Canadian Natural Resources Limited (CNQ) Management on Q4 2021 Results - Earnings Call Transcript

Canadian Natural Resources Limited (NYSE:CNQ) Q4 2021 Earnings Conference Call March 3, 2022 11:00 AM ET

Company Participants

Corey Bieber - Executive Advisor

Timothy McKay - President & Director

Darren Fichter - Chief Operating Officer of Exploration & Production

Mark Stainthorpe - Chief Financial Officer

Conference Call Participants

Greg Pardy - RBC Capital Markets

Neil Mehta - Goldman Sachs

Manav Gupta - Crédit Suisse

Phil Gresh - JPMorgan

Dennis Fong - CIBC Capital Markets

Doug Leggate - Bank of America

Operator

Good morning. We would like to welcome everyone to the Canadian Natural Resources 2021 Fourth 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, March 3, 2022 at 9:00 A.M. Mountain Time.

I would now like to turn the meeting over to your host for today's call, Corey Bieber, Executive Advisor. Please go ahead, Mr. Bieber.

Corey Bieber

Thank you, operator and good morning, everyone and welcome to Canadian Natural's fourth quarter 2021 corporate update conference call. Canadian Natural had an exceptionally strong quarter financially and operationally. As I commented before, I believe our asset base is unique amongst our peer group, underpinned by long-life, low-decline assets and complemented by our conventional assets that allow significant flexibility, all of which can generate significant free cash flow. And again, all of which was strongly demonstrated in Q4.

Beyond our robust asset base, there's a corporate strategy that focuses on generating real returns for shareholders and a driven management team and corporate culture that focuses on being effective and efficient. Over the years, Canadian Natural has differentiated itself through it's robustness, sustainability and strength of it's business plan. For 2022 and beyond, I believe we are one of the few energy companies capable of delivering meaningful economic growth while increasing sustainable returns to shareholders and reducing absolute debt in a responsible manner. For today's call, Tim McKay, our President, will first provide a corporate update. Darren Fichter, COO of E&P, will update our 2021 reserves; and Mark Stainthorpe, our Chief Financial Officer, will then provide an update on our 2022 financial outlook as well as our strong financial position. Tim will then provide a summary prior to opening up for questions.

Before we kick off, I'd like to remind you of our forward-looking statements. Of note, in our reporting disclosures is that everything will be in Canadian dollars unless otherwise stated. And as well, we report our reserves and production before royalties. I would also suggest you review our comments on non-GAAP disclosures.

So with that, I'll turn it over to you, Tim.

Timothy McKay

Thank you, Corey. Good morning, everyone. Canadian Natural delivered strong operational results in the fourth quarter of 2021 as we achieved record quarterly production of approximately 1.314 million BOEs per day, of which over 1 million barrels a day was liquid production, a result of our robust long-life, low-decline assets and operational excellence, primarily in the oil sands mining and thermal in situ. This, combined with our capital discipline, generated significant free cash flow as we continue to balance free cash flow to our 4 pillars of capital allocation, maximizing value for our shareholders.

In 2021, we exited with net debt of approximately $14 billion, returned approximately $3.8 billion to shareholders through dividend and share repurchases, maintain capital discipline and executed on OPEC net fixed acquisitions which added long-term value. We continue to apply that same drive to ESG, environmental, social and governance, to deliver industry-leading performance across the board, a significant factor in our long-term sustainability. Canadian Natural targets to publish it's 2021 stewardship report to stakeholders in Q3 2022, including a third-party independent reasonable assurance on Scope 1 and Scope 2 emissions and limited assurance on Scope 3 emissions. Additionally, we will continue to outline our path to lower carbon emissions across the asset base and our journey to achieve our goal of net zero GHG emissions in the oil sands.

