Q1 2021 Keyera Corp Earnings Call
Good morning, My name is Rebecca and I will be your conference operator today at this time I would like to welcome everyone.
You hear a corp first quarter 2021 conference call all.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question. Please press the pound key thank.
Thank you.
I would like to turn the call over to Dan Cuthbertson, you may begin.
Thank you and good morning, joining me today will be Dean Setoguchi, President and CEO.
Eric <unk> senior Vice President and CFO, Jamie Urquhart, Senior Vice President and Chief Commercial Officer, and Brad Lock Senior Vice President and Chief operating Officer, we will begin with some prepared remarks, after which we will open the call for questions I.
I would like to remind listeners that some of the comments and answers that we will provide speak to future events. These forward looking statements and given as of today's date and reflect events for outcomes that management currently expects.
In addition, we will refer just on non-GAAP financial measures for additional information on non-GAAP measures forward looking statements referred to here as public filings available on SEDAR and on our website with that I'll now turn the call over to D. Thanks.
Thanks, Dan and good morning, everyone.
I'd first like to take a moment to acknowledge frontline workers and those working to administer vaccines in the fight against COVID-19. We appreciate your efforts and dedication.
I would also like to acknowledge our employees many still working remotely for the commitment to safety and their continued efforts to keep our assets running safely and reliably for our customers.
At <unk>, our top priority continues to be the health and safety of our people and the communities in which we operate.
About this time last year global energy markets faced significant uncertainty.
I am pleased to share the share remained resilient and in this last quarter, we've seen encouraging signs of recovery.
That's reflected in strong performance across all three segments of our integrated business.
And in our first quarter financial results.
Volumes in our gathering <unk> processing business increased by 7% compared to last quarter, including 5% growth in our south region, leading to strong financial performance from the segment.
This result represents a year earned work in close collaboration with our customers, which aligns with our goal of being number one in customer recognition.
Our liquids infrastructure segment delivered record results for the quarter, resulting from continued high demand for.
For all services, including strong deliveries from our industry, leading condensate system.
Our liquid statements provides essential services to a wide range of customers throughout the basin and continues to deliver the best returns on our portfolio with stable contracted cash flow.
These attributes will remain our focus for future growth capital, which includes a cash pipeline project.
We also had solid performance from our marketing segment supported by strong pricing across the commodities. We service yesterday, we announced a significant increase to our 2021 guidance for this segment, which Jamie will speak to shortly.
We're pleased to deliver these first quarter results, but we also continue to focus on our goal of delivering superior shareholder returns over the long term.
And that means we must continue to.
Maintain our strong financial position keep improving our safety and reliability delivered our efforts to maximize efficiency.
And prepare for energy transition.
Our strong balance sheet and financial discipline have long been the hallmark of our business. Our conservative approach again has again served us well through this last commodity price downturn.
Our balance sheet remains in good shape with low leverage and ample capacity to fund our kaps pipeline project.
We continue to take steps towards improving our safety and reliability performance.
Ignite is important the bulls factors delivering superior customer recognition and total shareholder returns and we continue to hold ourselves accountable.
We continue to we continue our pursuit of being the most efficient operator for our customers and growing margin through efficiency gains and reducing cost.
Our customers rely on our interest infrastructure assets as well as our commercial operational and logistics expertise.
This allows them to get their products to the highest value markets.
We also see opportunities to apply technology and innovation to improve safety liabilities and lower emissions.
Recognize the world is undergoing a transition towards a low carbon future.
Mr supports and government policy are further enabling this transition.
We believe the Canadian energy industry, as an advantage and its ability to continue to responsibly deliver the energy the world needs.
Keira, we want to be part of the solution and.
And view the strength vision of opportunity.
Later this year, we will set emissions targets that.
That will consider a wide range of efforts that we have underway.
The close on a more general note the Canadian energy industry is also showing some positive signs that point to recovery.
For the first time in many years pipeline export capacity for both oil and natural gas will soon be adequate to meet industry needs.
