Q2 2024 Superior Plus Corp Earnings Call

August 14, 2024

Operator: Good day, and thank you for standing by. Welcome to Superior Plus 2024 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode.

Operator: Good day, and thank you for standing by. Welcome to Superior Plus 2024 second quarter results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your questions, simply press star 1-1 again. Please be advised that today's conference is being recorded.

Operator: After the speaker's presentation, there will be a question and answer session. To participate, you will need to press star 11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again.

Speaker Change: Good day and thank you for standing by. Welcome to Superior Plus 2024 second quarter results conference call. At this time all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To participate, you will need to press star 11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again.

Operator: Please, be advised that today's conference is being recorded. Now, I will pass the call over to Adam Kornick, Director of Corporate Finance and Investor Relations. Please go ahead.

Adam Kurnik: Now, I will pass the call over to Adam Kurnik, Director of Corporate Finance and Investigations. Please go ahead.

Speaker Change: Please be advised that today's conference is being recorded. Now I will pass the call over to Adam Kurnik, Director of Corporate Finance and Investor Relations. Please go ahead.

Adam Kurnik: Thank you, Carmen. Good morning, everyone, and welcome to Superior Plus conference call and webcast to review our 2024 second quarter results. On the call today are Allan MacDonald, President and CEO, and Greer Colter, EVP and CFO.

Adam Kornick: Thank you, Carmen. Good morning, everyone, and welcome to Superior Plus conference call and webcast to review our 2024 second quarter results. On the call today are Allan MacDonald, President and CEO, and Grier Colter, EVP and CFO. For this morning's call, Allan and Greer will begin with their prepared remarks, and then we will open out the call for questions.

Adam Kurnik: Thank you, Carmen.

Adam Kurnik: Good morning everyone and welcome to Superior Plus conference call and webcast to review our 2024 second quarter results.

Speaker Change: On the call today are Allan MacDonald, President and CEO , and Grier Colter, EVP and CFO .

Adam Kurnik: For this morning's call, Allan and Greer will begin with their prepared remarks, and then we will open up the call for questions. Listeners are reminded that some of the comments made today may be forward-looking in nature and are based on Superior's current expectations, estimates, judgments, projections, and risks. Further, some of the information provided refers to non-GAAP measures. Please refer to Superior's continuous disclosure documents available on Cedar Plus and Superior's website for further details. Dollar amounts discussed on today's call are expressed in U.S. dollars unless otherwise noted.

Speaker Change: For this morning's call, Allan and Grier will begin with their prepared remarks, and then we will open up the call for questions.

Allan MacDonald: Listeners are reminded that some of the comments made today may be forward-looking in nature and are based on Superior's current expectations, estimates, judgments, projections, and risks. Further, some of the information provided refers to non-GAAP measures. Please refer to Superior's continuous disclosure documents available on CDAR Plus and Superior's website for further details. Dollar amounts discussed on today's call are expressed in U.S. dollars unless otherwise noted. I'll now turn the call over to Allan. Thanks, Adam.

Speaker Change: Listeners are reminded that some of the comments made today may be forward-looking in nature and are based on Superior's current expectations, estimates, judgments, projections, and risks.

Speaker Change: Further, some of the information provided refers to non-GAAP measures. Please refer to Superior's continuous disclosure documents available on CDAR Plus and Superior's website for further details.

Speaker Change: Dollar amounts discussed on today's call are expressed in U.S. dollars unless otherwise noted. I'll now turn the call over to Allan.

Allan MacDonald: I'll now turn the call over to Allan. Thanks, Adam. Good morning, everyone, and thank you for joining our second quarter results call. When we made it encouraging progress in our propane divisions across Canada and the US this quarter. Despite the challenges brought on by unseasonably warm weather, our team successfully mitigated most of those impacts. In Canada, we achieved growth compared to Q2 2023, driven by our focus on expanding our customer base and maintaining disciplined cost and margin management. In the US, we countered the weather impact with a similar focus on adding new customers, managing our pricing effectively, and capitalizing on cost reduction and productivity opportunities.

Allan MacDonald: Good morning, everyone, and thank you for joining our second quarter results call. We made encouraging progress in our propane divisions across Canada and the U.S. this quarter, despite the challenges brought on by unseasonably warm weather, our team successfully mitigated most of those impacts. In Canada, we achieved growth compared to Q2 2023, driven by our focus on expanding our customer base and maintaining disciplined cost and margin management, in the U.S., we countered the weather impact with a similar focus on adding new costs.., managing our pricing effectively and capitalizing on cost reduction and productivity opportunities.

Allan MacDonald: Thanks, Adam. Good morning, everyone, and thank you for joining our second quarter results call.

Allan MacDonald: We made encouraging progress in our propane divisions across Canada and the U.S. this quarter.

Allan MacDonald: Despite the challenges brought on by unseasonably warm weather.

Speaker Change: Our team successfully mitigated most of those impacts.

Speaker Change: In Canada, we achieved growth compared to Q2 2023, driven by our focus on expanding our customer base and maintaining disciplined cost and margin management.

Speaker Change: In the U.S., we countered the weather impact with a similar focus on adding new customers.

Speaker Change: managing our pricing effectively, and capitalizing on cost reduction and productivity opportunities.

Allan MacDonald: While Q2 is a smaller quarter, I'm pleased to see that our early stage initiatives to grow the propane business and optimize our cost base are already showing positive results. Ceteros faced some regional pricing pressure, particularly in West Texas, where the oil and gas sector is a significant part of our business in the quarter. Despite this, the Ceteros team maintained strong margins and delivered a 15% increase in volumes, reinforcing its market leading position. Now, this is an emerging sector and one that's still in its infancy, and we have long anticipated some volatility as it expands. Smaller regional investors, with potentially different longer term aspirations in Superior, have been aggressive in the region impacting the quarter's results.

Allan MacDonald: While Q2 is a smaller quarter, I'm pleased to see that our early-stage initiatives to grow the propane business and optimize our cost base are already showing positive results. Sataris faced some regional pricing pressure, particularly in West Texas where the oil and gas sector is a significant part of our business in the quarter, despite this, the satirist team maintained strong margins and delivered a 15% increase in volumes reinforcing its market leading position.

Speaker Change: While Q2 is a smaller quarter, I'm pleased to see that our early stage initiatives to grow the propane business and optimize our cost base are already showing positive results.

Speaker Change: Soterios faced some regional pricing pressure, particularly in West Texas where the oil and gas sector is a significant part of our business in the quarter.

Speaker Change: Despite this, the Soteros team maintained strong margins and delivered a 15% increase in volumes, reinforcing its market-leading position.

Allan MacDonald: Now, this is an emerging sector, and one that's still in its infancy, and we have long anticipated some volatility as it expands. Smaller Regional Investors with Potentially Different Longer-Term Aspirations, have been aggressive in the region, impacting the quarter's results. However, we remain confident in the long-term prospects of this. Few sectors in the energy space today generate as much excitement and interest as CNG and RNG. When we acquired Soteris, we knew that market verticals would not necessarily evolve evenly quarter over quarter. However, our acquisition of Soteris wasn't about the short term or any one quarter.

Speaker Change: Now, this is an emerging sector, and one that's still in its infancy, and we have long anticipated some volatility as it expands.

Speaker Change: Smaller regional investors with potentially different longer term aspirations in Superior.

Allan MacDonald: However, we remained confident in the long-term prospects of this. Business. Few sectors in the energy space today generate as much excitement and interest as CNG RNG. When we acquired Caterus, we knew that market verticals would not necessarily evolve evenly quarter over quarter. However, our acquisition of Caterus wasn't about the short term, or any one quarter. It was about the long term value and potential of this business. In just one short year, Caterus has enabled Superior to become the largest player in the over-the-road CND distribution, commanding nearly half of the industry's fleet. It's allowed us to become the biggest distributor of over-the-road renewable natural gas, with over 65 MSUs dedicated to delivering RNG full-time, 24 hours a day, 365 days a year.

Speaker Change: have been aggressive in the region, impacting the quarter's results.

Speaker Change: However, we remain confident in the long-term prospects of this business.

Speaker Change: Few sectors in the energy space today generate as much excitement and interest as CNG and RNG.

Speaker Change: When we acquired Soteris, we knew that market verticals would not necessarily evolve evenly quarter over quarter. However, our acquisition of Soteris wasn't about the short term or any one quarter. It was about the long-term value and potential of this business.

Allan MacDonald: It was about the long-term value and potential of this business [inaudible] In just one short year, Soteris has enabled Superior to become the largest player in the over-the-road CND distribution, commanding nearly half of the industry's fleet. It's allowed us to become the biggest distributor of over the road renewable natural gas with over 65 MSUs dedicated to delivering RNG full time 24 hours a day, 365 days. This acquisition has positioned Superior at the forefront of the expansion of low-carbon energy solutions to new segments like power generation and backup power.

Speaker Change: In just one short year, Soteris has enabled Superior to become the largest player in the over-the-road CND distribution, commanding nearly half of the industry's fleet.

Speaker Change: It's allowed us to become the biggest distributor of over-the-road renewable natural gas, with over 65 MSUs dedicated to delivering RNG full-time, 24 hours a day, 365 days a year.

Allan MacDonald: This acquisition has positioned Superior at the forefront of the expansion of low-carbon energy solutions to new segments like power generation and backup power support. So as I reflect on the quarter, I'm very encouraged. Our efforts to operate the propane business with a new leadership team, improved effectiveness, and delivering organic growth are showing meaningful results. As we move forward, we will continue driving growth and incremental profitability within the propane segment, while growing Caterus and expanding into new segments and geographies as opportunities arise. All while ensuring we continue to operate our business safely and effectively as we have in the past.

Speaker Change: This acquisition has positioned Superior at the forefront of the expansion of low-carbon energy solutions to new segments like power generation and backup power support.

Allan MacDonald: So as I reflect on the quarter, I'm very encouraged. Our efforts to operate the propane business with a new leadership team, improved effectiveness, and delivering organic growth are showing meaningful results. As we move forward, we will continue driving growth and incremental profitability within the propane sector, while growing Soteris and expanding into new segments and geographies as opportunities arise. All while ensuring we continue to operate our business safely and effectively as we have in the past. So now with that, let me hand the call over to Grier to give you some comments on the quarter's financial results We're here. Thank you, Allan, and good morning, everyone.

Speaker Change: So, as I reflect on the quarter, I'm very encouraged.

Speaker Change: Our efforts to operate the propane business with a new leadership team, improved effectiveness, and delivering organic growth are showing meaningful results.

Speaker Change: As we move forward, we will continue driving growth and incremental profitability within the propane segment.

Speaker Change: while growing Soteris and expanding into new segments and geographies as opportunities arise. All while ensuring we continue to operate our business safely and effectively as we have in the past.

Allan MacDonald: So now, with that, let me hand the call over to Greer to give you some comments on the quarter's financial results. We're here.

Speaker Change: So now with that, let me hand the call over to Grier to give you some comments on the quarter's financial results.

Greer Colter: Thank you, Alan.

Greer Colter: Good morning, everyone. Before I get into the results, I'll remind everyone that all dollar figures are in US dollars as we completed our transition on reporting currency beginning in Q1. Overall, the business generated 43.3 million of EBITDA on the quarter, which represents an increase of 14 million over Q2 2023. The majority of this increase is a result of the Caterus acquisition, which will be closed on May 31, 2023. Adjust the EBITDA for share for the second quarter increased by 4 cents compared to Q2 2023 to 16 cents.

Grier Colter: Before I get into the results, I'll remind everyone that all dollar figures are in U.S. dollars as we completed our transition on reporting currency beginning in Q1. Overall, the business generated $43.3 million of EBITDA in the quarter, which represents an increase of $14 million over Q2 2023. The majority of this increase is a result of the CITERIS acquisition, which we closed on May 31st, 2021. Adjusted dividend per share for the second quarter increased by four cents compared to Q2 2023 to $0.60.

Grier Colter: Brr.

Grier Colter: Thank you, Allan, and good morning, everyone.

Grier Colter: Before I get into the results, I'll remind everyone that all dollar figures are in U.S. dollars as we completed our transition on reporting currency beginning in Q1.

Grier Colter: Overall, the business generated $43.3 million of EBITDA in the quarter, which represents an increase of $14 million over Q2 2023.

Grier Colter: The majority of this increase is a result of the Soteris acquisition, which we closed on May 31st, 2023.

Speaker Change: Adjusted dividend per share for the second quarter increased by four cents compared to Q2 2023.

Greer Colter: Our second quarter net loss of 45.3 million compared to a net loss of 29.2 million in the prior year quarter; the decreases are primarily due to an unreliable gain on derivatives in the prior year that didn't repeat this quarter.

Grier Colter: Our second quarter net loss of 45.3 million compared to a net loss of 29.2 million in the prior, increases primarily due to an unrealized gain on derivatives in the prior year that didn't repeat this quarter. Now turning to the, And I'll start with propane, which generated solid results, particularly in light of generally warmer weather. In aggregate, these businesses landed in line with our expectations in Q2. The U.S. propane business produced adjusted at about $9.8 million, which represents a decrease of $3.9 million, or 28%, compared to the prior quarter. This decrease was driven by lower sales volumes from the warmer weather, higher tank levels coming out of Q1, and the divestiture of non-core heating oil assets in the prior year.

Grier Colter: to 16 cents.

Speaker Change: Our second quarter net loss of 45.3 million compares to a net loss of 29.2 million in the prior year quarter. The decrease is primarily due to an unrealized gain on derivatives in the prior year that didn't repeat this quarter.

Greer Colter: Now turning to the businesses. And I'll start with propane, which generated solid results, particularly in light of generally warmer weather. In aggregate, these businesses' land is in line with our expectations in Q2. The US propane business produced adjusted EBITDA of 9.8 million, which represents a decrease of 3.9 million, or 28 percent, compared to the prior year quarter. This decrease was driven by lower sales volumes from the warmer weather, higher tank levels coming out of Q1, and the divestiture of non-core heating oil assets in the prior year. The Canadian propane business produced 10.5 million of adjusted EBITDA in the second quarter, which was an increase of 400,000 compared to the prior year.

Speaker Change: Now turning to the businesses.

Speaker Change: And I'll start with propane, which generated solid results, particularly in light of generally warmer weather. In aggregate, these businesses landed in line with our expectations in Q2.

Speaker Change: The U.S. propane business produced adjusted EBITDA of $9.8 million, which represents a decrease of $3.9 million, or 28%, compared to the prior quarter.

Speaker Change: This decrease was driven by lower sales volumes from the warmer weather, higher tank levels coming out of Q1, and the divestiture of non-core heating oil assets in the prior year.

Grier Colter: The Canadian propane business produced 10.5 million of adjusted EBITDA in the second quarter, which was an increase of 400,000 compared to the prior year. You'll recall from our 2024 guidance expectations related to our acquisition of Soteris that we divested of our Northern Ontario propane business in Q4 2023. Those assets contributed about a million and a half, of adjusted EBITDA on the prior year quarter, so we are especially pleased with the result given that the business grew 4% despite lapping a quarter with that contract. Curtis.

Speaker Change: The Canadian propane business produced 10.5 million of adjusted EBITDA in the second quarter, which was an increase of 400,000 compared to the prior year.

Greer Colter: You'll recall from our 2024 guidance expectations related to our acquisition of Caterus that we divested our Northern Ontario propane business in Q4 2023. Those assets contributed about a million and a half of adjusted EBITDA on the prior year quarter. So we are especially pleased with the result, given that the business grew 4 percent, just by laughing a quarter with that country. and the comparative figures. The business also saw the benefits of several operational initiatives related to workforce optimization and reduced customer nutrition. The wholesale business generated adjusted EBITDA of 2.8 million in the second quarter, a decrease of 1.2 million compared to the prior quarter, primarily due to lower sales volumes from the warmer weather.

Speaker Change: You'll recall from our 2024 guidance expectations related to our acquisition of Soteris that we divested of our Northern Ontario propane business in Q4 2023. Those assets contributed about $1.5 million.

Speaker Change: have adjusted EBITDA on the prior quarter, so we are especially pleased with the result given that the business grew 4% despite lapping a quarter with that contribution in the comparative figures.

Grier Colter: The business also saw the benefits of several operational initiatives related to workforce optimization and reduced customer. The wholesale business generated adjusted EBITDAV 2.8 million in the second quarter, and a decrease of 1.2 million compared to the prior quarter. Primarily due to lower sales volumes from the warmer weather. Moving to Soterra. The business produced adjusted EBITDA in the second quarter of $27.2 million, which represents a $2.6 million... Police, Comparative to Q2 2023. This accounts, of course, for the full quarter comparative number. Overall, the business did not meet our expectations for the quarter.

Speaker Change: The business also saw the benefits of several operational initiatives related to workforce optimization and reduced customer attrition.

Speaker Change: The wholesale business generated adjusted EBITDA of $2.8 million in the second quarter, a decrease of $1.2 million compared to the prior quarter, primarily due to lower sales volumes from the warmer weather.

Greer Colter: Moving to Sirteras, the business produced adjusted EBITDA in the second quarter of 27.2 million, which represents a 2.6 million decrease compared to Q2 2023. This accounts, of course, for the full quarter comparative number.

Speaker Change: Moving to Soteras.

Speaker Change: The business produced adjusted EBITDA in the second quarter of $27.2 million, which represents a $2.6 million decrease compared to Q2 2023.

Greer Colter: Overall, the business did not meet EBITDA expectations for the quarter. While we were pleased with the growth in volumes, which were 15% higher than Q2 2023, and this was driven primarily by the growth and increased efficiency of our MSUs, the business faced pressure on pricing as we moved out of the winter quarters and experienced an increase in competition, primarily in the oil and gas sector. Similar to Q1, we also faced approximately 10% headwind to our growth again in Q2, as our pricing evolves towards neutrality to natural gas pricing. In Q2 2023, we generated an additional 3.4 million in EBITDA from the movement in natural gas prices that didn't recur this quarter.

Speaker Change: which this accounts, of course, for the full quarter comparative number.

Grier Colter: While we were pleased with the growth in volumes, which were 15% higher than Q2 2023, and this was driven primarily by the growth and increased efficiency of our MS. The business faced pressure on pricing as we moved out of the winter quarters and experienced an increase in competition, primarily in the oil and gas sector. Similar to Q1, We also faced approximately 10% headwind toward growth again in Q2, as our pricing evolves towards neutrality to natural gas prices. In Q2 2023, we generated an additional $3.4 million in EBITDA from the movement in natural gas prices that didn't recur this quarter. And lastly, we experienced elevated operating costs that were unexpected and temporary in nature.

Speaker Change: Overall, the business did not meet our expectations for the quarter.

Speaker Change: While we were pleased with the growth in volumes, which were 15% higher than Q2 2023, and this was driven primarily by the growth and increased efficiency of our MSUs,

Speaker Change: The business faced pressure on pricing as we moved out of the winter quarters and experienced an increase in competition primarily in the oil and gas sector.

Speaker Change: Similar to Q1, we also faced approximately 10% headwind to our growth again in Q2 as our pricing evolves towards neutrality to natural gas pricing.

Speaker Change: In Q2 2023, we generated an additional $3.4 million in EBITDA from the movement in natural gas prices that didn't recur this quarter.

Greer Colter: And lastly, we experienced elevated operating costs that were unexpected and temporary in nature. So overall, we expect some pricing pressure to continue into Q3, but we don't expect to see the same headwinds from our change in contract pricing or elevated operating costs, and we expect to see a better Q3. And as we returned to Q4 and Q1, where overall market demand is historically stronger, we expect to have our MSUs fleet deployed at excellent economics.

Speaker Change: And lastly, we experienced elevated operating costs that were unexpected and temporary in nature.

Grier Colter: So overall, we expect some pricing pressure to continue into Q3, but we don't expect to see the same headwinds from our change in contract pricing or elevated operating costs, and we expect to see it better, and as we return to Q4 and Q1, overall market demand is historically stronger. We expect to have our MSU fleet deployed at Excellent Economics. For the full year, we are expecting Soteris to come in slightly below the low end of our assumed 15-20% growth range and continue to focus on diversifying the business and customer base over the longer term, and we are fully confident that we can continue to grow the business and produce excellent returns on capital on that.

Speaker Change: So overall we expect some pricing pressure to continue into Q3, but we don't expect to see the same headwinds from our change in contract pricing or elevated operating costs, and we expect to see a better Q3.

Speaker Change: And as we return to Q4 and Q1, where overall market demand is historically stronger, we expect to have our MSU fleet deployed at Excellent Economics.

Greer Colter: For the full year, we are expecting for terrorists to come in slightly below the low end of our assumed 15 to 20% growth range. We continue to focus on diversifying the business and customer base over the longer term, and we are fully confident that we can continue to grow the business and produce excellent returns from capital invested.

Speaker Change: For the full year, we are expecting Soteris to come in slightly below the low end of our assumed 15-20% growth range.

Speaker Change: We continue to focus on diversifying the business and customer base over the longer term.

Speaker Change: And we are fully confident that we can continue to grow the business and produce excellent returns from capital invested.

Greer Colter: Now I've turned to corporate results and leverage. Corporate operating costs to the second quarter were 7 million, a decrease of 800,000 compared to the prior year quarter, primarily due to onboarding costs related to the change in management and insurance provision in the prior year quarter. Beginning in Q1 2024, we adopted hedge accounting for the majority of our long-term incentive hedges to minimize P&L fluctuation. Our leverage ratio for the trailing 12 months ended June 30, 2024, was 3.8. Times and improvement from 3.9 times that year end, which was driven by an improvement in working capital due to the seasonality of the business and currency conversion on our CAD-denominated debt.