We'll also display how Canadian Natural leverages technology innovation to reduce it's environmental footprint, ensuring safe, reliable, effective and efficient operations. Canadian Natural has multiple pathways to achieve net zero with actions identified in the near, mid and long term. The strength of Canadian Natural's oil sands mining asset is that with it's long life, no decline and with it's manufacturing-like operations, it can have one of the clearest routes, if not the clearest route, to net zero of any global oil asset. I'll now do a brief overview of our assets, starting with natural gas.

Overall, 2021 annual natural gas production was approximately 1.695 Bcf per day which was a 15% increase over 2020 production. For North American operations, 2021 annual natural gas production was approximately 1.68 Bcf versus 1.4 for 2020 which was primarily a result of the company's strategic decision to invest in the company's liquid-rich Montney area through the drill-to-fill strategy, adding low-cost, high-value, liquid-rich natural gas production volumes, as well as opportunistic acquisitions completed in 2020 and 2021, the last being Storm resources in mid-December 21, in which we will target to drill 14 net wells into the asset as part of our 2022 capital budget.

Our 2021 annual North American natural gas operating cost was $1.15 per Mcf which was comparable to 2020 of $1.14. For the fourth quarter of 2021, North American natural gas production was approximately 1.841 Bcf per day versus 1.623 Bcf per day for Q4 2020. With strong operating costs of $1.08 per Mcf versus Q4 2020 of $1.07; good year-over-year operating cost performance as our teams continue to focus on operational excellence.

Looking forward on the annual strip basis, AECO prices for 2022 look very strong with approximately $4.25 a GJ, an increase of approximately 26% over 2021 levels of $3.38 per GJ, improving the economics of our Montney liquids-rich natural gas projects. For North American light oil and NGL 2021 annual production was 94,581 barrels per day, up 12% for 2020, primarily a result of strong drilling results. Annual operating costs were strong at $15.28 per barrel versus the 2020 operating cost of $14.61 per barrel. Q4 production was 97,799 barrels per day, up 11% when comparing to Q4 2020 with operating costs of $14.61 per barrel. As compared to the Q4 2020 operating costs of $15.88 per barrel.

The company delivered top-tier execution and results at the company's high-value Montney light crude development in 2021 was very good. As budgeted, a total of 18 net wells were brought on stream in 2021, with an exit rate exceeding the targeted budget rates by over 25%, totaling approximately 11,000 barrels a day of light crude oil and 35 million a day of natural gas and 12-month capital efficiencies of approximately $6,000 per BU. Based on the success, Canadian Natural targets to complete 15 net wells as part of our 2022 capital budget and targeted to maintain the processing facilities at full capacity for this year.

Our international assets in 2021 had an annual production of 31,650 barrels, a decrease from 2020 levels, primarily due to maintenance activities and natural declines. Offshore Africa production was approximately 14,000 barrels a day versus 2020 of 17,000 barrels per day. Annual operating costs in 2021 were $14.73 per barrel versus 2020 of $13.29. In the North Sea, annual production averaged 17,633 barrels a day in 2021 versus 23,142 in 2020. Our international assets continue to generate free cash flow and value for the company.

Moving to heavy oil. Annual production was 64,366 barrels per day in 2021, an 8% decrease versus the 70,279 in 2020, reflecting natural decline, partially offset by strong drilling results and increased development activity in 2021. Annual operating costs were $19.37 per barrel versus the 2020 operating cost of $17.59. Fourth quarter of 2021 production was 64,866 barrels per day, primarily as a result of strong drilling results and increased development activity versus the Q4 production of 65,513 barrels a day, while operating costs were $19.72 per barrel versus the Q4 2020 of $17.61, primarily a result of higher energy costs. At the company's Clearwater play at Smith, 12 net horizontal multilaterals were brought on stream in 2021 and continued to perform well, with the current production rates totaling over 3,200 barrels a day. As part of our 2022 budget, the company has commenced the 2 rig drilling program, targeting 41 net horizontal wells to be drilled and placed on production during the year.