And what's growing local demand from the petrochemical industry and better connections to overseas markets the trends for natural gas liquids, such as propane also look encouraging.
In addition, recent consolidation amongst amongst producers also good for our industry as it creates stronger players we're better positioned for the long term.
I'll now turn it over to Jamie to provide an update on our commercial activities. Thanks, Dean and good morning, as Dean mentioned, we have increased our 2021 marketing segment guidance.
The higher guidance is based on year to date performance, a disciplined hedging program and force. The conclusion of successful negotiations for natural gas liquids supply agreements for the contract year, beginning April one and ending in March 2022 as.
As a result, we have raised our 2021 realized margin guidance for the marketing segment to between 260 and $290 million.
This replaces our previous guidance range of between 180 and $220 million. The marketing segment continues to contribute to enhance our overall corporate returns and provides funding for investments in more highly contracted infrastructure assets on.
Now I'll take a moment to provide some broader context for our return expectations on cash.
Cash is transformative for tiara. The project is highly desired by industry and it provides a link in our value chain that fully integrates our business.
It brings a much needed alternative transportation solution for condensate and natural gas liquids from the Montney and Duvernay plays in northwest, Alberta, <unk> liquids hub in Fort Saskatchewan.
The initial capacity remains 70% contracted under long term transportation agreements with an average term of 14 years.
Based on our engagement with new and existing customers and the expected ramp up in industry activity. We remain confident that we'll be able to secure the additional contracted volumes to meet our return expectations up 10% to 15% by 2025.
A reminder, that this return is for the project on a standalone basis.
Now I'll turn it over to Brad to provide an update on how preparations are going for the Kaps project and also speak to other operational highlights.
Thanks, Jamie I'm pleased to share that during the quarter, we made significant progress on the <unk> project in preparation for mainline construction kick off this summer.
In Q1, we completed clearer almost a 150 kilometers of pipeline right away and pipe fabrication is well underway.
The project is a great made at Alberta story, the clearing work in both five local indigenous owned and affiliated contractors, who delivered outstanding performance and pipe fabrication is currently being done in cameras Alberta.
At the Wild horse crude oil storage and blending terminal in Cushing, Oklahoma Mechanical completion was declared on January 29, and commissioning activities are underway.
Our operations team continues to make steady progress and we expect debt facility will be fully operational this summer.
At Wapiti Theres been a lot of great work done by the team we have had strong safety and reliability performance. So far this year and we continue to grow facility volume.
In the third quarter will have a short planned outage to further ensure the future long term liabilities this asset.
We also have scheduled 10 day turnaround at <unk> in June and the Brazeau River gas plant, which is currently underway.
I'll now turn it over to Arlene will run through our financial results.
Thanks, Brad.
For our solid first quarter financial.
Financial results.
Performance from.
Yes.
Adjusted EBITDA.
2021.
$5 million.
Well the distributable cash flow.
$5 million.
Net earnings.
$6 million.
Hey, Gavin.
That meant for lithium margin $79 million.
Hi.
The wapiti and Pipestone GAAP.
We delivered a record $105 million.
A lot of margin in our liquids infrastructure.
This performance can be attributed to the continued high demand for services.
Thanks for his activity on strong delivery from our policy.
And our marketing segments delivered for realized margin $61 million.
We can continue to make whole on financial position. We ended the first quarter for the net debt to adjusted EBITDA ratio.
This is within our conservative target range.
Great.
On a capital basis.
The company has $5 billion in available liquidity with minimal near term debt maturity.
In addition, we completed $350 million hybrid operating margins.
This positions us well on our 2021.
Thank you for me.
$450 million.
Majority of this capital will be directed toward the construction site.
For the second half of the year.
For clothing.
Clothing.
Thanks Kelly.
<unk> value proposition continues to be the delivery of a sustainable dividend underpinned by low debt leverage and a deep inventory of investment opportunities aimed at expanding distributed distributable cash flow per share.
Looking ahead, <unk> will continue to be a safe reliable and sustainable operator dedicated to serving our customers and generate value for our shareholders.
We're excited about the future and we're confident we have the culture people and assets for continued success.
