Q2 2021 AltaGas Ltd Earnings Call
[music].
Good morning, ladies and gentlemen, thank you for standing by welcome to the Altra guests second quarter 2021 financial results Conference call. My name is on us and I'll be your operator for today's call all lines have been placed on mute to prevent.
Background noise. If you have any difficulties during the conference. Please press Star then zero for operator assistance at any time.
After the Speakers' remarks, there will be a question and answer session.
As a reminder, this conference call is being broadcast live on the Internet and recorded.
I would now like to turn the conference call over to Adam Mcknight Director of Investor Relations.
Please go ahead Mr Mcknight.
Thanks Anna.
Everyone. Thank you for joining us today for the Ultra gas, Inc. Second quarter 2021 Financial result conference call.
Moving on the call. This morning will be Randy Crawford, President and Chief Executive Officer, James <unk>, Executive Vice President and Chief Financial Officer.
We're also joined here this morning by Randy Toone, Executive Vice President and President of our midstream business.
Jenkins Executive Vice President President of our utilities business and John Morrison.
On your Vice President Investor Relations and corporate development.
Consistent with prior quarters. In addition to the second quarter press release financials.
Treatments and M. DNA that were released earlier today. We've also published our first quarter earnings summary presentation.
This presentation walks through the quarter and the highlight and highlight some of the variances of nonrecurring items that we would assume would be helpful for the market to understand and it is available on our website under events and presentations tab.
As always today's prepared remarks will be followed by an analyst question and answer period, I'll remind everyone that we will be available after the call for any follow up or detailed modeling questions.
We're proceeding the basis that everyone is taking the opportunity to review the press release and our first quarter results.
And for the structure of the call will start with Randy.
Randy Crawford to provide some comments on our second quarter performance and the progress on our strategic priorities followed by James harmless, providing more detailed walkthrough of our financial results near term outlook and guidance and then we'll leave plenty of time at the end for Q&A.
Before we begin we will.
Also.
1 that we will refer to forward looking information on today's call. This information is subject to certain risks and uncertainties as outlined in the forward looking information disclosure on slide 2 of our investor presentation, which can be found on our website and more fully within our public disclosure filings on both the Edgar and SEDAR system.
And with that.
That I will now turn the call over to Randy.
Thank you Adam and good morning, everyone.
We are pleased to announce that alter gas delivered strong second quarter results continued to execute on our strategic plan and positioned ourselves to meet the company's 2021 and longer term growth plans.
Our operating results were in.
A reminder of our expectations for the quarter and reflect the benefit of operating a diversified set of long life infrastructure assets that are positioned to provide resilient and durable value for our shareholders.
Despite ongoing headwinds associated with the U S. Dollar exchange rate, we delivered normalized earnings per share growth of 33.
In line with them normalized EBITDA.
EBITDA growth of 12% and <unk> growth.
Up 10% year over year.
Our U S utility business underpinned by our continued investment to update our pipeline network to reduce emissions.
Along with updated rates from our DC in Maryland jurisdictions delivered 30.
35% year over year EBITDA growth from local currency.
These actions will result in better customer outcomes and provide reduced operating costs.
Providing safe and reliable and affordable service to our customers across all 5 jurisdictions in which we operate is paramount.
Sustainable operational efficiencies that we achieve our driving.
3% results in better outcomes for our customers.
New customer growth at WGN continues to track ahead of our expectation.
And is in line with the robust population growth we've seen in the Dnb area over the past decade, which has been higher than the national average by nearly 25% since 2010.
On July 1.
First we filed a new rate case at 1 of our Alaska utility sinter requesting a U S $1.9 million rate increase and is a continuation of our ongoing plan to remain active and keeping our rates up to date.
We are also pleased to make headway on promoting combined heat and power to larger commercial and industrial customers during the quarter.
<unk>, which is advancing our lower carbon focus that as part of our climate business plan.
In the years ahead, we will continue to operate with a high degree of regulatory capital and cost discipline that we believe synonymous with delivering the best customer and stakeholder outcomes, which should also deliver steady normalized EPS net <unk> per share.
Yeah.
We believe this disciplined approach provides the foundation to support <unk> long term strategic plan and we'll continue to reward all of our stakeholders.
