Q4 2023 AltaGas Ltd Earnings Call
Good morning, ladies and gentlemen, thank you for standing by.
Operator: Good morning, ladies and gentlemen. Thank you for standing by.
Operator: Welcome to the AltaGas 4th quarter 2012 financial results. My name is Sylvie, and I will be your conference... All lines have been placed on mute to prevent any background noise. Did you have any difficulties figuring this out? Press star zero for the operator's assistance at any time.
Come to the altar gas fourth quarter 2023 financial results conference call.
Sylvie: My name is Sylvie and I will be your conference operator today all lines have been placed on mute to prevent any background noise. If you have any difficulties figuring the conference. Please press star zero for the operators assistance at any time after the Speakers' remarks, there will be a question and answer session. As a reminder, this conference call is being.
Adam Mcknight: Speaker's Remarks, there will be a question and answer session. As a reminder, this conference call is being broadcast live on the Internet, and we... And I would like to turn the comms... over to Adam McKnight, Director, Investor Relations. Thanks, and good morning, everyone.
Sylvie: Broadcast live on the Internet and recorded and I would like to turn the conference call over to Adam Mcknight Director of Investor Relations. Please go ahead Mr. Mcknight.
Adam Mcknight: Thanks, and good morning, everyone. Thank.
Adam Mcknight: Thank you for joining us today for AltaGas' fourth quarter and full year 2023 financial results conference call. Speaking on the call this morning will be Vern Yu, President and Chief Executive Officer, and James Harbalis, Executive Vice President and Chief Financial Officer. We're also joined here this morning by Randy Toone, Executive Vice President and President of our Midstream Business; Blue Jenkins, Executive Vice President and President of our Utilities Business; and Jon Morrison, Senior Vice President, Corporate Development and Investor Relations. We'll proceed on the basis that everyone has taken the opportunity to review the press release and our fourth quarter results. This call is being webcast, so I encourage those of you listening on the phone lines to follow along with the supporting slides that can be found on our website.
Adam Mcknight: Thank you for joining us today for Alta Gas's fourth quarter and full year 2023 financial results Conference call speaking on the call. This morning will be burned new President and Chief Executive Officer, and James Harmless Executive Vice President and Chief Financial Officer. We're also joined here. This morning by Randy Toone Executive Vice President and President of our midstream.
Adam Mcknight: Business Blue Jenkins Executive Vice President and President of our utilities business and John Morrison Senior Vice President corporate development and Investor Relations.
Adam Mcknight: Proceed on the basis that everyone, who has taken the opportunity to review the press release and our fourth quarter results.
Adam Mcknight: This call is being webcast. So I encourage those of you listening on the phone lines to follow along and the supporting slides can be found on our website.
Adam Mcknight: As always, today's prepared remarks will be followed by an analyst question and answer period, and I'll remind everyone that we will be available after the call for any follow-up or detailed modeling questions that you might have. As for the structure of the call, we'll start with Vern Yu providing an update on the business and progress on our strategic priorities, followed by James Harbalis providing a more detailed walkthrough of our fourth quarter financial results, our near-term outlook, and 2020 for guidance. And then we'll leave plenty of time at the end for Q&A.
Adam Mcknight: As always today's prepared remarks will be followed by an analyst question and answer period.
Adam Mcknight: I'll remind everyone that we will be available after the call for any follow up or a detailed modeling questions that you might have.
Adam Mcknight: As for the structure of the call will start with Vern you, providing an update on the business and progress on our strategic priorities followed by James harmless, providing a more detailed walk through of our fourth quarter financial results. Our near term outlook in 2020 for guidance and then we'll leave plenty of time at the end for Q&A.
Speaker Change: Before we begin I'll remind everyone that we will refer to forward looking information on today's call. This information is subject to certain risks and uncertainties as outlined in the forward looking information disclosure on slide two.
Adam Mcknight: Before we begin, I'll remind everyone that we will refer to forward-looking information on today's call. This information is subject to certain risks and uncertainties, as outlined in the forward-looking information disclosure on slide 2, and more fully within our public disclosure filings on CDAR. And with that, I'll now turn the call over to Vern. Thanks, Adam, and good morning, everyone.
Speaker Change: And more fully within our public disclosure filings on SEDAR.
And with that I'll now turn the call over to Burton.
Burton: Thanks, Adam and good morning, everyone.
Vern D. Yu: It's great to be here today to discuss AltaGas' fourth quarter financial results. I'm going to start by updating you on our operations and recent corporate developments. 2023 was a very busy and productive year for AltaGas. We made strong progress on our strategic priorities. We advanced a number of growth projects, we de-levered, and we de-risked our commercial operation. All of these actions will drive long-term value creation. I'll start by discussing our 2023 achievements. Then I'll provide an update on our major projects, discuss the outlook for natural gas and LPG, and then talk about our 2024 strategic priorities. Let's start with slide four.
Great to be here today to discuss alpha gas's fourth quarter financial results.
Burton: I'm going to start by updating you on our operations and our recent corporate developments 2023 was a very busy and productive year for al to gas.
Burton: We made strong progress on our strategic priorities, we advanced a number of growth projects, we de Levered and we derisked our commercial operations. All of these actions will drive long term value creation.
Burton: I'll start by discussing our 20th twenty-three achievements, then I'll provide an update on our major projects discussed the outlook for natural gas and LPG is and then talk about our 'twenty 'twenty four strategic priorities.
Burton: Let's start with slide four.
Vern D. Yu: We delivered normalized EBITDA of $1.575 billion for the year, which puts us in the upper half of our 2023 EBITDA guidance. This represents a two and a half percent increase year over year. However, despite losing EBITDA with the sale of the Alaskan utility, excluding this impact, 2023 EBITDA increased by roughly 7% year over year. 2023 normalized EPS came in at $1.90 per share, which is slightly below the midpoint of our guidance range, principally due to higher short-term debt costs.
Burton: We delivered normalized EBITDA of one.
Burton: 1.575 billion for the year.
Burton: Which puts us in the upper half of our 2023 EBITDA guidance range. This represents a 2.5% increase year over year, despite losing EBITDA with the sale of the Alaskan utility. Excluding this impact 2023, EBITDA increased by roughly 7% year over year.
Burton: Year.
Burton: 2023 normalized EPS came in at $1 90 per share, which is slightly below the midpoint of our guidance range, principally due to higher short term debt costs.
Commercially we made strong progress de risking the business.
