Earnings Call: Q2 2019

Aug 7, 2019

Good morning, ladies and gentlemen. Welcome to Gibson Energy's 2019 Second Quarter Conference Call. Please be advised that this call is being recorded. I'd now like to turn the meeting over to Mr. Mark Hitzcheff, Vice President, Strategy, Planning and Investor Relations. Mr. Hitzcheff, please go ahead. Thank you, operator. Good morning, and thank you for joining us on this conference call discussing our Q2 2019 operational and financial results. On the call this morning from Gibson Energy are Steve Spalding, President and Chief Executive Officer and Sean Brown, Chief Financial Officer. Listeners are reminded that today's call refers to non GAAP measures and forward looking information. Descriptions and qualifications of such measures and information are set out in our continuous disclosure documents available on SEDAR. Now, I'd like to turn the call over to Steve. Thanks, Mark. Good morning, everyone, and thank you for joining us today. We delivered another strong quarter with adjusted EBITDA from operations up 13% and distributable cash flow increasing 40% versus the Q2 of last year. In terms of headline numbers, adjusted EBITDA was $112,000,000 and distributable cash flow was $80,000,000 I would note that EBITDA has been adjusted for future environmental remediation provision recognized in the quarter. Looking more broadly than the financial results, we continue to execute our strategy. In April, we entered into an agreement to sell our Canadian truck transportation business. At the beginning of July, we closed the transaction. We have now finished our non core disposition completed our transformation into an oil focused infrastructure company. Today, we have 5 storage tanks or 2,500,000 barrels of tankage under construction at Hardisty, and we are negotiating to contract additional tankage this year. We're working with our partner at the rail terminal USD to secure additional commercial support for our DRU project at Hardisty. With our existing infrastructure, connectivity and capacity to load more than 3 unit trains a day, we are uniquely positioned to provide a cost effective solution for Canadian bitumen production. A DRU would improve egress out of the basin for the producer and the neat bitumen has more value than the dilbit to the sophisticated U. S. Refinery, an exciting opportunity, but we need to have the project fully underpinned by long term contracts before we proceed. At the end of June, the Moose Jaw facility was expanded from 17,000 barrels a day to 22. The project was completed ahead of schedule and below budget. Beyond increasing the capacity, we expect to realize higher margins on a per barrel basis. The expansion included heat integration equipment that would require no additional heat for the additional throughput. Moose Jaw is a natural fit with the rest of our business. It provides us a strategic hedge in the case of pipelines are not built and helps fund our infrastructure growth. In the U. S, we expect Piote East and the connection into Wink will be placed in service in late September, early October. This will be the 1st infrastructure asset Gibson Energy has ever built in the U. S. It's a big win for us and it comes far sooner than we expected when we laid out our plans at the Investor Day in 2018. The U. S. Team is currently pursuing several opportunities. We're in numerous discussions on gathering crude oil gathering front, mostly bunts and singles, but leveraging the assets we have in place. We're targeting that 5 to 7 times EBITDA project, and there's no need for us to reach. At Wink, we continue to have discussions with parties for tankage. It's still early, but we certainly believe there is a potential for Gibson Energy to build its first tankage in the U. S. Within the next year or so. Returning to the topic of completing our transformation, becoming fully investment grade reflects the quality of our business today. This is a major milestone for Gibson Energy, and Sean will discuss the impact in further detail. This speaks to our very strong financial position. Being investment grade will help reduce our funding cost, improve our access to capital. Both these benefits improve our ability to grow distributable cash flow per share. Looking to the balance of 2019, we are well positioned to keep our momentum going. All our capital projects under construction are proceeding quite well. They're on budget and most of them are ahead of schedule. At the top of the hill, we have made strong progress on Phase 3 tankage, and we now expect 4 of the 5 tanks under construction will be placed in service before the end of the year. On the commercial front, in Canada, we have sanctioned new projects at both Hardisty and the Edmonton terminals. This has pushed up our sanctioned capital to the top of our range, as Sean will speak to in his remarks. The commercial team remains focused on developing and executing additional oil infrastructure opportunities. We see the possibility for infrastructure capital in 2019 to approach that $300,000,000 target, and we are confident we will sanction