Q4 2024 Gibson Energy Inc Earnings Call
Okay.
Speaker Change: Good morning, everyone and welcome to the Gibson energy fourth quarter and full year 2024 conference call.
Be advised that this call is being recorded.
Speaker Change: I would now like to turn the meeting over to Beth Pollock, Vice President capital markets and risk metabolic. Please go ahead.
Speaker Change: Thank you Liz good morning, and thank you for joining us to discuss our fourth quarter and full year 2020 for operational and financial results. Joining me on the call. This morning from Gibson Energy are Curtis shell upon President and Chief Executive Officer, and Riley Hicks Senior Vice President and Chief Financial Officer, We also have to do.
Speaker Change: <unk> senior management team members in the room to help with questions and answers as required listeners are reminded that today's call refers to non-GAAP measures forward looking information and are subject to certain assumptions and adjustments and may not be indicative of actual results descriptions and qualifications of such measures and information.
Speaker Change: Worse in our Investor presentation available on our website and our continuous disclosure documents available on SEDAR, plus Alan I would like to turn the call over to Curtis.
Curtis Shell: Thank you Beth good morning, and thank you for joining us today.
Curtis Shell: I'll begin with highlights of 2024, followed by Riley discussing our financial results and position I will then provide some closing comments.
Curtis Shell: This has been a milestone year in Gibson's history, as we advanced our infrastructure strategy instead of our team for the next phase of growth.
Speaker Change: Since joining at the end of August I've been pleased with the progress. We've made our strategy is simple we focus on our great assets, we remove unnecessary distractions and implement a goal execution culture that ensures alignment and accountability.
Curtis Shell: On people we.
Curtis Shell: Sure we have the right people, we are organized correctly removed low performers and foster an ownership culture.
Curtis Shell: On growth, we prioritize working closely with our customers growing around our current assets and building the growth muscle to ensure that we have a pipeline of projects competing for capital.
Curtis Shell: Financially, we are owners and we stay committed to the governing principles that provide us a strong foundation.
Curtis Shell: To deliver on our strategy. It is imperative that we have the right team in place for this next chapter on this note I'm happy to a variety of Hicks, our new senior Vice President and Chief Financial Officer with me today.
Speaker Change: Reilly join Gibson in 2018, and it's helped critical roles across several areas of the business. Most recently Riley oversaw corporate development marketing and strategy after working closely with Riley over the last six months. It is clear to me that his financial acumen and proven leadership abilities will be instrumental in driving Gibson.
Curtis Shell: <unk>.
Speaker Change: Together, we are committed to creating shareholder value and maintaining our strong investment grade financial profile I'm looking forward to partnering closely with Riley I'm confident there'll be a difference maker for the organization.
Curtis Shell: Yeah.
Curtis Shell: On behalf of the board and the rest of the team I would also like to acknowledge and thank John Brown for his dedication and time with the company we wish him the best in his future endeavors.
Curtis Shell: The 'twenty 'twenty, four and 'twenty 'twenty four we demonstrated the value of the gateway acquisition to our business and to shareholders. I'm pleased to report that we ended the year on a consolidated basis with adjusted EBITDA of $610 million, an increase over 2023, and a new high watermark for the company.
Curtis Shell: Driven by a full year contribution from gateway and record adjusted EBITDA from our infrastructure segment.
Curtis Shell: As we look back on the growth of our infrastructure segment since the transition of our business. In 2017, we have now achieved a compound annual growth rate of approximately 14%.
Curtis Shell: Strong performance from infrastructure, offset or muted year for marketing, which now accounts for approximately 10% of our adjusted EBITDA and ended the year slightly below the long term run rate guidance.
Curtis Shell: Overall strong performance from infrastructure and the continued growth of our long term stable cash flows allowed us to end the year with our key financial targets within our key financial targets with leverage of three five times within our target range of three to three five times and a sustainable payout ratio of 71 <unk>.
Curtis Shell: <unk> within our target range of 70% to 80%.
Curtis Shell: Based on the enhanced quality of our cash flows and strong balance sheet, we have increased our quarterly dividend by two.
Curtis Shell: Our 5% to <unk> 43 per share, marking our sixth consecutive dividend increase and continued focus on delivering value to our shareholders.
Curtis Shell: As we look forward to 2025, we are excited to build upon several recent milestones in January we celebrated the one year anniversary of taking over operations that gateway and the acquisition has exceeded our expectations and is a key catalyst for our company moving forward.
Curtis Shell: We have a unique strategically located asset its location in the Ingleside outer Harbor makes it one of only two export terminals than in Texas and three in the us with the ability to directly load a very large crude carrier its close proximity to the port of <unk> significantly reduced the shipping time and cost for <unk>.
Curtis Shell: Customers.
Curtis Shell: And our unique fungible storage system minimizes the merge costs and inventory carry for our customers.
Curtis Shell: Last year, we reached a new record at the facility when we export it just over 2 million barrels in a single day, which represents nearly half of all U S crude exports on average.
Curtis Shell: Significant achievement, which demonstrates the strategic and critical nature of our terminal its value and its value in the U S crude supply chain and the value. It provides to both our customers and the entire U S economy.
