Q1 2025 Genesis Energy LP Earnings Call
[music].
Greetings and welcome to Genesis Energy L. P first quarter 2025 earnings conference call.
At this time all participants are in a listen only mode.
A question answer session will follow the formal presentation.
If anyone should require operator assistance. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
Duane: It is now my pleasure to introduce it Duane poorly. Thank you Duane you may begin.
Speaker Change: Good morning, and welcome to the 2025 first quarter conference call for Genesis Energy Genesis Energy has three business segments. The offshore pipeline transportation segment is engaged in providing the critical infrastructure to move oil produced from one life World class reservoirs from the deepwater Gulf of America to onshore refining centers.
Speaker Change: The Marine Transportation segment is engaged in the maritime transportation of primarily refined petroleum products.
Speaker Change: And the onshore transportation and services segment is engaged in the transportation handling blending and storage.
Speaker Change: And supply of energy products, including crude oil and refined products primarily around refining centers.
Speaker Change: Well as the processing of sour gas streams term of sulfur at refining operations.
Speaker Change: <unk> operations are primarily primarily located in the Gulf States Gulf Coast States and the Gulf of America.
Speaker Change: During this conference call management may be making forward looking statements within the meaning of the Securities Act of $19 33, and the Securities Exchange Act of $19 34.
Speaker Change: <unk> 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 Genesis energy Dot Com, where a copy of the press release, we issued this morning is located.
Speaker Change: The press release also presents a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures.
Grant Sims: At this time I would like to introduce grant Sims CEO of Genesis Energy L. P. Mr. Sims will be joined by Christopher <unk>, Chief Financial Officer, and Chief Legal Officer, Ryan <unk>, President and Chief Commercial Officer, and Louis Nicol Chief Accounting Officer.
Speaker Change: Thanks, Brian and good morning to everyone and thanks for listening to the call.
Grant Sims: As we mentioned in our earnings release. This morning, the first quarter was indeed, a busy quarter.
Grant Sims: It was kind of a retrans formation all quarter for Genesis.
Grant Sims: As we successfully exited our soda ash business and use the net proceeds to simplify our balance sheet and significantly reduce future cash costs for running our remaining businesses.
Grant Sims: Now that we have reached that targeted at an inflection point.
Grant Sims: We will be in a position to generate excess cash.
Grant Sims: Excess of our cash expenses and when combined with our refocused efforts under traditional midstream energy space. We believe we are now even better positioned to create long term value for all of our stakeholders in future periods.
Grant Sims: As we look forward.
Grant Sims: Cannot be more excited about what lies ahead for Genesis our offshore expansion projects supported by contracts executed in August of 2021.
Grant Sims: April 2022, or very nearly complete and will soon be ready for first production from both Shenandoah in Salamanca over the coming months.
Grant Sims: As stated in our earnings release, the Shenandoah floating production unit was successfully more to the seafloor and the Walker Ridge area of the Gulf of America in mid April.
Grant Sims: And we remain on schedule to commission, our new 100% owned St pipeline towards the end of this month.
Grant Sims: In advance of expected first oil sometime in June.
Grant Sims: All such oil continuing to shore through our 64% owned and operated chops pipeline.
Grant Sims: The Salamanca F. P. You recently completed its final safety and operational checks itself from Ingleside, Texas, approximately two weeks ago and it.
Grant Sims: As anticipated to arrive at its final location in Keathley Canyon any day now.
Grant Sims: Harness arrival, we will work closely with log to finalize our connection to our 100% owned Saco pipeline in advance of expected first oil some four to six weeks after Salamanca starts.
Grant Sims: All oil from Salamanca, we'll continue onto shore through our 64% owned and operated side and oil pipeline.
Grant Sims: We continue to believe these two new standalone production facilities and their combined almost 200000 barrels of oil per day of incremental production handling capacity will ramp very quickly and will likely reach their anticipated initial production levels by the end of the year if not sooner.
Grant Sims: This will represent a significant step wise change in the financial contribution from our offshore pipeline transportation segment.
