Q2 2020 Keyera Corp Earnings Call
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Good morning, everybody. It's my pleasure to welcome you to carry second quarter conference call for 2020, our speakers today will be David Smith, Chief Executive Officer, being Setoguchi, President and Chief Commercial Officer, I Lean marker senior Vice President and CFO.
And Brad log, our senior Vice President and Chief operating Officer I.
I would like to remind lister, let's nurses that some of the comments and answers that we will provide.
Speak to future events. These forward looking statements are given as of today's date and reflect events or outcomes that management. Currently expects. In addition, we will also referred to some non-GAAP financial measures for additional information on non-GAAP measures and forward looking statements. Please refer to care as public.
Filings available on SEDAR and on our website with that I will now turn it over to David.
Thank you live on and good morning, everyone.
As we continue to navigate challenges due to the ongoing cobot 19, pandemic health and safety of our employees customers and other stakeholders continues to be care is number one priority.
All of our operations are considered essential services and our pandemic response plans have focused on the safety of our people and the continued to safe and reliable operation of our facilities.
In response to the business challenges caused by reduced industry activity.
And the uncertain outlook for the global economy.
Chira has taken decisive action.
Since mid March we have reduced our capital spending plans.
Turned off the dividend reinvestment program.
And reduced our operating and corporate Gionee costs.
In addition, in our gathering and processing segment.
We continue to progress our facility optimization program to enhance our competitive is our competitiveness and our profitability.
Today, we have shut down three gas plants, including two last year.
And we have plans to suspend operations at five more over the next year.
We expect these efforts will have a meaningful impact on our bottom line beginning in 2021.
And we'll also materially reduce our overall greenhouse gas emissions.
These measures help us well help us well to manage the short term challenges.
Well at the same time positioning Kara for long term growth.
In the second quarter, despite a very challenging external environment.
Here are delivered strong results.
We worked with our gathering and processing customers to keep the majority of their volumes flowing.
Our liquids infrastructure business continues to demonstrate its resilience as it is backed by strong contracts with take or pay commitments.
And our effective risk management program protected the margins in our marketing segment through a period of unprecedented commodity price volatility.
Overall, our integrated business delivered adjusted EBITDA of $182 million in the second quarter.
Well distributable cash flow increased over the same period last year to $158 million or 71 cents per share.
We also strengthened our financial position during the quarter.
We have over $200 million of cash on the balance sheet.
And a 1.5 billion dollar undrawn credit facility, providing unparalleled liquidity.
And we have minimal minimal debt maturities in the next few years.
We have a net debt to EBITDA ratio of two and a half times and we have to investment grade credit ratings, reflecting our very healthy balance sheets.
This financial strength allows us to ensure the stability and continuity of our business and provides the flexibility to be opportunistic.
That said, we will continue to take a disciplined approach to capital allocation and we will maintain a cautious stance in the current uncertain environment.
Finally, our year to date dividend payout ratio is 51% and we're confident in our ability to maintain our monthly dividend of 16 cents per share, which currently represents a dividend yield of almost 9%.
I'll now turn it over to Brad to discuss our operations.
Thank you David.
A key era, we remain committed to the highest standard of health and safety performance and we continue to prioritize the well being of our employees and contractors as they continue to operate our facilities reliably.
Again, I would like to thank our front line employees that contingent workers for their commitment to our bodies.
Their diligence in working safely with one another has allowed us to keep our volumes flowing for our customers through this very challenging period.
In the second quarter of 2020, we continued to progress our capital projects that are nearing completion, and we'll begin to generate cash flow later this year.
Pipestone gas plant will began operating in September as our anchor tenant open to redirect its production from two other plants in the area.
In the fourth quarter, we expect to commission phase two of the wall PT gas plant and also begin operating or Wellforce crude oil storage and blending terminal in Cushing, Oklahoma.
These three projects substantially complete our current capital program, allowing us to focus on the development of the cops pipeline.
Chops project remains highly desired by industry as it provides a transportation alternative move producers condensate and natural gas liquids for the montney to market via liquids infrastructure assets imports in Scotland.
For Kiera copy provides a strategic connection between our gas plants in the Montney and our NGL business imports in Scotland and also creates a platform for number of future opportunities.
