Q2 2022 Keyera Corp Earnings Call
Good morning, My name is grant and I'll be the conference operator today at this time I would like to welcome everyone to tiara corporations second quarter 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.
I would like to ask a question. During this time simply press Star then the number one on your telephone keypad if.
If you would like to withdraw your question. Please press the pound.
Thank you I'd like to turn the call over to Calvin lock manager of Investor Relations you may begin.
Thank you and good morning join.
Joining me today will be Dean Setoguchi, President and CEO .
Our car 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 Dean and Eileen 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 give you today relate to future events. These forward looking statements are given as of today's date and reflect events or outcomes that management currently.
<unk>. In addition, we will refer to some non-GAAP financial measures for additional information on non-GAAP measures and forward looking statements referred to key areas of public filings available on SEDAR and on your website with that I'll turn the call over to Dean.
Thanks, Kelvin and good morning, everyone.
We continue to operate in an environment of sustained high LNG prices driven by tightening supply and continued strong demand.
This has become even more pronounced with the global drive towards energy security.
Keira is well positioned to benefit from the tailwind.
Our fully integrated assets and logistics expertise allow us to efficiently connect customers NGL production to the highest value end markets.
This unique advantage allows us to maximize value for our customers and deliver strong stable returns for shareholders.
This quarter saw strong performance from all three of our operating segments.
As a result of record isooctane margins today, we increased our marketing segment guidance.
We now expect to deliver realized margin of between 380 and $410 million for the year.
This is up from our previous guidance of $300 million to $340 million and puts US ahead of the record margin of 373 million achieved in 2019.
The gathering processing segment set a new quarterly record for realized margin as our customers continue to steadily grow production.
Contributing to these results were record throughput volumes at our Pipestone and Wapiti gas plant.
Strong performance across our south region assets.
As we continue to see increased demand from producers in the northern region, we're evaluating opportunities to expand the capacity of our pipestone gas plant.
Now Wapiti, we recently began utilizing the second processing train to accommodate increasing demand for our services.
Moving to our liquids infrastructure segment. This business delivered another steady quarter backed by continued strong performance from our fractionation storage and condensate transportation services.
We continue to engage with customers to gather support for an expansion for our fractionation business.
We're competitively advantaged to efficiently add fractionation capacity.
Our existing footprint, including extensive storage and connectivity to high value NGL markets.
Our soon to be completed Kaps project provides the next layer of contracted fee for service cash flow growth.
The project is now over 70% complete and is expected to be operational at the end of the first quarter of 2023.
Cost for the projects are now estimated to be approximately $900 million net to <unk>.
The increase in costs is mainly driven by weather related impacts.
<unk> is a game changer for Europe as it is the missing link in our value chain.
It will connect Ngls from our Montney G&P business and other third party facilities to our core liquids infrastructure business in Edmonton and Fort Saskatchewan.
It also provides meaningful future growth opportunities like our zone for expansion, which would extend the pipeline to the BC border.
Recently, we were pleased to see the competition Bureau take decisive action to protect competition to our industry and the interest of customers as it relates to our kaps pipeline project.
This decision reinforces the competitive value of caps.
And a strong desire from industry for an alternative NGL transportation solution.
I'll turn it over to Eileen to provide more information on our second quarter and updated 2022 guidance.
Thank you Dean and the second quarter, adjusted EBITDA was $316 million compared with 224 million second quarter of 2021 the.
The year over year increase was largely driven by strong contributions from the marketing segment.
Octane margins achieved a new quarterly record.
We continue to preserve balance sheet strength, ending the quarter with a net debt to adjusted EBITDA ratio of two three times, which is below our target range of two and a half to three times.
This calculation is consistent with our debt covenants, which exclude our outstanding hybrid debt.
Moving on to our guidance for the remainder of the year as Dave mentioned for 2022 realized margin for the marketing segment is now expected to range between 380 and $410 million.
The previous range of $300 million to $340 million.
<unk> takes into account a six week planned turnaround at Aes beginning in mid September and the return of motor gasoline.
Premium to more normalized level compared to the record pricing achieved in the second quarter.
The strong cash flow being generated in the marketing segment enabled us to fund infrastructure projects like our pipeline projects and enhances our ability to consistently deliver superior return on invested capital.
