Q2 2025 Gibson Energy Inc Earnings Call
Unknown Executive: Please be advised that this call is being recorded.
Beth Pollock: I would now like to turn the meeting over to Beth Pollock, Vice President, Capital Markets and Risk. Ms. Pollock, please go ahead. Thank you.
Curtis Philippon: Good morning, and welcome to our second quarter earnings call.
Good morning everyone and welcome to the Gibson energy. Second quarter 2025 conference call. Please be advised, that this call is being recorded. I will now like to turn the meeting over to Beth Pollock, vice president, Capital markets and risk. Miss Pollock. Please go ahead.
Curtis Philippon: Joining me today from Gibson Energy are Curtis Philippon, President and Chief Executive Officer, and Riley Hicks, Senior Vice President and Chief Financial Officer. The rest of our management team is also present to help with questions and answers as required.
Curtis Philippon: Listeners are reminded that today's call refers to non-GAAP measures, forward-looking information, and is subject to certain assumptions and adjustments and may not be indicative of actual results. Descriptions and qualifications of such measures and information are set out in our investor presentation available on our website and our continuous disclosure documents available on CDAR.
Curtis Philippon: With that, I will turn the call over to Thanks, Beth. Good morning, and thank you for joining us today to discuss our second quarter financial and operating results. Q2 was a great execution quarter for Gibson. We achieved many key milestones, including the safe and efficient execution of several major capital projects. These efforts underscore the momentum we have across our five strategic priorities, safety, gateway execution, growth, cost focus, and building high-performance teams. During the second quarter, we completed the Gateway dredging project and turnarounds at the Moose Jaw Facility and the Hardesty DRU, with all projects safely executed on time and on or under budget.
Indicative of actual results descriptions and qualifications of such measures and information are set out in our investor presentation available on our website and our continuous disclosure documents available on Cedar. Plus with that, I will turn the call over to Curtis
Thanks Beth. Good morning and thank you for joining us today to discuss our second quarter financial and operating results.
Q2 was a great execution quarter for Gibson, we achieved many key Milestones, including the safe and efficient execution of several major capital projects.
These efforts underscore the momentum. We've we have across our 5 strategic priorities safety Gateway, execution, growth cost, focus and building high performance teams.
During the second quarter, we completed the Gateway dredging project and turnarounds at the Moosejaw facility, in the Hardesty Dru.
Curtis Philippon: We also made significant progress on the Cactus II connection at Gateway and advanced construction on the crude infrastructure in the Duvernay being built as part of our new long-term producer partnership with Baytex. Both are on track and are expected to come online as planned in Q3 and Q4, respectively. I'd like to thank Marcus Engel's team at Gateway, Ken Martin and Cody Johnson's team at the DRU, and our Moose Jaw team. It was impressive to see the pride these teams took in the preparation and safe execution of their project. Their hard work set us up for a strong quarter.
With all projects safely, executed on time and on or under budget, we also made significant progress on the cactus 2 connection that Gateway and Advanced Construction on the crude infrastructure and the duet being being built. As part of our new long-term producer partnership with beex. Both are on track and are expected to come online as planned in Q3 and Q4 respectively.
Curtis Philippon: These projects will open up additional capabilities for Gibson going forward. These major projects were completed with zero recordable incidents, and we are proud of our continued top quartile safety performance. Gibson has now achieved a new milestone of over 9.5 million hours without a loss of injury. Safe operations provide a critical infrastructure bridge to enable the reliable flow of energy to key markets across North America and globally. We continue to grow with our customers, and year-to-date, we have safely moved over 260 million barrels in Canada and over 120 million barrels in the U.S., representing year-over-year increases of 6% and 5% respectively.
I'd like to thank Marcus Engels team at Gateway Ken Martin and Cody Johnson's team at The Dru and our Moose Jaw team. It was impressive to see the pride these teams took and the preparation and safe execution of their projects, their hard work. Set us up for a strong quarter. These projects will open up additional capabilities for Gibson going forward.
These major projects are completed with zero recordable incidents and we are proud of our continued top cortile, safety performance. Gibson is now achieved a new Milestone of over 9 and a half million hours without a lost time injury.
Our safe operations provide a critical infrastructure bridge to enable the reliable flow of energy to key markets across North America and globally.
Curtis Philippon: Turning our focus to Gateway, during the second quarter, we completed dredging and observed the benefits of the project immediately. With the draft now increased to 52 feet, we were able to load VLCCs up to 1.6 million barrels and Suez Maxx vessels in full up to 1.1 million barrels, increasing revenue per loading window and increasing average volumes for VLCC and Suez Maxx vessels by more than 20 percent. Following the completion of the project, average throughput at Gateway rose from approximately 600,000 barrels per day to over 700,000 barrels per day and with a new record of 755,000 barrels per day achieved in June.
We continue to grow with our customers and year to date. We have safely, moved over, 260 million Barrels in Canada and over 120 million barrels in the US. Representing year-over-year increases of 6 and 5% respectively.
During our focus, the gateway. During the second quarter, we completed dredging and observed the benefits of the project immediately with the draft. Now, it has increased to 52 ft, allowing us to load VLCCs up to 1.6 million barrels and Suezmax vessels in full up to 1.1 million barrels, increasing revenue for the loading window and increasing average volumes for VLCC and Suezmax vessels by more than 20%.
Curtis Philippon: Higher volumes at the terminal resulted in our Corpus Christi market share increasing to over 30 percent, a new high for Gateway. Looking forward, we expect the positive momentum to continue into the second half of 2025. The Cactus 2 connection is on track to come online in Q3. This connection, constructed to meet our customer needs, will provide them with long-term access to an incremental 700,000 barrels per day of crude supply. Completing this connection is an important step to unlock further growth potential at Gateway. To date, we've grown to over 30% market share in Corpus, while only having access to two-thirds of the supply.
Following the completion of the project, average throughput at Gateway Rose from approximately 600,000 barrels per day to over 700,000 barrels per day and with a new record of 755,000 barrels per day achieved in June.
Higher volumes of the terminal. Resulted in our Corpus Christi market share, increasing to over 30% a new high for Gateway.
Looking forward, we expect the positive momentum to continue into the second half of 2025. The cactus 2 connection is on track to come a line in Q3 this connection constructed to meet. Our customer needs will provide them with long-term access to an incremental 700,000. Barrels per day of crude Supply completing this connection is an important step to unlock further growth potential at Gateway to date. We've grown to over 30% market, share in Corpus while only having access to 2/3 of the supply.
Curtis Philippon: Access to this additional supply enables more options for our current customers, increases operational efficiencies, and expands the pool of customers for Gateway. Commercially, we see an infrastructure EBITDA per share growth rate of greater than 5% over the next five years. To drive this growth program, we have been adding key talent to our teams in Canada and the United States, including the recent addition of a new senior commercial director in Canada, Ryan Hyland.
access to this additional Supply, enables more options for our current customers increases operational efficiencies, and expands the pool of customers for Gateway,
Curtis Philippon: Across Our Business. We also made significant progress with respect to our We Are All Owners cost focus campaign. If you recall, we set a target of realizing over $25 million of run rate cost savings by the end of 2025, and to do it with high levels of participation. We're on track to exceed the $25 million target, and the participation across the organization has been impressive, with 80% of Gibson employees implementing a change that contributes to this cost job. This is a great example of the power of the ownership culture at Gibson. Over 95% of Gibson employees are shareholders, and it helps drive a differentiated performance culture that is aligned with shareholders.
Commercially, we see an infrastructure bit of per share growth rate of greater than 5% over the next 5 years. To drive this growth program, we've been adding key talent to our teams in Canada and the United States, including the recent addition of a new Senior Commercial Director in Canada, Ryan Highland.
Across our business.
