Q1 2021 CONSOL Energy Inc Earnings Call
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[music].
Good morning, and welcome the C E. Our energy first quarter 2020, plus the earnings call.
All participants will be in listen only mode.
If you need assistance. Please signal conference specialist by pressing the star key followed by growth.
After today's presentation.
The opportunity to ask questions. Please note that this event is being recorded.
I'd like the turn the conference over to Mr. Nathan Parker Director of Finance and IR. Please go ahead.
Thank you Nick and good morning, everyone welcome to Consol Energy's first quarter 2021 earnings conference call any forward looking statements or comments, we make about future expectations are subject to some risks, which we have outlined in our press release and in our SEC filings and are considered forward looking statements within the meaning of section 20 <unk> of the Securities Exchange Act of 19.
34, we do not undertake any obligations of updating any forward looking statements for future events or otherwise, we also be discussing certain non-GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures in our press release and furnished to the SEC on form 8-K, which is also posted on our website.
We also filed our 10-Q for the quarter ended March 31, 2021 with the SEC. This morning, you can find additional information regarding the company on our website Www Dot Consol energy Dot com.
On the call with me today are Jimmy Brock, our Chief Executive Officer of Tester Kerr, our Chief Financial Officer, Dan Connell, Our senior Vice President of strategy and Bob Braithwaite, Our vice President of marketing and sales in his prepared remarks, Jimmy will provide a recap of our key achievements during the first quarter of 2021 and specific insights on operations and sales attached for that.
And provide an update on our liability management program, including our recently completed tax exempt financing our financial results in 2020 one guidance in his closing comments Jimmy will lay out the key priorities for the remainder of 2021.
After their prepared remarks, there will be a Q&A session in which day in and Bob will join us as well. This morning, we posted the supplemental slide deck on our website, which we referred to on today's call with that let me turn it over to our CEO Jimmy Brock.
Thank you Nate and good morning, everyone.
Let me start by saying I am extremely proud of our employees and the response, we've had throughout our organization to manage through a very challenging 2020 and get off to a strong start in 2021, all while staying very much on target with our core values and priorities.
All of the ESG front, we're pleased to announce the release of our 2020 corporate sustainability report our fourth since becoming an independent company in 2017 the.
The report demonstrates our continued pursuit of industry, leading ethical social and environmental performance and disclosures as it better coal supplier throughout the report we highlighted the alignment of our practices with the internationally recognized better coal code of ESG operating principles specific to coal.
Mining supply chain.
Our 2020 performance, including the achieving an environmental compliance record exceeding 99.9% for the eighth consecutive year.
Reducing our water withdrawals of about 24% and reclaim and 2.9 acres for ever acre to start across our operating footprint.
The report Emphasises, the synergy between our sustainability technology, and financial strategies, which together inform and support our growth and diversification goals at the same time, our ESG performance enables our active operations to continue to provide the coal that is reliable and affordable.
And it's vitally important toward improving the quality of life of its end users specifically in developing countries.
Ultimately the alignment of our strategic initiatives in these areas will drive sustainable value creation for our stakeholders.
On the safety front, our Bailey preparation plant the Consol Marine terminal and it meant project each had zero recordable incidents during the first quarter of 2021.
Our total recordable incident rate at the P. A M. C finished Q1 of 'twenty, 144% improved versus the prior year period and continues to attract significantly and consistently below the national average for underground bituminous coal mines.
On the operations front not only did we end 2020 on a very strong note, but we followed that up in Q1 of 'twenty, one with our highest ever first quarter production in the history of the Pennsylvania mining complex as well as achieving a new record low cash cost at the Pennsylvania mining complex of.
All while running less than it for five longwall schedule.
We also continue our shift to seaborne markets by penetrating several new markets and strengthening our existing relationships.
Due to our strong free cash flow generation, we bolstered our balance sheet by increasing our cash position paying down our mandatory debt obligations and continually to opportunistically accelerate additional debt reduction through open market purchases.