We continue to build a world class midstream and global export business delivered another quarter of record volumes across the platform.
Our utilities continue to achieve sustainable.
Operational efficiencies and improved financial performance as we prioritize the health and safety of our employees, our customers and our stakeholders.
Our midstream business is performing incredibly well with record volumes in our global export businesses and solid volume growth across our entire platform.
Our global export business shipped a.
A record 90106 barrels a day of North American propane and butane to Asia during the second quarter.
Gas processing and fractionation volumes through our facilities were up 12% and 35% year over year, respectively and continues to demonstrate that our platform is well positioned for future at the Montney.
Outlook for Western Canadian supply growth looks increasingly positive and we are.
Witnessing strong well capitalized producer activity around our Montney focused platform in northeastern BC.
During the quarter, we exported 15, very large gas carriers to Asia.
With Ferndale exceeding 50000 barrels a day on.
And new records for that terminal.
Also during the quarter, we closed the purchase of approximately 600 acres of land adjacent to Ferndale LPG export facility.
Incremental land will provide petro gas with enhanced logistics flexibility and optionality to advance our promising future energy development initiatives.
June that are aligned with the larger energy transition.
From a strategic standpoint, ultra gas entered into a 7 year time charter with a 3 year optional extension for 2 new dual fuel Vlccs that will go into service in late 2023 in early 2024.
The contract extends out the gases.
Assets reached into the Asian market for its products and further derisk alter gas long term export strategy.
The procurement of the dedicated vessels will reduce shipping costs by approximately on 5% compared to prevailing market rates and reduced pricing volatility.
The vessels can carry 15% larger cargos and the standard VLCC.
As such the vessels deployment will drive reduce costs and provide better environmental outcomes.
Heading into the second half of the year, we remain confident we will achieve our increased guidance ranges and we remain on target to reduce our net debt to normalized EBITDA ratio by up to $5 buybacks over the course.
<unk> seen in 'twenty, 1 and we will continue to remain focused on further de risking on the platform.
Longer term, we will continue to operate long life infrastructure assets that deliver durable and growing EPS and <unk> per share for today and tomorrow and provide the foundation for steady dividend growth and provide the opportunity.
Or to ongoing capital appreciation.
As we have said in the past we continue to believe that natural gas will play a critical role in the energy transition as the fuel on the future.
Our assets are long life.
And provide a great deal of future Optionality. These.
These assets provide the critical infrastructure needed to deliver low carbon natural gas today.
While providing a foundation for delivery of carbon free solutions in the years ahead, including renewable gas and hydrogen.
And through this transition we will tirelessly advocate for the best outcome for the consumer and ensure that our debt. We are focused on delivering long term sustainability in all forms including economic safety.
And environmental.
And with that I will turn the call over to James to dig into the operational and financial results for the quarter in more detail.
Thank you Randy and good morning, everyone.
Overall, the second quarter was a relatively clean quarter for us and our results were right in line with our expectations.
Strong performance across.
Our core businesses and the significant year over year, EPS and <unk> per share growth clearly demonstrates the visibility and growth within our utilities and midstream businesses and the continued execution of our strategic priorities.
Natural gas continues to be a strong contributor for our integrated midstream business as it provides increased scale.
And Optionality, along our midstream value chain that realized continued volume growth across the entire platform.
Our utility results were driven by our continued investment across our networks acute cost discipline and fewer COVID-19 headwinds.
During the second quarter of 2021, we delivered.
All of our lives EPS of <unk> <unk> compared to <unk> in the second quarter of 2020, representing a 33% year over year increase.
Normalized <unk> per share of <unk> 56, compared to <unk> 51 in the second quarter of 2020, representing a 10% year over year increase.
Our normalized EBITDA of 200.
$130 million compared to $206 million in the second quarter of 2020, representing a 12% year over year increase.
Our utility results reflected the normal seasonal slowdown in energy demand that is associated with the spring and summer months and reported normalized EBITDA of $99 million.
Compared to $80 million in Q2, 2020, representing a 24% increase year over year.
Strong operating performance across the segment was somewhat offset by $9 million unfavorable moves in the U S to Canadian dollar exchange rate.
In local currency EBITDA was up $28 million from 30.
So year over year.
Utility segment growth continues to be underpinned by our disciplined investment in our distribution systems from our previously approved ERP programs.