at least 200 $1,000,000 to $300,000,000 of capital in 2020. Before we conclude our remarks, let me quickly return to the future environmental provision recognized during the quarter. This is not something I would consider normal course or just part of operating a terminal. We place significant importance in our asset integrity and loss prevention at our facilities. On this issue, the samples collected show the product in question is a product we've never had at our terminal. As a result, we have filed a statement of claim against an adjacent operator to recover past and future damages to our property. We believe we have a strong legal position. From an accounting perspective, once we quantify the future costs and filing the statement of the claim, we were required to make the provision. This provision will reverse upon settlement of IRFs upon settlement of our claim. The potential costs will be incurred over many years. Gibson Energy is a top operator and we pride ourselves in how we operate our terminals. The environment is very important to us as are the communities that we operate in and around. In summary, this was another strong quarter from both an operational and financial perspective. We continue to execute. We are very focused on the delivery of capital projects. Our commercial teams north and south of the border are developing additional business opportunities. Our financial position is very strong. Leverage and payout both remain well below target ranges. We are investment grade and we will remain fully funded. As I said on the last call, the objective is very clear. We need to keep executing our strategy, keep doing what we said we would do. I will now pass the call over to Sean, who will walk us through the financial results in more detail. Sean? Thanks, Steve. As Steve mentioned, we had another strong quarter. Results from a very consistent infrastructure business were very much in line with our internal expectations, and we were pleasantly surprised by the performance from marketing. This has been a busy year so far. I am very glad to have all the dispositions closed, and I'm also very happy that the quality of our business and the strength of our balance sheet have now been recognized by both DBRS and S and P. Speaking to the financial results, adjusted EBITDA from combined operations of $112,000,000 in the quarter, excluding the remediation provision, was a $10,000,000 or 10% increase from the Q2 of 2018. On a more comparable basis, adjusted EBITDA from continuing operations, excluding the remediation provision of $109,000,000 in the quarter was a $12,000,000 or 13% increase from the Q2 of 2018. Distributable cash flow from combined operations of $80,000,000 was an increase of $23,000,000 or 40% over the Q2 of 2018. The main drivers of the increases of the Q2 of last year were as follows: Infrastructure segment profit, excluding the remediation provision, was up $5,000,000 as a result of new projects coming into service within Q1, such as the 3 tanks or 1,100,000 barrels of storage at Hardisty, the Herc rail facility expansion and the Viking pipeline. Marketing segment profit increased $10,000,000 due to higher margins earned from the crude marketing business. Offsetting this slightly, G and A was a bit higher. As you'll recall, we changed some of our allocations this year, but I would note that the salaries and benefits portion of G and A is down 18% in the 1st 6 months of this year relative to the same period last year. On a distributable cash flow basis, in addition to the drivers I just discussed, we had a very small current tax recovery this quarter as a result of a cumulative benefit from the recognition of certain deductible items, resulting in a $9,000,000 increase relative to the comparable quarter last year. On a sequential basis, we very much anticipated a decrease in marketing segment profit. Differentials were much narrower, and there wasn't the same level of volatility to drive opportunities for the crude oil business. That said, we still outperformed our expectations, which really speaks to the strength of our marketing organization. Contribution from infrastructure was down $2,000,000 quarter over quarter after adjusting for the remediation provision, which was very much in line with our internal expectations and the commentary provided on our last call. Specifically, the Q1 benefited from 2 months of contribution from ES North, which did not qualify for discontinued operations treatment and, as such, appeared in our continuing operations in the Q1. Also, we had the annual turnaround at Moose Jaw, which was a bit longer this year to accommodate the expansion work without having to shut down the facility for a second time, which was the main driver of a $5,000,000 decrease in Moose Jaw's contribution to infrastructure segment profit relative to the Q1. This was only partially offset by billing for all 3 months at the Top of the Hill Phase 1 versus only 1 month in the Q1. On a distributable cash flow basis, the 2nd quarter was actually very close to the 1st quarter, decreasing by only $3,000,000 despite the