAD75 million. This capital reduction has no impact to production volumes for 2017.

In addition, in our oil sands, we expect to realize capital reductions of approximately CAD80 million related to continued improvements in drilling performance, development planning and optimized scheduling of well startups. Despite these changes to capital, our production outlook for the year remains unchanged.

To further support our financial resilience, while asset-sale bridge loan remains outstanding, we've hedged a greater percentage of our forecast liquids and natural gas volumes.

As of July 24, 2017, the company has crude oil hedges in place on approximately 232,000 barrels per day for the remainder of this year at an average Brent floor price of approximately $50.74 per barrel and 105,000 barrels per day for the first half of 2018 at an average floor price of approximately $48.55 per barrel, that's using both WTI and Brent hedges.

Hedges in place for the second half of 2018 consist of 27,000 barrels per day at an average WTI price of $48.34 per barrel. Cenovus also had natural gas hedges in place at an average NYMEX price of approximately $3.08 per MMBtu and approximately 116,000 MMBtu per day for the remainder of the 2017.

These financial contracts coupled with a liquidity of approximately CAD5 billion afford us a flexibility to ensure that we maximize the value from the assets that we have put up for sale. We know as a team that we have a lot to prove. We know that it is up to us to deliver and I have every confidence that we will do so.

The plan that we outlined at Investor Day includes measurable targets on free funds flow growth, leverage, production and resilience to oil prices, as well as a clear and disciplined capital allocation plan and a detailed timeline of key milestones. Finally, I'd like to touch on my decision to retire as President and CEO effective October 31.

I will be staying on in an advisory role reporting to the Board Chair until March 31, 2018, to help facilitate the transition to the new CEO. Cenovus has engaged a search firm which is currently conducting a global search. I have confidence in our management team and our business plan.

I remain fully committed to doing everything that I can to ensure a very productive next few months and a seamless transition. With that, the Cenovus leadership team and I are ready to take questions..

Operator

[Operator Instructions]. Your first question comes from Neil Mehta with Goldman Sachs..

Neil Mehta

First question from me is related to any synergies that you've uncovered as you've spent more time working with both the Deep Basin assets and scaled up the FCCL position.

How is the integration process going and any quantifiable update in terms to potential synergies associated with it?.

Brian Ferguson

Thank you for the question. As we indicated at our Investor Day on June 20, we're targeting cumulative synergies in terms of capital operating in G&A of a CAD0.5 billion over the next three years.

You've already seen some of the things that we've identified in terms of ongoing capital efficiencies with the CAD200 million reduction in capital that we have identified and updated our guidance for at the midpoint today and we will continue to identify and focus on other opportunities over the course of the next few months.

We're in the process right now of working through more detailed plan as it relates specifically to the Deep Basin and the integration there. And expect that you'll hear more over the course of the year and in particular as it relates to 2018 budget with more detailed responses there..

Neil Mehta

The driver of the lower capital spending in 2017 -- can you just help us walk us through what are the factors that drove the reduction?.

Brian Ferguson

Sure. I'm going to ask Kieron to respond to that question for you..

Kieron McFadyen

Thanks, Brian. Thanks, Neil. So the first thing I want to stress is that we're absolutely focused on spend. I think Brian bridged it earlier. We're absolutely focused on capital discipline too. So the main reasons for the adjustment of CAD200 million on capital and I'll give you a few, Neil, those many, but I'll give you the main ones.

Main reasons in oil sands simply doing faster than more efficiently is one and that's quite significant. The other area in oil sands which is equally significant, is we're saving a substantial CapEx associated with optimized pipeline routing.

Again sticking with oil sands, we're seeing further optimization benefits associated with optimizing steam availability and rig availability. And of course, Brian mentioned it earlier, decision to market conventional assets immediately led us to decision to suspend all development activities in conventional. There was a few other things I could cover.

So some reductions in steam, some reductions in Narrows Lake, et cetera. But I want to come back to the first point. We're absolutely focused on spending right now..

Neil Mehta

That's great.

And the last question, Brian, maybe you or someone from the team can talk about, it would be just as you think about that leadership transition and finding the next CEO candidate or some of the criteria the board in particular is looking for in terms of identifying the next person and any time line around when that could occur?.

Brian Ferguson

Neil, I just want to start out by emphasizing that I'm completely committed to a smooth and successful transition to the next CEO. I'm going to ask you Alan Reid to comment on the actual search process..

