Full Year 2023 Keyera Corp Earnings Call
Good morning, My name is Laura and that'll be your conference operator today at this time I would like to welcome everyone Stickier, China Chinese see year end conference call all.
All lines have been placed on mute to prevent any background noise.
Speaker Change: So just because remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press star followed by them in the queue. Thank you.
I'd now like to turn the call over to Calvin lock manager of Investor Relations you may begin.
Calvin: Thank you and good morning.
Calvin Lock: Joining me today will be Dean Setoguchi, President and CEO, Aileen, Mericarp Senior Vice President and CFO, Jamie Urquhart, Senior Vice President and Chief Commercial Officer, and Jared still need senior Vice President operations and engineering.
Calvin Lock: 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 today relate to future events. These forward looking statements are given as of today's date and reflect events or outcomes that management currently expects.
Calvin Lock: In addition, we will refer to some non-GAAP financial measures measures for additional information on non-GAAP measures forward looking statements. Please refer to <unk> public filings available on SEDAR and on our website.
Dean Setoguchi: With that I'll turn the call over to deep <unk>.
Dean: Thanks, Kelvin and good morning, everyone.
Speaker Change: <unk> delivered record results in 2023.
Deep: We continue to execute our strategy of increasing competitiveness.
Deep: Enhancing and extending our integrated value chain financial discipline and sustainability leadership.
Speaker Change: Results include best ever safety performance and exceptional financial results driven by record realized margin across all three of our business segments.
Deep: <unk> ended the year in a strong financial position with net debt to adjusted EBITDA at two two times.
Deep: Below our targeted range of two five to three times.
Deep: We had several strategic accomplishments in 2023 that helped drive the next phase of growth for Keira.
Deep: Early in the year, we closed the acquisition of an additional working interest at our core <unk> complex.
Deep: Adding meaningful fractionation capacity in a high demand market.
Deep: In the spring, we broadcast online strengthening our long term competitive position.
Deep: We now offer Montney and Duvernay producers a fully integrated solution, that's driving commercial success across our value chain.
Deep: Today, we announced that we've added long term integrated agreements with several producers.
Deep: This includes approximately 30000 barrels per day of incremental volume commitments on caps.
Deep: And 33000 barrels per day of incremental and extended fractionation commitments at TFS.
Deep: These have weighted average contract terms up 12, and 13 years respectively.
Deep: These integrated agreements also include storage at <unk> and other services like rail transportation pipeline connectivity and product marketing.
Deep: These contracts are highly credit where with highly credit worthy counterparties include a high degree of take or pay and require minimal additional capital.
Deep: <unk> delivered record fee for service growth in 2023 with best ever contributions for our gathering and processing and liquids infrastructure segments.
Deep: Continued growth from Wapiti, and pipestone cafes and caps support us reaching the upper end of our EBITDA growth target of 6% to 7% from 2022 out to 2025.
Deep: The new commitments, we announced today support continued growth beyond 2025.
Deep: Our marketing segment delivered a record $479 million of realized margin in 2023, driven by record sales volumes for the segment and continued strength of our isooctane business.
Deep: Our ability to leverage our physical assets and logistics expertise.
Deep: It provides us with a distinct competitive advantage and delivered strong cash flow.
Deep: This marketing margin is then reinvested into long life infrastructure projects in turn driving growth and high quality fee for service cash flows.
Deep: As we close out a successful 2023, we're excited for the year ahead.
Deep: 2024 is anticipated to be a year of strong free cash flow generation, resulting from continued margin growth and lower capital spending relative to the past several years.
Deep: Our capital allocation priorities remain the same.
Deep: They are first to maintain the strength of our balance sheet and then the balance between increasing returns to shareholders and investing in additional growth opportunities.
Deep: Fractionation expansion opportunities at TFS and the caps zone four expansion are great examples of capital efficient opportunities that support our growth outlook beyond 2025.
Deep: Our strong balance sheet provides maximum optionality to bring forward growth investments when they are ready.
Deep: Lastly.
Deep: You would've seen in our release this morning that we will be taking aes offline. This spring for approximately six weeks to proactively complete maintenance activities.
Deep: These maintenance activities are intended to facilitate aes continued reliable operations at full capacity until its next scheduled turnaround in 2026.
Deep: The work is expected to impact 2024 realized margins for the marketing segment by approximately $35 million to $45 million with no impact to maintenance capital.