We also made significant progress with respect to our, we are all owners cost focused campaign. If you recall, we set a target of realizing over 25 million of run rate, cost savings by the end of 25 and to do it with high levels of participation, we're on track to exceed the 25 million Target. And the participation across the organization has been impressive, with 80% of Gibson employees implementing a change, that contributes to this cost challenge.
Riley Hicks: During the quarter, we realized a mix of one-time and run-rate cost savings across all areas. From a distributable cash flow perspective, this amounted to approximately $9 million, or $0.05 per share, bringing the total year-to-date DCF impact to over $15 million, or $0.09 per share. Financially, the strength of our infrastructure business was showcased in Q2 as we finished the quarter with $146 million in adjusted EBITDA and $81 million in distributable cash flow. Continued strong infrastructure performance in Canada at both Edmonton and Hardesty, as well as in the U.S. at Gateway, following the completion of the dredging project, offset the cash flow impact of business interruptions at Gateway, Moosejaw and DRU, while capital projects were completed, and the muted marketing environment.
Ated performance culture. That is aligned with shareholders.
During the quarter, we realize the mix of 1 time and run rate, cost savings across all areas from a distributable cash flow perspective. This amounted to approximately 9 million or 5 cents per share. Bringing the total year-to-date DCF impact to over 50 million dollars or 9 cents for share.
Financially, the strength of our infrastructure business was showcased in Q2 as we finished the quarter with 1406 million, in a city IA and 81 million in distributable, cash flow.
Curtis Philippon: Overall, Q2 was an important quarter for Gibson as we successfully advanced our crude infrastructure strategy with the strong execution of major capital projects.
Continued. Strong infrastructure performance in Canada at both Edmonton and Hardesty as well as in the US. At Gateway following the completion of the dredging project offset, the cash flow impact of business, interruptions that Gateway moose John Dru, while capital projects are completed and the muted marketing environment.
Curtis Philippon: We're looking forward to maintaining this momentum through the second half of the year.
Riley Hicks: With this, I'll pass it over to Riley, who will discuss our financial performance in more detail. Thank you, Curtis, and good morning, everyone. As discussed, the second quarter was another strong quarter for our core business. In our infrastructure segment, we reported an adjusted EBITDA of $153 million. consistent with the same period last year and close to the high watermark of $155 million achieved during the first quarter. These solid results were driven by continued, strong demand for services at both Edmonton and Hardesty, as well as increased throughput at Gateway, which helped to mitigate the impact of minor business interruptions during the execution of our dredging project and the planned turnarounds at both Moosejaw and the Hardesty DRUs.
Overall Q2 was an important quarter for Gibson. As we successfully Advance our crude infrastructure strategy with the strong execution of major capital projects. We're looking forward to maintaining this momentum through the second half of the year with this. I'll pass it over to Riley who will discuss our financial performance in more detail.
Thank you, Curtis and good morning. Everyone.
As discussed. The second quarter was another strong quarter for our Core Business.
In our infrastructure segment, we reported adjusted ebida of 153 million.
Consistent with the same period last year and close to the high Watermark of 155 million achieved during the first quarter.
Riley Hicks: Marketing results continued to improve during the quarter, with adjusted EBITDA of $8 million landing at the top end of our prior guidance range of $0 to $10 million. This represents an $8 million improvement over our first quarter results, although it remains $12 million below the same period last year. Marketing performance reflected continued tight commodity differentials, limited storage opportunities, and the impact to a refined products business resulting from the planned turnaround at our Moose Jelf. Looking forward, with increased visibility into the second half of the year, we remain confident in our full-year marketing outlook of $20 to $40 million.
The solid results were driven by continued strong demand for services at both Edmonton and Hardesty as well as increased throughput at Gateway, which helped to mitigate the impact of minor business interruptions during the execution of our dredging project, and the planed turnarounds at both Moosejaw and the Hardesty dhiru.
Marketing results continued to improve during the quarter with adjusted ibida of 8 million. Landing at the top end of our prior guidance range of 0 to 10 million.
This represents an $8 million improvement over our first quarter results. Although it remains $12 million below the same period last year.
Marketing performance, reflected continued tight commodity differentials limited storage opportunities, and the impact to a refined products business resulting from the planned turnaround at our mooa facility.
Riley Hicks: Assistant with the guidance we shared on our first quarter call. As for the third quarter, we expect marketing performance to be substantially in line with second quarter results. While crude marketing is expected to benefit from an improved WTI price structure, this impact will partially be offset by take-grade differentials driven by egress capacity out of the business. Further, while crack spreads impacting our refined product segment have improved, this will be partially offset by reduced North American drilling rate activity, which will impact sales of our drilling food products. On a consolidated basis, second quarter adjusted EBITDA of $146 million was $13 million lower than the same period last year, primarily driven by the muted marketing results.
Looking forward with increased visibility into the second half of the year, we remain confident in our full-year marketing outlook of $20 million to $40 million, consistent with the guidance we shared on our first quarter call.
As for the third quarter, we expect marketing performance to be substantially in line with second quarter results.
While crude marketing is expected to benefit from an improved WTI price structure, this impact will partially be offset by pay grade differentials driven by egress capacity out of the basin.
Further while crack spreads impacting, our refined product segments have improved, this will be partially offset by reduced. North American drilling rig activity, which will impact sales of our drilling food products.
On a Consolidated basis. Second quarter adjusted ibida of 146. Million was 13 million lower than the same period last year.
Riley Hicks: Looking at distributable cash flow, we generated $81 million in the second quarter, a $20 million decrease compared to the second quarter of 2020. As noted earlier, this is primarily due to the lower marketing performance, which was only partially offset by the success of our cost-savings initiative.
Primarily driven by the muted marketing results.
Looking at distributable cash flow. We generated 81 million in the second quarter. A 20 million decrease compared to the second quarter of 2024.
Riley Hicks: which have resulted in $9 million of operating, GNA, and replacement cost savings during the... Turning to our financial position, we remain committed to our financial governing principles and maintaining both a strong balance sheet and a sustainable growing dividend. As expected, our debt-to-adjusted EBITDA ratio of 4 times was above our long-term target range of 3 to 3.5 times, while infrastructure leverage of 3.8 times remained below our target of less than 4 times. Our consolidated payout ratio of 83% was slightly above our target range of 70-80%, while our infrastructure-only payout ratio of 73% was below our target of less than 100%.
As noted earlier, this is primarily due to the lower marketing performance, which was only partially offset by the success of our cost savings initiatives, which have resulted in 9 million of operating GNA and replacement cost savings during the quarter.
Turning to our financial position. We remain committed to our financial governing principles and maintaining both a strong balance sheet and a sustainable growing dividend.
As expected, our debt to adjusted, even a ratio of 4 times was above our long-term target range of 3 to 3 and a half times while infrastructure leverage of 3.8 times remained below, our Target of less than 4 times.
Riley Hicks: Our consolidated metrics are temporarily above our long-term targets, reflecting the impact of a heavy capital program during the first half of 2025, combined with softer marketing results, and is fully aligned with our expectations heading into For more information visit www.fema.gov The majority of our 2025 growth capital projects are now complete, and with line of sight to a more stable marketing environment, we have a clear pathway to having both consolidated leverage and payout back within our target ranges by early 2026. Finally, and in support of our conservative financial profile and our commitment to our investment grade rating, DVRS has maintained our solid BBBB low rating with a stable trend, reaffirming their comfort with our long-term financials.
On a Consolidated payout ratio of 83% was slightly above our target range of 70 to 80%. While our infrastructure, only payout ratio of 73% was below our Target of less than 100%.
Our Consolidated metrics are temporarily above our long term targets reflecting the impact of a heavy Capital program, during the first half of 2025 combined with softer marketing results and is fully aligned with our expectations heading into the year.
The majority of our 2025 growth capital projects are now complete. And with line of sight to a more stable marketing environment, we have a clear pathway to having both Consolidated, leverage, and payout back within our Target ranges by early 2026.
