Murray Auchincloss: Yeah. Sure. I’ll take the first one, Kate, you want to take the second one? On the first one on TMX and what we’re seeing, obviously, differentials have started collapse on WTI, WCS. I think they’re probably sitting last time I looked somewhere around 14. It’s probably not a bad range, plus or minus a couple of bucks as far as what the range is on WTI, WCS is moving forward. Hard to predict, of course, but that’s our sense of what will occur. We’ve done two things to mitigate against this. First of all, as TMX comes online, it gives a direct route for that oil in the Cherry Point, so that will mitigate. Cherry Point will be able to access some more affordable product moving forward. So that should be a benefit to us that helps mitigate some of that effect.
Plus we have some pipeline re-wheeling that we’ve done over the past few years to be ready to flow product up-and-down across North America to manage risk associated with Whiting as well. So net-net, we think we’re probably still in the same shape we were pre-TMX coming online between Cherry Point and between our flexibility with Whitening and Cushing. Kate, over to you on the capital question.
Kate Thomson: Yeah. Sure. Yeah. Thanks, Ryan. So in terms of inflation, I think the area where we’re still seeing inflation persist is in wage growth. So that’s an area that we continue to battle against and the procurement team that we have inside the organization are working and have worked over the last few years incredibly hard to mitigate all the effects of inflation that we can through things like competitive bidding and moving into much more performance-based models. Alliancing and partnerships have been effective in terms of helping us drive our costs down. What I would say is, yard capacity is tight, utilizations are high, probably the highest they’ve been for about a decade, and we think they may well remain like that for another three to five years perhaps.
So that’s something we will pay attention to. At the end of the day, when we think about the investment decisions, we will be, as you’d expect us to be returns and value-driven. So we will be making sure that all our projects that we sanction are meeting hurdles but we feel pretty good about Cascadia right now. We hope to be able to move to sanction at some point during the remainder of this year.
Murray Auchincloss: And I think on the LNG side from recent bids we’re seeing, we’re okay to continue moving those forward, whether it’s in Asia or the Middle East as well. I think enough companies are now recycling things that we’re seeing some looseness inside the supply chain. But it’s a good question to ask us each quarter to observe as we see the bids come in with the potential sanctions upcoming.
Ryan Todd: Thank you.
Craig Marshall: Thanks very much. We’ll take the next question from Chris Kuplent at Bank of America. Chris?
Christopher Kuplent: Thank you, Craig. Hello. Just two quick questions from me. I was wondering whether there is a specific reason you no longer publish your surplus cash flow metric as that seems to have dropped off the page and just checking whether my back-of-the-envelope minus 1.5 billion in the quarter is anywhere close to where you would get to with your definition. That’s question number one. And question number two is on the ADNOC JV in Egypt. I’m assuming that is yet to close and it’s appearing in your assets for sale. So I wonder whether that will translate into disposal proceeds and obviously, you’re guiding still to $2 billion (ph) to $3 billion for the full year. And if you could give us any more clarity on how you’re going to account for that JV? Thank you.
Murray Auchincloss: Yeah. Sure. I’ll let Kate answer the surplus one and then I’ll tackle Egypt. Okay.
Kate Thomson: Yeah. Thanks, Chris. So when we updated the financial frame in February and set out a two-year frame to the end of 2025, what we were after was creating greater clarity and predictability on distributions. As a consequence of that, we’ve delinked our quarterly share buyback from a surplus cash calculation. It was creating an awful lot of volatility. It remains something when you look at over time. As you can see from the Finn Frame (ph), we’ve said that over time, we expect to distribute 80% of surplus cash to shareholders. And so we’ll think about the rate at which we may or may not want to include further disclosures. It’s not something we intend to disclose on quarter-on-quarter now no longer as it’s not a direct input to the share buyback.
So we don’t feel the need to make any quarterly disclosure on that. At the end of the day, cash flow is going to — go up and down over the quarters with things like working capital movements. So we expected the balance sheet to tolerate some fluctuations in the first half. We saw that come through. We have the typical working capital build and we’ve got heavy CapEx in the first quarter and our divestment proceeds are back-ended, but our balance sheet is strong enough to tolerate that. We can look through that over time. And that’s why we have moved to a frame that stops that quarter-on-quarter linked to a surplus cash calculation.
Murray Auchincloss: Great. Thanks, Kate. And Chris, on ADNOC, yes, we’ve moved forward with the transaction. It’s an asset held for sale. As you say, we’re waiting for completion second half of the year, probably 3Q, 4Q. It depends on — it depends really on how we move our way through the — with the Egyptian authorities. The accounting for that it will show up as proceeds as discussed, I can’t disclose those proceeds now. We’re under a confidentiality agreement, but by the time it closes, you’ll see that inside the accounts, but it will take up a good chunk of the $2 billion to $3 billion target that we talked about. I hope that’s clear, Chris.
Craig Marshall: Thank you, Chris.
Christopher Kuplent: Thank you.
Craig Marshall: Thanks. We’ll take the next question from Lydia Rainforth at Barclays. Lydia?
Lydia Rainforth: Thanks, Craig, and good afternoon, everyone. Two, if I could. Just if we could go back to the cost base and the targets that you’ve got at least $2 billion. Can you just walk us through in more detail some of the examples of what that involves and because actually, it’s sometimes quite hard to go what are good costs and that help growth and what are bad costs reflecting inefficiencies. And I am a little bit surprised that you’re talking about $20 billion of costs that in that transportation and shipping costs that there’s absolutely nothing you can do about and that does surprise me a little bit. So any thoughts you have on that? And then I’m going to come back a little bit to the EBITDA guidance, given the cost savings number, is there a reasonable argument that actually the EBITDA numbers and targets should be moved a little bit higher?
And effectively, I guess what I’m asking for slightly separately is that analysis that you’re not going to give me this, but an exit rate on EBITDA for 2024 as to just — we should be seeing momentum at this stage in that EBITDA number during this year, right?
Murray Auchincloss: Yeah. Great, Lydia. Thank you. Thank you for your questions. Let’s see, cost examples, I’ll tackle. I think the second question, I’ll let Kate deal with. On cash examples, so there are four areas that we’re really focused on Lydia to deliver at least $2 billion by the end of 2026. The first one was focusing on the portfolio. You heard about me talk about that already, so I won’t repeat myself. The second one is your favorite, which is digital transformation. We’ve done an awful lot to digitize many parts of our business and we’re now applying Gen AI to it. The places that we’re seeing tremendous results on are coding. We need 70% less coders from third parties to code as the AI handles most of the coding, the human only needs to look at the final 30% to validate it, that’s a big savings for the company moving forward.
Second things like call centers, the language models have become so sophisticated now. They can operate in multiple languages, 14, 15 languages easily. In the past, that hasn’t been something we can do. So we can redeploy people off that given that the AI can do it. You heard my advertising example last quarter where advertising cycle times moved from four to five months down to a couple of weeks. So that’s obviously reducing spend with third parties. We’ve now got Gen AI in the hands through Microsoft Copilot across many, many parts of the business and we’ll continue to update you with anecdotes as we go through. But I think this is just a tremendous step change in digital for our company and I continue to look for ways to drive higher margin and reduce cost both on capital and cost.