Grant Sims: There is no doubt in my mind at both the Shenandoah and solid market for us will be an integral part of the Genesis story over the coming decades.
Grant Sims: When combined with the steady performance from our other two segments.
Grant Sims: And the significant cash savings realized from the seller of our soda ash business.
Grant Sims: We believe this increasing free cash flow profile puts genesis in a relatively unique and enviable position within the midstream space, especially for small to mid cap midstream enterprises.
Grant Sims: With that I'll go into a little more detail for each of our business segments.
Grant Sims: As mentioned in our earnings release several of our producer customers continue to experience mechanical issues that are affecting production from various wells at three of the major fields that are connected to our offshore infrastructure.
Grant Sims: The producers involved have all been increasingly transparent with their public disclosures and we can confirm that all have deepwater drilling rigs on location that are actively working to restore production from these affected wells as well as drilling new infill development wells.
Grant Sims: We continue to see progress on these repairs as evidenced with the exit rate volumes in the first quarter being greater when compared to the exit rate volumes in the fourth quarter.
Grant Sims: Based on what we know today, we would reasonably expect to see this trend continue in the coming months with expected volume levels, returning to or near normalized levels as we exit the second quarter or at the absolute latest sometime in the third quarter.
Grant Sims: While these extended mechanical issues had been unfortunate our offshore team continues to focus on the things we can control.
Grant Sims: We continue to have an active dialogue and robust commercial discussions with multiple producers.
Grant Sims: Regarding additional infield subsea <unk> secondary recovery development opportunities that could turn to additional volumes on both our pipeline laterals and pipelines to shore.
Grant Sims: Excuse me.
Grant Sims: Along these lines, we are finalizing agreements with an operator to provide downstream oil transportation for a new subsea development with first oil scheduled for late second quarter. This single well is expected to produce in the range of 8000 to 10000 barrels of oil equivalent per day.
Grant Sims: It will be tied back to an existing volume production unit and approximately 500 feet of water.
Grant Sims: This is yet. Another example of the continued generation of smaller that meaningful and increasingly economic tie back opportunities in the central Gulf of America of America.
Grant Sims: That continued to leverage existing platform and pipeline infrastructure.
Grant Sims: We have been told by various operators to expect at least six more of these infield or tieback wells to come online before the end of the year, all with a capital requirement to us of zero.
Grant Sims: This type of activity typically offsets a decline for more mature wells and fields, making new developments like Shenandoah.
Grant Sims: Salamanca truly additive and incremental to our expected financial results.
Grant Sims: I want to add a little third party color around some of the comments we made in the earnings release regarding a relatively low commodity price environment and near term activity in the Gulf.
Grant Sims: Just last week Chevron.
Grant Sims: One of the most active operators in the Gulf of America.
Grant Sims: Which also happens to be one of the largest landowners and leaseholders in the Permian basin.
Grant Sims: Was asked on their quarterly earnings call to comment on the cost structure and breakeven analysis of the deepwater versus onshore shale.
Grant Sims: Their response was basically that they have driven breakeven cost in the deep water to a point, where they intend to continue to allocate significant capital to grow their production from the deep water. They.
Grant Sims: They had to because of their opportunity set and are onshore shale position.
Grant Sims: Just a couple of days ago Talose highlighted on their earnings call that they are breakeven for their slate of projects. This year, a couple of which we will see moving through our pipelines had a breakeven of $30 to $40 per barrel that allows them to quote unquote have robustness against this current price environment.
Grant Sims: All in all I think as site is it safe to say that deepwater projects, while larger and longer cycle from an up front capital perspective will prove to be substantially more resilient.
Grant Sims: During times of lower or uncertain prices.
Grant Sims: Given the 2030 40 plus year design lab.
Grant Sims: Producers consider when making these investment decisions.
Grant Sims: There is increasing evidence that the deepwater clearly stacks up very well.
Grant Sims: In some cases might be superior to onshore shale plays, especially given technological advancements where the industry is seeing recoveries reach in excess of 50 million barrels per well bore.
