Q2 2025 Keyera Corp Earnings Call
Good morning.
My name is Angeline and I will be your conference operator. Today at this time I would like to welcome everyone to ks 2025 second quarter conference. Call all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone,
Phone keypad. If you would like to withdraw your question, please press the pound key.
Thank you. I would now like to turn the call over to Dan because Britain general manager of investor relations you may begin.
Thank you and good morning. Joining me today will be Dean seguchi president CEO, Eileen marikar, senior vice president and CFO Jamie Kart, senior vice president and chief commercial officer and Jared bilney, senior vice, president operations and Engineering. We'll begin with some prepared remarks from Dean and Eileen after which we will open the call to questions. I'd like to remind listeners that some of the comments and answers that we'll give today relate to future events. These forward-looking statements are given as of today's date and reflect events or outcomes that management currently expects.
In addition, we will refer to some non-gaap Financial measures for additional information on non-gaap measures and forward-looking statements. Please refer to Kia's public filings available on Cedar and on our website with that I'll turn the call over to Dean.
Thanks Dan and good morning everyone.
Zero delivered strong results in the second quarter and advance its long-term strategy.
Strong commercial momentum led to the sanctioning of key growth projects.
We also secured more access to LPG, exports off the west coast and announced a transformational acquisition that significantly, expands our scale and enhances our service offering for customers.
So far in 2025, we sanctioned 3 Capital, efficient growth projects.
These are the fraction of the bottleneck, Frac 3 and cap Zone 4.
In the last several months, we've also secured over 100,000 barrels per day of new long-term contracted volumes on CAPs zones 1 to 4.
These have been mostly integrated deals. And as a result, Frac capacity at kfs including both expansions is now, substantially contracted
These developments keep us well on track to achieve our growth Target of 7 to 8% annual fee-based adjusted. EBA from 2024 to 2027
And they'll continue to drive growth well beyond that time frame.
This continued visibility to fee-for-service growth gives us the confidence to continue to sustainably raise our dividend.
Yesterday, the board approved another 4% annual increase.
In June, we announced the transformational acquisition of planes Canadian NGL business, a defining step that expands our scale, reach and service offering, the NGL value chain.
This acquisition creates a much larger Integrated Network, adding more efficient connectivity to key demand hubs across the Prairies Ontario and the US.
It also strengthens our ability to serve customers across all NGL products. Specifically enhancing our propane Market access.
For customers. It means better connectivity. Optimized, product flows, increase diversification, and stronger, net backs.
For shareholders, the deal is expected to be mid-, teens accretive to DCF per share in the First full year. Assuming 100 million in near-term synergies.
Our Fe fee-based, adjusted IBA de will increase by approximately 50% over that period.
And it's also important to note that this transaction is a Great Canadian story.
This deal, brings strategic infrastructure under Canadian ownership supporting energy security, and ensuring that value creation and decision-making remained right here at home.
With this expanded footprint, Kiara is even better positioned to enable the next phase of volume growth.
The Basin continues to benefit from low-cost, long-life resources in the Montney and Duvernay.
Increased demand from LNG. Exports oil, sands. And petrochemical development is driving sustained increases in natural gas, and NGL volumes.
Our combined platform will play an important role in meeting that demand efficiently.
With that, I'll turn it over to Eileen to walk through our financial performance. This quarter.
Thank you Dean we delivered solid Financial results in the second quarter driven by continued strength in our gathering and processing and liquids infrastructure segments.
Adjusted EBITDA was $252 million, which includes $12 million in one-time transaction costs related to the planes acquisition.
This is compared to Q2 2024 of 326 million.
Distributable. Cash flow was 159 million or 69 cents per share.
Net earnings were 127 million compared to 142 Million last year.
Our fee for service segments which are G&P and liquids infrastructure together, contributed to 2555 million in realized margins. This is up over 8% from the same period last year.
This steady growth in high-quality contracted cash flow continues to strengthen the foundation of our business and underpins the long-term sustainability of our dividend.
The Gathering processing segment. Delivered, real life, margin of 111 million up from 102 million last year.
The increase was driven by strong performance in the North Region including a new Daily, throughput Record at wapity and higher throughput at simonette.