Vern D. Yu: Commercially, we made strong progress de-risking the business. In the midstream segment, we grew tolling contracts in our global export business from around 25% at the start of the year to 40% at year end. This aligns with our long-term strategic goal of growing the take or pay cost of service portion of our business. We are striving to get to around 90% of AltaGas's total EBITDA under these types of contracts over the next couple of years. We entered into a five-year transportation agreement with CN that supports our growing LPG exports. This agreement provides us with strong predictability for our existing exports at RIPIT and provides cost certainty that will extend to our reef project as well. We commissioned a new VLGC time charter in December, which made its maiden voyage in the fourth quarter, and we commissioned our third time charter in Q1 of this year. These time charters reduce our total shipping cost to Asia by approximately 25% when compared to standard shipping rates.
Burton: In the midstream segment, we grew tolling contracts in our global export business from around 25% of the start of the year to 40% at year end.
Burton: This aligns with our long term strategic goal of growing the take or pay cost of service portion of our business mix.
Burton: We are striving to get to around 90% of Volta gas is totally EBITDA under these types of contracts over the next couple of years.
Burton: We entered a five year transportation agreement with CN that supports our growing LPG exports disagreement provides us with a strong predictability for our existing exports at referred and provides cost certainty that will extend to our reef project as well.
Burton: We commissioned a new V L. G T time charter in December.
Burton: Which made its maiden voyage in the fourth quarter and we commissioned our third time charter in Q1 of this year.
Burton: These time charters reduced our total shipping cost to Asia by approximately 25% when compared to standard shipping rates.
Burton: The vessels or remove volatility from our marine shipping costs on a long term basis.
Vern D. Yu: The vessels remove volatility from our marine shipping costs on a long-term basis. In total, we have three time charters operating in 2024. And when combined with our financial hedges and tolling contracts, we have effectively eliminated all of our exposure to Baltic freight in 2024.
Burton: In total we have three time charters operating in 'twenty, 'twenty, four and when combined with our financial hedges and tolling contracts, we have effectively eliminated all of our exposure to Baltic freight in 2024.
Burton: We also signed an agreement for a fourth time charter in 'twenty two 'twenty three which is currently under construction and set to be commissioned in the first half of 2026.
Vern D. Yu: We also signed an agreement for a fourth time charter in 2023, which is currently under construction and set to be commissioned in the first half of 2026. We significantly strengthened our midstream value chain through the acquisition of the Pipestone asset. This deal supports our long-term strategy and adds complementary assets that strengthen our footprint in the Alberta Montney and provides additional liquids for global export. A big highlight for us in 2023 was our joint venture with BOPAC to develop the reef project, where we've become the project's operator. We're actively advancing REEF through commercial, engineering, regulatory, and stakeholder workstreams. The completion of all this work will position us to make a final, positive FIDs decision in 2024.
Burton: We significantly strengthened our midstream value chain through the acquisition of the Pipestone assets.
Burton: This deal supports our long term strategy and adds complementary assets that strengthen our footprint in the Alberta, Montney and provides additional liquids for global exports.
Burton: A big highlight for us in 'twenty, two 'twenty, three whereas our joint venture with bolt back to to develop the reef project, where we become the project's operator.
Burton: We're actively advancing <unk> through commercial engineering regulatory and stakeholder work streams that completion of all of this work will position us to make a final call.
Burton: Positive <unk> decision in 2024 brief allows us to meaningfully grow our global export platform for many years to come.
Vern D. Yu: BRIEF allows us to meaningfully grow our global export platform for many years to come. Our utilities business was also very active in 2023, and here we took meaningful steps to maximize long-term value creation as well. We made significant investments in our network, focusing on new customer connections and system modernization. We invested $745 million in 2023, which enhanced our system's safety and reliability while extending the network to new residential and commercial customers. We closed the sale of our Alaskan utility, which provided more than a billion dollars of cash to reduce debt, significantly strengthening our balance.
Burton: Our utilities business was also very active in 2023.
Burton: Here, we took meaningful steps to maximize long term value creation as well.
Burton: Made significant investments in our network focused on new customer connections and system modernization, we invested $745 million in 'twenty, two 'twenty, three which enhanced our system safe junior in and reliability, while extending the network to new residential.
Burton: Commercial customers.
Burton: We closed the sale of our Alaskan utility.
Burton: Which provided more than $1 billion of cash to reduce debt significantly strengthening our balance sheet. We took active steps on cost management to ensure unnecessary costs removed from operations and that will continue their focus in 2024.
Vern D. Yu: We took active steps on cost management to ensure unnecessary costs were removed from operations, and that will continue to be a focus in 2024. We also made progress on our climate. Our RNG deal with Opal Fuels will add RNG to the WGL system, providing low carbon fuel for our customers. All of these actions helped drive strong shareholder returns.
Burton: We also made progress on our climate initiatives, our RMG deal with Opel fuels will add orangey into delivery all system, providing low carbon fuel for our customers.
Burton: All of these actions helped drive strong shareholder returns during 'twenty twenty-three also gas outperformed our peer group by roughly 22% on a T S Ara basis.
Vern D. Yu: During 2023, AltaGas outperformed our peer group by roughly 22% on a TSR basis. In addition to our ongoing investments in the utility, we added two major midstream projects, which are shown on slide five. The first is Pipestone 2, which is a deep cut sour gas processing plant in Alberta.
Burton: In addition to our ongoing investments in the utilities, we added two major midstream projects for sure are shown on slide five.
Burton: The first is pipestone too, which is a deep cuts sour gas processing plant in the Alberta Montney well.
Vern D. Yu: We reached a positive FID last December with 100% of the capacity contracted under long-term take or pay contracts. We spud the acid gas injection well for the facility in February. We will be starting pipeline and facilities construction this spring, and we look forward to adding much needed gas processing and liquids handling capacity to the region. The second new project is Reef, where we continue to move towards a late Q2 FID decision. With REEF, the most significant gating items relate to one, commercial agreements for the project.
Burton: We reached a positive RFID last December with a 100% of the capacity contracted under long term take or pay contracts.
Burton: We have spud the acid gas injection well for the facility in February we will be starting pipeline and facilities construction. This spring and we look forward to adding much needed gas processing and liquids handling capacity to the region.
Burton: The second new project as reef, where we continue to move towards a late Q2 F D decision.
Burton: Three the most significant gating items relate to.
Burton: One commercial agreements for the project.
Burton: Here, we are in advanced negotiations with producers and users and NGL Aggregators, we're seeing very strong commercial interest for long term tolling arrangements.
Vern D. Yu: Here we are in advanced negotiations with producers, end users, and NGL aggregators. We're seeing very strong commercial interest for long-term tolling arrears. And two, engineering procurement, where we are more than 75% complete and expect to have a final class three cost estimate in the coming months.