Towards the end of the quarter, we demonstrated our company's ongoing access to capital markets by pricing $75 million in tax exempt solid waste disposal revenue bonds with an initial term of seven years for.
Finally, our first quarter of free cash flow exceeded the free cash flow generated in the full year of 2020 and was nearly at the level of full year 2019, which demonstrates our significant earnings potential in a recovering market.
We believe that this is particularly impressive when we consider the fact that coal pricing levels are still in transition and remain somewhat suppressed during Q1 of 'twenty. One. This provides me further reason for optimism as economic conditions continue to improve and energy demand recovers to pre pandemic levels.
Now, let me provide our Q1 'twenty one operational performance in detail.
Coal production at the Pennsylvania mining complex came in at 7 million tonnes in Q1 of 'twenty, one compared to 6 million tons in the year ago quarter.
The vast improvement was due to a continued increase in demand for our product as well as no longwall moves during the quarter.
We consistently ran for loan losses in Q1 of 'twenty one.
Ever as demand exceeded our production, we sporadically ran the fifth longwall to meet this additional demand.
This recent quarter now marks the third consecutive quarter in which we have steadily increased our production as our Q1 'twenty one quarter production improved 19% from Q4 of 'twenty levels and nearly 200% from Q2 of 'twenty levels as demand has steadily increased since the depths of the COVID-19 related shutdowns.
For Q1, 'twenty, one productivity at the Pennsylvania mining complex measured as tons per employee hour improved by an impressive 31 nine per cent compared to Q1 of the 'twenty.
We're not only increasing our overall output, but also improving our efficiencies of right sizing our operations.
On the cost of fraud.
Our average cash cost of coastal per ton was $24.44 in Q1 of 'twenty, one a new record low quarterly level at the Pennsylvania mining complex and the nearly 25% improvement compared to the $32.41 in Q1 of 'twenty.
Our operation team was once again successful in keeping tight control over cash expenditures in the quarter, while benefiting from our improved operating leverage due to the increased production volume.
The adjustments, we made to our operations continued to pay dividends by allowing us to reduce our overall cash cost of coal sold per ton on our producing assets the.
The improvement was driven by a combination of factors, including lower mine maintenance and supply of cost contractors and purchased service cost labor expense and project expenses.
Not to be outdone, the Consol Marine terminal achieved a throughput volume of $4 1 million tonnes. During Q1 of the 21, establishing a new record for quarterly throughput compared to $3 4 million tons in the year ago period.
The terminal throughput volume reflects the pace of over 16 million tons per annum.
<unk> revenues for the quarter came in at $18 2 million compared to $16 5 million in the year ago quarter.
Consistent with recent trends across the company the CMT employees remain diligent and their cost control measures and despite the 700000 ton increase in throughput volumes cash operating costs were basically flat at $5 3 million versus $5 2 million in the year ago quarter, our two core operations.
Once again proved that they can adapt in any commodity market and thrive and improving markets.
Let me now provide an overview of the coal markets.
Demand for our products continued to strengthen in the first quarter of 2021 since the COVID-19 demand trough of Q2 of 'twenty as economic recovery continued and electric power and export demand improved.
Henry hub natural gas spot prices average $3 50 per million btu during the quarter or an 85% increase compared to Q1 of 'twenty.
Additionally, average PJM West day ahead power prices and a Q1 'twenty, 152% improved versus the prior year period.
Consistent with these trends the U S E T I estimate that coal's share of electric generation mix was 23% for the quarter, which is significantly improved from 18% in Q1 of 'twenty and vastly improved from the low point of 15% in April of 2020.
While natural gas prices haven't sustained above the $3 per million Btu, the mark that had been projected by many industry experts we remain hopeful that overall market conditions will continue to improve due to increased global economic recovery and the relatively muted supply response.