Liquid structure delivered 143 million in realized margins up from 133 million in the same period last year.
This segment benefited from continued growth in long-term, contracted volumes on caps.
And strong utilization at our fractionation assets and condensate systems.
Marketing realized a margin of $60 million compared to $136 million last year.
The decline. Mainly reflects softer commodity pricing as both periods. Included outages at AF.
The annual impact of the 2025 AEF outage remains estimated at $50 million.
We ended the quarter with net debt to adjusted EBITDA of 2 times, well below our 2.5 to 3 times target. This is excluding acquisition-related costs.
Our strong financial position enabled us, to pursue the plane's acquisition, while preserving our investment grade credit, ratings and long-term leverage targets.
Returning to 2025 guidance. We are reaffirming our marketing realized margin range of 310 to 350 million.
Growth capital is now. Expected to range between 275 million to 300 million, compared, to the previous range of 300 million to 330 million.
The difference is mostly related to project timing.
Maintenance capital and cash tax. Guidance are unchanged with that. I'll turn it back to Dean for closing remarks.
Thanks Eileen.
Our strategy is clear and we're executing it.
We're advancing Capital, efficient growth projects, securing long-term contracts, expanding our integrated platform, and creating value for both customers and shareholders.
The planes acquisition Builds on this momentum and positions us for the next phase of growth.
Combined with the strong macro. Tailwinds, for volume growth. We are very confident in our long-term Outlook.
On behalf of cures board of directors and management team. I want to thank our employees customers shareholders, indigenous, rights holders, and other stakeholders for the continued support.
Turn the call back to the operator for Q&A.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star, followed by the number 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the calling process, please press the star, followed by the number 2. If you are using a speakerphone, please leave the handset before pressing any keys. One moment, please, for your first question.
Your first question comes from Rob. Hope we discuss a bank. Please go ahead.
Good morning, everyone. Um, regarding the next wave of the unsanctioned growth projects. What's left in the most attractive currently? Uh, whether it be kind of a GMP expansion in the north, some rail, expansions, or, uh, ctor extraction projects,
Hey, good morning, Rob, it's Dean. Um thank you for the question.
Um, we're we're very excited about our entire business, to be honest. And, you know, first of all, I start with the uh, the macro Outlook. We see, uh, a lot of continued growth across our Basin both for natural gas and and uh, and crude oil growth, which obviously, we support with, uh, with daily went. So, um, with that we, we just see a lot of opportunity. Um, you know, we're we're looking at our real Logistics options and some of that might be through the plains acquisition and optimizing it
Or it might mean, uh, building a new unit, Trane facility on our Joseph Burke site. Um, and so that's a project that we're doing some early stage, uh, engineering work on. Um, certainly we're, we're very excited about opportunities that we see in, uh, in our Gene, in our GMP business up in, uh, up in the montney dubernet, Fairway. And, uh, certainly we see a lot of, uh, growth up in, in that area. So, we're looking at opportunities where we may be able to, uh, acquire some assets and, and enhance them. Uh, certainly looking at ways that we can expand our capacity at our existing facilities and, uh, and potentially, uh, uh, a new Greenfield facility. So, uh, again, lots of opportunity, I would emphasize that any opportunity that we pursue in the GMP side will be based on, uh, on very solid Contracting for uh, for any assets or Investments, we make in that part of our business, but also the contracts will be, uh, integrated
Contracts with our, you know, our Downstream caps fractionation and uh and marketing uh, business as well. So we just see tremendous opportunities uh, to provide a lot of great service for our customers to enable them to grow. Um, outside of that. I, I might also mention that, uh, some people have made note of uh, a condensate fractionator, uh, a license that we applied for, uh, very recently. And uh, you know what it is, is, uh,
it's a a fractionation, a fractionator that would process uh condensate into various hydrocarbon products and that would include uh light to mid-weight condensates uh
Uh, ngls and and also crude oil.
And, um, anyway, this is still early stages. So we're working on engineering and also, uh, you know, contracts, uh, with customers to potentially toll, through a facility like that.
So, so anyway, those are just some of the examples of the opportunities that we see long term, but, uh, at the same time, we don't want to get ahead of ourselves and, uh, we do have a lot of projects, as, you know, that we need to execute well on, in addition to, uh, the the planes, uh, acquisition. So, we have a, a very full plate, but we have a team that's very eager to, uh, to do a great job at it and I have 4 confidence that we will do it too.