Grier Colter: Now turn to Corporate Results and Leverage. Corporate operating costs for the second quarter were $7 million, a decrease of $800,000 compared to the prior year quarter, primarily due to onboarding costs related to the change in management and an insurance provision in the prior year quarter.

Speaker Change: Now turn to Corporate Results and Leverage.

Speaker Change: Corporate operating costs for the second quarter were $7 million, a decrease of $800,000 compared to the prior year quarter, primarily due to onboarding costs related to the change in management and an insurance provision in the prior year quarter.

Grier Colter: Beginning in Q1 2024, we adopted hedge accounting for the majority of our long-term incentive hedges. Minimized PNL folks. Our leverage ratio for the trailing 12 months ended June 30, 2024, was 3.8.

Speaker Change: Beginning in Q1 2024, we adopted hedge accounting for the majority of our long-term incentive hedges to minimize P&L fluctuation.

Speaker Change: Our leverage ratio for the trailing 12 months ended June 30, 2024, was 3.8.

Grier Colter: Times, an improvement from 3.9 times at year end, which was driven by an improvement in working capital due to the seasonality of and Currency Conversion on our CAD-denominated desk. Our leverage will move around somewhat from quarter to quarter due to the seasonal nature of the business, but our objective is to improve the metric to 3.7 times by the end of 2024 with a longer-term objective of 3.0.

Speaker Change: times an improvement from 3.9 times that year end which was driven by an improvement in working capital due to the seasonality of the business and currency conversion on our CAD denominated debt.

Greer Colter: Our leverage will move around somewhat from quarter to quarter due to the seasonal nature of the business, but our objective is to improve the metric to 3.7 times by the end of 2024, with a longer term objective of 3.0 times. We are confirming our adjusted EBITDA guidance of approximately $500 million for 2024, while we expect the CTERIS will be slightly lower than the original assumed growth rate. We expect that the propane businesses and corporate costs will compensate costs. at this.

Speaker Change: Our leverage will move around somewhat from quarter to quarter due to the seasonal nature of the business, but our objective is to improve the metric to 3.7 times by the end of 2024, with a longer term objective of 3.0 times.

Speaker Change: We are confirming our adjusted EBITDA guidance of approximately $500 million for 2024. While we expect that Soterios will be slightly lower than the original assumed growth rate, we expect that the propane businesses and corporate costs will compensate to offset this.

Grier Colter: While we expect that Soterios will be slightly lower than the original assumed growth rate, we expect that the propane businesses and corporate costs will compensate to us. And lastly, the board has approved a quarterly dividend of $0.18 CAD per share.

Operator: And lastly, the board has approved a quarterly dividend of 18 cents Canadian per share, and with that, I will turn the call over for Q&A. Thank you. And, as a reminder to ask a question, press star 11 on your telephone and wait for your name to be announced. So withdraw your question; simply press star 11 again.

Operator: And with that, I will turn the call over for Q&A. Thank you, and as a reminder, to ask a question, press star 111 on your telephone and wait for your name to be announced. So withdraw your question, simply press star 111 again.

Speaker Change: And lastly, the board has approved a quarterly dividend of 18 cents Canadian per share.

Speaker Change: And with that, I will turn the call over for Q&A.

Speaker Change: Thank you. And as a reminder to ask a question, press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. One moment for our first question that comes from Gary Ho with Judge Arden. Please go ahead.

Operator: One moment for our first question that comes from Gary Ho, with Dajar done. Please go ahead. Thanks and good morning.

Gary Ho: One moment for our first question that comes from Gary Ho, with the Dajar down.

Gary Ho: Please go ahead. Thanks and good morning.

Allan MacDonald: Maybe just start off with your guidance. You mentioned you're maintaining your 5% growth, 500 million, and you're suggesting a very strong second half. Maybe just walk us through maybe a bit more detail in terms of segments, Canada propane, U.S. propane, and Soteris. And are there any bigger operational initiatives kind of driving the second half strength worth highlighting? Hey Gary, it's Allan. Let me start and then Grier will finish.

Gary Ho: Maybe just start off with your guidance. You mentioned you're maintaining your 5% growth to 500 million, and you're suggesting a very strong second half.

Gary Hall: Thanks and good morning. Maybe just start off with your guidance. You mentioned you're maintaining your 5%.

Allan MacDonald: Maybe just walk us through maybe a bit more detail in terms of segments, Canada, Copaine, US Copaine, and Sataris.

Gary Hall: Growth 500 million, and you're suggesting a very strong second half. Maybe just walk us through maybe a bit more detail in terms of segments, Canada Propane, U.S. Propane, and Soteris. And are there any bigger operational initiatives kind of driving the second half strength worth highlighting?

Greer Colter: And are there any bigger operational initiatives kind of and rural finish? Yeah, we're maintaining guidance. I mean, short answer is yes. We've got, we've been working really hard, as you know, on looking at opportunities in the propane business, and we are very optimistically continue to add new customers and to improve the efficiency of the business. And it's less about cost reduction, quite frankly, and more about the effectiveness of how we're operating the business and really working at managing retention better, managing pricing, and working really hard at acquiring new customers. So, short answer is we see more opportunities coming into the latter half of the year.

Allan MacDonald: Yeah, we're maintaining guidance, I mean... The short answer is yes. We've been working really hard, as you know, on looking at opportunities in the propane business, are very optimistic, to add new customers and to improve the efficiency of the business. And it's less about cost reduction quite frankly and more about the effectiveness of how we're operating the business and really working at managing retention better, managing pricing and working really hard to acquire new customers.

Speaker Change: Hey Gary, it's Allan. Let me start and then Grier will finish. Yeah, we're maintaining guidance.

Speaker Change: The short answer is yes. We've been working really hard, as you know, on looking at opportunities in the propane business, and we are very optimistic.

Allan MacDonald: So the shorter answer is we see more opportunities coming into the latter half of the year. But I want to let Greer talk about sort of the little bit of a lot and how we get from here to there.

Speaker Change: We continue to add new customers and to improve the efficiency of the business.

Grier Colter: And it's less about cost reduction, quite frankly, and more about the effectiveness of how we're operating the business and really working at managing retention better.

Speaker Change: Managing Pricing, and working really hard at acquiring new customers. So the short answer is we see more opportunities coming into the latter half of the year. But I want to let Grier talk about sort of a little bit of the latter on how we get from here to there.

Greer Colter: But I want to let Greer talk about the little bit of the latter on how we get from here to there. Yes, sure. So if we are target of 500, obviously we'll see a little bit ahead when done the Sataris result. To say, you know, I think if we look at the second quarter, you know, this business missed by kind of 7 million S, right? We don't think Q2 will be that large in this, but we're going to see some of the same pressures, as I said, some of the things temporary, some of the things a little bit more longer term for us to manage once we get into Q4.

Grier Colter: Yes, sure. So, you know, if we, our target of 500, you know, obviously, we'll see a little bit of headwind on the Soterra's result. Just to say, you know, I think if we look at the second quarter. You know, with this business missed by kind of $7 million-ish, right? We don't think Q2 will be that large a miss, but we're going to see some of the same pressures.

Grier Colter: Yes, sure. So, you know, if we, our target of 500, you know, obviously, we'll see a little bit of headwind on the Soteris result.

Grier Colter: As I say, you know, I think if we look at the second quarter,

Grier Colter: You know this this business missed by kind of seven million ish, right? We don't think Q2 will be that large a miss But we're going to see some of the same pressures as I said some of the things Temporary some of the things a little bit more longer term for us to manage once we get into Q4

Grier Colter: As I said, some of the things temporary, some of the things a little bit more longer term for us to manage once we get into Q4, the winter work returns and the economics and the utilization, it's a much different picture. So overall for the year, we think Starteris is probably going to end up kind of $10 million or so off where we thought, but we think through a couple of corporate cost initiatives and some of the stuff that Allan was talking about in the propane business, just initiatives that we see um really primarily into 2025 that we might be able to nip that a little bit in 2024 and and get a little bit of benefit. And when you kind of bake that all together, we see us getting very close to the $500 million. Okay, great. No, thanks for those.

Greer Colter: You know, the winter work returns, and the economics and the utilization is a much different picture. So overall for the year, you know, we think Sataris is probably going to end up kind of 10 million or so off where we thought.

Grier Colter: you know, the winter work returns and, you know, the economics and the utilization, it's a much different picture. So overall for the year, you know, we think Sir Terrace is probably going to end up kind of 10 million or so off where we thought, but we think

Greer Colter: But we think through a couple of corporate costs and initiatives, and some of the stuff that I was talking about in the propane business, just initiatives that we see really primarily into 2025 that we might be able to knit that a little bit in 2024 and get a little bit of benefit when you kind of bake that all together. We see us getting very close to the 500, and that's why we've kept with that number.

Grier Colter: Through a couple of corporate cost initiatives and some of the stuff that Allan was talking about in the propane business, just initiatives that

Speaker Change: that we see really primarily into 2025, that we might be able to nip out a little bit in 2024 and get a little bit of benefit. And when you kind of bake that all together, we see us getting very close to the 500 and that's why we've kept with that number.

Gary Ho: Okay, great. No, thanks for those.

Grier Colter: And then maybe second question, specifically on Soteris, you mentioned the increased competition dynamics. I see the per MSU economics is down year over year and also versus 1Q. Can you parse out, you know, how much of your, let's call it, 760 average MSUs were underutilized in the quarter? I'm trying to get a sense, you know, if we exclude those, how much better would the unit economics look year over year? Yeah, I think, Gary, it's less of an underutilized MSU situation. I think, you know, the team did a great job to be flowing gas.

Gary Ho: And then maybe second question specifically on Sataris, that you mentioned the increased competition dynamics. I see that per MSU, economics is down year over year and also versus 1Q. Can you parse out, you know, how much of your, as call it, 760 average MSUs were underutilized in the quarter? I'm trying to get a sense. And we exclude those. How much better would the unit economics look here over year? Yeah, I think, Gary, it's less of an underutilized MSU situation. I think, you know, the team did a great job to be flowing gas, and if you look at the metrics, the flow actually was as higher, higher.

Speaker Change: Okay, great. No, thanks for those. And then maybe second question, specifically on SACARIS, you mentioned the increased competition dynamics. I see the per MSU economics is down year over year and also versus 1Q.

Speaker Change: Can you parse out, you know, how much of your, let's call it, 760 average MSUs were underutilized in the quarter? I'm trying to get a sense, you know, if we exclude those, how much better would the unit economics look year over year?

Speaker Change: Yeah, I think Gary it's less of an underutilized MSU situation. I think, you know, the team did a great job to

Grier Colter: And if you look at the metrics, the flow actually was as high or higher. We actually had more flow per MSU than we would have in the prior year. So this was not about, you know, idle capacity and having MSUs not in service. This was a question of being competitive and looking at the market dynamics and making sure that these MSUs were in use. So of the miss, you know, as I say, there are different components and some is temporary. But if we're talking about a competition, part of the, You know, it's a very high percentage, of the same park, pricing dynamic versus utilization. So they are highly. Got it.

Speaker Change: to be flowing gas. And if you look at the the metrics, the flow actually was as high or higher. We actually had more flow per MSU than we would have in the prior year. So this was not about.

Greer Colter: We actually had more flow per MSU than we would have in the prior year. So this was not about idle capacity and having MSU is not in service. This was a question of being competitive. And I'm looking at the market dynamics and making sure that these MSUs were in use. So, of the myths, you know, as I say, there are different components in some's temporary, but if we're talking about the competition part of this, you know, it's a very high percentage of this impact was the pricing dynamic versus utilization. So they were highly utilized. Got it.

Speaker Change: You know, idle capacity and having MSUs not in service, this was a question of being competitive and looking at the market dynamics and making sure that these MSUs were in use.

Speaker Change: of the MIS, as I say there are different components and some is temporary, but if we're talking about the competition part of this, it's a very high percentage.

Speaker Change: of this impact was the pricing dynamic versus utilization. So they were highly utilized.

Grier Colter: Okay, and in a career, while I have you, the number, quick numbers question, you guys used to disclose and adjusted operating cashflow figure, which passed out some of the noise in cashflow. Maybe share some of your views internally when you look at free cashflow, what do you look at, and what's the current annualized run rate free cashflow in the business today, and pay out ratio against your current dividend. Yeah, like, for sure, Gary, I mean, when you look at the avatar and you look at our growth, Growth and Maintenance Capital, the interest, the dividend, you can see, you know, it's relatively neutral right now.

Gary Ho: Okay, and in career, while I have you, the number of quick numbers question, you guys used to disclose an adjusted operating cash flow figure, which passed out some of the noise and cash flow.

Speaker Change: Got it. Okay. And then, Grier, while I have you, just a number, a quick numbers question. You guys used to disclose an adjusted operating cash flow figure, which backs up some of the noise in cash flow.

Greer Colter: Maybe, maybe share some of your views internally when you look at free cash flow. What do you look at and what's the current annualized run rate free cash flow business today and pay out ratio against your current dividends? Yeah, like for, for sure, Gary. I mean, when you look at the, the avatar and you look at our growth growth and maintenance capital, the interest, the dividend, you can see, you know, it's relatively neutral right now. You know, and as we continue to talk about our plans for the business, whether we're talking pro painters or terrorists, I think it'll become clear to the market what our plan is.

Speaker Change: Maybe share some of your views internally when you look at free cash flow.

Speaker Change: What do you look at and what's the current annualized run rate pre-cash flow of the business today and payout ratio against your current dividends?

Speaker Change: Yeah, like, for sure, Gary, I mean, when you look at the avatar and you look at our growth,

Grier Colter: Growth and maintenance capital the interest the dividend you can see, you know, it's relatively Neutral right now You know and as we continue to talk about our plans for the business Whether we're talking propane or Soteris, I think it will become clear to the market what our what our plan is and

Grier Colter: You know, and as we continue to talk about our plans for the business, whether we're talking propainters or tariffs, I think it will become clear to the market what our plan is. But, you know, we see growth, we see our ability to... The Cash Flow Pitcher and make it more of a positive scenario, which is how we get our head around the fact that these are all support of what we've got in our plans. Sufficient cash flows to support the growth of business through CapEx. Supporter Delivery Plan.

Greer Colter: And, but, you know, we, we see growth. We see our ability to improve the cash flow picture and make it more, more of a positive scenario, which is how we get our head around the, you know, the fact that these are all supportable, we've got in our plans. We see sufficient cash flows to support the growth of the business through CapEx; you know, support our delivering plan.

Grier Colter: But, you know, we see growth, we see our ability to improve.

Speaker Change: The Cash Flow Pitcher and make it more of a positive scenario, which is how we get our head around the fact that these are all supportable. We've got...

Speaker Change: In our plans, we see sufficient cash flows to support the growth of business through CapEx.

Grier Colter: As I said in my remarks, it's super important for us to get, a more sensible leverage target by the end of 2026 and obviously... So we, you know, we, we, uh... I'm not going to read the cash flow picture that supports that, but as I say, as we continue to unveil our plans for the future and our conference, we're going to continue to do that. Okay, great. Those are my questions.

Greer Colter: As I said in my remarks, it's super important for us to get to. More sensible leverage target on the end of 2026 and obviously support the dividend, so we, you know, we, we, we see the cash flow picture that supports that. But as I say, like as we continue to unveil our plans for the future and our confidence and growth of the businesses, I think we come clear to the market.

Speaker Change: support our delivering plan. As I said, in my remarks, it's super important for us to get to a more sensible leverage target by the end of 2026 and obviously support the dividend. So we,

Speaker Change: We see the cash flow picture that supports that, but as I say, as we continue to unveil our plans for the future and our confidence in growth of the business, I think it will become clear to the market.

Gary Ho: Okay, wait for my question.

Operator: Thank you. Thanks, Gary. Thank you. Our next question comes from the line of Daryl Young with CIFO. Please proceed. Hey, good morning, everyone.

Speaker Change: Okay, great. Those are my questions. Thank you. Thanks, Gary.

Speaker Change: Thank you. Our next question comes from the line of Daryl Young with CIFO. Please proceed.

Allan MacDonald: First question is just around the competitive pressures. Is it possible to speak to how much of the function of all the new MSUs in the market versus the downturn in oil and gas? And I guess what I'm really trying to get at is just, you know, what gives you the confidence that you're not going to have significant competitive pressure in the winter heating season as well? Because there does seem to be a lot of new MSUs in the marketplace. Well, it's really, I mean, that's a really tough one, but. You know, what I'd say, hey Darren, by the way, sorry, it's Allan.

Speaker Change: Hey, good morning, everyone.

Daryl Young: First question is just around the competitive pressures.

Daryl Young: Is it possible to speak to how much is a function of all the new MSUs in the market versus the downturn in oil and gas?

Allan MacDonald: And I guess what I'm really trying to get at is just, you know, what gives you the confidence that you're not going to have significant competitive pressure in the winter heating season as well, because there does seem to be a lot of new MSUs in the marketplace. Well, it's really, I mean, that's a really tough one, but, you know, what I said, hey, hey, sorry, it's out.

Daryl Young: I guess what I'm really trying to get at is just, you know, what gives you the confidence that you're not going to have significant competitive pressure in the winter heating season as well, because there does seem to be a lot of new MSUs in the marketplace.

Speaker Change: Well, it's really, I mean, that's a really tough one, but.

Allan MacDonald: When you think about the MSUs in the market, a lot of our competition.., is based in West Texas and that's really their home market and their focus areas. So number one you've got a higher concentration and a lot of these companies. They're, you know, the MSU businesses and adjacent.., or a smaller investment. So if you think about their size relative to us, a lot of these competitors are quite small, and very, very focused.

Allan MacDonald: When you think about the MSUs in the market, a lot of our competition. is based in West Texas, and that's really their home market and their focus area. So number one, you've got a higher concentration, and a lot of these companies, the MSU businesses is an adjacency for them, or a smaller investment. So if you think about their size relative to us, a lot of these competitors are quite small and very, very focused in this market. So, you know, the downturn in terms of activity, especially in Texas this time of year, coupled with the proximity of a lot of the competition, I suppose, some downward pressure on pricing.

Speaker Change: When you think about the MSUs in the market, a lot of our competition

Speaker Change: is based in West Texas, and that's really their home market and their focus area. So, number one, you've got a higher concentration of a lot of these companies.

Speaker Change: They're, you know, the MSU business is an adjacency for them.

Speaker Change: or, you know, a smaller investment. So if you think about their size relative to us, a lot of these competitors are quite small.

Allan MacDonald: So. You know, the downturn in terms of activity, especially in Texas this time, coupled with the proximity of a lot of the companies, and Downward Pressure on Price, but I think it's very difficult to extrapolate that, the rest of our segment, and especially in the busy [inaudible] So I wouldn't, I wouldn't necessarily. Okay.

Speaker Change: and very, very focused on this market. So...

Speaker Change: You know, the downturn in terms of activity, especially in Texas this time of year, coupled with the proximity of a lot of the competition has put some downward pressure on pricing.

Allan MacDonald: But I think it's very difficult to extrapolate that to the rest of our segments and the other, and especially in the busy winter seasons. So I wouldn't necessarily make that leap.

Speaker Change: But I think it's very difficult to extrapolate that to the rest of our segments and the other, and especially in the busy winter seasons.

Allan MacDonald: Okay, so when you look out, I know it's pretty early still to be talking 2025, but when you look out that period, does this cause you to reassess the growth rates for Sir Tarris or DST enough with time enough and market development outside of oil and gas that you could still sort of continue the growth rates at high return metrics. Yeah, I think that's more; that's more it. You know, predicting the oil and gas segment is something that I don't think I'm ever going to be capable of doing, but we've long had a strategy at Tarris, you know, beyond the well side strategy, which has continued to reduce our reliance on our home market. If you go over the origin of the company.

Allan MacDonald: So, when you look out, I know it's pretty early still to be talking 2025, but when you look out that period, does this cause you to reassess the growth rates for Sir Tarris or DST enough with time enough and market development outside of oil and gas that you could still sort of continue the growth rates at a high return metrics? Yeah, I think that's more, that's more it. You know, predicting the oil and gas segment is something that I don't think I'm ever going to be capable of doing, but we've long had a strategy at Sir Tarris, you know, beyond the well side strategy, which, um.., has continued to reduce our reliance on our home market if you go over the origin of the company. The RNG business doubled over last year.

Speaker Change: So I wouldn't necessarily make that leap.

Speaker Change: Okay.

Speaker Change: So when you look out, I know it's pretty early still to be talking 2025, but when you look at that period does this

Speaker Change: cause you to reassess the growth rates for Sertarus or do you see enough

Speaker Change: with time enough and market development outside of oil and gas that you could still sort of continue the growth rates at a high return metrics Yeah, I think that's more that's more it you know predicting in the oil and gas segment is something that

Speaker Change: I don't think I'm ever going to be capable of doing, but we've long had a strategy, it's a terrorist, you know, the beyond the well site strategy.

Speaker Change: which has continued to reduce our reliance on our home market, if you will, the origin of the company.

Allan MacDonald: The RNG business doubled over last year. Some of the new hubs we've opened have been greenfield. You know, we're looking at emerging segments like backup power and power generation. And those opportunities are going to be continued at the forefront. So the business development functions at Tarris is incredibly important. And you always want to have that imbalance with opportunities that exist in the traditional segment, whether it be Texas or other on gas markets. Because historically, as you can see from the results, have been incredibly lucrative. So it's a continuous balancing game to say, well, we don't want to walk away from opportunities that present the chance to generate a maximum return for these investments, but you also don't want to be exposed.

Allan MacDonald: Some of the new hubs we've opened have been Greenfield. You know, we're looking at emerging segments like, you know, backup power and power generation. And those opportunities are going to be continued at the forefront. So the business development function at Zoteris is incredible, and you always want to have that imbalance with opportunities that exist in the traditional segment, whether it be Texas or other gas markets, because historically as you can see from the results have been incredibly lucrative. So it's a continuous balancing game to say, well, we don't want to walk away from opportunities that present the chance to generate a maximum return for these investments but you also don't want to be exposed.