Deep: Due to strong term near strong near term market fundamentals.
Deep: We still expect to be within our stated base marketing guidance of $310 million to $350 million for 2024.
Deep: Consistent with prior years, we will update our 2024 marketing guidance with Q1 results in May.
Deep: This will include the impact of this outage.
Speaker Change: I'll now turn it over time, leading to provide a further update on our quarterly and annual financial performance.
Deep: Thanks, Dean adjusted EBITDA was a record $339 million for the quarter and a record $1 2 billion set of full year compared to $212 million and $1 billion for the same period last year.
Dean Setoguchi: Repeatable cash flow was $234 million or $1 <unk> per share for the quarter.
Deep: <unk> Q1 hundred $4 million or <unk> 47 per share for the same period last year.
Deep: DCF for the full year was a record 855 million or $3 73 per share compared to $654 million or $2 95 per share for 2022.
Deep: These results were driven by record contributions from all three business segments.
Deep: We recorded net earnings of $49 million for the fourth quarter and $424 million for the full year 2023. This compares to a net loss of $82 million for the fourth quarter and net earnings of $328 million for the full year 2022.
Deep: The 2023 result include a noncash impairment charge of $210 million related to the wildfires terminal.
Deep: The 2023 dividend payout ratio was 53% of Dcs at the low end of our target range of 50% to 70%.
Deep: Return on invested capital for 2023 was 16%.
Deep: At year end, we had over 1 billion of available liquidity and in January of this year, we issued $250 million of 30 year notes at a coupon rate of 566%.
Deep: Looking forward, our 2024 guidance remains unchanged.
Deep: Capital expenditures are expected to range between 80 and 100 million.
Deep: This includes about $60 million of sanction capital for various optimization projects with the remaining $20 million to $40 million contingent on the sanctioning of capstone for and fractionation capacity expansion at <unk>.
Deep: Maintenance capital expenditures are expected to range between $90 million and $110 million of which about $20 million is recoverable in 2024 and another $15 million is recoverable within the next few years.
Deep: Cash taxes are expected to range between $45 million and $55 million.
Deep: And I'll turn it back to Dean.
Dean Setoguchi: Thanks Aileen.
Speaker Change: Man for Canada's energy has never been stronger our.
Dean Setoguchi: Our base and set new records for both natural gas and crude oil production in 2023.
Dean Setoguchi: The Trans mountain pipeline expansion and LNG, Canada support the next phase of basin growth here.
Dean Setoguchi: <unk> is positioned to participate in a meaningful way.
Speaker Change: On behalf of <unk> Board of directors and management team I want to thank our employees customers shareholders indigenous rights holders and other stakeholders for their continued support.
Speaker Change: With that I'll turn it back to the operator for Q&A.
Speaker Change: Thank you, Sir ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: You have a question. Please press star followed by the number one on your Touchtone phone you will hear Teton palmed acknowledging your request should use silicon from the polling process. Please press star followed by the number if you will.
Speaker Change: Using a speaker phone please lift your handset before pressing any team.
Speaker Change: Our first question is from Rob Hope from Scotia Bank. Please go ahead.
Robert Hope: Hi, Good morning, everyone. The first question is on the Etfs contracting so the 30 to 33000 barrels a day would be we'll call it half the propane plus capacity assuming that the.
Speaker Change: Volumes of propane plus.
Robert Hope: But where do we stand on the remaining capacity at Carefirst and with this incremental contracts in hand, now does the contracting strategy that in turn to the expansion.
Speaker Change: Good morning, Rob.
Rob: Thanks. Thanks for your question this morning.
Rob: But obviously, we're very pleased with our contracting and how that's really integrated with our kaps pipeline project.
Speaker Change: Allowing us to be able to deliver integrated service offerings to add value for our customers.
Speaker Change: And.
Speaker Change: Certainly we haven't for commercial reasons.
Speaker Change: Commercially sensitive reasons, we haven't disclosed how much of our of our capacity is locked up but certainly this help support our future expansion and.
Speaker Change: Anyway, that's a key part of our integrated infrastructure Hff's assets and maybe I'll just turn it over to you Jamie if he wants to add any other comments, yes, thanks, Dean and thanks, Rob for the question.
Jamie Urquhart: So as we think about expansion.