All right, appreciate that. And then maybe sticking with Contracting so good to see the kfs is largely contracted now you know looking forward. How do you expect your Contracting strategy to evolve as you layer in the planes assets as well as kind of, you know, what you would Target for fees for service and marketing.
Uh, those growing contracted uh fee for service cash flows.
Overall, our business is going to be roughly 70% fee for service and 30% uh marketing uh with with the planes assets too. So the overall composition isn't going to be significantly different. Um, we're going to apply a very disciplined and rigorous uh risk management strategy to the uh the planes straddle business. Like and and again no different than the discipline we apply to our marketing business today. So yes, it's a bit different. But overall the composition of our business doesn't change that much. And, uh, and we think that the marketing piece will again be, uh, uh, a differentiator that helps us generate best-in-class, uh, return on Capital metrics, but anything else you want to add to the? Yeah. The only thing I'd add Dean is, is that, you know, we we
are confident that, you know, with the acquired assets with planes that does have some commodity exposure. That, you know, we, we will adhere to the same discipline risk management process that we do in our existing business. And we're very comfortable with the assets that that we're bringing in through the planes acquisition.
That's great. Thank you.
Thanks. Have a good day.
Thank you.
The next question comes from, Robert coutellier with cbic capital markets, please go ahead.
Hey, good morning. I wondered if you could um just comment on any initial customer feedback, you've had on your agreement, to buy the planes and ZL assets and uh how that might influence some competition Bureau um strategy.
Yeah, good morning, Rob.
yeah, they thanks for the question and, uh,
you know what, I, I can tell you that our, our, uh, customers have been very supportive generally overall, um,
you know, I think that they can see what we're trying to do for our industry, which is to create, um, you know, very, very efficient, uh, solutions for our customers, that maximize their, their net backs. And, um, you know, they can see that it's still a very competitive space. Any customers that? Uh, you know, if you look at, uh, a situation like, where we have our caps and uh, penis piece pipeline, anybody that is in, in that Fairway knows that, you know, we compete very hard with Tina and um, our goal is to be the most competitive integrated Midstream operator. And uh, and with that we
We we aim to provide our customers, the very best service and again, a maximize our net back. So I think that they can they can see that. It's not to say that they they don't have any concerns but certainly we're addressing what those uh, any questions that they might have. Um, as for the, uh, competition Bureau, uh, all I can say with that, is that, um, we're certainly, uh, you know, working with the competition Bureau. It's, uh, it's a process that, um, is necessary to get the closing. Um, we'll provide an update where in, uh, it's appropriate and, uh, I just want to reiterate that we're very confident that, uh, we'll close this deal. Um, as disclosed in every material aspect,
Yeah, that that's crazy. Obviously there's a lot more to it than um you know just um price obviously the the entire net back and flexibility matters a lot.
Um, and I, I'm just, uh, Curious. Um, you're still very confident that timeline as well given that uh, you've just started up with the competition Bureau is, is that timeline still on the high level of confidence?
Yeah, you know what, we we believe in the timeline, but, you know, obviously some of that is out of our control. It's it's, uh, you know, we're we're going through the process. We're working very closely with them, uh, and and planes through this process. Um, so we we believe, uh, q1 is a sweet spot. But again, we'll
Provide an update when it's appropriate.
Okay, great. Last 1 for me, then. Um, just on the juvenile. I wondered what? Um your specific plans are there.
I just get the sense that maybe activity there is picking up, um, and do you need to add any capacity or services to help support the Dubernet?
