Weyerhaeuser Company (WY)

Investor Day 2021

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Sep 22, 2021

Hello, and welcome to Weyerhaeuser's 2021 Virtual Investor Day, and thank you for joining us. With me here today are Russell Hagen, our Chief Development Officer and Nancy Lowy, our Chief Financial Officer. Let me spend just a moment here at the outset to walk you through today's Officer. I'll start off with a brief strategic overview, including a summary of what we've accomplished over the last couple of years Officer and where we're headed over the next several years. Next, Russell will discuss Weyerhaeuser's growth and business development initiatives, Officer, including our Natural Climate Solutions, Timberlands and Wood Products businesses. After that, I will update you on our plans Officer to capitalize on operational excellence and innovation to further improve our industry leading operating performance. Officer. Nancy will then talk to you about our ESG leadership position and walk you through what is one of the most impressive carbon records of any company around. Officer. Following that, she will cover our capital allocation approach and initiatives, including the announcements we made this morning. And then I will offer a few closing remarks. Officer. We'll then take a short 5 minute break and after that, we'll open it up for questions and answers. Before we start, Officer. I will note, we will be making some forward looking statements today. Please review the warning statements in the presentation slides and on our website Officer, regarding the risks associated with forward looking statements. A copy of the presentation materials will be available on our website Officer and a replay of this session will be posted shortly after the event. So we'll go ahead and get started. Over the last several years, Officer. Our employees and our management team have been hard at work making Weyerhaeuser a better and more valuable company. Officer. We've been optimizing and enhancing our portfolio of assets. We've been improving our operating performance. We've been pursuing new growth and Value Creation Opportunities, and we've significantly strengthened our balance sheet. We've combined these strategic initiatives Officer with solid execution to improve our competitive positioning and to deliver record results over the past year. Officer. And today, we're very excited to share with all of you more details on how our strategy will support long term sustainable growth Officer and drive strong returns for our shareholders. I'll begin with our investment thesis. At Weyerhaeuser, we're focused on 4 key levers Officer to drive value for our shareholders, an unmatched portfolio of assets, industry leading performance, a strong ESG foundation Officer and Disciplined Capital Allocation. Over the last several years, we've made significant improvements across each of these areas. Officer. This has positioned us very well for the future. And today, we'll share more details about our longer term plans across each of these levers Officer and how we will drive superior value for our shareholders into the future. Before I move on, some of you may have noticed that we've added ESG to our investment thesis. Officer. While we've been focused on ESG at Weyerhaeuser for many decades, we believe it makes sense at this point Officer to explicitly add that to our investment thesis. Similar to portfolio performance and capital allocation, Officer. ESG plays an important role at our company. ESG principles guide us in how we conduct our business, but increasingly Officer. Sustainability represents a compelling business opportunity for Weyerhaeuser, and we believe that our ESG leadership Officer will drive significant long term value for shareholders. For those who are newer to our story, I'll spend a few minutes Officer with a brief description of our company. Weyerhaeuser is the largest private owner of timberlands in North America with 11,000,000 acres of on high quality, highly productive timberlands across the United States. We're one of North America's largest producers of wood products Officer with 35 manufacturing facilities that produce lumber, OSB and a variety of engineered wood products. Officer. We also have 18 distribution facilities located in key markets across the U. S. And finally, our Real Estate Energy and Natural Resources segment Officer, focuses on maximizing the value from every acre we own, including our new Natural Climate Solutions business. Officer. All of our business segments have significant scale and industry leading performance and we manage them within a tax efficient REIT Officer. In fact, we're one of the largest REITs in the U. S. Over the many decades as a leader in the industry, we've developed deep Officer, unrivaled expertise in creating and capturing superior value across every step of our integrated supply chain Officer from our proprietary seedlings to our unmatched expertise in forest management to our efficient low cost manufacturing Officering Facilities, all the way to the end customer. We're constantly striving to be the best and to drive value at each Officer in every step of the process. And that includes capturing incremental value through our HBU land sales, energy and natural resources leasing activity Officer and realizing the optionality across our land base through our new natural climate solutions business. Our unique Opfolio and Differentiated Capabilities, together with our strong execution across the entire supply chain, Officer, including the ability to drive cross business synergies positions Weyerhaeuser to create significant value across all of our businesses. Officer. Ultimately, our ability to generate strong returns for our shareholders over time is largely a function of the competitive advantages Officer we bring to the marketplace. And I can tell you without hesitation that we do bring significant advantages to the businesses and markets where we compete. Officer. No other company has the same scale and quality of assets, financial flexibility and the breadth Officer and depth of expertise across the entire supply chain that we have here at Weyerhaeuser. When you combine that with Officer with a solid reputation and strong culture that we've built over many decades. We have a powerful platform to leverage in driving value for our customers, Officer, our suppliers, employees and other stakeholders. And many of these things are very hard for our competitors Officer Replicate. Further, these competitive advantages will help ensure that we deliver on the long term plans and targets that we'll share with you today. Officer. Let me pivot for a moment to some of the fundamental drivers that will, we believe, be significant tailwinds for Weyerhaeuser in the coming years. Officer. Russell will go into more detail on each of these here in a few minutes. But at a high level, there are several macro trends driving continued growth and demand for our products Officer and opening up new and potentially meaningful Officer, and I'll turn it over to Rick. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Russell. Thank you, Officer. I'll just say here that I'm very excited about the opportunities out in front of us. This should be a period of strong and growing demand for the forest products industry Officer and Weyerhaeuser will be very well positioned to capitalize on these strong markets and new opportunities to deliver superior returns for our investors. Officer. As I mentioned at the outset, we've been hard at work driving improvements across each of the value levers of our investment thesis. Officer. Just since the beginning of 2020 and throughout the many challenges that we've experienced over the last year, we've improved our timber portfolio. Officer. We formed a new natural climate solutions business with Russell leading that effort. We've continued to drive significant OpEx Improvements, which has led to industry leading margins across our businesses. And as we've experienced over the last year, when we combine our industry leading performance Officer with strong pricing, our businesses generate significant cash flows. We've also continued building on our long standing ESG leadership position Officer with our new sustainability strategy and our just released carbon record, which we think will generate a lot of interest and excitement. Officer. We've paid down a significant amount of debt and we've instituted a new dividend framework that will return a significant amount of cash to shareholders Officer in a sustainable manner. Our people have done a remarkable job. We've made great progress Officer, and we're now very well positioned to move into our next phase of driving growth and creating value for our shareholders. Officer. Looking forward, we have detailed plans for how we will drive growth and deliver superior value. Specifically, and we'll share this with you today, Officer, the targets we've set for the next several years through the end of 2025. Starting with our portfolio, Officer. We will of course continue optimizing and improving our portfolio of assets. Additionally, we intend to make investments Officer of around $1,000,000,000 over this time period to further grow our Timberlands portfolio. We will do it in a prudent manner Officer and in a way that generates attractive returns and creates superior value for our shareholders. Within Real Estate Energy and Natural Resources, Officer. We intend to grow Natural Climate Solutions to a $100,000,000 per year business. Russell will share more details on our growth plans in just a few moments. Officer. We will remain focused on our operating performance and we'll look not only to maintain an industry leading position, Officer, but to continue to further separate ourselves from our competition. I will share more details on how we intend to do that later in the presentation. Officer. We also plan to enhance our ESG leadership position through our 3 by 30 initiatives and our ongoing work around sustainability at Weyerhaeuser. Officer. We intend to make meaningful progress against the greenhouse gas reduction targets we announced today and to capitalize on our positive carbon story Officer to position the company as a very attractive option for those looking to invest in leaders in the ESG space. Officer, and Nancy will go through this in more detail during her ESG presentation. With our portfolio, industry leading performance Officer and the macro tailwinds I referenced earlier. We expect to generate strong cash flows through this 2025 timeframe and beyond. Officer. Through our disciplined capital allocation approach, we expect to generate significant amounts of free cash flow and return the vast majority of that cash Officer to our shareholders through our new dividend framework as well as opportunistic share repurchase. As we've said, we will return 75 Officer to 80% of adjusted FAD to shareholders through our base dividend, variable dividend and share repurchase. Officer. Our dividend framework is designed to facilitate sustainable growth in our base dividend, and we do expect to grow our base dividend Officer by approximately 5% per year from 2022 through the end of 2025. Nancy will provide more detail on this Officer and other capital allocation items, including the interim supplemental dividend and the increased share repurchase authorization that we announced today. Officer. In summary, we've made great progress on upgrading our portfolio, improving our operating performance, building on our ESG leadership Officer and demonstrating a commitment to disciplined capital allocation. We have detailed plans with specific targets Officer to drive further improvements across each of these areas through 2025. And as we deliver on these targets, we will grow the company Officer and deliver superior shareholder returns. Now let me turn it over to Russell to share a bit more detail on our growth and business development initiatives, Officer, including Natural Climate Solutions. Thank you, Devin, and welcome, everyone. Officer. I'm excited to speak to you for the first time in my new role as Chief Development Officer. In this role, I have the opportunity to lead a portfolio management team, Officer, which includes acquisitions and divestitures, real estate, energy and natural resources, as well as our new natural climate solutions business. Officer. This alignment gives us an end to end view of every aspect of portfolio management, which creates unique opportunities to identify and capture additional value across Officer of Operations. Over the past several years, Weyerhaeuser has built a strong track record of optimizing Officer and using our asset value optimization process to maximize the value of every acre we own. Officer. We have also realized significant gains through our disciplined capital investments to enhance the value of our assets Officer and drive improvements in our operating performance. Today, I'm looking forward to talking to you about the next Officer, our Chief Development Officer, and how we are using these tools to increase the value of our portfolio and capitalize on the optionality of Officer of 11,000,000 Acres. I'll begin with a quick overview of the macro trends that are driving our overall growth strategy. Officer. Then I'll discuss growth and business development initiatives for each of our segments. I'll focus in particular on Natural Climate Solutions, Officer, which we believe given our unique portfolio will create a lot of value over the coming years and further position Weyerhaeuser Officer as a uniquely attractive ESG investment. As Devin mentioned, we believe 4 fundamental trends will drive substantial growth Officer, the demand for sustainable forest products and serve as catalysts for the new market opportunities over the next decade. These trends include Officer. Increased demand for housing, growth in wood based building or mass timber construction, rising global demand for wood fiber Officer and emerging demand for natural climate solutions. 