As a result of higher marketing segment margin the cash tax expense for 2022 is now expected to range between 55 and $65 million up from the previous forecast of $30 million to $40 million.
Maintenance capital expenditures remain unchanged with a range of 100 $220 million.
Capital expenditures for 2022 are now expected to be between $680 million $720 million previously $620 million to 660 million excluding capitalized interest.
The increase broke capital guidance is mainly due to the higher estimated cost to complete the kaps project. The majority of caps related costs are forecasted to be incurred in 2022.
Given strong performance from our business, we now expect to exit the year with net debt to EBITDA within our target range of two and a half to three times.
I'll now turn it back to Steve for closing remarks.
Thanks Aileen.
Grounded in financial discipline, and with several key strategic growth opportunities underway.
<unk> is well positioned to continue to generate strong shareholder value for decades to come.
On behalf of tariff board of directors and the management team I would like to thank our employees customers shareholders and other stakeholders for their continued support.
With that I'll turn it back to the operator for Q&A.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone.
We'll hear three tone prompt acknowledging your request your question really pulled in the order that they are received.
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Your first question comes from Rob Hope from Scotiabank. Please go ahead.
Good morning, everyone. First question is on the G&P business and the record results that you had there. Despite the fact that you did add some outages can you help us better understand where the strength was in Q2, how much of a drag.
Outages were and kind of what I, what I would characterize as a run rate.
Number there would be and I guess secondly, there like are you seeing the ability to move up fees, either kind of in the quarter or longer term.
Oh, okay.
Yes.
I really want to.
<unk>.
Yeah. Thanks, Rob.
Regards to the outages. It was approximately 15 days, we estimate at around $5 million for Wapiti from a EBITDA impact in the second quarter and then we had the turnaround at Simon that as well, which did go on a little bit longer than expected I think it was 14 days plan, but it went on for about 23 days.
You bet.
So Rob to your first question with respect to where we're seeing the uplift in volumes frankly its across our entire.
Asset base.
Wapiti and Simon you mentioned the second train at Wapiti.
Having clear line of sight that we are seeing some some positive growth from the producers behind that facility.
At Pipestone were full and so obviously, we referenced that we're looking at a potential expansion there and having some constructive conversations with producers that would support that but really more importantly, well not just as important I think in my mind is into so starting to starting to see that.
Fact that with our integrated facilities getting close to.
Getting to capacity on those facilities as well looking at some.
And your capital costs to Debottleneck those facilities that we believe will be required in the near term and to your point on fees yes.
Definitely as we are filling up and the demand for our services and contracts roll off.
Which some do.
Early in 'twenty three there is an opportunity to garner higher fees. When we negotiated those deals there was ample capacity in our facilities in competitors' facilities.
That drove us to probably offer fees.
At this point, we would see some opportunity to have those fees go up going forward.
Alright, I appreciate that and a shorter question Dean in your message to shareholders you'd noted that with the conclusion of the cap sales process.
Would like to continue your strong track record of collaborating with partners does this infer or imply that.
Not interested in the second half and do you prefer just to maintain your ownership.
The yield the benefits downstream of the volumes.
I guess, you get paid to ask questions like that.
We're not going to comment on anything related to M&A.
But generally we just want to remind everyone that we are the operator of that project from a construction and operation and a commercial perspective.
We do have a very strong track record of working with partners. So should we have a different partner on our Kaps project we would.
Look to work with them as well.
Alright, Thank you I appreciate the color.
Thanks, a lot Rob.
Your next question comes from Robert Kwan from RBC Capital markets. Please go ahead.
Alright, great. Thank you if I can start with some questions here on caps.
Just in terms of the new costs can you kind of just.
You broke down some of the reasons, but there was contingency in the old numbers is there a contingency in the new numbers.
And just at a high level, how would you portray this new cost estimate versus the old one is it kind of just realistically. What do you think you are or do you do you view. This now as a conservative estimate to complete.
Yes.
Gerry I just wanted to answer yes, Robert Hello.
Yes.
Theres contingency in the estimate that would be difficult any projects like that I'd say I would characterize it is.
<unk>.