On behalf of tiers board of directors and our management team I, Thank our employees customers shareholders and other stakeholders for their continued support.
With that I'll turn it back to our operator for Q&A.
At this time, if you would like to ask a question. Please press star one on your telephone keypad.
On your first question comes from Rob Hope with Scotiabank.
Yes, good morning, everyone.
First question is on the cap side, just given the improving commodity price environment as well as some of the other dynamics that we're seeing in the basin.
You'll have to have discussions for additional contracting capacity accelerated there and then as well are you seeing incrementals on credit and incremental interest from producers in northeast B C with some potential to get northeast BC volume is down and delbert on there as well.
Maybe I'll just answer your second question first.
Yeah.
The announcements and the notification that was.
Filed by North River midstream.
It's an independent system.
Our BC system margin independent system, which is in Canada. Both systems are open access.
So we like the whole concept of more competition in our basin.
Good overall.
So we're happy to see that.
That project continues to develop.
Certainly with more volumes being collected in D. C. Obviously.
The potential for being able to capture some of that volume the caps.
It's more promising but again.
Early days.
And maybe on the contracted price.
Yeah, So certainly.
As we've.
Finalized and confirmed our commitment to caps and as we shared.
Starting to clear trees.
Manufacturing pipe.
In our customers' eyes as made the projects.
Solidified as real projects, so certainly we've.
Had more meaningful conversations with respect to incremental volumes.
I would just temper people's expectations around timing of when we might be in a position to.
Further announcements around additional contracting is most customers really do want to see line of sight as to when that project is going to be complete.
We hope and we will continue to keep our customers apprised of the development of that project.
Mind, everybody that project is scheduled to be complete Q1 2023.
We certainly expect that's going to be the case.
But.
To reconfirm, yes, much much more conversation happening with their customers more meaningful conversation, particularly at the top end of our of our pipeline up in the Pipestone area.
Yeah, Rob I mean overall.
We've seen some pretty robust results from our producers in the basin.
Obviously.
Projections are that their balance sheets are going to be pretty healthy here in another quarter or two.
So there's just a lot of.
A lot more discussion about future drilling plans and growth.
Obviously that only.
Yes, it makes it more encouraging for our pipeline and the rest of our business.
Excellent alright, and that leads me to kind of my next question you know taking a look at the northern plants you know good to see the volume picking up there how are volumes tracking to take or pays and you know.
At what point do you start having discussions about.
The incremental capacity on <unk> being coming available.
Yeah.
Yeah overall, I mean, we've always said that debt debt.
That fairway in the Montney.
If not the most economic it's certainly top tier within the Montney.
We're actually surprised at how quickly drilling activity has responded.
Based on our sort of some of the communications, we had with our producers just in the fall. So we think thats very healthy but again.
This commodity price environment remains which we feel pretty good about.
We think that's only going to increase in the fall. So there's some for some producers in the area that arent, even delivering towards debt are now much more engaged in both.
The potential of <unk>.
Reactivating drilling plans.
Potentially delivering to our gas plants.
Again, Thats very positive and again, we've always said we were in the best stretch of the Montney and we should build a capture more volumes over time, yes.
Yes, the only thing I'd add is that there are some new players in the wapiti area that have made some acquisitions.
In the Karr Wapiti area that we are very familiar with in other parts of our business. So.
We're we're.
Obviously with respect to the Wapiti gas plant.
Thank you.
Your next question comes from the line of Linda.
Gillis with TD Securities.
Thank you.
I think you can elaborate a little bit more on your experiences over the past year with respect to leveraging technology.
And transforming your some of your business processes that way.
Clearly.
Many of us have accelerated our use of technology in many ways during a pandemic and I'm wondering what practices you might add.
Keith it's permanent and further evolve the business to realize it.
Seizing opportunities beyond what you currently have in your.
Plan.
Maybe ill start with for.
Well good morning, Linda.
Yes, I think I think.
The pandemic there are some benefits that came from that in terms of just understanding what we can do remotely and we've operated our business very well, especially last year through very very challenging conditions.