Key component of our long-life, low-decline assets is our world-class Pelican Lake pool, where leading-edge polymer flood continues to deliver significant value. The 2021 annual production was 54,390 barrels a day versus 2020 average of 56,535 barrels per day, only a 4% decline, reflecting the very low decline of the property. The team continues to do a great job. We had strong operating costs of $6.75 per barrel, an increase from 2020 operating costs of $6.03, primarily a result of increased energy cost. Q4 2021 production was approximately 52,963 barrels per day, down for the fourth quarter of 2020 of 56,000 barrels a day.

Operating costs in Q4 2021 were $6.78 a barrel, reflecting higher energy costs versus the $5.85 for Q4 2020. With a very low decline and very low operating cost, Pelican Lake continues to have excellent netback. We had a very strong year in our thermal in situ operations in 2021 as we continue to leverage our continuous improvement culture and our expertise to deliver effective and efficient operations. In 2021, we achieved record annual production of 259,284 barrels a day as the teams optimize production throughout the year. The thermal annual operating costs were $12.14 a barrel, up from 2020 levels of $9.44, primarily a result of increased energy costs. Q4 2021 production was very strong at 263,110 barrels per day, up from the Q3 production of 248,000 -- roughly 248,000 barrels a day, with operating costs of $13.08 per barrel. When comparing last year's Q4 2020 production, it's very similar which was at 266,000 barrels per day with operating costs of $12.24 per barrel.

As part of our 2022 strategic growth capital, the company has commenced a 3-rig drill program in thermal that will conclude in Q2 2023. This program targets to drill 3 pads at Kirby, 2 pads at Jackfish targeting on-stream production volumes in mid-2023, with an average capital efficiency of approximately $8,000 per BUED. At Primrose, the program consists of 1 SAGD pad as well as 2 TCF pads targeted to be onstream in mid-2023, with average capital efficiencies of approximately $10,000 per BUED.

Finally, Canadian Natural is progressing in engineering and design of a commercial scale solvent SAGD pad development at Kirby North and targets to commence solvent injection early 2024.

In the company's world-class oil sands mining and upgrade assets, we had a record annual production averaging 448,133 barrels a day of SCO, an increase of 7% from 2020 levels, primarily a result of high utilization rates and operational enhancement. The team had strong annual operating costs in 2021 and remain industry-leading, averaging $20.91 per barrel of SCO versus the 2020 operating cost of $20.46 per barrel, driven by the company's continuous focus on high reliability, cost control as well as operational enhancement.

At our oil sands mining operations, we had a record production in Q4 2021 which was 493,406 barrels per day, as planned maintenance was concluded at Horizon and ASOP earlier in the year and the facilities ran well at expanded capacity. In the quarter, operating costs were strong at $19.55 per barrel of SCO as our teams drive for operational excellence. And the lead-up to the planned turnaround at the non-operated Scotford Upgrader, has had operational issues in the first quarter, impacting Canadian Natural's Q1 '22 production volumes by approximately 31,000 barrels a day. The turnaround is still targeting to begin March 15 for approximately 65 days as previously announced.

At Horizon, client turnaround is targeted for May for a full plant outage for approximately 32. Overall, the 2022 annual production target range remains unchanged.

I will now turn it over to Darren for our 2021 reserve review.

Darren Fichter

Thank you, Tim and good morning. As in previous years, 100% of Canadian Natural's reserves are externally evaluated and reviewed by independent qualified reserve evaluators. Our 2021 reserve disclosure is presented in accordance with Canadian reporting requirements using forecast prices and escalated costs. Canadian standards also require disclosure reserves on a company working interest share before royalties basis.

As you just heard from Tim, Canadian Natural had another excellent year and the results are also demonstrated in Canadian Natural's reserves. Total proved and total proved plus probable reserves increased 6% to 12.8 billion BOE and 17 billion BOE. Of the 12.8 billion BOE of total proved reserves, 8.9 billion BOE are proved, developed, producing reserves. It's also important to note that 55% of Canadian Natural's total proved reserves are high value, no decline, SCO reserves at 7 billion BOE. Finding and development costs and reserve replacements are key indicators of the strength of our assets. In 2021, Canadian Natural delivered top-tier results and our strong performance is reflected in our finding and development costs and reserve replacement. The corporate finding, development and acquisition costs, including changes in future development costs, are $5.88 per BOE for total proved and $5.49 per BOE for total proved plus probable reserves. Canadian Natural replaced 2021 production by 257% for total proved and 328% for total proved plus probable reserves.

