SEMG Q3 2017 Earnings Call

Operator: Good morning, ladies and gentlemen, and welcome to the SemGroup Corporation Third Quarter 2017 Earnings Conference Call. As a reminder, this call is being recorded. [Operator Instructions]. I would now like to turn the conference over to SemGroup's Head of Investor Relations, Alisa Perkins. Please go ahead.

Alisa Perkins: Thank you. Good morning, everyone. We're glad that you can join us today for our third quarter conference call. I hope that you had a chance to review our press release and earnings presentation, which can be found on our website. I would like to remind everyone that today's presentation may contain projections, forward-looking statements and certain non-GAAP financial measures. We encourage you to read our full disclosures in our latest press release, slide presentation and SEC filings for a discussion of those items. These materials contain reconciliations to GAAP financial measures. Hosting the call today is Carlin Conner, our CEO; Bob Fitzgerald, our CFO; and Dave Minielly, VP of Crude. With that, let me turn the call over to Carlin.

Carlin Conner: Thank you, Alisa, and thanks, everyone, for joining us today for our third quarter update. Beginning with Slide 4. This morning, we announced our third quarter earnings results along with an update on our capital raise initiative. Our third quarter adjusted EBITDA increased nearly 40% over the prior quarter, largely reflecting the positive addition of cash flows from our two new Gulf Coast assets, Maurepas Pipeline and HFOTCO. We're excited to have closed the HFOTCO transaction and completed the construction of the Maurepas Pipeline during the third quarter. And while these assets are performing as expected, we did not see a full quarter contribution due to timing of the close and construction completion. The transformational impact of these 2 assets on our portfolio will be even more pronounced as we see full quarter and full year contributions going forward. Together, in 2018, Maurepas and HFOTCO's annual adjusted EBITDA are expected to approach $200 million and significantly increase our portfolio share of secure cash flows from investment-grade counterparties. For the third quarter, our base businesses were relatively flat on a normalized basis, adjusting for onetime items from the prior quarter. Our focus remains on organically growing EBITDA while increasing the security of our cash flows from our core businesses in Canada, the Mid-Continent and Gulf Coast with an emphasis on increasing returns on capital. The benefits of this strategy are beginning to be reflected by the fact that approximately 58% of our gross margin was generated from take-or-pay contracts compared to 38% in 2016. This cash flow security highlights SemGroup's declining dependence on commodity prices. We expect this material improvement, along with high-value organic growth projects, to deliver shareholder value. We're executing on the capital raise initiative that we outlined on our last call. This morning, we announced the sale of our 50% interest in Glass Mountain Pipeline for $300 million. Our interest in this asset generated approximately $12.5 million of cash flow over the last 12 months. And with the contribution of the Omega Pipeline, we anticipate the 2018 multiple to be in the high teens. This accretive divestment was very opportunistic, and we expect it to close by year-end. We intend to use the proceeds to fund a portion of the HFOTCO second payment. We're also evaluating a number of other capital raise initiatives, including additional asset sales, joint ventures and structured equity solutions. Our goal is to fully pay the $600 million HFOTCO second payment by the end of the first quarter next year, allowing us to capture approximately $25 million of an early payment discount. We're also focused on prefunding our 2018 capital program, all without having to access the debt or common equity markets. Collectively, with our executed agreement to divest Glass Mountain Pipeline as well as the other processes, we are confident we will successfully meet these goals. Turning to Slide 5 for an update on key projects. We are very pleased with the continued execution around our footprint. We've completed Maurepas Pipeline. The other projects on the list remain on budget, with several coming online during 2018. In addition to achieving a significant downstream-facing position, we have also secured basin diversification with our Wapiti sour gas plant under construction in Canada and our gas and crude pipelines in the STACK. The Omega Pipeline, part of the Glass Mountain divestment, is a project that our Crude team developed and was a critical driver in the valuation of this transaction. In the midst of this project execution, our teams in the third quarter also experienced a major hurricane on the Gulf Coast and an earthquake in Mexico. I would like to commend our employees for their dedication through these events and for their help in safely and promptly returning the assets back to service. As we indicated back in September, these recent events did not materially impact any of our operations. Our thoughts continue to be with those affected, including several of our employees. Now I would like to turn the call over to Bob who will discuss our financial results for the third quarter as well as our financial outlook for the remainder of the year.