The U S energy information administration estimates that total domestic coal demand will increase by 13% in 2021 versus 2020, while the domestic coal supply is expected to increase by only 9%.
In fact, we continue to see tightness in the supply of northern App coal and the majority of our domestic customer stockpiles are at or below target levels for this time of year.
These fundamentals should help to maintain the current tightness in the domestic market that we see today.
On the export front, we have seen sustained improvements in the seaborne thermal coal market since the end of the third quarter of 2020 per.
Pet Coke prices continue to remain supportive as a result of reduced oil production propping up demand and pricing for northern App coal in high CV markets, particularly India.
Global LNG prices have been elevated with the Asian spot market bench, Mark price and in Q1 21 more than double compared to Q1 of 'twenty.
A P O two spot prices also remained strong and ended Q1 of 'twenty, one improved by 37 per cent compared to the prior year quarter.
As such I am very pleased to announce that we were able to capture of the ongoing improvements in the export market and reported our highest export shipment quarter in the history of the Pea AMC. Both in terms of total tonnage and percentage of tons. So.
We placed $3 3 million tons into the export market in Q1 of 'twenty, one much of which was used in industrial non power generation applications.
As you can see on slide five in our supplemental slide deck, we have continued to steadily diversify our global customer base and end use markets since 2019.
In the first quarter of 2021, our overall export volume as a percentage of total sales volume went up 15 percentage points versus full year of 2019, driven by a sharp increase in the portion of our tons going into the export industrial markets, which is driven by 17 percentage points we have.
Not only strengthened our relationships with existing global customers, but we're now serving several new international end users as well in Q1 of 'twenty, one exports accounted for approximately 48% of our shipments and global customers continue to provide competitive pricing opportunities compared to our domestic customers.
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This heightened our focus on export sales is consistent with our strategy of further reducing our exposure to the declining U S coal market or.
Our move away from the large take or pay contract that the terminal has given us increased flexibility to serve the seaborne markets.
Which include continuing to present growth opportunities for our product.
From a marketing perspective, it is encouraging to see the demand for our coal has continued to improve the since the low point in Q2 of 'twenty. We continued to maintain the vast majority of our core customer base and continue to see improvements in our customers' contracting appetite.
Since the end of 2020, our sales team has continued to remain opportunistic and its marketing strategy and increased our contracted position of about $2 3 million tonnes, bringing out of contracted position to 25 million tons in 2021, and $5 6 million tons in 2022.
With that I will now turn the call over to <unk> to provide the financial update.
Thank you Jimmy and good morning, everyone I will start with an update on the progress we have made on our financial priorities. I will then review our first quarter 2021 results and our full year 2021 guidance.
We continue to remain laser focused on generating free cash flow, maintaining strong liquidity, reducing outstanding debt and further strengthening our balance sheet.
After setting the stage in 2020 for the acquisition of CCI and the tightening of the significant amount of our debt we achieved a major milestone at the end of 'twenty one.
Our net leverage ratio declined to just under two times, which as many of you know create significant flexibility for us going forward.
However, we recognize that we have more work to do and have several initiatives underway that we believe will create long term value for our shareholders.
First we continue to focus on our cost containment of books and as a result, we achieved a new record low cash cost of course gold sold per ton at the Pennsylvania mining complex and the first quarter of 2021.
To highlight the importance of that consider the following.
For 2019, we generated $16 24.
Non cash margin went out of revenue per ton average $47.17.
For the <unk> 'twenty, one we generated $16 95 per ton of cash margin, even with the $5 78 per ton lower revenue.
This is the result of the lots of stepped down in our operating cost, which has positioned us to generate significant cash flows even in the lower revenue and board members.
It means we are more productive from a labor standpoint used supplies more efficiently and have a more optimized mine plan.
Second on the legacy liabilities strong I'm very pleased to announce that under our current actuarial assumptions. We have of funded status of approximately 103% on of our defined benefit pension plan. At this point, we do not have any funding requirements for the foreseeable future and have significantly lowered our exposure to equity market.