As evidence of Canadian Natural's long-life, low-decline asset base, 77% of total proved reserves are long-life, low-decline, resulting in our top-tier total proved reserve life index of 30 years and the total proved plus probable reserve life index of 40 years. The net present value of future net revenue before income taxes using a 10% discount rate and including the full company ARO is $120 billion for total proved reserves and $146 billion for total proved plus probable reserves.

In summary, these excellent results reflect the strength and depth of Canadian Natural's asset base. The value of the company's long-life, low-decline reserves and our ability to execute.

Now, I will hand over to Mark for the financial highlights.

Mark Stainthorpe

Thanks, Darren and good morning, everyone. The fourth quarter was strong operationally and financially as we delivered significant earnings of over $2.5 billion and adjusted funds flow over $4.3 billion. Free cash flow was approximately $3 billion, after capital and dividends, excluding acquisitions in the quarter. As a result of our significant free cash flow generation in Q4, net debt decreased by approximately $1.9 billion from Q3 levels. This resulted in year-end ending net debt at under $14 billion, a reduction of over $7.3 billion through 2021. As part of our financial strength, we continue to maintain strong liquidity. Including revolving bank facilities, cash and short-term investments, liquidity at year-end was approximately $7.2 billion.

Returns to shareholders were also significant in the quarter, with approximately $1.4 billion returned through dividends and share repurchases. Per our previously disclosed free cash flow allocation policy, with net debt now below $15 billion, target free cash flow, as defined in the policy, will be allocated 50% to share repurchases and 50% to the balance sheet. This targets to deliver significant increases in shareholder returns as well as continued financial strength. Our long-life, low-decline assets support a sustainable, growing and predictable dividend. This was evident through the period of challenging commodity prices in 2020, where we increased and maintained our dividend. Then in 2021, the dividend was further increased in March and November for a combined 38% increase.

On March 2 or yesterday, the Board of Directors has approved a further 28% increase to our quarterly dividend to $0.75 per share, payable April 5, 2022. This continues the company's leading track record of 22 consecutive years of dividend increases with a significant compound annual growth rate of 22% over that period of time. This increase in the quarterly dividend demonstrates the confidence that the Board of Directors has in the company's world-class assets and it's ability to generate significant and sustainable free cash flow.

Our asset base is underpinned by top-tier, long-life, low-decline assets, a strong balance sheet and effective and efficient operations that drive an industry-leading U.S. dollar WTI breakeven in the mid-30s per barrel which covers our base maintenance capital requirements and the increased dividend commitment, maximizing value for our shareholders. Additionally, year-to-date, up to and including March 2, the company has returned approximately $680 million to shareholders through repurchase and cancellation of 10.5 million common shares and the Board of Directors has approved the renewal and increase of the company's normal course issuer bid. The approval states that during the 12-month period commencing March 11, 2022 and ending March 10, 2023, the company can repurchase for cancellation up to 10% of the public float, subject to TSX approval.

We continue to balance our 4 pillars of capital allocation with increased returns to shareholders, further debt reductions, the ability to provide economic resource development and execute on opportunistic acquisitions. This clearly demonstrates the sustainability of our business model, the ability of our unique long-life, low-decline asset base with low maintenance capital requirements and effective and efficient operations to generate significant long-term shareholder value.

Before I hand it back to Tim for closing comments, I did want to acknowledge Corey. This will be his last conference call as he is retiring in April. Corey, you've been an exceptional -- you've had an exceptional career, including 21 years at Canadian Natural and we all appreciate your significant contributions to the company's success. On a more personal note, I'd like to thank you for your leadership, mentorship, guidance and friendship over our many years working together. We wish you all the best in retirement.