Robert Fitzgerald: Thanks, Carlin, and good morning, everyone. Beginning on Slide 6. As announced this morning, SemGroup's Board of Directors declared a quarterly cash dividend to common shareholders of $0.45 per share, resulting in an annualized dividend of $1.80. SemGroup reported a net loss of $19.1 million for the third quarter compared to net income of $9.6 million for the second quarter. The third quarter net loss includes a noncash impairment charge related to the crude trucking business and onetime M&A transaction expenses, partially offset by an income tax benefit. SemGroup posted third quarter consolidated adjusted EBITDA of $90.7 million compared to $65.4 million in the prior quarter. Our 3 crude segments reported total earnings of $38.2 million in the third quarter, up about 25% from $30.6 million in the second quarter. Our Crude Transportation segment adjusted EBITDA increased 27%, reflecting the Maurepas Pipeline contribution for the quarter. The Maurepas 24-inch pipeline began cash-flowing in late July, and the 2 product lines began cash-flowing mid-September, contributing to a partial quarter for - of earnings. White Cliffs volumes averaged just over 105,000 barrels per day for the quarter, in line with our full year guidance of 100,000 to 110,000 barrels per day. Crude Supply and Logistics adjusted EBITDA was up about $1.2 million over the previous quarter, driven by a slight increase in volumes and higher blending margins, partially offset by weaker contango results. HFOTCO posted adjusted EBITDA of $25.4 million, reflecting the 2.5 months of operations under SemGroup's ownership. Turning to SemGas. Adjusted EBITDA was down $3.8 million quarter-over-quarter, primarily due to the absence of a $2.5 million onetime contractual true-up in the second quarter as well as lower processing volumes. We expect to see volumes rebound starting in the first quarter of 2018 as the Canton Pipeline project begins to flow volumes from the STACK play. SemCAMS is down sequentially primarily related to the absence of a $4 million annual contract true-up recorded in the second quarter, partially offset by increased volumes. On a combined basis, SemLogistics and SemMexico contributed $5 million in adjusted EBITDA for the quarter, flat with the prior quarter. Turning to Slide 7. SemGroup is revising its full year 2017 adjusted EBITDA guidance to a range of $315 million to $330 million to reflect the timing of contributions from HFOTCO and Maurepas Pipeline as well as weaker crude marketing and trucking margins. Consistent with our announcement of the HFOTCO acquisition, we continue to expect HFOTCO to generate approximately $115 million of adjusted EBITDA for the full year 2017, of which approximately $55 million will be attributed to SemGroup reflecting the timing of the transaction close and related adjustments. We expect the fourth quarter to benefit from a full 3 months of Maurepas cash flows. With regard to the weaker crude margins as indicated by the slight improvement in crude supply and logistics results in the third quarter, recent market trends are pointing to higher blend and contango margins into the fourth quarter albeit limited, but not as much as we had forecasted in our original guidance. Overall, we expect the crude basin differentials to remain tight due to ongoing competition for barrels at the wellhead. SemGroup continues to expect 2017 capital expenditures of $575 million, including approximately $50 million related to maintenance projects. Forecasted maintenance spend decreased approximately $10 million due to the timing of certain projects. We intend to provide 2018 adjusted EBITDA and capital expenditure guidance with our year-end results in February. Moving to Slide 8, our leverage and liquidity position. We ended the quarter with a total consolidated net leverage ratio of 5.7x and consolidated liquidity of approximately $736 million. On a stand-alone basis, SemGroup ended the quarter with a net covenant leverage ratio of 4.4x. We are targeting consolidated leverage of less than 5x through a combination of organic EBITDA growth, proceeds from various asset sales and potential structure equity. I'll now turn the call back over to Carlin for some final comments.