Curtis Shell: In December 2024, we successfully extended and amended a key contract that gateway, while welcoming several new customers to our facility all of which are major global crude exports. We also sanction dredging, which will increase the depths of a better facility and reduce customer shipping time and cost.
Curtis Shell: Resulting in higher throughput and increased revenue at gateway.
Curtis Shell: With the benefit of dredging, which is underway and expected to be complete by the end of Q2 and the previously announced cactus to connection project, which is also underway and expected to be placed in service in Q3, and along with the impacts of re contracting some key customers. We are on track to achieve our key gateway acquisition objectives earlier than anticipated.
Curtis Shell: Including growing gateway EBITDA by over 15% to 20% on a run rate basis by year end 2025.
Curtis Shell: Okay.
Curtis Shell: In Canada, we placed two new tanks at our Edmonton terminal in service at the end of the year under a 15 year take or pay agreement with synovus, providing an incremental 870000 barrels of storage capacity and increasing throughput at the facility as we enter 2025.
Overall, we expect to deploy up to $200 million between growth and capital projects between growth capital projects and share purchase repurchases in 2025, or 100 million of which to be predominantly deployed at gateway.
Curtis Shell: Yeah.
Curtis Shell: We're also executing on our cost focused campaign, which is targeting over $25 million with cost savings by year end.
Curtis Shell: We have already implemented initiatives that will allow us to achieve approximately 50% of the school on a run rate basis by year end with numerous other additional initiatives are still being advanced.
Curtis Shell: We're confident that we will achieve this goal by the end of the year.
Curtis Shell: Turning to sustainability, we're proud to report that we recently received our fifth consecutive CDP score of a minus reinforcing our leadership and continued commitment to sustainability.
Curtis Shell: All the while safety remain foundational to everything we do and we are committed to mission zero, our goal of zero harm to people.
Curtis Shell: Thanks to this focus and the commitment of our team to work together to keep each other safe we achieved a new milestone of $8 8 million hours without a lost time injury for our employee and contract workforce at the end of 2024.
Curtis Shell: Okay.
Curtis Shell: I'll now pass the call over to Riley, who will walk through our financial results in more detail.
Riley Hicks: Thank you Curtis and good morning, everyone I would like to start by saying that it was great to meet you.
Riley Hicks: As Curtis mentioned I joined the company in 2018, and I've had the privilege of taking on a number of roles in both the finance and commercial organizations most.
Riley Hicks: Most recently as senior Vice President of corporate development marketing and strategy.
Riley Hicks: Well it is early days in this new role my focus will be on continuing to grow the business in a disciplined manner.
Riley Hicks: Remaining committed to our conservative financial management and key financial governing principles.
Riley Hicks: I am excited to take on the challenge of this new role and look forward to meeting and getting to know each of you more over the next few months.
Riley Hicks: As Curtis noted 2024, it was a year of milestones for our company.
Riley Hicks: Focusing on our financial results on a consolidated basis, we delivered another solid quarter with adjusted EBITDA of $130 million driven by strong infrastructure performance and offset slightly by muted performance within our marketing segment.
Riley Hicks: Infrastructure adjusted EBITDA of $147 million in the fourth quarter was impacted by several nonrecurring charges related to ongoing commercial matters.
Riley Hicks: Concurrent with yearend management reviewed outstanding items and accrued for the financial impact, although we will know it remains a potential to recover some of these costs through commercial resolutions in future periods.
Riley Hicks: When normalized for these items infrastructure EBITDA would've been approximately $153 million slightly ahead of our third quarter results due.
Riley Hicks: Due to contribution from the two new tanks placed in service at Edmonton.
Riley Hicks: But is partially offset by lower volumes at the Hardesty terminal.
Riley Hicks: Adjusted EBITDA for the marketing segment saw a loss of approximately $5 million, which was below the quarterly guidance provided on our Q3 call and represents a $19 million decrease relative to the third quarter.
Riley Hicks: This was a result of reduced opportunities for both our crude marketing and refined products businesses.
Riley Hicks: With respect to crude marketing increased demand for Canadian heavy oil driven by ample egress out of the basin contributed to narrow differentials and limited volatility during the quarter.
Riley Hicks: Additionally, the overall market structure for crude remains in steep backwardation.
Riley Hicks: These factors combined to result in fewer quality location and time based opportunities that had previously been forecasted.
Riley Hicks: On the refined product side, the business continues to be impacted by tight differentials higher feedstock costs and compressed margins due to take crack spreads.
Riley Hicks: In terms of our outlook for the first quarter absent a change in market conditions, we would anticipate another challenging quarter as steep backwardation continues to persist and the forward curve and opportunities remain limited for both crude marketing and refined products.
Riley Hicks: Given this outlook, we would anticipate adjusted EBITDA for the first quarter to be around breakeven.
Riley Hicks: That being said marketing now represents a smaller proportion of our business at approximately 10% on a trailing 12 month basis, which minimizes the impact of muted segment performance on our overall results and we continue to be well positioned from a balance sheet perspective, given our commitment to our key financial governance principles.
Riley Hicks: Further we anticipate the headwinds facing the marketing group will be temporary in nature and will begin to reverse as pipeline egress starts to tighten in the back half of this year and into 2026.
Riley Hicks: In the meantime market conditions are ever changing and our team is well positioned to take advantage of any opportunities that arise, but we will not in any way change our risk tolerance to chase marketing upside.