Speaker Change: The RNG business doubled over last year. Some of the new hubs we've opened have been Greenfield. You know, we're looking at emerging segments like, you know, backup power and power generation. And those opportunities are going to be continued at the forefront. So the business development function at Zoteris is incredibly important.

Speaker Change: And you always want to have that in balance with opportunities that exist.

Speaker Change: in the traditional segment, you know, whether it be Texas or other gas markets, because historically, as you can see from the results have been incredibly lucrative. So it's it's a continuous balancing game to say, well, we don't want to walk away from opportunities that present the

Allan MacDonald: So year-over-year you're seeing a little bit of that normalization and like I said, you know in my opening remarks We expect volatility in this segment. I mean it's emerging It's it's growing and unfortunately, it's not going to grow at the rate that we happen to you know Predict we're going to add MSU's sort of 18 months in advance. That's it.

Allan MacDonald: So you're a year; you're seeing a little bit of that normalization. And, like I said, you know, in my opening remarks, we expect volatility in this segment. I mean, it's emerging. It's growing.

Speaker Change: the chance to generate a maximum return for these investments, but you also don't want to be exposed.

Speaker Change: So year over year, you're seeing a little bit of that normalization and like I said, you know, in my opening remarks, we expect volatility in this segment. I mean, it's emerging, it's growing, and unfortunately, it's not going to grow at the rate that we happen to, you know, predict we're going to add MSUs sort of 18 months in advance.

Allan MacDonald: And unfortunately, it's not going to grow at the rate that we happen to predict we're going to add MSU sort of 18 months in advance. That's, we're okay with that.

Allan MacDonald: But we're going to be very, very mindful in terms of our business development plans for Q2 and Q3 next year that we're continuing to build the business for the long term. Developing new segments, participating in high growth segments, and capitalizing on opportunities to generate the most return we can. Constant balancing act, but the teams really working hard on it. And so far, you know, with a little bit of a bump in Q2, I think we've done an incredible job of really maximizing every opportunity that's presented to them. And, you know, we have a bigger presence in those emerging segments than anyone.

Allan MacDonald: We're okay with that, But we're going to be very, very mindful in terms of our business development plans for Q2 and Q3 next year, that we're continuing to build the business for the long term, developing new segments, participating in high growth segments and capitalizing on opportunities to generate the most return we can. Constant balancing act, but the team's really working hard on it. And so far, you know, with a little bit of a bump in Q2, I think we've done an incredible job of really maximizing every opportunity that's been presented to them.

Speaker Change: That's it. We're okay with that.

Speaker Change: But we're going to be very, very mindful in terms of our business development plans for Q2 and Q3 next year that we're continuing to build the business for the long term, developing new segments, participating in high growth segments, and

Operator: Good day, and thank you for standing by.

Operator: Welcome to Superior Plus 2024 Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your questions, simply press star 1-1 again.

Speaker Change: and capitalizing on opportunities to generate the most return we can. Constant balancing act, but the team's really working hard on it. And so far, you know, with a little bit of a bump in Q2, I think we've done an incredible job of really maximizing every opportunity that's been presented to them.

Allan MacDonald: You know, we have a bigger presence in those emerging segments than anyone, and I get the team full credit for the work they did and the were so they had to make that a reality. Okay, that's good, Keller. I'll get back in the queue. Thanks very much. Thanks so much.

Allan MacDonald: And I get the team full credit for the work they did and the poor site they had to make that a reality.

Speaker Change: And you know we have a bigger presence in those emerging segments than anyone and I give the team full credit for the work they did in the foresight they had to make that a reality.

Operator: Please, be advised that today's conference is being recorded.

Daryl Young: Thank you.

Operator: Thank you. Our next question comes from the line of Robert Catellier with CIBC Capital Markets. Please proceed. Hey, good morning, everybody.

Speaker Change: Okay, that's good, Culler. I'll get back in the queue. Thanks very much. Thanks so much.

Robert Catellier: Our next question comes from the line of Robert Catellier with CIBC Capital Markets.

Adam Kurnik: Now, I will pass the call over to Adam Kurnik, Director of Corporate Finance and Investigations. Please go ahead. Thank you, Carmen.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Robert Cattelier with CIBC Capital Markets. Please proceed.

Robert Catellier: Please proceed.

Allan MacDonald: Good morning, everybody. I just wanted to continue addressing the competitive situation. And maybe you can just describe to us what your competitive response has been on West Texas. It seems like giving the utilization rate. There was some response on price, but I'm curious if you've actually moved some of the MSUs out to more profitable regions.

Allan MacDonald: I just wanted to continue addressing the competitive situation. Maybe you can just... Describe to us what your competitive response has been in West Texas. It seems like, given the utilization rate, there was some response on price, but I'm curious if you've actually moved some of the MSUs out to more profitable regions. Hey Rob, it's Allan, I'm uh... You know, the volume in West Texas is really, continues to be really attractive and... When you see sort of a.., pricing fluctuation, which is not uncommon in that part of the world. There's, you know, there's always, going to be a reaction to the team.

Adam Kurnik: Good morning, everyone, and welcome to Superior Plus Conference Call and Webcast to review our 2024 Second Quarter Results. On the call today are Allan MacDonald, President and CEO, and Greer Colter, EVP and CFO. For this morning's call, Allan and Greer will begin with their prepared remarks, and then we will open up the call for questions. Listeners are reminded that some of the comments made today may be forward-looking in nature, and are based on Superior's current expectations, estimates, judgments, projections, and risks.

Robert Cattelier: Good morning, everybody. I just wanted to continue addressing the competitive situation. Maybe you can just...

Robert Cattelier: Describe to us what your competitive response has been in West Texas. It seems like, given the utilization rate, there was some response on price, but I'm curious if you've actually moved some of the MSUs out to more profitable regions.

Allan MacDonald: Hey Rob, it's Allan. You know, the volume in West Texas is really, continues to be really attractive. And when you see sort of a pricing fluctuation, which is not uncommon in that part of the world, there's always going to be a reaction to the team. And I think we've seen a couple of things. One, some of that price-related competition is being challenged with operational and safety issues. And in more than one instance, we've had, you know, contract opportunities that were a little lower than what would work for us, and the customer return. And so people are recognizing that Citeris, because this is our core business, our reliability and safety record is very, very strong.

Robert Cattelier: Hey Rob, it's Alan O'Neum

Rob: You know, the volume in West Texas is really, continues to be really attractive.

Adam Kurnik: Further, some of the information provided refers to non-GAP measures. Please refer to Superior's Continuous Disclosure Documents available on Cedar Plus and Superior's website for further details. Dollar amounts discussed on today's call are expressed in US dollars unless otherwise noted.

Speaker Change: When you see sort of a pricing fluctuation, which is not uncommon in that part of the world.

Allan MacDonald: And I think we've seen a couple things. One, some of that price-related... Competition, Patience, is being challenged with operational and safety issues. And in more than one instance we've had, you know, contract opportunities that were a little lower than what would work for us and the customer return. And so people are recognizing that Sataris, because this is our core business, our reliability and safety record is very, very strong. And that does command a small premium in the markets. So we're seeing some of that.

Rob: There's, you know, there's always...

Speaker Change: going to be a reaction to the team. And I think we've seen a couple of things. One, some of that price related

Allan MacDonald: I'll now turn the call over to Allan. Thanks, Adam.

Allan MacDonald: Good morning, everyone, and thank you for joining our Second Quarter Results call. When we made it encouraging progress in our propane divisions across Canada and the US this quarter. Despite the challenges brought on by unseasonably warm weather, our team successfully mitigated most of those impacts. In Canada, we achieved growth compared to Q2 2023, driven by our focus on expanding our customer base and maintaining disciplined cost and margin management. In the US, we countered the weather impact with a similar focus on adding new customers, managing our pricing effectively, and capitalizing on cost reduction and productivity opportunities.

Speaker Change: competition.

Speaker Change: is being challenged with operational and safety issues and in more than one instance we've had.

Speaker Change: Contract opportunities that were a little lower than what would work for us and the customer return. So people are recognizing that Soteris is a good company.

Greer Colter: And that does command a small premium in the market. So we're seeing some of that.

Speaker Change: Because this is our core business, our reliability and safety record is very, very strong. And that does command a small premium in the market, so we're seeing some of that.

Allan MacDonald: The other potential is, okay, well, diversifying into Greenfield opportunity, or opportunities outside of West Texas. We're working equally with the team on, we were talking to them, just this morning in terms of some opportunities in other parts of North America that are actually performing really well. Our ability to repurchase the fleet in a 30-day period and generate new contracts, obviously, that presents a bit of a challenge. But we're looking at every opportunity to say, OK, where's the best place for us to have the fleet?

Allan MacDonald: The other potential is, okay, well, diversifying into greenfield opportunities or opportunities outside of West Texas. We're working equally with the team on. We were talking to them just this morning in terms of some opportunities in other parts of North America that are actually performing really well. Our ability to repurchase the fleet in a 30-day period and generate new contracts is obviously that presents a bit of a challenge. But we're looking at every opportunity to say, okay, where's the best place for us to have the fleet? And continue to maintain relationships with customers that are very, very important to us in these periods.

Speaker Change: The other potential is, okay, well, diversifying into greenfield opportunities, or opportunities outside of West Texas, we're working equally with the team on. We were talking to them...

Speaker Change: Just this morning in terms of some opportunities in other parts of North America that are actually performing really well.

Speaker Change: Our ability to repurchase the fleet in a 30-day period and generate new contracts, obviously that presents a bit of a challenge. But we're looking at every opportunity to say, okay, where's the best place for us to have the fleet?

Allan MacDonald: And continue to maintain relationships with customers that are very, very important to us in these periods. You know, this isn't all dollars and cents in a 30-day period. We have customers that have relied on us for a long time, that have been with us from the beginning, and we need to be there for them because we're thinking about it in terms of the long haul. And the reality is, in September, October, November, the world's going to be changed.

Speaker Change: and continue to maintain relationships with customers that are very, very important to us.

Allan MacDonald: You know, this isn't all dollars and cents in a 30-day period. We have customers that have relied on us for a long time that have been with us from the beginning. And we need to be there for them because we're thinking about it in terms of the long haul.

Speaker Change: In these periods, you know, this isn't all dollars and cents in a 30-day period. We have customers that have relied on us for a long time.

Allan MacDonald: Now, this is an emerging sector and one that's still in its infancy and we have long anticipated some volatility as it expands. Smaller regional investors, with potentially different longer term aspirations in superior, have been aggressive in the region impacting the quarter's results. However, we remained confident in the long-term prospects of this. Business.

Speaker Change: that have been with us from the beginning and we need to be there for them because we're thinking about it in terms of the long haul. And the reality is, in September, October, November, the world's going to be changed and the capacity is going to be much smaller than it is today.

Allan MacDonald: And the reality is in September, October, November, the world's going to be changed. And the capacity is going to be much smaller than it is today. We know the activity is going to heat up, and we want to maintain those customer relationships. So it's always a balance, but yes, we're looking at every opportunity on the table right now.

Allan MacDonald: And the capacity is going to be much smaller than it is today. We know the activity is going to heat up, and we want to maintain those customer relationships. So it's always a balance. But yes, we're looking at every opportunity that's on the table. Maybe I'll just add Robert Grier.

Speaker Change: We know the activity is going to heat up, and we want to maintain those customer relationships. So it's always a balance, but yes, we're looking at every opportunity that's on the table right now.

Greer Colter: Maybe I'll just add Rob; it's a career. The economics in West Texas are still really good, right? So if you look at where these MSUs are in the kind of stacking order of where all the MSUs are, so if we say roughly if they're them or something like this, they're sitting in West Texas right now, they're generating. and average or above average returns for the portfolios. It's still a really good space. There is more competition in that space, right? But for us to move it, there are certainly markets where we can move some of these MSUs to generate higher returns.

Allan MacDonald: Few sectors in the energy space today generate as much excitement and interest as CNG RNG. When we acquired Caterus, we knew that market verticals would not necessarily evolve evenly quarter over quarter. However, our acquisition of Caterus wasn't about short the short term, or any one quarter. It was about the long term value and potential of this business. In just one short year, Caterus has enabled Superior to become the largest player in the over-the-road CND distribution, commanding nearly half of the industries fleet.

Grier Colter: The economics in West Texas are still really good, right? So if you look at, you know, where these MSUs are in the kind of stacking order of where all the MSUs are. So if we say roughly a third of them or something like this are sitting in West Texas right now, they're generating. Average or above average returns for the portfolio so still a really good space. You know, there's more competition in that space, right?

Grier Colter: Maybe I'll just add, Rob, it's Grier. The economics in West Texas are still really good, right? So if you look at, you know, where these MSUs are in the kind of stacking order of where all the MSUs are, so if we say roughly a third of them or something like this are sitting in West Texas right now, they're generating...

Grier Colter: But for us to move it, there's certainly their market, is one of those MSUs to generate higher returns, but not all markets would generate higher returns. It's the lowest and it's an issue, like it's still a great area, this is a great spot for us to generate some of our income and we do have very good returns, I just wanted to add that. Thanks, that's a helpful response. Just looking at the MSU Outlook, though, it looks like it was tweaked slightly, nothing serious, less than a percent. Can you describe the situation?

Grier Colter: average or above average returns for the portfolio, so it's still a really good space.

Grier Colter: There is more competition in that space, right? But for us to move it, there's certainly, there are markets where we can move some of these MSUs to generate higher returns, but not all markets would generate higher returns. It's not like.

Greer Colter: But not all markets would generate higher returns. It's not like these are the lowest, and it's still a great area. This is a great spot for us to generate some of our income, and we do have very good returns.

Allan MacDonald: It's allowed us to become the biggest distributor of over-the-road renewable natural gas with over 65 MSUs dedicated to delivering RNG full-time 24 hours a day 365 days a year. This acquisition has positioned Superior at the forefront of the expansion of low-carbon energy solutions to new segments like power generation and backup power support.

Grier Colter: These are the lowest and it's still a great area this is a great spot for us to generate some of our income and we do have very good returns. I just wanted to add that point.

Robert Catellier: I just wanted to add that point.

Robert Catellier: Thanks.

Robert Catellier: It's a helpful response.

Robert Catellier: Just looking at the MSU outlook, it looks like it was tweaked slightly. Nothing serious, what's on our percent?

Speaker Change: Thanks, that's a helpful response. Just looking at the MSU Outlook bill, it looks like it was tweaked slightly, nothing serious, less than a percent. Can you describe the situation in the supply chain in providing MSUs on schedule and on budget?

Robert Catellier: Can you describe the situation in the supply chain and providing MSUs on scheduled non-budget?

Operator: in the supply chain and providing MSUs on schedule and on budget. Rob, can you just asking about the number of MSUs? Yeah, the actual number of MSUs. Yeah, I think they took the full of your number down by five units, which is less than 100%.

Allan MacDonald: So as I reflect on the quarter, I'm very encouraged. Our efforts to operate the propane business with a new leadership team, improved effectiveness, and delivering organic growth are showing meaningful results. As we move forward, we will continue driving growth and incremental profitability within the propane segment, while growing Caterus and expanding into new segments and geographies as opportunities arise. All while ensuring we continue to operate our business safely and effectively as we have in the past.

Robert Catellier: Rob, can you just ask about the number of MSUs? Yeah, the actual number of MSUs. Yeah, I think they took the full year number down by five units, which was 100%. I think maybe it's the average that we're talking about.

Speaker Change: Rob, you're just asking about the number of MSUs? Yeah, the actual number of MSUs. Yeah, I think you took the foliar number down by 5 units, which is less than 1%.

Grier Colter: I think maybe it's the average that we're talking about. So here's what I would say, and if I don't ask your question, you'd ask me again, but we're obviously like we originally said we would buy roughly 140 of them. I think we're about 41 or something year-to-date, and we kind of thought they would occur.

Greer Colter: So here's what I would say, and if I don't answer your question, just ask me again. But we're obviously, like we originally said, we would buy roughly 140 of these. I think we're about 40, one or something year to date. And we kind of thought they would occur relatively evenly. So we're a little bit behind. I mean, we kind of thought they would be slightly back and weighted, but not this back and weighted. So we're still wanting to take these MSUs. Obviously, that's a lot to get delivered in the second half of the year. If they get delivered, we'll certainly take them.

Speaker Change: I think maybe it's the average that we're talking about, so that, so here's what I would say, and if I don't answer your question, just ask me again, but we're obviously, like we originally said, we would buy roughly 140 of these.

Grier Colter: So now with that, let me hand the call over to Greer to give you some comments on the quarter's financial results. We're here.

Speaker Change: I think we're about 41 or something, year-to-date, so, and we kind of thought they would occur

Grier Colter: Thank you, Alan.

Grier Colter: Um... You know, relatively evenly, so we're a little bit behind. I mean, we kind of thought they would be slightly back end weighted, but not this back end weighted. So we're yeah, we're still wanting to take these MSUs. Obviously, that's a lot to get delivered in the second half of the year. If they get delivered, we'll certainly take them. There's probably a chance that some of them may be slipping to next year, come right near the end of the year. If you recall last year, we had about 50 that came in the last week of December.

Grier Colter: Good morning, everyone. Before I get into the results, I'll remind everyone that all dollar figures are in US dollars as we completed our transition on reporting currency beginning in Q1. Overall, the business generated 43.3 million of EBITDA on the quarter, which represents an increase of 14 million over Q2 2023. The majority of this increase is a result of the Caterus acquisition which will be closed on May 31, 2023. Adjust the EBITDA for share for the second quarter increased by 4 cents compared to Q2 2023 to 16 cents.

Speaker Change: Um...

Speaker Change: you know, relatively evenly, so we're a little bit behind. I mean, we kind of thought they would be slightly back end weighted, but not this back end weighted. So we're yeah, we're still wanting to take these MSUs. Obviously, that's a lot to get delivered in the second half of the year. If they get delivered, we'll certainly take them.

Greer Colter: There's probably a chance that some of them maybe slip into next year or come right near the end of the year. If you recall last year, we had about 50 that came in the last week of December. But yeah, as I say, we're still counting on the 140. We've still got them ordered, and to the extent that they come, you know, just be more back and weighted. So that's the number you're talking about, just having that. If they came later in the year, the average for the year would be lower, but you might end up with the same number.

Speaker Change: There's probably a chance that some of them may be slipping to next year or come right near the end of the year. If you recall last year, we had about 50 that came in the last week of December .

Grier Colter: But yeah, as I say, we're still counting on the 140. We've still got them ordered. And to the extent that they come, it'll just be more back-end weighted. So that's the number you're talking about, just having that. If they came later in the year, the average for the year would be lower, but you might end up with the same number that's what it is.

Speaker Change: But yeah, as I say, we're still counting on the 140. We've still got them boarded, and to the extent that they come, it'll just be more back-end weighted. So that's the number you're talking about, just having that

Grier Colter: Our second quarter net loss of 45.3 million compared to a net loss of 29.2 million in the prior year quarter, the decreases primarily due to an unreliable gain on derivatives in the prior year that didn't repeat this quarter.

Greer Colter: That's what it is. But yes, certainly we're a little bit behind. We would love to have those MSUs. We can put them to work and generate great returns. So that is still our goal. And we're just we are a little bit behind on that. So, yeah, hopefully that clarifies it.

Speaker Change: if they came later in the year, the average for the year would be lower, but you might end up with the same number. That's what it is. But yes, certainly we're a little bit behind. We would love to have those MSUs. We can put them to work and generate great returns. So that is still our goal. And...

Grier Colter: But yes, certainly we're... We're a little bit behind, we would love to have those MSUs, to work and generate great returns, so that is still our goal. We're just, we are a little bit behind on that though, so, yeah, hopefully that clarifies. Thank you for that.

Grier Colter: Now turning to the businesses. And I'll start with propane, which generated solid results, particularly in light of generally warmer weather. In aggregate, these businesses land is in line with our expectations in Q2. The US propane business produced adjusted EBITDA of 9.8 million, which represents a decrease of 3.9 million or 28 percent compared to the prior year quarter. This decrease was driven by lower sales volumes from the warmer weather, higher tank levels coming out of Q1 and the divestiture of non-core heating oil assets in the prior year.

Greer Colter: Thank you for that.

Allan MacDonald: Last question, I just wanted to revisit the capital allocation question. I've talked about this in the past, but what are your current thoughts on? You know, how you're weighing the merits of maintaining your current capital allocation strategy as opposed to an alternative like reducing the dividend to accelerate the deleverging and, you know, sort of bring back different growth over time, as I think James and I, are I looking? No, I mean, hey Rob.

Greer Colter: And last question.

Speaker Change: We're just, we are a little bit behind on that though, so yeah, hopefully that clarifies it.

Greer Colter: I just wanted to revisit the capital allocation question. We talked about this in the past, but what are your current thoughts on, you know, how you're weighing the merits of maintaining your current capital allocation strategy as opposed to an alternative like reducing the dividend to accelerate the leveraging. And, you know, sort of bring back given growth over time.

Speaker Change: Thank you for that. And then the last question, I just wanted to revisit the capital allocation question. We've talked about this in the past, but what are your current thoughts on

Speaker Change: You know, how you're weighing the merits of maintaining your current capital allocation strategy as opposed to an alternative like reducing the dividend to accelerate the deleveraging and, you know, sort of bring back dividend growth over time.

Allan MacDonald: Is anything changed or not here? I look down. No, I mean, here up. No, nothing change. I mean, as as Greer was saying, we're very comfortable where we're at from a cast position. We've got a line of say within the business for incremental opportunities. We're able to fund the growth that we foresee in the business. I think there's opportunity to reduce the requirement for capital within the propane business and crease its contribution to the bottom line. So our long term vision hasn't changed in terms of our ability to reach our goals around the leverage to fund the growth of the business.