Our credit or our technology team for enabling us to do that so as we look forward.
Thinking about how do we how do we leverage off for the future.
So we will have some on a more flexible.
For work environments, we do like to collaborate still together, so we'll make sure that we.
We continue to do that on an basis, but we will add some more flexibility, but overall as a company, we think that technology and innovation.
Something that's a big opportunity for our company and something that we want to leverage in a much bigger weighted future. So maybe with that I can just pass over to Jim you, Brian maybe talk about some things in your areas.
We're looking at.
Hi, Linda I think certainly from a from an operational side.
Utilizing data management and.
And data access to more centralized some of our operations and business process is something that we're spending a lot more time and energy on right now and I think over the long term that has a real opportunity to reduce our operating costs and ultimately provide more value add services to our customers on that line.
Yes, so on the commercial side Linda.
Got a couple projects that were in the latter stages of implementing with respect to using machine learning to allow our people to make better business decisions.
We deal with a lot of data and asking people to be able to process that data and make the best business decisions possible. They do a great job.
But.
Using machine learning and.
Artificial intelligence just allows our people to.
To make better business decisions and so we've got some applications as it pertains primarily to our commercial marketing team that we're that we're implementing and we've seen some positive results out of that so far.
Yes.
Linda I think from a safety perspective, I think that again the technology, we've been using just to communicate virtually been very effective so.
Actually in the cold winter months here in Alberta.
I think it's a big benefit if we don't have as many people on the roads and we can we can do things virtually for.
On the safety of our people.
And on a separate note.
Another trend that we're seeing as inflationary pressures on many fronts and I'm wondering how you can comment on whether you're starting to see that in your operating or capital expenses and if you can specifically comment on what percentage of your.
Cost for caps have been locked down.
Apples in terms of what's incurred to date, Venezuela is that more importantly, prospectively and also confirm that theres no scope change contemplated for caps at this point.
So from a from an operating cost perspective, I think it is fair to say that we're seeing some inflationary pressure certainly.
Power is one of those components I think we do have.
Like all of our other commodities, we do have we do actively manage our power price.
Hedge that out over time to take to mitigate some of the impact of that so so that's a benefit to us.
Certainly other commodities like steel and copper and some raw materials are seeing inflationary pressures as well we're fortunate with.
With cash.
The fact that we had a one year delay allowed us to really lock in some of those opportunities early on so we had ordered our pipe.
Over a year ago.
And secured debt under a contract out that doesn't take all of the inflationary pressure out there, but it takes a lot of it. So so thats been real positive for us on caps, we've locked down on our pipes, we've locked on our mainline contractors, we've locked on another a number of key services as well.
So I don't have an exact number but it's going to be well north of 50% of our costs are already locked in for.
That project, so we're feeling pretty good about our confidence in delivering that within the budget that we've contemplated.
May I ask what contingency you've got embedded in that town.
Got you.
No we don't usually disclose that but certainly we use good project management principles to assess contingency on the basis of <unk>.
During those of engineering today.
Thank you it looks great for asking maybe on a separate note.
Your presence in the U S has expanded with wild horse.
Will be operational soon how's your expectation for the facility changed since it was originally contemplated given that we're going through a pandemic. There was the unfortunate winter storm Yuri and maybe there is some changes in some of the market dynamics there as a result, among other considerations can you comment on.
I guess, how wild horse fits into your approach to the lesson and how it might have evolved.
Yes, Linda Thanks for the question nothing has changed as a result of the business thesis of Wild horse, we're still very encouraged and excited about getting that facility up and running in and being part of our vertically integrated.
Value chain, and enabling us to find the highest value markets for for the products that we do market on behalf of our customers.
In particular, our U S assets Wild horse will be very integrated with our OLED assets Thats been on we've been very pleased with since we started only net assets.
And so yes, we're there's no no change as a result of any anything that's happened.
Over the last 12 months.
Thank you I'll jump back on the queue.
Your next question comes from the line of Matt Taylor with Tudor Pickering, Holt <unk> co.
Yeah, Thanks for taking my questions here.
I wanted to first start on on your run rate marketing guidance. We've now seen three consecutive years of guidance revised higher with the major reason being the bogey tank costs. So.
So can you talk about those assumptions do you think theres still relevant or do you think the run rate level is actually higher.
Yes, well, we will be likely at the end of the year.
Looking to revise that base guidance, Matt I think well I know one of the reasons why we're hesitating to do that is just to get a better line of sight with respect to the contributions that both Galena Park and while force will make to two of our marketing business, but also it's a significant contributor to our liquids infrastructure side of our business as well.
As it pertains to butane.
For the contract in year that we just completed.
On a successful contracting year, but.
Butane prices and within North America, we look at it there is still dynamic with respect to the demand.
Teen within Western Canada relative to the supply so.
Things do play into ultimately how marketing is going to perform going forward, specifically as it pertains to aes.
So we're obviously looking to.
Having the ability to stabilize the marketing contribution as much as possible, but just recognizing that you do.
Teen.
<unk> is still dynamic and fluctuate year to year.
That's great Jamie Thanks for those comments there and then.
The address you on.
Mentioned that on a standalone comment on your caps returns projects expectation. So I just wanted to clarify that for the opportunity. The source volume from this other open access pipeline is not considered in your return guidance and then.
And then maybe more broadly does this give you an opportunity to pull forward your assumption of earning that return by two years after in service.
Well our return expectations are based on our forecast with respect to bringing pipe volumes into that pipeline and when we see returns on a standalone basis. Its just looking at.
That pipeline net investment that we've announced.
Obviously, there would be.
Upstream benefits potentially with respect to some of our gathering and processing assets debt.
With feed into that pipeline or some of our downstream assets that ultimately that pipeline will feed into and that's that's what we're referencing when we say stand alone.
Was that your question.
Yeah, and then just to extend it further so then yeah, if youre looking at your own system and integration on the value chain side, if there's if theres more volume from a separate from a separate system coming in obviously, that's not considered and so there might be some wiggle room and moving within that range.
That the right way to be thinking about that.
I guess net.
<unk>.
We've always been sort of open day that we have a base level contracting 70% initial capacity.
To get to our 10% to 15% hurdle rate, we still need to secure more volumes and we have a number of different ways that we can do that we can we can capture a larger market share.
Are we.
We were talking to more.
Producers are on the upper side of the border about additional volume that we.
We hope to contract as well and also there is the potential for BC volume. So we're not specifying exactly where it comes from but we think on a risk basis.
For those three sort of sources that we're going to get to that 10% to 15% threshold.
That's great. Thanks for that Dean and one last one if I may sound announcement by a competitor. This morning on a new NGL system does that sound.
Any thoughts there on how this may impact your pet Chem feedstocks strategy or on any downstream conversations youre, having done new frac capacity or just even more broadly you know what.
This means in terms of the Alberta pet Chem strategy.
You know just generally.
I think more and more suppliers of NGL that feedstock are good for our basin.
We know the people at <unk>.
I presume youre, referring to Wolf midstream.
We know them very well and you know if theres any opportunities for us to work together to increase and enhance the efficiency of.
NGL extraction and delivery.
We're happy to work for them, but overall, it's good for based on than that.
Competition is what attracts more business to our province, which is what we want.
Yes.
Youre aware that those those are incremental volumes that will be straddled off of off of the natural gas system. So we don't view those as being.
Competition with respect to our are designed to potentially expand capex in the future.
I was referring to call competition defense of competing sources of feedstock for.
For players.
Yeah, No yeah, no fair point. Thanks, guys. I was I was also referencing the fact that they're looking to build out on a frac as well.
Yeah. So yeah. Thanks for addressing that question now jump back in the queue. Thanks.
Thanks Pat.
Your next question comes from the line of Chris Tillett with Barclays.
Hey, guys good morning.
I guess first question just to sort of follow up.
On something Matt was asking.
Given the.
Return of activity.
We're seeing in the basin today.
On.