Sure, I'll turn that 1 over to Jamie. Yeah, Rob, thanks for the question. Uh, I guess I want to get specific on. What what portion of the new Renee? You're referring to? Is it the West Shale around our roomy, gas bun? Or are you talking more up in around our assignment at gas plant or both? I was thinking more assignment at
We're the the assignment of gas plant. We actually, I think people will have noticed. We we had more throughput to that facility over the last couple quarters than we have historically. And, um, you know, we've had some good success in in being able to attract additional volumes. But we're also consciously looking to see what that facility can do. Um, originally wasn't built for a motti do Renee type. Um, gas and so we've, we've actually gotten some comfort that we're, we're going to be able to get the effect of capacity at that facility up by about 50 million a day from about the low 200s to the to the higher, 200 million a day range and, and the associated liquids that that come with it. And ultimately, obviously, that is destined for the Caps Pipeline and and downstream markets. Um, so we, you know, we're we're right now and have a higher level of confidence in being able to contract with the do Renee or me producers in that area. And then we're also doing some further work to see how we can unlock even more
natural gas and liquids capacity, um, over the next year or 2
Okay, that's excellent. Thank you.
Thank you. Thank you.
The next question comes from Aaron mcnel. With gidi Cohen, please go ahead.
Hey morning. All thanks for taking my questions.
Dean.
Maybe to build on Rob Hope's question with.
Fractionation capacity now, fully contracted. Does that make it more challenging for you to provide that sort of full path service and contract incremental volumes on caps and then just as an extension of that, how should we think about spare capacity on the planes, fractionation assets, and what potential connectivity to caps might that?
create, uh, if you're able to successfully,
Yeah, no. Uh, thanks for the question there and, um,
Certainly we're we're very pleased with the, uh, the long-term contracts that, uh, we sign on on, uh, our F, uh, complex at kfs. Um, what I'd say is, is that, it's not 100% contracted. Um, you know, when we say substantially all, you know, we're kind of saying, you know, around the 90% and greater Mark. So we do have some capacity. Uh, most of the contracts are long term and when I say, long term, 10 plus years, but we do have some, a few shorter term contracts that will be expiring over the next few years. So we will, uh, have some capacity available, um, to to work with. Certainly we are going to uh, when we integrate the planes, uh,
Assets in, um, you know, 1 of our objectives, too, will be to improve reliability overall between, uh, between both complexes. Some of that is with utilizing our, our storage more, effectively between the 2 complexes to, uh, to manage any short-term outages. And uh and again, and but also keep the uh reliability run rates uh, super high. So you know, those are some of the things that we're looking at in capacity, um, certainly we are here to provide the capacities that the, the industry needs. So if there's more demand in the future, we're going to be looking for the most Capital efficient way, uh, between the planes and cure assets to add that capacity when it's needed. So I certainly believe we could bridge that time period, uh, when when we see growth, uh, above and beyond, um, you know what we're building already. Um, let's go ahead G. Yeah, the only thing I'd add Aaron, um, is that, I think you made reference to
Apps and PFS planes for Saskatchewan. Um, we are we're already in the process of having plain Sports. Saskatchewan be connected to caps, that happened, that commitment was made a couple of years ago, um, to help support customers on caps, um, and our commitment to customers that they, they're, they're allowed to connect to any fractionator that they. So, choose off of the cap system, it's an open system for our customers.
Makes sense and that's what I was expecting in terms of, you know, other contracts potentially rolling and allowing you to reap. And then maybe just keeping with the, you know, 100,000 barrels per day of of Contracting capacity on caps. Can you give us a sense of how those contracts layer in by quarter or a year? And if we need to see any compression, adds to the pipe uh in order to accommodate those contracts,
Like Zone 4 and all of this additional contract, whether it's on the fractionation expansions, as well as Zone 4, those will continue to ramp up all the way into even the next decade. So again, it's but the ramp on Zone 4 will be quicker than what we saw on zones 1 to 3, when we initially brought caps on. So it will be a quicker ramp as we bring on Zone 4, but again, this will just help to push out growth. Well beyond that 2027 time frame and well into the 2030.
Yeah, I and and so just to just to further, add on to Eileen's comments is that? No 1. We look at our profile. It's really in the early early into the new decade is where we reach the uh the max capacity of the contracts that we signed. Not the Max Capacity, the the max production flow of the contracts that we signed
Early 2030.
Okay.
That's helpful. Thanks. I'll turn it back.
Thank you. Thank you.
The next question comes from Marie toy with RBC Capital markets, please go ahead.