Grant Sims: As you know there have already been numerous onshore operators that have come out this earning season and announced that they were laying down rigs are slowing their current pace of development onshore due to the current price environment.
Grant Sims: No deepwater producers that we're aware of have announce any such actions.
Grant Sims: As we look beyond the next two to three years, we were encouraged to see the department of interior announced the commencement of the 11th National outer Continental shelf oil and gas leasing program in mid April.
Grant Sims: Additionally, the department of interior recently announced they will be implementing new permitting procedures.
Grant Sims: To accelerate the development of domestic energy resources and critical minerals.
Grant Sims: These measures are designed to expedite the review and approval if appropriate Ah projects related to the leasing siding production transportation refining or generation of energy within the United States.
Grant Sims: According to our press release issued by the Department of Interior on April 23, the new permitting procedures are envisioned to take a heretofore multiyear process down to just 28 days.
Grant Sims: While we do not reasonably expect to see any actionable new developments or tie back opportunities in the next few years from this new leasing program.
Grant Sims: Accelerated permitting schedule and reduce timelines could bring forward opportunities that might've been slated for the end of the decade or even later.
Grant Sims: Regardless, we believe we have decades of opportunities under existing valid leases.
Grant Sims: I might point out that 10 of the 22 active deepwater drilling rigs currently working in the Gulf of America are working on leases already contractually dedicated to our pipeline infrastructure and one is working on a lease that would logically come through us or it's commercially successful not a bad place to be from our perspective.
Grant Sims: It says a lot about our strategically positioned and practically irreplaceable infrastructure in the central Gulf of America.
Grant Sims: Our Marine Transportation segment performed in line with our expectations and we're on pace to post record earnings from this segment in 2025.
Grant Sims: Market conditions for Jones Act tonnage remain constructive.
Grant Sims: A consistent theme of little to no significant new construction and reasonably steady demand from our refinery and terminal customers.
Grant Sims: On the supply side, we believe this trend of flat to lower available capacity will continue across the market for the foreseeable future as more and more older barges are candidates for retirement.
Grant Sims: And there are limited options for new construction.
Grant Sims: In addition to fewer and fewer shipyards available to build a new groundwater tank barge. The combination of the increased cost of steel and a limited labor pool to build such equipment.
Grant Sims: Not only making the cost of a new 30000.
Grant Sims: Merrell heated tank barge cost prohibitive, but new deliveries are being pushed out at least until late 2026 at the earliest and that is if you ordered one today.
Grant Sims: As you can imagine the estimated cost and timeline for delivery for any larger equipment in the same classes, our offshore fleet <unk>. The American Phoenix are even more challenging than in the inland world.
Grant Sims: On the demand side, we continue to monitor Gulf Coast and Midwest refinery utilization.
Grant Sims: Is that is the primary driver of activity levels for our brown water fleet.
Grant Sims: We did see a little softness in the first part of the year, which is not a trip atypical after you're in we are now past that and we've seen Gulf coast refinery utilization recover over the last several months from approximately 80% in January to roughly 94% in late April.
Grant Sims: This additional activity will continue to support the need to move heavy heavy and intermediate products within our heater barges from location to location.
Grant Sims: Demand for moving petroleum products from the Gulf Coast to the East and mid Atlantic markets remained steady.
Grant Sims: And we would expect this trend to continue given the lack of adequate regional refining capacity in those markets.
Grant Sims: All of this is to say, we believe the structural tailwind in the Jones Act World today, combined with our diversified fleet and layered term contract portfolio will continue to support steady if not marginally increasing financial contributions from our marine transportation segment for the foreseeable future.
Grant Sims: Yeah.
Grant Sims: Switching briefly to our onshore business I wanted to make sure everyone saw that we recently consolidated our legacy refinery services business, which was not a part of the sale of our soda ash business with our legacy onshore facilities and transportation segment under one umbrella.
Grant Sims: We are now referring to referring to it as our onshore transportation and services segment for Ots segment.