Jamie Urquhart: It's really driven as you pointed out around demand for Frac capacity, both in the near term and the long term and as you noted.
Jamie Urquhart: With our with our.
Jamie Urquhart: The additional 21% working interest in Caf fast that's really given us an advantage in the market to be able to go out and contract long term because we've got capacity available in the short term. So there's a couple of ways that we're looking at expanding our frac capacity in Fort Saskatchewan, Our most <unk>.
Jamie Urquhart: Capital and time efficient option is to pursue a debottleneck of Frac two and this allows us to take advantage of existing equipment. So the per barrel cost of incremental capacity is more favorable.
Jamie Urquhart: Also we're looking at further capacity expansions by building out Frac tree, which would be a new build on our existing lands. So we are also actively evaluating the best way to proceed.
Jamie Urquhart: With this project and we will update as appropriate.
Jamie Urquhart: It's really important to note that this isn't an either or you think about it sort of as a build as we as we increase our frac capacity to Debottleneck would then lead into a potential frac III.
Jamie Urquhart: So they're very they're very exciting opportunities for us I'll, just remind you and the listeners that <unk>.
Jamie Urquhart: Object to appropriate customer underpinning and board sanction.
Speaker Change: Alright, I appreciate that.
Jamie Urquhart: Then maybe keeping on the contracting themes good to see some incremental contracts on caps.
Jamie Urquhart: Can you maybe just.
Jamie Urquhart: To give some additional color on where we are in further discussions with customers on increasing that percentage contracted even further as well as how this zone four contract discussions are going, especially given the fact that a.
Jamie Urquhart: BC pipeline now has regulatory approval, although it is not yet sanctioned.
Speaker Change: Yes, no, we're having great conversations with our with our customers and.
Speaker Change: Obviously, we're also very excited about the growth in the basin. When you think about LNG, Canada finally coming into it.
Jamie Urquhart: Into service in the short time period.
Jamie Urquhart: We think that's going to unlock growth in the basin and.
Jamie Urquhart: When you think about global demand for LNG, we have a tremendous opportunity off the west coast to Canada. So I, certainly expect that theres going to be further expansions below phase.
Jamie Urquhart: Phase one of our Kendall LNG, Canada, so really what that means is that there's going to be a lot of growth opportunities in the basin and we're very well positioned so the contracts that we announced again integrated contracts for our services. We are in active discussions with other producers.
Jamie Urquhart: We continue to add more volumes to our system and in addition to that with the growth we see.
Jamie Urquhart: We think that theres going to be a lot more volume added in the years to come.
Jamie Urquhart: In terms of zone four.
Jamie Urquhart: Certainly we believe that there's going to be development, along the entire montney fairway in the BC. So we'd love to build a pipeline to the border. It's great that North River midstream received federal approval for that connected across the Alberta BC border. So that's a tremendous milestone.
Jamie Urquhart: Over three years of work on their behalf. So I congratulate them on the great work, they did to get that approval and for.
Jamie Urquhart: For all the reasons why producers were supportive of capstone of 1% to three those same.
Jamie Urquhart: Reasons apply to zone forward into BC.
Jamie Urquhart: And that said that they want optionality of their transportation of NGL service, they want competition and again it doesn't hurt to have a new pipe in the ground.
Jamie Urquhart: In terms of overall reliability. So we're very happy that we can provide that competitive alternative for our customers.
Jamie Urquhart: We're here to add value for our customers and I think that we have a great opportunity to do that for them and if we do a great job of it will also create value for our stakeholders as well, but Jamie anything else you want to add on that no I think you hit the nail on that.
Jamie Urquhart: Maybe just lastly.
Jamie Urquhart: Our caps, we just want to remind you that our guidance is now at the high end of our range of 7% EBITDA growth out to 2025, and the contracts that we announced and again some of the deals that we're working on going forward will help deliver growth beyond that 2025 time periods, we're very excited about it.
Speaker Change: Excellent. Thank you.
Speaker Change: We have our next question coming from the line and Robert Kwan from RBC capital markets. Please go ahead.
Robert Kwan: Thank you good morning, if I can.
Robert Kwan: Just start with that.
Robert Kwan: Questions on capital allocation and capital efficiency.
Robert Kwan: You've mentioned the number one priority is balance sheet strength, and just where that EBITDA is.
Robert Kwan: You're already.
Robert Kwan: Below your range. So are you rethinking the.