Thanks and good morning everyone. Um, speaking with a team about Contracting here, um you've highlighted that over the past several months, you've added more than 100,000 barrels, a day of new long-term contracts, that caps
Those are fully contracted at kfs. Can you give us a flavor as to what generally are the top reasons, your customers choose you, and also take the opposite direction, where what are some of the reasons why they don't choose you? Which perhaps offer you upside? If and when a deal like claims, um, is closed or or through other deals, that could improve your offering?
That's a great question.
They love us now. Uh,
Listen. I I think there's a a number of reasons why customers deal with us. Um, you know, I do think that they they appreciate the fully integrated uh, service offering that we do provide and and with that we can be very competitive when we're offering uh, you know, a bundle deal. Um so I think that they appreciate our ability to uh, access high value markets for their ngls which help them maximize um you know their net backs and as we said with the planes acquisition, this is going to enhance that market access out to Eastern markets um both in in Canada and and the United States. So
It's going to give them a lot more optionality overall. Um, I think that they, they like the reliability of our system and, um, and it's something that we continue to improve and and we're going to be able to improve reliability and and um, and again optionality uh, with the combined assets of planes. So this is only getting better for our customers uh with with the combination. So, um, you know, lastly, you know, we we try to be very customer focused, you know, it's not like 1 solution fits. All we try to understand what our customers needs are, what's important to them and what we can offer to help uh help them successfully execute their business plan. So you know, while we're smaller, I feel like we can be more uh custom fitting to the needs of our customers and uh and hopefully Nimble or um Jamie if there's anything else you want to add? No, I think he hit the the reasons why they chose us. Um maybe I'll touch on why. Historically they have
Haven't, um, supported our chosen us, and that's just uncertainty whether we had a project or not.
And now that we have the project and you'll see that we we announce, when we announced the sanction of Zone 4, we have 75,000 barrels, and we are now at 100. So once you have a real project,
um, I think there's greatest the greatest momentum that we've got um is is yet to come
Thanks for the wholesome answer. Um, if I could just finish off with uh, another big picture but perhaps a longer term uh thought here.
Um, just here's how you think over the long term, how NGO molecules will move differently from how it does today. Obviously today, a lot of liquids Rich growth are being piped in fra to um, and add support tasks, including caps and kfs. Uh, but if you see more export hanging out west, um, do you see the potential for more mystery math? That's in Northeast PC and north of Alberta? And what is that all mean to you and your facilities?
A lot of growth and natural gas and with that a lot of ngls in western Canada.
And uh, and obviously, that's that's what's Driven. Um, you know, the Contracting that we've seen so far, there's absolutely and and you know, I certainly don't see, I've been asked before whether there will be a an LPG uh, pipeline built to the West Coast. Uh, there's there's no world. I see that uh, you can justify the capital cost of uh, of building a pipeline like that to the West Coast, um, because there's just not enough volumes to, to support it. So, um, I think that would be cost prohibitive. So a lot of barrels will still move by rail some of that. Uh, as you suggested, I certainly believe that there's going to be uh more Field track projects in whether that's in uh North Northwest Alberta or into BC. Um, I think we'll see more of that and and there will be some product that gets railed directly to the, to the West Coast.
But uh um anybody that moves any product by rail would also appreciate that rail is is not not readable like a pipeline so whether the weather freeze up, so you get strikes, you get whatever other other issues that call, you know, your cars get bunched up, whatever happens. Um you know there's there's disruptions and
and, and so,
You know, if you, if you don't have enough storage and on-site storage above ground storage is is very expensive. So, if you are, uh, you know, you can't ship all your product for a couple weeks, um, you know, that adds to a lot of a lot of dollars and a lot of value. And if you have to truck all that that's super expensive. And and so the reliability of having a pipe to, uh, underground Cavern storage to the hub, where all of those, uh, ngls are a lot of them are consumed already. Um, still there. There's what I was pointing for to make is still going to be a lot of demand for those products to still go to, to Fort Saskatchewan. So I see a little bit of all the bub where they're still going to be filled track but they're still going to be um, a lot of demand to get to the Hub in uh in Fort Saskatchewan and and just maybe the other point I'd like to make is that the West Coast obviously. We think that um, there's growing demand in Asia and that's a good place to be the FBI index, but I'd also point out that there's also high demand,
Centers locally and uh and we want to make sure that we can provide optionality for our customers because a lot of times they don't want to put all their eggs in 1, 1 basket or 1 market. So again with the planes acquisition or going to be able to help uh them access those Eastern markets and I can tell you when it's cold, um they they need the product and they're going to price the product the price approximately priced.
