Q4 2021 Keyera Corp Earnings Call
[music].
Good morning, My name is Anna and I will be your conference operator today at this time I would like to welcome everyone to Kiara Corporation's year end conference call. 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'd like to ask a question. There James you. Please press Star then the number one on your telephone keypad.
She'd like to withdraw your question. Please press Star then the number to think.
I would now like to turn the call over to Calvin lock manager of Investor Relations you may begin.
Thank you and good morning, joining me today will be Dean Setoguchi, President and CEO , Aileen Merrick Park, Senior Vice President and CFO , Jamie Urquhart, Senior Vice President and Chief Commercial Officer, and Jerry <unk> Senior Vice President operations and engineering.
We will begin with some prepared remarks from gene and I leave after which we will open the call to questions.
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 are given as of today's date and reflect.
Or outcomes that management currently expects. In addition, we will refer to some non-GAAP financial measures for additional information on non-GAAP measures and forward looking statements.
<unk> public filings available on SEDAR and on our website with that I'll turn the call over to Dee.
Thanks Kelvin.
And good morning, everyone.
I want to start by reflecting on the past year and recognized the success, we achieved delivering several new financial and operational records.
The 2021 results reinforce our strategy and highlight the value we can create for customers and shareholders.
Along with higher commodity prices and a more favorable industry outlook. Our strong results were a direct result of our focused efforts in five key areas.
First we improved our safety performance and decreased our total recordable injury frequency, while nir, while nearly doubling the number of hours worked as compared to last year.
Second we demonstrated ESG leadership by setting meaningful emissions reduction targets and advanced our diversity and inclusion programs.
Next we maintain financial discipline through conservative leverage metrics and incorporated a revised and more rigorous capital investment framework.
We increased our competitiveness by completing the optimization program.
Gathering processing portfolio.
Which has led to lower per unit costs and higher per unit margins.
We also improved reliability across the business, most notably at EES, where we set a new annual production record.
And lastly, we strengthened our integrated value chain.
Bringing on more underground cavern storage and building a direct propane supply connection to the <unk>.
<unk> petrochemical complex near Fort Saskatchewan.
We also made meaningful progress on tax which comes into service in the first quarter of 2023.
While we advanced our strategic priorities the business delivered strong financial results in 2021.
And gathering processing, we delivered record annual realized margin and process one five bcf per day of gas in the fourth quarter.
Volume levels, we havent seen since early 2019.
Contributing to these results were the pipestone plants, which ran at above 90% capacity through the second half of the year.
Higher throughput at our Wapiti gas plant and continued positive momentum in the South region.
The liquids infrastructure segment also delivered record margin for the quarter and the full year.
Record volumes through our industry, leading condensate system.
Our underground storage business delivered its best ever margin contribution.
We also had strong performance from our fractionation business, which continued to operate near capacity.
With highly contracted and consistent cash flows these assets form the cornerstone of our NGL business.
We will see the strength of this segment further enhanced when the kaps pipeline is complete.
The marketing segment delivered 323 million of realized margin, which exceeded the top end of our guidance.
Shifting to our priorities for 2022.
We've identified several key priorities they include.
Our continued focus on safety performance.
Maintaining a strong financial position.
Successfully executing the taps project materially in line with our sanctioned expectations.
The project is currently over 40% complete and on schedule to start up in Q1 of 2023.
Continuing to optimize returns on previously deployed capital.
Sealing and Debottlenecking capacity.
While continuing to improve reliability.
And effectively managing costs across the business.
Now I'll turn it over to <unk> to provide an update on our fourth quarter and 2021 financial performance.
Thanks Dean adjusted.
Adjusted EBITDA was $294 million for the quarter and $956 million for the full year 2021, the highest annual adjusted EBITDA ever as both the gathering and processing and liquids infrastructure segment delivered record margins in 2021.
And marketing delivered contribution of $323 million for the full year exceeding the top end of the guidance of $320 million.
Net earnings were 90 million for the fourth quarter and $324 million for the full year 2021.
Dividends declared and paid for the year were $1 92 per share, resulting in a dividend payout ratio of 63%, which remains well within the company's targeted range of 50% to 70% of distributable cash flow.
Now moving on to capital spending.
Capital spending was $438 million for 2021, which is below the previously provided annual guidance range of $460 million to $490 million.
The difference is mainly due to a timing difference of approximately $45 million and spending largely related to the kaps project that was expected to occur in 2021, which will now occur in 2022.