Alan Reid

Thanks, Brian and thanks for the question, Neil. I guess really a question for the board, but certainly we've had conversations with the board about that.

Obviously, looking for a candidate that has leadership qualities and we focused on execution and cost and be able to advance the company's strategy and capitalize on the full potential of the strategy that we outlined at Investor Day on June 20..

Operator

Your next question comes from Phil Gresh with JPMorgan..

Philip Gresh

First question here is about capital spending. It's a bit of a follow up to Neil's question.

Outside of Palliser, the reduction that you're seeing in the rest of the business, I mean do you believe that these are sustainable reductions that would lead to a lower sustaining capital requirement go forward or how do you feel about the sustaining number you've given in the past?.

Brian Ferguson

So broadly speaking new, we think that the majority of these savings are sustainable. I mean if you look at drilling and drilling performance, I mean we're changing the way in which we're drilling, so that is clearly sustainable.

The way in which we're planning facilities and developing a plant in oil sands, things associated with urban planning and indeed where we put up a pipeline is absolutely sustainable. [Indiscernible] a number to and I won't to, but broadly speaking I would see about 60% to [indiscernible] is sustainable..

Philip Gresh

So is the sustaining CapEx guidance still on this, I believe, Brian, '16 to ' 17 in the past, [indiscernible]?.

Brian Ferguson

Yes, that's correct. We have not updated that guidance. It's still '16 to '17 corporately, so that includes downstream..

Philip Gresh

Second question is just on the asset sales.

In light of some of the transactions that happened in the marketplace recently and your confidence in this CAD4 to CAD5 billion range and if we separately from that, whether you've identified any other opportunities outside of conventional, thinking things like infrastructure perhaps that might be out there, joint ventures or anything else, just update us on how you're thinking about additional opportunities?.

Brian Ferguson

Thanks, very much, Phil. One of the observations I would make is, if you look at the second quarter financial results for our legacy conventional business it's regarding the discontinued segment, you'll see that they're indeed very strong cash flow generators, high-quality assets.

So we believe that they are actually distinguished in the marketplace today and we're seeing very, very strong interest in this. I'm going to ask Ivor Ruste to expand and answer the balance of your question..

Ivor Ruste

We have other potential divestiture candidates that would allow us to indeed exceed our CAD5 billion divestiture target. We identified those back at our Investor Day on June 20.

And as you referenced, certainly the infrastructure asset class is one of those opportunities that we've had lots of unsolicited interest in helping us come up with some opportunities there. But we need to spend time looking at our development program as Brian has mentioned.

We've got 2 growth platforms now and understanding where we should focus the capital and come seeing how those -- the existing 4 package processes go, will allow us to look at our future capital priorities and then make decisions about what other assets would come up..

Kieron McFadyen

I would just add for clarity and emphasis, Phil.

So as we have identified in the news release and as I mentioned in the call notes that -- it's our expectation based on activity and interest that we've seen so far that the proceeds from the 4 packages that we have out today will get substantially to the CAD4 billion target and we see opportunities beyond that as Ivor has mentioned, that will take us above that CAD4 billion and potentially above CAD5 billion in divestitures.

We're very focused on the pro forma portfolio and where we will allocate capital in our new portfolio..

Philip Gresh

My last question is just on the downstream business. Indicator margins seasonally were up Q2 over Q1, your throughput was up, utilization, your OpEx was down quite a bit sequentially, yet the earnings were weaker sequentially.

So obviously understand that differentials were tight, but were there other factors here in the quarter to think about besides just the differentials?.

Brian Ferguson

I'm going to ask Bob Pease to respond to the question, Phil..

Bob Pease

Yes, Phil, thank you for that. Two principal things to look at. One of the challenges is we do report our results in Canadian dollars on a FIFO basis, whereas most everybody in the U.S. reports theirs obviously on U.S. dollars and on a LIFO basis, so the FIFO being more subject to changes in absolute price level.

On a LIFO basis, on a more consistent basis, measures really operating performance. We're were actually up $25 million on the quarter relative to the first quarter. That's $25 million that was up. The other element is to do with the apparent margin.

So yes, the 3-2-1 crack spread was increased from Q1 to Q2, but as you mentioned, there is a lot of other factors we look at the actual available margin to the refinery. Our refineries are geared principally for heavy crude, more Canadian type heavy at the Wood River and more WTS typically down at Borger.

And these differentials actually narrowed significantly. Good for the company, but it actually completely diminish the apparent uplift on a 3-2-1. So the actual available margin was essentially flat from Q1 to Q2 for these refineries.