What we've learned throughout the project and what we think we have left to go so.
And when we last spoke to you.
We've learned a lot of sense, whether it's been a challenge for us and continues to be our largest risk.
And we've been doing everything we can to manage that.
Got it.
And then I don't know if this is for Eileen and then maybe related to caps and then the last question. Just the statement you made that you now expect net debt to EBITDA to exit the year in the two and half to three times range.
Is that just based on the growth capital plan that you've put forward and no M&A or is that a more absolute statement that.
You fully intend to exit in that range.
Based on everything that.
Youre planning on executing to the year end of the year.
I would say that is an absolute statement I'm quite confident that we will exit the year with our.
Leverage within our target range, just based on the very strong marketing results again, which help us to fund projects like cap and given everything that we sanction today.
Got it.
I would just finish here in marketing.
How much of the remaining margin in the second half has been hedged out and then just on your statement that Mo gas pricing and isooctane prices are back to historical levels by historical levels is that kind of.
The levels that you would see is that consistent with the prior 180 to 220 range or is that something different.
Yes.
It hasn't yet so we really don't disclose the percentage that we're hedged I would say we are we are well hedged in the second half of the year. The one thing I'll remind you of is we do have the AAF turnarounds. So that start mid September and so that'll impact both the third and fourth quarter as it relates to the.
The motor gasoline I would say, we had updated our base guidance right from the $2 $50 million to $280 million.
I'd say the motor gasoline pricing is still relatively strong, but certainly not a peak highs that we saw in may and June .
Okay.
Okay.
Sorry.
Higher end of the historical range right now Robert.
Okay. So it's consistent with the revised long term not the original long term and then as you mentioned, it's the high end of the revised long term is kind of where we're sitting right now.
Correct.
Okay, great. Thank you.
Your next question comes from Robert <unk> from CIBC capital markets. Please go ahead.
Yeah. Thanks, I'm, just going to go back to caps again, and I guess reiterate the question what is your level of confidence in the revised cost figures given there's still about 260 million not.
Two key are left to spend and is there anything that we should take away from the fact that the estimate is moved from.
Our range to now a point estimate.
That imply a higher level of uncertainty.
Robert It's Jaret again, what I would suggest with.
One of the things we're trying to characterize here really is that the range that we previously put out there given the experience we've had here.
Through the winter to spring into summer is that we don't think that the bottom end of that range is achievable anymore. So it's really guiding guiding folks to a number that we put out now.
Okay.
Okay.
Go ahead.
All of us.
Literally buy every week and every month that goes by our confidence increases because theres, just less and less of the project execute on right. So.
Anybody alert in Alberta know that Theres, just wild wild weather swings and we had a really wet.
Sort of spring and early summer here so thankfully.
Conditions are a lot drier now so well.
Hopefully those conditions will continue.
Yeah and then.
Just how far along are you.
Your discussions for.
Our pipestone expansion.
Do you view that as direct competition to the other expansion that's being discussed in the industry or not.
Because your customer composition.
Distinct and different project.
Our facility is very very well located in.
We have lots of interesting capacity of that facility. So we are.
Again advancing opportunities to add capacity of that facility, which we think we can add capacity.
Very competitive cost so we feel very confident on that opportunity.
Okay last one for me then is just with the high commodity prices and the backwardation, how is that impacting your ability to hedge or.
Is it causing you to tweak the hedging strategy at all.
We continue to hedge our inventory I think that's something that again month to month is typically how we have been managing it largely because of the backwardation. The other pieces are we'll try and lock in the margin, especially when we see very strong.
Cracks are the WTO pricing they'll just things that are risk management policy allows us to go.
24 months and the liquidity certainly is there so we have been layering in hedges that pretty.
Pretty strong value.
Yes, I would say just to add onto what Eileen said is that we've hedged out at this point being mid year, we've hedged on the 2023 at higher levels than we would have historically and we've taken advantage of some very strong pricing. The other thing that we've also modified some of our hedging strategy is to use some callers where we're again.
We're protecting your floors, while giving us some upside room as well.
So, yes, we've adjusted a bit, but we do still protect our margins.
Okay. Thank you.
Your next question comes from Andrew Kuske from Credit Suisse. Please go ahead.