The state in Canada so that they get uh the ability to heat their homes and things like that. So um, you know, bottom line, I think there's going to be great demand still at uh at kfs for Saskatchewan.
Perfect, thank you very much.
Thank you.
Thank you.
The next question comes from Ben. Sam with BMO. Please go ahead.
Hi, thanks. Good morning. Maybe to expand on that, uh, last question. Um, one more specifically on propane.
Market in western Canada. Can you comment? Also, similarly, on the flow Dynamic that you think could anticipate, uh, LPG exports has been viewed as taking market share from from other regions. Can you comment on that? And, and what it is, any potential impact on the Sarnia Market or the US export side of things?
well, uh,
thanks for the question been. Um,
you know, first of all, like I say the
The NGL Market is just getting over and over. Supplied we are a Sublime Supply based Basin. We have a very small population so you know our consumption relative to how much we produce that that is becoming more imbalanced. So you're just going to have a growing over supply of product that has to clear the market somewhere.
And um and so yes the the the West Coast Asian markets. Yes. They're um
They're they're going to be a very valuable Market to access and clear some of that excess Surplus product. But what we've seen is that in the Mid-Continent Us in the North, in the Northeast, uh, us and places like, you know, we get into Wisconsin and and uh, and also into uh,
In Canada. I mean, it gets cold here, as, you know, and, uh, and when that happens, they it it's, it's almost, it's pricey in elastic. Like they need to heat their homes. And there's a lot of homes that will never be connected to natural gas. And so they rely a lot on propane and so when you get uh, you know, demand spikes because of whether they need the product, and it's going to price higher than the West Coast because it it has to, to make sure that product goes there. So I I, I just think it's always great to have options and um, and uh, optionality of of accessing high value markets. Because, you know, the the highest place to send a molecule Pro propane changes from time to time and even during the same season and I'm really happy that we can we can uh hit any 1 of those markets and uh and take advantage of uh the strong pricing.
Okay. I understand there's a sound that may be...
Some potential market share changes, but the absolute movement is is on a trend up versus down.
I'd say Yes. Um,
Uh, thanks for that and and and maybe my next question. Say you mentioned a reference to
Systems acquisition.
Activity.
How do you think about framing that in organic strategy now with a large deal?
you're getting approval for an integrating afterwards, you
Fall back on the BT, BD set of things, telling those folks to reallocate their time. Are you still looking?
Actively.
On transactions, considering this is just where your balance sheet is heading towards.
Yeah, I I I see overall that. Um, we we're still looking for opportunities to enhance our Integrated Service offering and at the top end of the that, um, services are, is, are GMP business. So, you know, we're not looking to do big Acquisitions right now or anything like that. But could we look at some smaller, uh, tuck in opportunities that integrate well with our existing business? Absolutely. Um, so, you know, we're we're in the business to provide a a service for our customers and and uh, you know, we can't start it and stop it. Um, it's it's business that continues every day. And, you know, the great thing is that, you know, with our the financial plan that we executed on and and you know, I mean, we can speak to that in more detail. Um, we've left ourselves some flexibility to to maintain those activities, so Eileen this is anything you want to add? No, no, just to add that. Yeah.
Dean mentioned, it is the strength of our balance sheet and it was really getting our base business. The the, the execution of it, the growth in our fee, for service that allowed us to do such a transformational acquisition. And so the funding plan that we did put in place was intended to maintain our targeted. Um,
targeted, leverage at that 2 and a half to 3 times so that it didn't stop, um, opportunities because we do see so many, uh, and, and, and we want to continue to grow
Yeah, maybe, maybe 1 Thing more thing. I, I just like to add is that the bulk of our people and our company are still driving our business and, uh, working hard to make, um, you know, make it more competitive and more profitable. And we have a segregated team that is going to be dedicated to the integration and um, and bringing in the uh, the uh, you know, the planes business. Uh, you know, and combine it with ours. Uh, when when closing happens so we have we have different work streams in our company but um, our base business is still, uh, a big focus of most of our people.