much larger step down in marketing contribution. This was a result of taxes, lease payments, G and A and replacement capital all being lower in the 2nd quarter than in the first. With another strong quarter, distributable cash flow from combined operations for the trailing 12 months increased to $331,000,000 pushing down the payout ratio to 58% and even further below our 70% to 80% target range. Debt to adjusted EBITDA increased slightly to 2.5x, but remains well below our 3x to 3.5x target and would have been in line with the Q1 if the proceeds from the trucking sale had been received 2 days earlier. As discussed earlier, one item I'm extremely excited to discuss is the investment grade rating we received from S and P on July 24. Not only does this highlight our quality of cash flows and further reinforce the transformation into a pure play crude oil infrastructure company, but it also has immediate benefits from a cost of capital perspective. Right now, we have $900,000,000 of term debt at 5.25 percent 5.38 percent. With our 2nd investment grade credit rating, we will look to refinance that debt, starting with our $300,000,000 in notes due in 2022. We believe we can extend term and bring down coupons substantially, potentially reducing our interest costs by as much as $15,000,000 to $20,000,000 per year once all the notes are refinanced. That would really improve our EBITDA conversion into distributable cash flow as to make it in line or better than our peers and would represent greater than a 5% increase in distributable cash flow alone or half of our annual per share growth target. In terms of our outlook, let me speak first to marketing. With narrow differentials and the turnaround at Moose Jaw in the 2nd quarter, we are very conservative with our expectations for this part of the business. We are very glad we are able to exceed these expectations, but our bias will still be towards remaining conservative in our marketing outlook. For now, we will remain near our mid cycle outlook of $15,000,000 to $20,000,000 with the expectation of at least $20,000,000 to $30,000,000 in adjusted EBITDA for marketing in the 3rd quarter. But there are certainly factors that could drive upside to that. Specifically, with the Moose Jaw expansion coming into service, we'll realize greater profits within refined products, and it gives us further confidence that our mid cycle number is a low end conservative range rather than a mean or a P50. One factor that keeps us fairly conservative on our marketing outlook in the near term is how differentials have been slow to widen to levels we believe that are required to incentivize additional rail, likely around a $18 to $20 per barrel range. For example, August looks to be less than $12 per barrel. To the extent that differentials widen over the next few months, that would be upside to our outlook. Also, if similar to the Q2, we realized some opportunities that we did not have visibility to when we held our call, that would be another potential upside. For the benefit of investors and analysts looking to model our cash flows, we have also refined our capital outlook for the year to be between $230,000,000 $280,000,000 Our outlook is based on sanctioned projects, and the increase is reflective of growth projects we have added from the start of the year. The increase would include the Phase 4 tankage we sanctioned in March as well as several inside defense projects at our terminals. We have also decided to proceed on the foundations of the remaining 2 tank locations at the top of the hill. While only a small portion of the total cost of the tank, this will allow us to take advantage of the ongoing work at the top of the hill and maintain a schedule for delivery in the second half of twenty twenty. We feel comfortable that our commercial team will be able to contract this tankage on a timely basis, which would underpin the remaining construction work. In summary, the Q2 was above our internal expectations. Infrastructure is right where we thought it would be, and marketing was able to beat our outlook with a strong second half of the quarter. Not something we count on, but that extra cash flow will help further charge the balance sheet and fund infrastructure growth capital. Importantly, we continue to check all the boxes in our governing financial principles. We remain fully funded for all our sanctioned growth capital, with payout and leverage well below target levels, and we are now fully investment grade, which was one of our major goals. We are in a strong financial position, and that strength will continue to build as we place additional infrastructure into service over the coming quarters. At this point, I will turn the call over to the operator to open it up for questions. Thank And our first question comes from Jeremy Tonet with JPMorgan. Please proceed. Hi, good morning. Just wanted to start off on the CapEx side of the equation, lifting the budget there a little bit. I just wondering if you could provide a bit more detail as far as what were the drivers to accelerating here? What type of conversations you're