1st on housing. On the demand side, millennials and Generation Z Officer, are entering the home buying market. Collectively, these demographic groups represent the largest population cohort in the U. S. Officer. And they are coming into their prime home buying years. As this group enters the housing market, there's a growing demand for every level of housing Officer in a shift from multifamily to single family homes. Additionally, we are seeing a post pandemic consumer preference Officer for more single family suburban homes, supported by ongoing work from home flexibility. On the supply side, the underlying demand for housing, Officer, which is driven by new household formations, has exceeded the level of new house home construction in every year since the Great Officer. As a result, U. S. Housing is now severely underbuilt with the current deficit of approximately 4,000,000 units. When combined with a shift in preference Officer. Among older Americans to age in place, it's clear that the current $1,600,000 annual housing start rate Officer, our Chief Development Officer, our Chief Development Officer, our Chief Development Officer, our Chief Development Officer, Officer, will drive steady growth in global construction, including infrastructure, housing and industrial and office buildings. Officer. Today, global construction totals over $12,000,000,000,000 a year and is on a square footage basis is expected to increase 50% over the next Officer for several decades. As city planners, architects, developers and consumers increasingly appreciate the benefits of wood based Officer, including its sustainable nature, lower carbon footprint and ultimately we believe lower cost Officer. Construction compared with traditional steel and cement, we expect construction of tallwood buildings will become more and more commonplace. Officer. We've already seen a transition of building codes across developed countries to include mass timber in the construction of tall buildings, Officer. And we expect this trend to continue as technology and adoption improve. Global growth also drives demand for many other uses of fiber, Officer, such as consumer products, packaging and specialty pulp. Taking all this into consideration, we expect Officer. Global demand for softwood fiber will grow 25% by 2,030. Relatively few timber growing regions can sustainably supply Officer. Declining harvest volumes and long term supply chain challenges will limit supply from regions like Canada, Europe and Russia. Officer. The U. S. West and New Zealand will continue to benefit from strong markets, but material supply growth is not likely from these regions. Officer. This paves the way for the U. S. South, which has significant upside and ability to respond to increase in domestic and Officer. With our unmatched timberland portfolio in the West and South U. S, Weyerhaeuser is a very strong position to benefit Officer, as these demand trends further develop over the next decade. The final trend I will discuss is climate change, Officer, which has become one of the most significant challenges of our time. Governments and businesses across the globe are recognizing the urgency Officer for Climate Action and making significant net zero commitments. The customers, investors, stakeholders are urging meaningful progress against Officer targets. Achieving these commitments will require governments and companies to take major steps to modify operations, invest Officer and low carbon activities and by offsets to reduce environmental impacts. This will serve as a catalyst for Officer. The substantial reallocation of capital and resources throughout the global economy. There are currently limited cost effective solutions Officer to achieve meaningful carbon renewables and climate change mitigation. We firmly believe that forest and renewable energy Officer will be an important source of cost effective solutions and the carbon capture and storage, which I will discuss, will also contribute Officer to future carbon reduction efforts. The time for action is upon us and limiting global warming will require all currently available solutions. Officer. Turning to our strategic and business development initiatives. At a high level, our growth strategy through 2025 is focused on 3 areas: Officer. Growing Natural Climate Solutions to $100,000,000 per year business, continuing to optimize and invest in our timberland portfolio Officer with a target investment of $1,000,000,000 and investing in our Wood Products business to further reduce costs, improve productivity Officer and grow our lumber production by roughly 5% annually through 2025. Before I go into the details, I want to set the stage with a brief discussion Officer of our next generation asset value optimization process. AVO or asset value optimization is our fundamental approach Officer for maximizing the value of every acre we own. It was originally established several years ago Officer to identify higher and better use properties that generate a premium over timberlands. As we've demonstrated, this ABO program has allowed us Officer, consistently captures significant premiums to timber values through our real estate business. For the past year, we have been focused on developing Officer. A next generation process that enhances our ability to identify and capture value from various timber and non timber attributes, Officer, including carbon, renewable energy and other natural climate solutions opportunities. We are calling this ABO 2.0. Officer. This sophisticated technology enabled approach, which leverages remote sensing, satellite imagery, machine learning and other advanced data analytics Officer, has generated step change results in our ability to identify strategic growth opportunities and most importantly, manage every Officer in our portfolio to maximize value across the full suite of attributes and opportunities. I'll begin the discussion of our strategic and business development Officer with Natural Climate Solutions, one of the most important focused areas of ABO 2.0. Officer. There are 4 primary elements that make up this business. The first two are well established in our portfolio and include mitigation and conservation Officer and Renewable Energy. Forest Carbon and Carbon Capture and Storage or CCS are newer businesses that have the potential to drive Officer. We expect to grow Natural Climate Solutions into $100,000,000 a year business by the end of 2025. Officer. This is roughly a fivefold increase from where it is today. Currently, the business is comprised primarily of renewable energy leases Officer and Mitigation Banking Income. Although we are forecasting meaningful growth from these activities in the future, we expect the primary catalyst for growth will be forest carbon and Officer of Carbon Capture and Storage, which are currently in early days of market development. It's important to note that our $100,000,000 target Officer, who does not represent the full potential of this business. Demand for natural climate solutions will spend decades and Weyerhaeuser is uniquely positioned to benefit Officer as the markets develop and expand well beyond 2025. Over the next several minutes, I'll provide a more in-depth look at each of the 4 components Officer of the Natural Climate Solutions business, with some context on the current landscape, future market drivers and how we expect to participate. Officer. I'll begin with forest carbon. Forest carbon offsets can be generated from carbon that is proven to be sequestered, measurable over time Officer and represents a permanent removal of carbon. Importantly, the carbon store must be additional. That is there must be a change in management practices Officer. The results in incremental carbon sequestration beyond what would occur under business as usual operations. Within North America, the most common project type Officer, has improved forest management and this will be our primary focus as we are evaluating potential forest carbon projects within Weyerhaeuser's existing footprint. Officer. This means we will consider opportunities to modify certain management practices like civil culture to capture and store more carbon than our baseline carbon inventory Officer within Project Areas. Developing and managing verified carbon credits is not a trivial process and all credits are not created equal from an integrity perspective. Officer. We are committed to only bringing projects to market that meet the highest level of integrity requirements, Officer, ensuring that our credits represent a meaningful carbon removal that clearly contributes to climate change mitigation. I also want to be clear that carbon credits, Officer, which I just discussed are different from the carbon removals described in our carbon record, which Nancy will speak about later today. Officer. Our carbon record accounts for both carbon removals and emissions, but it does not necessarily represent a pool of carbon deemed as additional Officer for the purpose of monetization of forest based carbon credit projects. Let's now discuss the 2 primary markets where forest carbon credits are Officer. Compliance markets are the result of government regulations to reduce greenhouse gas emissions. In this market, Officer. Entities trade emission permits or purchase offsets to meet regulatory targets. The best known U. S. Compliance market is California. Officer is a highly complex, very restrictive and requires a time commitment in excess of 100 years. In contrast, voluntary markets Officer, are not driven by regulatory mandates. This market primarily serves buyers seeking ways to meet carbon reduction commitments such as net zero targets. Officer. As more companies publicly commit to climate change mitigation and net zero goals, there'll be a greater need for carbon offsets, which will drive growth Officer in the voluntary markets. We believe the voluntary markets are best suited for the projects we develop given the complexity Officer and time commitments of the compliance markets. However, the timing and scope of our participation will depend on future carbon prices. Officer. Although pricing is highly variable, credit prices in the voluntary market generally range from $5 to $10 Officer. At this level, only a small number of our acres would generate favorable project economics, but we expect the range of candidate acres will expand as carbon pricing Officer. Currently, voluntary markets are in early stages of development, but the addressable market is significant. Officer. Global net zero commitments today cover about 30,000,000,000 metric tonnes of annual carbon emissions. However, annual carbon credit Officer, total only about 1% of the committed volume and existing compliance mechanisms and