As a result, the capital guidance range for 2022 is being revised upward to 570 million to $610 million.
Our year end 2021 return on invested capital was 14%.
All other previously provided guidance for 2022 remains unchanged.
We exited the year in a strong financial position.
The company ended the year with net debt to adjusted EBITDA ratio of two four times.
It's stronger than the target range of two and a half to three times.
We will continue to actively manage our leverage profile in 2022.
As we continue to fund cap, we expect our net debt to adjusted EBITDAX to temporarily go above our target range of between two and a half and three times.
That said, we expect our debt leverage metric to return to the target range in 2023 as capital expenditures are reduced and capped in other areas of the business generate incremental EBITDA.
We also continue to look at opportunities to recycle capital into higher return and more strategic opportunity.
For example last month the company closed the sale of the Hull terminal net proceeds Shapiro with $40 million, which includes approximately $32 million of the assets and $8 million for the value of the inventory.
Proceeds from the sale will be applied towards further strengthening the company's balance sheet.
Now I'll turn it back to Dave.
Thanks Ali.
To wrap up we see several macro factors that support our positive longer term view of our basin and our business.
These include <unk>.
And there is abundant low cost supply of natural gas combined with natural gas broadly gaining recognition as an important fuel or a lower carbon future.
Continued geographic expansion to high value markets fueling strong demand and increased investments in the basin.
And lastly, strong government support for petrochemical sector growth.
And for emissions reduction initiatives, such as carbon capture and storage.
All of these factors combined to create a multitude of opportunities for <unk> to leverage our existing footprint to generate strong returns for decades to come.
We can play a key role in Canada's energy future.
On behalf of <unk> Board of directors and our management team I. Thank you for your continued support.
That I will turn it back to the operator for Q&A.
Thank you, ladies and gentlemen will now begin the question and answer session should you have a question. Please press star followed by one on you touched on film you'll hear from Exelon genuine request and your question will be pulled in there that they received.
Should you wish they can learn from the polling process. These fresh stifle a bite too if you're using a speaker phone. Please lift the handset before pressing any keys one moment. Please for your first question.
First question comes from Rob Hope with Scotiabank. Please go ahead.
Good morning, everyone. First question is on cap. So what are the nature of the cost pressures that youre seeing there and can you remind us some of the puts and takes that you're seeing on costs and that sorry, and then remind us how much of that costs you have seen locked up so far.
Good morning, Robert Jaret here.
We are seeing some cost pressures on <unk>, certainly and I think.
Despite that we don't materially expected to differ from our sanction estimate I think one important thing to note is that we've talked about before is escalate.
Escalation in steel costs.
That's largely behind US we expect dollar pipe to be in hand by the end of this quarter. So that's significant.
The challenge that is no longer on the table for us in terms of locked in costs were on the order of about two thirds that are unsecured I think it really speaks to the.
The early contracting strategy, we use with our when we were initiating construction and that's been beneficial for us So again we.
We remain on track with.
To come in.
Materially different than our sanction.
Alright, I appreciate that and then just moving over to the Pipestone and the Wapiti plant.
We are seeing.
<unk> being held back by its water handling pipestone operating at high utilization rates, how are the Congress stations, moving along to potentially debottleneck or expanding plants.
Yeah, Rob maybe just as a starter.
Ill turn it over to Jamie.
That is a very desirable area.
We certainly see a lot of activity already in.
I've talked to a lot of producers not just our existing customers, but other <unk>.
Customers as well that have plans to grow in the area. So we think that's incredibly.
It is exciting for our facilities, and especially where they're located.
So yes, we continue to have those discussions.
We don't have anything further to report at this point, but we certainly feel encouraged.
Do you want to add.
Yes, Rob it's a great question.
The way that we.
Our focus right now is on on the Debottleneck at Pipestone, we consciously put in larger refrigerate than we thought necessary just to get after the liquids because thats a big part of our business and that that gives us an opportunity now.
To pursue a debottleneck at the facilities. So we're in meaningful conversations right now with what that would look like contracting wise on the expansion, yes, we ought to be just really disciplined around how we contract for that expansion to ensure that.
If drilling plans change in the future with our customers that we ensured that we're going to get the desired rate of return on that capital spend.
<unk> can be very quickly filled up and then very quickly actually become very empty. If you don't have the right contracts in place.
And maybe just add to that at Pipestone.