We have received all regulatory approvals from the Alberta energy regulator for construction of the main line and we continue to progress engineering work amplified cost estimates for this project.
Our schedule remains unchanged and we begin to expect construction and 2021 and have the pipeline in service in 2023.
I'll now pass it over to deem to talk about the progress we've made on our optimization program and our future investments.
Thanks, Brad.
There are continually review this business to ensure that we're positioned to create long term value for shareholders.
Prior to cool bid, we initiated a strategy to create a best in class cost structure across our company with a significant focus synergy MP business.
Involves a continual effort to improve our cost structure without compromising safety and reliability, while increasing throughput through our facilities.
Our goal is to improve the profitability of our business and provide the most competitive service for customers.
As part of the strategy, we've been advancing our GP optimization plan to reduce cost improve utilization and reduce or overall environmental footprint.
In addition to closing are nervous and gilbey gas plants in 2019, we now plan to suspend operations at six additional gas plants.
Which is expected to increase plant utilization in the south region from less than 50% to approximately 70% by the end of 2021.
We also expect to reduce our current greenhouse gas emissions by approximately 12% compared to 2019.
In addition to the optimization program, we began a process to reduce or overall cost structure, including a thorough risk based review over operational costs.
To identify sustainable cost savings.
This process has produced meaningful results.
In the gathering processing segment, we expect this initiative combined with or optimization efforts to increase annual operating margin by approximately 20 to 30 million.
With the majority this benefit beginning in 2021 and increasing throughout the year as we turned down facilities.
The liquids infrastructure segment, we expect to reduce operating costs by approximately 10 to 15 million beginning in mid 2020.
Combined these savings with our recent Genie cost reductions, we expect an annual increase increased earnings before tax.
Of approximately 45 to 65 million in addition to a more competitive fee structure at some of our facilities.
We'll also be deferring approximately 40 to 45 million in maintenance capital from 2021 to 2022 as turnarounds at the Simon gas plant and the facility are now scheduled for the spring and fall of 2022, respectively.
This decision was based on the Therell risk assessment to ensure the safe and reliable operation of both facilities.
Well, we continue improve the competitiveness of our base business. Our goal is to ensure future investments continue to strengthen our integrated business.
And improve the quality of care as cash flow.
Our primary focus will be on our liquids infrastructure segment, which has demonstrated to be very resilient under the most challenging market conditions.
These assets are generally critical for the basin have high barriers to entry and typically involves strong counterparties with a greater ability to secure long term take or pay contract.
We have many growth opportunities.
Including Caf expansion of the baseline terminal and long term the development of our lands in industrial Heartland.
As we expand or liquids infrastructure. It will provide further opportunities to source transport process.
Sure upgrade and access high value markets for natural gas liquids and earn additional margin for marketing segment.
With that I'll turn it over to our lean to talk about our financial outlook.
Thanks, Steve as David mentioned care delivered strong results in a second quarter of 2020, despite the ongoing cobot 19, pandemic and low commodity price environment.
All three business segments performed well the gathering and processing segment reported operating margin of $69 million similar to the same period last year.
Acting care strong customer relationship that help ensure only modest volumes were shut in during the quarter.
The liquids infrastructure segment generated $100 million, an operating margin demonstrating the resilience of care storage and transportation and fractionation assets and its ability to generate a steady stream of cash flow despite market conditions.
The marketing segment earned realized margin of 54 million as our risk management program protected margin and inventory values from the sharp decline in commodity prices that began in March.
Even strong contributions to the first half a year and an improving commodity price outlook for the remainder of the year. We now expect marketing's realized margin for 2020 to be between 300 million and 340 million.
For 2020, our distributable cash flow per share is expected to benefit from significantly lower cash taxes and maintenance capital expenditures.
We are estimating a current income tax recovery of between 20 million and 30 million for the year and maintenance capital to be between 20 million and 25 million.
We expect to invest growth capital of between 500 million and 550 million. This year. In addition, invest another 70 million related to the butane distribution infrastructure I can't or Morgan's Galena Park facility.
We plan to fund our capital program, including cap without issuing common equity.
With ongoing uncertainty as to when a recovery and energy demand and commodity prices may occur we remain committed to our financial priorities which include.
Maintaining our Q investment grade corporate credit rating.