Utility.
Todd.
One of the most important development and <unk> of 21, one of our free cash flow generation of nearly $73 million.
Even more exciting is the fact that the vast majority of this free cash flow of what's generated directly from operating activities as the demand for that product continued to increase since the end of 2020.
For in anticipation of our future capital needs and the growing challenges of access to capital. We also continued to tap alternative sources of capital in the first quarter of 2021.
We successfully price $75 million of tax exempt of solid waste disposal revenue bonds to the Pennsylvania Economic development Finance authority at the end of first quarter, which were subsequently issued in mid April.
The bonds were priced at 9% and haven't initial 70 of them. This transaction gives us additional financial flexibility by freeing up of future operating cash flow that was earmarked for the Pennsylvania mining complex refuse area of project and allows us to prioritize the greatest arbitrage and executing our capital allocation strategy.
Furthermore, this transaction also helps to do the risk of portion of our future refinancing of fluids by pushing $75 million of maturity in 2028.
Finally, perhaps the most important thing to come out of this transaction is that the approved capital is still available to Consol energy and in this case, even for a seven year duration.
The Investor interest was very strong for the offering and this avenue of something that we can also use in the future.
We continue to take advantage of an ongoing strong equipment financing market and raised an additional $8 million of new capital in the quarter.
Fifth.
We continue to Opportunistically deploy discretionary capital towards the outstanding second lien notes and spent $9 $3 million to the top $10 2 million at a discount the bot.
We still view of these buybacks as a good use of capital even as our second lien prices have rallied back into the nineties.
However, we are now running into significant liquidity issues of portfolio debt repurchases at a discount in light of this we do not mind holding cash on our balance sheet and waiting for the right opportunity.
Our board of directors continues to remain supportive of this approach and views open market debt repurchases as a very effective tool to reduce our leverage ratio strengthening the balance sheet and create long term shareholder value, while maintaining control over the liquidity needs of the company.
The recently increased our repurchase program by an additional $50 million go in the aggregate amount of up to $320 million and extended the duration of the program by six months to December 31 2022.
Now have approximately $132 million of availability under the program to repurchase of our term loan B second lien notes and <unk> common shares subject to compliance with our debt documents and applicable laws.
Finally, we have also made significant strides on our overall debt reduction goals as we reduced our total debt outstanding by $22 million and $1 21, and due to our strong cash generation in the quarter, we reduced our consolidated net indebtedness part of the credit agreement by $63 million.
Let me direct you to slide number nine in our supplemental presentation. This slide really lays out how successful we have been since our spin in implementing our strategy of reducing our debt and improving the risk profile of out of balance sheet inspite of the very challenging market conditions, particularly in 2020.
We have continued to generate free cash free cash flow in all parts of the cycle and generating free cash flow in 2020 was extremely impressive when you consider the significant demand decline are the industries and global economies faced.
The stemmed the tide through cost reductions and other management actions such as the CCR merger and the other EBITDA generating transaction that we completed which set us up to hit the ground running in early 2021.
We will continue to remain true to our strategy of absolute debt reduction.
Reduced our overall debt level by $73 million since the start of a very challenging 2020 and by a total of $272 million since the end of 2017, but a reduction of 30%.
This was even more impressive when you consider that we have added the additional finance leases as an alternative and sustainable source of capital you have taken a very measured and diligent approach awarded unnecessary risk and the entire team is working towards our goal of improving liquidity reducing cost.
And strengthening the balance sheet.
As we move forward, we will continue to focus on strengthening our balance sheet, while implementing a targeted growth and diversification strategy I will note that in the coming quarters of debt reduction progress will be partially offset by the addition of the tax exempt bonds due to the treatment of restricted cash under our credit agreement. However, this will only be of transient issue and overall were resolved in <unk>.