Riley Hicks: With respect to our full year 2025 marketing guidance, we will look to reevaluate and provide an update on our first quarter conference call.
Riley Hicks: As previously noted we believe current market conditions will be temporary and we remain confident in our long term normalized outlook.
Riley Hicks: Turning to your distributable cash flow Gibson generated approximately $71 million in the fourth quarter, which was a $17 million decrease relative to the third quarter.
Riley Hicks: Consistent with our previous commentary this delta was driven largely by lower marketing results and partially offset by lower taxes and lease costs.
Riley Hicks: As the fourth quarter concluded the 2020 for fiscal year I would also like to compare year over year results.
Riley Hicks: On an annual basis, the infrastructure segments had another record generating adjusted EBITDA of $601 million, representing an increase of $107 million over 2023.
Riley Hicks: A result of record setting volumes achieved a gateway in Edmonton and partially offset by decreased volumes at hardisty.
Riley Hicks: Year over year infrastructure volumes increased approximately 25% or 142 million barrels.
Riley Hicks: And the calculation of our adjusted EBITDA. The company has excluded certain onetime nonrecurring items that impacted our 2024 results.
Riley Hicks: At the same time marketing adjusted EBITDA decreased from $145 million in 2023 to <unk> $63 million in 2024 and $82 million decrease due to the reasons previously discussed.
Riley Hicks: As such on a consolidated basis 2024, adjusted EBITDA increased by $20 million to $610 million, a 3% increase over the prior year and a new high watermark for Gibson.
Riley Hicks: These results contributed to distributable cash flow of $375 million in 2024.
Riley Hicks: Decrease of approximately $11 million related to 2023, primarily as a result of muted marketing performance.
Riley Hicks: As Gibson has done to date, we will continue to adhere to our financial governing principles, which include maintaining a strong balance sheet remaining fully funded for all growth capital and ensuring our dividends are fully covered by stable long term take or pay cash flows driven by our infrastructure segment.
Riley Hicks: At year end, our debt to adjusted EBITDA was three five times compared to three seven times exiting 2023 and within our target range.
Riley Hicks: On an infrastructure adjusted basis, our leverage of three six times is also below our target of four times.
Riley Hicks: Exiting the year, our payout ratio is both the percentage of distributable cash flow and on the infrastructure only basis or 71% at the bottom end of our 70% to 80% target range.
Riley Hicks: Well below our infrastructure only target of less than 100% highlighting the sustainable nature of our dividend.
Riley Hicks: We have ample headroom with respect to all metrics, providing us significant financial flexibility and notwithstanding any continued softness in our marketing business. This financial flexibility to support the 5% dividend increase we announced yesterday.
Riley Hicks: In terms of capital allocation, we continue to remain disciplined and focused on maximizing shareholder value.
Riley Hicks: In December we announced our 2025 guidance of up to $200 million in growth capital and share buybacks.
Riley Hicks: With continued growth in our free cash flow from our infrastructure segment throughout the year the quality of our cash flows has improved while we have maintained the strength of our balance sheet and our financial flexibility.
Riley Hicks: Infrastructure results in 2024 March new highs for the company due both to a successful first full year with gateway in our portfolio and continued strong and stable performance from our legacy infrastructure assets.
Riley Hicks: We have great momentum entering 2025 with exciting growth projects underway and expected to be completed in Q2 and Q3.
Riley Hicks: Great.
Riley Hicks: These projects will allow us to achieve our previously communicated EBITDA run rate growth target for this asset of 15% to 20% by the end of the year.
Riley Hicks: We continue to maintain our strong and conservative financial profile and disciplined approach to capital allocation, which provides us with significant flexibility, including low leverage on both the total and infrastructure adjusted basis.
Riley Hicks: The increase in quality of cash flows as a result of relative growth in our infrastructure business.
Riley Hicks: And significant liquidity with a staggered debt maturity profile.
Riley Hicks: We remain confident that our asset mix and strong balance sheet continue to offer an attractive total return proposition to our investors and supports the sustainability and continued growth of our dividend.
Riley Hicks: We are pleased with both our fourth quarter and full year results in 2024, as well as the strength of our balance sheet and our continued financial flexibility.
Curtis Shell: I will now turn it back to Curtis for his closing remarks.
Curtis Shell: Thank you Riley and closing the business delivered another solid quarter, which marked the end of a strong 2024.
Speaker Change: Despite a complex and evolving energy market, we remain focused on financial discipline and operational excellence demonstrated by our adjusted EBITDA and infrastructure EBITDAR, reaching record highs in 2024.
Speaker Change: We also see a number of tailwind for Gibson as we complete our growth projects and are well positioned to benefit from a favorable macro environment for infrastructure.
Speaker Change: Globally, we are seeing strong demand for energy a growing focus on energy security and increased recognition of higher quality assets.
Speaker Change: Lastly, I would like to express my appreciation to the Gibson team for the organizational progress that is being made and for safely delivering a strong year in 2024 I'm excited to see what we'll achieve in 2025.
Speaker Change: And I will now turn the call over to the operator to open it up for questions.
Speaker Change: If you'd like to ask a question at this time. Please press star one one on your Touchtone phone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Jeremy Tonet with J P. Morgan.
Hi, good morning.
Speaker Change: Sure Jeremy.
Jeremy Tonet: I just wanted to dive in a bit more on the marketing.
Speaker Change: Kind of a big gap versus what we were looking for previously.
Jeremy Tonet: As far as the conditions that led to this.
Speaker Change: 2020 for marketing.
Speaker Change: Below the 80% to 100 range.
Speaker Change: Could you provide a bit more detail on the components what were some of the bigger drivers to the delta for the quarter and really just more.
Speaker Change: You see that persisting in 'twenty five is there any reason to believe that $60 million or so of marketing EBITDA would be it would be higher than 25% and what we saw in 'twenty four.
Riley Hicks: Yes, Jeremy it's Riley here. Thanks, Thanks for the question.
Riley Hicks: In terms of the fourth quarter the negative quarters. Its really a result of all kind of key factors within the market working against US right within our refined products business, we continue to face headwinds, including increased feedstock costs and pay crack spreads.
Riley Hicks: In addition that business is impacted by seasonality.
Riley Hicks: Typically we see softer demand for paving asphalt in the winter months, given the Canadian winters.
Riley Hicks: And we would build as much inventory as possible through the winter as we can.
Riley Hicks: This was exacerbated this year as we have an upcoming turnaround in Q2, so we built even more inventory over the months.
Riley Hicks: Than typical.
Riley Hicks: So as such this business was impacted by both tighter margins, but also we didn't recognize some of the profit associated with the products that we were storing over the months.
Riley Hicks: In the past we've seen some of this in the refined products side and typically we've been able to offset these these headwinds on refined products with our crude marketing group.
Riley Hicks: Unfortunately.
Riley Hicks: Q4 here the opportunities didn't really materialize first in the fourth quarter as ample egress out of the basin combined with record low inventory levels resulted in steep backwardation and very little volatility within the market.
Riley Hicks: As such.
Riley Hicks: We typically would stay within our risk profile and our current risk tolerances, we opted to remain on the sidelines rather than chasing marketing upside.
Riley Hicks: In terms of 2025, we would see Q1 facing some of the similar issues not quite as significantly backward dated in 2025 at this point and moving forward, we're going to reevaluate our guidance for the full year and provide an update on the Q1 call.
Riley Hicks: Okay.
Riley Hicks: Understood. So we'll wait for that then and then.
Riley Hicks: Just for the for the infrastructure with.
Riley Hicks: The 15% to 20% higher as you said by.
Riley Hicks: 425 could you just remind us I guess what base.
Riley Hicks: Working off there or maybe what an absolute terms what that number would look like for kind of a regular.
Riley Hicks: EBIT run rate for gateway.
Riley Hicks: Yes sure. Thanks, Jeremy is driving again, so I think when we when we did the gateway acquisition.
Riley Hicks: Would have announced it at around nine times multiple.
Riley Hicks: That would imply kind of $40 million of EBITDA at gateway per quarter.
Riley Hicks: Acquired it so I would calculate the 15% to 20% growth off that number.
Riley Hicks: Sorry, what was that number again.
Speaker Change: $40 million Canadian per quarter.
Riley Hicks: Got it Okay I think that does it for me. Thank you.
Aaron MacNeil: Our next question comes from Aaron Macneil.
Aaron MacNeil: With TD Cowen.
Aaron MacNeil: Hey, good morning, all thanks for taking my questions, maybe I'll, just hey, good morning Erinn.
Great.
Aaron MacNeil: Maybe I'll just kick off with a clarification question you did address it in the prepared remarks prepared remarks, but.
Aaron MacNeil: Leverage exited the year at the high end of the range, you've got the dredging project underway.
Aaron MacNeil: You've indicated that marketing could be challenging in Q1.
Aaron MacNeil: Should we think sort of the competing objectives.
Aaron MacNeil: Meaning in that leverage range and.
Aaron MacNeil: Executing on capital allocation priorities beyond sort of the dredging projects specifically as it relates to.
Aaron MacNeil: Incremental growth capital or the buyback.
Aaron MacNeil: And we're still comfortable Aaron and as we look at the year we.
Aaron MacNeil: We were expecting coming into the year that the front half of the year was going to have a heavier spend related to the growth capital projects at the timing of the of the dredging work as well as the timing of the cactus connection.
Aaron MacNeil: And we're also we're expecting that coming into the early part of the year was likely going to be a little quieter from a marketing standpoint. So when we look at the full year, we're still comfortable with how all of this goes around and we're in the front half of the year, we Werent planning a lot of share buybacks to begin with that was always intended to be heavily focused on growth capital in the front half of the year.
Aaron MacNeil: Got you makes sense switching gears.
No.
Aaron MacNeil: Just on Tms ex any event then it gets expanded can you kind of paint a picture for us in terms of what the potential upside might look like there.
Aaron MacNeil: Yes.
Speaker Change: The immediate impact for us is more throughput through the Edmonton facility and so we're already seeing that today with BMX current expansion and as I think about expanding it further.
Speaker Change: We obviously just added two tanks to the end of December and as part of that project. We did the groundwork to get ready for adding two additional tanks and I would've said coming into the year that we really didn't have that in the plan for 2025, we thought that was a little bit further out it's been interesting as we've seen a lot of talk about.