Allan MacDonald: No, nothing's changed. I mean, as Grier was saying, we're very comfortable where we're at from the cast position, got a line of sight within the business for incremental, We're able to fund the growth that we foresee in the business. I think there's opportunity to reduce the requirement for capital within the propane business and increase its contribution to the bottom line. So our long-term vision hasn't changed in terms of our ability to reach our goals around the leverage to fund the growth of the business. Certainly that enables us to support the... Okay, thanks everyone. Thank you. Our next question comes from the line of Patrick Kenny with MBF. Please proceed. Thank you. Good morning, everyone.

Grier Colter: The Canadian propane business produced 10.5 million of adjusted EBITDA in the second quarter, which was an increase of 400,000 compared to the prior year. You'll recall from our 2024 guidance expectations related to our acquisition of Caterus that we divested our Northern Ontario propane business in Q4 2023. Those assets contributed about a million and a half of adjusted EBITDA on the prior year quarter. So we are especially pleased with the result given that the business grew 4 percent, just by laughing a quarter with that country, and the comparative figures.

Speaker Change: Has anything changed in your outlook there? No, I mean, hey Rob. No, nothing's changed. I mean, as Grier was saying, we're very comfortable where we're at from a cast position.

Speaker Change: We've got a line of say within the business for incremental opportunities.

Speaker Change: were able to fund the growth.

Speaker Change: that we foresee in the business. I think there's opportunity to reduce the requirement for capital within the propane business.

Speaker Change: Our long-term vision hasn't changed in terms of our ability to reach our goals around the leverage to fund the growth of the business, and certainly that enables us to support the dividend.

Grier Colter: The business also saw the benefits of several operational initiatives related to workforce optimization and reduced customer nutrition. The wholesale business generated adjusted EBITDA of 2.8 million in the second quarter, a decrease of 1.2 million compared to the prior quarter, primarily due to lower sales volumes from the warmer weather. Moving to Sirteras, the business produced adjusted EBITDA in the second quarter of 27.2 million, which represents a 2.6 million decrease compared to Q2 2023, which this accounts, of course, for the full quarter comparative number.

Allan MacDonald: and certainly that enables us to support the dividend. Okay.

Operator: Thanks, everyone. Thank you.

Patrick Kenny: Our next question comes from the line of Patrick Kenny with MBS. Please proceed. Thank you. Good morning, everyone. Maybe starting with Canadian propane. Just curious which regions across the country are experiencing the greatest success on the customer acquisition front? Maybe just some color on the main drivers of this growth. And as well, you know where you might be seeing the biggest opportunities in terms of further cost savings and margin expansion.

Speaker Change: Okay, thanks everyone.

Speaker Change: Thank you. Our next question comes from the line of Patrick Kenny with MBF. Please proceed.

Allan MacDonald: Maybe starting with Canadian propane, just curious what regions across the country are experiencing the greatest success on the customer acquisition front. Maybe just some color on the main drivers of this growth. And as well, you know, where you might be seeing the biggest opportunities in terms of further cost savings and margin expansion. Hey, Patrick, it's Allan.

Patrick Kenny: Thank you, good morning everyone. Maybe starting with Canadian propane, just curious what regions across the country are experiencing the greatest success on the customer acquisition

Patrick Kenny: Maybe just some color on the main drivers of this growth and as well, you know, where you might be seeing the biggest opportunities in terms of further cost savings and margin expansion.

Grier Colter: Overall, the business did not meet EBITDA expectations for the quarter. While we were pleased with the growth in volumes, which were 15% higher than Q2 2023, and this was driven primarily by the growth and increased efficiency of our MSUs, the business faced pressure on pricing as we moved out of the winter quarters and experienced an increase in competition, primarily in the oil and gas sector. Similar to Q1, we also faced approximately 10% headwind to our growth again in Q2, as our pricing evolves towards neutrality to natural gas pricing.

Allan MacDonald: Hey, Patrick, Alan. With regard to Canadian propane specifically, you mean? Yeah. Or, generally speaking. Yeah, Canadian propane. Well, Canadian propane; the difference between Canada and the US is largely Canada's more commercial and industrial. Where we, you know, where we're focusing our sales efforts, and in that vein, although there's some consumer component to that too. I would say our biggest successes have come with working with the sales organization to better understand costs. So we're working on profitability, understanding where we're investing our capital. There's been some collaboration between the Canadian propane business and Satiris around industrial customers, which has helped.

Allan MacDonald: With regard to Canadian propane specifically, do you mean? Yeah, or I don't really speak. Yeah, Canadian propane. Well, the difference between Canada and the U.S. is largely Canada is more commercial and industrial, where we, you know, where... We're focusing our sales efforts in that vein, although there's some consumer component to that. I would say our biggest successes have come with working with the sales organization to better understand costs. So we're working on profitability, understanding where we're investing our capital. There's been some collaboration with the Canadian propane business and satiris around industrial customers, which has helped. So it's, you know, this is a really boring answer, and I apologize, but it's...

Patrick Kenny: Hey Patrick, it's Allan. With regard to Canadian propane specifically, you mean?

Speaker Change: Yeah, or generally speaking.

Speaker Change: Yeah, Canadian propane.

Speaker Change: Well, Canadian propane, the difference between Canada and the U.S. is largely Canada's more commercial and industrial.

Speaker Change: Where we, you know, where...

Speaker Change: We're focusing our sales efforts in that vein, although there's some consumer component to that too.

Speaker Change: I would say our biggest successes have come with working with the sales organization to better understand costs. So we're working on profitability, understanding where we're investing our capital.

Grier Colter: In Q2 2023, we generated an additional 3.4 million in EBITDA from the movement in natural gas prices that didn't recur this quarter. And lastly, we experienced elevated operating costs that were unexpected and temporary in nature. So overall, we expect some pricing pressure to continue into Q3, but we don't expect to see the same headwinds from our change in contract pricing or elevated operating costs, and we expect to see a better Q3.

Speaker Change: There's been some collaboration between the Canadian propane business and Soteris around industrial customers, which has helped. So it's, you know, this is a really boring answer, and I apologize, but it's...

Allan MacDonald: So it's, you know, this is a really boring answer. I apologize, but it's very much blocking and tackling to say, okay, are we managing the interface for their customers well? So recently we've just made some adjustments with our internal sales support so that we're able to give more ballet service or concierge-type service to our industrial accounts. It's about managing our profitability to make sure that we're not, you know, losing a position when it comes to generating return on our capital. And it's about, you know, where we're prepared to look for opportunities and where we're investing to grow that business and supporting our sales organization.

Allan MacDonald: It's very much blocking and tackling to say, OK, are we managing the interface with our customers well? So recently, we've just made some adjustments with our internal sales support so that we're able to give more valet service or concierge-type service to our industrial accounts. It's about managing our profitability to make sure that we're not losing a position when it comes to generating return on our capital. And it's about where we're prepared to look for opportunities and where we're investing to grow that business and supporting our sales organization.

Speaker Change: It's very much blocking and tackling to say, okay, are we managing...

Speaker Change: the interface with our customers as well. So recently we've just made some adjustments with our internal sales support so that we're able to give more valet service or concierge type service to our.

Grier Colter: And as we returned to Q4 and Q1, where overall market demand is historically stronger, we expect to have our MSUs fleet deployed at excellent economics. For the full year, we are expecting for terrorists to come in slightly below the low end of our assumed 15 to 20% growth range. We continue to focus on diversifying the business and customer base over the longer term, and we are fully confident that we can continue to grow the business and produce excellent returns from capital invested.

Speaker Change: It's about managing our profitability to make sure that we're not in a losing position when it comes to generating return on our capital.

Speaker Change: And it's about, you know, where we're prepared to look for opportunities and where we're investing to grow that.

Allan MacDonald: So it's less about organic, you know, segment growth; like we're not adding new segments or, you know, looking at different geographies. I'd say more; we're looking to improve our density. So really capitalizing on where we have existing assets so the disproportionately able to contribute a return. It's about where we have a single flexibility by really understanding our costs and then being smart about where we're, you know, where we're targeting. So, like I said, that was going to be a boring answer. It's really basic stuff, but I think I got to give the team credit; they've made a lot of effort in the last couple of quarters to really manage our customer base better and starting to pay dividends.

Allan MacDonald: So it's less about organic segment growth, like we're not adding new segments or looking at different geographies. I'd say more we're looking to improve our density, so really capitalizing on where we have existing assets so they're disproportional, able to contribute a return. It's about where we have pricing flexibility by really understanding our costs. And then being smart about where we're targeting. So like I said, that was going to be a boring answer. It's really basic stuff.

Speaker Change: that business and supporting our sales organization. So it's less about organic segment growth, like we're not adding new segments or looking at different geographies. I'd say.

Grier Colter: Now I've turned to corporate results and leverage. Corporate operating costs to the second quarter were 7 million, a decrease of 800,000 compared to the prior year quarter, primarily due to onboarding costs related to the change in management and insurance provision in the prior year quarter.

Speaker Change: More, we're looking to improve our density, so really capitalizing on where we have existing assets so they're disproportionately able to contribute a return. It's about where we have pricing flexibility by really understanding our costs.

Grier Colter: Beginning in Q1 2024, we adopted hedge accounting for the majority of our long-term incentive hedges to minimize PNL fluctuation. Our leverage ratio for the trailing 12 months ended June 30, 2024 was 3.8. Times and improvement from 3.9 times that year end, which was driven by an improvement in working capital due to the seasonality of the business and currency conversion on our CAD denominated debt. Our leverage will move around somewhat from quarter to quarter due to the seasonal nature of the business, but our objective is to improve the metric to 3.7 times by the end of 2024 with a longer term objective of 3.0 times.

Speaker Change: and then being smart about where we're, you know, where we're targeting. So, like I said, that was going to be a boring answer. It's really basic stuff, but I think I've got to give the team credit. They've made a lot of effort in the last couple of quarters.

Allan MacDonald: But I think I've got to give the team credit. They've made a lot of effort in the last couple of quarters to really manage our customer base better and starting to pay dividends. Okay, I appreciate that. And then maybe on the US side for propane.

Speaker Change: to really manage our customer base better and it's starting to pay dividends.

Patrick Kenny: Okay, I appreciate that. And then maybe on the US side for propane.

Speaker Change: Okay, I appreciate that. And then maybe on the U.S. side for propane.

Allan MacDonald: And this is a bit of a follow-up on the capital allocation question, but any updated thoughts around, you know, perhaps, hydrating your focus in the US, any non-core sale opportunities that could help accelerate your path towards reaching your, your leverage target? Um, No, I mean, I- Sorry, what I know is a bad answer, so... Our plans right now are not, we're not looking at any dispositions in the U. We've got some opportunities to rationalize some assets which you'd normally expect when you grow up in Miami. I think we're very under penetrated.

Greer Colter: And there's a bit of a follow-up on the capital allocation question, but any updated thoughts around, you know, perhaps high-grading your focus in the US. Any non-core sale opportunities that could help accelerate your path towards reaching your leverage target. No, I mean, sorry, when I know it's a bad answer song. Our plans right now are not; we're not looking at any dispositions in the U.S. We're really pleased with our footprint. We've got some opportunities to rationalize some assets, which you'd normally expect when you grow and buy M&A. I think we're in the right markets. I think we're very under penetrated.

Speaker Change: and there's a bit of a follow-up on the capital allocation question but

Grier Colter: We are confirming our adjusted EBITDA guidance of approximately $500 million for 2024, while we expect the CTERIS will be slightly lower than the original assumed growth rate. We expect that the propane businesses and corporate costs will compensate costs, at this.

Speaker Change: Any updated thoughts around, you know, perhaps high-grading your focus in the U.S.? Any non-core sale opportunities that could help accelerate your path towards reaching your leverage target?

Grier Colter: And lastly, the board has approved a quarterly dividend of 18 cents Canadian per share, and with that I will turn the call over for Q&A. Thank you. And as a reminder to ask a question, press star 11 on your telephone and wait for your name to be announced. So withdraw your question, simply press star 11 again.

Speaker Change: Um, um,

Speaker Change: No, I mean...

Speaker Change: Hi.

Speaker Change: Sorry, what I know is a bad answer, so our plans right now are not, we're not looking at any dispositions in the U.S. We're really pleased with our footprint. We've got some opportunities to rationalize some assets, which you'd normally expect when you grow by M&A.

Gary Ho: One moment for our first question that comes from Gary Ho, with the Dajar down. Please go ahead. Thanks and good morning. Maybe just start off with your guidance. You mentioned you're maintaining your 5% growth to 500 million, and you're suggesting a very strong second half. Maybe just walk us through maybe a bit more detail in terms of segments, Canada, Copaine, US Copaine, and Sataris. And are there any bigger operational initiatives kind of and rural finish?

Allan MacDonald: There's an opportunity to take share from a competition set that I think we're very, very well poised to go up against. We've got great opportunities in terms of right sizing our pricing to be more aggressive on the acquisition front. And we've got great opportunities to retain our customers better than we have in the past. So I think, you know, the asset base in the U.S. is really attractive to me and it's underutilized. So we've got full designs on growing that business aggressively, and we think there's a lot of underutilized value there.

Allan MacDonald: There's an opportunity to take share from a competition set that I think we're very, very well poised to go up against. We've got great opportunities in terms of- Wright sizing our pricing to be more aggressive on the acquisition front. And we've got great opportunities to retain our customers better than we have in the past. So I think... You know, the asset base in the U.S. is really attractive to me, and it's underutilized. So, we've got full designs on growing that business aggressively, and we think there's a lot of unrealized value. Okay, thanks for that. And then last one for me, just on Sir Terrace.

Speaker Change: I think we're in the right markets. I think we're very under-penetrated.

Speaker Change: There's an opportunity to take share from a competition set that I think we're very, very well poised to go up against.

Speaker Change: We've got great opportunities in terms of

Speaker Change: Right-sizing our pricing to be more aggressive on the acquisition front and we've got great opportunities to retain our customers better than we have in the past so I think

Speaker Change: You know, the asset base in the U.S. is really attractive to me and it's underutilized. So, we've got full designs on growing that business aggressively and we think there's a lot of unrealized value there.

Gary Ho: Yeah, we're maintaining guidance. I mean, short answer is yes. We've got, we've been working really hard as you know, on looking at opportunities in the propane business, and we are very optimistically continue to add new customers and to improve the efficiency of the business. And it's less about cost reduction quite frankly and more about the effectiveness of how we're operating the business and really working at managing retention better, managing pricing, and working really hard at acquiring new customers.

Patrick Kenny: Okay, thanks for that.

Patrick Kenny: And then last one for me, just on Sir Terrace, and perhaps, you know, a bit of an offset to the higher competition. I know that the cost of natural gas is a flow through in general, but I'm just curious, you know, from a timing perspective, if the current weakness in 9x and ankle pricing might be a bit of a short-term tailwind for margins, at least through Q3 and perhaps into Q4. Patrick Curtis, are you asking this from a competitive standpoint and like a market positioning and pricing? Are you talking about like the way that contracts work and having either we spoke through or having kind of fixed price nature contract?

Allan MacDonald: And perhaps, you know, a bit of an offset to the higher competition. I know that the cost of natural gas is a flow through in general, but I'm just curious, you know, if from a timing perspective, if the current weakness in NYMEX and ACO pricing, might be a bit of a short-term tailwind for margins at least through Q3 and perhaps into Q4. Patrick, are you asking this from a competitive standpoint and like a market positioning and pricing or are you talking about the like the way that contracts work and having either flow through or having kind of fixed price nature of contracts?

Speaker Change: Okay, thanks for that. And then last one for me just on Sir Terrace.

Speaker Change: And perhaps, you know, a bit of an offset to the higher competition, I know that the cost of natural gas is a flow-through in general, but I'm just curious, you know, if from a timing perspective, if the current weakness in NYMEX and AECO pricing...

Speaker Change: It might be a bit of a short-term tailwind for margins at least through Q3 and perhaps into Q4.

Gary Ho: So, short answer is we see more opportunities coming into the latter half of the year. But I want to let Greer talk about the little bit of the latter on how we get from here there. Yes, sure. So if we are target of 500, obviously we'll see a little bit ahead when done the Sataris result. To say, you know, I think if we look at the second quarter, you know, this business missed by kind of 7 million S, right?

Speaker Change: And Patrick, Curtis, Grier, are you asking this?

Patrick Curtis: from a competitive standpoint and like a market positioning and pricing or you're talking about the like the way that contracts work and having either complete and full through or having kind of fixed price nature of contracts?

Grier Colter: Yeah yeah yeah more on the contracting front and you know I know that on the propane side of the business there's a little bit of a lag in terms of flowing through the pricing so just wondering if if there's a similar dynamic within Soterra. Okay yeah so on the Soterra side the vast majority of these are true flow through so the you know other than your market position and the competitiveness relative to diesel certainly as the price is lower on the knockout side it makes the proposition better but the contracts themselves a very high percentage of them are are complete flow through where you're taking, You're not going to take any risk on it.

Greer Colter: Yeah, yeah, more on the contracting front, and, you know, I know that on the propane side of the business, there's a little bit of a leg in terms of flowing through the pricing. So just wondering if there's a similar dynamic with Sir Terrace.

Gary Ho: We don't think Q2 will be that large in this, but we're going to see some of the same pressures as I said, some of the things temporary, some of the things a little bit more longer term for us to manage once we get into Q4. You know, the winter work returns and the economics and the utilization is a much different picture. So overall for the year, you know, we think Sataris is probably going to end up kind of 10 million or so off where we thought.

Patrick Curtis: Yeah, yeah, yeah, more on the contracting front. And, you know, I know that on the propane side of the business, there's a little bit of a lag in terms of flowing through the pricing. So just wondering if there's a similar dynamic within Sartaris.

Greer Colter: Okay, yes. So on the Sir Terrace side, the vast majority of these are true flow through. So the, you know, other than your market position and the competitiveness relative to diesel, certainly as the prices lower on the NACC outside, it makes the proposition better. But the contracts themselves, the very high percentage of them are complete flow through where you're taking; you're not going to take any risk on it. There are some legacy contracts, and this was to my remarks, and it's a declining thing, but some of the contracts that Sir Terrace has negotiated and some still exist have a construct where there's a Sir Church if the price of the commodity goes up.

Patrick Curtis: Okay, yeah, so...

Speaker Change: On the Soterra side, the vast majority of these are true flow-throughs. So, other than your market position and the competitiveness relative to diesel, certainly as the price is lower on the NACA side, it makes the proposition better. But the contracts themselves, a very high percentage of them are complete flow-through, where you're taking...

Grier Colter: There are some legacy contracts, and this was in my remarks, and it's a declining thing. Some of the contracts that Soterios has negotiated, and some still exist, have a construct where there's a surcharge if the price of the commodity goes up. So they're protected.

Gary Ho: But we think through a couple of corporate costs and initiatives and some of the stuff that I was talking about in the propane business, just initiatives that we see really primarily into 2025 that we might be able to knit that a little bit in 2024 and get a little bit of benefit when you kind of bake that all together. We see us getting very close to the 500 and that's why we've kept with that number. Okay, great. No, thanks for those.

Speaker Change: You're not going to take any risk on it. There are some legacy contracts, and this was in my remarks, and it's a declining thing.

Speaker Change: Some of the contracts that Soterios has negotiated, and some still exist, have a construct where there's a surcharge if the price of the commodity goes up, so they're protected. To the extent that the commodity goes down, they actually participate on that. So it's fixed price to the customer with the potential to surcharge, but obviously if the commodity price is going down, they're selling into a fixed price with a lower cost. So there has...

Greer Colter: So they're protected to the extent that the commodity goes down; they actually participate on that. So it's fixed price to the customer with the potential of the Sir Church, but obviously if the commodity price is going down, they're selling into a fixed price with a lower cost. So there has been some benefit over time to this, but these contracts are becoming fewer and fewer. And as I said, that was kind of part of the headman in Q1 and Q2 is that there's less of these contracts that have this potential benefit. It's almost like you have an embedded long put in the contract, but as customers kind of see the way these work, you know, obviously fewer and fewer of them are.

Grier Colter: To the extent that the commodity goes down, they actually participate on that. So it's fixed price to the customer with the potential to surcharge, but obviously, if the commodity price is going down, they're selling into a fixed price with a lower cost. So there has been some benefit over time to this, but these contracts are... Becoming fewer and fewer, as I said, that was kind of part of the headman in Q1 and Q2 is that there's less of these contracts that have this potential benefit.

Gary Ho: And then maybe second question specifically on Sataris, that you mentioned the increased competition dynamics. I see that per MSU economics is down year over year and also versus 1Q. Can you parse out, you know, how much of your, as call it, 760 average MSUs were underutilized in the quarter? I'm trying to get a sense. And we exclude those.

Speaker Change: There has been some benefit over time to this, but these contracts are...

Speaker Change: Becoming fewer and fewer. As I said, that was kind of part of the headman in Q1 and Q2 is that there's less of these contracts that have this potential benefit. It's almost like you have an embedded long put in the contract. But

Gary Ho: How much better would the unit economics look here over year? Yeah, I think, Gary, it's less of an underutilized MSU situation, I think, you know, the team did a great job to be flowing gas and if you look at the metrics, the flow actually was as higher, higher. We actually had more flow per MSU than we would have in the prior year. So this was not about idle capacity and having MSU is not in service.

Grier Colter: It's almost like you have an embedded long put in the contract, but as customers kind of see the way these work, you know, obviously fewer and fewer of them are.., interested in having that. So it's a very small number. The exposure, you know, if I said, you know, there's benefit in looking into Q3. Last year, it would have been like $3 million or something like that, so it's not a big number.