Robert Kwan: The nature of that range.
Robert Kwan: Joey just where investor feedback is in China to prepare for future Capex, we should expect that you want to be below the range.
Robert Kwan: Or that Youre going to move the range and then the second part is just on capital efficiency.
Robert Kwan: How do you define or think about what capital.
Robert Kwan: And just the idea.
Robert Kwan: And to understand your approach to projects and.
Robert Kwan: Major projects.
Robert Kwan: Yeah.
Speaker Change: Yes, maybe I'll just add a couple comments and I'll pass it over to Lee.
Lee: Robert but thank you for the question and I'll.
Speaker Change: I'll just state the obvious that.
Robert: We're in the enviable position that we just delivered our best year ever and our balance sheet is also.
Robert: An unbelievable strong position. So it gives us a tremendous amount of optionality for us to pursue opportunity and we see a lot of opportunity across our entire.
Robert: Integrated value chain, especially when you overlay the growth that we see coming in our basin over the next several years. So again, we're very pleased as a position that we have and and so with that I'll just start with Eileen and maybe if you can add a few comments as well sure. Thanks, Robert Yeah. It's a great question as it relates to the balance sheet.
Eileen: I think it's.
Eileen: To answer the question, it's really important to note that the two point to leverage at year end included record marketing results. So once you normalize marketing to even the high end of our new base. So say the $350 million that leverage ratio is at two five times, which is at the bottom of our target range. So I think the key.
Eileen: <unk> shares that we are very comfortable remaining at this range.
Eileen: The balance sheet provides us optionality as we said before to pull forward spending.
Eileen: And as Dean alluded to in his comments, we have several exciting opportunities.
Lee: For Frac expansion, so based on the where the balance sheet is today, we feel comfortable that we could fund these types of opportunities on a self funded basis.
Lee: And maybe the capital efficiency question, I think maybe Dan can add to it but I think we really look at how are we adding projects to our existing value chain and looking at the fully integrated recurrence.
Lee: And the whole system and I think that's that's where additional frac expansions and extending caps as all four of those are certainly more capital efficient.
Lee: Yes.
Lee: Moving on that.
Speaker Change: Sorry go ahead.
Speaker Change: Go ahead, Bob just going to say I mean, obviously, a big part of our capital efficiency too is just having the financial backing to make sure that we can deliver strong returns for our stakeholders as well so.
Bob: That's a key part of our our strategy and how we deploy capital, but sorry go ahead and ask your question.
Speaker Change: So yes, so there is a good or bad.
Speaker Change: That just you've had that old range of 10% to 15% you've talked about wanting to be towards the high end. So presumably that's kind of what youre getting at around being efficient you want your returns at that high end.
Lee: Jamie also talked a little bit around smaller projects or time efficient projects is there we are.
Lee: To try and just take on smaller initiatives that can be done quickly or is there still an appetite for a.
Lee: Kaps like and I don't know what that project would be back to take on a larger project that would be a multiyear delta.
Speaker Change: Yes, I think that's it.
Speaker Change: Those are great questions.
Speaker Change: First of all say that we're here to provide a very competitive and efficient service for our customers. So we look for opportunities to be able to to provide that service offering for our customers.
Speaker Change: And we're also about adding value for our shareholders and on a per share basis. So that's how we think about value it's got to be value accretive.
Speaker Change: When we think about individual projects, we do look at large projects and small small projects too because.
Speaker Change: There is a number of smaller projects that.
Lee: But generally our small projects have to have a very high return and that's to compensate for the resource allocation that we would dedicate to those those types of investments generally they're ones that we can we can turnaround on a shorter time period versus.
Lee: The big projects that might take.
Lee: Two to three year development development and build cycle. So there is always a combination of both that we're pursuing I think the one thing thats exciting to you about our small projects is that <unk> team has identified a number of emissions reduction opportunities that also have really great economics. So we're also.
Lee: Satisfying our goal of reducing.
Lee: Our overall emissions and achieving our 25% intense.
Lee: Intensity reduction goal by 2025.
Lee: Got it if I can just finish on marketing and I know you're going to update your guidance.
Lee: Just if we can deconstruct 2023, and just where the market is like.
Speaker Change: I think you mentioned that you put up a record year.
Speaker Change: There was actually a slight loss on hedging so.
Speaker Change: Hedging wasn't really a driver.