emission trading programs Officer. Voluntary market transactions, in particular forestry carbon offsets, Officer. Are expected to contribute significantly. Last year alone, forestry and land use projects comprised 30% of voluntary credit Officer. And we believe the volume of forest carbon transactions is positioned to grow substantially over the coming years. Officer. It is important to note that not all timberlands will be suitable for carbon projects. The value of standing timber differs by region, species type, productivity and markets. Officer. This means the appeal of growing for carbon versus growing for timber will vary by landowner and even within portfolios of timberlands. Officer. With this in mind, we expect owners of low value timberlands to be the first to participate in the forest carbon markets given current Officer. The value proposition starts to look more compelling for owners of high quality timberlands as carbon prices increase and become more competitive with timber prices. Officer. As the voluntary market grows and carbon prices increase, a broader group of timber owners will have an alternative to harvesting timber to generate income, Officer, which will result in additional competition for fiber and logs in certain wood baskets. This pricing competition should influence timber values over time, Officer, which will benefit landowners even without direct participation in the market. I'll close my discussion on Officer with a brief outline of the path to monetizing the carbon credit and an update on where we are at along that pathway. Officer. Monetizing a carbon credit involves a series of steps. It begins with assessing the carbon potential of a wood basket or region Officer, after which specific projects are identified and documented. The project can then be submitted to a voluntary end market registry for verification. Officer. After verification is complete, the credits are issued and available for sale. Finally, the seller must manage the carbon inventory for the life of the agreement. Officer. Typically, most landowners will outsource their carbon projects to 3rd party developers. The outsource model makes sense for landowners who don't have a large portfolio of Officer of potential carbon projects because of the complexity and the expertise required to bring a project to market. However, landowners who outsource this work Officer, share a meaningful amount of the economics with the developer. In general, we expect to develop and manage our own projects. Officer. Given our scale, timber management expertise and technology enabled approach, this will allow us to optimally manage our portfolio of carbon opportunities Officer of capturing the highest value. We have completed initial assessments across the Northeast of our select locations in the West and South Officer and commenced work to develop a potential project scenarios, economics and timing across multiple candidate areas. Officer. As a result of this work, we're initiating a pilot project in New England and positioning other timberlands for potential projects. Officer. We expect to have the New England project completed with the option of bringing these credits to market during 2022. Turning now to our carbon capture and Officer. In addition to carbon sequestration in our forest, we have a unique opportunity to participate in the development of geologic carbon capture and storage Officer for CCS. This is enabled by our surface and subsurface ownership in targeted areas in the Gulf Coast region where CCS development Officer, has the most near term potential. At a high level, CCS is a process where carbon dioxide is captured at the source, Officer, typically an industrial facility and transported along pipelines to a storage location and injected into deep Officer of Subsurface Formations for Safe Permanent Storage. This process has been used for decades in the oil and gas industry to improve hydrocarbon recovery. Officer. However, the costs have been a significant barrier to broader adoption for just carbon mitigation. But a few things have changed, which positions CCS for Officer of future growth. These include continued advances in technology and infrastructure, significant capital commitments to develop CCS by companies and heavy Officer with hard to abate carbon and last, federal tax and direct investment support. This includes recent legislation with Officer, Pacific CCS tax incentives and the new infrastructure bill, which contains nearly $12,000,000,000 for large scale CCS, Officer, Commercialization and Pipeline Infrastructure. The map on this slide is an example of our ABO 2.0 process. Officer. It shows our surface and subsurface ownership combined with proprietary geologic data mapped against major industrial carbon emitters and existing CO2 pipeline Officer. Through this process, we have identified the potential for several large scale CCS hubs Officer on 400,000 acres of Weyerhaeuser surface and subsurface ownership. And we now are in discussions with several potential companies Officer that has significant expertise and interest in developing CCS projects on our acreage. Similar to our approach when partnering with developers of solar and wind projects, Officer. We do not intend to invest in the development or manage the operations of CCS projects that we enter. Officer. Instead, we will benefit from lease and royalty payments, the access to our surface and subsurface ownership. Officer. As we think about how this business will develop over the next few years, it's important to note that even with growing market demand and government backing, it will take time to Officer finalized geologic assessments, permits and infrastructure before projects become operational. As a result, we expect these revenues will begin to emerge Officer, towards the end of the 2022 to 2025 timeframe. Last, I'll touch briefly on our Renewable Energy and Mitigation Banking business. Officer. Through our ABO 2.0 process, we have identified a number of potential new wind sites, primarily in our Western and Northeastern ownership. Officer. We've also identified 200,000 additional acres for potential solar development. As is typical in these types of projects, Officer. Not all areas identified will be developed, but it does position us to create a significant project pipeline. Officer. Turning to our mitigation banking business. We are one of the largest providers in mitigation services in the Southeast. Officer. We have operating banks on over 20,000 acres and additional mitigation projects in entitlement on 11,000 acres. Officer. With the expected increase in building and infrastructure required to support population expansion, particularly in the Southeast, Officer. Demand for mitigation banking is expected to triple by 2,030. We are well positioned to grow our business in that market. Officer. Turning now to Timberlands, the 2nd focus area of our growth strategy. Our portfolio optimization and acquisition decisions follow a Officer. Rigorous analytical process. We have identified using data analytics and market intelligence, a series of targeted investment zones, Officer, where we see potential to strategically increase or decrease our Timberlands footprint over time. That analysis forms Officer, the foundation of our portfolio decisions. We then apply our proprietary data analytics, including many of the ABO 2.0 tools I have described Officer and our deep boots on the ground understanding of timberland operations and markets to evaluate and prioritize specific investment opportunities. Officer. This approach allows us to efficiently pursue timberlands that fit our strategic profile and provide the highest return opportunities. Officer. Over the past year, we've completed 4 acquisitions and divestitures totaling over $1,200,000,000 that enhanced the value of our portfolio Officer and demonstrated the benefits of these tools and approach. In our Western Timberlands, we sold lower value, less productive acreage in Southern Oregon Officer in Northern Washington. We also acquired highly productive acreage in Midcoast, Oregon, which fits seamlessly into our existing ownership, Officer, provides additional timber to our mills and adds fee volume to our export business. In the South, we acquired high quality timberlands in Alabama Officer, strategically located near our existing ownership and are in attractive pulp and log markets. Although these transactions reduced our Timberlands holdings by 1 Officer. 140,000 acres collectively, they resulted in higher annual harvest volume, dollars 30,000,000 of annual EBITDA improvement Officer and cash yield uplift of nearly 5% that will be sustained over the long term, all while generating additional capital for future redeployment. Officer. These recent transactions demonstrate our ability to enhance the value of our Timberlands through disciplined investment and portfolio management. Officer. We remain committed to growing the value of our Timberlands over time. And looking forward, we are targeting to invest $1,000,000,000 in Officer of Strategic Timberlands Acquisitions focused in the U. S. South and West between now and the end of 2025. Officer. These investments will be made with a high level of discipline and rigor that we expect to generate near term cash yields Officer, comparable to the recent transactions I just discussed. As Devin outlined in his opening remarks, we actively manage Officer. All aspects of our value chain, from the integration of our timberlands and mills to our supply chain and log merchandising, Officer to our marketing and log export program. This competitive advantage drives incremental value from the timberlands that we operate Officer and enhances our near term results. In addition, our silviculture and productivity investments allow us to capture Officer. Additional returns throughout the harvest cycle. Last, as I discussed in previous slides, the sheer size and diversity of our portfolio Officer, generates tremendous option value. While we do not include these values in our acquisition underwriting, we have repeatedly demonstrated Officer, that we have the expertise to capture additional value from real estate, E and R and conservation opportunities over time. Officer. And with increasing demand for emerging natural climate solutions, there's an opportunity for even further upside. Officer. I'll wrap up the Timberland section with some comments on our business development efforts and specifically our export growth strategy. Officer. Weyerhaeuser has a long history of exporting into the Asian markets from our Western Timberlands. Building on this experience, Officer, Operational Scale and Supply Chain Reliability. We are increasing efforts to target new markets for our Western export program. Officer. This includes selling high grade logs to new customers in China and exploring opportunities to sell into additional Asian markets. Officer. The Southern markets, as I discussed earlier, are in the best position to respond to growing export demand, not only for logs into the Chinese and India markets, Officer for wood fiber, pulp and biomass into the Japanese markets. We are also seeing increased interest from non traditional markets such as Officer of Turkey as well as the Middle East and other parts of East Asia. Today, our southern export program is in the early stages of development, but we are well positioned Officer for increased participation as this growing market continues to develop. Turning now to Wood Products, the final focus area for growth. Officer. We have transformed our Wood Products businesses over the last number of years through disciplined capital investments and OpEx improvements. Officer. As Devin previously mentioned, we have achieved lack of the bottom in Wood Products and delivered peer leading margin performance across Officer of all manufacturing businesses in 2020. Looking forward, our OSB and distribution businesses are well positioned Officer, given the favorable supply demand outlook, and we will continue to improve efficiencies and reduce costs in these businesses. Officer. However, with rising demand for wood based building, we see additional opportunity to expand our lumber production and enhance our engineered wood products Officer to serve the growing market for these products. Looking specifically at lumber, we expect North American lumber demand Officer, will increase by 