With that, I'll turn it back to you, Tim.

Timothy McKay

Thanks, Mark. Canadian Natural's advantage is our ability to effectively allocate cash flow to our 4 pillars. We have a well-balanced, diverse and large asset base with a significant portion of which long-life, low-decline assets which requires less capital to maintain volumes. We balanced our commodities in 2021 with approximately 47% of our BOEs, light crude oil and SCO, 30% heavy and 23% natural gas which lessens our exposure to volatility in any 1 commodity as we move through 2022.

We will continue to allocate cash flow to our 4 pillars in a disciplined manner to maximize value for our shareholders which is all driven by effective capital allocation, effective and efficient operations and by our teams who deliver top-tier results. We have a robust, sustainable free cash flow. And through our free cash flow policy -- allocation policy, returns to shareholders are significant. For 2021, approximately $2.2 billion in dividends and $1.6 billion in share repurchase full policy -- allocation policy, returns to shareholders are significant. For 2021, approximately $2.2 billion in dividends and $1.6 billion in share repurchases for a total of $3.8 billion. And today, our dividend was increased by 28% for the 22nd consecutive year and has a CAGR of 22% over that time.

In summary, we'll continue to focus on safe, reliable operations and enhancing our top-tier operation and we'll continue to drive our environmental performance. We are in a very strong position and being nimble enhances our capacity to create value for our shareholders.

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

With that, we will open up the call to questions. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Greg Pardy with RBC Capital Markets.

Greg Pardy

Great quarter again on you guys and fond farewell, Corey. Sad to see you go but good to know I have a place to crash in Las Vegas. Look, just one question then is really around marketing and on the nat gas side. One of the questions that's come up in the market is whether you would be willing or would you even contemplate entering into like a longer-term supply arrangement in connection with LNG or, whether the marketing strategy is still geared around selling most of your gas at AECO?

Timothy McKay

That's a really good question, Greg. And I think what -- we generally don't go into a long-term marketing agreement unless it's something that we feel we have an opportunity to gain some diversification and not overexpose us to 1 market or another. So it's difficult to say at this time when the LNG projects finally get up and running, obviously, being 1 of the largest producers of natural gas, there may be an opportunity to do some kind of agreement there. But right now at this time, there's nothing on the table.

Operator

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

Neil Mehta

Corey, congratulations as well. It's been a terrific run, especially here over the last couple of years. So congratulations to you, sir.

Corey Bieber

Thank you, Neil.

Neil Mehta

The first question is obviously a very dynamic crude market environment right now but particularly in the heavy markets with euros potentially being taken out of the market. I'd be curious, from your guys' perspective, what this all means for Western Canadian crude? And does that create a structural bid on the commodity even if there are potentially Iranian barrels coming back into the market? So curious on your perspective of does the geopolitics support the case for WCS in the near term and long term?

Timothy McKay

Even before the geopolitical piece there, if you look at the heavy oil market, it was very robust. There was a period of time when the differentials had gone wider but that was primarily due to apportionment to here in Alberta. So we've always felt that there shouldn't have been an apportionment issue. But with the additional egress, I just look at the market for the crude to the Gulf Coast is very strong and the differentials seem to support that view.

Neil Mehta

And Tim, with the strengthening of the curve here, although a lot of it's in the front, does it change any of the growth ambitions that you laid out a couple of months ago around the next couple of years? Or it very much stayed the course?

Timothy McKay

It very much stayed the course. We're always looking ahead on the market. But we came out with what I felt was a very strong budget, one that has some near-term growth as well as a very balanced outlook for long term. And being efficient and effective with our drilling program is the key in keeping our costs under control.

Operator

Your next question comes from the line of Manav Gupta with Credit Suisse.

Manav Gupta

First of all, I really wanted to thank Corey. Over the years, you were super helpful and you were very patient even when our questions were outright dumb and stupid. So thank you for that, Corey.

Corey Bieber

Thank you, Manav. Appreciate working with you.