Working at a small debottleneck project there.
It's backed by a contract.
Thank you.
Your next question comes from Robert Kwan with RBC capital. Please go ahead.
Hey, good morning, if I can start by coming back to caps and I'm. Just wondering are you over 800 million.
A modest amount at this point are you signaling that you've maybe even three of the contingency.
And you're just seeing the pressures out there.
Yes, Robert I would say that.
Where we are feeling that pressure, but it's we still got a long way to go on the project as Dean noted, where we're 40% or a little over 40% through so we still have a lot of work to do.
We're in the midst of our peak construction season right. Now this winter is key for US. So we'll know a lot more next quarter, but again at this point, where we don't see anything.
Again from promoting 100.
Alright, and on that comment that two thirds has been secured as that two thirds of what's left to spend or is that two thirds of the total call. It just the 800 that you've already spent $3 28 of it and if you can just comment in terms of.
The one third that's exposed like what are the major buckets.
Within that one third.
As construction.
But the two thirds, Rob it was intended to represent the overall cost.
Correct.
In terms of the materials I think that's a piece that is largely behind us what's really left to go now is.
As labor in the construction effort a good portion of that's locked in but theres still a number of variables, whether COVID-19 factors like that that could influence productivity.
Got it okay.
So the question on the way Youre approaching returns.
It seems like there's a little bit more focus you on ROIC.
So ultimately the question relates to how youre thinking about.
Project deployment of capital going forward with respect to your comfort with deploying capital.
With returns that maybe are a little bit more on the comp first via partially contracting similar.
Similar to what you did with caps.
What's your comfort level without or we should we expect more of that take or pay fully contracted approach going forward.
Yes.
Eileen's on us all the time so.
She'd cracks the whip, yes, definitely Robert I think the amount of risk that we're prepared to take on a given project.
This would be sort of less less going forward. So we're going to look for a much higher <unk>.
On track to return in order for us to deploy capital in the future.
Okay, and just how do you think about using ROIC see though because when you look at the definition.
It benefits from shrinking the denominator in this quarters.
<unk> has a couple of different things in that selling an underperforming asset and haul or the impairment at rimbey, all things being equal it improves ROIC, yet, it's not really improving profitability.
Yes.
Yes, I'll, let <unk> comment about this as well, but I guess, what I can say is that we had a difference.
Investment hurdles internally.
But I think for simplicity and something that people can calculate based on public information.
We view something simple calculation, but we have we put a lot more rigor in terms of again the financial hurdles that we have.
We expect to achieve internally.
Okay, great. Thanks.
Your next question comes from Matt Taylor with Tudor Pickering Holt. Please go ahead.
Great. Thanks for taking my questions here.
Wanted to go back to Wapiti theme and can you start filling that phase two today.
Or do you have the liquid handling bottlenecks I just want to be clear on that point.
So that's it.
Yeah. So Matt Thanks for the question, Yes, we certainly have the ability to still phase two.
Today, we did some work back in December with one of our customers that assisted in some of the water handling bottlenecks that we had at the facility. So.
Obviously.
Our customer and our us invested some capital to enable.
Their growth aspirations and we will.
Obviously seen some of that materialize.
Early in this year, but we fully expect that we'll see further growth now there is limitations with respect to how much we're going to be able to.
Grow without having to handle some some additional bottlenecks at that facility, but yeah. Our expectation is youll start to see some inlet volumes.
That would be in excess of the first phase, which is 150 million a day at Wapiti, Yes, Matt if I could just add to jamie's comments.
Certainly we can use a portion of the second train capacity, but we would have to invest more capital to use the full capacity of the second train.
I think the things that we've been Jamie's team has been working on is as you mentioned.
We're trying to also use.
Third party facilities in the area were trying to minimize the amount of capital that we have to deploy to fill that white space.
So as Jamie said, we actually tied into a third party water disposal facility.
At a bus again, making that investment was to use someone else's facilities and bring the guesswork facility. So that's one of those strategies.
Another thing Thats also maybe you can help us in our favor a bit going forward as.
One of our customers, where they are drilling now it's going to be more of a gas youre area.
And with lower liquids cuts, including water. So again that just helps us bring more of a pure stream of natural gas to the plant.
So not creating further bottlenecks in areas that are already tight.
Those are some of the things that I think that we have kind of go in our favor that might help us that's more volunteered to that facility.