Speaker Change: As customers kind of see the way these work, you know, obviously fewer and fewer of them are.

Greer Colter: I'm interested in having that. So it's a very small number. The exposure, you know, if I said, you know, this benefit in looking into Q3 last year would have been like three million or something like that. So it's not a big number. So, you know, if you had zero, that would be the kind of headwind, but we'll have a million or two or something like that will be the benefit. But we're talking pretty small numbers here. Got it.

Speaker Change: interested in having that. So it's a very small number. The exposure, you know, if I said, you know, there's benefit in looking into Q3.

Grier Colter: So, you know, if you had zero, that would be the kind of headwind. But we'll have, you know, a million or two or something like that will be the benefit. But we're talking pretty small numbers. Got it.

Speaker Change: Last year would have been like 3 million or something like that, so it's not a big number. So, you know, if you had zero, that would be the kind of headwind, but we'll have, you know, a million or two or something like that will be the benefit, but we're talking pretty small numbers here.

Gary Ho: This was a question of being competitive. And I'm looking at the market dynamics and making sure that these MSUs were in use. So, of the, of the myths, you know, as I say, there are different components in some's temporary, but if we're talking about the competition part of this, you know, it's, it's a very high percentage of this impact was the pricing dynamic versus utilization. So they were highly utilized. Got it.

Operator: Okay, that's great. I'll leave it there. Thanks.

Patrick Kenny: Okay.

Patrick Kenny: That's great.

Patrick Kenny: I'll leave it there. Thank you.

Patrick Kenny: Thanks.

Operator: Thank you.

Operator: Thank you. Our next question comes from the line of Aaron MacNeil with TD Cowen. Please proceed. Good morning, guys.

Aaron MacNeil: Our next question comes from the line of Aaron MacNeil with TD Cowan. Please proceed. Hey, morning, guys. Eric, you know, you've obviously got some MSUs. Quite a few. Still be delivered, presumably your competitors do as well. I can appreciate that, you know, interseasonality sort of saves you in the near term. But do you have any sense of what? Overall, supply additions are going to be over the next six to 12 months. Do you get the sense that, you know, next summer, like the competitive dynamic maybe worse than the summer?

Speaker Change: Got it. Okay, that's great. I'll leave it there. Thanks

Speaker Change: Thank you. Our next question comes from the line of Aaron MacNeil with TD Cowen. Please proceed.

Allan MacDonald: Eric, um... You know, you've obviously got some MFUs, quite a few to still be delivered. Presumably your competitors do as well. I can appreciate that, you know, interseasonality sort of. Dave's you in the near term, but do you have any sense of what overall supply additions are going to be? over the next six to twelve months. Do you get the sense that, you know, next summer, like the competitive dynamic may be worse than the summer?

Speaker Change: Good morning, guys.

Speaker Change: Eric, I

Aaron MacDonald: You know, you've obviously got some MCUs, quite a few to still be delivered, presumably your competitors do as well. I can appreciate that, you know, interseasonality sort of.

Gary Ho: Okay, and in career, while I have you, the number of quick numbers question, you guys used to disclose and adjusted operating cash flow figure, which passed out some of the noise and cash flow.

Speaker Change: saves you in the near term, but do you have any sense of what overall supply additions are going to be?

Grier Colter: Maybe, maybe share some of your views internally when you look at free cash flow, what do you look at and what's the current annualized run rate free cash flow business today and pay out ratio against your current dividends. Yeah, like for, for sure, Gary, I mean, when you look at the, the avatar and you look at our growth growth and maintenance capital, the interest, the dividend, you can see, you know, it's relatively neutral right now.

Allan MacDonald: And as you talk to your suppliers, like, are lead times increasing or decreasing? Can you just give us a bit of a flavor for that? Let me offer a comment and then maybe Grier has some thoughts, you know. To assume that, There's going to be an increased fleet that's going to go back to West Texas next Q2 and have the same situation I think. Way too early to think that way.

Speaker Change: Over the next 6 to 12 months, do you get the sense that, you know, next summer, like, the competitive dynamic may be worse than this summer? And as you talk to your suppliers, like,

Allan MacDonald: And as you talk to your suppliers, like our lead times increasing or decreasing, like, can you just give us a bit of a flavor for that? Let me offer a comment, and then maybe grow as some thoughts.

Speaker Change: Are lead times increasing or decreasing? Like, can you just give us a bit of a flavor for that?

Allan MacDonald: You know, to assume that there's going to be an increased fleet that's going to go back to West Texas next Q2 and have the same situation, I think it's way too early to think that way. The grooves point our volume was up and our productivity was up. So it's not necessarily that, you know, the volume has dropped off. So I think there's still capacity and opportunity in that segment.

Speaker Change: Let me offer a comment and then maybe Grier has some thoughts.

Grier Colter: you know

Grier Colter: To assume that...

Grier Colter: You know, and as we continue to talk about our plans for the business, whether we're talking pro painters or terrorists, I think we'll become clear to the market what our plan is. And, but, you know, we, we see growth. We see our ability to improve the, the cash flow picture and make it more, more of a positive scenario, which is how we get our head around the, you know, the fact that these are all supportable, we've got in our plans. We see sufficient cash flows to support the growth of the business through CapEx, you know, support our delivering plan.

Speaker Change: There's going to be an increased fleet that's going to go back to West Texas next Q2 and have the same situation. I think it's way too early to think that way.

Allan MacDonald: The Grier's point, our volume was up and our productivity was up. So it's not necessarily that, you know, the volume has dropped off. So I think there's still capacity and opportunity in that segment, but more to the point, the other verticals, so, you know, if you think about... C&G and RNG market. It's expanding and there's so much excitement around it right now. There's all the talk of the consumption of C&G around data centers.

Speaker Change: To Grier's point, our volume was up and our productivity was up. So it's not necessarily that the volume has dropped off.

Allan MacDonald: But more to the point, the other verticals. So, you know, if you think about the CNG and RNG market, it's expanding. And there's so much excitement around it right now. There's all the talk of the consumption of CNG around data centers. There's all the RNG products that are projects that are coming on board. There's backup power that's coming on board. And all of that's going to consume some of the capacity that's being put in the market. It's foreseeable over the next several years that the demand for the energy will far outpace the availability of MSUs.

Speaker Change: So I think there's still capacity and opportunity in that segment. But more to the point, the other verticals, so, you know, if you think about...

Allan MacDonald: There's all the RNG products that are projects that are coming on board. There's backup power that's coming on board. And all of that's going to consume some of the capacity that's being put in the market. It's foreseeable over the next several years that the demand for the energy will far outpace, the availability of MSUs. Now, it's too early to predict that, but that's certainly potentially the case. So, I want to be really careful about saying, look, there's going to be overcapacity, that this signal is overcapacity and that it's going to be exasperated, because that's not necessarily what we're seeing. Grier, I don't know if you'd add anything to that. No, I agree.

Speaker Change: The CNG and RNG market it's expanding and there's so much excitement around it right now There's all the talk of the consumption of CNG around data centers. There's all the RNG products that are Projects that are coming on board. There's backup power

Grier Colter: As I said in my remarks, it's super important for us to get to. More sensible leverage target on the end of 2026 and obviously support the dividend, so we, you know, we, we, we see the, the cash flow picture that supports that, but as I say, like as, as we continue to unveil our plans for the future and our confidence and growth of the businesses, I think we come clear to the market.

Gary Ho: Okay, wait for my question. Thank you.

Speaker Change: that's coming on board. And all of that's going to consume some of the capacity that's being put in the market.

Speaker Change: It's foreseeable over the next several years that the demand for the energy will far outpace

Allan MacDonald: Now it's too early to predict that. But that's certainly potentially the case.

Speaker Change: the availability of MSUs. Now it's too early to predict that but

Greer Colter: So I want to be really careful about saying, like, there's going to be over capacity, that this signals over capacity, and that it's going to be exacerbated because that's not necessarily what we're seeing right now. Greg, I don't know if you'd add anything to that. No, I agree. I think for this very hard to predict, but I think for us to foresee that in the summer quarters next year to see more MSUs there, I think that's a reasonable assumption.

Daryl Young: Our next question comes from the line of Darryl Young with CIFO. Please proceed. Hey, good morning, everyone. First question is just around the competitive pressures. Is it possible to speak to how much of the function of all the new MSUs in the market versus the downturn in oil and gas? And I guess what I'm really trying to get at is just, you know, what gives you the confidence that you're not going to have significant competitive pressure in the winter heating season as well, because there does seem to be a lot of new MSUs in the marketplace.

Speaker Change: that's certainly potentially the case. So I want to be really careful about saying, look, there's going to be overcapacity, that this signal is overcapacity and that it's going to be exasperated because that's not necessarily what we're seeing right now.

Grier Colter: I think, you know, I think for this, very hard to predict, but I think for us to foresee that in the summer quarters next year, it is... More MSUs there, I think that's... David Smith, David Smith, David Smith, David Smith, David Smith, David Smith, I think what we are very focused on is continuing to diversify the business. Geographically and from a product standpoint, and to try to, to make the business more resilient to individual markets, whether it's good or whether it's bad.

Speaker Change: Grier, I don't know if you'd add anything to that. No, I agree. I think for this, very hard to predict, but I think for us to foresee that in the summer quarters next year to see more MSUs there, I think that's a reasonable assumption.

Aaron MacNeil: I think what we are very focused on is continuing to diversify the business geographically and from a product standpoint, and to try to continue to make the business more resilient to individual markets, whether, you know, whether it's good or whether it's bad. But that's something we're talking quite a lot about. We're very focused on. So I think to the extent that you have similar dynamics when we get back to the summer quarters next year, that we're in a position. that it would have less than an impact, so that's our goal. That's right. Yeah, I get all that, I guess.

Speaker Change: I think what we are very focused on is continuing to diversify the business.

Daryl Young: Well, it's really, I mean, that's a really tough one, but, you know, what I said, hey, hey, sorry, it's out. When you think about the MSUs in the market, a lot of our competition, is based in West Texas, and that's really their home market and their focus area. So number one, you've got a higher concentration, and a lot of these companies, the MSU businesses is an adjacency for them, or a smaller investment.

Speaker Change: Geographically and from a product standpoint and to try to continue to make the business more resilient to individual markets whether you know whether it's good or whether it's bad, but

Grier Colter: But that's something we're talking quite a lot about and we're very focused on. So I think to the extent that you have similar dynamics when we get back to the summer quarters next year, that we're in a position, it would have less of an impact, so that's our goal. That's right.

Speaker Change: That's something we're talking quite a lot about and we're very focused on, so I think to the extent that you have similar dynamics when we get back to the summer quarters next year, that we're in a position that it would have less of an impact, so that's our goal.

Allan MacDonald: Yeah, I get all that. I guess, you know, obviously, if demand is up, your volumes are up, that means that supply is growing at a faster pace than demand. And as you've mentioned, you know, your competitors are more regional focused and mostly focused on that West Texas, market. And so I guess the, The question is really geared towards like, what are your suppliers telling you of what your competitors are adding? Like, do you think that that the supply ads from your competitors will continue at the current pace? Or do you think that those supply ads will decrease? Look, that's a tough one.

Aaron MacNeil: Obviously, if demand is up, your volumes are up. That means that supply is growing at a faster pace than demand. And, as you've mentioned, your competitors are more regionally focused and mostly focused on that West Texas market.

Speaker Change: Thank you.

Daryl Young: So if you think about their size relative to us, a lot of these competitors are quite small and very, very focused in this market. So, you know, the downturn in terms of activity, especially in Texas this time of year, coupled with the proximity of a lot of the competition, I suppose some downward pressure on pricing. But I think it's very difficult to extrapolate that to the rest of our segments and the other, and especially in the busy winter seasons.

Speaker Change: Yeah, I get all that. I guess, you know, obviously, if demand is up, your volumes are up, that means that supply is growing at a faster pace than demand. And as you've mentioned, you know, your competitors are more regional focused and mostly focused on that West Texas

Allan MacDonald: And so I guess the question is really geared towards, like, what are your suppliers telling you of what your competitors are adding? Do you think that the supply ads from your competitors will continue at the current pace, or do you think that those supply ads will decrease? Look, that's a tough one. I can't speak on behalf of the manufacturer. What I tell you is there's a finite amount of supply. We're grabbing about 50% of it. So if the demand were to increase, there's just limitations put on the market by the supply capacity. And the fact that we're behind in our deliveries would imply that there's some natural bottlenecks just in production.

Speaker Change: market. And so I guess the

Speaker Change: The question is really geared towards, like, what are your suppliers telling you of what your competitors are adding? Like, do you think that the supply ads from your competitors will continue at the current pace, or do you think that those supply ads will decrease?

Daryl Young: So I wouldn't necessarily make that leap. Okay, so when you look out, I know it's pretty early still to be talking 2025, but when you look out that period, does this cause you to reassess the growth rates for Sir Tarris or DST enough with time enough and market development outside of oil and gas that you could still sort of continue the growth rates at high return metrics. Yeah, I think that's more, that's more it.

Allan MacDonald: I can't speak on behalf of the manufacturer. What I tell you is there's a finite amount of supply. We're grabbing about 50% of it. [inaudible] There's just limitations put on the market by the supply capacity. And the fact that, you know, we're behind in our deliveries would imply that, uh.., that there's some natural bottlenecks just in production. So I'm not seeing an excess capacity of MSUs in the market that are up for grabs, sir. No, same thing.

Speaker Change: Look, that's a tough one. I can't speak on behalf of the manufacturer. What I tell you is there's a finite amount of supply. We're grabbing about 50% of it. So if the demand were to increase,

Speaker Change: There's just limitations put on the market by the supply capacity. And the fact that we're behind in our deliveries would imply that...

Daryl Young: You know, predicting the oil and gas segment is something that I don't think I'm ever going to be capable of doing, but we've long had a strategy at Tarris, you know, beyond the well side strategy, which has continued to reduce our reliance on our home market, if you go over the origin of the company. The RNG business doubled over last year. Some of the new hubs we've opened have been greenfield. You know, we're looking at emerging segments like backup power and power generation.

Greer Colter: So I'm not seeing an excess capacity of MSUs in the market that are up for grabs, certainly. That's the same thing.

Speaker Change: that you know, there's there's some natural bottlenecks just in production, so I don't want I I'm not seeing an excess capacity of MSUs in the market that are up for grabs certainly

Grier Colter: I think the other thing I'd maybe add, Aaron, is, I mean, there is... There's the lens of economics here, right? We've got the largest fleet by a long shot in the industry. We've been doing this for a long time. Our team is very strong.

Greer Colter: I think the other thing I may be at arenas, I mean, there's the lens of economics here, right? And we've got the largest fleet by a long shot in the industry. We've been doing this for a long time. Our team is very strong. It's very difficult to get insight into the economics that particularly those that are integrated kind of oil and gas companies. But even the smaller competitors is very difficult to know what their economics are. But we should be as positioned as well or better than most in the industry. And so economics, as they compress you, you know, at some point it'll be less interesting for those to buy MSUs, you would think.

Speaker Change: No, same thing, I think the other thing I'd maybe add, Aaron, I mean there is-

Speaker Change: There's the lens of economics here, right, and we've got the largest fleet by a long shot in the industry. We've been doing this for a long time. Our team is very strong.

Grier Colter: It's very difficult to get insight into the economics that, you know, particularly those that are integrated kind of oil and gas companies. But, you know, even the smaller competitors, it's very difficult to know what their economics are. Yeah, we should be positioned as well or better than most in the industry. And so economics as they compress. At some point, it'll be less interesting for those to buy MSUs, you would think. So that is going to be a factor at some point.

Daryl Young: And those opportunities are going to be continued at the forefront. So the business development functions at Tarris is incredibly important. And you always want to have that imbalance with opportunities that exist in the traditional segment, whether it be Texas or other on gas markets. Because historically, as you can see from the results have been incredibly lucrative. So it's a continuous balancing game to say, well, we don't want to walk away from opportunities that present the chance to generate a maximum return for these investments, but you also don't want to be exposed.

Speaker Change: It's very difficult to get insight into the economics that, you know, particularly those that are integrated kind of oil and gas companies, but, you know, even the smaller competitors, it's very difficult to know what their economics are.

Speaker Change: Yeah, we should be positioned as well or better than most in the industry, and so economics as they compress you.

Allan MacDonald: So that is going to be a factor at some point. And our key is to be positioned better than most, so we maintain what have been and what we think will continue to be exceptional economics.

Speaker Change: Yeah

Speaker Change: At some point, it'll be less interesting for those to buy MSUs, you would think, so that is going to be a factor at some point, and our key is to be positioned better than most, so we maintain

Grier Colter: Our key is to be positioned better than most, so we maintain, what have been and what we include continue to be exceptional. [inaudible] Yeah, I mean, if you think of a small example, and I'm making this up, but if you had 50 MSU.., and your origin was in West Texas. To diversify outside the oil and gas sector would be incredibly.., start setting up hubs in other parts of the country, just creating the sales organization. That's what makes Soterra's unique.

Daryl Young: So you're a year, you're seeing a little bit of that normalization. And like I said, you know, in my opening remarks, we expect volatility in this segment. I mean, it's emerging. It's growing. And unfortunately, it's not going to grow at the rate that we happen to predict we're going to add MSU sort of 18 months in advance. That's, we're okay with that. But we're going to be very, very mindful in terms of our business development plans for Q2 and Q3 next year that we're continuing to build the business for the long term.

Allan MacDonald: Yeah, I mean, if you think of a small example, and I'm making this up, but if you had 50 MSUs and your origin was in West Texas, to diversify outside the oil and gas sector would be incredibly expensive. To start setting up hubs in other parts of the country is just creating the sales organization you would need. That's what makes Caterus unique. We're one of the few companies that has national coverage. So, you know, because of our size, we're able to maintain a business development and sales function that not only covers, you know, North Continental, North America, but also emerging segments like hydrogen and R&G.

Speaker Change: Yeah, I mean, if you think of a small example, and I'm making this up, but if you had 50 MSUs and your origin was in West Texas,

Speaker Change: To diversify outside the oil and gas sector would be incredibly expensive. To start setting up hubs in other parts of the country is just creating the sales organization you would need.

Allan MacDonald: We're one of the few companies that has national coverage. So, you know, because of our size, we're able to maintain a business development and sales function that not only covers, you know, continental North America, but also emerging segments like hydrogen and RNG. So it gives us a competitive advantage, frankly, just based on our scale and the fact that we have spent the last three years diversifying outside of traditional oil and gas markets. That's really hard for a small regional competitor to do profit. Okay, appreciate the response. Happy to turn it back. Thanks.

Daryl Young: Developing new segments, participating in high growth segments and capitalizing on opportunities to generate the most return we can. Constant balancing act, but the teams really working hard on it. And so far, you know, with a little bit of a bump in Q2, I think we've done an incredible job of really maximizing every opportunity that's presented to them. And, you know, we have a bigger presence in those emerging segments than anyone. And I get the team full credit for the work they did and the poor site they had to make that a reality. Thank you.

Speaker Change: That's what makes Catero's unique. We're one of the few companies that has national coverage so you know because of our size we're able to maintain

Speaker Change: a business development and sales function that

Speaker Change: not only covers continental North America, but also emerging segments like hydrogen and RNG. So it gives us a competitive advantage, frankly, just based on our scale and the fact that we have spent the last three years diversifying outside of traditional oil and gas markets.

Allan MacDonald: So it gives us a competitive advantage, frankly, just based on our scale and the fact that we have spent the last three years diversifying outside of traditional oil and gas markets. That's really hard for a small regional competitor to do profitably.

Aaron MacNeil: Okay, I appreciate the response and happy to turn it back to you.

Speaker Change: That's really hard for a small regional competitor to do profitably.

Operator: Thanks, sir. Thank you.

Operator: Thanks, Aaron. Thank you. Our next question comes from the line of Nelson Ng with RBC Capital Markets. Please proceed. Great, thanks, and good morning everyone.

Speaker Change: Okay, appreciate the response. Happy to turn it back.

Nelson Ng: Our next question comes from the line of Nelson Ng with RBC Capital Markets. Please proceed. Great thanks then. Good morning everyone. So I had a few questions on Sataris, and I think you guys talked about diversification. So from a MSU allocation perspective, like can you talk about the portion of MSUs allocated to the on gas services? How does sector in Q2 and how that changes seasonally over the year? Because I think your area you mentioned that especially one third of your MSUs were in Western Texas in Q2, is that right? About a third of the fleet in Q2, that's right.

Allan MacDonald: Our next question comes from the line of Robert Catellier with CIBC capital markets. Please proceed. Good morning everybody. I just wanted to continue addressing the competitive situation. And maybe you can just describe to us what your competitive response has been on West Texas. It seems like giving the utilization rate. There was some response on price, but I'm curious if you've actually moved some of the MSUs out to more profitable regions. Hey Rob, it's Allan.

Speaker Change: Thanks, Aaron.

Speaker Change: Thank you. Our next question comes from the line of Nelson Ng with RBC Capital Markets. Please proceed.

Operator: So I had a few questions on Sotarus and I think you guys talked about diversification. So from a MSU allocation perspective, like, can you talk about, the portion of MSUs allocated to the oil and gas services. Sector in Q2 and how that changes seasonally over the year, because I think, Grier, you mentioned that potentially one-third of your MSUs were in western Texas. You too, is that right?

Nelson Ng: Great, thanks and good morning everyone. So, I had a few questions on Sotarus and I think you guys talked about diversification. So, from a MSU allocation perspective, like, can you talk about

Nelson Ng: the portion of MSUs allocated to the oil and gas services sector in Q2 and how that changes seasonally over the year because I think Greer you mentioned that potentially one-third of your MSUs were in western Texas.