Carlin Conner: Thanks, Bob. In closing, I would characterize the third quarter as a period of transition as we made significant strides towards strengthening our portfolio. We began to see contributions from Maurepas and HFOTCO and look forward to the full benefit of these 2 new assets next quarter and for many quarters to come. This growth will be coupled with growth in our Canadian businesses as well as optimization of our Mid-Continent assets. Finally, I want to underscore that we are working diligently on our financing strategy and are absolutely committed to executing on processes to promptly address the second HFOTCO payment, strengthen the balance sheet and support our growth in key geographic regions. With that, I'd like to thank you for your time this morning, and now I'll turn the call over for questions. Operator?

Operator: [Operator Instructions]. The first question is from Elvira Scotto of RBC Capital Markets.

Elvira Scotto: The $300 million sale of your interest in Glass Mountain goes a long way towards that second payment to Alinda. And then you did mention some other opportunities to raise capital and reduce leverage, including the asset sales, joint ventures and structured equity. So, with respect to asset sales, I know you're actively marketing SemLogistics, and Mexico could be another potential sale. Outside of those 2, are there other assets across your portfolio that may be noncore that you would sell?

Carlin Conner: Thanks for the question, Elvira. This is Carlin. We're looking at - across the portfolio all of our assets that are considered noncore, but you rightfully mentioned Mexico and Logistics. In the process that we're working through, we have gotten several very interesting inbounds on a variety of assets. And we are running to ground whether or not those transactions will be accretive for us. And we will create what we need to create with respect to the raise relative to our strategy. I would put SemGas in that category at this time as an asset that we're taking inbound very seriously, and we're working through those ideas and options.

Elvira Scotto: Okay, great. And then you also mentioned JVs. What are some of the potential assets that you'd consider for JV? Would Maurepas be one? And then with respect to JVs, are you looking strictly to raise capital? Or do you want a JV partner that brings something else to the table such as volumes?

Carlin Conner: Well, we always look at projects and businesses from a - with a strategic lens. And if a partner can bring something that adds to what we can do, then clearly, that is something we should consider. Whether we're raising capital or not, that's just, I think, good, smart business. So, we're always looking for strategic partners. As far as Maurepas, and Maurepas is a great asset, it's an asset we consider to hold dear. The - there are lots of interest in Maurepas. If we were to JV Maurepas, it'd be something that would be very structured. Quite frankly, as we exercise some of the other options we have, the Maurepas option is there, but it's not something that we're actively pursuing at this time.

Elvira Scotto: Okay, great. And then just the final one for me. A while ago, you did talk about some potential expansion opportunities around Maurepas like linking it to other refineries. Can you provide any updated view on these expansion opportunities and when we could see some of those come into fruition?

Carlin Conner: We still continue to have great conversations with the refiners that would value having access to St. James on the crude system. Recent discussions about Capline being reversed adds to the liquidity prospect in St. James with different barrels hitting with different qualities. And we think refiners are very interested in that. So, we hope to have positive news along those lines sooner than later.

Operator: The next question is from Shneur Gershuni of UBS.

Shneur Gershuni: So, with HFOTCO mostly financed at this stage right now and it seems like a pretty high multiple, I was just wondering if we can focus on sort of 2 strategic questions. First, in sort of thinking about the HFOTCO asset, you - it's been well known that a lot of the expectation for crude exports is going to continue to ramp lesser known view, but refined products are looking to ramp for exports as well, too. Do you think about the HFOTCO asset potentially repositioning from where it's at today to sort of focus on those trends? Or do you sort of take advantage of some of the sulfur changes that are going to happen in 2021, potentially put blending assets on site as well, too? I'm just kind of wondering how you're thinking about that asset, let's say, 2, 3 years from now in terms of what products will flow through it?