Long term net debt to adjusted EBITDA ratio of between two and a half three times and a conservative payout ratio target between 50% and 70% with that I'll turn it over to David.
Thanks Eileen.
The second quarter has demonstrated how our resilient business model delivers results even in the most challenging environment.
During this unprecedented time Chira has also remained an engaged and responsible corporate citizen committed to good environment, social and governance practices.
Also known as SG.
Gears commitment to E.S.G. is rooted in our values and although we haven't talked about it much I am proud of our MSG track record.
In June RBC capital markets included Kiera as one of only two Canadian energy companies in their global E.S.G. best ideas list.
And Scotia capital need ranked cure a number one for E.S.G. performance among Canadian energy companies.
Going forward, we are committed to continuous improvement and we plan to share more information with our stakeholders regarding our E.S.G. goals and initiatives that will support the long term success of our business.
On behalf of care as board of Directors and management team I would like to thank our employees.
Customers shareholders and other stakeholders for your continued support during these difficult times. Please continue to stay healthy to stay safe and healthy.
With that I'll turn it back to the operator. Please go ahead with questions.
As a reminder, if you'd like to ask a question. Please press Star then the number one on your telephone keypad.
And star one Gascon audio question.
There are a pause for just amendment chicken, Paul that Q and a roster.
And our first question comes from Patrick Kenny National Bank Finance.
Hi, Good morning, everybody I'm just on the 10 day unplanned outage at a shift back in April.
I can't recall, if that was discussed on your Q1 call or not but either way maybe.
Just some color on what happened there and perhaps.
Why you're confident that facility will be able to operate at full capacity until your next major turnaround there in the fall of 2022.
Thanks for the question, Pat I'll ask Brad locked to respond.
Certainly so we are planned outage in April was a was just a a two bleak on a like a condenser within the plan. So we.
We were able to bring that facility down then do the repair and the 10 day timeline.
When we do these turnaround deferrals, we actually look at the entire risk assessment of the facility and all the maintenance work that's been done the regulatory requirements associated et cetera, and with all about energy that we put into it. We've got very we're very confident we can extend the turnaround cycle out till 2022, the others that we had in Asia.
As well as the others. We had in 2019 allowed us to catch up with a lot about work that would have driven a trigger a 2021 2020 or 2021. So all those things really led us to the decision to push the front although 2022.
Okay. Thanks for that and then maybe an update on Simon at volumes as well looks to be running it.
Just 50% utilization, even with the short term fee relief there in the quarter, but now with condensate demand coming back how should we be thinking about Simon at filling up some of the white space there over the next few quarters.
Are you able to pull some production in from other wells in the area similar to I guess, what will be happening. It pipestone this fall or is it.
Mainly dependent on drilling activity, Michigan come back here in.
In that simonette area.
Hey, Pat as Dean.
A couple of things I mean, obviously in a there's been a lot of.
You know a production some flipped production fluctuations over the quarter, just because of how low condensate prices for a while and.
And you know producers of obviously scaled back I would say with respect to the volumes that you are seeing at a assignment at.
There are some producers that are producing below their take or pay. So we're still collecting you know there there are fees, but they're they're under delivering the volume today.
Certainly we see.
You know when we when we look out into 2021 and for the remainder this year, we certainly see a much stronger.
Price environment, both for condensate and natural gas and natural gas liquids for that matter. So I don't think people are going to start drilling right away, but certainly you know there looking much healthier and I think that will lead to more drilling over time to attract more funds tour our facility.
Okay, Great and last one from you guys and and then I'll jump back in the queue, but.
I appreciate all the granularity on the optimization plan, including the 12% reduction NGL GHG emissions.
I mean, that's obviously a good news story, just wondering what other upstream or downstream opportunities you might be able to pursue from SG accretive perspective, we've seen some refineries here of late and else plans to switch over to bio diesel [noise].
Is there an opportunity there to capitalize on this renewable fuels trend either from an infrastructure standpoint, or perhaps more blending opportunities similar to.
Your Galena park opportunity there.
That's great question, we've actually kind of established on internal effort to a you know look at some of those opportunities and a little bit more detail. Brad lock is heading that up I might ask Brad to maybe just mentioned a couple of the ideas that we're looking at from from a long list of opportunities.