Burton: And to engineering and procurement, where we are more than 75% complete and they expect out of a final class three cost estimate in the coming months.
Vern D. Yu: In parallel, we're also advancing procurement and EPC contracting to definitive terms. We're very excited about both of these projects, which will be very important for midstream and provide long-term earnings and cash flow growth. Now, let's move to slide six.
In parallel we're also advancing procurement and EPC contracting to definitive terms.
Burton: We're very excited about both of these projects.
Burton: Which will be very important for midstream and provide long term earnings and cash flow growth.
Burton: Let's move to slide six.
Vern D. Yu: Gas utilities are irreplaceable and a key part of the ongoing energy evolution. Demand for natural gas within AltaGas's jurisdiction represents 70% of total household energy consumption. Natural gas accounts for nearly 70% of U.S. household energy demand yet only represents a third of home energy costs. As such, natural gas is the most cost-effective home energy source. In fact, switching to electricity would increase home energy costs by more than 300% in the U.S. Natural gas is critical in the long term to ensure that we have affordable and reliable energy.
Burton: Gas utilities are irreplaceable and a key part of the ongoing energy evolution demand for natural gas within Alpha gasses jurisdiction represent 70% of total household energy consumption.
Burton: Natural gas accounts for nearly 70% of U S household energy demand yet only represents a third of palm energy costs.
Burton: As such natural gas is the most cost effective home energy source in fact switching to electricity would increase home energy costs by more than 300% in the U S.
Burton: Natural gas is critical and the long term to ensure that we have affordable and reliable energy natural gas has been the biggest driver in reducing emissions in the U S. For the last two decades, it's our job to make sure. These realities are understood and to advocate for an energy an evolution.
Vern D. Yu: Natural gas has been the biggest driver in reducing emissions in the US for the last two decades. It's our job to make sure these realities are understood and to advocate for an energy and evolution that provides safe, reliable, and affordable energy and to make this energy ever greener for the customers that we serve. Slide 7 shows that the fundamentals for a Canadian midstream business are equally compelling. Although we are in a period of low gas prices due to warm weather across North America, and Access Drilling in Western Canada before West Coast LNG. The multi-year outlook for natural gas is extremely robust as Canada expands its markets to Asia.
Burton: And that provides safe reliable and affordable energy and to make this energy ever greener for the customers that we serve.
Burton: Slide seven shows that the fundamentals for our Canadian midstream business are equally compelling.
Burton: Although we are in a period of low gas prices due to warm weather across North America.
And excess drilling in Western Canada is that before west coast LNG, the multiyear outlook for natural gas is extremely robust as Canada expands markets to Asia.
Vern D. Yu: WCSB natural gas production is poised for significant growth through 2030. West Coast LNG facilities such as LNG Canada and Wood Fiber LNG are game changers that bring a structural tailwind for supply. All of this activity will create the need for additional midstream infrastructure across BC and Alberta. At the same time, Asian LPG demand is expected to grow significantly over the next two decades.
Burton: W. C. S. P. Natural gas production is poised for significant growth through 'twenty 30 west.
Burton: West Coast LNG facilities, such as LNG, Canada, and wood fiber LNG are game changers that brings a structural tailwind for supply all of this activity will create the need for additional midstream infrastructure across BC and Alberta.
Burton: At the same time Asian, LPG demand is expected to grow significantly over the next two decades positioning our global export business as the most economically attractive outlet for growing western Canadian LPG supply.
Vern D. Yu: Positioning our global export business as the most economically attractive outlet for growing Western Canadian LPG supply. Turning to slide eight, we are excited about the road ahead and advancing our 2024 priority, which includes operating under an equity self-funding model.
Burton: Turning to slide eight we are excited about the road ahead and advancing our 'twenty 'twenty four priorities.
Burton: This includes operating under an equity self funding model.
Vern D. Yu: Achieving our four-and-a-half-times leverage target and operating with strong capital discipline, where we ensure that only the best capital projects go forward. In utilities, our number one objective is to improve returns and close the ROE gap at WGL. We've made good strides to date, but the journey continues. The recent regulatory decisions in Maryland and D.C. were mixed for us.
Burton: Achieving our four and a half times leverage target and operating with strong capital discipline.
Burton: Where we ensure that only the best capital projects go forward.
Burton: In utilities, our number one objective is to improve returns and close the ROE gap Adobe G. L. We've made good strides today, but the journey continues.
Burton: The recent regulatory decisions in Maryland, and D. C were mixed for us so to close the ROE gap will have to be even more vigilant on how we deploy capital and manage our costs.
Vern D. Yu: So to close the ROE gap, we'll have to be even more vigilant in how we deploy capital and manage our costs. We will also need to continue to be very proactive and timely with our rate filing. We will continue to work on modernizing our aging infrastructure to reduce leaks and improve system safety and reliability.
Burton: We will also need to continue to be very proactive and timely with our rate filings.
Burton: We will continue to work on modernizing our aging infrastructure to reduce leaks and improve system safety and reliability will continue to invest in and explore growth opportunities related to climate and new initiatives, such as RMG and energy efficiency programs finally, you'll see us.
Burton: Ramp up our advocacy for natural gas and our utilities.
Burton: Within midstream our near term priorities are clear.
Burton: First we need to integrate the pipestone assets into our system and built pipestone two on time and on budget second we need to advance reef to F. I D, which we are targeting for late Q2.
Burton: Finally, we need to continue to Derisk the business. We made good progress in 'twenty, two 'twenty three by adding additional take or pay contracts, adding more tolling agreements and systematically hedging our remaining exposure.
Burton: Our plan is to continue down this road again in 2024.
Burton: All of these actions will improve our profit margins reduce our debt balance and lower commercial risk profile collectively improving alta gasses value proposition.
Burton: We're excited that all of these actions are in our own control and our job is to execute on them.
Burton: And with that I'll turn the call over to James to talk more specifically about Q4, 2023, and our 'twenty 'twenty four outlook.
James Harmless: Thank you Vern and good morning, everyone.
James Harmless: We are very pleased with our fourth quarter and full year 2023 results and the strong progress that we made on our strategic priorities.
James Harmless: We achieved normalized EBITDA of $502 million in the fourth quarter and 1.5 dollars 75 billion for the full year.
James Harmless: Consistent with our expectations and as previously communicated this landed us firmly in the upper half of our 2023 normalized EBITDA guidance range of one five to $1 6 billion.
James Harmless: We achieved normalized EPS of <unk> 76 cents in the fourth quarter and $1 90 for the full year.
James Harmless: This was firmly within but slightly below the midpoint of our 2023 EPS guidance range of 185 to 205.
James Harmless: The main drivers for EPS trailing EBITDA was higher than expected interest rates during the year.