Grant Sims: Our Ots segment is very refinery centric as we provide the critical last movements of crude oil and or intermediate products into or out of major refining centers.
Grant Sims: Along with critical sour gas processing services to help our host refiners' lower their emissions and remove sulphur from their final refined products.
Grant Sims: During the quarter, we saw steady volumes across our systems and we continue to expect to see a marginal increase in volumes at both our Texas City, and rice and terminals and a complimentary pipeline interconnects as our two new offshore projects commence production in the next few months and flow downstream on our chops.
Grant Sims: Poseidon pipelines to shore.
Grant Sims: In addition, our host refineries performed in line with our expectations and provided us with adequate sour gas volumes that allowed us to produce the necessary.
Grant Sims: Cellular hydrosulfide volumes demanded by our mining and pulp and paper customers.
Grant Sims: In closing the management team and I could not be more excited with how Genesis is positioned for the remainder of 2025 and enter 2026 and beyond.
Grant Sims: The anticipated increase in segment margin contribution from our two new offshore developments combined with a cash cost of running and sustaining our businesses.
Grant Sims: Having already been reduced to approximately $425 million to $450 million per year.
Grant Sims: Should allow us to start harvesting significant and growing free cash flow in the quarters and years ahead.
Grant Sims: We plan to implement a capital allocation strategy that deploys the antenna anticipated excess cash flow across a three pronged approach, including continuing to redeem more of our high cost of 11, 4% preferred units.
Grant Sims: Paying down debt in absolute terms or buying back unsecured bonds in the open market.
Grant Sims: And ultimately returning capital to our unit holders in one form or another.
Grant Sims: As we are successful in harvesting more of our corporate for preferred units and paying down debt. We will further reduce the ongoing cash costs are running this is staying in the business.
Grant Sims: Which will only accelerate our financial flexibility.
Grant Sims: And allow us to achieve our targeted bank calculated leverage ratio and ultimately return more capital to our unit holders in the form of distribution growth unit buybacks or both.
Grant Sims: All while maintaining the financial flexibility to capitalize on new commercial opportunities as they might ultimately arise.
Grant Sims: Finally, I would like to say that the management team and the board of directors remains steadfast in our commitment to building long term value for all our stakeholders, regardless of where you are in the capital structure.
Grant Sims: We believe the decisions we are making reflect this commitment and our confidence in Genesis moving forward.
Grant Sims: I would once again like to recognize our entire workforce for their individual efforts and unwavering commitment to safe and responsible operations IMAX.
Grant Sims: I'm extremely proud to be associated with each and every one of you.
Grant Sims: With that I'll turn it back to the moderator for questions.
Speaker Change: Thank you well now be conducting a question and answer session, let's see I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue. You May press star two to remove yourself from the queue for participants using speaker equipment, it may be necessary to pick up the handset before.
Grant Sims: Pressing the star keys.
Grant Sims: One moment, while we poll for questions.
Speaker Change: And our first question comes from the line of Michael Blum with Wells Fargo. Please proceed with your question.
Michael Blum: Thanks, Good morning.
Grant Sims: Yes.
Grant Sims: So I wanted to ask about your.
Grant Sims: Your thoughts on capital allocation.
Grant Sims: Given the uncertain backdrop, you have some moving pieces in the business with.
Grant Sims: Some of those repairs coming online the timing of the two big offshore projects.
Grant Sims: I guess first question is.
Grant Sims: Is there a thought to maybe hold the distribution flat this year and if not is it is the timing maybe shifting to Q4 from Q3 or how should we think about that.
Grant Sims: Oh, I don't know that we've.
Grant Sims: Changed any of our thoughts around.
Grant Sims: Things I mean, I know, where you're anxious to see Shan come on as well as solid bunker.
Grant Sims: Both of which are scheduled obviously as we said in.
Grant Sims: In the second quarter early or sometime in the third quarter. So I think we'll have a lot more visibility around the around that.
Grant Sims: As well as.
Grant Sims: The pace at which the mechanical issues are addressed and also the pace at which the six additional wells that are slated to come on.
Grant Sims: Between now and the end of the year. So you know.
Grant Sims: I think that we will probably in all likelihood to maintain a flat distribution for the second quarter, but certainly be in a position relative to the third quarter and beyond to.
Grant Sims: To consider our movements in the in the.
Grant Sims: <unk> quarterly distribution.
Grant Sims: Okay, great. Thanks for that and then.
Grant Sims: Hugh you mentioned the opportunity for additional in field in subsea and secondary.
Grant Sims: Tie backs.
Grant Sims: Could add additional volumes is there any way to quantify that in terms of what that opportunity looks like from a either a volume or an EBITDAR timing standpoint. Thanks.
Grant Sims: Yep.
Grant Sims: As we said a 10 of the 22 deepwater rigs are currently working in the Gulf of Mexico, We're working on.
Grant Sims: Fields in acreage that are already dedicated to us obviously the three fields.
Grant Sims: Occupy a occupy that that we've talked about that are.
Grant Sims: Either doing workovers are and where drilling new development wells there. So theres another seven active.
Grant Sims: Rigs that are drilling.
Grant Sims: Drilling into the REIT that could turn into production by the end of the year. So these.
Grant Sims: These wells typically are these are not HP Ht wells I mean, obviously theres two other rigs working that are working on solid month.
Grant Sims: And Shenandoah, So there's five others that are.
Grant Sims: Uh huh.
Drilling infield or our subsea tieback wells and typically these wells will be in the seven to 10000 barrel a day range and so we anticipate that.
Grant Sims: Getting a little bit of a cumulative.
Grant Sims: The increase of throughput from those wells as we go through the year.
Grant Sims: Thank you.
Grant Sims: Thank you.
Speaker Change: And our next question comes from the lineup Wade Suki with capital. One. Please proceed with your question.
Speaker Change: Great. Thank you operator, and good morning, everyone. We appreciate you all taking my questions.
Speaker Change: I know you all don't.
Speaker Change: Give segment guidance, but.
Speaker Change: I think I figured I'd ask it anyway, if you all might be able to sort of bracket.
Speaker Change: Segment margin for the offshore segment this year and maybe maybe I'll push it and ask if you have a preliminary look into next year.
Speaker Change: We don't really I mean, I think it's as we said you can do some of the arithmetic that relative.
Speaker Change: Would anticipate are.
Speaker Change: Oh T S marine.
As we go through the year to be reasonably consistent with the first quarter maybe.
Speaker Change: Maybe ticking up just a hair.
Speaker Change: The rest of the segment margin.
Speaker Change: So we anticipate given our annual EBITDA.
Speaker Change: The guidance is going to come from the offshore.
Speaker Change: Okay, Great I think we've kind of talked previously about these tie back tie in opportunities sort of thinking about them in the context of offsetting.
Speaker Change: Declines do we need to actually start thinking about <unk> growth in handsets and to what extent are some of these opportunities you talked about in your prepared remarks already embedded or not embedded in guidance.
Speaker Change:
Speaker Change: We've taken.
Speaker Change: The ones that have.
Speaker Change: Higher visibility into account and are formulating our our guidance for the year, but there's potential for.
Speaker Change: The upside.
Speaker Change: Upside if you will to the extent that they come on.
Speaker Change: Additional ones come on kind of aren't on the horizon. So you.
Speaker Change: As we it is.
Speaker Change: It is typical that.
Speaker Change: It more than offsets if not more than offsets the decline for more mature fields, given the position that.
Speaker Change: And the development and technological capabilities.
Speaker Change: Basically.
Speaker Change: Everything within a 30 mile radius of one of these existing.
Speaker Change: Floating production units, which are exclusively tied or pipeline infrastructure.
Speaker Change: Are considered host platforms for subsea developments and break evens on those were in the teens.
Speaker Change: Because you don't have to amortize if you will the upfront.
Speaker Change: The floating production units and other things so we're pretty excited about it and I'm pretty excited about where we stand and hopefully.
Speaker Change: We can be net additive to more than offsetting the decline with that at.
Speaker Change: This type of activity.
Speaker Change: Yes, if I could squeeze one in one more in I would be I'd be I'd be grateful.
Speaker Change: Just on the new projects, you've got kind of talk about things that are potentially on the horizon.
Speaker Change: Things kind of popping up on your radar already any sense kind of in terms of order of magnitude or little too early for that.
Speaker Change: It's again, we just wanted to emphasize that we have the financial flexibility in our view to take advantage of things, but nothing has popped up again over the.
Speaker Change: The next several years, we're really focused on.
Speaker Change: On harvesting from the ramp from the significant monies that we've spent in the past, but as we've also reiterated we've prebuilt and the capacity on.
On both the same collateral and importantly on chops system too.
Speaker Change: To be able to move significant incremental <unk>.
Speaker Change: Volumes and generate significant potentially significant incremental segment margin without having to spend any money. So that's a pretty comfortable place to be and that's what we're focused on.
Speaker Change: Absolutely great. Thank you so much and look forward to figure here in a couple of weeks.
Speaker Change: Thanks.
Speaker Change: Thank you once again, if you'd like to ask a question. Please press star one on your telephone keypad Star one.
Speaker Change: And our next question comes from the line of Elvira Scotto with RBC capital markets. Please proceed with your question.
Elvira Scotto: Hey, good morning, everyone and thanks for all the details.
Elvira Scotto: Going back to the offshore can you provide just a little more detail I know we've talked about this in the past, but on the producer issues in.
Elvira Scotto: It seems like some of this remediation keeps getting pushed out a little bit, but what gives you confidence kind of been a resolution by the end of the second quarter or.
Elvira Scotto: Early thank you and then.
Speaker Change: Also on the on the offshore.
Speaker Change: Do realize that for producers these are large multiyear projects.
Speaker Change: And generally more immune to near term crude oil price fluctuations, but.
Speaker Change: Is there a crude oil price point.
Speaker Change: We could see.
Variation in producer activity airplanes.
Speaker Change: Okay.
Speaker Change: On the first the first part of the question is what gives us a little bit of confidence.
Speaker Change: We were before our call start who we were listening to the Murphy call.
Speaker Change: And I think it's well documented that one of the fields that we've talked about in the past is khaleesi more months.
Speaker Change: King's key field and they say, yeah, basically to summarize a little bit while the.
Speaker Change: More than my number two number in samurai and number three wells are back on the weather impact in the <unk>.
Speaker Change: First quarter cause them to come on later than expected.
Speaker Change: Caliche, two workover has been pushed to the right as a result, because it's using the same rigs so.
Speaker Change: These are but two.
Speaker Change: As I said two of them are on and are now on the caliche too well to our network over as well as in anticipating drilling a new development well. So that's what gives us confidence in that's explicit in real time.
Speaker Change: Data there.
Speaker Change: I think on the other fields.
Speaker Change: We I'm not sure that those have been identified in the public domain, but I think it's fair to say that the producers are insensitive to get it done as quickly as possible and so we have a lot of confidence.
Speaker Change: There on location and taking care of things.
Speaker Change: Relative to your second question I mean really the the marginal lifting cost is extremely low and in the Gulf.
Speaker Change: Especially given the fixed cost economics, you already spent several billions of dollars.
Speaker Change: So.
Speaker Change: Youre not going to.
Speaker Change: Shut in production, you're not going to unmanned platform and shut in production.
Speaker Change: And ultimately run the risk of reducing overall recoveries from your existing well bores and stuff. So.
Speaker Change: I think that we've not ever.
Speaker Change: Ever seen even when prices and I'm dating myself and prices went to $10.
A barrel that we saw in the <unk>.
Speaker Change: Significant a much less meaningful.
Speaker Change: Supplier response of current production so.
Speaker Change: Again these are.
Speaker Change: Long live wells, if you're producing if you're recovering.
Speaker Change: 20, or 30 million barrels are much less 50, or 60 million barrels per well bore and yet youre seeing.