Yes.
Certainly I mean, we've got a we've got a bops list of opportunities that we've identified where we could.
Where we could.
Advance or our admissions activity I think the trick is going to be finding the right ones that have the.
Most impact for the.
For the lease capital investment, but I think we can look at the additional efforts throughout carbon capture a storage around some of our facilities.
We've got opportunities for waste heat recovery at a couple of via the facilities that we would we would like comfortably undertake.
We can look at a scenario, where we've got inefficient engines that we could change out with higher efficient engines that would reduce our greenhouse gas emissions. So this there's quite a plethora of opportunities in front of us and it's just a matter of prioritizing picking the right bonds over time to get us to the targets and objectives, we want to achieve.
Okay. Appreciate all the comments I'll leave it there.
Your next question comes from Matt Taylor with Tudor Pickering, Pickering Holt.
Hi, good morning, Thanks for taking my questions here I just want to follow up there on past question on GMP looking for some more color on on your second half outlook for the segment is it fair to say I mean.
69 million Bucks 'cause that'd be the low watermark for the rest of the year as you start to see some and pipestone volumes as you turn it on September North region contracts start to normalize you might start getting benefits you know a little bit early in 2020 before 2021, and then to your point on timing it if when we start returning there.
So any color on the second half it look of GMP would be helpful.
Hi, Matt as Dean.
I think overall there'll be some pluses and minuses for for the rest of year and as you look at drilling stats I mean, obviously theres minimal activity. Today. So you know again there are there are declines obviously in existing wells and things like that.
But I think on a on a promising side as I mentioned before is that a pricing, especially for natural gas has not look this is good for many years.
I mean, if you look back to the last few summers gas is traded down to zero price or negative price and here. It's over $2. We have a very very good cost structure in terms of our production in Alberta, and that's because we've gone through many years now of poor pricing and our producers have learned to be very very efficient.
In terms of the cost of the extracting hydrocarbons.
Think was that.
Economic environment is much stronger.
When we look at our customers and we look at maybe the ones that we we had maybe the most concerned with they're in a much better states you knew bellatrix has purchased by Spartan as you saw a bona Vista was with recapitalized and puts them in a much better position you know the bank lines with the someone like.
Fair amount has been a it's been reviewed and no I think there in a in a much stabler spots and.
Look at.
Another company Pipestone pipe stones on the smaller side, but they are very very well run company. So I think overall, we feel much much more confident about environment going forward and legacy maybe the next quarter to there's there's.
Some puts and takes to that but I think as we look into 2021, I think the picture looks a wood looks much more optimistic.
Thanks for those comments or Dean I'm, just as a follow up to that looking in the back half of this year is how do you view the competitive landscape changing at all if and when Topaz enters the market is that a impactful to your business.
Any comments on on the competitive GMP landscape would be helpful.
Well you know it just as the hurt in there.
You know earlier in their call is that you know our goals to create a best in class cost structure.
So I think that's that's number one for us.
On top of that.
I think that we provided a integrated midstream services. So we can it's just kinda like your your TV package, you get a better deal with when you bundle it with your your phone and your your wife thought.
And.
To have the touch point, whether GNP helps host helps us access business across the whole value chain.
So again, we have those advantages that.
Some of our competitors like like Topaz wouldn't have I guess thirdly, we.
We're very customer focused and we are not a producer and we're not we're not tied to a producer. So we're very independent we want to do what's best for all of our customers in the basin and I think that does have some traction and value for our customers.
Great. Thanks for that one more for me.
Then over to business development.
You mentioned your focus is going to be on liquids growth backed by long term contracts.
To me the potential expansion of baseline seems to fit into that nicely can you remind me of the expansion potential there and are you starting to have conversations to sanction additional tankage and 21 head of TMX entering service and 23.
Yeah, we have the ability extend that site by 1.8 million barrels a day and the great thing about it is a lot of the common infrastructure, a 41.8 billion barrels 40 million barrels of it. Thank you for that correction, David [laughter], but.
Well, obviously you have a lot of the common infrastructure is already there I mean, we we've invested a lot of money and the Pike Ructions. The manifold. The you know bridge over baseline roads. So incrementally the cost of building incremental storage their capacity is a lot less than the than the first phase. So you know we're always.