10,000,000,000 board feet or 17% from 2020 to 2025. This is supported by favorable demand fundamentals Officer for new residential construction, particularly single family housing as well as repair and remodel and wood based commercial construction. Officer. With Western markets in balance and limited ability to add production capacity and continued reduction in Canadian production over time, Officer. We expect the U. S. South to serve as the primary supplier of incremental lumber supply. As a result, our Southern Timberlands and manufacturing operations Officer, well positioned to capitalize on this new opportunity. Another area of demand growth is mass timber, which is gaining acceptance in the United States and overseas. Officer. This trend is supported by the environmental benefits of mass timber and continuing improvements in the production and building processes. Officer. As the relative cost in mass timber construction decreases over time and the benefits are demonstrated in larger projects, we expect to see capacity Officer and Chief Development Officer. We're also expanding our expansion and increasing adoption in construction of commercial and multiunit buildings. While Weyerhaeuser has no current plans to invest in cross laminated timber Officer for Mass Timber Panel Manufacturing. We do expect to benefit as a supplier of lumber and engineered wood products, Officer, which are feedstocks for mass timber construction materials. We view this as a compelling growth opportunity and are strategically positioned to Officer, who served this emerging market with our existing product base. Turning now to our lumber portfolio. Several years ago, we made the decision to modernize Officer of 2 of our highly strategic lumber mills, Dierks, Arkansas and Millport, Alabama. These were relatively low risk investments and proven operations Officer of strong teams, markets and feed timber alignment. The projects were completed in 2018 2019 and the results have been outstanding. Officer. We've reduced controllable costs by 15% and enhanced our product mix. The projects also increased our lumber capacity by Officer, we have 3 20,000,000 board feet and an attractive cost and have generated an estimated 30% return on investment. Officer. Following these strong results, we announced earlier this year a third modernization project at our Holden, Louisiana mill Officer and an expected completion date in 2023. With the success of Dierks and Millport and holding on the horizon, we continue to view investments in Officer and our existing businesses as the primary catalyst for enhancing our Wood Products portfolio in the future. This proven strategy Officer serves as a strong foundation for our target to organically grow lumber production by 5% annually. We expect this production growth will be achieved by capturing Officer, full uplift of our Millport and Holden projects as well as additional disciplined capital investments. Additionally, Officer will continue to position both our lumber and engineered wood products businesses to capitalize in the emerging mass timber market. With our unmatched portfolio of assets, Officer. Deep expertise and proven track record, we are well positioned to achieve these targets. Before handing it back to Devin, Officer. I will just summarize the growth strategy we announced today. We are focused in 3 areas: growing Natural Climate Solutions to $100,000,000 per year business Officer, continuing to optimize and invest in our Timberland portfolio with a target investment of $1,000,000,000 and investing in our Wood Products business to Officer. Further reduce costs, improve productivity and grow our lumber production by roughly 5% annually through 2025. Officer. This growth strategy is aligned with our investment thesis and we believe success in each of these areas will enhance portfolio value and Officer and shareholder returns. And now I'll turn it over to Devin. Thanks, Russell. A core part of our company strategy for some time Officer, has been a relentless focus on achieving industry leading performance across all of our businesses. This is something that we're focused Officer on each and every day. And today, we'll give you a little more detail on how we will continue to drive performance improvements going forward. Officer. Since 2014, we've made tremendous progress on improving our operating performance in each of our businesses. Officer. Our unrelenting focus on operational excellence has been at the heart of this improvement. Across the company, we've been working to attain an industry leading cost Officer, driving superior execution in everything we do and identifying opportunities for future improvements. OpEx has become part of our culture Officer and is now deeply ingrained in our organizational DNA. Over the past couple of years, we've also increased our focus on innovation. Officer. I'm encouraged by the progress we're making and we are now starting to really leverage innovation to accelerate improvements in all parts of Company. OpEx and innovation will be the primary drivers for our operating performance improvements going forward. Officer and I think the OpEx and innovation culture that we're building will be a sustainable competitive advantage for us well into the future. Officer. As a reminder, the foundation of OpEx at Weyerhaeuser has always been cost control and margin improvement. That was the focus when Officer. We initiated the 1st operational excellence program back in 2014 and it will undoubtedly continue to be a core part of OpEx going Officer Forward. But as OpEx continues to evolve into what we call OpEx 2.0, we've broadened our approach Officer for driving operational excellence and incremental value. Specifically, we've added future value creation, Officer, which is important for any company, but certainly that's true for a long term business such as ours. We've also included cost avoidance and Efficiency as part of OpEx 2.0 as we believe that incentivizing these activities will create a better business today, Officer, but also position us well for the future. And we're always looking for more opportunities to drive cross business synergies and improvements Officer throughout our integrated supply chain. Over the last several years, operational excellence has become a core part of who we are as a company. Officer. In fact, during a recent employee survey, 95% of our employees indicated that they understood how their work contributed to our OpEx goals. Officer. That level of alignment is a great indicator of how deeply ingrained this is within the organization. Officer. Our OpEx 2.0 efforts are supported by an increased level of focus on innovation at the company. We've been working to foster an innovative Officer across our businesses and our functions. And we've implemented new tools to better engage our workforce around innovation. Officer. We've also been increasing the role that innovation both big and small plays in how we run our business on a day to day basis. Officer. I'm really excited about the progress that we've been making on this front. I've highlighted just a few examples here in the slide of innovation that are Officer, driving improvements in our businesses today from increasing mechanization in steep slope logging out west Officer, to leveraging drones for a wide variety of forestry applications. We are seeing improvements across our Timberlands business. Officer. On the wood product side, we've been increasing our usage of automation and leveraging artificial intelligence to drive efficiencies and performance improvements in our mills. Officer. We've also been working on some proprietary tools and processes for drying lumber, which is allowing us to capture more value Officer and increase the amount of higher value product that we produce at the mills. Again, these are just a few examples, but I believe that our innovation program Officer is a very valuable source of competitive advantage and for Weyerhaeuser to set us up well for the future. Officer. But ultimately, these efforts are all about results. And as you can see, we've delivered meaningful improvements across our businesses. Officer. Through 2020, we've captured $750,000,000 of OpEx improvements. We've achieved black at the bottom in our manufacturing Operating Businesses, meaning we're positioned to be cash flow positive even in a historic downturn like the Great Recession. We've delivered record results Officer both in terms of cost structure and EBITDA generation from an EBITDA benchmarking standpoint. We were number 1 or number 2 in all of our businesses in 2020, Officer, including being number 1 across all of our manufacturing businesses. I'd also note, we haven't stopped there. We've targeted another $50,000,000 to Officer of $75,000,000 of OpEx improvements for 2021. Our OpEx and innovation efforts have been paying off in terms of improved operating performance Officer and we are fully committed to ongoing improvement in the future. So looking forward, we will continue to focus on leveraging OpEx Officer and Innovation. This will include maintaining an industry leading cost structure, increasing the mix of higher value products Officer and improving reliability across our manufacturing operations. We plan to further reduce our controllable costs in our lumber business Officer by approximately 10% and our OSB business by approximately 5% by the end of 2025. Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer Officer, Officer, our Chief Development Officer, our Chief Development Officer, our Chief Development Officer, our Chief Development Officer, our Chief Development Officer, our Chief Development Officer, our Officer, S&P Global, MXCI and ISS Scores, as well as several others as a result of our improved performance and disclosure. Officer. We have worked hard to set and achieve ambitious sustainability goals and this effort has earned us a myriad of external recognitions Officer that we're very proud of. In addition to these specific awards and recognitions, we're also part of numerous ESG and socially responsible investment Officer. In summary, we have a long history of operating with a strong ESG foundation. It's part of our strategy Officer. And we are uniquely positioned with our Natural Climate Solutions business to grow as carbon markets develop. Officer. And with the announcements today on our carbon record and setting a science based emissions reduction target, we have further enhanced our industry leading position as a premier Officer. And now I'm excited to talk to you about our ability to create value for shareholders Officer, who will be the first to discuss our financial results through disciplined capital allocation, including the announcements we made earlier today. I'll start with a quick review of our balanced capital allocation philosophy. At Officer. At Weyerhaeuser, we have 3 key priorities for capital allocation. Returning cash to shareholders, primarily through our dividend framework, but also through opportunistic share repurchase Officer, investing in our businesses through disciplined high return capital projects and value enhancing growth opportunities, Officer, all while maintaining an appropriate capital structure. Over the past 18 months, we've taken strategic actions in all of these areas Officer to position Weyerhaeuser to deliver superior long term value for our shareholders. We implemented a new dividend framework that enhances our ability Officer to return meaningful and appropriate amounts of cash to our shareholders across market cycles. We made disciplined investments to undertake additional high return capital projects to Officer. We'll take additional high return capital projects to enhance the value of our portfolio and we strengthened significantly our balance sheet. Officer. I'll spend a few moments on each of these areas beginning with our dividend framework. Our framework targets a payout ratio Officer of 75% to 80% of our annual adjusted funds available for distribution or FAD. This underscores our Officer. Our commitment to return a significant portion of our free cash flow back to shareholders. The framework includes 2 components. 