Carlin Conner: Well, we bought the asset knowing that it would provide us lots of optionality to look at different markets, look at different segments. We love the refinery-facing aspect of the business. The fact that you have deepwater front, the fact that you have pipeline connectivity, a pretty substantial crude position already today. When you look at our crude projects that we have already talked about for HFOTCO, we will be almost hitting 7 million barrels of crude storage in Houston. So, we have a pretty significant crude footprint. As we think about clean products, there is definitely opportunity there. We're focusing on resid and crude oil at this time, but we are talking to folks about how can we leverage the infrastructure, really the waterfront, and possibly help some of our customers out with their product exports. As far as crude exports go, that was the thesis, and we bought this knowing that this was going to happen. And we feel pretty good about our position not only with the existing assets we have that we can work and sweat those assets to drive more export activities, which we think are going to be higher value, but we also have the ability to expand the amount of tanks and also the amount of waterfront we have. So, it's playing out exactly like we had hoped, and we are definitely in play for crude and products.

Shneur Gershuni: And on the marine side, would you be able to potentially put in some sort of blending to get to the lower sulfur requirements as well, too? Is that an option that you'd be looking at also?

Carlin Conner: Well, our customers do a lot of blending already. That is an activity we already are doing for our customers on the resid side. So that's something we will continue to support. And we believe that the IMO regulations that are coming are actually neutral to positive for us due to the fact that we believe things need to happen with those barrels. Those molecules are going to be coming from the refineries, whether they'd be used for bunker fuels or not. So, we have great confidence that the assets themselves will be - there will be many options on how to use the assets. We'll just have to try to find out what's the highest value.

Shneur Gershuni: That makes sense. And then just transitioning to White Cliffs. Obviously, we've seen the news about the walk-up tariffs and so forth. But I was wondering strategically, if given the amount of oversupply of NGLs kind of happening kind of in the North regardless, whether it would make some sense to consider turning it into NGL service. I mean, is that possible? Is the pipeline too big? Or is that kind of an option - I wouldn't call it a nuclear option, but an option that you could potentially consider that may add more value as the MBCs roll off in a couple years?

Carlin Conner: Well, having 2 12-inch lines gives us a lot of flexibility. We believe that we can look at repurposing in a different way than maybe the bigger pipelines. We've talked about repurposing in the past. And I think it is an option that we have in front of us and we continue to talk to potential customers about repurposing. We definitely think it's something that deserves a lot of review. And clearly, the crude takeaway is overbuilt. And any of the pipelines, if they can find alternative use, I think, would be helpful to the takeaway situation there. So, we're definitely evaluating and continuing to talk to customers about repurposing to NGLs.

Operator: The next question is from Craig Shere of Tuohy Brothers.

Craig Shere: How large could the 2018 CapEx prefunding be? And how do you think about convertible equity given your share is still so depressed versus the pre-HFOTCO acquisition announcement levels?

Carlin Conner: Well, I'll take a stab at that, and Bob may clean up. First, I - we've talked about not only raising enough capital to manage the $600 million deferred payment. But we've always talked about we needed to overexercise a bit and try to raise more than we - than the $600 million goal for - to prefund '18. We thought that, that was something that was worthwhile to pursue. And I won't put a high end on it, but we definitely believe that we can exceed the $600 million. And if you think about - when you talk about Logistics and you talk about Materials and maybe even SemGas, you get up to a pretty good number if you put a fair multiples on our cash flows from those businesses. Even beyond that, we still may want to do some sort of structured equity to again, to just continue to work towards getting this - the balance sheet where we want it to be, which is sub 5x. I think it's highly likely that we will do asset sales plus structured equity at some point.

Craig Shere: Great. And can you speak in any greater detail to SemGas results and prospects post commencement of Canton STACK pipe? Do you see potential for higher 2018 year-over-year segment EBITDA?