James Harmless: Normalized <unk> per share was $1 33 for the fourth quarter and $4 for the full year, which was largely in line with our expectations.
James Harmless: Digging into our operating segments, we'll start with the midstream segment, which is shown on slide nine.
James Harmless: Normalized EBITDA came in at $182 million for the fourth quarter and $684 million for the full year, representing 12% and 13% year over year growth respectively.
James Harmless: The fourth quarter included a strong improvement in the profitability of the global exports business relative to last year due to stronger Asian to North American LPG prices.
James Harmless: In the fourth quarter, we exported approximately 91000 barrels per day of propane and butane across 15 Vlccs.
James Harmless: This included approximately 63000 barrels per day at <unk> and 28000 barrels per day at Ferndale.
James Harmless: This was a bit lower than we anticipated due to the loading of two ships being delayed in late December which push revenue recognition into early January 2024.
James Harmless: As a reminder, our global exports business typically recognizes seasonally lower export volumes during the winter months driven by two factors.
James Harmless: First and most meaningfully as the absence of butane that we procure from local Washington refineries in the spring and summer when butane is not required for summary summer gasoline spec, but is in the fall and winter and the second is seasonal weather related logistics impacts.
James Harmless: In addition to these seasonal impacts we had the one delayed ship it rip it in one delayed ship at Ferndale during the fourth quarter, which negatively impacted volumes by an approximate 11500 barrels per day during the quarter.
James Harmless: During the fourth quarter waterborne exports across all industries experienced elevated shipping times and costs due to congestion issues in the Panama Canal.
James Harmless: However, we were insulated against these higher costs as a result of our Baltic freight hedges and through the use of Volta gasses time charters.
James Harmless: In addition, our direct market access to Asia from the West Coast Insulates us from the operational and cost challenges experienced by shippers accessing the Panama Canal.
James Harmless: The fourth quarter also benefited from a few D C related to MVP construction activities as forward progress continues on the pipeline.
James Harmless: In the fourth quarter, we saw a 3% year over year volume increases across our G&P footprint with Townsend and her madden showing the strongest growth.
James Harmless: Our fractionation and liquids handling volumes were up 9% year over year led by North pine younger and her matan.
James Harmless: This volume growth continued to highlight the ramp up of development activity in Canada with the Montney being at the center of that growth.
James Harmless: Alta gas realized frac spread averaged $23 13 per barrel after transportation costs in the fourth quarter as most of Alta gasses frac spread exposed volumes were hedged.
James Harmless: This was approximately $2 per barrel below the fourth quarter of 2022.
James Harmless: As I highlighted on our previous quarterly call, we advanced a number of positive derisking initiatives within our global exports business in the fourth quarter, including a five year transportation agreement with CN and taking delivery of one new VLCC time charter with another following in the first quarter of 2024.
James Harmless: These initiatives continue to lock in costs and de risk our business, which we will continue to focus on going forward.
James Harmless: Moving onto utilities on slide 10, we reported normalized EBITDA of $311 million in the fourth quarter of 2023 as compared to $294 million in the fourth quarter of 2022, an increase of 6% year over year on a full year basis, we reported normalized EBITDA of $886 million representing a five.
James Harmless: 5% decrease year over year with the full year number reflecting the impact of the sale of the Alaska utilities and the outsized asset optimization revenue that we generated at Washington gas over 2020 to.
James Harmless: Overall fourth quarter utility results were generally in line with our expectations, but included negative weather impacts in Michigan and the district of Columbia due to unseasonably warm weather.
James Harmless: The lost contribution from the Alaska utilities, and outsized asset optimization contribution that was present in the fourth quarter of 2022 was more than offset in the fourth quarter of 2023 by a strong performance from Wgla retail marketing business.
James Harmless: Higher revenue from rate base additions from ongoing investments in ERP modernization programs and the positive impact of the Virginia rate case.
James Harmless: At the utilities, we deployed $192 million of invested capital for the fourth quarter and $745 million for the full year in 2023 on behalf of our customers.
James Harmless: This included $98 million in the fourth quarter and $420 million for the full year two our various AARP modernization programs.
James Harmless: These investments are focused on upgrading the network to improve safety and reliability of our system. While also delivering ancillary benefits of long term productivity improvements, while balancing customer affordability. During this period of higher cost of living.
James Harmless: Closing the remaining ROE gap at Washington gas remains one of our top priorities within our utilities as highlighted on slide 11.
James Harmless: That will include our continued focus on operating with strong capital cost and regulatory discipline.
James Harmless: In the corporate and other segment, we reported normalized EBITDA of $9 million compared to a $3 million loss in the fourth quarter of 2022.
James Harmless: The stronger results were mainly driven by lower expenses related to employee incentive plans and lower corporate operating and administrative expenses.
James Harmless: Turning to slide 12, we remain focused on continued commercial derisking within the midstream business.
James Harmless: We have made solid progress on securing tolling arrangements on a global exports business over the year, including more than a 50% year over year rise in the percentage of tolling.
James Harmless: We exited 2023 at approximately 40% of our volumes being under tolling arrangements will which will continue to rise in 2024, as we move towards our long term goal of 60% tolling across the portfolio.
James Harmless: Where we continue to have commodity or spread exposure will continue to actively manage our exposures through a systematic hedging program.
James Harmless: Currently we have 90% of expected 2024 global export volumes, either told or financially hedged at an average <unk> to north American spread of approximately $18 U S per barrel.
James Harmless: This includes being 99% hedged for the first quarter at approximately $18 50 U S per barrel.
James Harmless: We are also actively managed our costs across the export value chain with substantially all of our 2020 for Baltic freight exposure effectively hedged through a combination of time charters financial hedges and tolling arrangements.
James Harmless: We remain focused on balancing our three pillars of our capital allocation framework is shared on slide 13, including funding organic growth, providing sustainable and growing returns of capital and operating with financial strength and demonstrating debt reduction over the course of 2023.
James Harmless: This included continued enterprise growth in 2023, which resulted in another 6% increase in our dividend to $1 19 per share in December.
James Harmless: As we have said in the past our strategy is to deliver sustainable annual dividend increases that compound in the years ahead.
James Harmless: We target an industry low payout ratio of 50% to 60% of earnings which has been consistent over the past four years.
James Harmless: In terms of debt reduction, we had a strong year for absolute debt reduction in 2023 as shown on slide 14, Ultra gas exited 2023 at five two times trailing net debt to normalized EBITDA on a run rate basis. After adjusting for the pipestone acquisition debt incurred at year end without the corresponding EBITDA being added.
James Harmless: Due to the closing date.