Yeah, I got it and if I just just 1, quick follow up on on that topic. With with gas processing.
A transactions. I mean is is a focus more?
Looking at that North money area where medialization is already quite strong, but you're bolstering an entire footprint or is it more, maybe?
That the solve region where you can buy buy for value and enhance and integrate.
I I mean again we're we're here to uh, Supply Services where there's greatest demand. And uh, right now the greatest demand is up along the montney duberney, uh Fairway um up in the northern uh region. Um, we still have capacity available in our in our South Region. So again, most of our Focus down there is the is to fill what we have.
Okay, thank you.
Thank you.
Thank you.
Aono with dph, please go ahead.
Morning everyone. Um, I was wondering if we could uh, you know, go back to just overall NGL competition in the Basin in light of some of the contracts incremental contracts that you guys have been able to sign with.
Uh, Cap Zone 1 to 4—just thinking over the longer term and maybe some of the comments from larger producers in the Basin about overall transport rates are looking to save on overall transport rates by the end of the decade.
How would you characterize the contracts that you've been signing? Have they been, um, pretty competitive from a price advantage? Or, you know, are we getting into a situation where we start to build out all this NGL infrastructure in the Basin and we could potentially see some um, margin compression later on in the decade as as things start to roll off and recontract.
Yeah, good morning AJ. And and uh and again thank you for the question. Um, certainly the the Basin is very competitive and and that's why we have such a competitive marginal cost Supply overall for the Basin which is great. And uh, what I'd say is that, you know, our I said this earlier is that our objective is to build the most, uh, competitive integrated Midstream platform and, uh, you know, our goal is to keep on improving every day and and this is a, a Relentless Pursuit that we'll never
Never stopped and um, you know, so we're very pleased that uh we could be competitive to to sign and attract uh 100,000 uh barrels of Supply onto our system and uh and that led to obviously, including Downstream contracts through our Frac and and Logistics and marketing business.
So we can be very, uh, competitive. I do want to reiterate that all of our projects are well within our, our Capital return, uh, expectations. So they fill that and they're well within the range on an independent basis. And again, when you, when you look at it on an integrated basis, um, we we feel very confident that we're going to deliver Superior return on Capital returns, um, for our shareholders. So we believe this is very sustainable. We think that there's going to be more consolidation in the Basin and, uh, and, and, you know, if that happens again, we're very well positioned to compete for for business in that World, um, and uh, and still deliver strong, uh, returns for our shareholders.
Yeah, I I think the only thing I'd add Dean and you know I agree 100% with everything you said is that, you know, like I mean as as we think about our Frac expansions coming online as and as Dean has said is that, you know, they're the way we looked at, as we contracted fracks, 1 2, and then we contracted Factory. So, when you think about fully contracted, it's not just Frac 3 and a bunch of contracts are rolling off on 1 and 2. We looked at it from a
Stacked perspective. And it's all of our track complex that has a high degree of Contracting. Um, the the contracts, that, that our rolling off and they're they're there's some not not a huge amount, um, you know, we think about it with respect to being able to offer that integrated offering as as Dean said. Um, you know the fact that you know, we we've got another fractionation expansion coming online next year. Um, might create some very short term over Supply in the market, that the fundamentals and the drilling activity that we're seeing is our, our view is that Frac capacity within, um, our Basin is going to be highly utilized, um, in, in the long term and you know, can't speak for our competitor but we're already looking at the next Brack expansion. We're not looking to, um, you know, wait, another 7 8 years, like, we did the last time between Frac 2 and Frack 3. We, we, we believe that the Basin is going to require more Frac capacity, much
Sooner than that.
Great, I appreciate that detail. Um, maybe just the last 1 from me.
I know it's only been a couple months in and, you know, the plane's assets are not quite in your hands yet, but you guys have kind of talked about, you know, your prudent risk management activities and
Just wondering as you look out over the, you know, the Frac forward curves, um, into next year, maybe what your ability is like, have you been able to lock in any additional margin or, or Hedges on that business? Um,
Yeah, just any comments on that. Thank you.
Which is kind of what we've seen over the past few years from our Standalone business.