Does it make sense at this point in time to sort of contemplate maybe expanding caps further west out of Gordon Dale.
And in the northeast BC is that something you guys are actively investigating do you think maybe that's something that would make sense to do further down the road.
Just curious to hear kind of where your heads are at on that at the moment.
While our cash system as the Alberta, only based on NGL solution.
<unk> solutions so.
If there is demand to build up to the border whether it's.
On the producers that are up from the Gordon Dale area or whether there is a pipeline system in DC that want to connect to our system.
It has to be underpinned by contracts to justify the incremental capital.
But we think theres potential for that.
Absolutely, but we will not make investments unless we have adequate contractual support for it.
Understood Okay.
The rest of my questions have been asked thanks guys.
Thanks, Chris.
Your next question comes from the line of Patrick Kenny with National Bank financial.
Yeah. Good morning, just on the colonial pipeline outage here in the impacts we're seeing on our board.
Any comment on how this situation is playing into your spot isooctane margins and I guess, maybe just to confirm is this short term tailwind for Q2 at least.
Is baked into your new marketing guidance range for the year.
Yes, Pat its Jamie Thanks for the question.
Yes.
Yes.
As Youre aware, our Bob talked a little bit over the weekend and it settled primarily I know it popped again, a little bit this margin and we expect there is going to be some volatility in the short term it really will be determined on on the extent of that outage.
I think it's fair to say that those that can take advantage of optionality tend to benefit from this type of disruption.
We built our business off of the ability to lock in stable cash flows but also.
Be able to take advantage of Optionality.
And when it presents itself so hopefully that answers your question.
It does thanks, Jamie and then.
Maybe just looking at more on a sustainable basis for the ISO octane business.
Perhaps you can just walk us through some of the opportunities around clean fuel standards and what this emerging demand trend could mean for your realized premium going forward relative to historical.
Yeah sure happy to yes, certainly we're looking at the clean fuel standard.
And the opportunities that it does present to us, particularly around some potential efficiencies at that site to get our intensity, our carbon intensity down net debt facility.
So early days on that but we certainly see once again an opportunity.
With respect to that clean fuel standard.
You know part of that clean fuel standards.
We look at this and I think we've telegraphed this.
The market is that we are focused on trying to.
Find higher value markets within North America traditionally we've spent a lot of product down to the Gulf of Mexico and sold it out of there where we've.
Realized higher margins frankly, if we can find.
Sales points within North America, both from a rail cost perspective, but also just frankly from a realized premium perspective, so that's going to be a continued focus for us we've actually hired.
Individual that's dedicated to AE and increasing margins out of that facility.
So, it's obviously really important to us.
On a margin perspective, we're still seeing we're not we're not back to sort of the levels. We were pre COVID-19 with respect to the octane premium component of pricing of our isooctane certainly true on our Bob <unk>.
Historic high certainly on the RF side.
But the premiums still are there decent but they're not back to those levels and frankly, our view is they're not going to get back to.
Historic levels until.
On.
Octane worldwide gets more balance we're still seeing a lot of opportunities coming from the rest of the world into North America Kazakh things are priced off of our Ben Our Bob is very very strong in North America right now.
But until we see demand for gasoline in the rest of the world catch up to the production capabilities for the rest of the world. We're going to we're going to continue to see <unk> being pushed into North America and keep those premiums at the current levels. So.
We expect that's going to happen probably going to happen.
Happen over the next.
Period of time as the vaccines take hold.
We see that that global demand get back to normal levels, hopefully that helps give some flavor to how we see our isooctane business.
Okay. Thanks, Yeah, that's great color last one for me I guess for Aileen.
I'm wondering if there could be a credit rating updates here on the horizon with S&P just given I.
Leave the downgrade last year was largely related to the lower commodity prices at that time, which of course, we're now back to <unk>.
Pre pandemic levels not sure.
And I guess they would also view the recent hybrid issues being positive to your credit ratios. So just curious on the potential timing for.
Our rating review.
Yeah. Thanks Pat.
For me, it's actually currently undergoing review and based on.