Curtis Philippon: With this, I will now pass the call back to Curtis for a few closing remarks. Thanks, Riley. To close, we are pleased to have ended the first half of 25 with another solid quarter. We achieved key milestones through the execution of major infrastructure capital projects. We generated strong quarterly infrastructure segment EBITDA, which benefited from the new tanks at Edmonton and increased throughput at Gateway. We delivered improved marketing segment EBITDA. We maintained a strong and sustainable balance sheet. And while infrastructure-adjusted metrics remain within targeted levels, we are cognizant that the consolidated leverage and payout metrics are currently above and have line of sight to both returning within target ranges by early 2026.
And in support of our conservative Financial profile and our commitment to our investment grade rating. Dbrs has maintained our solid Triple B low rating with a stable Trend reaffirming their comfort with our long-term financial plan.
With this, I will now pass the call back to Curtis for a few closing remarks.
Thanks, Riley to close. We are pleased to have ended the first half of 25 with another solid quarter. We achieved key Milestones through the execution of major infrastructure capital projects.
Curtis Philippon: And finally, we have made considerable advances with respect to the Cactus II connection and the new DuVernay infrastructure as part of our producer partnership, setting us up for a strong second half of the year.
We generated strong quarterly infrastructure segment EBITDA, which benefited from the new tanks at Edmonton and increased throughput. At Gateway, we delivered improved marketing segment results. EVA, we maintained a strong and sustainable balance sheet, and while infrastructure adjusted metrics remained within targeted levels. We are cognizant that consolidated leverage and payout metrics are currently above target, and we have a line of sight to both returning within target ranges by early 2026.
And finally,
we have made considerable advances with respect to the cactus 2 connection, and the new do Renee infrastructure as part of our producer partnership setting up for a strong second half of the year.
Curtis Philippon: Thank you.
Unknown Executive: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star-11 again. Please stand by while we compile the Q&A roster.
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Eli: Our first question comes from the line of Jeremy Toné from J.P. Morgan Securities, LLC. Hi, good morning. This is Eli on for Jeremy. Congrats on a strong quarter.
Please stand by while we compile the Q&A roster.
Our first question comes from the line of Jeremy Ton from JP Morgan Securities LLC.
Curtis Philippon: Maybe just wanted to start on the progress of commercialization at, you know, post the SGT. Just if you can talk about some of the longer-term growth opportunities you see at Gateway, whether those are vertically integrated Permian bolt-ons or, you know, what that opportunity set looks like. Thanks. Good morning, Eli. We're pretty excited about what we're doing right now at Gateway. So the dredging just recently completed, and with this cactus tie-in, you're going to see those benefits being something we're working on over the next few years, really. There's some immediate volume increases that we're seeing, but the big benefits come from us fully utilizing this new capacity and recontracting customers at higher MVCs in the future, now that we're able to fully load Suez Max vessels and fill VLCCs to a much larger capacity.
Hi, good morning. This is Eli on for Jeremy. Uh, congrats on a strong quarter, maybe just wanted to start on. Um, the progress of commercialization at you know, post the Sgt GT. Um, just if you can talk about some of the longer term growth opportunities, you see, at Gateway, whether those are vertically integrated, permeable, owns, or, um, you know what that opportunity set looks like
Sure, thanks. Good morning, Eli. Uh, from we're pretty excited about what we're doing right now at Gateway. So the dredging just recently completed and with this Cactus tie in, you're going to see those benefits being something we're working on over the next few years. Really like there's some immediate volume increases that we're seeing, but the big benefits come from us fully utilizing this new capacity and and recontracting customers at
Curtis Philippon: So I think you're going to see us use that over the next few years. There's a lot of wood to chop still to fully realize the benefits we got out of the capital projects we completed this year.
Curtis Philippon: Longer term, you get pretty excited about what else you can do with Gateway. There's obviously interesting vertical integration options that you can have now that you have this Gateway platform with this type of incredible capability out of Ingleside. So we'll watch for that. And even longer term, we've talked about that as crude exports increase in the U.S., Ingleside is the most cost-effective place to export crude out of the U.S. And we see a good path to building a third dock at that location as well to facilitate that as exports grow in the U.S.
Higher mvc's in the future. Now that we're able to fully load so as Max vessels and and Phil uh, vcc's to a much larger capacity. Uh, so I think you're going to see us use that over the next few years. Like there's a lot of wood that chops still to fully realize the benefits that we got out of the capital project. So you included this year um longer term, you get pretty excited about what else you can do with. Gateway, there's obvious.
Curtis Philippon: And that's still a number of years out, but that's still a very attractive project, I think, in time for Gateway.
Curtis Philippon: I appreciate that there's kind of some push and pull factors that you see progressing through the second half of the year, but maybe just confidence in a turnaround in 2026 and understanding what that could look like for the business, what would drive sort of stronger performance next year, and what you guys are seeing now. Thanks. I think you're seeing a lot of factors all coming together this year to sort of temporarily have our marketing segment pretty muted this year. We're pleased to see the sequential improvement. We're seeing quarter over quarter as things are improving. As you get into 26, I expect that you continue to see that happen, that things do improve, whether that's egress efficiency, refinery crack spreads, or even things like drilling fluid demand.
Li interesting, vertical integration options that you can have now that you have this, this Gateway platform, but this type of incredible capability out of Engleside. Uh, so we'll watch for that. And, and even longer term we've, we've talked about that as crude exports increase in the US Engleside, is the most cost-effective place to to export crude out of the us. And we see a good path to building a third dock at that location as well to facilitate that as exports grow in the US. And I think that's still a number of years out, but that's still a very attractive project, I think in time for Gibson.
got it, that's helpful and then maybe shifting over to marketing um you know I appreciate that there's kind of some push and pull factors that you see progressing through the you know, second half of the year but maybe um
You know, just confidence in a turnaround in 26 and, you know, understanding what that could look like for the business. What would drive sort of stronger performance next year and um you know what you guys are seeing now. Thanks.
Curtis Philippon: So we see some line of sight that things are improving as you get into 26, but I still would say that we're still cautiously watching that as it's progressing. It is improving, but it's still a little bit out, and really the marketing business depends on macro impacts, and I think we've done quite well to capitalize on macro events, and I think as you go forward, you'll see us do that in 26 as well. I think the one interesting thing in 25 is there's been a lot of macro events that have happened in 25, but because of exceptionally low inventory levels in the basin, some of the impact of those macro events have been fairly muted, and so it's not that these events have stopped happening, it's just that because of very low inventory levels driven by this very efficient egress currently, you're not seeing the same scale of marketing opportunity.
I think you're seeing a lot of factors all coming together this year to sort of temporarily have our our marketing segment, pretty muted this year. Um, we're we're pleased to see the sequential Improvement. We're seeing quarter of a quarter as as things are improving. As you get into 26, I expect that you can continue to see that happen. The things that the things do improve and whether that's uh, egress efficiency, uh, Refinery crack spreads or even, uh,
Curtis Philippon: I think as you go forward, you see some of that return to more historical norms, that you're going to have a little bit more inventory, you're going to have a little bit more efficiency challenges around egress, and you're going to continue to see macro impacts, and I would argue that's something that's going to only increase in time and increase opportunities for the market. Got it.
Curtis Philippon: And then just really quick, one last one if we could. Was there any sort of change in July volumes at Gateway? I think there were some folks looking at seaborne exports data showing a drop. I'm not sure if you're seeing anything there. Sorry.
You'll see us do that uh, in 26, as well. I think the 1 thing in 25 is, there's been a lot of macro events that have happened in 25, but because of exceptionally low inventory levels in the base and some of the impact of those macro events have been fairly muted. And so it's not that these events uh uh have stopped happening. It's just that. Because of very low inventory levels driven by this very efficient egress. Currently, uh, you're not seeing the same uh scale of marketing opportunity. I think as you go forward, you see some of that return to more historical Norms that you're, you're going to have a little bit more inventory. Uh you're going to have a little bit more efficiency challenges around egress and you're going to continue to see macro impacts and I I would argue that's something that's going to only increase in time and sort of increase opportunities for the marketing segment.