These programs are focused on driving better customer and environmental outcomes through improved safety and reliability reduce leak rates.
<unk> and lower operating costs.
WGS had another solid quarter with normalized EBITDA of $56 million compared to $44 million in Q2.2020.
Excluding the $5 million negative impact of foreign exchange, Wgla, EBITDA increased approximately $17 million or 39% year over year.
In local currency.
Notable drivers include the rate cases of D C and Maryland, which became effective Q2 in late Q1, respectively. The ongoing capital investment across the network and lower COVID-19 related impacts on usage and late fees.
This was partially offset by lower asset optima.
Total revenue.
As Randy mentioned, we continue to make solid progress towards earning our allowed returns at WGN <unk> through a combination of capital rates and cost discipline, which you continue to see reflected in our quarterly results.
<unk> and <unk> combined normalized EBITDA was $33 million in the second quarter.
About $5 million from the same period last year.
Entirely as a result of the negative impact of foreign exchange.
Strong customer growth and usage was offset by higher G&A costs associated with higher property taxes and employee benefits.
And finally normalized EBITDA from retail energy marketing business was 10.
To migrate all of us in the quarter, an increase of $11 million year over year, driven by favorable gas and power margins and increased demand from C&I customers.
Within our midstream segment, we reported $142 million of normalized EBITDA on the second quarter compared to $111 million in the second quarter of 2020.
10 million, which represented a 28% year over year increase.
EBITDA from global exports was approximately $70 million during the second quarter, reflecting the record shipments of LPG to Asia across 15, Vlccs from the Rip It confirmed oil terminals.
Record export.
Volumes were underpinned by strong operational efficiencies across the 2 terminals demonstrating the value of our expanded midstream operations and the integration of the Petro gas assets as we continue to optimize our operations and logistics networks and embrace best practices across the ultra gas and petrochemical teams.
Our processing and fractionation business also realized strong volume growth across the midstream platform with gas processing up 12% year over year, and fractionation volumes up 35% year over year, driven by increasing producer activity on the back of improving fundamentals in commodity prices and a number of customers growing.
Going into their contractual commitments.
We continue to benefit from our strong footprint in the heart of the Montney, which we believe will continue to outpace development in other parts of the basin.
Processing and fractionation volumes at our non Montney facilities were also up year over year, driven by increasing drilling activity and the strengthening.
And commodity prices.
We remain focused on actively derisking, the midstream platform and reducing commodity price exposure and volatility we.
We had approximately 84% of our frac exposed volumes for the quarter hedged at $25 a barrel.
Alta gas remains well hedged through the balance of 'twenty.
<unk> with approximately 79% of.
2021, total expected global export volumes told per collectively hedged.
This includes an average <unk> and North American financial hedge price of approximately 10, 79 U S per barrel for both propane and butane.
We also.
Have 98% of our expected frac exposed volumes hedged at $25.70.
In our corporate segment strong contributions from higher generation in place was more than offset by higher G&A costs largely associated.
With higher long term incentive plan costs due to the significant increase in our share price.
During the quarter and year to date.
Depreciation and amortization expense for the second quarter of 2021 was $108 million.
Per to $93 million for the same period in 2020.
The increase was mainly due to new assets placed in service and the consolidation of the Petro gas assets.
Expense of $69 million was down slightly over last year's at $71 million.
As a result of lower average interest rates and a lower U S dollar to Canadian dollar exchange rate.
Which were partially offset by higher average debt balances.
We continue to make significant progress towards strengthening our.
Our financial position and improving our leverage ratios from 2021, which.
Which include reducing net debt by more than $630 million year to date, which was supported by the sale of the non core U S transportation and storage business on April 23rd.
This was an important milestone as it reflected the continuation of our.
<unk> and ongoing efforts to de risk the platform and deleverage the balance sheet.
We are reiterating reiterating the increased guidance that we made concurrent with first quarter results, which includes 165 to $1.80.
For normalized EPS.
And 1.4 dollars 75 billion to 1.
$5.5 billion for 2021 normalized EBITDA.
Our 2021 Capex outlook remains unchanged at approximately $910 million.
As Randy mentioned, our corporate strategy remains unchanged as we are focused on operating long life infrastructure assets that provide resilient and.