1st Officer. Our sustainable quarterly based dividend, which is currently set at $0.17 per share. It's supported by the steady cash Oste Flow from our Timberlands, Real Estate and E and R segments. Our base dividend is sustainable across market cycles and we're committed to growing it over time. Officer. We'll supplement the base dividend each year with an additional return of cash to achieve the targeted 75% to 80% of adjusted FAD. Officer. We expect to achieve this primarily through a variable supplemental cash dividend, which is largely tied to performance from our Wood Products segment. Officer. The supplemental dividend will normally be paid in the Q1 of each year based on prior year cash flow. Officer. Under certain circumstances, we may also utilize opportunistic share repurchase to return cash to shareholders. Next, I'll talk briefly about our Officer, which are organic investments to sustain and enhance our Wood Products and Timberland operations. Officer. These disciplined investments have been a key driver of the operating improvements and cost reductions that Devin talked about earlier and will support continued OpEx Officer. For 2021, we continue to anticipate $460,000,000 of CapEx Officer. And this includes the beginning phase of our recently announced Holden sawmill modernization project. Looking forward, we expect our 2022 to 2025 Officer. Annual CapEx level to be moderately lower than 2021, somewhere in the range of $420,000,000 to $440,000,000 Officer. This level of investment includes CapEx required to support the growth targets that Russell previously discussed and it demonstrates Officer. Now let's discuss our capital structure. Officer. Core to this is maintaining a solid investment grade credit profile. We ended the Q2 of 2021 with approximately $1,800,000,000 of cash OSSH and a leverage ratio well below our target of 3.5x. Over the past 18 months, we've paid down $1,100,000,000 of debt Officer and reduced our pension liability by almost $800,000,000 We also plan to retire $150,000,000 of debt when it matures in the Q4. Officer. With these actions, we have strengthened our balance sheet, enhanced our credit profile and created significant flexibility and dry powder in the form of debt Company. This positions us to strategically deploy capital to grow the value of our portfolio and our returns to shareholders. Officer. I'll move now to a brief summary of our year to date cash flow generation and today's announcement that we've declared an interim supplemental dividend. Officer. Our financial results in the first half of twenty twenty one were truly unprecedented. We generated over $2,000,000,000 of cash from operations, Officer, our highest first half operating cash flow on record as lumber and OSB prices surged to historic highs during May June. Officer. Adjusted FAD through the 2nd quarter totaled nearly $1,900,000,000 Summing the midpoint of our targeted 75% to 80% payout ratio, Officer. That translates to nearly $1,500,000,000 of cash earmarked for our shareholder returns through a combination of our base plus variable supplemental dividend. Officer. We've returned $255,000,000 of base dividends through mid year of 2021, leaving approximately $1,200,000,000 of Officer or $1.60 per share, already earmarked for the variable supplemental component of our dividend. Officer. And as I previously stated, our intention is to generally pay the full supplemental dividend annually in the Q1 based on the prior year's cash flow. Officer. Given the strength of the first half financial results and a good line of sight to full year cash generation, we are accelerating a small portion of our first Officer of the Q4 2022 accumulated supplemental dividend for payment in the Q4 of this year. This morning, we announced that our Board of Directors has declared a one time interim Officer, our supplemental cash dividend of $0.50 per share payable on October 19, 2021 to shareholders of record as of close of business on Officer, October 5, 2021. I want to emphasize that this is a one time off cycle cash return and it should not be interpreted as a change to our commitment Officer to generally pay the entirety of our supplemental dividend on an annual basis in the Q1. The interim dividend enables our shareholders to benefit Officer from extraordinary market conditions with a supplemental dividend in the 1st calendar year of our new dividend framework. Additionally, the specific amount of the dividend Officer, allows us to take advantage of a one time tax planning opportunity to enhance our future NOL capacity. Officer. We're excited to accelerate this return to cash and we also look forward to delivering a meaningful supplemental dividend in the Q1 of 2022. Officer. After the interim supplemental dividend is paid next month, there remains an impressive $1.10 per share of supplemental dividend earmarked for payment in first Officer of 2022. This is prior to the contribution from our second half twenty twenty one results. I'll now discuss our expected full year dividend Officer for 2021 2022. Combining the interim supplemental dividend announcement today and a full year of our base quarterly dividends, we expect Officer. Our 2021 dividend payment will total $1.18 per share. This level of payout translates to an attractive dividend yield at our current share price. Officer. Looking forward to 2022, we're on pace to return more than $1.78 per share of dividends next year. Officer. Our base dividend is currently $0.68 on an annualized basis, and we anticipate this amount will increase next year, and I'll discuss that more in a minute. We also Officer. Our variable supplemental dividend will increase beyond the $1.10 currently earmarked due to an incremental contribution from our second half twenty twenty one results. Officer. This level of payout will generate a 2022 dividend yield that is well in excess of what we expect to deliver in 2021. Officer. It's worth noting that we anticipate second half twenty twenty one adjusted FAD will be lower than the first half of twenty twenty one, primarily due to lower average Officer, our Chief Development Officer, as well as higher capital expenditures in the second half of the year. Officer. Let's now spend a few minutes on our base dividend and specifically our plan to grow it over time. Since establishing our new dividend framework in late 2020, it's Officer. It's been our intention to grow the base dividend as we generate incremental cash flow that's sustainable across market cycles. Officer. The portfolio growth and OpEx targets that Russell and Devin have outlined will sustainably increase our annual cash flow generation Officer over the next several years. As a result, today we are committing to grow our base dividend by approximately 5 Officer, and we're very pleased with our progress against those Officer. We're excited to make this commitment in the 1st year of our new dividend framework and we believe it underscores our ability to prudently return Officer. I'll now briefly summarize the components of our total dividend framework Officer and recap what investors can expect between now year end 2025. I've already talked about the foundation of this framework, which is our growing base dividend, Officer, sustainable and supported by our Timberlands, Real Estate and E and R segments. We then add a variable supplemental dividend Officer that's supported by strong Wood Products earnings power. With our proven ability to be black at the bottom in our Wood Products business, we have confidence that we'll deliver an annual Officer. In summary, we're incredibly excited about the near and long term benefits of this dividend structure Officer for our shareholders. And we look forward to returning meaningful amounts of cash through this framework across market cycles. Officer. I'll wrap up this morning with the discussion of share repurchase. We believe share repurchase is a meaningful tool Officer for returning capital to shareholders under certain circumstances. And we look to repurchase shares opportunistically when we believe it will create significant value. Officer. Entering the Q3, we had $440,000,000 of authorization remaining under our existing Officer repurchase program. As you can see on the slide, we've executed on that authorization during the Q3. Officer. With the new $1,000,000,000 authorization announced today, we have significant flexibility to opportunistically repurchase shares. Officer. We're committed to allocating capital for this purpose as we look to maximize shareholder value within our overall capital allocation framework. Officer. In summary, driving superior long term value for shareholders through disciplined and balanced capital allocation is the 4th lever in our investment thesis. Officer. The actions we've taken over the past 18 months have positioned us well for the future. With our new announcements today, we're further demonstrating Officer, our commitment to return meaningful and appropriate amounts of cash to shareholders across market cycles, while also investing to grow the company over time. Officer. And now I'll turn it over to Devin for some closing remarks. Thank you, Nancy. Over the past few years, Officer. We've made significant progress on improving our portfolio and achieving industry leading performance. We've continued to build on our strong ESG foundation Officer and have taken a number of actions to strengthen our balance sheet, invest in our businesses and have positioned Weyerhaeuser to return significant amounts of cash Officer to our shareholders. Today, we detailed a number of strategic actions to enhance shareholder value over the coming years. Officer. These actions and related multiyear targets will support the growth of our company and our cash flows, Officer, improve our competitive position in the marketplace and further differentiate our company as a leader in ESG. Officer. These actions will also ensure that we continue to return meaningful amounts of cash to our shareholders through a growing base dividend, Officer of variable supplemental dividend that allows shareholders to continue to benefit from Wood Products markets and through opportunistic share repurchase, Officer, all while continuing to invest in our businesses and maintain an appropriate capital structure. In summary, with our unmatched portfolio, Officer, our industry leading performance, our strong ESG foundation and our disciplined capital allocation approach, Officer. Combined with the strategic actions that we've outlined today to further improve in each of these areas, we are well positioned Officer to drive superior total shareholder returns for our investors in the years to come. We will now take a brief Officer, a 5 minute break to set up for the question and answers period. We'll be back shortly and we'll look forward to taking your questions. Officer Officer Officer Officer Officer. Officer Officer Officer. Officer Officer Officer. Officer. Officer. Officer. Officer Officer. All right. Officer. Hi. Well, welcome back, everyone. We'll go ahead and get started with the question and answers here momentarily. Just a brief note, I understand that Officer. There was an issue with the webcast, so that may have gone down for a few minutes. I will remind you that the full webcast will be available on our Officer, as soon as the event ends. So we're sorry about that. But let's go ahead and move on to the Q and A period. So just a couple of brief Officer. We'll be taking live questions via audio. You can also enter questions in through the webcast platform as well. I would Officer. For those that are asking questions over the phone, if you could limit it to just one question and one follow-up, that way we can get through as many questions as possible. So with that, I think we'll go ahead and kick it over to the operator to get us started. Officer. Our first question Officer. Thanks, operator. Devin, Nancy, Russell, thanks for the details. Officer. I wanted to spend the first question on your targets. Officer. Having targets is wonderful, but how do you guard against the unintended consequences of having to keep up with Officer. 