Manav Gupta

So my question here is, you have now done 2 good deals, Painted Pony and Storm. I think Painted Pony closed somewhere in October 2020. And I just wanted to understand from the point where you thought you wanted those assets to the point where you now have them and they're operating, have they met your expectations? Have you been able to achieve the synergies that you set out when you wanted to take out Painted Pony? And again, as far as Storm is ready, I understand it's been about 2 months but are the assets, in general, meeting your expectations?

Timothy McKay

Yes. The assets are doing very, very well. From a reserve point of view, they're actually better than what we had anticipated. And with Storm assets, in the near term, we've been able to grow the production from -- today, it's around 170 million a day and about 9,000 barrels a day of liquid. So yes, the properties have been very good and very accretive.

Operator

Your next question comes from the line of Phil Gresh with JPMorgan.

Phil Gresh

I'm going to throw my congratulations to Corey as well. One question for Mark. I'm not sure if you're willing to answer this one but in the past, sometimes you guys have been willing to talk about how you think CFO will look at the strip. So do you -- it's obviously incredibly volatile right now but anything you'd be willing to share on that front?

Mark Stainthorpe

Well, yes, if you're thinking about CFO versus adjusted funds, so there will be some changes there, too, just as you look at accruals going in a backward-dated market and how manage accrual accounting in the last month and then getting paid for it in the following month. So there'll be some instances of that as well. But on an overall basis, it really depends in this market with the changes in pricing and the differentials and the Canadian dollar or the U.S. dollars being strong, it really depends. So we can sit back and model with you and look at what your assumptions are and how it relates to a cash flow overall but it's very strong. And the free cash flow itself is very strong because you've got a prudent capital program and a dividend that's very sustainable, as we talked about, in kind of the mid-30s areas. So the free cash flow potential here is quite strong.

Phil Gresh

Yes. No, fair enough. And then I guess, are you seeing any risks at this point from the inflationary environment? I know, obviously, you've talked a little bit about the natural gas impacts to OpEx. But just curious with respect to your capital budget, any pressures you might be seeing there in 2022?

Timothy McKay

Yes. Phil, it's Tim here. So yes, we're seeing some inflationary pressures, a little bit on labor. Obviously, the fuel, whether it's diesel or natural gas is going to roll through. But having said that, a good example is on the drilling side. The drilling team is doing an excellent job in terms of maintaining our costs and mitigating those inflationary pressures on the drilling side. So that part is going very well. So the teams are very focused on what we can control and what we can do to mitigate the inflationary impacts. When you get to more on the facility side, where you're using a large amount of steel, we are seeing inflationary pressure is probably in that 20% range. But it's very early here yet. And I have to emphasize, our teams are doing a great job in terms of looking at ways to mitigate that inflationary pressure.

Phil Gresh

Okay. Got it. Sorry, one last one for Mark. Do you have an update on the post payout for Horizon? Has that pulled forward? I think you had said maybe second half of '22 previously, if I remember correctly but just your latest thoughts there.

Mark Stainthorpe

Yes. With the increase in pricing here, it would move forward. We're probably in actually the March-April time frame depending for payout on Horizon. As you indicated, the payout was, of course, in our budget for 2022. It just shifts on timing based on the payout because of commodity prices.

Operator

Your next question comes from the line of Dennis Fong with CIBC World Markets.

Dennis Fong

Also, I'll just throw my name and add as well for the congratulations to Corey. The question that I have really just relates back to ideal capital structure, given quite strong crude oil prices and your outlined allocation of 50-50 after base CapEx and the dividend between debt repayment and buybacks. How should we be thinking about potentially getting to something that's well below the $15 billion level. And how do you look at potentially balancing that versus either deploying more capital and share buyback and so forth? Obviously, keeping in mind kind of the 4 pillars and focusing on what the best, most efficient use of capital has to be.