Allan MacDonald: You know, the volume in West Texas is really, continues to be really attractive. And when you see sort of a pricing fluctuation, which is not uncommon in that part of the world, there's always going to be a reaction to the team. And I think we've seen a couple of things. One, some of that price-related competition is being challenged with operational and safety issues. And in more than one instance, we've had, you know, contract opportunities that were a little lower than what would work for us and the customer return.

Grier Colter: About about a third of the fleet in Q2, that's right. But West Texas is not the only oil and gas work we're doing. You know, certainly the, The concentration of oil and gas in the summer months is higher than in the winter months. The winter months you have, you know, the backup power, as an example, heating for mining customers. There's more diversification of the portfolio in the winter months than there is in the summer.

Speaker Change: in year two, is that right?

Nelson Ng: But West Texas is not the only oil and gas work we're doing. Certainly, the concentration of oil and gas in the summer months is higher than in the winter months. The winter months you have the backup power as an example, eating for mining customers. So there's more diversification of the portfolio in the winter months and there's in the summer. But yeah, it's not just West Texas overall, on average for the year. What's coming from oil and gas? If I had to guess, I would say it's probably in the 70% territory. But, as I say in the summer, it's going to be higher, and the winter is going to be lower.

Speaker Change: [inaudible]

Speaker Change: The concentration of oil and gas in the summer months is higher than in the winter months. The winter months you have, you know, the backup power, as an example, heating for mining customers. So there's...

Speaker Change: There's more diversification of the portfolio in the winter months and there's in the summer. But yeah, it's not just West Texas overall on average for the year.

Grier Colter: But yeah, it's not just West Texas. Overall, on average, for the year, what's coming from oil and gas, if I had to guess, I would say it's probably in the 70% territory, but as I say, in the summer, it's.., higher and in the winters.

Speaker Change: What's coming from oil and gas if I had to guess I would say it's probably in the 70% Territory, but as I say in the summer, it's going to be higher and in the winter. It's going to be lower Yeah, and there's a distinction between number of MSUs in volume two because the nice the nice economic

Allan MacDonald: And so people are recognizing that Citeris, because this is our core business, our reliability and safety record is very, very strong. And that does command a small premium in the market. So we're seeing some of that. The other potential is, okay, well, diversifying into Greenfield opportunities or opportunities outside of West Texas, we're working equally with the team on. We were talking to them just this morning in terms of some opportunities in other parts of North America that are actually performing really well.

Greer Colter: Yeah, and there's a distinction between number of MSUs in volume two because the nice economic component of the oil and gas sector is very geographically dense. And if you think about that, comparing to backup power and backup power, you have the MSUs on standby; you may not be flowing. So, if you look at volume, it may be different than the number of MSUs that are dedicated, but it's in the two-thirds range. Okay. And then I think I heard that the oil and gas sector is a bit more profitable than some of the other sectors. So the evit.contribution would be a bit higher than that.

Allan MacDonald: Yeah, and there's a distinction between number of MSUs and volume, too, because the nice... The Nice Economic... This component of the oil and gas sector is very geographical. And if you think about that, comparing to backup power and backup power. If you have MSUs on standby, you may not be flowing.

Speaker Change: component of the oil and gas sector is very geographically dense.

Speaker Change: And if you think about that comparing to backup power, in backup power you have the MSUs on standby, you may not be flowing. So if you look at volume, it may be different than the number of MSUs that are dedicated. But to Grier's point, it's...

Allan MacDonald: If you look at volume, it may be different than the number of MSUs that are dedicated. Okay, and then I think I heard that the oil and gas sector is a bit more profitable than some of the other sectors. So the EBITDA contribution would be, A bit higher than that. Am I right to make that assumption?

Allan MacDonald: Our ability to repurchase the fleet in a 30-day period and generate new contracts is obviously that presents a bit of a challenge. But we're looking at every opportunity to say, okay, where's the best place for us to have the fleet? And continue to maintain relationships with customers that are very, very important to us in these periods. You know, this isn't all dollars and cents in a 30-day period. We have customers that have relied on us for a long time that have been with us from the beginning.

Speaker Change: It's in the, you know, kind of two-thirds range.

Speaker Change: Okay, and then I think I heard that the oil and gas sector is a bit more profitable than some of the other sectors, so the EBITDA contribution would be...

Greer Colter: Am I right to make that assumption? Yeah, I'd say, I'd say they're what I was talking more particularly about West Texas, which is somewhat representative. But they're, I'd say West Texas is a really good market. I'd say that the economics are as good or better than our average returns, but there are other regions that are oil and gas in nature. Some would have better economics than that. Some would have not as good economics, so there is a bit of a range.

Grier Colter: Yeah, I'd say I'd say they're what I was talking more particularly about West Texas. Yeah, we, you know, somewhat representative, but they're, I would say, West Texas. [inaudible] is a really good market. I would say that the economics are as good or better than our average returns. But there are other regions that are oil and gas in nature. Some would have better economics than that. Some would have not as good economics.

Speaker Change: a bit higher than that? Am I right to make that assumption?

Speaker Change #100: Yeah, I'd say, I'd say they're, I was talking more particularly about West Texas, which is

Speaker Change #101: Yeah, somewhat representative, but they're, I would say West Texas.

Allan MacDonald: And we need to be there for them because we're thinking about it in terms of long haul. And the reality is in September, October, November, the world's going to be changed. And the capacity is going to be much smaller than it is today. We know the activity is going to heat up, and we want to maintain those customer relationships. So it's always a balance, but yes, we're looking at every opportunity on a table right now.

Speaker Change #102: is a really good market. I would say that the economics are as good or better than our average returns.

Speaker Change #102: But there are other regions that are oil and gas in nature. Some would have better economics than that. Some would have not as good economics. So there is a bit of a range.

Allan MacDonald: So there is a bit of a range. Okay, so like from a big picture perspective, like, And from a diversification perspective, is there, a level of, There's this mix you want to see from oil and gas over there. I presume you want it to gradually decline, but is there a level that you're looking to target?

Allan MacDonald: Okay, so like from a big picture perspective, and from a diversification perspective, is there a level of, I guess, business mix you want to see from oil and gas over the next few years? I presume you want it to gradually decline, but is there a level that you're looking to target? Well, you know, it's funny. In one way, I wanted to decline, but another way I don't, because it's been incredibly profitable historically, because it's such a big segment, and you know, it's so urgent and dense. So what we don't want to cut our nose off despite our face, strategically speaking, more than 50% of our capital has been allocated to be on the well site, to diversification outside the oil and gas sector.

Speaker Change #103: Okay, so like from a big picture perspective, like...

Grier Colter: Maybe I'll just add Rob, it's a career. The economics in West Texas are still really good, right? So if you look at where these MSUs are in the kind of stacking order of where all the MSUs are, so if we say roughly if they're them or something like this, they're sitting in West Texas right now, they're generating, and average or above average returns for the portfolios. It's still a really good space.

Speaker Change #103: and from a diversification perspective, is there...

Speaker Change #103: a level of

Speaker Change #104: I guess, business mix you want to see from oil and gas over the next few years. I presume you want it to gradually decline, but is there a level that you're looking to target? Well, you know, it's funny.

Allan MacDonald: Well, you know, it's funny. In one way, I want it to decline, but in another way, I don't, because it's been incredibly profitable historically, because it's such a big segment, and it's so urgent and dense. So we don't want to cut our nose off to spite our face.

Speaker Change #104: In one way I want it to decline, but in another way I don't.

Grier Colter: There is more competition in that space, right? But for us to move it, there are certainly markets where we can move some of these MSUs to generate higher returns. But not all markets would generate higher returns. It's not like these are the lowest and it's still a great area. This is a great spot for us to generate some of our income and we do have very good returns. I just wanted to add that point. Thanks. It's a helpful response. Just looking at the MSU outlook, it looks like it was tweaked slightly. Nothing serious, what's on our percent?

Speaker Change #105: because it's been incredibly profitable historically because it's such a big segment and it's so urgent and dense. So what we don't want to cut our nose off despite our face is strategically speaking, more than 50% of our capital has been allocated to be on the well site to diversification outside the oil and gas sector.

Allan MacDonald: Strategically speaking, more than 50% of our capital has been allocated to be on the well site, so diversification outside the oil and gas sector. As we go on the journey, because you sort of said in the next two years, you go, well, other sectors are other, you know, other oil and gas geographies are embracing more CNG consumption. And those are going to present great opportunities for us in the next couple of years.

Allan MacDonald: Director. As we go on the journey, because you sort of said to the next two years, you go, well, other sectors, or other, you know, other oil and gas geographies are embracing more CNG consumption, and those are going to present great opportunities for us in the next couple of years, and we're going to capitalize on them. But we're also building new markets too, and we're building new verticals, so it's a constant balance. So, if you look at power generation, if you look at new geographies, where we're going to put hubs, we always have a mind to the majority of our capital going to outside the oil and gas sector.

Speaker Change #106: As we go on the journey, because you sort of said to the next two years you go, well, other sectors or other, you know, other only gas geographies are embracing more CNG consumption and those are going to present great opportunities for us in the next couple of years and we're going to capitalize on them.

Allan MacDonald: We're going to capitalize on, But we're also building new markets too, and we're building new verticals, so it's a constant balance. So if you look at power generation, if you look at new geographies, where we're going to put hubs, we always have a mind to the majority of our capital going to outside the oil and gas sector. But at the same time, we don't want to walk away from very profitable volumes either. So we're keeping sort of both options. I see. And just one last question.

Grier Colter: Can you describe the situation in the supply chain and providing MSUs on scheduled non-budget? Rob, can you just asking about the number of MSUs? Yeah, the actual number of MSUs. Yeah, I think they took the full year number down by five units, which was 100%. I think maybe it's the average that we're talking about. So here's what I would say, and if I don't answer your question, just ask me again. But we're obviously like we originally said we would buy roughly 140 of these.

Speaker Change #106: But we're also building new markets, too, and we're building...

Speaker Change #106: New Verticals, so it's a constant balance.

Speaker Change #106: If you look at power generation, if you look at new geographies, where we're going to put hubs.

Allan MacDonald: But at the same time, we don't want to walk away from very profitable volumes either. So, we're keeping sort of both options in motion there. I see.

Speaker Change #107: We always have a mind to the majority of our capital going to outside the oil and gas sector. But at the same time, we don't want to walk away from very profitable volumes either. So we're keeping sort of both options in motion.

Allan MacDonald: So you guys sound pretty positive about Q4 for Sotarus in terms of pricing and demand. How much of the, Pricing for the MSUs has been has already been locked in for Q4 and Q1. Wow, that's a really difficult question to answer. You know, some of we have a let me answer it this way.

Greer Colter: And then just one last question. So, you guys sound pretty positive about Q4, so Taurus in terms of pricing and demand. How much of the pricing for the MSUs has already been locked in for Q4 and Q1? That's a really difficult answer, question to answer. You know, we have a. Let me answer it this way. We have a mix that's very intentional of long-term contracts and short-term. You never want to be too much of one or the other. If you're too short-term, you get, you know, a lot more volatility than you perhaps want. Too long-term, it has; it makes it difficult to be opportunistic in terms of where demand's going, especially in a market.

Grier Colter: I think we're about 40, one or something year to date. And we kind of thought they would occur relatively evenly. So we're a little bit behind. I mean, we kind of thought they would be slightly back and weighted, but not this back and weighted. So we're still wanting to take these MSUs. Obviously that's a lot to get delivered in the second half of the year. If they get delivered, we'll certainly take them.

Speaker Change #108: I see. And then just one last question. So you guys sound pretty positive about Q4 for Sotarus in terms of pricing and demand. Like how much of the...

Speaker Change #109: Christing for the MSU has already been locked in for Q4 and Q1.

Speaker Change #110: That's a really difficult question to answer.

Grier Colter: There's probably a chance that some of them maybe slip into next year or come right near the end of the year. If you recall last year, we had about 50 that came in the last week of December. But yeah, as I say, we're still counting on the 140. We've still got them ordered and to the extent that they come, you know, just be more back and weighted. So that's that's the number you're talking about just having that.

Allan MacDonald: We have a mix that's very intentional, of long-term contracts and short-term. You never want to be too much of one or the other. If you're too short term, you get, you know, a little more volatility than you perhaps would. If you're too long term, it makes it difficult to be opportunistic where demand's growing, especially in a market, like I said, this one is in its in So if you think about contracts like our backup power generation contract with National Grid, our RNG contracts tend to be more long-term, so pricing and the economics are fixed.

Speaker Change #111: you know some of we have a let me answer it this way we have a mix that's very intentional

Speaker Change #111: of Long-Term Contracts and Short-Term Contracts.

Speaker Change #112: You never want to be too much of one or the other. If you're too short term, you get more volatility than you perhaps want.

Speaker Change #113: To long term, it makes it difficult to be opportunistic in terms of where demand is growing, especially in a market, like I said, this one is in its infancy and really just evolving.

Greer Colter: Like I said, this one is in its infancy and really just evolving. So, if you think about contracts like our backup power generation contract with National Grid, our RNG contracts tend to be more long-term. So, pricing in the economics are fixed. We know that you know, with applied capital, very specifically for projects like that. If you think if some of the work we're doing in oil and gas, the last thing you'd want is fixed pricing because, you know, there's volatility and there's opportunistic reasons to make sure that you're not tied in. So, you know, we're happy with our mix right now.

Grier Colter: If they came later in the year, the average for the year would be lower, but you might end up with the same number. That's what it is. But yes, certainly we're we're a little bit behind. We would love to have have those MSUs. We can put them to work and generate great returns. So that is still our goal. And we're just we are a little bit behind on that. So yeah, hopefully that clarifies it. Thank you for that.

Operator: And last question.

Speaker Change #113: So, if you think about contracts like our backup power generation contract with National Grid or our RNG contracts tend to be more long-term.

Allan MacDonald: We know that we've applied capital very specifically for projects like that. If you think of some of the work we're doing in oil and gas, the last thing you'd want is fixed pricing, because there's volatility and there are opportunistic reasons to make sure that you're not tied in. So we're happy with our mix right now.

Speaker Change #113: So pricing and the economics are fixed. We know that.

Operator: I just wanted to revisit the capital allocation question.

Speaker Change #113: with Applied Capital.

Speaker Change #113: very specifically for projects like that. If you think of some of the work we're doing in oil and gas,

Allan MacDonald: We talked about this in the past, but what are your current thoughts on, you know, how you're weighing the merits of maintaining your current capital allocation strategy as opposed to an alternative like reducing the dividend to accelerate the leveraging. And, you know, sort of bring back given growth over time. Is anything changed or not here? I look down. No, I mean, here up. No, nothing change. I mean, as as Greer was saying, we're very comfortable where we're at from a cast position.

Speaker Change #114: The last thing you'd want is fixed pricing because there's volatility and there's opportunistic reasons to make sure that you're not tied in. So we're happy with our mix right now. We think it's where it should be.

Grier Colter: We think it's where it should be, and we're going to continue to be mindful of both having flexibility and water. Okay, thanks. Just one last question. On your CapEx plan of about $230 million, that still assumes the 140 MSU deliveries, and if the deliveries slip into next year, then we should assume that the CapEx spend is going to be lower this year, right? Yeah, for sure. Yeah, so 230 is still the number, but I would say this, it's definitely not going to be more than... I think if anything, things will slip and you know, you could see. That would probably be in the 10s.

Nelson Ng: We think it's where it should be. And, you know, we're going to continue to be mindful of both having flexibility and longer-term commitments. Okay, thanks.

Speaker Change #114: And, you know, we're going to continue to be mindful of both having flexibility and longer-term commitments.

Nelson Ng: Just one last question. On your CAPEX plan of about 230 million, like that still assumes that 140 MSU deliveries, and if the delivery is slipping to next year, then we should assume that the CAPEX spend is going to be lower this year, right? That's right. Yeah, for sure. Yeah, so 230 is still the number, but I would say that it's definitely not going to be more than 230. I think if anything, things will slip. And, you know, you could see I would probably be in the tens of millions the other way if we're going to be lower.

Speaker Change #115: Okay, thanks. Just one last question on your capex plan of about 230 million. That still assumes that 140 MSU deliveries end.

Allan MacDonald: We've got line of say within the business for incremental opportunities. We're able to fund the growth that we foresee in the business. I think there's opportunity to reduce the requirement for capital within the propane business and crease its contribution to the bottom line. So our long term vision hasn't changed in terms of our ability to reach our goals around the leverage to fund the growth of the business, and certainly that enables us to support the dividend.

Operator: Okay.

Operator: Thanks, everyone.

Speaker Change #116: If the deliveries slip into next year, then we should assume that the CapEx spend is going to be lower this year, right?

Speaker Change #117: That's right. Yeah, for sure. Yeah, so 230 is still the number, but I would say this, it's definitely not gonna be more than 230. I think if anything, things will slip and you could see.

Operator: Thank you.

Grier Colter: The Capital is still there for the business, and we're still... You know, we're still on the list and trying to get the product, but to the extent that we can't yet, it would definitely, it would drift downward. It's definitely not drifting outwards. Yeah, and let me add one qualifier on that because, Soterios isn't our only capital investor, in the propane businesses we've said to you, Charles. Thank you all before we're looking at opportunities, to get better utilization from our assets and to rationalize, sort of the surplus assets we have from the M&A, like So, I mentioned we're growing the business and in pro- [inaudible] but we're trying to do so with a view that the capital requirements that...

Allan MacDonald: But, you know, the capital is still there for the business and we're still, you know, we're still on the list and trying to get the product, but to the extent that we can't, it would definitely, it would drift downward; stuff will not drift outward. Yeah, and let me have one qualify on that because the terrorists are our only capital. Management. In the propane business, as we've said to you all before, we're looking at opportunities to get better utilization from our assets and to rationalize sort of the surplus assets we have from the M&A legacy. So, I mentioned we're growing the business in propane, but we're trying to do so with a view that the capital requirements that the business had in the past are going to be different going forward.

Speaker Change #118: That would probably be in the tens of millions the other way if we're going to be lower, but you know The capital is still there for the business, and we're still

Patrick Kenny: Our next question comes from the line of Patrick Kenny with MBS. Please proceed. Thank you.

Speaker Change #119: You know, we're still on the list and trying to get the product, but to the extent that we can, it would definitely drift downward. It's definitely not drifting outward. Yeah, and let me add one qualifier on that, because Soteris isn't our only capital investment.

Allan MacDonald: Good morning, everyone. Maybe starting with Canadian propane. Just curious what regions across the country are experiencing the greatest success on the customer acquisition front? Maybe just some color on the main drivers of this growth. And as well, you know where you might be seeing the biggest opportunities in terms of further cost savings and margin expansion. Hey, Patrick, Alan. With regard to Canadian propane specifically, you mean? Yeah. Or generally speaking. Yeah, Canadian propane.

Speaker Change #119: in the propane business, as we've said to you.

Speaker Change #120: you all before, we're looking at opportunities to get better utilization from our assets and to rationalize sort of the surplus assets we have from the M&A legacy.

Speaker Change #120: So, yeah, I mentioned we're growing the business in propane.

Allan MacDonald: Well, Canadian propane, the difference between Canada and the US is largely Canada's more commercial and industrial. Where we, you know, where we're focusing our sales efforts and in that vein, although there's some consumer component to that too. I would say our biggest successes have come with working with the sales organization to better understand costs. So we're working on profitability, understanding where we're investing our capital. There's been some collaboration between the Canadian propane business and satiris around industrial customers, which has helped.

Grier Colter: The business had in the past are going to be different going forward. So not all of the reduction that Gris is mentioning is simply a factor of MSU. There will be some opportunities in propane, but I want everyone to be very, like, I want to be very clear that this isn't deferring capital, we're still continuing to acquire customers, we're continuing to grow the business, we're just doing it more, OK, thank you very much. Thank you very much.

Speaker Change #120: But we're trying to do so with a view that the capital requirements that the business had in the past are going to be different going forward.

Nelson Ng: So, not all of the reduction that Grier is mentioning is simply a factor of MSUs. There'll be some opportunities in propane, but I want everyone to be very, like I want to be very clear that this is deferring capital. We're still continuing to acquire customers; we're continuing to grow the business; we're just doing it more efficiently. Okay, thank you very much.

Speaker Change #120: So, not all of the reduction that Grier is mentioning is simply a factor of MSU's.

Speaker Change #121: There will be some opportunities in propane, but I want everyone to be very, like I want to be very clear that this isn't deferring capital, we're still continuing to acquire customers, we're continuing to grow the business, we're just doing it more efficiently.

Nelson Ng: Thanks, Nelson. Thank you.

Allan MacDonald: Thanks Nelson. Thank you. Our next question comes from the line of Hribar Hansen with Raymond James, please proceed. Yeah, good morning, guys. Thanks for time. I think we beat this entire issue pretty hard here.

Hribin Hansen: Our next question comes from the line of Hribin Hansen with Raymond James. Please proceed. Yeah, I want to go ahead and thank the time.

Speaker Change #121: Got it. Okay, thank you very much.

Speaker Change #121: Thank you.

Speaker Change #122: Our next question comes from the line of Steven Hansen with Raymond James. Please proceed.

Allan MacDonald: But I just have a couple of quick follow ups, if I may. We've seen a number of strategic partnerships emerge across the CNG space here in the last year or two, where companies are partnering with some of their largest customers. Just curious, have you contemplated any relationships like that, whether it be in the traditional oil and gas space, or even in some of the newer, faster growing verticals like data centers? Hey Steve, it's Allan.

Hribin Hansen: I think we beat this Atari issue pretty hard here, but I just have a couple of quick follow-ups in M&A. We've seen a number of strategic partnerships emerge across the CNG space here in the last year or two where companies are partnering with some of their largest customers. Just curious, as you contemplated any relationships like that, whether it be in the traditional oil and gas space, even in some of the newer, faster growing verticals like data centers.