Carlin Conner: One of the issues with our Mississippi Lime business, as you very well know, you follow this, is that Chesapeake hasn't put the rigs to work that we had hoped. So, we're fighting decline in that basin. And what Canton has done, is given us a great opportunity to diversify our basin independents and move toward the STACK. So, if when Chesapeake brings rigs back, then we'll see production growth in Lime again. And then we'll see Omega - excuse me, Canton, adding to that - to those volumes, and you'll see gas potentially outperform where we sit today.

Craig Shere: Okay. And what are prospects for announcing the next SemCAMS processing plant? Would the cost be about the same as the $240 million Wapiti sweetening plant due mid-'19? And how do you think about the ultimate range of EBITDA multiples on these projects and the time ramp to achieve?

Carlin Conner: The multiples are similar to what we've always talked about, the high end of our greenfield may be billed 5x to 8x organic multiple. That's kind of where Wapiti is folding in, and we believe we can do the same for Pipestone. I think Pipestone, as we see it today, may be a little less expensive than Wapiti. But we're still working through that and really not prepared today to talk about the cost of that project. We're excited about the conversations we're having with producers in the area and again having the asset gas transfer solution being able to handle high sulfur gas, all the way from Pipestone, all the way through Wapiti, down to K3, is a real game changer, we think, in the market. And we'll continue to leverage those existing assets and really get good, great contracts against that - those businesses and those investments.

Craig Shere: Do you see that 7x or 8x high-end multiple achievable, say, on Wapiti in 2020? Or is that a couple of years to achieve?

Carlin Conner: Those include some ramping. So, I wouldn't call them full-cycle multiples, but you got to give us a little bit of time to get to full strength on the cash flows.

Craig Shere: Okay. And there's been a couple of questions already on additional bolt-ons from Maurepas, HFOTCO. We've talked about SemCAMS. How do you think about new project announcement CapEx commitments relative to your goal of reducing leverage?

Carlin Conner: There's tension, right, between the two, and we appreciate that. But good projects offer a base footprint - good core organic projects, I should say, that are in that 5x to 8x. We believe we can find capital for those projects. And those are - that's what we should do. We're good at sourcing and then executing on these kind of projects, and we should continue to do that. Someone asked earlier about JVs. One of the areas that we can JV is that we outsize capital requirements in a certain area. That's when strategic JVs might make some sense where we can share the risk in the capital investment.

Craig Shere: Great. And can you elaborate about the headwinds and prospects into next year for crude S&L and field service ops? Should we expect a drop-off from crude facilities results, which saw 4% sequential EBITDA decline? And could you just phase out much of S&L if EBITDA losses seem perpetual?

Robert Fitzgerald: Craig, this is Bob. When you look at crude supply and logistics, as we had indicated in the prepared comments, we do expect it to kind of level out here into the fourth quarter with some slight improvement. Some of that is going to be improved blending margins, but we're also seeing contango that looks better. We locked into some contango opportunities in the fourth quarter. That should help, but we don't expect that to continue going forward. In fact, we think blending margins, hopefully, will hold in and then mitigate the losses. But given the current market trends, I would say that we don't expect a significant blowout in supply and logistics. But we do think the optionality of it is significant, both from overall market returns but also the fact that, that business drives additional activities on our facilities and in our transportation segment. So, there's a lot more value than what you're seeing just under one segment called supply and logistics. And with regard to - I think you're asking about field services, too. When we look at that business, the things that we're doing there is, one of the issues is we're focusing very hard on our operating costs, both the operating costs relative to the equipment but also - and drivers and getting enough drivers to seat the trucks that we have. Because if you don't have the drivers and we need to bring out third-party drivers, that gets more expensive, and that eats up margin. So, we're getting focused on managing those two particular aspects, and we think that could help out going into '18.

Operator: The next question is from Tristan Richardson of SunTrust.

Tristan Richardson: I'll just keep mine to two. In terms of the updated guide for '17, both on EBITDA and CapEx, is there an assumption there for a close of Glass Mountain? Or is it just assumed fully owned through the end of the year?

Carlin Conner: Fully owned through the end of the year.