Lee: If anything you see upside.
Lee: Can you just talk about what youre seeing though the butane.
Lee: Market right now.
Lee: And in 2023, how much of a benefit did you get from <unk> do you see that as one time just with.
Lee: Trans mountain coming in in oil Sands growth would you see that as continuing.
Lee: And then how much might have been a benefit from <unk> 15 rolls, although those may get rolled over as well just was there what was unusual in 2023 that.
Lee: People shouldn't be thinking about as carrying over into the 'twenty four and beyond.
Speaker Change: That's a lot of questions Robert.
Robert: First of all I would just say in general terms.
Robert: Obviously, we had a record year and.
Robert: We benefit from volume because we're volume times margin business, so as the volumes to our systems grow.
Robert: Our downstream marketing business will benefit as well our ISO octane business has been very strong in <unk>.
Robert: Jamie can speak to some of those <unk>.
Robert: Sectors that contribute to that but also want to say that you also touched on hedging.
Jamie Urquhart: And I do want to remind everyone, even though that we have great marketing results. We have a very disciplined hedging strategy and our team we have a team of executives and a marketing team that meets every week and we go through all of our positions.
Jamie Urquhart: And so we want to always make sure that we're preserving margin and we're not trying to swing for the fence to also expose yourself to big losses as well so.
Jamie Urquhart: That's all part of our overall marketing margin strategy as well, but with that I'll turn it over to Jamie for his comments.
Jamie Urquhart: Yes, so Robert I was I was feverishly jotting down your question here. So hopefully I'll hit all the points that you that you were asking for I think the first thing that you you.
Jamie Urquhart: Were enquiring about was our butane costs.
Jamie Urquhart: So.
Speaker Change: Excuse me.
Jamie Urquhart: As we look at butane right now I think we look at the market is.
Jamie Urquhart: Being in a relatively similar places as last year.
Jamie Urquhart: But it's early days within our within our supply season, and ultimately what we would be able to contract for for butane.
Jamie Urquhart: And to remind everybody in 2023 butane.
Jamie Urquhart: Carl was in.
Jamie Urquhart: Probably.
Jamie Urquhart: The mid range slightly lower than what we would've seen in our five year average so it wasn't like it was an extraordinarily.
Jamie Urquhart: Inexpensive butane market in 'twenty three so that really goes to the next question Condensates, you inquired about.
Jamie Urquhart: As I look at our condensate business, it's really driven off of the assets that we have and that we've that we've invested in over the years and so.
Jamie Urquhart: It was condensates contribution sort of.
Jamie Urquhart: One time thing in 'twenty, three I would say not as that that business is driven off of the assets that we have in the ground and the service that we provide and remind everybody. We do touch over 70% of all the currency that ultimately gets delivered to the oil sands in Western Canada.
Jamie Urquhart: We have very very enviable assets on the condensate side.
Jamie Urquhart: On the ISR isooctane side.
Jamie Urquhart: What we're seeing around the premiums that we're receiving for isooctane and also.
Jamie Urquhart: <unk> pricing is that we continue to see.
Jamie Urquhart: Good good fundamentals on a supply demand perspective for gasoline within within North America and also for octane. So.
Jamie Urquhart: Sure.
Jamie Urquhart: Continue to see lower imports of octane blend products coming into North America, and with new gasoline regulations.
Jamie Urquhart: In the U S in particular.
Jamie Urquhart: We're seeing lessor teens being produced and ultimately therefore, a higher demand for our product to be able to top up if you will the octane requirements for gasoline in North America. So.
Jamie Urquhart: Those are all things that contribute to.
Jamie Urquhart: Our guidance our base guidance that we communicated in the latter part of 'twenty three I guess the last point I'd make is that.
Jamie Urquhart: The marketing team has done a very very good job as well of accessing.
Jamie Urquhart: Better.
Jamie Urquhart: More lucrative advantaged markets for isooctane over the last couple of years and once again, I think thats really driven by some of the change in regulation in gasoline and ultimately a demand for isooctane in those jurisdictions so that all.
Jamie Urquhart: <unk>.
Jamie Urquhart: World together.
Jamie Urquhart: Is sort of the backdrop for what we see in 2000 and for going forward.
Jamie Urquhart: Okay.
Speaker Change: That pretty much sums it up in a fairly long winded manner.