Stephen Hansen: Yeah, good morning, guys. Thanks for the time. I think we've beat this entire issue pretty hard here, but I just have a couple of quick follow-ups, if I may. We've seen a number of strategic partnerships emerge across the CNG space here in the last year or two, where companies are partnering with some of their largest customers.

Speaker Change #124: Just curious if you contemplated any relationships like that, whether it be in the traditional oil and gas space or even in some of the newer, faster-growing verticals like data centers?

Allan MacDonald: Hey, Steve, down. Thanks for joining us today. Yeah, absolutely.

Allan MacDonald: Thanks, thanks for joining us today. We, yeah, absolutely we have. I mean, we have a very coveted relationship with BP on RNG that's virtually exclusive, that we're really proud of and probably don't talk about as much as we should. It's been so much on the go here in the past year.

Allan MacDonald: And it's about, you know, where we're prepared to look for opportunities and where we're investing to grow that business and supporting our sales organization. So it's less about organic, you know, segment growth like we're not adding new segments or, you know, looking at different geographies. I'd say more, we're looking to improve our density. So really capitalizing on where we have existing assets so the disproportionately able to contribute a return. It's about where we have a single flexibility by really understanding our costs and then being smart about where we're, you know, where we're targeting.

Allan MacDonald: We have a very coveted relationship with BP on RNG, that's virtually exclusive, that we're really proud of and probably don't talk about as much as we should. So much on the go here on the past year. But I'm actually in Houston next week, and for that reason, where we're meeting with a number of folks. And there's a lot of talk about opportunities in the market on the renewable side, on emerging verticals, power generation, data centers, and we're right in at the forefront of those discussions. I've been very conscious of not getting out ahead of the business in terms of creating a buzz before we see real, meaningful financial, either investment or profit generation from them.

Speaker Change #125: Hey Steve, it's Alan. Thanks for joining us today. Yeah, absolutely. We have a very coveted relationship with BP on RNG. That's virtually exclusive.

Speaker Change #125: that we're really proud of and probably don't talk about as much as we should. It's been so much on the go here in the past year, but I'm actually in Houston next week and for that reason we're meeting with a number of folks.

Allan MacDonald: But I'm actually in Houston next week, and for that reason we're meeting with a number of folks. And there's, there's a lot of talk about opportunities in the market on the renewable side on emerging variables, power generation data centers. And we're at we're right in at the forefront of those discussions. I've been very conscious of not, getting out ahead of the business in terms of creating a buzz, before we see real meaningful financial either investment or or Profit Generation. So, in terms of things like the data center business, yeah, that's going to be an emerging addressable market. And if you think about that in the context of Soteris, I continue to remind people.

Speaker Change #125: and there's

Speaker Change #125: There's a lot of talk about opportunities in the market on the renewable side, on emerging verticals, power generation, data centers.

Allan MacDonald: So like I said, that was going to be a boring answer. It's really basic stuff, but I think I got to give the team credit they've made a lot of effort in the last couple of quarters to really manage our customer base better and starting to pay dividends. Okay, I appreciate that.

Speaker Change #125: and we're right at the forefront of those discussions. I've been very conscious of not...

Speaker Change #125: getting out ahead of the business in terms of creating a buzz before we see real meaningful financial either investment or or profit generation from them.

Allan MacDonald: And then maybe on the US side for propane. And there's a bit of a follow up on the capital allocation question, but any updated thoughts around, you know, perhaps high grading your focus in the US. Any non core sale opportunities that could help accelerate your path towards reaching your leverage target.

Allan MacDonald: So, in terms of things like the data center business, yeah, that's going to be an emerging addressable market. And if you think about that in the context of satiris, I continue to remind people of this. We own virtually 50% of the MSUs in North America. As verticals emerge that are either CNG or RNG centers in terms of over-the-road distribution, we are absolutely going to be the leader in that segment. Right now, there's a lot of buzz about the potential. And I think some of that's real, and some of it is probably optimistic. But as those opportunities come online, make no mistakes.

Speaker Change #125: So in terms of things like the data center business, yeah, that's going to be an emerging addressable market. And if you think about that in the context of Soteris, I continue to remind people of this.

Allan MacDonald: We own virtually 50% of the MSUs. As verticals emerge that are either CNG or RNG-centric in terms of over-the-road distribution... We are absolutely going. Right now, there's a lot of buzz about the potential and I think some of that's real and some of it is probably up and up. But as those opportunities come online, make no mistakes, the Terrors will be a significant player.

Speaker Change #125: We own virtually 50% of the MSUs in North America.

Speaker Change #125: as verticals emerge that are either CNG or RNG centric in terms of over the road distribution. We are absolutely going to be the leader in that segment.

Allan MacDonald: No, I mean, sorry, when I know it's a bad answer song. Our plans right now are not, we're not looking at any dispositions in the U.S. We're really pleased with our footprint. We've got some opportunities to rationalize some assets, which you'd normally expect when you grow and buy M&A. I think we're in the right markets. I think we're very under penetrated. There's an opportunity to take share from a competition set that I think we're very, very well poised to go up against.

Speaker Change #125: Right now there's a lot of buzz about the potential and I think some of that's real and some of it is probably optimistic.

Allan MacDonald: Ataris will be a significant player.

Speaker Change #125: But as those opportunities come online, make no mistake, Soteris will be a significant player, there is no question in my mind.

Allan MacDonald: question in my mind. And by simply a virtue of our scale and our presence in these markets. So, yes, we're in continuous dialogue with partners, whether it be folks that are companies that see energy, you know, the assurance of energy being able to be provided as key to their business, and whether or not a partnership makes sense with the terrorists or new verticals that are emerging. So, we're absolutely going to be involved in those discussions, but expect, like you have in the past, that they won't be public until they're real and kind of financial impact.

Allan MacDonald: But simply a virtue of our scale and our presence in these markets. So, yes, we're in continuous dialogue with partners, whether it be companies that, Energy, you know, the assurance of energy being able to be provided as key to their business and whether or not a partnership makes sense with Soteris or new verticals that are emerging. So we're absolutely going to be involved in those discussions, but expect, like you have in the past, that they won't be public until they're real and final. I appreciate the color there.

Speaker Change #125: and by simply a virtue of our scale and our presence in these markets. So yes, we're in continuous dialogue with partners whether it be folks that are companies that see.

Allan MacDonald: We've got great opportunities in terms of right sizing our pricing to be more aggressive on the acquisition front. And we've got great opportunities to retain our customers better than we have in the past. So I think, you know, the asset base in the U.S, is really attractive to me and it's underutilized. So we've got full designs on growing that business aggressively and we think there's a lot of underutilized value there.

Speaker Change #125: energy, you know, the assurance of energy.

Speaker Change #125: being able to be provided as key to their business and whether or not a partnership makes sense with the terrorists or new verticals that are emerging. So we're absolutely going to be involved in those discussions, but expect, like you have in the past, that they won't be public until they're real and kind of financial impact.

Patrick Kenny: Okay, thanks for that.

Hribin Hansen: I appreciate the color there. It just maybe is a derivative follow-up.

Allan MacDonald: Just maybe as a derivative follow-up, it might be too early, perhaps, but we have seen one-year competitors invest in downstream integration opportunity where they're seemingly become more of a microgrid power producer, as opposed to just providing backup power. That kind of relationship comes with, you know, 10-plus-year offtake rates or contracts, which can be attractive, but the capital intensity is also much higher. I mean, if you thought about that specific area at all.

Allan MacDonald: It might be too early, perhaps, but we have seen one of your competitors invested in downstream integration opportunity where they're seemingly become more of a microgrid power producer as opposed to just providing backup power. That kind of relationship comes with, you know, 10 plus year offtake rates or contracts, which are can be attractive, but the capital in Tennessee is all so much higher. I mean, we thought about that specific area at all. We have, and I mean the million dollar question for us is, you know, you can bifurcate this a little bit and say, look, the total addressable market for over the road CNGR and G is going to continue to increase.

Speaker Change #126: I appreciate the color there. Maybe it's a derivative follow-up. It might be too early, perhaps, but we have seen one of your competitors.

Patrick Kenny: And then last one for me, just on Sir Terrace, and perhaps, you know, a bit of an offset to the higher competition. I know that the cost of natural gas is a flow through in general, but I'm just curious you know, from a timing perspective, if the current weakness in 9x and ankle pricing might be a bit of a short-term tailwind for margins, at least through Q3 and perhaps into Q4. Patrick Curtis, are you asking this from a competitive standpoint and like a market positioning and pricing?

Speaker Change #126: invested in downstream integration opportunity where they're

Speaker Change #127: I'm a microgrid power producer, as opposed to providing backup power. That kind of relationship comes with 10 plus year offtake rates, or contracts, which are can be attractive, but the capital tends to be also much higher. I mean, we thought about that specific area at all. We have, and I mean, the million dollar question for us is...

Allan MacDonald: We have, and I mean, the million dollar question for us is... You know, you can bifurcate this a little bit and say, look, the total addressable market for over the road CNG, RNG is going to continue. There's going to be opportunities in renewables that perhaps have an upstream or downstream potential for us. And then there are either partnerships or direct investment in.., and.., energy provision in terms of power again, with very capital intention. And we have yet to be convinced that that's the best next logical step for Terrison, for Superior.

Speaker Change #128: You know, you can bifurcate this a little bit and say, look, the total addressable market for over-the-road CNG, RNG is going to continue to increase.

Allan MacDonald: There's going to be opportunities and renewables that perhaps have an upstream or downstream potential for us. And then there are either partnerships or direct investment in energy provision in terms of power gen. Very capital intensive. And we have yet to be convinced that that's the best next logical step for the terrorists and for Superior. We think there are a lot of opportunities in this business that are on the table, and they all need to be vetted. So, you know, I'm reluctant right now to say, look, going aggressively at a really capital intensive power gen business is the right next step.

Patrick Kenny: Are you talking about like the way that contracts work and having either we spoke through or having kind of fixed price nature contract? Yeah, yeah, more on the contracting front and, you know, I know that on the propane side of the business, there's a little bit of a leg in terms of flowing through the pricing. So just wondering if there's a similar dynamic with Sir Terrace. Okay, yes. So on the Sir Terrace side, the vast majority of these are true flow through.

Speaker Change #128: There's going to be opportunities and renewables that perhaps have an upstream or downstream potential for us.

Speaker Change #128: And then there are either partnerships or direct investment in...

Speaker Change #128: and uh...

Speaker Change #128: energy provision in terms of power gen. Very capital-intensive.

Speaker Change #128: And we have yet to be convinced that that's the best next logical step for Soteris and for Superior. We think there are a lot of opportunities in this business that are on the table and they all need to be vetted.

Allan MacDonald: We think there are a lot of opportunities in this business that are on the table and they all need to be vetted. You know, I'm reluctant right now to say, look, going aggressively at a really capital-intensive power gen business, is the right next step. It may be, but we're not at that stage. Fair enough, I appreciate the color, I like this.

Patrick Kenny: So the, you know, other than your market position and the competitiveness relative to diesel, certainly as the prices lower on the NACC outside, it makes the proposition better. But the contracts themselves, the very high percentage of them are complete flow through where you're taking, you're not going to take any risk on it. There are some legacy contracts, and this was to my remarks, and it's a declining thing, but some of the contracts that Sir Terrace has negotiated and some still exist have a construct where there's a Sir Church if the price of the commodity goes up.

Speaker Change #128: You know, I'm reluctant right now to say, look, going aggressively at a really capital intensive power gen business is the right next step. It may be, but we're not at that stage just yet.

Allan MacDonald: It may be, but we're not at that stage just yet. Fair enough, I appreciate the color like this.

Operator: I see. Thank you. One moment for our last question, and it comes from the line of Ben Isaacson with Scotiabank. Please proceed. Good morning, everyone. Thank you for taking my questions. They've actually all been asked. I only have one or two left.

Hribin Hansen: I see. Thank you.

Patrick Kenny: So they're protected to the extent that the commodity goes down, they actually participate on that. So it's fixed price to the customer with the potential of the Sir Church, but obviously if the commodity price is going down, they're selling into a fixed price with a lower cost. So there has been some benefit over time to this, but these contracts are becoming fewer and fewer. And as I said, that was kind of part of the headman in Q1 and Q2 is that there's less of these contracts that have this potential benefit.

Ben Isakson: One moment for our last question. Any comments from the line of Ben Isakson with Scotia Bank? Please proceed.

Speaker Change #129: Fair enough, I appreciate your color, I like this. I see. Thank you. I'm going to move on for our last question.

Speaker Change #130: and he comes from the line of Ben Isakson with Scotiabank. Please proceed.

Ben Isakson: Good morning, everyone. Thank you for taking my questions. They've actually all been asked. I only have one or two left.

Allan MacDonald: The first question is back to the dividend. Why do you feel the need to continue paying one at all? I mean, the stock is, I think, a nine and a half percent yield. And so the market doesn't seem to be paying you at all for giving them a dividend. So why not pull it and use that to buy back shares or, as someone else said, accelerate the leverage reduction? I guess I'm approaching this from a different way. Some are asking whether the dividend is safe, but I'm asking whether it just makes sense to kill it entirely. You know, hey Ben, it's Allan.

Ben Isakson: Good morning everyone. Thank you for taking my questions. They've actually all been asked. I only have one or two left. The first question is back to the dividend.

Ben Isakson: The first question is back to the dividend. Why do you feel the need to continue paying one at all? I mean, the stock is, I think, a nine-and-a-half percent yield. And so, the market doesn't seem to be paying you at all for giving them a dividend. So, why not pull it and use that to buy back shares or, as someone else had to accelerate the leverage reduction? I guess I'm approaching this from a different way. Some are asking whether the dividend is safe, but I'm asking whether it just makes sense to kill it entirely.

Speaker Change #132: Why do you, um...

Ben Isakson: feel the need to continue paying one at all? I mean, the stock is, I think, a nine and a half percent yield. And so the market doesn't seem to be paying you at all for giving them a dividend. So why not pull it and use that to buy back shares or, as someone else said, accelerate the leverage?

Patrick Kenny: It's almost like you have an embedded long put in the contract, but as customers kind of see the way these work, you know, obviously fewer and fewer of them are. I'm interested in having that. So it's a very small number. The exposure, you know, if I said, you know, this benefit in looking into Q3 last year would have been like three million or something like that. So it's not a big number.

Speaker Change #133: Reduction. I guess I'm approaching this from a different way. Some are asking whether the dividend is safe, but I'm asking whether it just makes sense to kill it entirely.

Allan MacDonald: You know, hey, Ben, talent. Yeah, it's a great question. I think I could say that about a number of things. You know, when I look at the value of Satara versus some of its competitors in some of the parts, I think it's tremendously undervalued. and the answer to that isn't to sell Sataris. It's to work within the business to get it better understood and for us to continue to stay on the path. So what we're not doing right now with our share valuation is challenging the fundamentals of this company. Superior has, I think, stellar assets when it comes to the propane business that, frankly, have an opportunity to be optimized in a meaningful way.

Allan MacDonald: Yeah, I mean, it's a great question. I think. I could say that about a number of things. You know, when I look at the value of Soteris versus some of its competitors in, in our sum of the parts, I think it's tremendously undervalued. And the answer to that isn't to sell Soteris. It's to work within the business to get it better understood and for us to continue to stay on the path.

Speaker Change #133: You know, hey Ben, it's Allan.

Ben Isakson: Yeah, I mean, it's a great question. I think...

Speaker Change #134: I can say that about a number of things. You know, when I look at the value of Soteris versus some of its competitors in...

Speaker Change #135: in our sum of the parts, I think it's tremendously undervalued.

Patrick Kenny: So, you know, if you had zero, that would be the kind of headwind, but we'll have a million or two or something like that will be the benefit, but we're talking pretty small numbers here. Got it. Okay. That's great. I'll leave it there. Thank you. Thanks. Thank you.

Speaker Change #136: And the answer to that isn't to sell Soteris.

Speaker Change #136: It's to work within the business to to get it better understood and for us to continue to stay on the path So what we're not doing right now with our share valuation is It's challenging the fundamentals of this company

Allan MacDonald: So what we're not doing right now with our share valuation is challenging the fundamentals of this company. Superior has, I think, stellar assets when it comes to the propane business that frankly have an opportunity to be optimized in a meaningful way.

Speaker Change #137: Superior has, I think, stellar assets when it comes to the propane business that frankly have an opportunity to be optimized in a meaningful way.

Allan MacDonald: I think Sataris is positioned this incredibly well. And right now, our capital structure may not be getting the value that we think it deserves, but we're not under any pressure to have to change that in order to capitalize on the opportunities in the business. So, in the fullness of time, of course, you're always looking at how are you getting the right value and is the business being seen the way that we see it. But I think over the course of the next, you know, the coming months, we're going to continue to focus on what we do best.

Allan MacDonald: I think Soteris has positioned us incredibly well, and right now our capital structure may not be getting the value that we think it deserves. But we're not under any pressure to have to change that in order to capitalize on the opportunities in the business. So in the fullness of time, of course, you're always looking at, are you getting the right value and is the business being seen the way that we see it?

Speaker Change #137: I think Soteros has positioned us incredibly well, and right now our capital structure may not be getting the value that we think it deserves.

Speaker Change #137: but we're not under any pressure to have to to change that in order to capitalize on the opportunities in the business. So in the fullness of time of course you're always looking at are you getting the right value and is the business being seen the way that we see it?

Aaron MacNeil: Do you get the sense that, you know, next summer, like the competitive dynamic maybe worse than the summer? And as you talk to your suppliers, like our lead times increasing or decreasing, like, can you just give us a bit of a flavor for that?

Allan MacDonald: But I think over the course of the next, you know, the coming months, were around. We're going to continue to focus on what we do best, that's drive the business heart, to continue to generate growth, and I don't think our capital structure necessarily, certainly for our ability to support the dividend, doesn't require any augmentations. Thank you for that and then just. Kind of maybe a half question. Natasha, is she available to share her vision for Satoris at some point and just give her perspective on the market?

Speaker Change #137: But I think over the course of the next, you know, the coming months.

Allan MacDonald: That's drive the business heart, continue to generate growth. And, you know, I don't think our capital structure necessarily, certainly for our ability to support the dividend, doesn't require any augmentation as well.

Speaker Change #137: were wrong.

Speaker Change #137: We're going to continue to focus on what we do best, that's drive the business heart.

Allan MacDonald: Let me offer a comment and then maybe grew as some thoughts. You know, to assume that there's going to be an increased fleet that's going to go back to West Texas next Q2 and have the same situation, I think it's way too early to think that way. The grooves point our volume was up and our productivity was up. So it's not necessarily that, you know, the volume has dropped off. So I think there's still capacity and opportunity in that segment.

Speaker Change #137: continue to generate growth and You know, I don't think our capital structure Necessarily certainly for our ability to support the dividend doesn't require any augmentation at this point

Allan MacDonald: Thank you for that. And then just kind of a maybe a half question. Natasha, is she available to share her vision for Sataris at some point and just give her perspective on the market? Oh, yeah. I mean, Natasha is just joined us here in the last while, not just joined us, but I mean just just took on the role in the last number of weeks, and going from COO to president is, in some cases, a really easy transition. It's tricky one because now you're, you know, you're moving beyond the operations of the business, which were running credibly well and really putting, casting your eye to what are you going to do next in terms of your vision.

Speaker Change #138: Thank you for that and then just

Speaker Change #138: Kind of maybe a half question. Natasha, is she available to share her vision for Satoris at some point and just give her perspective on the market?

Allan MacDonald: [inaudible] just joined us here in the last, well it's not just joined us, but I mean just took on the role in the last number of weeks. And going from COO to president is, in some cases, a really easy transition.

Speaker Change #139: Oh yeah, I mean, Natasha is, um, is, uh...

Grier Colter: But more to the point, the other verticals. So, you know, if you think about the CNG and RNG market, it's expanding. And there's so much excitement around it right now. There's all the talk of the consumption of CNG around data centers. There's all the RNG products that are projects that are coming on board. There's backup power that's coming on board. And all of that's going to consume some of the capacity that's being put in the market.

Speaker Change #140: just joined us here in the last, well it's not just joined us, but I mean just took on the role in the last number of weeks and going from COO to president is in some cases a really easy transition, in some cases it's a tricky one because now you're moving beyond the,

Allan MacDonald: In some cases, it's a tricky one, because now you're moving beyond the... The Operations of the Business, which were running incredibly well, and really casting your eye to what you are going to do next in terms of your vision. So we are working with Natasha on that. I think it would be great if you want to meet her in the interim, we can certainly make that happen. But she is also taking the time that she should be taking, to make sure that the vision for the organization going forward reflects where we are today and it's her vision, not the one that necessarily... Great, and then just very last, oh sorry, and then just very last question on my part is... Alan, I think you mentioned earlier that Sotoris is looking at developing new segments. Is there, can you shed some kind of color on that in terms of.., what those verticals look like, size, timing, or is it still PBD?

Natasha: Beyond the operations of the business which were running incredibly well and really putting casting your eye to What are you going to do next in terms of your vision? So she's we're working with Natasha on that and I think it'd be great if you want to meet her in the interim That's we can certainly make that happen. But

Allan MacDonald: So we're working with Natasha on that. And I think it'd be great if you want to meet her in the interim that we can certainly make that happen, but she's also taking the time that she should take. To make sure that the vision for the organization going forward reflects where we are today and it's her vision, not the one that necessarily.

Grier Colter: It's foreseeable over the next several years that the demand for the energy will far outpace the availability of MSUs. Now it's too early to predict that. But that's certainly potentially the case. So I want to be really careful about saying like, there's going to be over capacity that this signals over capacity and that it's going to be exacerbated because that's not necessarily what we're seeing right now. Greg, I don't know if you'd add anything to that.