Speaker Change: In sort of accelerating the <unk> expansion in Jordan and fully utilizing the Tms.
Speaker Change: Capacity that we're seeing increasing discussions over potentially accelerating some of that and an expansion.
Speaker Change: Thanks, Curtis I'll turn it back.
Speaker Change: Our next.
Speaker Change: <unk> comes from Robert Hope with Scotiabank.
Speaker Change: Good morning, everyone.
Curtis Shell: Curtis Youre going to see Carlos six months now you.
Speaker Change: You did highlight a number of changes in the organization, but what do you think it's been the most impactful change.
Curtis Shell: Or changes so far and kind of what is left for you to do with the organization in terms of <unk>.
Restructuring and changes.
Speaker Change: Yes, thanks, Rob.
Speaker Change: The biggest thing that we spent the most amount of time on over the first six months is really on the people side of things.
Speaker Change: They're coming in with a fresh set of eyes in the organization.
Speaker Change: We've really looked hard at who do we have in the organization what does the structure how focused are we on the business and.
Speaker Change: I had a real push to say, let's let's make sure that we've got the right people and let's say, let's remove low performers. Let's also look hard at how were structured and are we as efficient as possible and so youll see a fairly significant restructuring.
Speaker Change: Amount in the quarter and that's related to that we've made a number the number of people changes as we address what is the most efficient focused on the business structure, let's remove things that arent value added and let's remove low performers. That's the most impactful work really.
Speaker Change: Been a lot of focus of the team and I am quite confident thats going to pay a lot of dividends over the next couple of years.
Speaker Change: Okay. Appreciate that and then maybe just going over to south Texas with the dredging.
Speaker Change: Yes.
Speaker Change: Project being announced as well as some other contract wins there what does the commercial tension look there for kind of further commercial initiatives and further contract extensions.
Speaker Change: So we've been we've been pleased with how that's gone good activity in the terminal of good re contracting last year at the end of last year. We also announced a couple of new customers coming into the terminals are great.
Speaker Change: Super Major oil exporters that are added to the terminals that are we're excited about what they'll grow into in time.
Speaker Change: I'd also take one more macro step back and look at everything that's going on in the world right now around on tariffs and sort of geopolitical right now and I think youre seeing a significant shift with the new administration, where theres a lot of question, there's sort of one sort of drill baby drill youre seeing a lot of sort of pro energy sentiment within the U S.
Speaker Change: You're also seeing a significant push to look at trade balances around the world and to increase the influence of the of the U S and global energy markets and thought I expect you will see increases in crude exports coming out of the U S. And I think we are exceptionally well positioned to be a beneficiary of that you already see it just recently in the.
Speaker Change: Last couple of weeks.
Speaker Change: India, making comments about increasing energy imports from the U S. One of the prime ways Theyre going to do that.
Speaker Change: Through crude exports out of Corpus Christi.
Speaker Change: We're pretty excited about that so you combine that with the good work the team is doing right now.
Speaker Change: Increase the capacity with the dredging and the cactus connection all of a sudden we're really well situated to be able to increase the throughput out of that facility at the same time, where we're expecting you're going to see some increasing demand.
Speaker Change: Appreciate that thank you.
Speaker Change: Our next question comes from Maurice Choy with RBC capital markets.
Speaker Change: Thanks, and good morning, everyone I'm, just trying to come back to the marketing business.
Speaker Change: You mentioned quite a number of market conditions that you said worked against you in Q4.
Speaker Change: But was there any decisions that your team took.
Speaker Change: <unk> on the accounting accrual our revenue recognition side of things this quarter that was different from the past and if I could just have a quick follow up on that.
Speaker Change: What is the total fixed costs of this business.
Speaker Change: Yes.
Speaker Change: Thanks, Marissa Riley here. So there was no one time accruals or anything like that that we took in the quarter. It was really just a function of of challenging market conditions. I'd also say that there is no kind of one time trades that caused us to go negative.
Speaker Change: In terms of the fixed cost of the assets to run obviously the refinery as an asset that has to be run we have employees to pay in and fees to cover including storage points across the U S to get to markets.
Speaker Change: In terms of a dollar number we don't typically talk about better ore really said, so we'll keep that to ourselves for now but there is some fixed cost we have to cover and the conditions in this quarter, we were unable to do so.
Speaker Change: We've got to add that we're pretty confident as we look at the cost structure going forward that the marketing business will contribute positively in the year and we look hard at our cost structure and how we're set up for the current market conditions, but I would also caution that this is a business that is a very attractive feature of the gift.
Speaker Change: And the overall business and you look at over the last six years on average that's contributed $110 million of EBITDA per year, and there will be some volatility on that but we'll also be very cautious not to overreact to serve a couple of quiet quarters.
Speaker Change: We want to make sure we preserve that earnings capability of that business.
Speaker Change: So I guess, if I can say all of that and recognizing that you are.
Speaker Change: Looking for a refresh in Q1 call.
Speaker Change: Should we walk away thinking that structurally.
Speaker Change: Structurally belief that this business has changed or is this.
Speaker Change: More of you.
Speaker Change: You and your executive team trying to ensure that we manage our street expectations for a little bit more.
Speaker Change: Our assembly.