Speaker Change: And I appreciate the color. Thank you very much.
Jamie Urquhart: Thanks.
Jamie Urquhart: We have our next question coming from the line of Ben Pham from BMO. Please go ahead.
Ben Pham: Hi, Thanks, Good morning, a couple of questions on caps.
Ben Pham: I'm wondering of that contract.
Ben Pham: We have announced.
Ben Pham: You could have been able to secure those contracts if you didn't have the <unk>.
Ben Pham: Yes.
Ben Pham: Scale and Optionality that you had.
Speaker Change: Hi, Good morning, Ben that's a great question.
Ben Pham: I think independently there is a lot of demand for again.
Ben Pham: Competing.
Ben Pham: Transportation.
Ben Pham: Service for NGL.
Ben Pham: Standalone basis, so I think that that asset stands on its own and again evidenced by the contracts that we sign but I can say that we're very active in adding to that contract base. So there's good demand for that I would say that overall with our integrated system now across the Montney is that it enables.
Ben Pham: US to provide a bundled service.
Ben Pham: <unk> and I think it's a more.
Ben Pham: <unk> service for our customers, which again will it's a one stop shop that will help add value for them.
Ben Pham: And for that reason, we're able to leverage other parts of our integrated value chain, including our G&P business and also our downstream fractionation storage and marketing business. So it's really complementary to our integrated value chain and Thats why youre seeing integrated deals and expect to see more of those in the future.
Speaker Change: Okay got it.
Speaker Change: And now you provide a bit more context on that.
Speaker Change: The messaging around that.
Speaker Change: 15%.
Speaker Change: Return on on caps getting pushed out beyond 2012.
Speaker Change: 2020.
Speaker Change: Sorry 2025.
Speaker Change: Yes, no. That's a great question, we're still not in the range, but I can say that certainly takes us in the right direction.
Ben Pham: And.
Ben Pham: As I mentioned before we're in active discussions to add more contracting so we feel pretty good about.
Ben Pham: How that's looking.
Ben Pham: And then and again I do want to emphasize to your earlier question that.
Ben Pham: Really helps us provide an efficient service for our customers to basically sign a fully integrated deal with them which helps.
Ben Pham: Generate strong returns at enterprise level.
Ben Pham: And.
Ben Pham: We think that's a big advantage for us.
Speaker Change: Okay and can you remind me too on Pipestone you had.
Speaker Change: The bottleneck and things that go on.
Speaker Change: Well there is paramount.
Ben Pham: Paramount is there some sort of operating.
Ben Pham: Okay agreement there that.
Ben Pham: It was going to expire or is that on something else now how do you see that shaking out from your perspective.
Speaker Change: Yes, Ben.
Speaker Change: Great question on Pipestone, and we're very pleased that that project came in under budget.
Speaker Change: <unk>.
Speaker Change: And actually before.
Speaker Change: On schedule actually before the scheduled in service dates. So it's great that we brought in service in Q4.
Ben Pham: There was a lot of gas that was waiting to be processed. So basically were using the full capacity of what we just added which is which is fantastic.
Ben Pham: You know, we do have an option to take over operator ship and.
Ben Pham: That basically option exists after five years of being in service. So that's something that we will be addressing in the future.
Speaker Change: Okay got it okay. Thank you.
Ben Pham: I should mention on Pipestone, though we do have.
Ben Pham: We are the commercial lead on that project. So we're the one two.
Ben Pham: Contract incremental volumes through that facility, we just don't physically operated today in the field, but we do have.
Ben Pham: Some are ops folks that are very integrated with that with that facility.
Speaker Change: Okay. Thanks, Andy.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line is that everyone from GBM. Please go ahead.
GBM: Perfect. Thanks for taking my question guys. So sounds like Pipestone is running near capacity even after the expansion you guys brought on are there other opportunities you're looking at there or can you push incremental volumes to maybe last year.
GBM: Lance.
Speaker Change: Around the area just trying to get an idea of how much more growth you can see out of that.
Lance: Yes, no. Thanks for the question Zack.
Speaker Change: We're very fortunate to have a footprint in.
Lance: In a highly economic area of the Montney.
Zack: It's very condensate rich and which really drives a lot of strong economics in that area.
Lance: We see a lot of demand, but maybe I'll just turn it over to Jamie for his comments.