Speaker Change #142: She's also taking the time that she should take.

Speaker Change #142: to make sure that the vision for the organization going forward reflects where we are today, and it's her vision, not the one that necessarily we would have had.

Allan MacDonald: Great.

Allan MacDonald: I'm just very lost. Oh, sorry. I'm just very lost. Question on my part is. Alan, I think you mentioned earlier that Sataris is looking at developing new segments. Is there, can you shed some kind of color on that in terms of what those verticals look like size timing or is it still TBD? Well, it's a little bit of both. Yeah, I mean, we're looking at understand. So let me give you an example: the industrial segment. So either industrial power gen or, you know, things like brick factories and mines. If you overlay that with geography, we've identified some markets, and I'm going to be a little quiet here for competitive reasons, but some markets that we think have potential.

Speaker Change #142: Great, and then just very last question on my part is.

Grier Colter: No, I agree. I think for this very hard to predict, but I think for us to foresee that in the summer quarters next year to see more MSUs there, I think that's a reasonable assumption. I think what we are very focused on is continuing to diversify the business geographically and from a product standpoint and to try to continue to make the business more resilient to individual markets, whether, you know, whether it's good or whether it's bad.

Speaker Change #142: Allan, I think you mentioned earlier that Sotoris is looking at developing new segments. Is there, can you shed some kind of color on that in terms of...

Speaker Change #143: what those verticals look like, size, timing, or is it still TBD?

Allan MacDonald: Um, well, it's a little bit of both. Uh, yeah, I mean... We're looking at- Let me give you an example. The industrial segment, so either industrial power gen or things like brick factories and mines, if you overlay that with geography, we've identified some markets, and I'm going to be a little coy here for competitive reasons, but some markets that we think have potential. But then you start a journey, because now we have to get a hub. Some are easier than others.

Allan MacDonald: Well, it's a little bit of both yeah, I mean

Allan MacDonald: We're looking at...

Speaker Change #144: So let me give you an example. The industrial segment, so either industrial power gen or, you know, things like brick factories and mines. If you overlay that with geography, we've identified some markets, and I'm going to be a little coy here for competitive reasons, but some markets that we think have potential.

Grier Colter: But that's something we're talking quite a lot about. We're very focused on. So I think to the extent that you have similar dynamics when we get back to the summer quarters next year that we're in a position, that it would have less than an impact, so that's our goal. That's right. Yeah, I get all that, I guess. Obviously, if demand is up, your volumes are up. That means that supply is growing at a faster pace than demand.

Allan MacDonald: But then you started journey because now we have to get a hub. Some are easier than others. There's, as you can imagine, putting a natural gas hub in a geography is not without its regulatory compliance constraints. So these aren't processes that happen necessarily quickly. If we have adjacencies to our existing infrastructure, they can happen a little faster, but we're developing markets with a mind of how do we create both a vertical presence and a geographic presence? James, you know, the RNG segment is a really interesting one because it emerged, you know, quite quickly in the last sort of 10 years, but it's also off the pipeline infrastructure because it tends to be largely agricultural and it's not in very densely populated areas.

Speaker Change #144: But then you start a journey, because now we have to get a hub. Some are easier than others. As you can imagine, putting a natural gas hub in a geography is not without its regulatory and compliance constraints.

Allan MacDonald: There's, as you can imagine, putting a natural gas hub in a geography is not without its regulatory and compliance constraints. These aren't processes that happen necessarily quickly. If we have adjacencies to our existing infrastructure, they can happen a little faster. But we're developing markets with a mind of how do we create both a vertical presence and a geographic presence. You know, the RNG segment is a really interesting one because it emerged, you know, quite quickly over the last sort of ten years, but it's also off the pipeline infrastructure because it tends to be largely agricultural and it's not in very densely populated areas. Conversely, there are some, you know, Northern US, Northeastern US opportunities that we think would be really, really meaningful. But the density of the population provides some challenges when it comes to getting the infrastructure in place.

Grier Colter: And as you've mentioned, your competitors are more regional focused and mostly focused on that West Texas market. And so I guess the question is really geared towards like, what are your suppliers telling you of what your competitors are adding? Do you think that that the supply ads from your competitors will continue at the current pace or do you think that those supply ads will decrease? Look, that's a tough one. I can't speak on behalf of the manufacturer.

Speaker Change #144: These aren't processes that happen necessarily quickly if we have adjacencies to our existing infrastructure They can happen a little faster, but we're developing markets with a mind of how do we create both a? vertical presence and a geographic presence

Speaker Change #144: You know, the RNG segment is a really interesting one because it emerged, you know, quite quickly over the last sort of ten years.

Speaker Change #144: But it's also off the pipeline infrastructure because it tends to be largely agricultural and it's not in very densely populated areas.

Allan MacDonald: Conversely, there are some, you know, Northern U.S., Northeastern U.S. Opportunities that we think would be really, really meaningful, but the density of the population provides some challenges when it comes to getting the infrastructure in place. So, we're always balancing those two things, and they take time. I know that's not a super crisp answer, but I want to stop short of giving the world our competitive strategy here.

Grier Colter: What I tell you is there's a finite amount of supply. We're grabbing about 50% of it. So if the demand were to increase, there's just limitations put on the market by the supply capacity. And the fact that we're behind in our deliveries would imply that there's some natural bottlenecks just in production. So I'm not seeing an excess capacity of MSUs in the market that are up for grabs, certainly. That's the same thing.

Speaker Change #144: Conversely, there are some, you know, northern U.S., northeastern U.S. opportunities that we think would be real and meaningful. But the density of the population provides some challenges when it comes to getting the infrastructure in place. So we're always balancing those two things.

Allan MacDonald: So, we're always balancing those two things. Um, and they take time. I know that's not a super crisp answer, but, um... I want to stop short of giving the world our competitive strategy.

Speaker Change #144: I know that's not a super crisp answer, but I want to stop short of giving the world our competitive strategy here.

Ben Isakson: Yeah, thanks so much. Appreciate it.

Allan MacDonald: Yeah, very much. Thanks so much. Appreciate it. Thanks, Ben.

Operator: Thanks, Ben. Thank you.

Allan MacDonald: Thank you. And this concludes our Q&A session. Thank you. I will turn the call back to the President and CEO, Allan MacDonald, for closing remarks. Thanks everyone. Look, just let me wrap up by just expressing our gratitude internally for the interest that you take in the company. I know you all put a tremendous amount of work in this, and the effort that you put into it, and all your thoughtful comments and questions are much appreciated on our end. So thank you, and look forward to talking to you all again. Take care. And thank you for everyone that participated in today's conference. You may now disconnect.

Allan MacDonald: And this concludes our Q&A session. Thank you.

Speaker Change #145: Yeah, fair enough. Thanks so much. Appreciate it. Thanks, Ben.

Allan MacDonald: I will turn the call back to the President and CEO, Allan MacDonald, for close and remarks. Thanks, everyone. Look, I just let me wrap up by just expressing our gratitude internally for the interest that you take in the company. I know you all put a tremendous amount of work in this, and your effort that you put into it. And all your thoughtful comments and questions are much appreciated on our end. So thank you and look forward to talking to you all again in the coming months. Take care. And thank you for everyone that participated in today's conference.

Speaker Change #145: Thank you. And this concludes our Q&A session. Thank you. I will turn the call back to the President and CEO, Allan MacDonald, for closing remarks.

Grier Colter: I think the other thing I may be at arenas, I mean, there's the lens of economics here, right? And we've got the largest fleet by a long shot in the industry. We've been doing this for a long time. Our team is very strong. It's very difficult to get insight into the economics that particularly those that are integrated kind of oil and gas companies. But even the smaller competitors is very difficult to know what their economics are.

Allan MacDonald: Thanks, everyone. Look, just let me wrap up by just expressing our gratitude internally for the interest that you take in the company. I know you all put a tremendous amount of work in this.

Allan MacDonald: the effort that you put into it and all your thoughtful comments and questions are much appreciated on our end. So thank you and look forward to talking to you all again in the coming.

Operator: You may now disconnect.

Speaker Change #146: And thank you for everyone that participated in today's conference. You may now disconnect.

Grier Colter: But we should be as positioned as well or better than most in the industry. And so economics as they compress you, you know, at some point it'll be less interesting for those to buy MSUs you would think. So that is going to be a factor at some point. And our key is to be positioned better than most so we maintain what have been and what we think will continue to be exceptional economics.

Grier Colter: Yeah, I mean, if you think of a small example, and I'm making this up, but if you had 50 MSUs and your origin was in West Texas, to diversify outside the oil and gas sector would be incredibly expensive. To start setting up hubs in other parts of the country is just creating the sales organization you would need. That's what makes Caterus unique. We're one of the few companies that has national coverage.

Grier Colter: So, you know, because of our size, we're able to maintain a business development and sales function that not only covers, you know, North continental, North America, but also emerging segments like hydrogen and R&G. So it gives us a competitive advantage, frankly, just based on our scale and the fact that we have spent the last three years diversifying outside of traditional oil and gas markets. That's really hard for a small regional competitor to do profitably. Okay, I appreciate the response and happy to turn it back to you. Thanks, sir. Thank you.

Nelson Ng: Our next question comes from the line of Nelson Ng with RBC Capital Markets. Please proceed. Great thanks then.

Nelson Ng: Good morning everyone. So I had a few questions on Sataris and I think you guys talked about diversification. So from a MSU allocation perspective, like can you talk about the portion of MSUs allocated to the on gas services? How does sector in Q2 and how that changes seasonally over the year? Because I think your area you mentioned that especially one third of your MSUs were in Western Texas in Q2, is that right?

Nelson Ng: About a third of the fleet in Q2, that's right. But West Texas is not the only oil and gas work we're doing. Certainly the concentration of oil and gas in the summer months is higher than in the winter months. The winter months you have the backup power as an example, eating for mining customers. So there's more diversification of the portfolio in the winter months and there's in the summer. But yeah, it's not just West Texas overall on average for the year.

Nelson Ng: What's coming from oil and gas? If I had to guess, I would say it's probably in the 70% territory, but as I say in the summer, it's going to be higher and the winter is going to be lower. Yeah, and there's a distinction between number of MSUs in volume two because the nice economic component of the oil and gas sector is very geographically dense. And if you think about that comparing to backup power and backup power, you have the MSUs on standby, you may not be flowing.

Nelson Ng: So if you look at volume, it may be different than number of MSUs that are dedicated, but it's in the two-thirds range. Okay. And then I think I heard that the oil and gas sector is a bit more profitable than some of the other sectors. So the evit.contribution would be a bit higher than that. Am I right to make that assumption? Yeah, I'd say, I'd say they're what I was talking more particularly about West Texas, which is somewhat representative, but they're, I'd say West Texas is a really good market.

Nelson Ng: I'd say that the economics are as good or better than our average returns, but there are other regions that are oil and gas in nature. Some would have better economics than that. Some would have not as good economics, so there is a bit of a range. Okay, so like from a big picture perspective, and from a diversification perspective, is there a level of, I guess business mix you want to see from oil and gas over the next few years?

Nelson Ng: I presume you want it to gradually decline, but is there a level that you're looking to target? Well, you know, it's funny. In one way, I wanted to decline, but another way I don't, because it's been incredibly profitable historically, because it's such a big segment, and you know, it's so urgent and dense. So what we don't want to cut our nose off despite our face, strategically speaking, more than 50% of our capital has been allocated to be on the well site, to diversification outside the oil and gas sector.

Nelson Ng: Director. As we go on the journey, because you sort of said to the next two years, you go, well, other sectors, or other, you know, other oil and gas geographies are embracing more CNG consumption, and those are going to present great opportunities for us in the next couple of years, and we're going to capitalize on them. But we're also building new markets too, and we're building new verticals, so it's a constant balance.

Nelson Ng: So, if you look at power generation, if you look at new geographies, where we're going to put hubs, we always have a mind to the majority of our capital going to outside the oil and gas sector. But at the same time, we don't want to walk away from very profitable volumes either. So, we're keeping sort of both options in motion there. I see. And then just one last question. So, you guys sound pretty positive about Q4, so Taurus in terms of pricing and demand.

Nelson Ng: How much of the pricing for the MSUs has already been locked in for Q4 and Q1? That's a really difficult answer, question to answer. You know, we have a, let me answer it this way. We have a mix that's very intentional of long-term contracts and short-term. You never want to be too much of one or the other. If you're too short-term, you get, you know, a lot more volatility than you perhaps want.

Nelson Ng: Too long-term, it has, it makes it difficult to be opportunistic in terms of where demand's going, especially in a market. Like I said, this one is in its infancy and really just evolving. So, if you think about contracts like our backup power generation contract with national grid, our RNG contracts tend to be more long-term. So, pricing in the economics are fixed. We know that, you know, with applied capital, very specifically for projects like that.

Nelson Ng: If you think if some of the work we're doing in oil and gas, the last thing you'd want is fixed pricing because, you know, there's volatility and there's opportunistic reasons to make sure that you're not tied in. So, you know, we're happy with our mix right now. We think it's where it should be. And, you know, we're going to continue to be mindful of both having flexibility and longer-term commitments. Okay, thanks.

Nelson Ng: Just one last question. On your CAPEX plan of about 230 million, like that still assumes that 140 MSU deliveries and if the delivery is slipping to next year, then we should assume that the CAPEX spend is going to be lower this year, right? That's right. Yeah, for sure. Yeah, so 230 is still the number, but I would say that it's definitely not going to be more than 230. I think if anything, things will slip.

Nelson Ng: And, you know, you could see I would probably be in the tens of millions the other way if we're going to be lower. But, you know, the capital is still there for the business and we're still, you know, we're still on the list and trying to get the product, but to the extent that we can't, it would definitely, it would drift downward, stuff will not drift outward. Yeah, and let me have one qualify on that because the terrorists are our only capital.

Nelson Ng: Management. In the propane business, as we've said to you all before, we're looking at opportunities to get better utilization from our assets and to rationalize sort of the surplus assets we have from the M&A legacy. So, I mentioned we're growing the business in propane, but we're trying to do so with a view that the capital requirements that the business had in the past are going to be different going forward. So, not all of the reduction that Grier is mentioning is simply a factor of MSUs.

Nelson Ng: There'll be some opportunities in propane, but I want everyone to be very, like I want to be very clear, that this is deferring capital. We're still continuing to acquire customers, we're continuing to grow the business, we're just doing it more efficiently.

Nelson Ng: Okay, thank you very much. Thanks, Nelson.

Steven Hansen: Thank you. Our next question comes from the line of Hribin Hansen with Raymond James. Please proceed. Yeah, I want to go ahead and thank the time. I think we beat this Atari issue pretty hard here, but I just have a couple of quick follow-ups in M&A. We've seen a number of strategic partnerships emerge across the CNG space here in the last year or two where companies are partnering with some of their largest customers.

Steven Hansen: Just curious as you contemplated any relationships like that, whether it be in the traditional oil and gas space, even in some of the newer faster growing verticals like data centers. Hey, Steve, down. Thanks for joining us today. Yeah, absolutely. We have a very coveted relationship with BP on RNG, that's virtually exclusive, that we're really proud of and probably don't talk about as much as we should, so much on the go here on the past year.

Steven Hansen: But I'm actually in Houston next week and for that reason, where we're meeting with a number of folks. And there's a lot of talk about opportunities in the market on the renewable side, on emerging verticals, power generation, data centers, and we're right in at the forefront of those discussions. I've been very conscious of not getting out ahead of the business in terms of creating a buzz before we see real, meaningful, financial, either investment or profit generation from them.

Steven Hansen: So in terms of things like the data center business, yeah, that's going to be an emerging addressable market. And if you think about that in the context of satiris, I continue to remind people of this. We own virtually 50% of the MSUs in North America. As verticals emerge that are either CNG or RNG centers in terms of over the road distribution, we are absolutely going to be the leader in that segment.

Steven Hansen: Right now, there's a lot of buzz about the potential. And I think some of that's real and some of it is probably optimistic. But as those opportunities come online, make no mistakes. Ataris will be a significant player, question in my mind. And by simply a virtue of our scale and our presence in these markets. So, yes, we're in continuous dialogue with partners whether it be folks that are companies that see energy, you know, the assurance of energy being able to be provided as key to their business and whether or not a partnership makes sense with the terrorists or new verticals that are emerging.

Steven Hansen: So, we're absolutely going to be involved in those discussions, but expect like you have in the past that they won't be public until they're real and kind of financial impact. I appreciate the color there. It just maybe is a derivative follow-up. It might be too early, perhaps, but we have seen one of your competitors invested in downstream integration opportunity where they're seemingly become more of a microgrid power producer as opposed to just providing backup power.

Steven Hansen: That kind of relationship comes with, you know, 10 plus year offtake rates or contracts, which are can be attractive, but the capital in Tennessee is all so much higher. I mean, we thought about that specific area at all. We have, and I mean the million dollar question for us is, you know, you can bifurcate this a little bit and say, look, the total addressable market for over the road CNGR and G is going to continue to increase.

Steven Hansen: There's going to be opportunities and renewables that perhaps have an upstream or downstream potential for us. And then there are either partnerships or direct investment in energy provision in terms of power gen. Very capital intensive. And we have yet to be convinced that that's the best next logical step for the terrorists and for superior. We think there are a lot of opportunities in this business that are on the table and they all need to be vetted.

Steven Hansen: So, you know, I'm reluctant right now to say, look, going aggressively at a really capital intensive power gen business is is the right next step. It may be, but we're not at that stage just yet. Fair enough, I appreciate the color like this. I see. Thank you.

Operator: One moment for our last question.

Benjamin Isaacson: Any comments from the line of Ben Isakson with Scotia Bank? Please proceed.

Allan MacDonald: Good morning, everyone. Thank you for taking my questions. They've actually all been asked. I only have one or two left. The first question is back to the dividend. Why do you feel the need to continue paying one at all? I mean, the stock is, I think, a nine and a half percent yield. And so, the market doesn't seem to be paying you at all for giving them a dividend. So, why not pull it and use that to buy back shares or, as someone else had to accelerate the leverage reduction?

Allan MacDonald: I guess I'm approaching this from a different way. Some are asking whether the dividend is safe, but I'm asking whether it just makes sense to kill it entirely. You know, hey, Ben, talent. Yeah, it's a great question. I think I could say that about a number of things. You know, when I look at the value of Satara versus some of its competitors in some of the parts, I think it's tremendously undervalued, and the answer to that isn't to sell Sataris.

Allan MacDonald: It's to work within the business to get it better understood and for us to continue to stay on the path. So what we're not doing right now with our share valuation is challenging the fundamentals of this company. Superior has, I think, stellar assets when it comes to the propane business that frankly have an opportunity to be optimized in a meaningful way. I think Sataris is positioned this incredibly well. And right now our capital structure may not be getting the value that we think it deserves, but we're not under any pressure to have to change that in order to capitalize on the opportunities in the business.

Allan MacDonald: So in the fullness of time, of course, you're always looking at how are you getting the right value and is the business being seen the way that we see it. But I think over the course of the next, you know, the coming months, we're going to continue to focus on what we do best. That's drive the business heart, continue to generate growth. And, you know, I don't think our capital structure necessarily certainly for our ability to support the dividend doesn't require any augmentation as well.

Allan MacDonald: It's tricky one because now you're, you know, you're moving beyond the, beyond the operations of the business, which were running credibly well and really putting casting your eye to what are you going to do next in terms of your vision. So we're working with Natasha on that. And I think it'd be great if you want to meet her in the interim that we can certainly make that happen, but she's also taking the time that she should take.

Allan MacDonald: To make sure that the vision for the organization going forward reflects where we are today and it's her vision, not the one that necessarily. Great. I'm just very lost. Oh, sorry. I'm just very lost question on my part is. Alan, I think you mentioned earlier that Sataris is looking at developing new segments. Is there, can you shed some kind of color on that in terms of what those verticals look like size timing or is it still TBD?

Allan MacDonald: Well, it's a little bit of both. Yeah, I mean, we're looking at understand. So let me give you an example, the industrial segment. So either industrial power gen or, you know, things like brick factories and mines. If you overlay that with geography, we've identified some some markets and I'm going to be a little quiet here for competitive reasons, but some markets that we think have potential. But then you started journey because now we have to get a hub.

Allan MacDonald: Some are easier than others. There's, as you can imagine, putting a natural gas hub in a geography is not without its regulatory compliance constraints. So these aren't processes that happen necessarily quickly. If we have adjacencies to our existing infrastructure, they can happen a little faster, but we're developing markets with a mind of how do we create both a vertical presence and a geographic presence? James, you know, the RNG segment is a really interesting one because it emerged, you know, quite quickly in the last sort of 10 years, but it's also off the pipeline infrastructure because it tends to be largely agricultural and it's not in very densely populated areas.

Allan MacDonald: Conversely, there are some, you know, northern U.S., Northeastern U.S, opportunities that we think would be really, really meaningful, but the density of the population provides some challenges when it comes to getting the infrastructure in place. So, we're always balancing those two things and they take time. I know that's not a super crisp answer, but I want to stop short of giving the world our competitive strategy here. Yeah, thanks so much.

Allan MacDonald: Appreciate it. Thanks, Ben. Thank you.

Operator: And this concludes our Q&A session. Thank you.

Allan MacDonald: I will turn the call back to the president and CEO, Allan MacDonald, for close and remarks. Thanks, everyone. Look, I just let me wrap up by just expressing our gratitude internally for the interest that you take in the company. I know you all put a tremendous amount of work in this and your effort that you put into it. And all your thoughtful comments and questions are much appreciated on our end. So thank you and look forward to talking to you all again in the coming months. Take care. And thank you for everyone that participating in today's conference.

Operator: You may now disconnect.

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