Curtis Philippon: There's always going to be a little bit of weather-related timing things that'll come up for an export terminal, so nothing notable to comment on. All right, thanks. Thank you.
Got it and then just really quick 1, last 1. If we could, um, was there any sort of change in July volumes at, uh, at Gateway? I think there were some folks looking at seabourne exports data, showing a drop. I'm not sure if you're seeing anything there. Sorry.
Yeah, there's there's always going to be a, a little bit of uh weather related timing things. That'll that'll come up uh uh, at for her next sport terminal, so nothing. Nothing notable to comment on.
All right, thanks.
Aaron MacNeil: One moment for our next question. Our next question comes from the line of Aaron MacNeil from T.D. Cowan. Hey, morning all. Thanks for tuning in. Curtis on Gateway.
Thank you. 1 moment for our next question.
Our next question comes from the line of Aaron. McNeil from TD Cowen.
Curtis Philippon: Close the record. Volumes. Growth. 20% © The Bulletproof Executive 2013 when you acquired the asset. We have yet to see the impact of Cactus 2, so volume... In that context, or in Growth at the Asset Level. And we're there. I think so. volumes, we're already seeing the volumes upticking already today with cactus tie and that will help us and we'll you'll see another increase in volume. We have one customer in particular that initially backstopped the connection that will bring additional volume to gateway. So you'll see a bit of an uptick related to volume. I would say, you know, one from an EBITDA impact, we feel very good about what we've been messaging that in Q4 that we will that in Q4 that we will Meet or exceed the 15 to 20% EBITDA growth rate that we said we were targeting is when we did the gateway acquisition that we're going to we're going to hit that run rate increase by by Q4 this year.
Hey morning, all thanks for taking my questions. Um Curtis on Gateway. You know you disclose the record volumes growth and excessive you know 20% versus when you acquired the asset on a volume basis and we're yet to see the impact of cactus 2 so volumes could continue to increase.
In that context or in the context of your 15 to 20% ebit. Dog. Growth Target, do you think we could see Gibson exceed this range or do you think that you know there's some nuances in terms of why you know growth at the asset level uh in terms of volumes may not translate into to ibida?
And we're there, I think so volumes were already seeing the volumes up ticking already today with cactus tie and that will help us and what you'll see. Another increase in volume. We have 1 customer in particular that, uh, initially backed up the, the connection that will bring additional volume to gateways. So, you'll see a bit of an uptick related to the volume. Uh, I I would say, you know, 1 from an ibida impact. We feel very good about what we've been messaging that in Q4 that we will.
Curtis Philippon: Feel very good about that. But I would also say that boy, we would have just got gateway connected to Cactus 2. So we're still pretty early days on fully realizing the benefits of that connection. And so as you get into into 26, you're going to see us use that in an even bigger way and find additional efficiencies. We'll see what it does on the volume perspective. We're always on the volume side, we're always relying on the activity of our customers. But what we'll find is that there's just a lot more efficiencies that we can drive with additional capacity connections, I think just drives some good EBITDA opportunities in there.
Curtis Philippon: And we'll see what it does to volume.
Curtis Philippon: I'd expect a small uptick in volume with the Cactus Maybe to follow on Eli's question on the marketing outlook, you know, what if some In order to get to the lower end. I think on the marketing side, one of the big things I would look at is, is there production growth coming in Western Canada? I think we see that, that we're seeing Western Canadian production growth coming at us, and that will inevitably lead to some tightening of egress, and that will increase marketing opportunities. And so that's, for us, that's probably one of the big levers.
Meet or exceed, the 15% IBA growth rate. That we said, we were targeting is when we did the Gateway acquisition that we're going to, we're going to hit that run rate, increase by, by Q4. This year. Feel very good about that. But I would also say that boy we would have, we would have just got Gateway, uh, connected the cactus to. So we're, we're still pretty early days on fully realizing the benefits of that connection and so I it gives you get into into 26. You're going to see us use that in an even bigger way and find additional efficiencies. We'll see what it does. On the volume perspective, we're always on the volume side, we're always relying on, um, the activity of our customers. But what we'll find is that there's just a lot more efficiencies that we can drive with additional capacity connections. I think just drives, um, some good EBA opportunities in there and we we'll we'll see what it does to the volume. I expect a small uptick in volume with the cactus connection.
Gotcha. Okay. And then maybe to not to beat a dead horse here, but maybe to follow on, Eli's question on the marketing Outlook. You know what assumptions do we need to believe in terms of, you know, the heavy differential or 2 on 1, crack spread or inventory levels in order to get to the lower end of the previous guidance range.
Curtis Philippon: There's a number of different levers in this business we're able to pull on, but that's one to watch for sure.
I think in the marketing side, like 1 of the big things I would look at is, you know, is their production growth coming in in western Canada? I think we, we see that that we're seeing Western Canadian production growth coming at us. And, and that will inevitably lead to some tightening of of egress. And, and that will increase marketing opportunities. And so that's for us, that's, you know, probably the 1 of the big levers. There's a number of different levers in this business, we're able to full on, but that's, that's 1 to 1 to watch, for sure.
Unknown Executive: Thank you. One moment for our next question.
Thanks, I'll turn it back.
Robert Hope: Our next question comes from the line of Robert Hope from Scotiabank. Morning, everyone. I appreciate the commentary on the South Texas growth outlook. You may be moving north on the border.
Thank you. 1 moment for our next question.
Our next question comes from the line of Robert Hope from Scotia Bank.
Curtis Philippon: Can you give us an update on, you know, how the next wave of growth projects are progressing across the business there? Morning, Rob. For the growth in Canada, next wave of projects, so the big one right now that's live is the producer partnership agreement with Batex, so that's progressing really well and we expect that that will be fully online by the end of Q4. That sets a bit of a template out there that I expect that there's some other interesting projects that we can get into, and there's also additional phases potentially with Batex that we can get into with that as we get into 26, and so that's one interesting growth leg in Canada to watch, but just to remind everybody, we love the nature of that agreement and that, you know, good Guaranteed take-or-pay long-term agreement on that infrastructure, but importantly, the barrels are driven to our core facilities in Edmonton, in this case, and just drive an additional throughput through our facilities, and just a great way to help out our customer as well.
On you know how the next wave of growth projects are uh progressing across the business there.
All right, Rob.
Curtis Philippon: So we love that type of agreement. We'd be happy to do more of that with Paytex and with other producers, and so we see some good opportunity around that.
Curtis Philippon: And then the second part of the growth in Canada, I think near-term, that I get excited about right now, is there's a number of optimization-type projects that we've been chipping away at some fairly significant major capital projects at Gibson over the last 18 months, and I would argue we've got a bit of a backlog of some of these optimization projects that we've got to get around to, and no one of these is that significant that we'll talk about in great detail, but they're typically projects that are anywhere from $1 million to $15 million, but good, excellent return projects that also help out our customers and are sort of on the lower end of the 5-7 payback range as well, and so nice projects to get done that we've got a bit of a backlog that we're working through in engineering and our BD team.