Speaker Change: I'd say, it's more of a managing expectations and the reality is when we look near term.
Speaker Change: Good egress out of the Western Canadian Basin is at.
Speaker Change: It reduces some of the marketing opportunity in the near term for us.
Speaker Change: But if you step back from that boy, what a great outcome for our customers and so I think this this increasingly aggressive out of the western getting based on suddenly there's been very healthy for our customer as you see our all of our customers on.
Speaker Change: On the oil side, having good strong years looking hard at expanding their production.
Speaker Change: All of those things together will ultimately make for a stronger Canadian business, but also will eventually.
Speaker Change: Lead you back to running into some more tightening of egress switch, Rob sort of bring bring marketing back into play in a bigger way.
Speaker Change: On view this as a structural change I view this as a temporary factor that nicely benefits our customers in particular on the infrastructure side of things that.
Speaker Change: That will go through a bit here.
Speaker Change: And I also think as we grow the Gibson footprint over Canada, and the U S. We suddenly.
Speaker Change: We're no longer just the western Canadian marketing business. There suddenly we have an ability to have our marketing footprint in the U S as well with our great asset base, there and so I think if anything I'm excited structurally about having to sort of us.
Speaker Change: All sort of Western Canada, right to the coast sort of view of the business in view of marketing opportunities in infrastructure opportunities.
Speaker Change: Thanks, and just finishing off on.
Speaker Change: To follow up on a past questions about changes in the company.
Speaker Change: I guess more finely Curtis do you believe that you have the right team and organization in place right now to execute on your strategy and if not what segments do you think requires incremental focus.
Speaker Change: We're getting there, it's obviously youre never completely done, but we've got we've got a very strong team very experienced team. We've made a number of changes on the.
Speaker Change: And the group. We've also done a lot of things in the background just on how we operate from a from a focus on goals and alignment of the entire organization and driving some accountability and focus around sort of key goals in the organization that I think that's going to set us up really well.
Speaker Change: From a sort of getting the team fully in place where we're in the final stages of adding a chief operating officer that we'll expect a lot of it and update for the shares shortly on that that's really the key outstanding individuals that will be we'll be announcing shortly.
Speaker Change: Great. Thank you very much.
Anthony Linton: Your next question comes from Anthony Linton with Jefferies.
Anthony Linton: Hey, good morning, guys and thanks, a lot for taking my questions.
Speaker Change: Sorry, I, just sorry to revisit some of the questions that have already been asked this morning, and maybe just bringing it all together when you think about that long term outlook for marketing of that 80 to 120 and just some of the potential for the various pipeline expansions that have been out there how does that sort of funnel through into how you think about that.
Speaker Change: For the next couple of years and then it sounds like the offset there is there'll be some incremental tankage. When do you expect to have greater visibility around that.
Speaker Change: Yes, Thanks, Anthony O'reilly here I think with the expansions on the pipes out of the basin I think it's early days and it remains to be seen and kind of whats projects.
Speaker Change: Get done what's grades are going to move out of the basin.
Speaker Change: And we would view that from a Gibson perspective positively I think youll egress out of the basin results in extra extra production and more growth deployed by our customers upstream which creates opportunities for our infrastructure business.
Speaker Change: I'm, a marketing standpoint, we continue to view it.
Speaker Change: This kind of market headwinds as temporal.
Speaker Change: Even with egress out of the basin, we've seen kind of significant degradation that we havent seen in the past we are starting to see a portion of it come back in the market a little bit. So we have some positivity around where the back half of the year and into next year ago.
Speaker Change: Got it alright, that's helpful. And then maybe just a couple of cleanup questions just on the outlook for for growth capital in 2025. It sounds like just reading through your preview for your prepared remarks, no changes to the plan and the allocation towards the buyback this year.
Speaker Change: And no J&J I think the one interesting thing from a capital allocation standpoint, that's maybe advanced over the last few months.
Speaker Change: I've been very pleasantly surprised by the number of growth opportunities right around our current assets and so we've we've been very deliberate in our messaging that we see lots of very good opportunities directly around our western Canadian and our in our gateway asset in particular.
Speaker Change: And so lots of interesting work to do around that.
Speaker Change: That is.
Speaker Change: Pulling forward more interesting growth projects over and above the dredging and cactus connection that.
Speaker Change: I expect it will be likely closer to the $150 million of growth capital than the $100 million that we talked about it at the tail end of last year ends up.
Speaker Change: That's a positive thing we still have some work to do to go through that and there is some timing of when that will actually be deployed but it's been encouraging to see how much interesting projects. We've got working with our current customers around our current facilities.
Speaker Change: Got it Okay. That's helpful. And then just the last one for me the $25 million in cost savings that you've talked about previously you picked up $5 million from that in 2024 from the interest refinancing can you just maybe talk about some of the other levers you have available as you look to achieve that.
Speaker Change: So it's really been a push inside the company to really focus on on cost and I think this is.
Speaker Change: Every organization has gone through this that you've gone through an inflationary period.
Speaker Change: And there is there's a tendency and every company to sort of accept that as the new norm and while we've taken opportunity here is to say, okay, let's let's pause on that lets look hard at what is what is real cost increases and where are there opportunities for us to rethink about how we're doing things and we've actually had a significant push right through the entire organization.