The liquidity with that let me now recap the fourth quarter results before moving on to our 'twenty to 'twenty one guidance.
<unk> reported very strong first quarter 2021 financial performance with net income of $26 4 million of 75 cents per diluted share with adjusted EBITDA of $106 7 million, which is our highest quarterly EBITDA since the second quarter of 2019.
This compares for $2 5 million nine cents per diluted share.
And $62 9 million, respectively in the year ago quarter.
121 of earnings marked the third consecutive quarter since the low point in Q2, 'twenty and which we have seen significantly improved earnings versus the prior quarter.
Most importantly in <unk> 'twenty, one we generated $78 million of cash flow from operations spent $13 8 million in capital expenditures and receipt of $8 5 million in proceeds from asset sales.
Which resulted in free cash flow generation of $72 7 million.
This was higher than our total free cash flow generation and all of 2020 and nearly at the level achieved in the full year of 2019 and it highlights our earnings potential in all parts of the cycle, especially in the strong markets.
As a result of our free cash flow generation, we ended the fourth quarter with the cash and cash equivalents of $91 2 million a substantial improvement from $50 9 million of the end of 2020.
<unk> finished the quarter with the net leverage ratio of 197 times gross and below the two times Mark for the first time since year end 2019.
Now, let me provide you with our outlook for 2021.
We are reaffirming our full year 2021 guidance based on the on the on our results and expectations for the remainder of the year with the exception of out of pricing assumptions the cut.
Do you have of 2021 contracted position of $20 5 million tonnes at an expected average price of approximately $42 35 per ton.
Despite a very strong first quarter, we chose to maintain our current guidance for two key reasons.
First it is early in the year the.
First quarter was very strong and we are cautiously optimistic that we will be able to achieve the high end of our sales volume guidance.
However, all of us of but nothing of new wave of COVID-19 that is impacting global economies, while we have not seen any impact of our shipments of customer demand. This is an area of risk that we will closely monitor.
We also have approximately two to 4 million tons of coal debt our own contracted and as a result, we did not feel it was prudent to raise the guidance given the sort of position.
Second on the cost front, our operations team did a great job of managing our costs in <unk> 'twenty one.
However, we are expecting two longwall moves in the second quarter and one longwall move each in the third and fourth quarters, which could make it difficult to keep cost as low, particularly in the inflationary environment that all of us are witnessing.
Of course, I'd expect it to be in the mid to low end of our guidance range, but this will ultimately be a function of how well we manage the impending longwall moves and how our shipments play out.
As always we strive to be.
As transparent as possible and provide you with our best estimate at any given time.
We'll continue to reassess how the guidance range each quarter. The good news is that we got off to a very strong start for 2021.
We expect to generate significant free cash flow this year and improve the return on all of assets and the write down on equity for our shareholders.
With that let me turn it back to.
Jimmy to make some final comments.
Thank you for <unk> before.
Before we move on to the Q&A session. Let me take this opportunity to provide a recap of our accomplishments in the first quarter and reiterate our priorities as we move forward.
We continue to prioritize strengthening our balance sheet, and improving liquidity and financial flexibility access to capital for coal companies has been shrinking. However, we have been extremely dedicated to identifying and executing alternative sources of capital.
As the potash alluded to we'll remain laser focused on continuing to drive down cost at our operations through efficiencies and a focus on reducing discretionary spending.
The team continues to look for ways to effectively drive costs down without sacrificing the effectiveness of our operations.
The significant reduction in cash cost of coal sales per ton over the past several quarters is proof that if we set of target, we intend to achieve or beat it.
We will continue to pursue our targeted growth and diversification strategy as we move forward on previous calls we highlighted the many projects we have been working now and remain excited about it.
I won't rehash all of those but I want to reiterate that in the near term our most important growth and diversification of vehicle remains our metallurgical coal project in southern West Virginia.
We are containment with development mining, where we're operating a single section one shift per day at minimal cost while evaluating all options associated with the ramp in the project back up.