For the growth in in Canada, next wave of projects. So the the big 1 right now that's live is the the producer partnership agreement with batex. So that's progressing really well and uh we expect that that will be fully online by the end of Q4 that that sets a bit of a template out there that I expect that there's some other interesting projects so we can get into it and and there's also additional phases potentially with Vex so we could get into with that as we get into 26. And so that's 1 interesting growth like in Canada to watch with just to remind everybody. We we love the nature of that agreement and that you know, good guaranteed taker pay long-term agreement uh on that infrastructure. But importantly, the barrels are driven to our core facilities in Edmonton in this case and just drive an additional throughput through our facilities, uh, and just a great way to help out our customer as well. So we love that type of agreement. We'd be happy to do more of that with Bex and with other producers and so we see some good opportunity around that. And, and then the second part of the growth in
Canada, I think near-term uh that I get excited about right now is there's a number of optimization type projects that we've been chipping away at some fairly significant major capital projects that Gibson over the last 18 months. Uh, and I, I would argue we've got a bit of a backlog of some of these optimization projects, so we've got to get around to and uh, no 1 of these is
Robert Hope: I appreciate that. And then just in terms of capital allocation, you know, commentary that, you know, the debt deep down will remain a little bit above target this year, getting back to the range next year. How are you thinking about share buybacks, just given the continued media outlook for marketing and where the leverage is? Yeah, thanks, Rob.
That, uh, significant for that will sort of talk about in great detail, but they're typically projects that are sort of anywhere from 1 to 15 million dollars but good. Excellent return projects that, uh, also help out our customers and our sort of, on the lower end of the 5 to 7 payback range as well. And uh, so nice, uh, nice projects to get done that. We've got a bit of a backlog that we're we're working through an engineering and our BD team right now.
Riley Hicks: It's Riley here. You know, as we think about capital allocation and share buybacks specifically, you know, they're always going to be executed within the context of our balance sheet. So, as we sit here today and look at our leverage profile, you'll be wouldn't expect to be executing any buybacks here in 2025.
All right, I appreciate that. Um, and then just in terms of capital, allocation, uh, you know, commentary that uh you know, the debt will remain a little bit above Target this year. Getting back to the range next year. Uh, how are you thinking about, uh, share BuyBacks, uh, just given the continued muted outlook for marketing in where the leverages
Unknown Executive: And it looks like more likely at 2025. buyback program. Thank you. One moment for our next question.
Yeah, thanks Rob. It's it's Riley here. Um, you know, as we think about Capital allocation and and share buyback specifically, you know, they're always going to be executed within the context of our balance sheet. So as we sit here today and and look at our our leverage profile, uh, you know, we wouldn't expect to be executing any BuyBacks here in 2025 and it looks like more likely a 2026, uh, buyback program.
Thank you.
Thank you. One moment for our next question.
Maurice Choy: Our next question comes from the line of Maurice Choy from RBC Capital Markets.
Curtis Philippon: Thank you and good morning everyone. I just wanted to speak about the five to seven times bill multiple that you've referenced in terms of capital deployment. You've been clear that you're going to be remaining disciplined and you also highlight that some of your opportunities are at the lower end of that range.
Our next question comes from the line of Maurice Choi from RBC Capital markets.
Thank you, and good morning, everyone. I just wanted to speak about the 5 to 7 times bill multiple that you...
Curtis Philippon: Not that you need it, but when you look at M&A, what are some of the must-haves for you to go beyond this five to seven times? The other big thing is, I would say, is Gibson has done a phenomenal job over the years to accumulate what I call sort of crown jewel assets. These are truly differentiated assets that are best in class and are integral to the energy story in North America, and will be that for the rest of our lifetime. And so those types of assets are often, they cost you something to acquire. And so those are the types of things that we'll look at.
That you've referenced in terms of capital deployment, uh, you've been clear that you're going to be remaining disciplined. And you see also highlight that some of your options are at the lower end of that range, not that you need it. But when you look at m&a, what are some of the must-haves for you to go beyond this 5 to 7 times?
All right, Morris, we've for sure our focus on the organic opportunities. We see a nice set of opportunities that are in that 5 to 7, build multiple m&a. Those are something. We we constantly look at. And so 1 of the big things that we look at is, is there a, is there an integration with our current Assets in some way? And so that, that's important, that that we look at. So, uh, is there a connection obviously crude Focus that tie to our current assets are are very interesting things. We spend time looking at, uh, you know, the other big thing is, I would say, is Gibson has done a phenomenal job over the years, to accumulate what I call sort of Crown, Jewel assets. Like, these are truly differentiated assets that are best in class and are integral to the energy story in North America and and will be that
Curtis Philippon: And so in the case of Gateway, that was one of those assets. So we looked at it, that that is a incredible strategic fit that has a long-term role to play, a significant role to play in the U.S. energy picture. And we saw the value of stepping above that five to seven, build multiple for sure, to go acquire that asset. And so it would require things like that, the things that we think are truly additional crown jewels to add to the story that have just that long runway in front. with strong contracted cash flows in particular.
For the rest of our lifetime. Uh, and so those types of assets, uh, are often, they cost you something to get to acquire. And so those are the types of things that we'll we'll look at. And so, uh, in the case of Gateway that was 1 of those assets. So we looked at and said that is a incredible strategic fit that has a long-term role to play a significant role to play in Us in the US Energy picture and uh, we we saw the value of of stepping above that. 5 to 7, build multiple for sure to go acquire that asset and and so it would, it would require things like that. The things that we think are are truly additional crown jewels to add to the story that have just that long runway in front of them.
Curtis Philippon: And just a quick follow-up to that, what consideration is there between an opportunity in Canada versus the U.S.? Now that we've got this platform on both sides of the border, it's interesting. We had asked this question a lot, and I see good opportunity on both sides of the border. The U.S., with the Gateway platform, there's lots of interesting things to do around that, but on the Canadian side of the border, we've been in business in Canada for 70 years. We know this market exceptionally well, have a great footprint, and a lot of great relationships with the customers, and so there's good opportunities on both sides.
With strong, contracted cash flows in particular as well.
And just a quick follow-up to that, um, what consideration is there between an opportunity in Canada versus the U.S.?
Curtis Philippon: Maybe I'll give you the wishy-washy answer on that, Maurice. So I see it. I think there's good opportunities both on the capital deployment and on the M&A side on both sides of the border. Great.
Now that we've got this platform on both sides of the Border, it's interesting. We had asked this question a lot and, and I I see good opportunity on both sides of the border, the US with the Gateway platform. There's lots of interesting things to do around that, but on the Canadian side of the Border, we've we've been in business, in Canada, for 70 years. We know this Market exceptionally. Well, of a great footprint and a lot of great relationships with the customers. And so there's good opportunities on both sides. That, maybe I'll, I'll give you the the wishy-washy answer that worse. But I think I I so I see it. I think there's good opportunities both on the, on the, on the capital deployment and on the m&a side on both sides of the Border,
Curtis Philippon: And just to finish off on marketing, Curtis, I know that on the last Q1 call, you suggested that you may reach the low end of the $80 million to $120 million marketing guidance next year. Can you reconfirm this outlook or given your comments earlier about the macro as well as the need to see production growth, do you sense that this outlook has materially changed? I'd say it's constructive that we're seeing that it's quarter over quarter improving, so it gives you confidence that you're tracking towards that. I'd say probably a little bit too early to come out and say confidently it's absolutely back in that range, but we're pleased with how this is tracking, and some of the good work being done by our marketing team this year to add additional capabilities to our marketing effort, and whether it's at the refinery or some of our U.S.
Great. Um, and just to finish off, um, on marketing. Um, Chris, I know that on the last q1 call you suggested that, you may reach the low end of the 80 to 120 million.
Marketing guidance next year. Um, can you reconfirm this Outlook or given your your your comments earlier about the macro as well as the need to see production growth. Uh, do you sense that this Outlook has materially changed?
It's constructive that we're seeing that it's sort of a quarter over quarter improving, uh, so it gives you confidence that you're tracking towards that say probably a little bit too early to come out and say confidently. It's absolutely back in that range but we're we're
Curtis Philippon: marketing activities that we're doing, just to sort of expand the toolbox a little bit, I think that also gives me some good confidence that we're trending in the right way for that.
We're pleased with how this is tracking. And, you know, some of the good work being done by our marketing team, this year to to add additional capabilities to the, to our marketing effort. And and whether it's at the refinery or some of our us marketing activities that we're doing just to sort of expand the toolbox a little bit. I think that that also gives you some some good confidence that we're trending in the right way for that.