On durable value for our stakeholders.
Our focus continues to be steady returns that compound value over time.
That concludes our prepared remarks, and we would be happy to turn it over to the operator for Q&A.
Thank you, ladies and gentlemen, let me now conduct the analyst question and answer session. So I'd like.
Your question. Please press Star then the number 1 on your telephone keypad she'd like to withdraw your question. Please press Star then the number 2.
There will be a brief pause while we compile the Q&A roster.
Your first question comes from Douglas Loves Me with Bank of America.
Darius Please go ahead.
Hi, good morning, and thank you for taking my questions.
My first 1 is I wanted to follow up on.
You mentioned chartering a couple of vessels for your export strategy I was just curious how you're thinking about that on a go.
Go forward basis are you going.
Looking to potentially acquire more on.
More capacity to vertically integrate the logistics side of things a little bit and also on <unk>.
How could how could you, possibly or how might you.
Do that.
In terms of transportation of NGL to the Ferndale and repair facilities.
I know you've mentioned in the past on logistics that had been an issue. So I'm just curious how youre thinking about that on a prospective basis.
Well good morning, Thank you for the question.
When we looked at the value proposition on the 2 ships.
The first driver was the commitment that it's going to reduce our shipping costs.
25%, so that's it's key to improving our.
Being a low cost shipper for our customers and continuing to improve our gross margin. So but overall, we feel that this is a strategic to control more of the value chain to the markets and essentially reaching further into the market on behalf of our.
Our customers going forward.
So it's the 2 ships are a small part of that and at the beginning of us, creating optionality for ourselves and our customers going forward.
Okay, great. Thanks, Thanks, very much from that detail and 1 more if I could I'm just curious about.
Your power assets I know you clearly said in the past that those are considered non core we have been seeing a lot of.
Of news in California, specifically about resource adequacy.
Things along those lines. So just curious how those how youre thinking about.
<unk>.
For those power assets, either now or in the intermediate term.
Yes, James or various I mean, obviously, we are thinking hasnt changed or on <unk>. I mean, the power segment has been identified as something thats non core that being said, though.
The assets performing extremely well its being second year on.
On a roll here, where it's being dispatched.
Significantly higher than where it has been historically and that's obviously helping to.
Some of the power shortages in California, we think that the asset has.
Has a break.
Future in terms of in terms of being able to meet California's power needs. So we're not in a rush to.
Sell it but we have said that if it's the right value comes along and it fully reflects the intrinsic value of that asset and its so accretive to our debt metrics, we would consider it but nothing in the plans right now.
Okay. Thanks, very much I'll turn it back.
Thank you.
Next question comes from Jeremy Tonet with J P. Morgan. Please go ahead.
Hi, good morning.
Good morning, Jeremy.
On the land acquisition that you that you announced today 600 acre land can you speak on the potential energy transition opportunities.
Yeah sure.
A little color on that I think besides <unk>.
Sizeable breadth of the land.
It has access to hydropower.
It's in close proximity to.
On a carbon capture opportunities.
In the short run we plan to use the land expand our rail system handle the handle unit trains which will increase.
Efficiency lower our logistics costs in.
In the longer term, we're exploring all of the low emissions opportunities.
Including construction of hydrogen facilities that will enhance our product mix further position Ulta gas is that right.
On an energy expert leader up the West Coast and North America.
I'm confident that the culture of innovation that all the gas and our track record of building challenging and complicated projects will position us to succeed.
This is going to take several years and it's going to require some governmental policy support but there's no debate.
Heading into a lower carbon world.
Overall, our asset base.
Is well positioned to be at the forefront in my judgment on this energy transition.
Got it. Thank you so much and then 1 more just on the on the export side.
It seems like you've been able to capitalize on that pretty well.
Just wondering how the synergies.
For the Petrograph integration and the optimization across reported in Ferndale had been tracking against your initial expectations.
Yeah, I'm going to let Randy to comment on that because his team has done just an excellent job and it's exceeding our expectations quite frankly, and you can see it in the results.
Yes.
Overall.
Since the in flexibility and synergies have been tremendous net team is hitting on all cylinders sovereign debt.
Hi, Jeremy.
We were initially we are targeting $30 million worth of synergies.