Speaker Change: In addition to rally around this and look for opportunities to implement cost savings that save money and sort of no dollar is too small and so we've really rallied the entire company around this and encouraging the very high level of participation of the company so everything from cutting.
Speaker Change: Cutting the watering of plants in that office to making fairly significant operational improvements in the field, but its really driven around we want everybody focused on this and we believe there is significant cost savings and so.
Speaker Change: In the in the script at the start we talked about the fact that we're already implemented over half of that $25 million and not all of those are sort of clicking and quiet from an impact but by the end of this year already half of those savings will be realized and so we were sort of midway through February and already tracking over happened. So I feel pretty good that we're going to.
Speaker Change: Exceed the $25 million by the end of the year.
Speaker Change: Got it Okay. That's super helpful. Thank you very much I'll turn it back.
Speaker Change: Our next question comes from Benjamin Pham with BMO.
Speaker Change: Okay.
Speaker Change: Hey, Thanks, Mr RF on gateway.
Speaker Change: <unk>.
Speaker Change: Executed on this 15% to 20% EBITDA growth and a 2025 Howdy, how do you think about mechanic growth of.
Speaker Change: That kind of at all beyond that period of time.
Speaker Change: Sure I think it was for me there is two main things that I think about sort of next near stage after that.
Speaker Change: One is additional tankage and so we have room for additional tankage at gateway.
Speaker Change: A number of our current customers are pushing us to look at bringing in more eagle Ford barrels into the facility and with Eagle Ford barrels do require additional segregated tankage and we're happy to do that for customers under contract and so that's an interesting one where you see a fairly rapid sort of deployment of capital to address that tankage.
Speaker Change: Uhm.
Speaker Change: Second one is the non capital one that midway through last year's or late last year. We received approval from the port to do night moves of vessels.
Speaker Change: The night moves the vessels is a bit of a game changer from an efficiency and throughput of the facility.
Speaker Change: And so I think that's that's still something that we're we're early on truly understanding what is the impact we can do and just how many additional vessels that we can turn through that facility, but we're already seeing the impact of that that you're suddenly able to.
Speaker Change: Have some sort of single day turnarounds of <unk> vessels.
Speaker Change: Whereas previously we would have always looked at sort of a two day loading window per vessel, we're seeing some opportunity there to potentially contract additional slots in the facility without any additional capital.
Speaker Change: Are you logistically maxed out at 1 million barrels just given that land position.
Yeah, No we're not right now we're.
Speaker Change: Obligated with kind of the regulatory at 1 million barrels, but that's something that can easily be changed and certainly we can do more than a million barrels.
Speaker Change: Okay got it.
Speaker Change: I think you'd mentioned that alright, you did mentioned the 40 million EBIT can you greenlight.
Speaker Change: The hedging program.
Speaker Change: That I think you put on some hedges when you announced the acquisition just how long that duration is your overall assumptions.
Speaker Change: Yes, Thanks, Ben we obviously have a hedging program in place to derisk or to Derisk, our asset and our cash flows for 2025 or about 80% hedged at that facility.
Speaker Change: In and around 137 call it.
Speaker Change: For 2026, we'll start to explore putting on further hedges.
Speaker Change: We're going to pick our spots here, depending on what happens with tariffs and FX rates.
Speaker Change: Got it and maybe clean.
Speaker Change: Cleanup question, if I may on marketing.
Speaker Change: Are you able to share roughly.
Speaker Change: In the quarter between.
Speaker Change: The cracks in the trading side of things.
Speaker Change: I'm, assuming on the trading side of things if youre not doing any trades, there's fixed commitments that push it to a loss.
Speaker Change: <unk> Ddos fixed commitments start to roll off more in 2025.
Speaker Change: Yeah, when we think about our trading business in Q4, it would have been slightly above above breakeven and really the loss would have been related to our refined products business. So.
Speaker Change: We continue to think that we're well set up from an infrastructure standpoint to take advantage of market conditions change and we're ready to kind of tackle some of those opportunities as they come up.
Speaker Change: Alright, and just to clarify.
Speaker Change: So your fixed commitments, it's typically quite quite radical event from 'twenty 'twenty four 'twenty five.
Speaker Change: Yes, yes, yes, yes fairly ratable over the year for sure.
Speaker Change: Okay. Thank you.
Speaker Change: Our next question comes from Robert <unk> with CIBC capital markets.
Robert Hope: Hey, good morning, just wanted to.
Confirm that.
Speaker Change: Given that you don't expect.
Speaker Change: Long term change to the guidance at this point for marketing I was just wondering what.
Speaker Change: Level of crack spread and differential do you need to see to get back.
Speaker Change: Two the 80 to 120, if we assume.
Speaker Change: In an environment with normal volatility.
Speaker Change: Withdraw turnaround.
Speaker Change: Yes, I think Rob we're.
Speaker Change: We work on maybe maybe having some more transparent currency around those numbers moving forward with an investor day, but I don't think we're going to release those those type of numbers on a quarterly call.
Speaker Change: Alright.
Speaker Change: In terms of the infrastructure business, what was the nature of the nonrecurring charges for commercial matters.
Speaker Change: Look there is there anything unusual.
Speaker Change: Unusual there in terms of provisioning or is this just.