Unknown Executive: Thank you very much. Thank you.
Thank you very much.
Unknown Executive: One moment for our next question.
Sam Burwell: Our next question comes from the line of Sam Burwell from Jefferies. Hey, good morning, guys. Apologies for another Gateway related question, but wondering if we could dig in a little bit more on how you might be able to take share from the existing facilities in Corpus. I understand that you guys have a nicely advantaged position. But just curious, is that a function of existing contracts rolling off? Or was the lack of connection to Cactus2 something that was really holding back? And just curious how quickly any sort of share gains might be able to be realized?
Thank you. 1 moment for our next question.
Our next question comes from the line of Sam Burwell from Jeffries.
Curtis Philippon: When you look at Gateway and you look specifically at Ingleside, Ingleside is just going to win. Ingleside is the most advantaged location to export crude out of the U.S. You will see consistently more crude moving out to Ingleside. You're going to see both ourselves and our neighbour do quite well with that. This is by far the most advantaged location. The bulk of crude exports are exiting the U.S. on VLCCs and Suez Max vessels. This is by far the best location to load those vessels in the U.S. You'll see volume continue to shift in that direction.
Hey, good morning guys. Um, apologies for another Gateway-related question, but I was wondering if we could dig in a little bit more on how you might be able to take share from the existing facilities in Corpus, understanding that you guys have a nicely advantaged position. Um, but I'm just curious if that is a function of existing contracts rolling off, or if the lack of connection to Cactus was something that was really holding back. Additionally, I’m curious how quickly any sort of share gains might be able to be realized.
Curtis Philippon: It was really important for us to get the dredging completed and the cactus connection completed. We have all the advantages available to our customers. I agree with your comment that the other factor is really just time. There is a certain amount of contracts rolling off at other locations and volume being able to shift over to Gateway. Okay, understood.
Morning s the yeah, I think when you look at Gateway, uh, and he looks specifically at Engleside Engleside is just going to win. That Engleside is the most advantaged location, the export crewed out of the US. And so you will see consistently more crude moving out to tingle side. And so you're going to see, uh, you know, both ourselves, and our neighbor do quite well with that, that this is, by far the most Evangelical location. You see the bulk of crude exports are, are exiting the US on vcc's and Sue has Max vessels. This is by far the best location to load those vessels in the US. And so you, you'll see volume continue to shift in that direction. It was really important for us to uh, get the dredging completed in the cactus connection completed. And so we've sort of have all the advantages and and uh, to available to our customers. Uh, and and then I I I'd agree with your comment that the other factor is, is really just time that there is a certain amount of contracts rolling off at other locations and
Curtis Philippon: And then just sort of for the rest of the year, I mean, are there any maintenance items or construction related matters that might influence volumes? I mean, notwithstanding the comment that you already made about sort of normal course of business, month-to-month volatility, but any sort of data items to call out there? We've completed all the major turnarounds for the year so we have a number of tank turnarounds but those tend to have very minimal impact so there is maintenance work that's going on for the remainder of the year but nothing that has a material impact on that.
And volume will be able to shift over to Gateway.
Okay. Understood. Um, and then just sort of for the rest of the year. I mean, there are there any maintenance items or construction related related matters? That might, uh, influence volumes. I mean, notwithstanding the, the comment that you already made about sort of normal course of business months and months volatility, but, um, any sort of data, and I used to call out there,
Curtis Philippon: Got it. Thank you.
Yeah, we're completed all the major turnarounds for the year so we have uh, a number of of tank turnarounds but those tend to have very minimal impact. Uh, so there is, there is maintenance work that's going on, uh, for the remainder of the year, but nothing that has a material, uh, impact on the results.
Got it. Thank you.
Unknown Executive: One moment for our next question.
Patrick Kenny: Our next question comes from the line of Patrick Kenny from National Bank Financial. Thank you. Good morning, everyone.
Thank you. 1 moment for our next question.
Our next question comes from the line of Patrick Kenny from National Bank Financial.
Curtis Philippon: Just hard to see on the pullback in volumes and, I guess, overall demand for storage being experienced at the terminal. I know Trans Mountain is mainly to blame here, pulling barrels west, but I'm just curious if there might be any other factors at play driving that trend as well and, you know, how you're thinking about mitigating the impact over the near term and just your overall outlook for Hardesty rebounding through the back half of the year and into 2026. Thanks. Hardesty is having a very solid year for us, actually, so we're definitely seeing the impact of Trans Mountain, and we've been very impressed with the volumes that our Edmonton facility has been moving on Trans Mountain, but I'd also say that we see our customers in the oil sands with very good projects that are bringing more and more volume online, and so I expect you'll see that impact, positively impacting Hardesty over the next couple of years.
Over the near term and just your overall outlook for Hardesty rebounding, um, through the back half of the year and into 26. Thanks.
Curtis Philippon: We see 600,000 barrels of capacity growth in Canada between now and 28, and I think a good chunk of that volume increase is going to come through Gibson facilities and will be a beneficiary of that, both in Edmonton and in Hardesty.
Curtis Philippon: Also in Hardesty, we would note that we just recently welcomed Strathcona into the Hardesty Rail Terminal. So that is a great new partner for us in that facility. We're excited about what we can do with that partner on the rail facility. That's still very early days, but that's, I think, an interesting, positive relationship that we look to grow.
Yeah. Hard to see is having a very solid year for us actually it's we're definitely seeing the impact of Trans Mountain and we've been very impressed with the volumes that are editing facilities been moving on Trans Mountain. Uh, but I'd also say that we've boy we see our customers in the oil sands with very good projects that are bringing more and more volume online. Uh, and so I expect you'll see that impact positively impacting harvesty over the next couple of years. We, you know, we see 600,000 barrels of of capacity growth in in Canada between now and 28. And I think that's a, a good chunk of that, uh, volume increases going to come through Gibson facilities and will be a beneficiary of that both in Edmonton and Hardesty.
Curtis Philippon: Yeah, and on the customer front, I guess, on the potential acquisition of MAG here, you know, depending on how things play out, just wondering if you have any thoughts, Curtis, on what a takeout could mean for your business just in terms of presenting perhaps new commercial opportunities or, you know, on the flip side, if you might need to manage any downside risks associated with a change in ownership? Absolutely. Thank you.
Also has been hard to see. Also even hard to see with note that we just recently welcomed the Strathcona into the the Hardesty rail terminal and so that's that is a, a great new partner for us in that facility. We're excited about what we can do with that partner, uh, on on the rail facility. And so, that that's still very early days. But that's, uh, I think an interesting positive relationship that we look to grow.
Yeah, and on the, the customer front, I guess on the potential acquisition of Mag here, um, you know, depending on how things play out. Just wondering if you have any thoughts, Curtis on what a takeout. Could mean for your business, just in terms of uh, presenting perhaps new commercial opportunities or, you know, on the flip side, if you might need to manage any downside, risks associated with a change in ownership.
Yeah, we're just we're watching that like everybody Pat and just curious to see how that that plays out. I think it goes to show that these oil stands assets are very attractive and I think there's going to be a lot of interest in those assets and just the growth potential. You look at North America and the most attractive areas of of oil. Growth are clearly the oil sands. And uh I think that's uh I think it's an that's a great macro story for for Gibson and uh we're we're watching how this Meg story plays out as well.
Curtis Philippon: You had the notes mature in July and it looks like you just utilized your bank lines for now. I just wonder what the plan is to refi those notes timing-wise, whether or not you have any concerns about what terms you can tap the markets at here over the near term? Yeah, yeah, thank you. No, no real concerns about refinancing the notes. We did put them on our revolver for the short term as we had any kind of the summer, the summer months here. We'll look to refinance those in the fall here at the long term notes.