For the year and we are expected to.
Do more than that.
The 2 businesses come together.
We've really identified a lot of great things to do to do and you can see it with our export capability through both Ferndale and rip It and we think that we're going to EBIT more in the second half of this year.
Alright got it thank you I'll leave it there.
Thank you.
Thank you. Your next question comes from Rob Hope with Scotiabank. Please go ahead.
Hey, good morning, everyone on.
First question on continuing on the export theme with the increasing volume connectivity that we're seeing in northeast B C.
Has that driven any <unk>.
Incremental conversations on additional contracting or tolling of Brexit that could support an expansion.
Thanks, Rob Good morning, and thanks. Thank you for the question.
Okay.
Conversations with producers are constructive and we speak to them regularly and we are focused on securing additional.
Claims that ribbon Ferndale. So we're currently at 35 per cent it with it and they're targeting higher percentages, but really the recent strengthening of fundamentals improving commodity prices are starting to support the conversation and we are seeing increased interest from aggregators, who want to participate on the upside on having direct access to the Asian markets.
So in summary.
Tony Rob I'll tell you that the industry consolidations, resulting in stronger counterparties on your balance sheets capable of taking long term commitments. So.
With our greater scale and in the tools on our toolbox around logistics and supply chain that we're optimistic that we'll continue to to provide that access and increase on totaling.
Tolling volumes into this.
Alright, I appreciate that and then just kind of on a question on the similar vein when we take a look at the synergies of having to export terminals on the West Coast are you able to move barrels.
Between the 2 facilities like for instance, if we're seeing kind of fires impacting PC rail could you ship them down to Ferndale.
And the fact that you do have Ferndale does that push off the need to expand record that you could further optimize that's from capital first.
Yes, I mean I think that.
You're spot on and look the fact is even.
We'll move on shifts between the 2 ports on the <unk>.
Rail logistics, if we have some challenges and we've.
Uh huh.
Some of the C N N and some of the fire, but overall our ability to.
So we route those into our facilities and that Optionality is created.
Significant benefits and opportunities and we're just scratching the surface. So Randy just wanted to add anything more to that.
Yes.
We've talked about before Richard can do more than we.
Currently doing 50000 barrels a day, we think we can get that above closer to say 70000 barrels a day and it's all about logistics and the petrol gas and the gas assets combined has made us more efficient on the logistics frac sand. So we are going to continue to.
We've had to make both terminals to increase export volumes.
We're on a ladder.
The 2 products also provides us.
Another layer of.
Optimization of our assets make depending on the availability and the logistics associated with that so.
Really a lot of a lot of.
Value to the scale and Optionality to thank you for the question.
I appreciate the color. Thank you.
Thank you. Your next question comes from Robert <unk> with CIBC. Please go ahead.
Hi, Rob <unk> from CIBC.
I wondered if you could provide your initial thoughts on how the Blueberry River first nation case.
On impactful current operations and.
Future development in the Montney.
As per the industry, but also for your.
With that kind of strategy.
Well on ultra.
Altra gases headed.
Excellent stakeholder relationships with all of the first nations and particularly on the blueberry.
And so clearly our asset position, having existing capacity and to be able to take with a growing volumes is certainly something of value to us.
And it makes us distinctive so we think it's somewhat of a competitive.
<unk> advantage clearly is.
As we work with all of our stakeholders.
Going forward.
Think that.
Our constructive relationships, we're not going to impact a lot of our future growth, but I think it's important to understand that.
It's from our perspective.
When you have access to land in someone's land that interest.
Important to them.
To have an excellent relationship with them and to manage the environment total impacts along the way. So I think you'll be on excellent relationship on that.
That's how we were going to progress going forward.
Hello, Randy.
Normally what Randy said I think with our stakeholder relations group has.
It's a job in northeast B C and even around <unk> and we know that we have to work with the first nations to do any kind of development and we and we've always done that so we don't think that this.
This ruling is going to have a major impact to your business.
We think we can help our producers and those in the north montney that to continue to.
On a great day to develop and we can leverage those strong relationships going forward.
Okay.
Further clarity on the timing of the purchase of the 600 acres on Ferndale.
And the timing of the Blueberry River case, that's just coincidental and it.
It doesn't reflect the pivot.