Speaker Change: Mac's initial production rates of 20000.
Speaker Change: <unk> barrels a day you can do the arithmetic that the.
Speaker Change: Individual wells or.
Speaker Change: 710 to 15 year alive, well, so youre not going to see.
Speaker Change: Our opinion and based on history, we have not seen a.
Speaker Change: Our response to a low price environment and certainly in a.
Speaker Change: While it's.
Speaker Change: At $50 60 as is.
Speaker Change: Not as good for the producers has 80 or 90 or whatever its doing well.
Speaker Change: Affect any of their behavior in our opinion.
Speaker Change: Great. Thanks for that and then.
Speaker Change: Just going back to capital allocation and I know you provided some good detail here, but and you noted you are taking in all of the above the well that's.
Speaker Change: Can you just remind us so.
Speaker Change: Yes, Sir.
Speaker Change: Target kind of leverage ratio and distribution coverage ratio that you target before increasing the distribution more meaningfully and rapidly.
Speaker Change: Hum.
Speaker Change: Any help there.
Speaker Change: I think our long term.
Speaker Change: Target.
Speaker Change: Leverage ratio as calculated by our banks.
Speaker Change: It's always been in the neighborhood of four times.
Speaker Change: We anticipate being able to get there fairly rapidly.
Speaker Change: Again.
Speaker Change: The cost of increasing the distribution in terms of the cash cost given that we only have $122 5 million.
Speaker Change: Units outstanding there's not a great.
Speaker Change: It is not.
Speaker Change: And overly burdensome thing to be able to do it but.
Speaker Change: You know again as theirs.
Speaker Change: Little bit of noise from a GAAP accounting point of view in our disclosures and our calculated coverage ratio this quarter, but all of that is going to that.
Speaker Change: That noise of exiting a significant business from a GAAP point of view and going forward as well as when we start seeing the cigna.
Speaker Change: A significant ramp in.
Speaker Change: Incremental segment margin, which as we've publicly stated if the producers actually hit their numbers that they provided us would generate an incremental $160 million a year.
Speaker Change: Segment margin to us, that's pretty meaningful and being able to rapidly approach that our targeted leverage ratio as well as <unk>.
Speaker Change: Having the ability to consider meaningful movements in the in the distribution.
Speaker Change: Great. That's that's helpful. And then just I guess my last question is just on the Marine segment.
Speaker Change: It sounds like.
Speaker Change: <unk> been holding steady.
Speaker Change: Can you just remind US you know working day rate.
Speaker Change: So that's that's where they are today.
Speaker Change: To kind of incentivize new.
Speaker Change: I think consistent with some other public company disclosures, which are certainly.
Speaker Change: There are larger.
Speaker Change: The significantly larger than we are a publicly stated that in their opinion.
Speaker Change: Rates need to go up 30% to 40% from here.
Speaker Change: And B I believe to be sustained.
Speaker Change: Awesome for five plus years.
Speaker Change: Because you have two years' worth of construction and then three to five year payback.
Speaker Change: Payback period before.
Speaker Change: They would entertain.
Speaker Change: Initiating a significant Newbuild program. So I think that you know what.
Speaker Change: In today's world, what we inland heater barge that we built our 2000.
Speaker Change: 17, 2018 for three and a half million dollars is probably order of magnitude six to six $5 million in today's world and given that.
Speaker Change: These have a.
Speaker Change: 30% 35 to 40 year useful life.
Speaker Change: And we have a relatively.
Speaker Change: One of the youngest and the aggregate fleets on the water. We think that we're in a very good position given that kind of backdrop.
Speaker Change: Thank you very much thank you.
Speaker Change: Thank you there are no further questions at this time I would like to turn the floor back to grant Sims for closing remarks, okay, well, thanks, everyone for participating and we look forward to continuing the dialogue in 90 days if not sooner. Thank you.
Speaker Change: Thank you and with that this does conclude today's teleconference. We thank you for your participation you may disconnect your lines at this time.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Uh huh.