Next question.
Significantly more positive.
Especially as we showed you know 2020 results.
Good day to day only tend to forecast overall.
Good day.
Just from where we are.
Thank you.
Net.
We reported net interest.
That's a fair outlook.
Okay, Great I'll leave it there thanks.
Our next question comes from the line of Andrew Kuske Credit Suisse.
Thank you good morning, I guess on some big broad question, where we've got an environment, where egress is improving across the product spectrum out of Western Canada.
Commodity prices have clearly improved volumes have improved across the board for producers.
So when you start to think about the environment on a go forward basis, how does your risk management activities either stay the same.
For change and evolve and adapt.
The market that we see now.
So overall I mean.
We want to remain disciplined.
Drew and we know that there is on.
On the risk.
Price shocks.
We want to.
Definitely want to generate upside returns, but we also on a protected downside.
No one predicted the pandemic last year.
Who knows it could be for their way.
Maybe not be as aligned as they are today other factors could happen. So we're just trying to be very responsible to our shareholders.
So when we look forward, if we see sort of quite prices that we can lock in better than sort of five year averages.
We started to take advantage of and layer in some of that recognizing that pricing could go even higher.
Again, just securing that.
Okay.
That's helpful context, and then just maybe a bit of discussion on what you view as being more captive volumes are committed volumes across your portfolio.
First in areas, where you have maybe a bit more of a competitive dynamic.
You mean, you're asking like a percentage or.
Rough percentage of it whatever way you'd like to characterize it.
Yeah.
From a from a G&P perspective, we don't have the exact numbers generally in the north and our north facilities, where we've made new investments, particularly on <unk>.
And so from a price don't have you contracted.
<unk>.
We do have.
Some of our producers that are producing above their initial commitment which is always nice to see.
As we said earlier there are.
Other players in the area that we're talking to debt.
Could be contracted volumes as well.
They're more typically on on.
Evergreen basis, I mean, we have been locking up more for longer terms generally less than five years.
But.
Once our captive to your system and a lot of circumstances not always though.
Loans were competitively price cases.
On the volumes are pretty statements.
I know those are just general comments.
We can follow up with maybe a bit more specifics.
After this call it is important to them.
That's helpful. And then maybe one final one if I could just sneak it in.
And for all along the lines of just egress improving.
What are your thoughts on just baseline expansion with line of sight on Trans Mountain.
Yes, Andrew Great.
Great question.
We're talking and we're not the operator baseline.
But we're very connected with the operators.
This line and obviously, we through our condensate system, we have all of the major players.
As customers. So we have great relationships with them and we look to bring those relationships to to our 50% ownership in baseline.
Baseline is in our mind going to have great connectivity to Trans mountain and as a result, we see that there is no reason for us not to benefit off of <unk>.
On the.
Expectation of additional storage requirements off of that system.
Okay, great. Thank you very much.
I'd also mention that our baseline terminal.
Can add another.
2 million barrels per capacity about $1 8 million barrels on capacity and that capacity is going to.
Lower cost than the original phase.
Because all the.
All the infrastructure like the flashes in the pipe racks.
Bridges and things like that are already in place. So we think that we can be very competitive as demand increases with the trans mountain pipeline.
That's great.
Thank you for your question.
If you would like to ask a question. Please press star one on your telephone keypad and your next question comes from Robert Kwan with RBC capital markets.
Thank you.
Start with the G&P segment.
South region.
Specifically your guidance moving utilization from below 50% roughly 70% for mid 'twenty two.
As time has progressed.
You've done some of the work in the basin recovery continues like how much of that.
Move on to utilization do you think will just be consolidated from your existing plants versus volumes.
<unk> will be produced or be migrating from from competitive plan here for me.
How much of that is margin from your view.
Yes, it's interesting a lot of it is just but putting redirecting.
Volume from the facilities that we're going to be some spending to our most efficient facilities.
Now having said that.
Last year, where we had basically three quarters of virtually no drilling.
Obviously volume fell off more than originally expectation.