Focus.
<unk>, putting more emphasis on ferndale.
No no that it does or just coincidental on the timing it right. We've been focused on optimizing ferndale and our core competency around exporting and we're very bullish on our north Montney and the development there too.
No change in the fact that our integrated strategy overall.
Yeah, that's what I thought and just last question from me then is on the retail.
Notable improvement.
The results there year over year.
We speak a little bit more to the drivers there and whether you foresee those being sustained.
Payable over the next 12 months.
Bill I'll, let you comment on that.
Yeah of course, yeah, Yeah. Good question, Rob, notably the challenge we had in Q2 of last year was related to that was the first full quarter, where we were facing the COVID-19 impacts and so of course on our usage expectation.
<unk> and profiles didn't match our didn't match our transportation.
And.
Purchase profile, so as we've gotten more competent in the usage profiles et cetera, what you see this year is a better management and more.
And more reflective of our expectations as we work our way through Covid.
Covid, they're really the change was just coming into the year with the expectations of Covid and being able to manage around that usage profile. So yes, we do think.
We're slightly above budget for the year and we expect that low.
Look the same as we go throughout the year. So will it continue yes, we think so we just we werent surprised by a full quarter of Covid This year.
Alright, so its more to do with Covid effects coming off on and it has to do with the winter storm effects maybe incentivizing.
Demand for retail products.
Correct. So you know demand has been good yeah, I would I would characterize there was minimal if any impact from the winter storm activity.
Okay. That's it from me.
Thank you.
You bet.
Thank you. Your next question comes from Ben Pham with BMO. Please go ahead.
Hi, Thanks, Good morning, I wanted to go back on from your comments on on the new acreage with hydrogen.
Is.
Crosses on I wanted to clarify that you would not be getting any net production of hydrogen it skews more to the benefit from from.
On that market, expanding and <unk>, it's more the expectation for exportation of hydrogen that you would be looking at.
Yeah. This is yeah. This is.
Is the thought of longer term vision and then in terms of the all of the attributes.
Additional land.
Purchase and so the fact that as I mentioned in my previous answers from the comments some of the attributes associated with.
Our access to ports.
Hydropower Green power as well as pipeline.
Pipeline access that we have a visit from a long run again. This is this is a long term transition.
We're looking at that into the future keeping our eye on the fact that we have.
Our strong track record of building and challenging another project. So again long term nothing nothing immediate no significant dollars to invest but just wanted to make.
Sure.
So the attributes of this and how we're looking at the future energy transitions and serving our customer needs in Asia to help them transition to cleaner burning fuels and reduce carbon emissions.
Okay.
Thanks, Brian.
As also mentioned, Alberta power price benefit.
As you have results on.
I haven't been hearing on that.
That price impact for some time is that.
Is that just simply the co gen plants.
I'll put into the market are you.
Could you just moving some of the volumes internally too to the external market.
Yeah.
Interesting.
She has to read I'll, let you comment about specific 1 yeah. That's just with our co Gen facilities per mountain complex, we've been able to take advantage of the.
On the high power price in Alberta.
And you usually sell.
Debt to the spot market are you using that.
Typically that is where do you typically do that internally.
Well those coaches are largely to provide power to our mountain.
And then with the excess volume we sell into the into the grid on a slot basis.
Okay.
Okay and then maybe my last question is on the but the spreads like what's what's the.
I think under debt the softness in and this spread do you think it's supply driven demand driven combination.
Alright.
Look we continue to see robust demand information certainly local domestic prices, but the spreads are.
You too.
Is it coming a bit here, but you can see it in the forward.
Outlook that day and continues to be stronger on on.
We expect and it seem increase.
Increasing demand going forward, so and you've got to remember that as you know I mean, our structural advantage around on that.
Being up in North West Coast of North America.
<unk> provides a significant transportation advantage and so where we continue to optimize that going forward.
Okay. That's great. Thank you.
Yeah.
Thank you.
Your next question comes from Robert Kwan with RBC capital markets. Please.
Hey, good morning.
I'm, just wondering you've talked a bunch about and especially on the export side exceeding expectation some of the integration on the synergies on so I'm just kind of wondering as you were thinking about your guidance.
What are some of the headwinds that youre seeing.
For the second.