Speaker Change: Took a big Biopharma quarter.
Rob: Hey, Rob so the one time items is really.
Rob: Really driven by my new eyes coming into the organization at a real push to say, let's let's let's work through some things with emergency. So we've talked about already from a people standpoint that we worked through a number of people things and so you saw a significant.
Rob: People restructuring charge on the commercial matter side of things.
Rob: No no sort of one overly material item, but in aggregate.
Rob: What we have here is that we had a lot of backlog of various commercial matters with customers that had been built up over a couple of years and you look at that and that now the thing about those types of situations as they don't tend to get better with time.
Rob: There's not a lot of upside of not properly recognizing the cost of that and moving into some urgency to get those resolved with your partners and your customers and so that's what we've had a real push on that you hear me talk a lot about.
Rob: Our goal is to remove distractions and so I think some of these things become a bit of a distraction in months, let's go resolve them, let's take those issues away.
Rob: And sort of get back to work well with our customers.
Rob: That's what you see is a bit of these have been hanging out there for a couple of years in some cases on some of them and we've got a real push to clean that up and move forward.
Rob: Yes.
Rob: Very helpful context, and then.
Rob: Just.
Rob: One quick cleanup on gateway.
Rob: I think the progress on the project shows.
Rob: It's on schedule.
Rob: From what I saw the documents were silent on the budget is on budget.
Rob: It is yes.
Rob: Okay. Thanks.
Rob: Thanks Thats it from me.
Speaker Change: As a reminder to ask a question at this time, Please press star one one.
Speaker Change: Our next question comes from Patrick Kenny with National Bank financial.
Patrick Kenny: Thank you good morning.
Patrick Kenny: Just on the environmental remediation charge taken in the quarter at the end.
Patrick Kenny: Terminal.
Patrick Kenny: The onetime provision as well, but just wanted to confirm Curtis if youre.
Patrick Kenny: If your team is fully completed the review of all potential environmental liabilities not only at the <unk> terminal, but I'll.
Speaker Change: Also hardesty Moose jaw gateway and others.
Speaker Change: Yes. So this may I'll talk first on the 18th of terminal. One. So this is this is a.
Speaker Change: Pretty unique one and that this is related to our material that we were handling really 30 years ago.
Speaker Change: And there's a soil contamination issue that.
Speaker Change: Has it been monitored and was flagged as an issue over the last year and over the last year. We worked very closely with the regulator regulator to come up with a remediation plan and just the nature of of the remediation will be fairly time consuming and so it's a fairly significant charge, but because we developed a very detailed plan on how.
Speaker Change: Now to remediate and and now we're actioning that we thought it was important fully recognize that that impact that charge is related to the cost over the next 10 years.
Speaker Change: And so just from a sort of a cash flow perspective, I think it's important to recognize that sort of the remediation and monitoring costs related to that over the next decade.
Speaker Change: We've also as we've talked about sort of looking hard at.
Speaker Change: To understand all of our exposures around the business, we spend a lot of time looking at what else.
Speaker Change: Is out there and I'm quite comfortable with where we're at from an environmental exposure. The team has done a great job.
Speaker Change: Take a lot of pride in being great stewards of the environment and we've got an outstanding team that works through these things theres, absolutely nothing of sort of the scale of this sort of uniqueness of the <unk> out there, there's always going to be a little things that youre working at.
Speaker Change: Seven years in this business. There is there's always going to be some things that we're working at that sort of in a constant thing, but nothing of this magnitude.
Speaker Change: Okay, that's great thanks for that.
Speaker Change: And then.
Speaker Change: Maybe just back to where the balance sheet is currently.
Speaker Change: I know in the past dispositions were.
Speaker Change: Required to bring the ratios back onside and.
Speaker Change: Just wanted to get your thoughts around potentially looking at some smaller asset sales too.
Speaker Change: Provide a little bit of cushion going forward on the financial position.
Speaker Change: What assets in the portfolio you might consider to be noncore.
Pat: Thanks Pat.
Speaker Change: Really at this point, we've divested we spent a bunch of time this year to Curtis this point kind of cleaning up our business.
Speaker Change: Divesting our non core assets. So we sold $30 million worth of of noncore assets throughout 2024, and that would have really cleaned up our portfolio of kind of non critical assets everything that would remain we would consider to be core to our business.
Speaker Change: And tied into Synergistically with our with our main assets at Edmonton Hardisty or gateway so at.
Speaker Change: At this point, we're not looking to dispose anymore.
Speaker Change: Okay, that's great I'll leave it there thank you.
Speaker Change: Thank you.
Patrick Kenny: There are no further questions I'd now like to hand, the call back to Pat.
Pat: Thank you Liz and thank you for joining us for 2020 for fourth quarter and full year conference call again, I would like to note that we have also made available certain supplementary information on our website Gibson energy Dot Com. If you have any further questions. Please reach out to myself or our investor relations at Gibson.
Patrick Kenny: <unk> dot com. Thank you.
Patrick Kenny: This concludes today's conference call. Thank you for participating you may now disconnect.
Patrick Kenny: Okay.
Patrick Kenny: [music].
Patrick Kenny: Okay.
Patrick Kenny: [music].
Patrick Kenny: Okay.
Patrick Kenny: Okay.