The great thing is is that we've seen that volume big sort of stabilized and producers are starting to drill.
The lock volume we expect to.
To recover that in the next.
A year or two as producers are resumed drilling.
<unk>.
I'll look it up.
Player like Spartan, who is one of the more active players in the cell.
The tagline on the.
On the release from <unk>.
Research report was the Spirit River wells.
Six months.
And that's not surprising to me based on.
Current commodity price and the other thing is is that we felt the economics a lot with our with our optimization program and the competitive feeds that we offer to our customers, it's really going to set them to drill. So we're just seeing a little bit of that in the first quarter again producers are strengthening their balance sheet.
But.
Adjusted to see what happens in the fall here and into 2022.
It sounds like no.
Asked majority of them.
For you from 50 to 70 is I don't want to say, it's locked in but.
On a confident just moving moving the molecule surround.
Yeah, a lot of it is yes, yes, and again, we have to make up now for the declines from last year.
Alright.
If I can come back to caps and contracting and recognizing you don't want to be too granular as to where these contracts and volume is going to come from.
But based on your answer on.
Are you expecting.
Anything to come off.
<unk> connect or do you think.
That's really just gravy and could actually underpinned on expansion do you think theres enough stuff on the Alberta side.
Okay.
We think that there is enough volumes on the.
Alberto side, but again I mean, when we look at our projections were just taking your risk view of the based on then what's likely to happen. So.
It could come from Alberta, but it would certainly enhance the project.
If we're able to capture volume from.
For the Alberta BC border from a.
A connecting system there.
Again, our systems just Alberta.
<unk>.
Right understood.
And maybe just to finish then.
Turning to marketing.
And specifically for Wild horse.
Are you hedged out.
Any of that in the second half for just as a new facility or you're leaving it open to make sure. It runs smoothly up from an operational perspective that would give you confidence to deliver product in the future.
Yes.
Yes, Robert I can verify we havent hedged anything out of Wild horse.
Just to remind everybody that the value of wells versus the players that are leasing capacity yield of wild horse.
Our more traders and blenders.
If there is contango in the market, which there isn't right now.
Certainly that would be within there.
Toolbox to be able to realize value.
But traditionally.
That terminal with turn products.
On a monthly and it would be as a result, our blending activities.
That is the way people make money out of Cushing.
That's great. Thank you.
And your next question comes from the line of Elias <unk> with Industrial Alliance.
Good morning, and thanks for taking my call.
On a little bit of a follow up I guess on Rob's question I wanted to maybe dive into the GP segment.
We do have or you printed in <unk>.
<unk> and off on.
Operating margin improvement of $20 million to $30 million run rate in the future I'm wondering although you've sort of printed the number how do you feel about that.
Our part way more than partway through it do you think that might be trending towards the upper end middle end and could you give an update at some point.
Thank you for lines for the question.
So far everything is tracking according to plan at least that earlier, we are excited to see the benefits.
Thanks.
Consolidated volume and on the operating costs are coming out of our system.
We really see the majority of that benefit.
Sure.
And to be well within that guidance.
Okay.
Yeah.
Sorry, I interrupted.
I think we're probably going to be more towards the lower the range from some of that is because some of our optimization work that is going to be done in 2022 for that.
Yes.
Savings is going to be ongoing those day I'll mention as we referred to that reduction.
Controllable costs, so as you heard from Brad earlier.
Obviously things like power, there's only so much we can mitigate exposure to rise rising costs. So.
It's just mainly our controllable that we're investing.
Great Yeah, thanks for that color Dean.
I understand increased volumes potentially in an alternative off sales quite like power button.
I was simply trying to use calibration points off the number of plants that are shut down and.
Being the analysts being very high level using that as sort of a ratio, but I appreciate the color and that's it for me.
At this time there are no further questions do you have any closing remarks.
This is Dan cuthbertson.
You all again for joining us today feel free to reach out to the Investor Relations team.
One has additional.
Questions or context for the seeking have a great day everybody.
Thank you for participating this concludes today's conference call you may now disconnect.
Okay.
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