James Harmless: This represented approximately $1 billion lower year end net debt.
James Harmless: Turning to slide 15, we are pleased with the strong progress that has been made on the mountain valley pipeline over the past few months as we have said in the past maximizing the value of that investment remains the quickest path for near term leverage reduction.
James Harmless: At this stage the pipeline is now 99% complete including 97% of water crossings that remained at the time of construction resuming in August of 2023 now being complete.
James Harmless: 95% of our planned pipe wells have also been complete as has greater than 75% of the crossing of the Appalachian Trail with hydrostatic testing completed on more than half the pipeline.
James Harmless: The in service date has been shifted from the end of the first quarter 2024 to the end of the second quarter.
James Harmless: Moving along to the 2024 capital budget on Slide 16, we continue to take a prudent approach to our investment portfolio.
James Harmless: As we outlined at our Investor day in December we expected to deploy $1 2 billion of Capex in 2024, which will advance key growth initiatives and our midstream and utilities platform.
James Harmless: There have been no major changes to the spending plan to date.
James Harmless: The 2024 guidance puts and takes are outlined on slide 17.
Overall, we remain well positioned to achieve our 2024 guidance ranges of normalized EPS of 205 to $2 25, and normalized EBITDA of $1 675 billion to $1 775 billion. This represents 13% and 9% year over year growth respectively with that.
James Harmless: Said, we have experienced slightly more headwinds than <unk> at this point in the year as outlined on this slide.
James Harmless: Overall, we are pleased with the fourth quarter and full year 2023 results and we believe we have a compelling forward value proposition as outlined on slide 18.
James Harmless: As has been the case over the past four years, we believe execution of our long term strategic plan will continue to drive outsized shareholder returns in the years ahead.
James Harmless: As has been the case over the past four years, we believe execution of our long term strategic plan will continue to drive outsized shareholder returns in the years ahead.
James Harmless: The long term fundamentals for our business remains strong.
James Harmless: Canadian producers are poised to deliver significant growth in natural gas and associated NGL production over the balance of the decade, and Alta gas will play a critical role in providing additional west coast egress to ensure our north American customers received the strongest net backs for their lpg's and the premium Asian markets.
James Harmless: Our utilities also have a bright future with natural gas being a critical fuel for everyday life across our jurisdictions.
James Harmless: It will be essential to balance the needs of energy affordability energy reliability and the pursuit of climate goals.
James Harmless: We remain tremendously excited about the opportunity in front of us and we are confident that we can deliver.
Speaker Change: And with that I will turn it over to the operator for the Q&A session.
Thank you.
Speaker Change: Ladies and gentlemen, we will now conduct at the analyst question and answer session. If you would like to ask a question Press Star then the number one on your telephone keypad and if you would like to withdraw your question Press Star then number two.
Speaker Change: There may be a brief pause, while we compile the Q&A roster.
Speaker Change: And the first question will be from Jeremy Tonet at Jpmorgan. Please go ahead.
Jeremy Bryan Tonet: Hi, good morning.
Jeremy Bryan Tonet: Hi, Jeremy.
Hi, just wanted to start off with the LPG exports, if I couldnt. Thanks for the incremental color there.
Just wanted to see I guess.
Jeremy Bryan Tonet: Anything else you can share with regard to the outlook for increasing the percentage towing kind of on a longer duration and how you think about I guess tradeoff between duration of take or pay firm tolling.
Jeremy Bryan Tonet: Versus versus rates charge and how the current spread may or may not influence that just wondering over what period of time could we see that tolling number increase and where do you see it getting too.
Speaker Change: Okay, Jeremy Thats, a great question I think obviously, we've made a concerted effort to increase the amount of tolling that we have in our portfolio really if you look at the aggregate EBITDA of alpha gas as a whole the take or pay.
Jeremy Bryan Tonet: Cost of service percentage of the EBITDA is about 80% today, our goal is kind of to get tolling too, but 60% of the total.
Jeremy Bryan Tonet: Volumes, we have once reef is up and running and that by doing that will drive our cost of service EBITDA mixed closer to 90%. So I think we're kind of materially then de risk the business.
Jeremy Bryan Tonet: Obviously, there is trade offs. The more tolling you do you do you do you do give up some upside on the merchant barrel, but obviously that's been beneficial to us in the sense that it reduces the earnings and cash flow volatility, we see in that business. So yeah and haul we're comfortable.
Jeremy Bryan Tonet: Making that trade are giving up a little bit of the upside for more stability of cash flow and obviously, we're targeting term as we make.
Jeremy Bryan Tonet: More and more as we get more and more of these tolling agreements.
Speaker Change: Got it that's helpful. Thank you for that and.
Just wanted to pivot towards the balance sheet, if I could deleveraging trajectory in primarily as it relates to MVP as we approach the finish line here and just wondering.
Speaker Change: What high level thoughts, you're able to share I guess on the possibility of monetizing that asset do you still see the type of demand for those type of assets is in the past is the asset being kind of captive to transco Etienne kind of influence the valuation just any high level thoughts you could share would be helpful. Thanks.
Speaker Change: Yes, Jeremy it's it's James here and look our views haven't changed we've we've been pretty consistent that we.
James Harmless: We will see a monetization opportunity for this asset once it becomes operational and obviously the Coa days now is Q2 of 24. So we would be looking to do price discovery potentially post that date.
James Harmless: In terms of in terms of the pipeline itself.
James Harmless: We feel strongly that it still has some very strong attributes from a valuation standpoint in terms of the 20 year take or pay contracts strong free cash flow generation, obviously, low capex to EBITDA growth potential on the mainline and obviously south gate could be another expansion with respect to the pipeline.
James Harmless: And given the recent transaction that was announced with <unk>.
James Harmless: TC energy under PNG ETS system, we think there's a lot of read throughs relative to that valuation to MVP, just given the contracted nature of that pipeline.
James Harmless: And that's free cash flow generation. So we do think that there's some strong demand for these type of infrastructure assets and that was reinforced by the recent transaction that was just announced.
James Harmless: Okay.
Speaker Change: Got it that's helpful I'll leave it there thanks.
Speaker Change: Thanks, Jeremy.
Speaker Change: Next question will be from Linda at.
Linda: At TD Cowen. Please go ahead.
Linda: Thank you.
Linda: Okay.
Linda: Thanks, and your outlook for this year, recognizing that there's some tailwind and headwind can you comment on.
Linda: Where you see your debt to EBITDA at the end of 2024, if the year substantially unfolds as you've contemplated.
Linda: Okay.
Linda: Yes, Linda it's James here and I'll answer the question two ways I guess.
James Harmless: If we close an MVP transaction in.