Thank you good morning, I guess.
Yes.
Question for Dan to start off with and it was just how do you think about.
The frac capacity positioning and prospective developments on a go forward basis, and really by yourself and just competitors in the next few years is sort of the chess match gets underway on who builds first.
How do you think all of that starts to play out.
Yes, I mean, well first of all Frac capacity is very very tight.
We are using every barrel of capacity that we have in the entire system.
Which is obviously great for our business.
So, yes, we definitely see demand for future growth.
Capacity to be built.
We certainly have as I said in my earlier remarks that we have a very competitive footprint, because we have a brownfield site.
We have all the storage already there all the connectivity is.
On that site.
We have the people to run it so.
We are as advantaged as anybody in industry to add more capacity, obviously, we have to work with our customers continue to work with our customers to get the contracting to back that kind of investment.
And we certainly have a high level of interest already so it's something that we continue to work towards.
And again I think it's a great opportunity for us.
And I appreciate that and then maybe just on a bigger broader basis. When you think about the recent agreement between LNG, Canada and and coastal gas link.
And then just sort of the outlook on a longer term basis for LNG movements off the coast in I mean, obviously, we're in sort of talking about this for a decade plus at this stage, but when you think about the near term and then maybe the medium and longer term.
What's sort of the outlook for our key do you wind up with a view of.
Maybe prices got sloppy for a little bit or are they tighten up and then there's a more robust supply, meaning a more robust opportunity set for processing and frac.
Color on the short term medium term and longer term would be appreciated.
While near term.
You heard from from Jamie we're seeing a lot of activity I'd say near to midterm. We are seeing a lot of activity in our basin.
Over the last year.
We kept on telling us that theres going to be no growth in our basin, but that's not what our customers are telling us.
When im reading all of our customers on our quarterly reports.
Everybody is projecting some some growth and they keep on increasing their targets. So you'll look at dry gas in western Canada. It increased.
Increased from about 16 Bcf last year to over 17 Bcf a day today.
With expansions on the NGL system that are going to be in play later this year, which is about a <unk>.
CF in a half a day.
Canada LNG.
License for four Bcf a day, so I think theres, a very strong potential for them to expand.
And sanctioned.
Second the third and fourth train at that site and when you look at what's happening in the world.
The demand for LNG, obviously is very strong and it felt a lot of its tied as well too.
Security of supply so I think there is unbelievable.
Opportunity for our responsibly produced.
Yes.
From Western Canada to.
The supply.
The world with some of that gas and whether it goes up the west coast or whether we displaced more gas that gets exported from the U S Gulf coast or East Coast. It's all part of our North American system that will export more LNG over time.
What does that translate to you I think in the short and long term I think it translates to.
So a lot of great opportunities for infrastructure and and again, we're already seeing it already we are seeing.
Record volumes and a lot of other parts of our business on our liquids business and also our G&P business and we think thats going to continue there might be a slight lull as.
Yes.
The producers try to gear up for Ken to LNG coming into service and bring on all that gas.
Head of that project being online, but I think that would be very short and.
Obviously very temporary in nature, but that'd be my sort of view. So again I think that we have a very robust outlook for natural gas.
Okay very much appreciate it thank you.
Thank you. Your next question comes from Ben Pham from BMO. Please go ahead.
Alright, thanks on the first part of that.
Simon that comments around it.
Yes.
Potential increase in utilization, maybe given that expansion.
Can you talk about.
Really considering maybe is it more of.
A large expansion similar to what you did.
A couple of years ago or is this more of a potentially a debottleneck.
No just to just to maybe.
Correct information I'm, not sure where you're getting that from Ben but we have ample capacity at Simon that we have over 200 million a day of Unutilized capacity, there and that will be a very well connected plant, including with our <unk> pipeline system.
No.
We think it's a great opportunity that.
White cap is purchased or purchasing you're closing the purchase of the <unk> production.
Production reserves and lands in that area, which are in very close proximity to Simon <unk>.
We want to work.
<unk> closely with grants bigger high him and his team to provide a.
Our integrated service offering for them to maximize the returns for them and also benefit us as well.
Okay, and then thanks for clarifying that I referenced to the assigned that produces instead is white cap.