Half of the year things that you are cautious about.
Just in terms of maintaining guidance versus either change again or even just a directional guidance.
Well Robert Thanks for the question as you know, we increased our guidance and into the first quarter and we're coming into the second quarter and I think the team has done an excellent job continuing to execute it as I've said in my prepared remarks.
And while we have some currency headwinds and such.
I'd be disappointed if we're not in the high end of our guidance range.
Going forward.
So clearly we are just in the second half the team is executing.
Quite clearly and doing a great job.
So again.
We can revisit that but overall.
<unk> quarter goes by but overall were.
We're well positioned to get into the high end of our guidance range and interest.
Many of the other hidden yeah, just wanted to add obviously as Randy touched on 1 of the headwinds that <unk> been creating volatility for us and everyone else on has U S dollar denominated revenues and EBITDA.
He is coming that we keep our eye on for the back half of the year, but right now propane spreads have been tracking below where they were when we rolled out our guidance. So obviously is Q3 unfolds and we get into another winter season, we'll see if those rebound and if they create a bit of a tailwind for us but right now those are headwinds that we need to take into account.
In respect to the current guidance range.
Got it.
But I thought when you did your guidance range you remark your FX assumption.
Yes, we did.
So that's a tailwind actually isn't that at this point quite well.
Yeah, So Robert I mean, obviously, when we remarked it in the first quarter.
<unk>.
We saw it go from what we had in our budget of $1.32 down to 126, we've seen a further decline in the 5 bank forecast $1.23, and I think the spot right. Now is about 124.125, so if it stays there.
In the back half of the year, then I agree with you it would become a tailwind.
But when we.
We said when we when we re forecast of the business in the quarter.
The exchange rate between Q1 and Q2, it's on them.
Got it okay. So is this maybe just.
A little debt with respect to Randy disappointment, if youre not at the high on just trying to stay conservative given you've just increased guidance a quarter ago.
Yeah.
Right.
Randy I think.
We want to be clear and we.
We will visit these each quarter, but I stand by my comment in the teams do an excellent job hitting on also on yourself.
Got that.
If I can just quickly come back to the question around vertical integration and chartering.
Basketball, how far down the value chain would you be willing to go would you be willing to get into receiving terminals on the other side.
No not just what we want to be able to do is we're building relationships with our customers global customers across the world and into Asia, and so our ability to be have direct access.
Yes.
Think about it as extending your pipeline late into the market areas, I think where we would be focusing on our value chain I think it adds value to our customers as well on derisking platform. So not a lot further than that I don't believe.
Got it if I can just finished the 1 last question here, we've seen strong asset valuations.
<unk> and private markets.
Does that enticing enough for you to to look to transact on assets, maybe that you went to considered or is your focus pretty squarely at this point.
On the sale of of MVP as it relates to more material dispositions.
Sure sure I think we've demonstrated as a management.
The team that we are focused on creating shareholder value and that we will recycle capital and we will grow our core assets as we say so.
Our non core assets and to the extent that.
Other assets that don't meet sort of our growth profile or that are better to be monetized and recycled to these.
Tremendous organic growth opportunities, we have both on the midstream and utility we'll look at that but we're not going on we're in a position where we continue to improve the strength of our balance sheet focus on on driving organic growth going forward in our long durable resilient model.
Creasing, our dividends over time so.
I guess the short answer is Robert will look at all of that and but overall our focus is continuing to invest in these core businesses and demonstrate the growth that we have.
Okay. That's great. Thank you very much.
Thank you. Your next question comes from Patrick Kenny with National Bank. Please go ahead.
Yeah. Good morning, guys I'm, just maybe back to your G&P business here and on the continued trend of consolidation across the E&P sector.
Specifically in the Montney region, and given where commodity prices are at these days I'm. Just curious how far are we might be in terms of <unk>.
Needing to expand capacity.
North Pine Townsend.
On potentially needing to add infrastructure across other assets in your portfolio.
Sure No great question will.
Fortunately part as we've said in the past that we've made significant investments in our midstream infrastructure in over $2 billion.
Investing in our.
Export capabilities as well as our our fractionation and processing assets. So our focus has been and we're in an enviable position right. Because we can move additional products with the capacity that we have already invested in so that puts us in a really strong position overall.