Jamie Urquhart: Yes, so just to supplement that a little bit is with the pipestone Debottleneck and then ultimately the expansion that came online.
Jamie Urquhart: The back end of last year that that's fully contracted with high take or pay.
Jamie Urquhart: But it is a very active area. So we had announced last year that we were looking at a further expansion at pipestone and we still continue to work with producers in the area to see weather.
Lance: We can get the volume commitments to be able to pursue that opportunity.
Lance: Yes.
Lance: Ability for us to be able to.
Lance: Shifts volumes around to ultimately other.
Lance: Other facilities, such as walking to your assignment at.
Lance: It has a limited we have a limited capability to be able to do that and what I would say is that I also think that that debt.
Lance: The geology and the activity around both Simon at Wapiti would would support them getting to very high utilizations in the very near term regardless.
Speaker Change: Got you that makes sense and then kind of <unk>.
Lance: Shifting downstream a little bit the fractionation facility saw a pretty big jump this quarter.
Speaker Change: Are you pretty maxed out on fractionation capacity as well at this point or do you have a little bit more operating leverage there.
Lance: Our station demand is very high so we are operating at.
Lance: Pretty much full capacity.
Lance: I would remind you that.
Lance: The 21% of campus that we acquired last year really helped us because we acquired more frac capacity at a time when it's needed the most.
Lance: And Thats all she helped us leverage into some very long term contracts as well as that of that complex and as Jamie mentioned, we're working on unexpected to for the future to service the basin.
Speaker Change: Perfect I appreciate it guys. Thanks.
Speaker Change: Thank you have a good day.
Lance: Our next question comes from the line of Patrick Kenny from National Bank Financial. Please go ahead.
Patrick Kenny: Thank you good morning.
Patrick Kenny: Just on the write off of the Wild horse terminal.
Patrick Kenny: I assume you had very little if any contributions from Cushing baked into your base marketing guidance.
Patrick Kenny: Just wondering you know if we extrapolate the fundamentals around crude oil blending.
Patrick Kenny: From down South up to your Canadian operations, especially with the outlook for tighter heavy differentials once <unk> comes online.
Patrick Kenny: Your thoughts around how you are looking to maybe reposition your overall tankage and crude oil marketing portfolio just to.
Patrick Kenny: To help mitigate some of these structural macro headwinds.
Speaker Change: Hey, good morning, Pat.
Speaker Change: It's a good question and wild horse and I'll turn that over to Jamie.
Jamie Urquhart: So thanks for the question Pat.
Jamie Urquhart: Yeah. So.
Jamie Urquhart: The structural.
Jamie Urquhart: Forward curves of crude oil with the backwardation that we're seeing right now.
Jamie Urquhart: It's just it's really a challenge to to.
Jamie Urquhart: Testify hi, tankage fees.
Jamie Urquhart: Or that type of opportunity.
Jamie Urquhart: Having said that that backwardation in the higher crude prices that we're seeing and enjoying right now as an industry.
Jamie Urquhart: <unk> is also beneficial to care as other components of its business as well because we price isooctane off of off of crude.
Jamie Urquhart: Bob crack off of that so but back to the two.
Jamie Urquhart: Yes.
Jamie Urquhart: The storage business that we have down in Cushing.
Jamie Urquhart: We're not a huge.
Jamie Urquhart: Crude player in.
Jamie Urquhart: That asset was viewed as an opportunity.
Jamie Urquhart: For blending.
Jamie Urquhart: And just frankly hasnt.
Jamie Urquhart: Panned out the way that we expect it to over the first few years of operation not to say that at some point as the forward curve shifts that that asset won't habits date, but.
Jamie Urquhart: And as we look at it from Western Canadian perspective, once again to be repetitive, we're not a big crude blender. We yes, we have an interest in BTT, but really that that asset is.
Jamie Urquhart: More of an enabler for.
Jamie Urquhart: Crude to ultimately go.
Jamie Urquhart: Two other pipes.
Jamie Urquhart: We will be benefited from the Trans mountain expansion that we're hopeful that will ultimately be in service shortly so.
Jamie Urquhart: That's not as we talk about our core business is probably not an area that we would look to get it further positioning.
Speaker Change: Okay, great Thanks for that Jamie.
Speaker Change: And then maybe to just on the propane side, so looking at supplies continuing.
Speaker Change: Continuing to grow in both Canada and the U S.