James Harmless: In 2024.
James Harmless: And we do believe that we can get a four five to four six times net debt to EBITDA, just given the midpoint of our guidance range. Obviously, if it's a close or a transaction gets delayed and pushed into 2025 potentially we do still think that we can get some natural deleveraging from the five two times as.
The earnings start to be generated within MVP and we start to include those in our in our obviously in our actual results and we get a little bit of a working capital unwind as we did see working capital build a little bit as we closed out 2023.
James Harmless: Okay.
Speaker Change: And just as a follow up.
Speaker Change: How long do you plan to finance through construction, and then permanently and with the rating agencies have some forbearance, Tony crusher that might put on your credit metrics during construction.
Speaker Change: Okay.
Reese: Reese's Reef is a project that we've had included in our long term forecast with the rating agencies for quite some time. So the metrics that we've shared with them and the construction profile and cash flows that we anticipate from reef. Once it comes online is something that they are comfortable with in the context of our current ratings. So we wouldn't expect it to put any any type of <unk>.
Speaker Change: Ratings pressure on us.
Speaker Change: As a result of that.
Speaker Change: And remember Linda we have a JV partner and the construction cycle will be spread out over a number of years. So it shouldnt be that huge a drag on our funding capacity.
Speaker Change: Okay. Thank you and just another follow up on reef.
Speaker Change: If there is some slippage in schedule and you can't get too.
Speaker Change: In Q2, do you think that would be more related to project financing on the commercial side or EPC.
Speaker Change: Hmm.
Speaker Change: Sure.
Speaker Change: And I guess, if there is any slippage in timing on any of those fronts.
Speaker Change: Are there any sort of sunset clauses in any of your agreements that might require an F to be made by certain date for the project to be viable.
Well I think Linda we're very happy with the progress that we're making towards <unk> really the two critical gating items are.
Speaker Change: Firstly getting our arms around the capital cost and I think as we said in the prepared remarks, we're finalizing the <unk>, we want to have a very strong class three cost estimate before we take an FID decision and part of that will be.
Speaker Change: Ensuring that we have clear line of sight on getting some fixed price EPC contract for the component parts of the project.
Speaker Change: As well as having done.
Speaker Change: Some really good geotechnical work on the site and in fact, we have started clearing the site to help us out with that so I don't see any showstoppers in front of us.
Speaker Change: The other second thing is is to get.
Speaker Change: A bunch of tolling contracts.
Speaker Change: Finalized as we proceed depth and we're seeing very significant interest from producers and users and NGL Aggregators. So we're well advanced with.
Speaker Change: Commercial discussions on that front so at the end of the day.
Speaker Change: We don't see a slippage.
Speaker Change: Slippage, there and I think the you made a comment about project financing, it's not our expectation to project Finance This project.
Speaker Change: Thank you.
Speaker Change: Thank you next question will be from Rob Hope at Scotia.
Robert Hope: Bank. Please go ahead.
Robert Hope: Hello, everyone.
Robert Hope: To go back to slide 11, which is kind of the ROE walk up at WGN.
Robert Hope: It does look like it's changed a little bit since what you presented at the Investor day, specifically a little bit more.
Robert Hope: Central uplift from rate cases.
Robert Hope: Given the recent experiences that you've seen year rate cases, how do you.
Robert Hope: How do you move forward in terms of ensuring that you get a timely recovery on of your capital and could we see you go back a little bit quicker on certain jurisdictions are.
Speaker Change: I think I'll start here and then I'll turn it over to Blue Rob.
Our expectation is that we need to close this gap and Theres, a whole bunch of levers for us to do that.
Blue Jenkins: How we spend capital and how we manage our O&M costs and obviously on how timely we get back into a.
Blue Jenkins: A rate proceeding.
Blue Jenkins: It is our expectation that we'll be back in D. C. In Maryland sometime this year. The exact timing is still a bit uncertain and I think one of the things Blues team is making progress on is getting more certainty out of D. C. On the timeline of getting decisions back, but with that I'll turn it over to <unk>.
Speaker Change: Yes. Thanks.
Speaker Change: Vern and Rob good question.
Speaker Change: <unk> hit the highlights for sure we continue to focus on minimizing the amount of capital that we have regulatory lag that does that does suggest as vern as Ron said that we would be filing in both D C and Maryland this year.
Speaker Change: TBD on the exact timing as he said.
Speaker Change: I would suggest as as Ron alluded to the the order out of D. C. We thought was pretty good overall it just took a long time, we're happy with the Commission's response and issuing an NOI, we're hopeful that moves too.
Speaker Change: Hey.
Speaker Change: Effectively <unk> to put some timeline and some clarity around from filing to outcomes and we're optimistic based on how the commissions moving that we'll get there.
Speaker Change: The conversation in Maryland is similar we're understanding where they're headed as commission understanding what that means for our capital decisions. We clearly are.
Speaker Change: Have a capital plan outfit that is focused on ensuring safety and reliability and modernizing our system for lower carbon fuels as well as continuing to serve our customers with high.
Speaker Change: Highly reliable and affordable energy, but we'll need to think about as we look across our jurisdictions, how we how we manage the capital across those jurisdictions based on the timing and us and the lag that does result from that so all of those things are factors and of course, our cost discipline. We continue to be focused on we've been under the run rate of inflation in the last.
Speaker Change: Several years, we think we can continue to do that and even improve that and so that's a lever that we're focused on as well to close that gap.
Speaker Change: Alright, Thanks for that and then maybe just shifting over to the midstream business so beyond pipestone beyond grief.
Speaker Change: Those other medium term growth projects that you had previously identified how are discussions going on there as we kind of inch closer to.
Speaker Change: LNG, Canada as well as you know there are a couple of other big demand centers for Ngls in Western Canada that are popping up.
Speaker Change: Well I think it's.
Speaker Change: There's lots of commercial interest Rob.
Speaker Change: Obviously, our assets in northeast B C. R. In the ground already are on the ground already and I.
Speaker Change: Readily expandable so we're seeing.
Speaker Change: Interest from producers to bring more volumes into north pine.
Speaker Change: Post Pipestone too I think we're out there today talking with customers.
Speaker Change: About pipestone three so all of those things are working our way and I think we're.
Speaker Change: Pretty bullish on the potential prospects there.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Next question will be from Patrick Kenny National Bank. Please go ahead.
Speaker Change: Thank you good morning, guys.
Patrick Kenny: Maybe just back to the tailwind and headwinds for the year and.
Patrick Kenny: As he mentioned producers still gearing up here for LNG, Canada.
Patrick Kenny: But recently, we've seen some of your key customers in the Montney.