That's great. Thanks for that and then just in terms of using a more temporary solution and a third party versus.
Getting to that full capacity on phase two having to spend capex is that something that's contemplated in your capex guidance today or would you need to.
SaaS, how much that might cost in your customers' needs and then update the market at some other point.
Yes.
Look we are saying I mean, now we have more capacity that we can add to that facility without adding capital. So that is going to be step one.
As we get to the point, where we think we need to Debottleneck, we think that some point in the future like maybe second half of next year or maybe 24. So.
We'll address it at that.
At that time, our first priority right now.
Utilize the capacity that we have available.
Great. Thanks for that Dean and then I just wanted to move over to liquids really strong print there.
Wanted to get some sense I know you've messaged previously.
Run rate is about $100 million a quarter just in terms of thinking through that business.
Versus what you printed there in Q4 can you give us some sense of how much of that performance was tied to higher storage revenues from a good pricing environment and higher interruptible condensate volumes above your take or pay levels and trying to get a sense of how much of that you can continue to see.
In 2022 above that run rate $100 million level.
Maybe I'll start and then Jamie can certainly add in there is still a little bit of seasonality. So typically in that Q4 Q1 period, there tends to be a bit of a path mainly because of the propane like Joseph Mercy, It's certainly more active with all of the propane that's moving out so that's what.
We tend to see.
No in that Q4 to Q1 period.
Yes, so just the underlying fundamentals matters.
You touched on them, obviously, we're starting.
To experience some record volumes through our condensate system.
Frac capacity is tight in the province, regardless of the planes outage.
We fully expect as we have in the last couple of years.
Our.
Fort Saskatchewan assets fully implemented storage continues to be.
Valued by our customers and high demand so.
Really it's all of the above.
Our customers are commodity prices are very strong and our customers are seeing the benefit of that and as a result, so are we.
Great. Thanks for that Jamie and then one last one if I may on U S butane blending.
Mentioned in the report there that margins are currently economic in that you might see some under utilization at wild horse, which might push out the returns on that.
Project. There my understanding is most of that is his contributions that would show up in marketing so.
Is that impacting the way you're thinking about a run rate guidance, obviously more to come on that whether or not you released when my guidance. So I'm just trying to think in terms of.
Some of these facilities on the USB obtain blending side that might not be normal and how that might be impacting your thinking on marketing.
Yes, so as you pointed out what will be in a better position the investor day in six weeks to give guide.
Guidance will be through our contracting season in Western Canada, which really drives the primary contributions to the organization, but as it pertains to the U S. Yeah, certainly the fact that butane has softened substantially.
In the U S is going to be a favorable contributor too.
The commercial value that a terminal like wild horse contributes.
Having said that.
It's still a challenge.
That facility.
He is going to be challenged to really provide in my mind, a strong contribution consistent with what we would have assumed that sanctions based on the huge backwardation of crude right now its like its.
It's a challenge to.
To make money.
No.
On the crude blending side than you would see right now Cushing storage levels at Cushing or are at a historic low just because of that fact so.
We're still confident in the asset going forward, but certainly.
There is a challenge for conventional blending operations out of Cushing given the current conditions. Those conditions are very favorable for other parts of our business, but for this specific part of our business.
I would say better days ahead with respect to wild horse.
Great. Thanks, James Thanks for taking my question.
Your next question comes from Patrick Kenny with National Bank Financial. Please go ahead.
Thank you good morning.
On this asset sale program could you provide any color on which other assets might be.
To be considered to be non core.
Curious if wild horse would be in that bucket just given the cash flow challenges you mentioned relative.
Relative to the potential price tag there and then I guess the credit accretion on that one.
And also if you could maybe comment on your Edmonton assets.
Thinking ECT baseline.
I'm just wondering how you're thinking about your crude oil terminals in general being core to the business or not at this point.
Hey, good morning, Pat.
<unk>.
Hi.
We're not in a position right now to sort of share with a lot of detail I guess, what what we plan the disposal.
I think.
Generally what I can say is that we're trying to get more focused in our operations though.
And really focused on the parts of our business that are just very highly integrated and.
And again were areas that we can continue to grow it and also transition so that would be just sort of a general overview. We're trying to match that also with.
Again, just the ideal timing for the crystallization of value of assets that again.
<unk> that value for our shareholders as well.
So I'm just trying to marry some of those factors together, but overall, we do have a sort of ongoing.
Physician program.
I mean, just thanks for that.