Yes, yes, I mean, if you look at the if you look at the land map and you look at where the <unk> are they are in that in that vicinity.
White cap has.
Published that in the slide deck.
Okay got it as hey, what somebody else okay.
Going back to the caps.
Are you able to comment on.
Progress on contracting.
Afterwards, maybe over loss last quarter.
Yes, I mean, our practice is not to provide quarterly updates on our contracting but I can say that we feel very optimistic with the.
The engagement the level of engagement interest that we have in our pipeline and we get a lot of questions about some of the announcements that have.
That made relating to the competing pipeline.
And I would just say that.
In general customers typically want to diversify their service, we do not want to put all their eggs in one basket.
So they want to have some redundancy and I think that is also attractive that we're going to have a brand new pipeline for and I think that obviously has some value from integrity perspective.
No.
Anyway, we feel very confident in terms of.
Our ability to contract caps and we're making some good progress on that side.
Okay and related to that comment.
Comments on the competition Act and eliminate.
I'm not.
<unk> ownership.
Do you think thats kind of women theater.
Darren.
Western Canada in more broadly and I was taking a look at caps.
Well I mean.
First of all.
It really commence.
The competition Bureau has done but I think it really speaks loudly for.
How all of the customers a lot of the customers in our base and really spoke up for the need for this critical piece of infrastructure because it is it is.
The basin asset.
In terms of the billions of dollars of development that are going to occur in the decades to come.
This is this is a key piece of that equation and again I think the key.
Competition barrels spoke up in a big way, but it's because of the feedback that they received from industry.
Okay, and then maybe lastly, I mean, it looks like your <unk>.
Mocking upside in.
Damn delevering down at the lower end.
Our two by three times right below that is basically Washington, the caps increase I mean, how do you.
Like what are your thoughts about share buybacks into early.
Early 2023.
Yeah, I mean share buybacks is certainly a tool or an option that we consider.
More so than in the past I think at the end of the day. It will always compete with growth projects. The way we'd look at it is if we have a great infrastructure project with the return and the contract profile that we're looking for that's where we would likely allocate toothless.
Okay, great. Okay. Thank you.
Your next question comes from Linda <unk> from TD Securities. Please go ahead.
Thank you as a follow up to capital allocation can you provide us a sense of.
How you are now are recently thinking about.
Dividend increase and a dividend policy, given your confidence and line of sight to competing caps.
Thanks, Linda for the question, Yeah, I think I'll just keep it pretty general that's one of our core financial priority is to generate cash returns for our shareholders.
Really proud of that long history of growing the dividend over the long term.
As we think about it the things we try to balance of course, maintaining the balance sheet strength and reinvesting in our business and growth and then returning cash to shareholders. So what we're really focused on is growing that DCF on a per share basis and projects like cats as well as continuing to fill the white space in our gathering and processing facility.
They're going to help us do that and maintaining that conservative payout ratio. So that it's sustainable. So again I think just given the strength of our marketing cash flow and we're set up well from our balance sheet perspective going into next year that will be the balance between again those other priorities are reinvesting in the business and returning cash but at the end of the day.
The increase in the dividend remains a board decision.
Thank you.
And just maybe on a separate now.
Theres systemic inflation everywhere can you give us an update on what youre seeing in the business in your operations.
How what proportion of your EBITDA or revenues.
And your and your G&P and liquids infrastructure business has had some <unk>.
Existing contractual ability to pass through whatever cost to customers.
<unk>.
Maybe the nature of of where inflation is greatest including.
Any sort of views on labor availability and productivity contributing to any sort of inflationary pressures.
Yes, maybe just to speak to just general inflation first and operations on to turn that over to Jared.
I think we're seeing it like everyone else's.
Across all aspects of our business I would say in general operating costs, it's not really material to us yet.
Can you speak to labor labor availability and productivity again, another issue that that we're seeing the same as everyone else. So it is a challenge to find depo and keep people.
But we're able to manage through it and haven't seen any significant impact.
Outside of that certainly been a contributing factor.
And the cats cost increase.
Yeah, and just maybe to add to what Gerry said.
As you know we undertook.