5% dividend growth rate on the regular dividend or the $1,000,000,000 investment program, which is obviously tied to that. How aligned is the dividend Officer. And would you reconsider as a program over time if the investment opportunities aren't yielding the return that you'd want? So that's general Officer. General question 2 is how you plan on reporting on Natural Climate Solutions? Will this be a separate business line item or will you report Officer within one of the segments. And will you consider managing project areas for Carpkin and Storage for others Officer. Yes. Thanks for the question, George. Maybe Nancy and I will tag team the first part and then we'll turn it over to Russell for Officer for the second question. Nancy, you want to talk about the confidence level and the dividend target that we put out there? Yes. Officer. So as we've said, any growth in our base dividend would come from growth in our steady Timberlands and Officer and E and R Business segment. And with today's announcements about the targeted Timberlands acquisitions Officer for the next several years through 2025, as well as the growth in our Natural Climate Solutions business. Those will support Officer, this 5% annual growth in our base dividend. Things like lower interest payments and operating Officer. OpEx Sustainable Performance Improvements will also contribute to that. And we modeled Officer. And we feel confident that Officer. We'll be able to fund a 5% annual growth in our base dividend through 2025. Great, Nancy. Russell, you want to talk about Officer of the Carbon Business. Sure. And George, I think you had a couple of questions there. So if I missed one of them, please repeat. But I think your first question was Officer. In relation to the $1,000,000,000 investment, I believe that was focused on the timber side. As we look at that opportunity, we're going to be very disciplined. Officer. We think that the $1,000,000,000 fits kind of within our profile. We've been in the market. We've been active in the market both on the buy side and the sell side. Officer. So looking at the strategic areas where we want to invest, we think the $1,000,000,000 makes sense. But we're only going to do deals that make sense to create value for the portfolio. So we'll Officer. As far as managing carbon for others or I think on other projects, our focus is going to be on our portfolio, Officer. And we can go into that a little more detail later. As far as our reporting segments, we're not Officer. We basically have the Natural Climate Solutions, the current $22,000,000 is sitting within our Officer, Energy and Natural Resources and then our mitigation banking and our conservation is within the real estate program. So today, Officer. Given the size, it just makes sense to have it kind of within the existing segment. On an annual basis, we'll report our progress against our targets. And Officer. And then as the business grows, if it makes sense to break that out as a separate segment, we may consider that sometime in the future. But we'll provide you updates on a regular Officer. Terrific. So I guess in summary, George, the targets we put out, we Officer. We certainly feel that they're aggressive, but we feel very confident in our ability to meet those. And we have a lot of work ahead of us, but feel very good about our ability to deliver on Analyst. Our next question comes from Anthony Pettinari with Officer. Good afternoon, and thanks for all the detail. On Timberland's optimization, is it possible to talk a little Officer. And are there subregions Officer. And then is it possible to Officer. Russell, Officer. Russell, can you take that? Yes. The way I would look at our portfolio is we're in every Officer. Major growing timber area in the United States in the West and in the South. And so we have a very broad perspective across all of our portfolio, Officer across all the major timber growing regions. So given that we have a unique kind of opportunity to see what is coming to the market Officer and how those values are trading and really how the operations work within those regions. So again, we look at every opportunity within Officer. Our ownership, we look very closely at how it matches with our manufacturing base. And then we identify kind of the strategic locations where we wanted to invest. And as we've demonstrated in the past, we may Officer, where we wanted to invest and as we've demonstrated in the past, we may divest. And so that portfolio optimization is an ongoing Officer, both on the buy side and on the sell side. I would say that as we've announced, we're going to be pursuing 1,000,000,000 Officer, the transactions through 2025 that we're going to be a net buyer over the next number of years. That would be the expectations. But if there's an opportunity or we see Officer. We need to divest of a property and reinvest, that's something we'll also consider. Our focus will be in the West and in the South. Again, we have Officer. A lot of opportunities throughout kind of both of those regions. Got it. Got it. And then just the 1,000,000,000 Officer. Our investment program and the dividend growth, does that assume some level of Southern Rock price improvement Officer. Over the next few years, is there a certain benchmark, whether it's an inventory level Officer. Or level of housing starts or that you think that we need to see before we see more price tension in the South? Officer. Yes, a couple of comments there. Certainly, as we think about the go forward plan, there is some Officer. And we've been Officer. We're seeing continued growth in the U. S. South in terms of new capacity coming into that region. We're seeing more opportunities around exports. So our view over the long term is that we are going to see Southern sawlog prices continue to grow and improve. In terms of how that's going to fund the dividend growth that we've laid out, we've been Officer, pretty modest in our internal modeling just because we want to make sure that we're able to meet that 5%. So in other words, we don't need Officer, with significant log price appreciation in order to meet that 5% dividend growth, although again, we do believe Southern sawlog Officer, will improve over time. Officer. Our next question comes from Susan Maklari with Goldman Sachs. Officer. My first question is thinking about the goal that you talked about Officer and Climate Solutions. Could that perhaps change or in any way influence where you're kind of targeting in terms of geographies for Officer. Timberland Acquisition. You mentioned in the commentary that you've got a pilot program in New England. Does this suggest maybe Officer. Yes, you're open to more geographies or incrementally focused on growing areas that you haven't been maybe expanding as rapidly Officer. Yes, Russell. Yes. What I would say is, that's an interesting question. Our primary focus in our acquisitions is Officer. It's really on kind of the near term and the mid term and the long term returns that are really specific to the Timberlands operations. If you recall in the one graph, Officer, kind of what are the option values that we're pursuing through our ABO 2.0 and bringing those forward. And that's really where a lot of Officer of Natural Climate Solutions focuses. As far as acquiring with that thesis today, I would say that would be Officer. Our underlying economic evaluation or underwriting, but it's an opportunity that Officer. We see as a potential for the future. And I think as we've demonstrated in the past, we've done a really good job of capturing those alternative values through our real estate Officer in our E and R program. So, I'd say it's something we're definitely paying attention to as we think about the investment thesis and our Officer, over the next number of years. It won't be included kind of in the underwriting and the valuation analytics. Yes. The only Officer. I would even add to that, Susan, is just certainly that's true with respect to the near term. But one of the things that's really exciting about Officer of the ABO 2.0 work that Russell and his team are doing is it just opens up a whole another Officer. Over time, that will ultimately become a bigger player in terms of how we think about our A and D activity. So really exciting work there. It's going to feed, I think, a lot of how we think Officer about acquisitions and divestitures into the future. Okay. That sounds helpful. My normal question is Officer. You obviously announced $1,000,000,000 repurchase authorization this morning. And Officer. And can you talk a little bit to the timing of working through that? Anything that we should kind of be thinking about there? And Officer. A little bit more in terms of where the buybacks and the authorization, using the authorization kind of fits within your overall thoughts on capital allocation. Officer. Is there any increased interest in kind of working through that maybe a little faster than you have in the past? Nancy, you want to cover that? Yes, sure. As we've Officer. We think share repurchases is a good tool for delivering return of capital back to shareholders under certain circumstances. And specifically, Officer. That's when it's the best option to create shareholder value. So the primary rationale for our increase in the authority to $1,000,000,000 Officer. Today was to give us more flexibility to be opportunistic about buying back shares. And that's flexibility in terms of Officer. The amount up to $1,000,000,000 of share repurchase and also the timing to allow us to move quickly when we see the opportunity arise. Officer. And so we're not going to set a specific amount or a certain timeframe. We're going to continue to look at share repurchase Officer on an opportunistic level in terms of when it creates shareholder value. Okay? Okay, Officer. Our next question comes from Mark Weintraub with Seaport. Officer. Thank you, and thanks for the very interesting presentation. One question on the Officer. $1,000,000 of incremental EBITDA you're expecting from the Officer. I think primarily Forest Carbon and CCS. Can you give us a sense, is that based on things that are already visible Officer. Or does it depend on new development? Yes, Mark. The way I would think about the $80,000,000 right now the business is at about Officer. So that $80,000,000 kind of growth is going to be centered really in 3 areas. The first is in the renewable energy. As I mentioned, we're Officer. We're having significant demand for solar installations in the Southeast. And we've been working on that kind of pipeline of potential projects Officer and bringing developers in for really a couple of years. So we'll start seeing that come to market in the next in the near term. On the mitigation banking, Officer. We have a very active program. We continue to build out our mitigation credits as we see the Southeast continue to grow and demand continue to expand. We're starting to serve that Officer, and that business is starting to grow. So I think in near term that will also make contributions. When you look at the carbon, the carbon forestry and the carbon capture and sequestration, Officer. The Carbon Forestry market is still pretty small. You saw the growth that we're projecting or we're expecting to $50,000,000,000 Officer. I've seen estimates that are growing to $100,000,000,000 And so we're definitely in the early stages of the growth of that market. And as that grows, we're going to expect Officer. Our focus has been to ABO our whole carbon opportunity within our portfolio so that when prices reach Officer. To that point where it makes sense, we can readily act and bring projects to market. But we only have a small pilot project up in the Northeast that we're expecting Officer. On the carbon capture and storage, the reason that is so unique is that we have a Officer. Very unique ownership in the Gulf South. And so we're working with potential developers to really accelerate the development of some of those projects in the Gulf South. Officer. I would expect that we'll sign contracts in kind of the early 2022 timeframe. And it will take a couple of years to get those, the geological assessments done, the permitting Officer and the infrastructure installed and the operations going. But in the interim, we should see some cash flows from lease payments right away, etcetera. But the real cash flow generation Officer. And just trying to think big picture, Officer. The longer term growth opportunity is that forest carbon, is that sort of the one that's yet to be Officer. But ultimately can be the biggest potential source. And in that context, I think you talked about Officer. 