Tristan Richardson: That's helpful. And then, Carlin, in terms of the team's tight multiple you discussed, does that sort of assume Omega is fully baked when you look at it that way? Or is it assume any contributions from Omega?

Carlin Conner: It assumes Omega is up and running and contributing in '18.

Operator: The next question is from Ryan Levine of Citi.

Ryan Levine: What was the hurricane impact to SemGas during the quarter?

Robert Fitzgerald: We had a slight hiccup in the SemGas operations relative to NGL takeaways that were going down to Bellevue. So, it was really how that impacted. It was fairly insignificant within the SemGas business, but it would have been related to the fact that some of those wells had to dial down a little bit relative to the NGL takeaway issue.

Ryan Levine: Okay. And then to the extent that you can comment, is there a third-party cash investment or partnership at SemCAMS that you may be actively considering?

Carlin Conner: No, Ryan. We're 100% owned by SemGroup, and we've had lots of folks that would love to invest, co-invest with us or buy it straight out. But we're very pleased with where we're headed with SemCAMS, and we'll continue to execute.

Operator: The next question is from Michael Blum of Wells Fargo.

Michael Blum: Maybe if you don't mind, a 3-part question because they're all kind of interrelated, I think, the answers. The question is just on the dividend. Kind of what is your latest thinking in terms of dividend growth? Are you still comfortable with the growth rate you laid out on the HFOTCO merger? And then the second part to that is your latest thinking on your target for dividend coverage. And then the third is just the 5x or below consolidated leverage target. What's the time line do you think to achieve that?

Carlin Conner: So, let me start with the leverage target that you asked about, Michael. As we think about that and as we indicated earlier, there's a couple of things that are going to drive us to hitting that target, including some of the asset sales, potential equity from a preferred equity offering, all of which is - we've got significant progress under our belt thus far. So, we have pretty good comfort in seeing that happening in 2018. All in all, in growing EBITDA, all in all, we expect to see us hitting that target sometime in next 12 to 24 months. But that will be dependent upon the timing and the extent at which we're executing some of those other initiatives.

Robert Fitzgerald: And you also asked about dividend?

Michael Blum: Yes. The dividend growth rate that you laid out when you announced the HFOTCO merger and then the coverage of the dividend.

Robert Fitzgerald: Yes. We talked in the past about - I think you recall that we moved to an annual dividend evaluation process, which we use that meeting to fully access - assess the various capital needs as well as the capital allocation for the company. As always, that is dependent on what's happening. And we have a lot of moving parts right now, especially with respect to asset sales, future CapEx plans, trying to get our leverage down. So, I think it'd be - it would probably be inappropriate for us to comment on what our recommendation will be to the board in December. But when we get together in December, we'll definitely come together and talk about all these different aspects. And what's really new, I think, since we last talked, about HFOTCO was the fact that we are definitely now calling in the coordinates on which assets we're selling and what the business looks like going forward. One thing I can probably sit here today and tell you that there is not going to be a cut on the table. We are fairly certain that the $1.80 per year that we have today is very sustainable, and we have great coverage against that, growing against that. It's really going to be a question about what does this portfolio look like in '18, '19 and where are we with our leverage and also internal needs for capital. So, we'll check back in December.

Michael Blum: Maybe just a follow-up on that. Is there a dividend coverage target that you have for the company?

Robert Fitzgerald: What we expect - and if you look at our third quarter results, the way that we calculate it for this quarter where our coverage was about 1.3x of the payout, 75% or so. And that's only with a partial contribution from the Gulf Coast assets that we talked about. So, as we look forward, any quarter could be dependent upon certain timing issues. But I would say, all in all, we're still looking at a pretty healthy coverage. I would expect to see something in the 1.5x range, somewhere in that 60, high 60s range of payout ratio.

Operator: The next question is from Jerren Holder of Goldman Sachs.