From significant measures to reduce our cost profile through 2000 22021. So we feel very happy today that we did that and it's obviously offsetting some of the <unk>.
<unk> of inflation that we're seeing today in terms of business and contracting maybe ultra sterno, Jamie yes, So Linda.
We do have some fixed fee deals.
What we do.
<unk> identified.
Identify where we would be at risk with respect to some inflationary.
<unk> pressures, particularly on the power side and so therefore, we hedge.
Our exposure on that regard that we just view that as a risk management across our entire business, sometimes we focus a lot on risk management on marketing, but we also look at risk management with respect to other parts of our business when we do.
<unk>, we talked a little bit about.
As the market changes as we go forward. We certainly are focused on having our customer have exposure to inflationary pressures along with us So thats that.
We're not entirely exposed to those pressures so hopefully that helps give some flavor on our on our future.
As we look at the inflationary pressures.
Yes, Thank you and maybe a bigger picture another question around.
Value chain full service offerings.
Clearly caps.
And the scope of what you can offer along the value chain. What's your latest thinking about further extension either getting invested in LPG or potentially expanding aes or other.
Initiatives to do more along along the value chain than you are currently.
Yes, I mean strategically Linda.
We're always looking for opportunities to expand our value chain.
And also on the downstream side of it doesn't mean that we have to own all the downstream facilities, but we want to make sure that we have the most efficient means of connecting to that downstream market. So could there be more opportunities in refined products and as we look longer term low carbon refined products suitable carbon.
Fuels.
Absolutely.
Sure.
We have a lot of logistics expertise and marketing expertise.
And operating expertise in that.
Side of the business, so we want to leverage those skills and.
And the advantages.
We think theres opportunities there long term.
Thank you I'll jump back in the queue.
Thank you.
Your next question comes from Matt Taylor from Tudor Pickering Holt incorporated please go ahead.
Hey, Thanks for taking my questions here.
I'd go back to cabs, you have the project entering service at the end.
Q1 2023 there.
Give some some guidance on the EBIT wrapped in 'twenty three 'twenty four as it pertains to that slide you have in your deck on the 6% to 7% EBITDA growth through 'twenty five.
Thanks, Matt.
Yes, certainly there is a ramp so let's start out smaller in 2023.
2025, we would see more of that cash flow ramp.
Embedded in our 6% to 7% EBITDA growth profile, but not Jeff cap, but there was also filling more white space at wapiti, etc included in that growth.
Thanks Aileen.
Maybe just to dig in a little bit deeper there you had guided to invested capital returns of 10% to 15% or so.
Excuse me multiples of around 10 times. So in the first couple of years are you expecting below.
That range, and then you ramp into that 10% to 15% range over time.
Yes, that's correct it would be something that ramps up into that means you got it.
Okay, and then on that returns.
Now that you have an updated standalone capex estimate.
I began to see some thought on updating that 10% to 15% invested capital returns I guess, what I'm asking is what's what's the return profile look like for that base system with that new Standalone estimate and then where could it trend with other expansions like zone four.
I think maybe just generally speaking as we look to invest in new investments.
We're looking to target towards the higher end of that investment again, it's more on that infrastructure, we're looking for that the longer term contracts and take or pay.
Again, just for newer investments as we're looking down the road, whether its frac III horizontal or whatever it may be I think that's how we're thinking about it going forward, yes, Matt as it relates to caps.
We've been very clear that with the contracting that we've had we have in place today.
Earnings threshold.
But as I mentioned earlier, we feel very confident in terms of the outlook for the basin and the discussions that we're having with our customers.
Customers that we believe that we are going to get in that range.
Okay, great. Thanks for that.
Dean and then the last one for me.
I think it was mid last year Youre talking about South region, GMP capacity getting up to about 70% by mid this year.
Are you still on track to see that I mean, you've seen some pretty robust volumes in the south region or are you still tracking to the 70 or can we see that getting higher.
Okay.
Yes, Matt it's Jamie Yes, certainly we're on track and as you alluded to I think we're optimistic that we'll be able to by end of year be trending ahead of what we would've been vision to year ago.
Very robust area, you think about where gas prices not gas prices are today.
I know, it's been moving around a bit here, but call it $5 plus.