In contact with our.
Potential customers to expand that site and I do believe that as.
You know Trans mountain gets closer to completion, maybe peace talks will continue.
Thanks for the color there that's all for me thanks.
Your next question comes from Linda Ezergailis with TD Securities.
Thank you I'm wondering if you can provide some more context around the improved a utilization that you'll see as you consolidate your facilities.
Does that include new volumes assumed coming from either drilling or either existing production not currently tied to any of your facilities or is that just regarding.
All of your existing volumes being consolidated.
Yeah, Yeah, Linda it's it's really the massive of just redirecting gas at that you know to fewer facilities.
So you know again the way we look at our cost structure. It's all about the absolute cost to run a facility and the volume going through there. So it's it's you know what's on your your per unit costs to deliver your service.
And if you look at utilization and most of the facilities in this province, they are very very underutilized and that's advantage we have because in the in ourselves region, most of our facilities or pipeline connected so it doesn't.
It doesn't cost a lot of money for us to redirected to where most efficient facilities increased utilization again reduced our environmental footprint and and again make us very very competitive in terms of the cost of offering or service. So when we see a turnaround and we see more drilling happening in our cat capture area.
I think that will be very very tough to compete with because again our per unit costs will be you know.
The lowest.
Okay, and Linda Linda it's Dave here I'll, just I'll just add I think as we look at the South region from a longer term perspective, I think it's our expectation that drilling activity will be sufficient to kind of keep volumes flat or if we see.
Growth in volumes.
So stronger commodity prices I think thats, a bonus and we can you know we're certainly we have the flexibility to be able to cook to accommodate that growth.
And with the with the changes in ownership a that we're starting to see and the consolidation that we're starting to see in that region. We're actually quite confident that the a the geology is such that we will see some recovery in drilling activity, but we havent assumed any any growth in volume.
And in our you know what our plans.
And just and just as a follow up for the redirected gas can you confirm that all the volumes to be diverted have been commercially secured or how confident are you that some might not be lost in the process.
Yeah, we've had I mean, obviously, our first of course of action was we wanted to reach out to our own employees and make sure. They're aware of the plans and we've done that we've had a lot of discussions with our with our partners, where we do have partners at facilities and also our customers. So.
We feel quite confident that we'll be able to move those volumes as as we have planned.
That's helpful. Thank you and just with a utilization going up and for example, some of your optimization.
In the near term or in the medium term with eight yes, nice your maintenance scheduling generally shift around to a different agents than in the past or after this period of change over the next couple of years can we expect.
Reversion to a more typical maintenance timeline.
Brad Lock would you like to comment on that.
Sure. So I think there's there's pieces of equipment and the site that really drive the turnaround timing. So you know the what's going to cause our schedules to move a little bit is going to be our ability to take some about work into other outages that happened in the site. So so I think after 22.
22, we will likely.
Get back to a more predictable timeline, but any opportunity we have to adjust that we're certainly go to take advantage, but if that if it creates a above your proposition for us.
Thank you.
Linda it's Dave here I might add that technology is helping in this regard you know what used to be that do you had to do a turnaround. According to a certain cycle. Because you didn't really have a good idea what you're going to find but I think the the benefit that we have now much more sophisticated control systems and data analysis gives us the car.
Competence to be able to do that risk based assessment that Brad was talking about earlier.
And so we can or in some cases extend those maintenance intervals, knowing exactly what's a you know what the implications are.
And the regulators are are often are much more acceptable to these extended intervals with the risk based in session because inspection procedures that we haven't place.
Great.
And maybe just one last financial question, how might we think of a preliminary sense of what cashes cash taxes might look like next year and beyond.
Hi, Linda given our growth capital program over the last two to three years, we would expect cash taxes certainly to be lower than it was last year. As we said this year. We we had sufficient taxable so that we were able to create a tax loss carry that back and that's how we're getting.
The recovery, but we will provide more information in our third quarter about cash taxes for 2021.
Thank you.
Your next question comes from Sean.
The.
Hi. Thank you this is Sean from a for Ben Pham.
So just on a pipestone coming in later this year when do you guys expect that facility during the targeted 10% to 15% return.
And I guess can you just right your view on the shape of about return.