Jerren Holder: I guess, I wanted to follow up maybe on the White Cliffs. I guess, we all know there's a lot of pipeline capacity coming out of the DJ Basin. Maybe what was the catalyst - and it's always been the case, right? So, what was the catalyst, I guess, to take down some of the spot tariffs now as opposed to before?

Carlin Conner: Well, as we sit here today, and production continues to stay relatively flat, albeit there appears to be some production growth on the horizon, we're fighting for uncommitted barrels. And until recently, our - we had a tariff strategy that attracted one of the largest producers' uncommitted barrels. And that worked. We did a pretty good job of getting the uncommitted barrels. However, due to take-or-pay commitments elsewhere, this producer's uncommitted barrels became committed to somebody else or they - and they have decreased. So, we're hunting the smaller producers at this point, and we're trying to be competitive in a changing market. And just to remind you, the tariff is temporary, and we may adjust it back going forward. But for now, we're hunting barrels.

Jerren Holder: And in terms of the tariff being temporary, so how should we think about it? It's similar to this where you can go back to the FERC and get the refile, something, and then it takes a month or so to put it back to, I guess, wherever you guys see fit? Is that the right way to think about it?

Carlin Conner: I have my FERC expert. I have David Minielly here. He's going to answer that question.

David Minielly: No, it's not a problem to change that temporary rate. We can retract it at any time.

Jerren Holder: And then maybe lastly, on the White Cliffs point. So, recognizing some of the take-or-pay commitments from your customer. But in terms of those other volumes, you guys feel with the lower tariff now that, that level pretty much, essentially, all those excess volumes that's up available that will be coming to White Cliffs? Is that the right way to think about it?

Carlin Conner: Well, I don't know if we can sit here and say we're going to win them all, but we're definitely in a better position now to win a fair share of them. And that's the plan is to go out and grab some barrels.

Operator: The final question is from James Carreker of U.S. Capital Advisors.

James Carreker: Just wondering about impact of Hurricane Harvey on HFOTCO. Did you have any downtime there or something that would have negatively impacted the quarter's results?

Carlin Conner: Nothing material. We had one pump that was under water, an electric motor pump that - driven pump that we had to repair and sorted issues here and there.

James Carreker: But it wouldn't materially change the EBITDA generated?

Carlin Conner: No. No.

James Carreker: Okay. And then I guess, talking about - you indicated significant inbounds on SemGas. Do you guys have a timetable internally whether or not to make a decision on that?

Carlin Conner: Well, as you know, with these processes, you work through who's interested. You work through what valuation looks like, and you kind of figure out, is this the path we want to pursue? And we've been at this for quite a bit. And I would say that we're down the road quite a ways. I would imagine if we were to execute on something, it would be sooner than later, at least the announcement.

James Carreker: I mean, is that kind of coincident with the - having a payoff of the HFOTCO $600 million payment by Q1? Is that kind of - or do those two things kind of go together, if you will?

Carlin Conner: Not really. I mean, we want to pay off the HFOTCO second payment ASAP, and we're just probably giving ourselves a little bit of room to maneuver when we say in the first quarter. Things happen sooner, and things close, and we raise capital. Then we may pay off sooner. And we're running processes not just on gas, but we're running some other processes as well that those have their own time lines. And we're not going to run the risk of appearing like there's a fire sale or losing value in a process just to hit a certain time line.

James Carreker: Appreciate it. And [Technical Difficulty] logistics, kind of third straight quarter of negative margin. Is there any kind of visibility towards that turning positive? You mentioned Q4 was - looks like it's going to be a little bit better. Can we get to a level where it's going to be a consistent EBITDA generator?

Robert Fitzgerald: Yes. I'd say, James, right now that if we can get to a breakeven, given the current markets and the current basin differentials that we see out there in today's market, driving value to those other segments like we mentioned earlier, I think that's probably what was be a reasonable expectation today. There'll be more value in the future, but that's going to take some additional market changes than what we're seeing out there today.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Carlin Connor for any closing remarks.

Carlin Conner: Thank you all very much for joining us today. We appreciate your continued interest and support. Have a great day.