Over the past, while and as we look forward as well and the forward strip.
Those are very strong economics and.
The advantages for the producers in that area is that theres, various stablish infrastructure, and obviously, we own a lot of it. So it's not just gas processing and the ability to get.
Deeper cuts for your NGL liquids extraction, but we also have our keybank pipeline system.
<unk>, which is tied to our fractionation at rimbey, which is pipeline connected to our <unk> SaaS versus SaaS when complex. So.
Producers, Eric and drill wells and get them on stream in a very short period of time and generates a return on their investments in a matter of a couple of months.
And then just can be cleared that tailwind would be incremental right. So your guidance through 'twenty five if youre starting to see capacity utilization above 70%.
That's correct.
Okay, great. Thanks for taking my questions.
Thanks, Matt.
Your next question comes from Patrick Kenny from the National Bank. Please go ahead.
Thanks, Good morning.
To come back to your commentary around.
The refining market dynamics out there right now I guess, both in Europe , and North America.
Can we get an update just on how Galena Park is performing in this environment.
Maybe relative to your initial expectations.
And then also even though your top priority is executing caps just any thoughts around bolting on additional infrastructure.
Say over the near to medium term that might be more directly tied to this increasing global demand for north American exports.
So Pat I'll take the first question on the refining market. So.
Galena Park.
Obviously, we move our ICA does that that facility, but we also did the.
The butane inline butane blending into gasoline project, a couple of years ago and that project.
Came out of the gates, a little slow because of Covid and gasoline demand we've seen obviously.
As customers understand what our offering is in.
How sophisticated are blending system is in relation to other auctions. We've started to see an increased demand right now it's summer so the RVP limits on gasoline limit our ability to or anybody else's ability to blend butane into gasoline, but certainly our expectation as we come out of summer and.
<unk> limits increase on gasoline.
We're going to see an increase in demand and get.
Basically to our expectations with respect that when we sanction that project.
In terms of bolt on indefinitely.
Great.
Yeah, Thanks, Jamie feel free Dean.
Okay. Thanks Pat.
With respect to bolt on opportunities to cap, we still think that zone four is still a very good opportunity and.
But going forward would connect to the to.
To the BC border and click to independent gathering system, there NGL gathering system there.
Obviously developments in D C have been.
Moderated over the last year and a half.
We await the blueberry decision.
My understanding is that they're continuing to make progress on that front.
So I think some of the developments there have been.
Shelves, a little bit or maybe not as aggressive.
But we certainly believe that that's going to happen in the future and when that does happen, we're going to be well positioned for it.
We also I also talked about the down downstream part of our business in terms of the whole frac storage.
Rail logistics side of it we think that theres going to be continued supply through of NGL supply coming through Fort Saskatchewan.
And again, we're very well positioned to capture the incremental infrastructure demand associated with.
With those volumes.
Okay, great. Thanks for that guys.
And then just on your carbon hub opportunity with shell.
Update on.
Near term milestones that we should be keeping.
Keeping an eye on here through the back half of the year with respect to your role in the project.
I can say that our teams.
Actively worked together.
Very regularly I mean, they are collaborating on a weekly basis. So we don't have any specific updates at this point.
Number two is tied to.
All the all the all the companies that receive poor space in the industrial Heartland.
There is incredible process to work through all the details associated on how that's going to work so.
No.
<unk> is working with the government.
On that.
And also working with us so we're trying to sort through all the details as they come but.
I can tell you that we are both very actively engaged in terms of working together on opportunities in that area I would say that our.
Our scope of what we envision for our Heartland lands.
In and around Fort Saskatchewan near or adjacent to our <unk> terminal.
Is that we're also talking to other potential partners again to create.
The industry solution too in terms of our industrial park in that area for low carbon developments.
<unk>.
The opportunity with shell is phenomenal we continue to work with it but we're also working with others.
In terms of opportunities as well.
The thing I'd add too is it's not limited just to low carbon.
We're working on lots of things with the industry with respect to conventional hydrocarbons, we see that potentially can also create a bridge for then.
Facilities and infrastructure belt that then will transition into a low carbon offering as well.
Great. Thanks for that color I'll leave it there.
Okay.
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