So we actually produced about $25 million more operating margin in the quarter and it was driven primarily by lower maintenance, lower operating costs, strong operational performance, really was a strong quarter, despite how the Canadian FIFO report would depict at..

Operator

Your next question comes from Paul Cheng with Barclays..

Paul Cheng

Several questions. I know that it still early days, Brian, at the time of the acquisition you had also indicated in Deep Basin that some of assets maybe noncore. Just wondering that after the last two months any update on that.

Have you've been able to identify any asset that you do not believe [indiscernible] to the portfolio?.

Brian Ferguson

You're right, Paul. It's still early days. We have the assets -- had ownership of the assets since May 17 and are working through a more detailed development plan identifying core, noncore right now. So a little early right now for us to comment on that, but we do see significant opportunity to continue to core up.

And I would just emphasize that we continue to get recurring inbound calls from a variety of competitors and companies that would like to be new entrants into the area. So we see a lots of opportunity there. Once we have had the chance to really prioritize where we're going to allocate capital, so stay tuned we will update you later this fall..

Paul Cheng

And should we assume that as a result, because the divestment program is still [indiscernible] you won't be able to give us any preliminary 2018 CapEx outlook at all?.

Brian Ferguson

Again, we will be working through our 2018 budget shortly and will provide an update on that in the fall..

Paul Cheng

I mean that -- can we talk about that at least, is there any particular area other than say in Deep Basin you're going to raise the CapEx comparing to this year? Is there any area that the CapEx actually may be increased or it's more likely to come down?.

Brian Ferguson

So, we have flexibility on our capital depending on the price environment that we see ourselves. And so, first and foremost, we have flexibility there. You're right, we do plan to ramp up activity and add rigs and more well activity. And of course, we'll have a full year of activity in 2018 in the Deep Basin.

So yes, we would expect that will be somewhat higher. But we do expect that it is going to continue to be self-funding and generate free funds flow. So our expectation is that it will be -- it will self-fund itself even at a higher level of capital.

As it relates to the oil sands, Christina Lake phase G will take some more capital in 2018 as we mentioned and it will be on stream in 2019. Beyond those commitments though, the #1 priority for us is to complete the asset divestitures and delever the balance sheet and get back down to a net debt to EBITDA of 2x or lower.

So do not expect to see any ramp up in spending until we have accomplished the deleveraging of the balance sheet..

Paul Cheng

Final one on the Foster Creek. You need transportation costs, maybe [indiscernible] the reason why we have seen that churn couple of years ago is because of the commitment that on the [indiscernible] higher volume than your equity production. And so as a result, on a per barrel basis that's high and over time, as production increase that will down.

So with the acquisition of the FCCL, how come we didn't see the unit cost coming down?.

Brian Ferguson

I'll ask Bob Pease to respond to that one Paul..

Bob Pease

Paul, thanks for question. There's a few answers to the question. The primary one, I think you're asking about the impact of FCCL volumes. We were already shipping and marketing all volumes associated with FCCL, so not just our own.

So when the new pipeline did come in a couple of years ago and we did see that increase in cost that was reflected across all the barrels. So the acquisition of the 50% Conoco share of FCCL didn't alter our throughputs, commitments or price on that. The kick up that we saw in Q2 was not related to that principally two reasons.

One, we had the turnaround at Foster Creek which was an exceptional turnaround, well run in terms of time and cost and what we're seeing out of it. But it significantly decreased our volumes during the course of the quarter which did kick up our transportation costs out of Foster Creek. So we'll see that move back to normal going forward.

And we did also see more delivered volumes coming out of Foster Creek, both by rail and by pipe. And each of those with more than offsetting margin increases. So you can see that in terms of the realized price coming out of there. But those are the 2 reasons, not the change of the FCCL ownership..

Operator

Your next question comes from Amir Arif with Cormark Securities..

Amir Arif

Just a few quick questions. Just on the Deep Basin, the 28 wells, I know some of that includes the Pipestone and Montney drilling.

Can you just remind us where -- what are the key areas that drilling will be focused on and where that will just exit rate to by the end of this year when you get those 28 wells done?.

Brian Ferguson

I will ask Drew to respond..

Drew Zieglgansberger

So the rig that we've up and running right now is actually doing the Montney wells; it's on a four-well pad right now that we just started. The first well we're targeting the lower Montney and the other wells will be in the middle Montney. So that rig is already up and running.