Patrick Kenny: Recalibrate their capital programs at least for this year.
Patrick Kenny: In light of where forward gas prices are through the summer. So I'm just wondering how you see these near term speed bumps and producer spending.
Patrick Kenny: Perhaps impacting your your GMP throughput or your LPG export volume expectations for the year.
Patrick Kenny: If at all.
Patrick Kenny: You see any material risk to your financial guidance as well.
Yes, Pat it's James here, we don't see any near term risk to the financial guidance I mean, obviously within <unk>.
James Harmless: Northeastern BC.
James Harmless: Print that we have in the Montney, we still have a lot of room to go here before he people leave and fill a take or pay commitments. So we do experience a lot of stability as a result of that within that footprint.
James Harmless: Within the Alberta, Montney, we don't expect any.
James Harmless: Short term headwinds either and obviously with key egress projects coming online off the West Coast of Canada. We do think that this is a bit of a blip here in terms of soft gas prices and a mild winter that led to some of the capex cuts that you're referring to but with respect to our guidance. We don't expect any downward pressure here.
James Harmless: As a result of that.
Speaker Change: Okay, that's great thanks for that.
Speaker Change: And then maybe just with respect to your outlook kind of below the EBITDA line.
Speaker Change: Specifically your effective tax rate of 21%.
Speaker Change: Curious just to get your thoughts on how well protected you might be.
Speaker Change: At least from a cash tax perspective.
Speaker Change: Should we see an increase to Canadian corporate tax rates.
Speaker Change: With the federal budget next month.
Speaker Change: Then also if you had any insights into whether or not the merchant side of your LPG exports business might be protected.
Speaker Change: Somehow as well from any sort of onetime tax targeting a windfall profits from the energy sector.
Speaker Change: Yeah, I mean in terms of cash taxes for a for the balance of this year and even if we look beyond this year, we do have.
Speaker Change: Nols, obviously that limit the amount of cash taxes that we pay the only cash taxes that we're currently paying us on part $6 one dividends with respect to depressed just given our operating losses.
Speaker Change: We don't expect any kind of impact from windfall tax.
Speaker Change: But we're currently tracking either with respect to exports.
Speaker Change: In terms of the volatility of those cash flows we've highlighted a couple of times now that we're extremely well hedged at 90% with.
Speaker Change: With a big chunk of that coming from an increase in year over year totaling percentages.
Nols: Got it that's perfect. Thanks James.
Yeah.
Speaker Change: Thank you.
Speaker Change: Next question will be from Robert <unk> at CIBC capital markets. Please go ahead.
Robert Hope: Hi, Good morning, I was hoping you could provide a little bit more color on the situation in the Panama Canal, how severe that puzzle traffic restriction is and what impact you see in terms of volumes and in duration of that.
Speaker Change: Those restrictions.
Robert Hope: How long might impact.
Robert Hope: Versus guidance or a normal year.
Robert Hope: Okay.
Speaker Change: Hi, Thanks.
Speaker Change: In Q4, the Panama restrictions were obviously.
Speaker Change: Very significant with the low water levels polls, and so forth and you saw.
Speaker Change: F E Fai to Belvieu spreads widen you, but you also saw Baltic freight rates go up.
Speaker Change: I think we've seen some of that normalize out in Q1, I don't think it's going to have a major impact on our outlook for.
Speaker Change: For 2024, as James had mentioned that we're highly highly.
Speaker Change: Highly tall or hedged this year so.
Speaker Change: But long term I think the.
Speaker Change: Canadian advantage or the West coast advantage that we have from our export terminals will be sustained because of the.
Just because of the logistical advantage that we have.
Getting lpg's to Asia from the West Coast.
Speaker Change: Okay. That's helpful and then.
Speaker Change: Just doesn't apply to extended hours there what was the nature of the outage.
Speaker Change: Planned or unplanned outage.
Speaker Change: What are what are you seeing in terms of.
Speaker Change: How long before it returns to service.
Speaker Change: Hey, Robert It's James here, obviously, it was a scheduled turnaround for that facility that we had in January as with any scheduled turnaround once the operation folks get in there and do their inspections. They saw a couple of areas that we wanted to do some preventative maintenance on.
Speaker Change: And obviously the parts for that preventative maintenance took a little time to arrive and Thats what extended the outage beyond what we anticipated.
Speaker Change: The outages almost a turnaround is almost complete and the outage will be over a next week. The plant is expected to be operational again next week as they do their final commissioning. So it was really just us trying to address some preventative maintenance issues within the facility.
Speaker Change: So that we don't have to take another outage later in the year and go back in there and do that maintenance.
It's a normal course for a turnaround.
Speaker Change: Great and just last one last question for me.
Speaker Change: I'm just curious.
Speaker Change: How are you looking at potentially handling too.
Speaker Change: Growth projects at the same time.
Speaker Change: How you're set up from a capacity point of view to handle that.
Speaker Change: Maybe you could speak to how you're managing risk in general I know that the EPC contracts involve maybe you can discuss the percentage EPC you expect to have with the reef and just generally your.
Speaker Change: Internal operating capacity to handle two projects is about neutral at once.
Speaker Change: Sure why don't I start on that.
Speaker Change: I think thats an obvious point.
Speaker Change: Of interest because we've seen infrastructure projects go over budget all through the midstream sector. So we're very mindful of how we're managing our capital cost risk. So maybe starting with Pipestone I think we've talked about there's a whole bunch.
Speaker Change: At the Investor Day, where.
Speaker Change: Effectively it's a plant on site.
Speaker Change: The vast vast majority of the capital is going to be under fixed price EPC contract I think we're up 75% protected there the balance of the of the work is kinda geotechnical earthworks driven.
Speaker Change: A lot of the component parts are obviously getting.
Speaker Change: Built and brought in so there's not a ton of construction on the site and its a single site as opposed to a long linear.
Speaker Change: Project, where we've seen where the industry is seeing the biggest capital cost variances.
Speaker Change: Reef in many respects is similar.
Speaker Change: It is a one specific site.
Almost we're trying to get the vast majority again here of the component parts built off site and brought in.
Speaker Change: That includes the NGL storage vessels, the NGL bullets, the compression and all those great things.
Speaker Change: Really the only significant piece of work that has to be done on site is the construction of the new dock.
Speaker Change: And the good news is that the vast majority of the rail loop is already already exists so that.
Speaker Change: Again, we're minimizing the amount of site construction. So we have staffed up internally to manage these risks, but we do obviously have experience in building <unk>.
Speaker Change: Processing plants as well as.
Speaker Change: Ship loading facilities with rip it. So I think we're cautiously optimistic that we're going to be able to manage these capital costs.