We believe this project provides a solid pathway for organic growth and diversification.
Finally, we continue to focus on ways to leverage one of the most important assets debt we have in our portfolio. The Consol Marine terminal as we highlighted we successfully shipped 48% of our total sales volumes into the export market in Q1 of 'twenty one we.
We expect this trend to continue as we move further into the year as an operator owning our own terminal is a huge differentiator for us compared to our peers, especially when you consider the continued strong coal demand is expected from growing economies across the globe.
And the attractive quality characteristics of our KOL that make it a solid after a product in seaborne industrial and metallurgical as well as power generation markets.
Before handing the call over I want to and as I always do by thanking our entire workforce for their continued hard work and commitment to achieving the strategic goals we've laid out.
While there's always more work to do we are extremely proud of our accomplishments to date and believe we have a lot of opportunity in front of us to build upon our strategic priorities.
We once again showcase while we believe our high quality low cost assets are truly in the class of the wrong.
We can generate cash in almost all parts of the commodity cycle as we proved last year and we really demonstrated our earnings potential in improving markets in Q1 of 'twenty one.
We continue to focus our goal of building a robust balance sheet and creating long term value for our shareholders with that I will hand, the call back over to the need for further instructions.
Thank you Jimmy we will now move to the Q&A session of our call net can you. Please provide the instruction to our callers.
I'll begin the question and answer session.
That's the question. The press Star then one of you touched on the phone.
The speaker boldly pick up your handset before pressing the keys.
As part of your question. Please press Star then two.
At this time of pause momentarily to assemble the roster.
First question comes from Lucas pipes of B Riley Securities. Please go ahead.
Hey, good morning, everyone and congratulations on a very strong start to the year, especially the shops.
Good morning Lucas.
I wanted to follow up on the on the cost side.
Just a bit.
Hi.
You didn't raise the guidance in your prepared remarks, you mentioned the longwall moves you mentioned, some inflationary pressures, but to what extent.
Do you see the inflationary pressures kind of coming through today and is that on the labor side of it on the material side steel side of what you're saying is also just the degree of conservatism maybe embedded in your in your numbers just given how strong you were in the first quarter I. Appreciate your thoughts. Thank you.
Thanks, Lucas well when we look at guidance as you know is something that we take very seriously we like to be within a <unk>.
Close range on our guidance and our forecast as we move forward the.
The one reason we didn't raise the guidance on many fronts costs.
Sales price of production when we look at debt today, there's still all of the uncertainties of the COVID-19, it's very easy to say well production newmont of 7 million tons, if you're most part of that before quarters. It should be 28, we know that typically our second quarter due to summer shutdown and we have two longwall moves in here the production it'll be less than the <unk>.
7 million tonnes now would be happy if we hit 7 million tonnes, but we're trying to be realistic about that so.
I look for us to take a real close look when we get through Q2, we should know more about the COVID-19 related shutdowns at the R&D and those things and we probably will update our guidance at that point in time, but we will have a half of year underneath our belt certainly have more certainties on the cost front you know that's something that I've emphasized zone almost every call.
We've had is something that we do daily we emphasize on cost are of mine managers our employees at the mine did an extremely good job in this quarter of the things that they control. So the commodities I think there is we are seeing some inflation small inflation in the commodities that we use to produce the coal, but we will continue to monitor.
Two of those and we think it's well within our guidance range, where we are now and I would expect as MS. Natasha alluded to in his comments that we will be somewhere in the mid to lower end of our guidance for the for year. When you look at cost.
And Lucas also.
Remember like cost is partially driven by volume so assuming this COVID-19 situation does not result in any impact on the volumes I think if the volumes remain strong we will look to.
Butte and improve on our cost guidance.
Very helpful. Thank you and then my second question is on the ESG side earlier in your prepared remarks you.
Commented on your profile.
You know how consistently you've been.
The working towards.
Continued.