And again, we view our marketing business as a true competitive Advantage because we have the storage, the logistics, and the risk management discipline. So as it relates to hedging, specifically, really our philosophy isn't going to be very different. What we do is we look to protect inventory which is really key and we look to lock in future margins. So when it comes to the Frac spread exposure, you know, the key elements to this is Echo, Gas Propane in particular and butane as well as FX these components already fit very well within our existing, me risk management program. So so I think we feel very confident that we will be able to manage this as as as we close and and get into next year.
Yeah, I'd also add AJ that we can't speak to this in a lot of detail but I'd say that there are hedges in place that gives us confidence with our mid teams. Uh DCF accretion and the first uh full 12 months of closing.
Great. Thank you, everyone.
Thank you.
Thank you. The next question comes from Patrick Kenney with National Bank Financial, please go ahead.
Thank you. Good morning everyone. Um, just on the GMP margin front, I know uh LNG Canada is still working through some Growing Pains but you know, in light of where Echo prices are at just wondering if you could comment on, you know how you're seeing fees and overall margins holding up across your GMP portfolio going forward.
um, especially in the South where, you know, um, whether or not you
might need to share the pain, at least over the near term just to support current production levels at, you know, whether it's rimbey brazo or tracking
Hey Patrick. Good morning. Uh you know, thanks for the question. I I'll turn this over to uh, to Jamie but
You know, I just, I just want to make a couple quick points. Uh, 1, is that about 70% of our margins, from our GMP business is generated from the north. So, and that's more, that's more linked to condensate pricing. So it's, it's, it's less elastic to to natural gas prices. So, you know, the 30% is in the South what I'd say is that, you know, we've seen low prices for a long time. So this is, this is nothing new. Um, so, uh, you know, our, our volumes have been pretty steady, um, uh, because of that, but a jail turn over to Jamie. Yeah, well, I was going to make the same.
Point is, is that sharing and the pain. We've been sharing in the pain for a period of time. Now Patrick, you know, obviously everybody's aware of where gas prices are being over the last few years. Um, the the the point I like to make is that um, you know, the growth that we see around some of our facilities, um you know have some liquids associated with them. So we're we're we're we're optimistic with respect to some of the growth opportunities. We do see in the South and, um, and that that spends all all of our facilities, not just around the rimbi gas line. Um, but also
A great interconnectivity have have deeper Cuts traditionally and they have great interconnectivity to Market. So, you know, if you if you look at the
The the plays that that we service in the South, there's still a a pretty significant liquid component and value proposition associated with them. Um, that still makes it attractive for for customers to to drill Wells. Now, would they prefer gas prices to be north of 23 dollars? Of course, but they can still make it work for them. Um, and you know, and and I think you would have seen. There's just more plays that are developing to be a little bit repetitive around the do Renee the belly River. Um, that, that, you know, we're we're obviously, um, in conversations with customers to help serve their needs on on those emerging plays that are more liquids based
Yeah, and maybe 1 more thing to add Patrick, I'd also say that Jared's team is done a lot of work to find uh optimization efficiencies uh across our entire portfolio including our our sales GMP. And uh and with that um you know, it helps enable us to provide a a service to our customers at a price point where it makes sense for them, but where we can also um, generate a margin as well.
Be experiencing a bit of a delay, whether it's specific to the project or more macro related. Um,
but also maybe what initiatives your team might be undertaking just uh, in order to maintain the Target and service dates.
Timing, it's largely just free forecasting and so there's really been no impact to timing schedule overall cost of any of the key projects that we have sanctioned. So I would say, overall, you know, our guidance that we provided in December of last of last year, I think we said over 26 and 27, we would average 350 to 450 million in in each of those years, you know, I think you can expect that 1 year may have higher spend versus the other but on average that's Still Remains.
Yeah, what I'd add Patrick is uh you know, as as some of the findings were shifting is that you know, the commercial Arrangements were coming together on some of those projects? Our engineering team was was in lock step with our commercial group and and understood that. So we were able to make a bunch of adjustments in terms of kind of sequencing and timing around those projects when we ordered some of the long lead equipments and made some of those commitments to, uh, to still preserve the isds that that we, that we originally planned for
Okay, that's perfect. Thanks everybody.
Thanks Patrick.
Thank you.
There are no further questions at this time.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect