Q2 2024 Genesis Energy LP Earnings Call

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Operator: Greetings and welcome to the Genesis Energy LP second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Speaker Change: Greetings and welcome to the Genesis Energy LP second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dwayne Morley, Vice President of IAR. Thank you, Dwayne. You may begin.

Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dwayne Morley, Vice President of IAR. Thank you, Dwayne. You may begin.

Dwayne Morley: Good morning. Welcome to the 2024 second quarter conference call for Genesis Energy. Genesis Energy has four business segments. The offshore pipeline transportation segment is engaged in providing the critical infrastructure to move oil produced from long-lived world-class reservoirs in the deepwater Gulf of Mexico to onshore refining centers. The Southern Sulfur Services Segment includes TRONA and TRONA-based exploring, mining, processing, producing, marketing, and selling activities, as well as the processing of sour gas streams to remove sulfur at refining operations.

Speaker Change: So the Insulphur Services segment includes TRONA and TRONA-based exploring, mining, processing, producing.

Speaker Change: marketing and selling activities, as well as the processing of sour gas streams to remove sulfur at refining operations. The on-tour facilities and transportation segment is engaged in the transportation handling, blending, storage, and supply of energy products, including crude oil and refined products.

Dwayne Morley: The Ontour Facilities and Transportation Segment is engaged in the transportation handling, blending, storage, and supply of energy products, including crude oil and refined products. The marine transportation segment is engaged in the maritime transportation of primarily refined petroleum products.

The marine transportation segment is engaged in the maritime transportation of primarily refined petroleum products.

Grant Sims: Genesis' operations are primarily located in Wyoming, the Gulf Coast states, and the Gulf of Mexico. During this conference call, management may be making forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The law provides safe harbor protection to encourage companies to provide forward-looking information. Genesis intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities Exchange Commission.

Genesis' operations are primarily located in Wyoming, the Gulf Coast states, and the Gulf of Mexico.

Speaker Change: The law provides safe harbor protection to encourage companies to provide forward-looking information.

Speaker Change: Genesis intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities Exchange Commission. We also encourage you to visit our website at GenesisEnergy.com where a copy of the press release we issued today is located.

Grant Sims: We also encourage you to visit our website at GenesisEnergy.com, where a copy of the press release we issued today is located. The press release also provides a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. At this time, I'd like to introduce Grant Sims, CEO of Genesis Energy LP. Mr. Sims will be joined by Kristen Jessalitis, Chief Financial Officer and Chief Legal Officer, Ryan Sims, President and Chief Commercial Officer, and Louie Nickel, Chief Accounting Officer.

Speaker Change: At this time, I'd like to introduce Grant Sims, CEO of Genesis Energy LP. Mr. Sims will be joined by Kristen Jesselitis, Chief Financial Officer and Chief Legal Officer, Ryan Sims, President and Chief Commercial Officer, and Louie Nichol, Chief Accounting Officer.

Grant Sims: Good morning to everyone, and thank you for listening to the call. As we mentioned in our earnings release this morning, we continue to move closer and closer to an important inflection point when we will complete our current major capital spending program and be a short time away from a notable step change in earnings and cash flow. We have always viewed 2024 as kind of a transition year and have instead been more focused on 25 and beyond.

Grant Sims: Good morning to everyone and thank you for listening to the call.

Speaker Change: As we mentioned in our earnings release this morning, we continue to move closer and closer to the important inflection point when we will complete our current major capital spending program and be a short time away from a notable step change in earnings and cash flow.

Grant Sims: We have always viewed 2024 as kind of a transition year, and have instead been more focused on 2025 and beyond.

Grant Sims: As such, I thought it would be most useful to comment further on the internal discussions that have been ongoing at the board level regarding capital allocation and strategic priorities for Genesis. As we have detailed in the past, and subject to certain assumptions, the current annual cash cost of running our businesses, including all cash interest payments, cash maintenance capital requirements, principal, and interest on our Alcalaz Senior Secured Nodes, and cash taxes.

Grant Sims: Approximately $88 million worth of payments on the currently outstanding 11.24% coupon convertible preferred units and roughly $73.5 million worth of cash payments based on the current common unit distribution of $0.60 per annum. This all adds up to be approximately $620 million per year. That's the annual cash cost of running our businesses as currently capitalized. At this point, we have spent everything we anticipated spending on our Granger expansion. And the vast majority of the cash required for our offshore expansion projects has already been, or soon will be, spent.

Grant Sims: As we have detailed in the past, and subject to certain assumptions, the current annual cash cost of running our businesses, including all cash interest payments, cash maintenance capital requirements,

Speaker Change: That's the annual cash cost of running our businesses as currently capitalized.

Grant Sims: While a little of this expansion capital will slip into the first part of 2025 due to some previously disclosed producer delays, the billion plus dollars of growth capital we have deployed over the last several years, should all be out the door by the end of the first quarter 2025, in advance of first production from our contracted offshore developments coming online and starting to ramp in the second quarter next, Looking out over the coming years, we have identified no growth capital projects, and remain committed to not pursuing any meaningful growth capital projects in the near in essence, because we believe we have laid the foundation for meaningfully higher and sustainable adjusted EBITDA for the foreseeable future, and really don't need to pursue anything. As we look ahead to the full year of 2025, assuming a mid-year startup for our contracted offshore development.

Speaker Change: Looking out over the coming years, we have identified no growth capital projects and remain committed to not pursuing any meaningful growth capital projects in the near term.

Grant Sims: A marginal sequential recovery in our Soda Ash business and steady to marginally increasing performance in our marine transportation segment. We believe Genesis should be able to generate approximately $800 million in adjusted EBITDA in 2025, and we could be approaching and potentially exceeding $900 million of adjusted EBITDA in 2026, at least based on how we see our future world today. It is easy to figure out that upon completion of our capital spending program, coupled with the absence of any meaningful future growth capital requirements in the near term, we expect to be generating significant amounts of cash over the next several years and beyond. Looking at the balance sheet,

Speaker Change: It is easy to figure out that upon completion of our capital spending program,

Grant Sims: The combination of our successful capital markets transactions, including our most recent bond offering in May and the recent extension of our senior secured credit facility into 2028 that we announced a couple of weeks ago, has positioned the partnership with no near-term debt maturity. Given the expansion of certain buckets and permitted investments recently agreed to in our Senior Secured Credit Facility, we have ensured the partnership has more than adequate financial flexibility and liquidity to continue to simplify and strengthen our capital structure by redeeming our high-cost convertible preferred and paying down debt in absolute terms.

Speaker Change: Looking at the balance sheet.

Speaker Change: including our most recent bond offering in May and the recent extension of our senior secured credit facility into 2028 that we announced a couple of weeks ago has positioned the partnership with no near-term debt maturities.

Grant Sims: These actions should, in turn, lower our cost of capital and ultimately reduce the long-term annual cash costs of running our businesses, affording us, over time, even more flexibility and levers we can pull to maximize unit holder value. With this backdrop, and given our confidence in this future cash flow, today we are announcing that the Board of Directors has approved an increase in our quarterly common unit distribution of one and a half cents per unit, starting with the third quarter distribution, which is scheduled to be paid in mid-November. This represents a 10% increase over the second quarter's distribution and yet only represents an incremental annual cash cost of approximately $7.3 million.

Speaker Change: These actions should in turn lower our cost of capital and ultimately reduce the long-term annual cash cost of running our businesses, affording us over time even more flexibility and levers we can pull to maximize unit holder value.

Speaker Change: With this backdrop, and given our confidence in this future cash flow,

Grant Sims: This represents a 10% increase over the second quarter's distribution, and yet only represents an incremental annual cash cost of approximately $7.3 million.

Grant Sims: The board believes this is an important first step and should signal to the market the confidence we have in the future performance of our business. Subject to future board deliberation and approval, we could envision this common unit distribution growth continuing in coming quarters and years as we realize increasing EBITDA and benefit from the reduced cash obligations to run our businesses, resulting from the redemption of high-coupon securities throughout our capital structure.

Grant Sims: The board believes this is an important first step and should signal to the market the confidence we have in the future performance of our businesses.

Grant Sims: and benefit from the reduced cash obligation to run our businesses resulting from the redemption of high coupon securities throughout our capital structure.

Grant Sims: By way of illustration, if we were to continue this level of quarterly distribution growth for, say, ten quarters in a row, the quarterly distribution by the end of 2026 would double from where it currently is, and yet it would only represent an incremental annual cash cost of approximately $73.5 million per year. By 2027, we will likely have redeemed hundreds of millions of dollars of the high-cost convertible preferred and or paid down meaningful amounts of debt, and therefore, we would have reduced the cash costs of running our business.

Grant Sims: By way of illustration,

Speaker Change: If we were to continue this level of quarterly distribution growth for, say, ten quarters in a row,

Grant Sims: This, in turn, would result in even greater cash flow, everything else being the same, and we would be able to accelerate the redemption of the remaining preferred, further reduce outstanding debt, as well as extend our flexibility to further increase the distribution and or take other strategic steps to drive unit holder value. In summary, absent unforeseen circumstances... We believe we have positioned the partnership with more than adequate financial flexibility and a clear line of sight on robust commercial opportunities to hopefully be able to create long-term value for everyone in the capital structure in the coming years. Now I will touch briefly on our individual business site.

Speaker Change: This, in turn, would result in even greater cash flow, everything else the same, and we would be able to accelerate the redemption of the remaining preferred.

Speaker Change: We believe we have positioned the partnership with more than adequate financial flexibility and a clear line of sight on robust commercial opportunities to hopefully be able to create long-term value for everyone in the capital structure in the coming years.

Grant Sims: As mentioned in our earnings release, our offshore segment was negatively affected by what can be characterized as technical issues at a couple of large fields and a couple of months' delay from our original expectations and the start-up of a couple of new subsea developments. I want to emphasize that the occasional technical issues offshore and delays in bringing new developments online are not uncommon. While the timing of the production might move to the right a little, or even a few quarters, there are rarely ever any long-term impacts to the production profile or the residue. The oil will still be produced and ultimately flow through our pipes.

Grant Sims: As mentioned in our earnings release, our offshore segment was negatively affected by what can be characterized as technical issues at a couple of large fields and a couple of months' delay from our original expectations in the startup of a couple of new subsea developments.

Grant Sims: I want to emphasize that the occasional technical issue offshore and or delays in bringing new developments online are not uncommon.

Grant Sims: While the timing of the production might move to the right a little, or even a few quarters, there are rarely ever any long-term impacts to the production profile or the reservoir. The oil will still be produced and ultimately flow through our pipelines.

Grant Sims: Our offshore expansion projects remain on schedule, and we continue to... expect to complete most of the construction work by the end of this year. We expect to finalize the connection of the new sink pipeline to the Shenandoah floating production system once it arrives at its final location in the Gulf of Mexico, with such work likely spilling over to the first quarter of 2020. Both the Shenandoah and Salamanca developments and their combined almost 200,000 barrels a day of incremental production handling capacity remain on schedule to be online in the second quarter of 2025.

Grant Sims: Our offshore expansion projects remain on schedule, and we continue to...

Grant Sims: expect to complete most of the construction work by the end of this year.

Grant Sims: As we have mentioned in the past, these two developments alone will provide us with an anticipated incremental annual segment mark of approximately $90 million at the contracted taker pay level and upwards of $120 million at 75% of the producer's respective forecast. These amounts could approach $160 million per annum, net to us, to the extent the producers meet or exceed 100% of their respective forecasts when fully ranked.

Grant Sims: These amounts could approach $160 million per annum, net to us, to the extent the producers meet or exceed 100% of their respective forecasts when fully ranked.

Grant Sims: We continue to expect both these fields to ramp very quickly and reach initial peak production within three to six months of their respective dates of first production. These two new floating production facilities are also expected to serve as host platforms for additional future subsea developments or tieback opportunities, which could sustain or increase these cash flows to us for years and years into the future. In fact, a group of producers led by Beacon has recently taken a final investment decision on Monument Field, which will be developed as a 17-mile subsea tieback to the new Shenandoah Floating Production Unit.

Grant Sims: for additional future subsea developments or tieback

Grant Sims: The Shenandoah FPU has been expanded to accommodate an additional 20,000 barrels per day for monument starting in mid to late 2026. We would expect to finalize agreements to move these volumes through our sink lateral and onto shore through the CHOPS pipeline under terms and conditions generally consistent with those for Shenandoah. Monument is the first example of what is likely a broader set of incremental opportunities that have been identified but are not fully sanctioned by the producers involved in the geographic vicinity of our new sink pipeline, as well as around our other existing pipeline infrastructure in the Central Gulf of Mexico.

Grant Sims: The Shenandoah FPU has been expanded to accommodate an additional 20,000 barrels per day from monument starting in mid to late 2026.

Grant Sims: We would expect to finalize agreements to move these volumes to our sink lateral and onto shore through the CHOPS pipeline under terms and conditions generally consistent with those for Shenandoah.

Grant Sims: Importantly, our ongoing discussions around the connection of additional infill, subsea, and or secondary recovery development opportunities would not require any incremental capital on our part and could turn to production as early as next year and certainly over the next few years. We remain advantageously positioned in the central Gulf of Mexico and believe our steady and marginally increasing base of volumes transport. Combined with these new developments coming online in mid-2025 and 2026, plus the potential for additional subsea tieback and development opportunities, just like Winterfell, Warrior, and Monument, give us the opportunity to deliver significantly higher and sustainable cash flows from our offshore transportation segment for many years and decades to come. Turning now to our Soda and Sulfur Services segment.

Grant Sims: Importantly, our ongoing discussions around the connection of additional infill

Grant Sims: We remain advantageously positioned in the central Gulf of Mexico and believe our steady and marginally increasing base of volumes transported.

Grant Sims: Combined with these new developments coming online in mid 2025 and 2026, plus the potential for additional subsea tieback and development opportunities, just like Winterfell and Warrior and Monument,

Grant Sims: Give us the opportunity to deliver significantly higher and sustainable cash flows from our offshore transportation segment for many years and decades to come.

Grant Sims: Our Sodash business generally performed in line with our expectations, despite some lingering production challenges at our West Vaco operation, as well as not having a full quarter's worth of production from Granger due to the need to replace the defective component parts we discussed last quarter. With these items now behind us, we expect the back half of the year to be more representative of the true production capabilities of our soda after. The global macro conditions for SODASH continue to show signs of bottoming out.

Grant Sims: as well as not having a full quarter's worth of production from Grainger due to the need to replace the defective component parts we discussed last quarter.

Grant Sims: The global macro conditions for SODASH continue to show signs of bottoming.

Grant Sims: The market dynamics within China so far this year continue to be strong, as evidenced by year-to-date export totals of soda ash from China being down 56% year over year, whilst imports into China were up 266% for the same period. Furthermore, third-party research indicates that apparent demand for soda ash within China has grown by 28% year-to-date, with the large drivers being the steady production of lithium carbonate, EV production, and solar glass, which are up by approximately 53%, 29%, and 23%, respectively, year-over-year through the end of June.

Speaker Change: The market dynamics within China so far this year continue to be strong, as evidenced by year-to-date export totals of soda ash from China being down 56% year-over-year, whilst imports into China were up 266% for the same period.

Speaker Change: Furthermore, third-party research indicates that apparent demand for soda ash within China has grown by 28% year-to-date.

Grant Sims: We also continue to see changes in the flow of physical volumes around the globe, most notably with natural soda ash tons that were moving to Asia last year that are now moving into Europe to displace high-cost synthetic soda ash or to fill the holes left by the shuttering of high-cost synthetic production facilities in the region. This theme is supported by third-party research indicating that exports of natural soda from Turkey to Asia, excluding China, during the first five months of the year were down 17% year-over-year. At the same time, Turkish exports to Europe and the Middle East were up 16% and 14% year over year, respectively, through May.

Speaker Change: This thematic is supported by third-party research, indicating that exports of natural soda from Turkey to Asia, excluding China, during the first five months of the year were down 17% year-over-year.

Speaker Change: At the same time, Turkish exports to Europe and the Middle East Africa were up 16% and 14% year-over-year, respectively, through May.

Grant Sims: We believe these changes in physical flows and the steady demand for soda ash within China, combined with recent increases in certain transportation costs and some supply disruptions from other U.S. producers in the second quarter, have yet to fully trickle into the export markets. All this should lead to continued tightness in our traditional export markets and the potential for soda ash prices to improve over the balance of the year and, importantly, in advance of our contract negotiations for our open volumes in 2025.

Speaker Change: We believe these changes in physical flows and the steady demand for soda ash within China

Grant Sims: Regardless of these real-time dynamics, there is no doubt that in overtime markets, physical volumes always flow to the highest value market. The market data points I mentioned, the expected continued return of normalized global economic growth, and the continued increase in worldwide demand from various low-carbon transition initiatives all lead us to believe that the market is in fact rebalancing and is poised to become increasingly more balanced, which in turn should provide support for higher prices and a sequential improvement in the financial performance of our soda ash business over the coming quarters and years ahead. Our Sulphur Services business performed in line with our expectations during the quarter.

Grant Sims: Physical volumes always flow to the highest value markets.

Speaker Change: and is poised to become increasingly more balanced, which in turn should provide support for higher prices.

Speaker Change: and a sequential improvement in the financial performance of our soda ash business over the coming quarters and years ahead.

Speaker Change: Our Sulphur Services business performed in line with our expectations during the quarter.

Grant Sims: Our marine transportation segment continues to meet or exceed our expectations, as market conditions and demand fundamentals continue to remain very favorable. We continue to operate with utilization rates at or near 100% of the practical available capacity for all classes of our investment and expect the progression of day rates to be commensurate with those underlying fundamentals as our existing term and spot charters renew over the remainder of the year and into 2025.

Grant Sims: These fundamentals, combined with the completion of most of our previously scheduled dry docking work, should drive sequential segment improvement in the back half of this year and continue into next year. As I have mentioned in the past, and will reiterate again today, the value proposition for Genesis remains unchanged and totally intact.

Speaker Change: As I have mentioned in the past and will reiterate again today,

Speaker Change: The value proposition for Genesis remains unchanged and totally intact.

Grant Sims: We have a clear line of sight to the end of our current growth capital program in the next few quarters. As we sit here today, we look forward to the increase in financial performance of our businesses next year and accelerating into 2026, driven primarily by identified and contracted growth in our offshore transportation. A lighter dry docking schedule and full year of day rates at historically high levels drive an improved performance in our marine transportation sector and, in addition, a likely sequential improvement in Sodash pricing, resulting in an improvement in the financial results from our Sodash operation.

Speaker Change: As we sit here today, we look forward to the increase in financial performance of our businesses next year and accelerating into 2026, driven primarily by identified and contracted growth in offshore transportation,

Speaker Change: A lighter dry docking schedule and full year of day rates at historically high levels, driving improved performance in our marine transportation segment. And, in addition, a likely sequential improvement in SODASH pricing, resulting in an improvement in the financial results from our SODASH operations.

Grant Sims: I want to emphasize again that Genesis is not, and never has been, a 2024 story; instead, it's a 2025 and 2026 story where we reasonably expect to ultimately be capable of generating upwards of $250 to $350 million or more of excess cash per year and be able to sustain around those levels for many years to come. This will allow us to simplify our capital structure, lower our overall cost of capital, maintain prudent leverage, and have the ability to opportunistically drive long-term value for our unit holders.

Speaker Change: I want to emphasize again that Genesis is not and never has been a 2024 story.

Speaker Change: instead of as a 25 and 26 Torrey.

Speaker Change: This will allow us to simplify our capital structure.

Speaker Change: lower our overall cost of capital, maintain prudent leverage, and have the ability to opportunistically drive long-term value for our unit holders.

Grant Sims: Finally, I'd like to say the management team and the board of directors remain steadfast in our commitment to building long-term value for all our states, regardless of where you are in the capital structure. We believe the decisions we are making reflect this commitment and our confidence in Genesis moving forward. I would once again like to recognize our entire workforce for their individual efforts and unwavering commitment to safe and responsible operations, and I'm extremely proud to be associated with each and every one of you. With that, I'll turn it back to the moderator for questions. Thank you. We'll now be conducting a question and answer session.

Speaker Change: Finally, I'd like to say the management team and their board of directors remain steadfast in our commitment to building long-term value for all our stakeholders.

Speaker Change: and others, regardless of where you are in the capital structure.

Speaker Change: And I'm extremely proud to be associated with each and every one of you.

Operator: Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using specific equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is on the question queue. You may press star 2 if you'd like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Operator: One moment, please, while we poll for questions. Thank you. Our first question is from Michael Blum with Wells Fargo. Please proceed with your question.

Michael Blum: Thanks, good morning everyone. I wanted to ask about your capital allocation comments, can you give us a rank order of your priorities and if there are any limitations in repurchasing debt early in terms of prepayment penalties and the like.

Speaker Change: Thanks, good morning everyone. Wanted to ask on your capital allocation comments, can you give us like a rank order of your priorities and if there are any limitations in repurchasing debt early in terms of prependant penalties and the like?

Grant Sims: As I said, I think our priorities are a little bit of all of the above. I think starting with the increase in the distribution as well as what we perceive to be further increases in the distribution as we go through time at the same time as redeeming high-priced or high-coupon securities in the capital structure. As we mentioned, we have expanded buckets and increased the amount of permitted investments under our senior secured facility to be able to periodically harvest, so to speak, the high-priced coupons in the capital structure, all of which reduces the costs of running our business and therefore increases the amount of excess cash flow that we can either accelerate the redemption and harvesting of those high-priced securities or have the flexibility to continue to increase the distribution or otherwise return capital to equity holders

Speaker Change: As I said, I think our.

Michael Blum: Okay, great. Thanks for that.

Speaker Change: Priorities are a little bit of all of the above.

Speaker Change: Yeah, I think starting with...

Speaker Change: redeeming high-priced or high-coupon securities in the capital structure, so

Speaker Change: As we mentioned, we have expanded buckets and increased the amount of permitted investments under our Senior Secured Facility to be able to periodically harvest, so to speak, the high-priced

Speaker Change: coupons in the capital structure, all of which reduces the costs of running our business and therefore increases the amount of excess cash flow that we can either accelerate the redemption and harvesting of those high-priced securities or have the flexibility to

Speaker Change: continue to increase the distribution or otherwise return capital to equity holders.

Grant Sims: And then I just wanted to ask a little bit about the marine transportation business. First, can you give us a sense of the magnitude of the increase in day rates you're seeing? And then just remind us the long-term strategy for this business. Do you consider this to be like a core asset within the Genesis portfolio? Yeah, I think that is consistent with some of the other public comments.

Speaker Change: Okay, great. Thanks for that. And then I just wanted to ask a little bit on the marine transportation business.

Speaker Change: First, can you give us a sense of the magnitude of increase in day rates you're seeing? And then just remind us the long-term strategy for this business. Do you consider this to be like a core asset within the Genesis portfolio? Thanks.

Grant Sims: I think that consistent with some of the other public commentary that came out today by other public companies, we would think that it's consistent that we're seeing day rates increase in the high single digits to mid-teens depending upon the class of vessels. Utilization for us is, as a practical matter, 100% of available that is not either in dry dock or other kind of maintenance required. So we think we have the ability to set a record this year of contributed or segment margin in a marine group, and I think that we have room to grow for that in 25.

Speaker Change: either in dry dock or other kind of maintenance required.

Speaker Change: We think it's, you know, we have the ability to, we will set a record this year of contributed or segment margin in a marine group, and I think that we have room to grow for that in 25.

Grant Sims: Also you know I mean as we've commented earlier that the only substantive way to kind of resolve the supply-demand tightness in the marine world is the increase in Jones Act tonnage through new construction and that I think we would continue to believe that day rates need to go up 20 to 30 percent from here and be sustained at that level for a significant period of time before significant new new build programs are undertaken, and so as a result, I think that we view the next several years as a very good position to be in in holding and maintaining a young fleet of Jones Act tonnage such as ours.

Speaker Change: earlier that the only substantive way to...

Speaker Change: Kind of resolve the supply-demand tightness in the marine world is the increase in

Speaker Change: And so, as a result, I think that we've used the next several years as a very good position to be in, in holding and maintaining a young fleet of Jones Act tonnage such as ours.