Speaker Change: Sure.
Speaker Change: And a good way.
Speaker Change: Okay perfect. Thank you.
Speaker Change: Thank you next question will be from Ben Pham.
Benjamin Pham: BMO. Please go ahead.
Benjamin Pham: Alright, thanks, good morning.
Benjamin Pham: Couple of questions on near first off on <unk>.
Benjamin Pham: MVP I'm wondering if you can comment a minute it's been no secret that you viewed as noncore.
Speaker Change: Uh huh.
Speaker Change: Have you been receiving inbound calls on it and then I'm also curious why.
Speaker Change: Why haven't you started a formal process with the.
The project 99%.
Speaker Change: Don.
Speaker Change: Hey, Ben it's James here, I mean look we've been pretty consistent about the fact that we've gotten calls.
Speaker Change: Throughout.
James Harmless: Our ownership of MVP, even than in past years, and the reason that we havent really kicked off a process as we'd like to see the the project operational because we feel that that's the best way to completely de risk it and not have kind of any kind of valuation overhang I mean, obviously the Q1 in service dates slipped if we had kicked.
James Harmless: Off a process and that process was alive and you get a you get slippage in the pipeline and some upward cost pressure, even though our interest is insulated from that we do feel that that could have.
James Harmless: Have real valuation implications for a potential buyer. So we've been pretty consistent about being patient here. So that we can completely derisk, it and eliminate that kind of overhang and once the pipeline is flowing gas than there is certainty there from a buyer's perspective and there is also more certainty there from us advancing some of the growth projects that we see on the main.
James Harmless: Wine and a and.
James Harmless: And the expansion.
James Harmless: The Southgate expansion. So that's why we've we've been pretty patient with this and Havent really launched a process yet.
Speaker Change: Okay and then.
Speaker Change: Can you comment then since Investor day, you're feeling better about it.
Speaker Change: The valuation and just with your comments around.
Speaker Change: Our conversations with folks into this that when you when you do launch the process. It may be a bit quicker process than they may have a presence transactions out there.
Speaker Change: Yeah, I think the one the one transaction that I've that I pointed to in my in my earlier comments has some very positive read throughs to MVP. The Pn GTS system that was sold had 16 year contract durations MVP is a little longer than that the investment grade counterparty mix that we understand is stronger at MVP relative to.
That pipeline.
Speaker Change: And obviously, we do have the expansion opportunities within South gate and on the mainline that I think are going to be really attractive from a growth standpoint. So I do think from a valuation standpoint, it will attract a strong valuation given those those attributes and we think that the same type of buyers that looked at the pipeline would be interested in MBT as well.
Speaker Change: Okay.
Speaker Change: Okay, Okay can I ask in OSA under that contract.
Tolls on the LPG export if you sit here at year end.
Speaker Change: Can you comment on the composition of that.
Speaker Change: The counterparty is between suppliers aggregators buyers and where do you see that composition.
Speaker Change: Moving to we're going to when you start to add more.
Speaker Change: Well, we have got a great mix of producers and users and Aggregators I think as we.
Speaker Change: As production grows in the basin over the next couple of years Youre going to see growth from all of those Counterparties I think we've talked a little bit above.
Speaker Change: About expanding our air and user universe with R. D methanol.
Speaker Change: Methanol.
Speaker Change: <unk> process at Rip it. So that's that's something that we're looking forward to as well. So I think it's going to be a good mix as we go forward banner.
Speaker Change: It's quite exciting about how much commercial insurers there is out there these days.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: The last question comes from Robert Kwan of RBC. Please go ahead.
Robert Kwan: Okay. Good morning, if I can just start with the export business and first just on the tolling and if I can.
Robert Kwan: Just to make sure I understand the numbers here. So if you are looking to be 60% across.
Robert Kwan: The entire piece and you exited 23 at 40% so that implies maybe needing another 2025.
Robert Kwan: And then.
Robert Kwan: On reef, Youre, looking probably somewhere 30% to 35.
Thousands a day so is it fair that you're out there looking for about $50 to 60000 barrels a day of contracting.
Speaker Change: I think.
Speaker Change: So for 2024.
Speaker Change: We're we have in our guidance about 115000 barrels a day of exports for the year, our expectation is to be.
Speaker Change: At least 50% towards perhaps a little bit higher on that.
Speaker Change: And then so obviously to move to 60%, we do need some more.
Speaker Change: Tolling on those underlying volumes the reef expansion is 55000 barrels a day.
Speaker Change: So if we do 60% of that.
Speaker Change: My math.
Speaker Change: The back the envelope Mac Disney something around 40000 barrels of incremental tolling, we need to do.
Speaker Change: And we have clear line of sight to that Robert there's lots and lots of commercial interest.
Speaker Change: Okay Perfect I think previously you mentioned you're in discussions are more than double the amount youre looking for or is that still about the same.
Oh, Yeah, we have Linus potential if we're successful on all of the new commercial negotiations, we have to go higher than the 60% number for sure.
Speaker Change: Okay.
Speaker Change: And then if I can just finish.
Speaker Change: Just we've seen some on the <unk> side. So we've seen some strong asset sale valuations for Ltc's recently and just.
Speaker Change: What are your thoughts on what Youre seeing out there in the market.
Speaker Change: What does that mean or not mean for your strategy going forward.
Speaker Change: Well I think our strategy as you know is multi pronged we want we need to improve the returns in our existing businesses, we need to derisk commercially and de lever the balance sheet, obviously MVP is clear.
Speaker Change: And most fastest way for us to do that.
Speaker Change: We see great embedded growth, obviously in midstream and in our in our utilities.
Speaker Change: Including Semco or we have some very significant growth projects in front of us and we see the ability to invest about $800 million a year in your utilities ratably at attractive alright.
Speaker Change: Returns so.
Speaker Change: Right now.
Speaker Change: We don't really need to do anything acquisition or divestiture side outside of MVP to.
Speaker Change: Meet our strategic outlook, which is I feel very robust so.
Speaker Change: We will always look at things and if theres something thats extremely compelling then we will for sure have a hard look at it Robert.
Robert: Okay. That's great. Thank you very much.
Speaker Change: Thank you.
Adam Mcknight: This concludes the Q&A portion of the call today I will now turn the conference back to Mr. Mcknight.
Mcknight: Thanks, Sylvia and thank you everyone. Once again for joining our call today and for your interest in Ulta gas that concludes our call. This morning, I Hope you enjoy the rest of your day and you have a great weekend you may now disconnect your phone lines.
Mcknight: [music].
Mcknight: Okay.
Mcknight: Yeah.
Mcknight: [music].