Sorry, if I mean, I think you can think about it the criteria that I think we use is like we think about how how's the asset contributing current and in the future.
How does it impact our leverage metric how does it fit within our overall admission.
<unk> targets and goals and then how does it fit with our goal of increasing stability of cash flow and that take or pay. So those are some of the things. We will think about at least thinking about divestments.
Yes, Thanks, Charlene and this may come out at Investor day, but would you be looking to establish perhaps a target range.
With respect to total sale proceeds that you would be looking to to bring in whole pursue the next 12 to 18 months.
Probably not something at this point that we can talk about but maybe more at Investor day.
Great.
Over to <unk>.
Carbon sequestration can you just confirm if you guys did participate in the industrial Heartland.
RFP process and if not maybe what other.
Sequestration opportunities across your portfolio might be.
Hey on the front burner through 2022.
I guess.
Pat I guess, we won't comment on I guess, maybe confidential.
Kind of situations like that what we participate or not but generally I can say that we are interested in us.
Yes.
And we do have a strong asset position already in the industrial Heartland that we think we can leverage also also for <unk> as well.
We do have interest generally in that area.
And we think that we have other areas of interest.
And our operations in the South GNP portfolio and also the north as well.
Okay, Great last one for me guys just on the contracting front for caps. This is probably another confidential one but just directionally can you provide a bit of a bit of an update as to.
How much of the initial capacity is spoken for I believe you were at 70% this time last year.
And maybe just a.
Any comment on whether or not there's been any change to scope or the reach of the project given some of the activity levels that you've been witnessing over the past six months or so.
Yes, we haven't updated our initial guidance.
So I guess I'll, let that stand but.
Generally as we've been saying is that.
The discussions that we're having with our customers have been more and more engaging for sure.
I mean, just look at their balance sheets.
They're starting to think a lot longer term now versus obviously a year ago.
We obviously follow the blueberry.
First nations and also.
The government BC and what's happening there.
But when we talk to our customers, we get a sense that they are feeling a lot more confident in terms of.
Some some resolution happening here in the visible future so.
With that I would just say in the both sides of the.
The border in terms of that Montney fairway that just more more optimism.
And again, that's just leading to more more engaging discussions with our customers in cats.
Alright, that's great I'll leave it there thank you.
Thank you.
Your next question comes from Andrew <unk> with Credit Suisse. Please go ahead.
Thanks, Good morning, if we could maybe focus just on the interplay of your business activities and just some of the increased exports of butane and propane off the west coast.
Direct involvement.
At the time in that in that business and you don't own the assets, but that ship.
Uh huh.
How do you think about the tension there.
Before an opportunity and then maybe related.
Did you have any benefit of a burden from just the flooding activity that happened in British Columbia during Q4.
Hey, good morning, Andrew.
First of all we think it's great that there's higher valued more access to higher value markets for all of our products.
Western Canada.
It's something that we blocked or forever.
And it's never been about the amount of resource that we have in our base.
It's again, it's market access so.
When we think about Ngls in particular.
It's great that we have access to the Asia off the West Coast to Canada.
We see volume continuing to increase in our basin.
In our asset base, our strategy has always been to give our customers maximum flexibility.
And most of them like to be able to access a basket or a portfolio of markets. Just so they're not captive to one place.
Also logistically they don't want to be maybe just.
Totally exposed to the logistics of getting.
Their products by rail to the West coast either so.
We can offer.
Access to the west coast to the.
The U S markets mid continent has been very strong, but also local markets, including obviously use the PVH facility that's about to start up.
Local industrial propane market in <unk>.
See a growing demand for for solvents, propane and butane solvents in Western Canada.
We think it's an opportunity that we can serve in the future as well. So again, our strategy has been to offer our customers maximum flexibility to access all of those markets and we think it's good for.
For the basin.
Okay, that's very helpful color and context on that.
Just on the flooding did do you have any detriment or benefit in the quarter.
Andrew It's Jamie no no we did not.
It did not impact us in fact, probably.
There was a slight benefit based on where we're our flexibility as Dean said with respect to the markets that we are able to add.
Okay great.
A follow up on you.
Mentioned, a little bit of a PD agents coming up and running later on.
Have you seen any behavioral difference just from willingness to contract or just our way of doing business with the new owner of <unk>.
Of those assets and Cochrane and everything that goes with it versus the past and what you dealt with.
It's Jamie again, I wouldn't say we've noticed any.
No no noticeable difference certainly around the PVH facility, we we've already as gene said, we've got an interconnection there and we're helping our customers facilitate being able to access that market.
On the other parts of the business.
Certainly there is opportunity in our eyes to two.
Do business with inter pipeline, regardless of whether it was the previous management team are or the current management team and we continue to have dialogue with inter pipeline on what might hold value for both our organizations.
Okay. Thank you very much.
Oh, yes, sorry, and good relationship.
Yes, we have a good relationship with Brookfield.
Both of our entities north rebrand.
Pipeline.
See them as a.
As the valued.
Partner.
Okay. Thank you.
Your next question comes from Linda either galleys with TD Securities. Please go ahead.
Yes.
Thank you.
Wondering if you could maybe give some high level thoughts around the guardrails of your financing plan. The next couple of years, not just fund caps, but also.
Refinancing some maturing debt securities.
And a potentially very likely rising interest rate environment, how do you balance maybe like pre financing pre funding locking in long term capital.
Financing versus.
Potentially retaining some flexibility depending on how your asset sales and I guess then.
The two pronged question to that is and how are your discussions with the rating agencies kind of influencing how you think of those guard rails on what your options are.
Yeah. Thanks, Linda Yes, we think about our guardrails that two and a half to three times leverage is kind of what we use and that keeps us very well in line with the rating agencies.
As you know we have good relationships with both <unk> as well as S&P and it had recent reviews with both of them.
As I think about 2022, certainly we do see that debt level going up towards the end of the year, especially with Aes coming having a six week outage and then the maintenance capital, but we do see that coming back down in line. So when you think about capital allocation and our priorities we would look to.
Reduce our debt through 2023 to bring that back in queue.
Those guardrails about two and a half to three times.
And then and then it's looking at our other option between weighing it as we look into 'twenty four 'twenty five.
Capital versus returning capital to shareholders. So those are kind of how we're looking at it in terms of interest rates yeah, absolutely. The good thing is we don't have anything material really coming due until 2024. So that's very very positive for us.
And I think about we were about a little over $250 million drawn on our line.
I have a credit at the end of the year. So certainly I think we always look to.
Term out debt and so potentially it makes more sense to do that earlier in the year versus later when there are several interest rate hikes expected.
Thank you.
Recognizing that.
Capital markets can change and how you return capital to shareholders will change over time.
Any thoughts evolving around the merits of discrete dividend increases potentially tied to new assets coming into service versus maybe a smooth profile over time.
You know again I step back and I think at the end of the day. Our goal is to focus on increasing that distributable cash flow on a per share basis, and we will weigh all of those options again throw capital dividend share buyback.
So.
I'll leave it at that.
Okay. Thank you.
I'll jump back in the queue.
Your next question comes from Ben Pham with BMO. Please go ahead.
Okay. Thanks, Good morning, maybe I can start to go back to the noncore asset <unk>.
Conversation asset recycling.
I can ask it in a way or are there.
Any assets in your portfolio that are highly core Q sacrosanct and that you would never sell at any price. You mentioned integration is important for you, but maybe I'll take it from the perspective of core assets.
Well I guess, we'll say never say never because we're.
We're always trying to add value for our shareholders, but really the I'd say the nucleus of our asset basis.
Fort Saskatchewan.
Wow.
That's the product of.
Probably 30 or 40 years of all the connectivity that's been built over that time period.
To get to where.
That property is today and obviously, we have those same advantages now because we have great connectivity to the to the Josephberg undeveloped land that we acquired in 2017 so.
That would be sort of quarter, our business, but as Aileen said I mean, we're also looking at areas where.
First of all that we have very strong competitive advantages, but where we can bring more of that.
Contracted cash flow into our into our business.
And also feeds our whole integrated value chain, because that's that's really the benefit of <unk> is that every time, we touch a molecule and it moves through our integrated value chain, we generate a fee or we earn a margin at the end and so we want to we want to continue to build on that sort of the concept.
Out of our business so caps will be tremendously important once that's in place.
We certainly think that our montney assets are actually very.
Yes, very valuable as well, but again, we're also looking to try to continue to increase our long term contracting on the on the G&P part of that business.
And maybe I can follow up I mean would you would you ever consider hopeful name as a core asset like would you consider selling down say, 10% small slice charging a an operating theater. He mentioned around boosting returns would you be open to something like that.
Bill I'd again without without going into specifics, we're here to create value for our shareholders. So.
Can we be creative and looking at different alternatives, yes.
Look at everything, but it's got to be again, a net net value add for our shareholders.
Not just for today, but on Germany.
And maybe maybe one more for me on going back to the capital project has has your view on how the volumes and returns are ramping up when you first announced that changed at all just to see how how the trends have been in and do you do you think or do you have that there could be.
Maybe.
Positioning on scope.
In response to maybe some of the petrochemical build out that you could be seeing.
We like I said before I mean, I think we feel pretty good about.
<unk> and the interest in caps with based on the discussions that we're having and again the outlook that we have for the for the basin and the need for competition.
A competitive alternative for NGL pipeline transportation.
Anthony.
We do believe that caps.
Could be could create other opportunities like.
Potentially provide.
Providing ethane ethane feedstock as an example in the future, but again the only way we would pursue that type of opportunities. If they were highly contracted two to secure our rate of return and events.
Yeah, and maybe just to clarify that point.
I mean did the returns youre targeting as tenants, 15% you've maintained that even with the last Capex increase but you also I think when you first announced that there was a.
A phased return approach over three years or so is that is that still.
What youre expecting or maybe you pulled forward a better return kind of front end.
Yes, it's still face still faced in again.
Again, the target range. The simple range is 10% to 15% return on capital.
Again, the master lease.
<unk> you don't get your all your volumes on day, one that there is certainly a ramp up to that profile.
And that's just on the pipe.
All the downstream benefit well on top of that.
Okay alright, thank you.
Your next question comes from Robert Cavalier with CIBC capital markets. Please go ahead.
Yes, good morning, a couple of follow up questions loft Tillman.
And the C O messaging, you mentioned implemented rigorous capital.
Criteria can you please describe that.
What's really changed there.
Yeah, you know what if we're perfectly honest.
Probably.
We probably invested in some areas that we wouldn't would investor day.
<unk>.
Today, we certainly see.
A lot of <unk>.
There's a lot of background noise on the line but.
Hello.
Your line.
Yes.
Alright.
Robert.
First of all we want to be more focused.
Terms of the type of businesses that we invest in our assets that we invested and as I said before we're looking for a much higher contracted.
Profile before we thanks for that project. So again, we're we're not willing to take as much risk as we did in the past.
We really want to focus on again assets that are really integrated and probably more so focused on our Canadian business now again.
Again with all the egress that is getting built has been built and getting built.
Certainly see more growth.
And our base and we're very well positioned here and have a lot of competitive advantages.
So we want to.
To build on that and obviously <unk> is a great example, but we see a lot of.
Good downstream opportunities.
Fort Saskatchewan and some of that is like fractionation storage.
But jamie referred to earlier, but.
Beyond that we think we can continue to do fine.
Find great opportunities in that area with good counterparties.
Okay. That's helpful and then.
There's also a comment about.
And Chris will play a octane blending components being important to us who can provide more color there.
Do you think this is an ongoing impact.
So what do you expect from this development.
Sure.
I missed the first part of it we just said.
Sure I think the MD&A.
A comment about increased supply of octane blending components being imported into the U S. So my interpretation was that.
Some product competition for for Aaas.
Can you describe what you're seeing there and whether there is expected.
I expect it to be an ongoing impact.
Yes.
So Robert it's Jamie.
So, yes, I wouldn't characterize it as that.
Competing products for our products because our product is a superior products from RVP perspective, and an operating perspective, but it is certainly weighted temporarily on the premium that <unk> have in the North American market.
Frankly, it's just as a result of.
The world not.
Gasoline demand not responding and recovering as quickly on other parts of the world as it did in North America and as a result the.
The refineries that were creating knock things as part of their process. So North America is a higher value market. So that product was diverted to North America.
For that period of time, what we've seen in the last couple of months. However is that those auctions are now Stan frankly, where they belong which is where they are produced and as a result of that we've seen a rebalancing in the north American markets and premiums have come back to historical levels, which is which is a positive outcome obviously for ISO.
<unk> business because once again that product is as you know.
We don't have any issues selling the product it's just ultimately.
The price that we're going to garner as a result of what those ice octane premiums are.
Yes. Thank you very much that's good color.
Thank you there are no further questions at this time Mr. Locke you May proceed.
Thank you all once again for joining US today, please feel free to reach out to our Investor relations team for any additional questions. Thank you.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.