Sorry, sorry, sorry shot in the question was about pipestone on what the a profile will be of the cash flow will after it starts up yeah exactly yeah.
So our return on capital guidance when we provided it it was for the entire pool of capital. So the 2.2 billion program. So that excluded the caps pipeline, we still expect to be in that 10% to 15% return on capital beginning in 2022 for that entire portfolio of assets.
Okay, great. Thanks, and then I guess just on.
Marketing.
Long term guidance what are the structural factors I guess you guys see on maybe improve being on that 180 to 220 be guidance that a that you provided.
Yeah, I mean, I think a lot of it.
Oil is down to a Wi Fi price certainly helps generally for for NGL business, because that's really the benchmark for.
So then NGL, but butter isooctane business and really the the recovery of driving demand.
No. So again, that's been a very isooctane business has been a very resilient business for us.
Right now driving or three gasoline demand is probably at 85% to 90% of of what it would be typically so you know we're not want to think about that and sort of the state of the economy. Today I think that's pretty remarkable that demand is that high.
But but the same time, what's happening is that a refiners are running at a reduced run rates today, but the production of of different types of competing octanes are producing at near capacity. So it's creating a flood of of Octanes in the markets right now realm.
Today, how much gasoline is getting produced and sold so that's that's weakening the price of of Octanes in a in the near term.
And so we think that.
You know, we'll see a recovery more towards the end to 2021 and later after 2021 and no I think with that in some of the new assets that were adding would would bolster our base sort of guidance for marketing business.
Okay perfect. Thank you it that's it for me.
Your next question comes from Robert panel that Caterpillar with.
VC capital markets.
It's Rob could tell you from servicing.
Specifically it looks like you're feeling pressure on the.
On the marketing margins from both sides of the equation you talked about.
How long it might take to work off the.
A flood of.
I guess isooctane, but what about the butane side in light of the fact that Theres lower NGL production.
Increasing export auctions on was up pressuring the.
Okay, 10 cost as well.
Certainly I mean.
There's a lot of dynamics to a to what's happening with butane.
You know, obviously, we have a lot of butane and our inner and our value chain already there our export auctions, but again, there's a cost to getting that that barrel to the coast and an exporting and everything else. So.
You know last year in 2019 was a was probably the lowest butane price that we've seen in Alberta ever.
And this year is higher and what I'd say, though if you look at a five year average the price of butane is still at a very attractive level, where we can we can make some attractive profit still with rice walk in business.
Okay and.
And then when you look at the occurring dynamics and NGL liquids.
What that means for.
The Wild horse terminal do expect that to be about doesn't want floater in the short term.
Given where pricing is an access to a blending agents or.
What sort of a wrap up to your targeted returns do you expect on the facility.
You know, we've we've done a lot of work to prepare ourselves to.
Let's put that facility and the business in place so that it can be working efficiently like any business. There is a there is going to be sort of a a ramp up period in terms of.
You know again getting that business too too low where we expected to be but we think that that's relatively short like probably a six month period in terms of a ramp up and.
Again, theres, there's still lots of varieties of EUR of Ah crude and additives that are being produced and some that.
Our discounted and again, we think there we have a very a very good business too.
To begin deal to create value with a with different blend stocks of of crude and other other additive.
Okay, and then just one more on the.
GMP business in your.
Targets for cost reduction and increasing profitability.
There is just too how much automation.
It is involved on achieving those.
Those targets or are the benefits of potential automation is still something you're working at that could add to the profitability in future.
Brad do you want to take that question.
Sure.
So automations US has played a significant part of getting the cost efficiencies as we have today, but we're clearly not done there's still lots of opportunity there in terms of centralized operations enhance maintenance practices.
Higher level equipment monitoring that we're really just scratching the surface on right now as far as the options that are out there again I think it's going to be finding the right balance of where do you invested those technologies to give you. The right returns up we've got a a team that is actually in place that is is really looking at innovation.
And as an organization and where do we find the real value. So we can achieve.
So I think there's more to come.
Okay, that's interesting and then.
Just on the dividend policy here hopefully the market understands why now that.
Glad to maintain a dividend on a sustainable.
Well, what do you need to see.
Two tourism dividend growth now that hopefully the worst of covert is behind us and you're starting to realize some of the the benefits of the cost optimization plan.