We actually have another rig coming in this week in the Edson area targeting in the Wilrich. And then even next week, we have a third rig starting in kind of our Clearwater area, kind of the Sand Creek targeting not a key win in Spirit River. So all of these initial wells that we're going to be drilling on 100% working interest land.

So we're targeting really the liquids rich content, natural gas liquids content on some of our higher working interest properties. So as we drill out these net wells, I think we're going to drill about 31 or 32 gross wells which will be about 28 net. So very, very high working interest.

But you'll see us over the next year or 2 actually targeting liquids-rich really the Spirit River formations and the Montney. So we'll continue to provide updates every quarter, but that's kind of the current progress that we've made and we will have 3 rigs running here in the next week or so..

Amir Arif

And I know you have a low decline rates, so the 119,000 BOEs a day, do have any sense where that give by year-end. Just want to be....

Drew Zieglgansberger

Yes, sorry Amir. Yes, the second part of your question, yes, so for Q4, but we're still planning on track to be at the 120,000 BOE in Q4 average. So yes, sorry about that second part of your question..

Amir Arif

And then, second question just on the -- at Foster Creek, I believe you were going to be starting testing some propane solvents.

Do you have any color in terms of how that's -- or any initial color on how that's progressing?.

Brian Ferguson

Okay. I will ask Harbir to respond to that..

Harbir Chhina

They were still scheduled to start the test in the fourth quarter and get some results. And we'll have planning on 1 pad coming on to the full pad by the end of the second quarter '18. So servicing is still on track with solvents in terms of testing at high concentrations of butane and propane and everything looks good so far..

Amir Arif

And then initial results are until mid '18 before you have better sense of what that [indiscernible]?.

Harbir Chhina

No, we will start to get results by the end of this year. So the pilots that we were planning are scheduled to come on in the fourth quarter. So we just need a couple two, three months to look at the initial production. But we're very confident which is why we're proceeding, we're doing the engineering and planning the convert 1 pad in Q2 '18..

Amir Arif

And then just on the -- next question is just on the CAD1 billion cost synergies that you laid out over the next 3 year.

Could you roughly break out how much of that is in the next 12 months? As a rough number of the CAD1 billion ?.

Brian Ferguson

So the target -- it's CAD125 million annually sustainable and we've established a plan where we're really going to focus and try and target on accomplishing the majority of the CAD125 million annual improvement by early 2018. So it's something that's got a great focus. We're into our third year of volatile commodity prices.

And I would say, the cost leadership and production, efficiency and productivity is really a way of life here at Cenovus..

Operator

Your next question comes from Harry Mateer with Barclays..

Harry Mateer

Just 1 question for me, so on the -- you've got a CAD4 to CAD5 billion Canadian asset sale target. You've got a CAD3.6 billion asset-sale bridge facility or set of facilities.

Assuming you hit the CAD4 to CAD5 billion target, can you give us a sense for how you allocate those proceeds above and beyond the CAD3.6 billion bridge? Or you consider further deleveraging or you perhaps look at taking some of those 2019s out of the way to make it a smaller refinancing effort in a couple years?.

Brian Ferguson

So I'll ask Ivor Ruste to give details on it. But short answer is further deleveraging..

Ivor Ruste

Thanks, Brian and Harry. Certainly concur with Brian's response. We will devote those proceeds to further deleveraging in the near term. And we've started to think about the 2019 maturity certainly, but no specific plans at this point in time.

Again, a function of how we make up with these existing packages, but I continue to be confident to divestiture process and we will -- we're committed to that priority of deleveraging the balance sheet, getting that metric down to less than 2x debt to EBITDA..

Operator

[Operator Instructions]. Your first question comes from Geoff Morgan with Financial Post..

Geoff Morgan

About the Keystone pipeline system, will the company be committing some of its barrels to ship the TransCanada as for commitments on binding open season this morning? Has the company either recommitted on previous commitments or do you intend to participate in separate season?.

Brian Ferguson

So Geoff we continue to be a supporter of the Keystone pipeline in the process of recommencing in open season which is obviously competitive process. Beyond, I don't want to get into specifics right now in terms of committed volumes, but I would just say that we continue to be a supporter of the Keystone pipeline..

Geoff Morgan

Do you think there could be a pinch on getting your production to market if this pipeline weren't built?.

Brian Ferguson

No, not for Cenovus. We've got several alternatives. And again I just want to restate we're a supporter of Keystone and see as an important egress point for the Canadian industry..