Yeah, last one for me, I guess for Riley. Um, so you had the notes mature in July and.
Um, looks like you just utilized your bank lines for now, but just wonder what the plan is to refi. Those notes, timing wise, uh,
Whether or not you have any, uh, concerns about, you know,
What terms can you tap the markets at here over the near term?
Curtis Philippon: So no, no step change in what we're doing on the financing side.
Yeah, yeah. Thank you. Uh, no. No real concerns about refinancing the notes. Uh, we did put them on a revolver for, for the short term as we had any kind of the the summer, the summer months here. Uh, we'll look to refinance those in the fall here at the, you know, long-term notes. So, so no, no step change in. What we're doing on the financing side,
Curtis Philippon: Okay, that's great. I'll leave it there. Thanks. Thank you.
Okay, that's great. I'll leave it there. Thanks.
Unknown Executive: One moment for our next question. Our next question comes from the line of Robert Catellier from CIBC Capital Markets. Hi, good morning. I just wanted to go back to the marketing for a second here. Curtis, you touched on the fact that your U.S. assets can contribute over the long term. I'm wondering what you think is possible there. What do you think is possible for the U.S. market? What do you think those U.S. assets could eventually contribute to the marketing? We're on the U.S. marketing side where I get most interested in that is I think our customers are craving more supply options at Gateway and I actually view the marketing business as a key way for us to increase the utilization at Gateway.
Thank you. 1 moment for our next question.
Our next question comes from the line of Robert Kilia from CIBC Capital Markets.
Hi, good morning. I just wanted to go back to the uh marketing for a second here. Courtesy touched on the fact that your usss can contribute over the long term. I'm wondering what you think is possible there. What what uh
What do you think those, um, us assets can eventually contribute to the, uh, marketing business?
Curtis Philippon: We move a significant volume to fill VLCCs out of that location. One of the bottlenecks for our customers is being able to get access to the supply they need when they need it. I think we're early days in doing a bit of this, but we're working and helping our customers through our marketing business to help increase and give them access to more supply. I think that's the key thing.
Yeah, morning Rob. Yeah. Where are you on the US marketing side? Where I get the the most interested in that is, I think our customers are craving more Supply options at Gateway and I actually view the the marketing business as a key way for us to increase the utilization at Gateway. Um it's we move a significant volume to fill VCS out of that location, 1 of the bottlenecks.
Curtis Philippon: There is obviously a marketing EBITDA benefit out of doing that, but I would say more importantly for us is it's a way for us to really provide a service to our customers and increase that utilization even further at Gateway. Okay, that makes sense.
X for our customers, is being able to get access to the supply they need when they need it. Um, I I think uh we we're early days in doing a bit of this. But we're we're working and helping our customers through our marketing business, to help increase and give them access to more Supply. I think that's the key thing. There there is obviously a a marketing Eva benefit out of doing that. But I would say, more importantly for us is it's a way for us to really, you know, provide a service to our customers and increase that utilization. Even further at Gateway.
Curtis Philippon: And then I wonder if you could give us your view on the outlook for the Permian volumes going forward. I think there's some competing views out there. But what are you hearing from the major producers in the area about their plans and how that informs your outlook? It's interesting to watch, right? You see rig counts and frac spread counts sort of dropping to very low levels. From our perspective, one, Ingleside is the most cost-effective place to export barrels, and so we're not chasing the sort of the incremental Permian production growth barrel to get to Ingleside.
Okay, that makes sense. And then um yeah I wonder if you could give us your view on the outlook for the Permian while I'm scrolling going forward and I think there's some competing views out there. But what are you hearing from the major producers in the area about their their plants and how that informs your outlook?
Curtis Philippon: And so it's interesting for us to watch what happens in the Permian, but it doesn't impact what Gateway does for volumes. We'll find the most efficient barrels going to market will come through Gateway, and regardless of what Permian production does, we're going to have great activity out at Ingleside with Gateway. But when we watch the Permian, I still would have a strong view that the Permian is an incredible resource, and there's a lot of great companies out there, a lot of great resources, a lot of great people in the Permian. I do think it will be muted in the near term, but I'd be of view that the Permian's got a lot of legs left in it still, that there's still some very good growth years to come out of the Permian.
Curtis Philippon: But we'll watch that. It's not something that we need for the success of Gateway, but I believe there's a lot more to come still from the Permian.
Dropping the to very low levels. You know, from from our perspective, 1 Engleside is the the most cost-effective place to export barrels. And so we're not chasing the uh, sort of the incremental permanent production growth Barrel, to get to Engleside. And so it's, it's interesting for us to watch what happens in the Parian, but it doesn't impact what Gateway does for volumes. We, we we'll find the most efficient barrels going to Market will come through Gateway. And regardless of what Parian production does, we're going to have great activity out out at Engel side of Gateway. Uh, but when we watch watch the Permian, I, I still, I still would have a strong view that the Parian is an incredible resource and there is a, a lot of great companies out there a lot of great resource. A lot of great people in the Permian, I do think it will be muted in the near term, but I I I'd be a view that, uh, the pruriens got a lot of legs left in it. Still that there's still some very good growth here is to come out of the Permian, uh, but we'll we'll watch that. It's, uh, it's not something that we, we need for the success of Gateway. But, uh,
Riley Hicks: Okay, maybe finally for Riley, I'm wondering how the Budget Reconciliation Act in the U.S. Shades of Noir tax out look in particular. Yeah, no, it's a it's a great question. You know, I think as we looked at as we looked at the one big beautiful bill, we obviously saw some impacts from Section 899. That got pulled from the bill. And so so that would have been the major the major impact to us as Gibson. You know, we do sit back and look at our kind of tax planning strategy for the long term. And we'll be going through that process over the next few months to ensure that we're set up for success.
Yeah, I believe there's a there's a lot more to come. So from the Permian,
Okay. Maybe finally for Riley, I'm wondering how the, um, the Budget Reconciliation Act in the U.S.?
Impacts your us. Um strategy. The cash tax Outlook in particular
Unknown Executive: Okay.
Yeah, I know, it's it's a, it's a great question. Um, you know, I think as we looked at, as we looked at the 1, big beautiful. Bill, we obviously saw some impacts from from section 899 back up. Pulled from the bill and so so that would have been the major the major impact to us as Gibson. Um, you know, we do sit back and and look at our kind of tax planning strategy for the long term. And and we'll be going through that process over the next few months to ensure that we're set up for success in the future.
Unknown Executive: Thanks, everyone.
Okay. Thanks everyone.
Unknown Executive: Thank you.
Unknown Executive: As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.
Benjamin Pham: Our next question comes from the line of Benjamin Pham from BMO. Hi, thanks. I wanted to go back to your leverage guidance early 2026 target of hitting that ranges that you have there. Can you comment on what you're assuming in the marketing side of things to achieve that?
Thank you. As a reminder, to ask a question, please press star 1, then 1, then 1 on your telephone and wait for your name to be announced to withdraw your question. Please press star 1, then 1, then 1 again.
Our next question comes from the line of Benjamin fam. From BMO.
All right, thanks. Good morning. Wanted to go back to your The Leverage, uh, guidance early. 2026 Target of of hitting that. That ranges that you've had. That you have there.
Can you comment on what what you're assuming in, in the marketing?
Riley Hicks: And then the other question I had on the leverage is once you do reach there. What do you plan or target in terms of being within the portions of the range, or do you Eventually plan to be below the ranges over time. Yeah, thanks. Thanks, Ben. I think when we think about getting our leverage back down to where we like it within that three to three and a half times in early 2026, you know, that would assume, you know, still remaining a pretty muted marketing assumption in there. So that doesn't require marketing getting back to, you know, the midpoint of our long-term range.
Side of things to achieve that. And then better question, I had on the leverages once. Once you do do reach their
Uh, what do you plan or or targeted in terms of being Within?