Wade Suki: Thank you. The next question is from Wade Suki with Capital One.

Speaker Change: Thank you. Our next question is from Wade Suki with Capital One. Please proceed with your question.

Wade Suki: Morning, everyone. Appreciate you taking my questions. Just offshore, really appreciate your commentary there, Grant, on the activity levels. I'm wondering how we think about tiebacks and tie-ins. Is this potentially more than offsetting the sort of base declines that you're seeing in the system? Is that a fair way to think about it, the opportunity going forward? Or is it really just sort of offsetting existing declines from the larger

Wade Suki: Morning everyone, appreciate you taking my questions.

Wade Suki: Just offshore, really appreciate your commentary there, Grant, on the activity levels. I'm wondering if how we think about tiebacks and tie-ins.

Wade Suki: Is this potentially more than offsetting sort of base declines that you're seeing in the system? Is that a fair way to think about it, the opportunity going forward? Or is it really just sort of offsetting existing declines from the larger projects and base projects for that matter?

Grant Sims: and base projects for that matter.

Grant Sims: Yeah, we say that the cadence of infill drilling and subsea tiebacks in essence at least offsetting the declines that we see from our more mature fields and therefore these incremental opportunities such as Salamanca and Shenandoah and now Monument are kind of truly incremental so that's and you know in some cases you know we do see the level of activity of subsea and tiebacks and stuff actually you know increasing our base load of business so it's all a very good situation and that's why we like to you know we like to be the the one and only export pipeline off of these deepwater facilities because you'll set up for decades-long worth of a geographic franchise. Fantastic. Thank you for that. And just switch gears a little bit to Sodash.

Speaker Change: Yeah, we see the cadence of infill drilling and sub-sea tiebacks in essence.

Speaker Change: at least offsetting the declines that we see from our more mature fields. And therefore, these incremental opportunities such as

Speaker Change: Salamanca and Shenandoah and now Monument are kind of truly incremental so that's

Speaker Change: And, you know, in some cases, you know, we do see the level of activity of subsidy and tiebacks and stuff actually, you know, increasing our base load of business. So it's all a very good situation, and that's why we like to...

Speaker Change: You know, we like to be the one and only export pipeline off of these deep water facilities because you'll get set up for a decades-long worth of geographic franchise.

Grant Sims: Would you mind maybe updating us on where you guys are in terms of price certain volumes, open capacity, so to speak, looking out to next year? Into next year, around 40 to 45 percent of our law anticipated sales volumes in 25 are either known with certainty as we sit here today or subject to very tight caps or collars. So basically, 55 percent or so will be redetermined as typical in our business towards the November-December time frame either under annual contracts or as short-term duration as we can get with our customers because we continue to believe that the market is stabilizing and that prices should continue to rise as we move through 25.

Speaker Change: Fantastic. Thank you for that. And just switch gears a little bit to Sodash. Would you mind maybe updating us on where you guys are in terms of kind of price certain volumes, open capacity, so to speak, looking out to next year?

Wade Suki: Fantastic. Thank you so much. I appreciate it.

Speaker Change: Into next year, around 40 to 45% of our

Speaker Change: Law Anticipated Sales Volumes in 25 are either Known with certainty as we sit here today or subject to very tight caps or collars so

Speaker Change: basically 55% or so.

Speaker Change: will be redetermined, as typical in our business.

Speaker Change: Towards the in the November-December time frame either under

Speaker Change: annual contracts or as short-term duration as we can we can get with our customers because we continue to believe that the market is balancing and that prices should continue to rise as we move through 25.

Speaker Change: Fantastic. Thank you so much. Appreciate it.

Operator: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Thank you. There are no further questions at this time. I would like to hand the floor back over to Grant Sims for any closing comments. Okay, well, again...

Speaker Change: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: Thank you. There are no further questions at this time. I would like to hand the floor back over to Grant Sims for any closing comments.

Grant Sims: Okay, well again, thanks everyone. We appreciate your interest in listening in, and we look forward to continuing to create value for everybody in the capital structure. So, thanks very much.

Grant Sims: Okay, well again, thanks everyone we appreciate your interest in listening in and we look forward to Continuing to create value for everybody in the capital structure. So thanks very much

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.