Hi, Rob it's Dave here.
You know I think first of all in the context to the current environment, there's still lots of uncertainty and I think I would be prudent for us to just kind of keep the dividend where it is.
But if I reflect back over our 17 years of history, we've always taken a cautious approach and made sure that whenever we increased the dividend a that we have high degree of confidence that we can sustain it at that higher level.
And I think that's still is the philosophy that governs our decision making.
So that you know there's a lot of things that factor into that what's our outlook for for a growth in cash flow, what's our look for me for capital requirements.
And a and you know.
Questions like that so are you know I think we're going to continue to be cautious or probably for at least the next couple of quarters and and then we'll see but those are the factors that we look at.
Okay. That's helpful. Thank you very much.
Your next question comes from Robert.
With RBC capital.
I can just go back to that.
Optimizations.
Just to confirm especially for GP, but even for the others are those figures shown nats.
For example, any sees that you're going to be passing on to customers. That's already baked into that the 20 to 30 million incremental.
That's correct. Robert does these are all net to us the benefit to care. So there would be an incremental benefit to the customer on the GMP side.
Perfect and then you've used the term earnings before tax I'm. Just wondering are these figures similar.
Perspective are there material changes in DNA, whether that write offs or accelerated.
Workstation.
Consider.
Correct correct it would be similar to EBIT EBITDA, except for yeah, including Ginny correct. It would be the same as EBITDA.
Just turning to cash so you've got your regulatory approvals and hand, it sounds like.
It's really just that delay into 2021, which really just material change and messaging.
Is it really just the passage of time that we need to be thinking about.
Are there other considerations before you move into construction or other strategic customers.
Robert I think you know, it's still our plan to be going forward with caps are beginning in our middle of next year and Ah you know, we still have as we as we emphasized in the spring when we announced a deferral we still have commitments in place from all of the same customers that we had.
Well made the decision a year ago.
We are you know revisiting all aspects of the project down at the same time, we're talking to customers sort of further north and west.
To see if if we can enhance the picture, but right now our plan is to go ahead and obviously there are there are.
Some uncertainties in the environment.
But but that's you know that our expectation is that assuming things.
On our back on track or by early part of next year that that would be our plant.
And I just finish with spending you reiterated the equity self funding message you got the messaging that short to medium term I just want to confirm that.
Your perspective short to medium term covers.
Timing with respect to caps construction, maybe second partners as we tickets.
What considerations.
Would you would be out there with respect to.
It's about migrating away from.
Oh.
Hi, Robert Yep Faith based on the way, we think see things today, we do you plan to adopt keep more of that self funding model. We you know we don't expect to issue any common equity for our growth capital program and that includes caps and given the strength of our balance sheet, our strong liquidity position et cetera, we feel quite.
Confident in that so at this point that would be our plan for that for the foreseeable future.
Thanks very much.
Your next question comes from Rob Hope from Scotiabank.
Good morning, everyone follow up question on the Robert's Kinda question on funding there just given your comments on improving or focusing future capital on liquid segment.
And potential funding requirements on caps are you thinking about potentially using some of your gas plants as a source of funding like for instance, Pipestone you could sell my a minority non op interest there as a source of funding.
Yeah, Rob Good morning, it's Dave here.
You know we all we're always looking at the portfolio that we have and determining what what yeah, what assets makes sense and that includes the possibility of divestments I think.
The the and that is certainly a source of funding for other opportunities that we might want to pursue.
I I think it would be it would it wouldn't be prudent to meet a kind of speculate on on what assets that that might include.
But a you know I think we're careful not to ever fall in love with with our assets had a as you know to Oh, that's just didn't you know twin inappropriate degree.
The other thing that I would point out of course is that we've we've also done a number of joint venture is and we think that were actually pretty good at a at aligning with partners to to you know to share that could the capital cost burden on a number of the investments that we've made over the years. So that that is certainly another possibility when it comes to fund.
Requirements.
All right appreciate that and.
And then just in terms of Waveny too, we've seen a little bit of a push out of the commissioning to better align with your customer requirements.
Taking a look at existing volumes and rigs operating out there could we see some movement in the take or pay is such that you could utilize just walk 31 core portion of 2021.