Continued advancement of your of your profile there.
I congratulate and commend you on all of those efforts.
Wanted to ask to what extent you think stakeholders.
On the funding side surety side financial markets at large.
Recognizing.
Your efforts and instead of just looking at U S.
As another cool companies.
To put it bluntly, but but.
Would appreciate your thoughts on that and again I really commend you and all of the work you've been doing on that front.
It's a very good question and it is on the minds of many of investors. It is an important issue and at the end of the day, we want to be responsible for our employees the communities in which we work. So we will continue to work on the the ESG part of our business in our corporate sustainability report that we posted.
Late last night on the website has allowed the details in it but it is something that we take very seriously. It's on the the minds of many many investors you know the.
By the administration and a lot of others one of the first things we hear about ESG concerns and we strongly believe that we can be compliant with the ESG issues and produce a low quality energy source that's needed, particularly in these developing countries.
And Lucas I think your comment about how.
How much credit do we get from insurance companies and surety than some of the other stakeholders I think they do recognize.
That we are the best in class I think in terms of how we deal with the environmental issues and reclamation.
That we do.
I think.
We also need to do a little bit better job on our front to communicate the various markets that we supply cold tool I think historically.
We have been we have been thought of as predominantly thermal coal and today like you probably noticed in our presentation deck.
It is it is amazing when you look at things, how we have gone from 75 plus percent.
Of our coal going into thermal market to just around 62% going into the total market in the first quarter of 2021, So I think.
Part of that is on us that we need to do a better job of communicating it but I think generally we debt.
The the stakeholders do realize that we do good by an.
The environmental pushback day of reclamation work and some of the all the things that you mentioned, so I think it.
It is a marathon not of sprint, we will have to continue to do.
Making sure the do convey our story correctly.
But we do get a lot of credit for at least disclose and what we do and we were going to continue to be very transparent about that moving forward and continue to be very responsible as an operator.
Terrific terrific.
Really good to hear.
I'll try to sneak in one.
Last one.
The cash you spoke of a fair bit about.
The lever.
Rich in your prepared remarks.
Could you could you share your thoughts on where you see kind of a.
Long term optimal capital structure for this business.
Especially in light of the.
The prior comments just a moment ago. So so thank you for your perspective yeah.
Thank you Lucas and I'm sure you noticed that like even though sub two times is something that wasn't brought on from a credit agreement perspective, I did mention that we still have somewhat the chop here. So we're not done yet we will continue to delever.
I think it is really hard for me to answer right now what is the right leverage for this business, but as you can see we have generated free cash flow and.
All parts of the cycle now.
And 2021, 2020 was particularly challenging but we demonstrated that we can generate free cash flow. So I think I feel a lot better.
Having said that.
We will have to be watchful like if you asked me.
Three years ago, what the right leverage ratio was I would have told you.
Of the one five knowledge slower and.
Given all the comments about access to capital debt.
We will continue to go lower and I think that has a good understanding and then Todd management team is deleveraging is not something that we're going to achieve a certain level and call. It a day, it's going to be of continued work in progress. This year next year.
And as we look out I think the tax exempt financing for the for instance allowed us to push the maturity to 2028 so to speak.
And those are the kinds of things that we are going to block and tackle but generally speaking we're going to continue to delever, our balance sheet to reduce the overall.
Rudy is the overall debt level I wish I can give you exact fine number.
You know if things continue to continue the weighted taz.
I think you could make a case for the zero leverage.
Very very helpful really appreciate all the detail.
Answers and continue the best of luck. Thank you.
Thanks Lucas.
Got it for you of a question. Please press Star then one.
At this time, we have no further question I like the turn the call back over maybe the sucker for final remarks.
Thank you Nick we appreciate everyone's time this morning, and thank you for your interest in in support of the IX Hopefully we were able to answer most of your questions. Today, We look forward to our next court currently earnings call. Thanks for everybody.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.