Speaker Change: But just in light of consumption being down this winter.
Speaker Change: You guys mentioned that the disciplined hedging strategy on the margin front, but just wondering if there's any concerns around physical sales volumes being down say for Q1, just given the warmer winter.
Speaker Change: At the higher inventories that were seeing across North America.
Speaker Change: Yes, so yes, great question.
Speaker Change: Yes.
Speaker Change: I think as we think of propane is that we think about really export North America is very well positioned to be able to to clear.
Speaker Change: Clear product.
Speaker Change: Out of the golf and as we see opportunities on the West Coast of Canada.
Speaker Change: We really do view that that export capability is always going to allow propane too.
Speaker Change: And the producers that ultimately.
Speaker Change: That is being one of their products.
Speaker Change: Clear.
Speaker Change: Into markets that are going to justify.
Speaker Change: The cost to produce and ultimately fractionate the fractionate the propane.
Speaker Change: So that's our view.
Speaker Change: We've certainly seen a run up in propane in the last little while.
Speaker Change: And as you pointed out not driven off of North American demand, but frankly global demand.
Speaker Change: Yes, I think maybe just to add to that as well pad is that.
Speaker Change: Our strategy has also been to have optionality to be able to hit multiple markets. So we do deliver locally to the industrial market in Alberta.
Speaker Change: We're pipe connected to Ipl's PVH facility, we deliver some to the west coast, but we also deliver somebody United States and and again.
Speaker Change: The highest priced market varies over time so.
Speaker Change: Now, it's really helping us having that optionality in the physical assets to be able to deliver to all of those markets.
Speaker Change: Perfect. Thanks, guys.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of will <unk> from CIBC. Please go ahead.
Will: Hi, Good morning, just wondering if there are any plans to grow volume.
Will: He is from here and what would that look like.
Will: Ben perhaps during the future turnaround or any comments around that.
Ben Pham: Yes, it's a great question.
Speaker Change: Will and.
Ben Pham: Obviously that part of our business is.
Ben Pham: Is very lucrative for us and what I can say is that over the last.
Ben Pham: Three or four turnarounds our team has found ways to discrete small will be bottlenecks. So we can operate that facility above nameplate capacity and we've been operating in as high as 110% of nameplate. So I think that's really great. Because every barrel we produce in that facility generates a lot of margin.
Ben Pham: But maybe I'll just turn it over to Gerry to two.
Gerry: To comment on what he sees about the future for that facility, yes, well. It's a good question in terms of future capability to grow volumes or there are opportunities that we do continue to pursue.
Gerry: Dean touched on some of the incremental work that we've done over the past few years that really grabbed kind of small snippets of capacity and there are opportunities to go bigger than that and do that through debottlenecking work and our team does continue to evaluate those opportunities, but you are correct that we'd be looking to plan that kind of work around turnaround execution windows given the given the nature of the work and the importance of.
Gerry: Run time at that facility in between turnarounds.
Speaker Change: Okay awesome. Thanks.
Speaker Change: Last one for me just.
Speaker Change: What impact has the cold snap recently had on operations and how do you view asset performance in inclement weather.
Speaker Change: Yeah.
Speaker Change: It was obviously very cold in Alberta for the first couple of weeks of January and those extreme cold conditions do cause production issues, but.
Speaker Change: So maybe I'll turn it over to Gerry.
Gerry: Well, it's a great question and you know it certainly super challenging times across the whole industry I think when those happen.
Gerry: I really give credit and thanks to all the all our field folks at times like that when they're doing the best they can primarily to stay safe during conditions like that and then also keep the facilities running safely and reliably. So we made a we made up pretty well, but we as you'd expect and minus 40 conditions. There are some things that just don't run that well so there's always minor things that <unk>.
Gerry: At our sites and with our producer customers out in the field as well. So those folks are always working together to try to keep things running as best they can but I think you can always expect some sort of impact when it when it gets that cold.
Speaker Change: Okay, great. Thanks, that's all for me.
Speaker Change: Thank you will.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time I would now like to turn the call back over to Mr. Taylor for final closing comments.
Matt Taylor: Yes. Thank you all again for joining us today and please feel free to reach out to our Investor relations team with any additional questions. You may have thank.
Taylor: Thank you.
Speaker Change: Thank you, Sir ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask could you. Please disconnect your lines have a lovely day.
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