10,000,000 I forget the denomination, but 10,000,000 tons or something in 2020. Is that Officer. A standard type number, your harvest was lower than normal last year. And so that's not something that we should look at as Officer. And how does one think about beginning to scope the potential value from that Officer. Sure. So the way I would think about it is, yes, we definitely feel that there is more opportunity to grow beyond Officer, our 2025 target. And I think that's really going to be driven by the renewables because there's going to be a lot of renewable energy demand as states put forward the Officer, Renewable Energy requirements. And then I think it's in the carbon in the forestry and then also in the carbon capture and storage. So I think those are going to be Officer of future growth beyond what we're projecting in the 2025 timeframe. So that will definitely be the focus. As far Officer. How to dimension it? Again, we're going through our ABO 2.0 process to identify all the carbon opportunities. As I mentioned, we're Officer. We're really focused on what we call improved forestry management. And so it's the carbon that you capture as a result of changing your civil culture Officer. And then that carbon is actually built out over 20 years of the 40 year contract. And so as we bring more projects to Officer. You'll see a pipeline develop of carbon projects and then it will be additive over that period of time. And so you'll see a kind of a long cash flow profile Officer, building over time and obviously is going to be dependent on carbon prices. So does that kind of answer your question, Mark? It Officer. Maybe, and I apologize, you made a reference to the like a $5 or $10 per unit. How does that relate to Officer. Yes. As it is currently. Yes. So the reference to the 5% to 10% is, right now, the carbon market is Officer in early stages. And so there's a number of protocols, registries. And as you look at where carbon is trading and granted Officer. It's still early, so price transparency isn't really there. So a lot of the pricing that you're seeing is based on surveys, because in the voluntary market, a lot of it is over the counter Officer. And so looking at the surveys, it's anywhere from $5 to $10 I will point to a recent survey that came out that showed the carbon pricing in the Officer in the American Carbon Registry, which is one that we're looking at very closely, is now at about between $11 $12 And so as Officer. As we start seeing carbon prices increase, then we'll start thinking about, okay, which projects are appropriate to bring into the market. I will say at $11 or 12 Officer. We'll probably bring that pilot project that we're working on in the Northeast that might make sense at that stage to kind of get a feel for how these projects operate, how we Officer. Officer. Our next question comes from Mark Wilde with BMO. Officer. Good morning, Devin, Nancy, Russell. Good morning. Devin, I wanted to start off, the growth in the lumber Officer business that you're talking about, which looks like about 800,000,000 board feet by 2025 from this year's base. Is that Officer. Likely to be just debottlenecking and some of these rebuilds or could that possibly be a new green Officer. Yes, Mark. So that incremental lumber production is coming just through organic growth within our Officer, our existing mill footprint. So we've got the Holden project, which we've announced, which is a brownfield modernization project, which is about Operations project, which is about 100,000,000 board feet. We've got about 50,000,000 board feet of additional production coming from the Millport project as we ramp Officer to full production. And the rest of that is really just coming through debottlenecking, improving rates, Officer, improving reliability, just the sort of normal capital projects that we have in our existing footprint. So we don't have Officer. Any Greenfield projects in that, no more big modernization projects. It's really just replicating projects that we've already Officer in the Millstadt. Okay, that's helpful. And then Nancy, I wondered if you could just put a little more color around that Officer. NOL structure that you mentioned will lead you to pull forward a portion of the variable dividend. And sort of how you just thought about that Officer. In the context of also trying to establish some kind of predictability Officer. Around Weyerhaeuser's dividend strategy. I mean, you just had just rolled this out in the Q4 of last year, and you've already made a kind of Officer. A one time modification here. So just to help us think a little bit about that balancing act Officer. And I'm going to be kind of financially kind of rational to take advantage of situations like that, but at the same Officer. Thanks, being consistent and predictable for investors. Yes, sure. Thanks, Mark. As we've said, Officer. Normally, we would be paying the supplemental dividend annually in the Q1 following the prior year's results. And we really do that to ensure Officer. We're aligning the supplemental dividend with the cash we're generating from operations. This year was unusual Officer with unprecedented first half financial performance driven by the Wood Products pricing environment. So our decision to pay an Officer. Our interim dividend was to enable our shareholders to benefit from this extraordinary market condition. And it's in the 1st calendar year Officer of our new dividend framework. So it's from that standpoint, we feel like it's pretty good news. Additionally, Officer. The level, the $0.50 per share level allowed us to optimize our NOL capacity. So it's Officer. A one time tax planning opportunity as we said. And what it means is basically if we hadn't paid an interim, then we would be utilizing our NOLs this year. So by paying an interim 50 Officer. So by paying an interim $0.50 per share at that level, that allows us to preserve Officer. Our NOL capacity that otherwise wouldn't be available in 2022. And that's really why it's a one time opportunity. And going forward, Officer. As we talked about, there's still the majority of the supplemental dividend to be paid and earmarked for Q1 of 2020 Officer. Our next question comes Officer from Rock Connelly with Stephens. Thank you. As Russell pointed out, a senior housing Officer. Our Chief Development Officer has been in place for some time now and so have predictions that we're going to reverse it and get a big housing boom. So what gives you confidence that the barriers Officer. The higher housing starts are really behind us. Is it just this incredible pickup in pent up demand? Yes. I think there are a few things Officer, go into that. And no question, we've been talking about this dramatic uptick in housing for a number of years. Officer. I think everyone agrees that there is a significant amount of pent up demand for housing. We're seeing that in the market today. We talk to on the homebuilders all the time. And the demand is certainly there for more homebuilding. And in fact, whether you think we're under built by 3,000,000 Officer, 5,000,000 units. We're going to really have to elevate the level of building in the U. S. To catch up on that anytime in the foreseeable future. So I think the Officer. The main signal is there and I think people generally agree on that. The challenge has been overcoming some of these supply side challenges and that's Officer. It's really been the story over the last 3, 4, 5 years. And what we've seen is each year we gradually improve. We build a little bit more Housing year after year. We've gotten to the point now where certainly we think we're going to be well above 1,500,000 housing starts for the year. And Officer. I think that the supply side challenges, they're not completely going away. It's just a matter of each year the homebuilders find some incremental Officer to keep driving that up over time. And so, obviously, I think we could be building at a much higher level today if it weren't for Officer for some of the supply side challenges, but I have a lot of confidence in talking with the homebuilders that they've got a line of sight on how they're going to Officer, continue to grow the amount of home production that they've got in the pipeline over the coming years. So I think it's just going to be gradual Officer. And ultimately, again, we have a lot of homes that we have to build here in the United States. And so we Officer. That's helpful. And just as a follow-up, Matthew, how should we think Officer. This is an opportunistic program. I'm sort of hoping you could help us Officer. Yes, sure. Thanks for that follow-up question. Officer. We see it as we said as a good tool when it's an opportunity to create shareholder value. We have it's one of many tools in our capital allocation framework. Officer. And so that's why the flexibility in allowing us to go up to $1,000,000,000 and it's fair to say you can read into that, Officer. We believe there are opportunities where we could buy back shares in addition to the previous authorization limit, which was that we had about 400 Officer. But look, we're not going to give a number in Q3. As we shared in the slides, we did start to buy back shares Officer. And we'll give a full report in our Q3 earnings when we release. But again, it's really about having that flexibility and Officer. And our next Officer. Thank you. I'll paraphrase the question here. Many companies outside the forest Officer. Our Chief Development Officer now seeks to plant trees to support carbon neutrality goals by 2,030 through 2,050. Is Warehauser Officer. Russell, why don't you take that question? Sure. Yes, tree planting has Officer. We think that's good. A lot of companies are looking to enter programs like Officer, our Chief Development Officer, or we're seeing other companies even invest in a forestation type programs. As I mentioned, as we look at the Officer. Our warehouse portfolio is really around the improved forest management. And so it's managing the existing timber stands to incrementally Officer. We grow carbon so that we can then take that to the carbon markets. Aforestation is a very different model. The cash flows associated with that Officer, very long term and we really don't have any property or timberlands that meet those requirements. And so the opportunity I Officer is going to be focused really on our existing portfolio. We'll watch that continue to develop. Again, it's early stages in Officer. And if there's opportunities to participate in a forestation type program or partner with somebody in that Officer. We would assess that. But today, our focus is really going to be on our portfolio and the carbon optionality within that portfolio. Officer. Thank you. One more question from the webcast. Does the targeted 75 Officer. Yes, sure. So Officer. The way that the dividend framework is set up is to give us some flexibility to utilize share repurchase as part of that Officer 75% to 80%. We think that flexibility can be very helpful as we are returning cash to shareholders Officers under different market conditions. I would say in year 1, so for this year, the 1st year of our dividend framework, the full Omni 5% to 80% will come via dividends, so the base plus supplemental dividend. And that share repurchase, anything we do will be over and above that 70 Officer, 5% to 80%. But again, we do have that kind of flexibility in the future if the market conditions warrant using it in that way. Officer. Our next question is going to be a follow-up on the phone line from George Staphos with Bank of America. Officer. Thanks very much. I wanted to come back to the OpEx targets of $175,000,000 to $200,000,000 Officer. Your planning horizon. The company has done a terrific job over the last 4 years. I think the figure is $750,000,000 cumulatively. And Officer. The benefit that you've created and in recent years, as you said, Devin, that a lot of the programs now really coming bottoms up and even I think in Officer. You're not looking at, as Mark's question, not any large projects or rather organic. Can you talk to us a bit Officer. How these next this next project might differ from what we've seen in the last couple of years and how confident again Officer. That you can hit that kind of number given that you've already been so successful with the $750,000,000 cumulatively so far. And then I have a follow on. Officer. Yes. Well, look, OpEx has been one of the remarkable aspects of our strategy over the last several years. We've captured a lot of value through hard work Officer. And I would say, unlike when we first started OpEx back in 2014, where it was very Officer. At this point, the way those