And while we work with our customers and to stay out in front of this as they develop their world class resource.
So we have the opportunity to do module other expansion opportunities with the facilities that we have so we'll continue to work with our customers.
Right now I think given the fact that we have available opportunities and we can connect our producers to these value global and domestic markets.
Bodes well for our growth and our profitability into the future. So.
There will be a time, there will be need for additional assets.
We will be we stand ready to.
To be there.
Okay, great. Thanks for that and then.
Within the utilities just curious.
If you might be working on any emerging opportunities on the R&D front, just with respect to you know.
Taking into new supplies there and.
Whether or not this might represent a little bit of upside to that 8%.
Sent rate base CAGR outlook yeah.
No excellent point, well, let you come on but yet the team is doing looking at all of those and we've talked a lot about that in.
Moving some of our first LNG into the city.
Blue I'll, let you comment on on the activities yes.
You bet. Thanks, Randy Yes, Patrick Good question. So we signed a recent small deal with a local R&D facility building that facilities and pipeline connections to deliver gas net facility and of course take R&D from the facility we are scrubbing several.
Others and are working actively across the region.
More of those opportunities. So yes, we're optimistic that we'll.
I have more to come and more announcements as we go from a.
Those are in fairly early stages, but yes, we think there's some upside around on the G overtime.
Okay, that's great I'll leave it there thank you.
Systems simple Patrick.
Thank you. The last question comes from Linda <unk> with TD Securities. Please go ahead.
Thank you.
Just wanted to follow up again on your intriguing extending into that falls opportunity and.
Now around that.
You mentioned that it is the beginning of your creating Optionality I'm wondering if there might be the potential to rent additional vessels.
And if.
If you can expand on that comment and then.
A second part to that question.
The I'll take your optionality extend a little bit upstream as well or into other marketing type opportunities.
Thank you Ron and thank you for the question.
First part of your question about the ships and additional opportunities and the Optionality is.
Starting here and we think the snakes makes good sense.
For the company as a small aspect of our overall volumes that we're moving but if you think about what I mentioned on our structural advantage a 10 day Joe.
Expectations to the open waters of the Pacific to the growing markets of Asia, China, and India as well I mean, just really does in highland that create tremendous optionality for ourselves and for.
Miners and to be able to get them access to these growing markets. So I think it will ultimately.
Allow us as you said, even further upstream so as we as we optimize our footprint and focus on our leading export footprint. That's extremely valuable on a robust Asian market I believe it will also provide.
<unk> opportunities further upstream to bring on more product more investments.
In the basin as well so yes, it's all calculate and coordinated strategy and steps that we're taking and we're excited about those and Randy and from the.
The team are doing an excellent job and looking forward as.
Well to create even more value with maximizing the latent capacity that we have.
Tremendous support assets. So thank you for the question.
Thank you and just as a follow on with respect to creating optionality and accessing end markets.
You've done a great job of expanding.
Access to North American markets global markets, but but what about getting a little bit into upgrading some of your peers have.
And accessing new markets through that whether it.
Propane or butane or other products being partially upgraded.
Yeah, I think that.
We certainly when we are shipping to the global markets.
Getting some of that into upgrading and debt.
On the PVH facilities.
Our overall focus right now is to maximize the flow of the propane and butane to to our customers and such and so.
Well look.
Look upstream on different types of investments right now I think when I look at our ability to provide.
Almost 100.
Capacity up in excess of 130000 barrels too.
On the.
Global access markets across the world right as opposed to domestic markets alone I think is really valuable now and I think that's we're.
This is more on on on connecting the growth that's going on in Asia.
With the basin.
But again, we'll look at those things Linda we're early on.
And as we've talked in refining that product and if we can do upgrades and the team is extremely low.
<unk> and entrepreneurial and we will look at that right now on.
I was just maximizing the capacity and getting our customers connected to those markets.
Thank you.
This concludes the Q&A portion of today's call I will now turn the call back to Mr. Mcknight.
Thanks, Dennis and thank you everyone.
Focus once again for joining our call today and for your interest in Ulta gas just as a reminder, the IR team will be available after the call for any follow up questions that you might have.
That concludes our call. This morning, I hope everyone enjoys the rest of the day you may now disconnect your phone line.
Okay.