Operator

Your next question comes from Jeff Jones with Globe and Mail..

Jeff Jones

Brian, you've had a pretty good reaction to the Q2 earnings in the market today, but I'm just wondering just seeing what has happened to the company's shares since the deal was announced, what do you think was the fundamental misunderstanding in the investment community?.

Brian Ferguson

Yes, thanks for the question. And you're quite right. Our stock's been under pressure here in the second quarter. I would observe as a general observation, we've also seen the commodity price market and oil prices under pressure as well.

Specific to Cenovus, the recurring point of interest feedback from our shareholders is around specifically the temporary increase in the leverage on our balance sheet and our ability to complete the divestitures that we have targeted to deleverage the balance sheet and to make sure that the company has got great financial resilience.

So you observed about the positive response here initially to second quarter, I think that really demonstrates the ability of the company as we go forward to generate meaningful increases in free funds flow and as I said, job #1 for us is to focus on completion of the divestitures and delever the balance sheet..

Jeff Jones

Just as a follow up on that.

There have been some concerns about the commodity markets weighing on whether buyers will step up to the plate or not, is that something that you share?.

Brian Ferguson

We continue to see very strong interest in all 4 processes -- all 4 properties that -- and from a variety of parties. Many of them are very, very well-funded and do not rely on capital markets activity..

Operator

Your next question from comes Ethan Lou with Reuters..

Ethan Lou

Brian, what WTI price do you need to breakeven in terms of the oil sands and can you give up breakdown of per barrel costs?.

Brian Ferguson

So, let me respond to that on a corporate basis. So on a corporate basis, we cover all of our sustaining capital and our current dividend just above CAD40 WTI equivalent.

In the oil sands, we cover all costs there and our supply cost, we refer to which is generating a 9% after-tax rate of return, is in the mid CAD30 WTI range on the existing projects..

Ethan Lou

Can you give a breakdown of cost per barrel?.

Brian Ferguson

Breakdown of cost per barrel, those are contained specifically in the financial statements that we've released and our media folks would be happy to follow up on you specifically with for both Christina Lake and Foster Creek..

Ethan Lou

And my next question Cenovus quite some time ago has said that it committed 75,000 barrels per day on Keystone and I'm just wondering, has that changed?.

Brian Ferguson

Again as I said a little bit earlier, TransCanada and Keystone are in the process of a new open season. That's obviously a competitive process. So I don't want to comment specifically at this point as to what our specific commitment is at this point, but we all are supporter of Keystone XL..

Ethan Lou

And any shortlists of new CEO?.

Brian Ferguson

I will let Alan Reid respond to that..

Alan Reid

Hi, Ethan. There is a process that's underway that's being managed by our board. So not something that we're aware of at this point in time..

Operator

Your next question comes from [indiscernible] with The Canadian Press..

Unidentified Analyst

I was just curious if the reduced number of players in the Canadian oil and gas base has affected to your sales, target or pricing or just kind of how well the sales process is going in general, if you feel that admit a difference?.

Brian Ferguson

Short answer that is, no. We've seen no impact. We continue to see very good solid strong interest by well finance players, some of whom are new entrants..

Unidentified Analyst

And just quickly on efficiencies and combining of the assets.

Can you say kind of how many personnel or jobs you may have cut in kind of gain the synergies out?.

Brian Ferguson

The synergies are coming from a variety of areas and its combined capital, operating cost and G&A. We do not have specific workforce targets or reductions established..

Unidentified Analyst

[Indiscernible] target, but just how many have already been let go because of it..

Brian Ferguson

Over the course of 2015 and 2016, we've reduced our total staff including employees and contractors by approximately 1/3..

Unidentified Analyst

And since the Conoco acquisition, has it been further or?.

Brian Ferguson

So, with the Conoco acquisition, we actually added staff because we acquired not only the assets but we have acquired the staff..

Unidentified Analyst

Right.

But I guess in terms of any synergies between the 2 operations, have there been layoff since then?.

Brian Ferguson

So we were -- just to remind you, we always were 100% -- operating 100% of the oil sands. So no staff reductions associated specifically with the transaction with that.

We do expect that as part of the divestiture process on our existing legacy conventional oil and natural gas properties that a good portion of our existing staff will transfer with the divestitures to the new owners..

Operator

There are no further questions queued up at this time. I turn the call back over to Brian Ferguson..

Brian Ferguson

Thank you for joining our call today. The call is now complete..

Operator

This concludes today's conference call. You may now disconnect..

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