targets are developed is every mill, every Operating Area in Timberlands has a 5 year roadmap to get to top quartile performance. And those OpEx Officer. Our Officer has a number of specific targets that they need to achieve and that gap closure is really what drives the OpEx number. And so, it really cuts across all parts of the supply chain from continuing to Officer, who will automate and mechanize our logging in the West, really working on how we do road building to drive those costs Aftdown, silviculture execution improvements, all the way through the mill and the blocking and tackling around Officer, driving reliability across the mill set, leveraging new technologies to drive efficiencies. And so it really has become and part of the DNA of the organization. So we have a lot of confidence in our ability to get to that 175 Officer, those projects are really coming across the board from every part of the organization. We've had even more momentum, I would say, on OpEx after we Officer, and the other thing is we've really been increasing our focus on innovation. And I Officer. I think those efforts will generate more OpEx opportunities and ideas and ways to drive efficiencies, reliability, cost reductions throughout the Officer. So a lot of work going on there, very exciting. And again, we have a lot of confidence in our ability to continue to execute on those OpEx programs. Officer. Thanks, David. And then kind of a larger picture question in terms of the carbon opportunity Officer. And some of the things that will go along with it. And again, really appreciate the detail you gave us on the presentation around that. First, Officer. With the mitigation banks, to the extent that this becomes a larger and larger program, not just for warehouses but for other companies perhaps, will Officer. That ultimately engender more regulation from an environmental standpoint as you're depositing Officer. And then, as you think about Officer, and again, it's laudable that we are now focused on that Officer. You are as a company and as a society that also could be somewhat deflationary over time for timber as long if there's not sufficient amount Officer. So as you look out longer term, what do you think the long term growth rate is going to be Officer for Wood and Wood Fiber that will help to balance the growth of forest and prevent deflation in some of your key products. Thank you guys and good luck Officer. Maybe I'll take the first part and then you can see the regulatory impacts of some of the things that we're thinking about. There's a Officer. And as we use the forest to sequester carbon, there may be some impacts to the overall Automotive, but I would say, on balance, our view is when you think about operating in a world that is focused Officer on Global Warming and Climate Change, one of the best building materials that you can find anywhere, bar 9, is wood. And there is a growing Officer, with an appreciation for the benefits of building with wood. So I think and I think our view is over time this conversation Officer is going to drive more demand for wood products, not less. And so that's kind of how we think about that. Maybe you want to speak to the regulatory Officer, some of these things. Yes. So, George, specific to carbon, I think on the carbon forestry side, there are very strict protocols Officer in place for you to bring a project to the market and actually transact on the carbon credits. And these are in the voluntary markets, not in the compliance markets. Officer. The compliance markets are even more stringent as far as timeline, etcetera. But I think the protocols that are being established for the voluntary market are Officer. So I would expect to see those voluntary markets to continue to grow over time and not necessarily see Officer. Some of the regulatory requirements, depending on where they're directed for emission reductions or greenhouse gas mitigation, Officer. May influence the way those markets grow in price, but I don't see that being significant impact in the development of the voluntary markets in the near term. On the Officer. On the carbon capture and storage, that definitely we're going to see probably a pretty state level regulatory framework around that Officer. To ensure that as you establish the infrastructure, do the injection, that the geological formations are Officer. We're going to work as prescribed that is going to store the carbon permanently for a long, long time. And so yes, we would expect to see a regulatory Officer and that is being developed because it is different than the gas oil and gas regulatory framework that is currently in place. Officer. That regulatory framework is forming around the carbon capture and storage. But I think with the demand for carbon capture and storage, because when you really look Officer. What is available for carbon mitigation, first up is forests and then really next in line is the carbon capturing storage. I think you'll see Officer, a very appropriate response, particularly since the federal government is now directing capital, I mentioned $12,000,000,000 towards the development of the infrastructure Officer for Carbon Capture and Storage. But I don't think it will be a framework that will be unmanageable. I think we'll be able to manage through it and our partners, our development partners will be able to manage through it Officer. Thanks, Russell. Yes, it was a CCNS that I was really interested in. Thanks very much. Officer. Our next question is a follow-up from Susan Maklari with Goldman Sachs. Thank you. Officer. One of the things that we hear a lot from homebuilders is the value that they see in the EWP product Officer, as it reduces the labor content, helps them maybe build a bit faster than they would with some of the other products that are out there or alternatives. Officer. Can you maybe talk to any opportunities that you see to kind of further add value to the construction process, maybe the ability to expand that Officer. Or anything that's in there that perhaps could kind of just increase your ability to capture some of that growth that's coming through in housing? Yes, Officer. And that's one of the reasons we're really excited about our EWP business. I think as we see more wood based building generally Officer or even the homebuilders looking to drive efficiencies in the process so that they can build more homes. I think EWP is an important part of that. So, we Officer. We have a little bit of additional production that we think is available within our existing footprint on the EWP Officer. We're working very closely with not only the homebuilders, but the dealers, the distribution network. We're working with academic institutions like Boise State and some others on how do we leverage Optimizations like Boise State and some others on how do we leverage efficiencies in the system. And I think EWP Officer is a really important part of that. So in short, yes, we think that is an opportunity and we as an industry, but we in particular Officer, excited to participate and really help drive that forward in the future. Officer. And our next question will come from the webcast. Thank you. The question is, how have recent Officer. Hurricane and fire season activity affected Weyerhaeuser's operations during the Q3. Sure. I'll take that. In Q3, we have had some Officer from fire, from weather. Fortunately, on the fire side in the West, although it was a pretty severe Officer. The fire season across much of the Pacific Northwest, we didn't have any real impacts to our land in terms of damage. However, we did have Officer, operating restrictions in certain parts of Oregon. So we lost a little bit of production on the Timberland side in Q3 as Officer, as a result of those fire restrictions. More broadly in terms of weather, Hurricane Ida, some of the other weather systems that we've seen in the South, we lost Officer, production on the Timberland side as you would expect as the hurricanes have come through. So a little lower volume out of the South than we had perhaps expected. We lost a little bit of production time on the wood product side as well. We had Officer. We lost a little bit of production time on the wood product side as well. We had 1 mill in particular in Louisiana that was down for about 2 weeks after the hurricane due on power outages, etcetera. So we have experienced a little bit of impact from weather, fire, hurricanes, etcetera. I would say just on the note of Q3 Officer in general. In addition to the weather, there are some other things going on. You probably heard about transportation challenges. We haven't been immune to that. Officer. So certainly that's been a bit of a headwind in the quarter and just the general labor issues in trying Officer, not perhaps producing as much as you might otherwise be able to do as you manage through COVID and some of the inflationary pressures around resins, Officer. With that all being said, I think our team has done just a remarkable job navigating all of these challenges Officer in the quarter. And our final question today will come from Mark Wilde with Officer. Thanks. I've got 2 follow ups for Russell, fairly short. First, Russell, on that $80,000,000 of non Officer. Can you just give us any sense of how you think that cadence is over the next 4 years? Yes. Officer. As far as the cadence, again, as I mentioned, I think first you'll see the renewable energy EBITDA kind of increasing Officer. And then the mitigation banking, I think we'll pace with that also. And then I think you'll see a little more back ended loaded Officer. Kind of in that 2025 timeframe coming from the forestry carbon and the carbon capture and storage. I will say if carbon prices increase and it makes Officer. For us to bring projects forward on the forestry carbon side. That's the whole emphasis for 2022 is to wrap up Officer of our carbon opportunities. And if prices dictate, we'll bring that forward too. But I would say the CCS is Officer. Okay. And on those renewables in the South that you've mentioned, it's my follow-up here, Officer. Hi, Russell. You talked about Southeast Solar. And I'm just curious, is that more likely to come through Officer. Outright land sales in the light solar farms or might that be structured as long term lease payments? Yes. So the goal is to structure those as long Officer and that fits with a lot of the developers kind of capital requirements and what they're how they're trying to structure those businesses. Officer. I will say we'll have instances where utilities will prefer a outright acquisition of the Timberlands, but I'd say a Officer. Majority of it will be in a lease structure, a long term lease structure. And will you be able to provide us with some visibility on sort of Officer. What I would say is the structures that we're negotiating Officer on a present value basis are well in excess of what you would realize on a timber operating basis. So we're capturing a meaningful premium to timber for Officer. Those developments and lease structures. It's a really good business. That's what I'm hearing from some others. Thanks very much, Russell. You bet. Officer. All right. Well, I think that was the last question and that is the conclusion of our event. So again, thank you very much for Officer joining us for the last couple of hours. We've got a lot of really exciting work going on at Weyerhaeuser. As you heard today, Officer. We are very optimistic about the demand drivers for our products and our services and some of the new opportunities Officer out in front of us. We've done a lot of work. We've got a lot of work left to do around improving our portfolio, growing our company, growing our cash flows, Officer, enhancing our competitive position to be industry leading from an operating performance standpoint. I think we've got Officer. We've taken some actions this morning in publishing our carbon record, our greenhouse gas reduction targets to really enhance Officer, our role as the leader in ESG in our space and even more broadly. And we're really excited about the targets and the goals that we've laid out, which will allow Analyst to grow our company and return cash to shareholders and ultimately deliver superior shareholder returns for our investors. Officer. Again, thank you for joining us today and thank you for your interest in Weyerhaeuser.

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