The portions of the range or do you.
Uh, eventually plan to be below.
The range is over time.
Riley Hicks: In that scenario, we would de-leverage quite a bit quicker. So when we think about where our range is at, we like the three to three and a half times. We think that gives us lots of financial flexibility. I think anything below that is probably a little bit under-leveraged, and we'd look to buy back shares at that point. So being within that range gives us lots of flexibility to kind of execute our long-term capital allocation priorities. Got it.
Yeah, thanks. Thanks, Ben. I think, I think, when we think about getting our, our leverage back back down to where we like it within that 3 to 3 and a half times in, in, in early 2026, you know that would assume, you know, a, a still, a remaining a pretty muted, marketing assumption in there. So that doesn't require marketing, uh, getting back to, you know, the midpoint of our long-term range. You know, in that scenario we would de-lever quite a bit quicker. Um, so when we think about where our range is at that, we like the 3 to 3 and a half times, uh, we think that gives us lots of financial flexibility, I think anything below that is probably a little bit under levered and, and we'd look to buy back shares at that point. So, uh, being within that range gives us lots of flexibility to to kind of execute our long-term capital allocation priorities.
Riley Hicks: And next question on the growth side. One example of a project you're quite positive on is the third dock that you mentioned. perhaps a couple of years out. And you mentioned a couple of smaller projects.
Okay, so that's, and, uh, next question on the growth side. So, you know, one example of a project he is quite positive on is the third dock that he was, that I mentioned.
Riley Hicks: So you think about 26, then do you anticipate that it's going to be more of your cash harvesting and maybe more of these single digit projects and something that's that's larger in terms of sanction? Ben, just for clarity on the third dock, I'd say the third dock is still more than a couple of years out. I think we're doing some good work on that, on regulatory and things like that, to keep that advancing. But realistically, long-term, for a third dock, you need to see that trend on the premium production increasing. You need to see pipes to corpus getting some expansions.
Perhaps a couple years out um and you mentioned a couple of smaller projects as you think about 26 then do you anticipate that it's going to be more of your cash harvesting and maybe more of these these single digit projects and something that's that's larger in terms of of sanction.
Riley Hicks: And so there's a couple of things that we'd want to see before we're moving forward with that. We'd also like to, we would need a customer backstopping that as well.
Riley Hicks: So I wouldn't put that in your model for the next couple of years. But the near-term growth, there's a number of these projects. I don't know that I'd go to a sort of a cash-harvesting sort of strategy for 26. There's a number of good projects we've got in the queue for 26. These producer partnerships are quite interesting. These optimization projects are quite interesting. And then additional tank capacity at, you know, really at a few different locations are still things that we're looking hard at for 26. And that, we'll see. As we see it, depending on timing of customer award, we'll dictate that.
Riley Hicks: And Claire said, thank you guys a lot for that context. I also want to clarify in the third doc, we see a few years out, is that more cash generation or is that more FID in a few years and then the cash comes later, subsequently? Yeah, you're, I, you're going to need to see a Permian Expansion, Corpus Pipe Expansion before you're at the point of FID. So you're still at least a couple of years out, I believe, from an FID situation. So that's just to be clear on that. I think there's a lot of work we're able to do in the near term, though, to sort of advance the engineering on that and the regulatory side of that, so that we're effectively shovel-ready on that project as demand comes for that.
And then additional tank capacity at, uh, you know, I I really had a few different locations. There's still things that we were looking hard at for 426 and um, that uh we we'll, we'll see as we, we see it depending on timing of customer, award will dictate that.
And Claire said, thanks a lot for that context. I also want to clarify and the third document, we see it. A few years out is that is that more cash?
Generation or is that is that more of FID in a few years? And then the cash comes later, subsequently.
Yeah, you're going to need to see a...
Riley Hicks: But that's something we're going to be working out in the background. Okay, got it.
Permanent expansion, Corpus, pipe expansion before. You're at the point of f. So you're, you're still, you're still at least a couple years out, I believe from an FID situation. So that's just to be to be clear on that. I think there's there's a lot of work. We're able to do in the near term though to sort of Advance the engineering on that and the regulatory side of that. So that we're sort of effectively shovel ready on that project uh as demand comes for that. But that's that's something we're going to be working at in the background.
Riley Hicks: And maybe one final one, if I may, on the cost reduction side of things. You've mentioned potentially exceeding the $25 million. Can you share what portion of that is recurring? And then of that $25 million, is there a portion that flows back to your customers versus the GDI shareholder?
Okay, got it. Um,
but maybe maybe 1 final 1, if I met on the cost reduction side of things that
You've measured potentially see, the 25 million. Can you
Share what portion of that is recurring?
And then, of that $25 million, is there a portion that flows back to your customers versus the GI your order?
Riley Hicks: I'm glad you asked about the $25 million. This is one of my favorite initiatives for the year. We've just seen such tremendous participation across the entire company, and in every department in the company, people are really challenging costs and where do we find opportunities. Boy, there's been wins all over the place from eliminating waste to working with our vendors to find better solutions. Now we're moving to this next phase of actually implementing process changes and technology changes and capital projects to drive additional levels of cost savings. It is one of the big success stories of the year for us.
Riley Hicks: I couldn't be prouder of the team for the great work that people are doing around this. We feel very confident that we'll be, by the end of the year, achieving the $25 million of run rate savings. When I think about $25 million of run rate savings, I look at that as Gibson run rate savings, and there's a mix of DCF and EBITDA impacting things, but those are true savings for us. I think you're picking up on a good thing as well. Some of these savings we've found are also in some of our capital projects. We've thought about different ways of doing some of our capital project execution.
So on the the 25, I'm glad you asked about the 25% across the entire company and in every Department in the company. People really challenging costs and where do we find Opportunities? And boy, there's been wins all over the place from eliminating waste to sort of working with our vendors to find better Solutions. And now we're moving to this next phase of actually implementing process changes and Technology changes and capital projects to drive additional levels of of cost savings. So I it is uh 1 of the big success stories of the year for us. I could couldn't be prouder of the team for the for the great work that people are are doing around this. Uh, so we we feel very confident that we'll be by the end of the year, achieving the 25 million dollars of run rate savings. Uh, that that, uh, when I think about 25 million dollars of run rate savings, I I look at that as sort of Gibson run rate savings and there's a mix of DCF and ibida impacting things. But those are, those are
Riley Hicks: We've found some real savings, which I believe, going forward, provide us with an interesting opportunity for us to increase our competitiveness with our customers, still drive great returns on our projects, but also offer a great low-cost solution for our customers as we're developing projects with them. There is absolutely a customer benefit to this program as well.
Unknown Executive: Thank you.
Unknown Executive: END Thank you.
True savings for us. I I I also would, uh, it's like you're picking up on a good thing as well. I think some of these savings we've found are also in some of our capital projects. So we've thought about different ways of doing some of our Capital project execution. We found some real savings which I believe going forward. Provide us with an interesting opportunity for us to increase our competitiveness with our customers, still drive great. Returns with our cut for on our projects, but also offer, uh, a great low-cost solution for our customers as we're developing projects with them. So there there is a absolutely a customer benefit to this program as well.
Okay, got it. Thank you.
Thanks.
Unknown Executive: There are no further questions.
Thank you.
Beth Pollock: I would now like to hand the call back to Beth. Thank you. And thank you for joining us for Gibson Energy's Q2 2025 earnings call.
There are no further questions. I would now like to hand the call back to Beth.
Unknown Executive: Additional supplementary information is available on our website, gibsonenergy.com.
Unknown Executive: For follow-up questions, please reach out to investor.relations at gibsonenergy.com.
Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect.
Thank you, uh, and thank you for joining us for Gibson, energies. Q2 2025 earnings call additional supplementary information is available on our website. Gibson energy.com for follow-up questions, please reach out to investor relations at Gibson. Energy.com, thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.