Yeah I mean.
Certainly a the there is as I mentioned before there's not a lot of drilling.
Right now in that area. So we believe in the in the near term that you know we can provide the service with though with our first train we are planning to bring the second trained on the later this year and again, we want to make sure that that facility is ready to go when do we need it and I'm certainly enhance overall reliability of the of the whole thing.
Right as well so you know I would say again, you know Wap is another facility where.
You know when you look at volumes <unk> you know.
So not necessarily match the revenue that we bring in because a you know the take or pays.
Our above where some of the volumes are today.
Alright, thank you.
And your final question comes from.
Yes, so close with industrial Alliance.
Good morning, maybe I'll direct this a bit towards the dean <unk>, thanks for bringing up a baseline but.
I wanted to play back on Investor Day, and you talked about the whole a sort of liquid hydrocarbon chain and is there any possibilities are things percolating on the ethane side given that you know why your rumblings of an ethane cracker being added in Alberta.
Yeah, absolutely I mean, you know our business is really centered a lot of boat on on Ngls and and an ethane would be included in that package as well.
I think there are opportunities.
For us to to supply more ethane even to the existing.
To satisfy existing requirements today for petrochemical use and and again, it's just everybody likes to have competitive alternatives and and again, I think where that logical competitive alternative to supply that market.
When we look at what Alberta government has announced in terms of a ambitions to diversify our economy and to expand the the petrochemical sector.
You know I think it's tremendously exciting for for our provinces for Canada, and a cure it can certainly be a big part of that.
You know again, we have an existing value chain, where we have on we handle a lot of Ngls already.
In addition to that we have undeveloped piece of land, it's about 1300 acres and it's very it's adjacent to our original Super terminal.
And.
My mind, when you look at long term petrochemical development.
What you need is is it's a factor of cost and I think you have to be very a environmentally responsible and so I think we can offer both at our site. It is unparalleled connectivity, we have almost all the underground salt rights for storage, which is a big requirements you can access both rail lines.
It's it's.
Industrial zones.
And and again, we have access to water and everything else and I say, but we could also make it very environmentally friendly site with a power water no Alberta carbon trunk line is just to the north and into the east of US. So again when you look at all the connectivity and to the proximity of that that development you know there's there's.
Got a potential long term for petrochemical development.
Okay.
The license its Dave.
Life to date here the one on one other thing I would mention is going back to the question the earlier questionable caps.
We are still looking at the possibility of expanding and our reconfiguring caps.
To be able to handle on ethane plus feet.
Throughput.
That would require from our point of view that would require a some sort of a contractual commitment to support that but a in along the lines of what Dean was Ah was suggesting that's another opportunity that we're still looking at actively.
Yes, thanks for bringing that up because I I understand it higher vapor pressure and requires you know probably different configuration would you be looking at the commitment from.
The producers are there or the.
You know the ultimate consumers both to follow up.
Either or both.
Okay. Okay.
Maybe one last question is almost everything I had has been Aston and it has to do with cost savings and maybe I'll try to directed towards Brad I think when I looked at the table I didnt necessarily see annualized cost saving reductions from lower maintenance, if you have less plants. So.
No not specifically getting to that but maybe relating to that is there anything else on the cost saving side that.
The might come through it at some point in time.
You know you're always surprised would you can do when you are pushed.
[laughter], Brad do you want to respond to that.
Sure.
So I think I think there are saving so we tried to.
Summarizing the data we tried to break it up into.
Here's the.
The cost reductions as a result of B.
The central Fort Hills optimization consolidation program here is the specific cost savings as it relates to.
Our targeted cost reduction activities at risk of existing sites.
There are certainly a number of maintenance savings would you go into the maintenance capital side. So all of our turnarounds for example are captured under.
Maintenance capital, So we see maintenance capital savings because those facilities that we shutdown do not require outages to go with some as well. So there's a lot of those types of things that are actually kind of built into those numbers already.
Okay.
That's it for me thank you very much.
And I would now I turn the call back over to line for any closing remarks.
Thank you everyone for listening in on our conference call and if you have any additional follow up questions. Please reach out to carries Investor Relations team. Thank you for your support and investments and have a great Kay.
That does conclude today's call you may now disconnect.
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