Mark Stainthorpe

Dennis, it's Mark. It's -- yes, we've got now a free cash flow allocation policy that has kicked in as you indicate, we're allocating 50% to the share buyback program and 50% to the balance sheet. So we'll execute along those lines as we go through the year and we manage that based on the pricing and the free cash flow profiles. I think what's important, just to recognize, one is, yes, the balance sheet is certainly strong and you could argue that it's in a good place go forward, of course, kind of deliver on all of them and particularly in this environment to a significant perspective. So I think that's unique and it's part of the asset base that's been developed here being long life, low decline that gives us that opportunity to have an increasing, sustainable dividend, buy back shares, pay down debt, grow the business and look at opportunistic -- opportunities when they present themselves. So to me, it's a very unique position.

Operator

Your next question comes from the line of Doug Leggate with Bank of America.

Doug Leggate

And Corey, thanks for helping us get right back up to speed and embarrassing us with outstanding performance. So congratulations to you as well from us. So, Mark, this is probably for you. I guess just kind of a follow-up on the capital structure, the return of capital structure, I should say. A number of your peers talk about comfortably living with a portfolio breakeven, if you like, including the dividend closer to about $40 and you're obviously well below that. I'm just curious how you think about the right level of dividend burden and whether you'd be -- given the obvious terrific performance of the portfolio, whether you'd be prepared to continue to move up that breakeven. In other words, headroom for continued outsized dividend increases?

Mark Stainthorpe

Yes. Well, okay. First off, I think when you look at a dividend and what the Board really considers paramount to it is the sustainability of it through cycles. So we look at that to make sure that once a dividend is declared, that we're not having to take it back. That's why you see a steady increase, predictable increases year after year. We've talked about it today 22 straight years. So that's a very key component of our dividend. We want it to be sustainable and increasing. There's different ways, of course, to manage breakevens on a continuous improvement in cost and growing production and paying down debt. It's another way to help with interest costs and things like that. So there's other parts of the equation that can help deliver or sustain a lower breakeven. But in reality, when you look at the asset base, again, with the long-life and low-decline nature of it and the cost structure we've been able to build over time, really sets out a part and helps maintain that low breakeven.

Doug Leggate

Okay. I appreciate that. But in terms of dividend policy, there is no -- do you expect to hold that breakeven in that mid-30s kind of level? Or would you be open to that moving higher to accommodate a higher dividend over time?

Mark Stainthorpe

Well, I think, again, it's about being consistent and being sustainable over time. So those factors change all the time and the Board is looking at those every quarter when they set the dividend.

Timothy McKay

Yes. In perspective, Doug, remember, 2020, we averaged $39 to WTI. So the Board is really focused on making sure that we have a robust, sustainable growing dividend. So to me to be in the mid-30s today is a very evitable position but you don't want to get too far ahead of yourself.

Doug Leggate

My follow-up, I'm not sure who wants to take this but it's really just a housekeeping note on British Columbia permitting. Our understanding is that there were some of the changes in leadership that things might be improving there. I'm just wondering if you could give us a quick update? And I'll leave it there.

Timothy McKay

Yes. In B.C., there's really no change. As far as we know, the OGC is still working through the agreements with the groups there. So there's talk that there may be some opening up of some of the low risk or low impact to permits but we haven't seen anything that I'm aware of today.

Operator

At this time, there are no further questions. I would now like to turn the call back over to management for any closing remarks.

Corey Bieber

Thank you, operator. Before signing off, I wanted to thank Tim and the rest of the management committee for creating and sustaining such a strong corporate culture. I'd also say our strong culture and focus on delivering value to shareholders, coupled with the depth of talent across our organization, provides for seamless transitions in leadership and we've repeatedly seen that over the years. Thank you all to the numerous fixed income and equity investors, analysts and bankers I've spoken with over the years. I learned a lot from each one of you and appreciate the relationships we've developed over the years. So with that, thank you to everybody who joined us on the webcast. And if you have any questions, please don't hesitate to give us a call.

Operator

Thank you. That does conclude today's conference. We thank you for participating. You may now disconnect.