having with your customers? And what is their, I guess, demand drivers to sign up for this incremental storage that gives you the confidence as far as doing the prep work for the next round of expansion there? I think there's 2 questions there. I mean one is what expanded our capital. That was those were activities both at those were small pipeline projects internally at both Hardisty and Edmonton. At Edmonton, we're going to expand our rail additional 22 spots, and that's backed by 1 of the large refiners in the area. So they're unloading they'll be loading refined products on one of those facilities. And then at Hardisty, we just have additional we have additional projects that are funded through throughput fees. Now why do we move forward with the expansion or with the 2 rings? It was really a synergy opportunity. We've built out that one tank that we announced earlier in the year. We had an opportunity that saved us considerable amount of money if we move forward and built those 2 rings. The one thing about those rings is they can sit there for 10 years. So that investment is what we consider just a really sound investment, and we save a considerable amount of money building the rings early. As far as talks, we continue to have talks, when we and we do believe that we'll be successful this year and contracting additional tankage. But until those documents are signed, it's not guaranteed. That's helpful. Thanks. And maybe just pivoting to the U. S. Side, when you're looking at the Wink opportunity, could you provide a bit more color there as far as how you feel that you're tracking towards actually bringing new storage into service? What capital have you deployed? Or what customer conversations have you had so far to backstop new storage there? The storage is that's something we're working on there. We definitely have the land. We have the 160 acres. Our pipe our we have a pipe coming up from our Piodes system being connected in, and then we're laying out dual 16 inches connected into the facilities nearby. We continue to have discussions with parties there. But I don't if we contracted something, it would be later in the year or early next year. Those discussions have not proceeded as far as the discussions at Hardisty. That's helpful. And then the last one, if I could. With Moose Jaw, the expansion there, could you just frame for us, I guess, the uplift that you could see in the marketing EBITDA versus what you were expecting before now that you have this new capacity incremental capacity? Well, uplift in marketing, I mean, it's just the 25% expansion. So Moose Jaw marketing or the marketing organization around Moose Jaw will have about 25% more profit. Addition into that is they actually pay the fuel cost. So they'll see that savings in fuel, which is another one probably $1,000,000 to $2,000,000 a year. Yes, Jeremy, the only thing I'd add to that is, as you know, there is an ITP that the marketing business does play into the infrastructure business for operation maintenance and such as the facility. That's in the range of $25,000,000 as you can see in our financials. Commensurate with the increase in capacity, you will see an increase in that ITP. So that will show up in the infrastructure side. Any further increases, so assume that goes up by, call it, circa 25%. Any other increases that we would see would be reflected in that 20% to 30% range that we provided for Q3 marketing. That's helpful. That's it for me. Thanks. Thank you. And our next question comes from Rob Hope with Scotiabank. Please proceed. Good morning, everyone. First comments our first question is on Edmonton with Trans Mountain inching forward and you're available in there. Have conversations on adding some storage in Edmonton to serve an expansion of Trans Mountain started yet? Or will you need to see a little bit more progress there on the pipe? We have our 30 inches mainline connection into Trans Mountain, and we're well connected to all the incoming pipeline. But the customers, I think it's still kind of a wait and see there, Rob. Okay. And that's fair. And then just in terms of the pre construction activities at Hardisty, would those have occurred if you weren't well down the path on tankage discussions there? Or are those indicative of kind of a confidence that you're seeing in your contracting discussions there? And could we see you pursue other preconstruction activities? The first course was it was significant cost savings. That's the reason we moved forward with it. We are confident that we will use these tank beds within and contract these tank beds within the next year either this year or next year. All right. Thank you. Thank you. And our next question comes from Patrick Kenny with National Bank Financial. Please proceed. Yes, good morning guys. Just on the marketing performance, wondering if you can confirm for us whether you've locked in some cheaper butane supply for your blending operations, at least until through next March? And if this might represent any upside to your previous marketing guidance of $15,000,000 to $20,000,000 per quarter, even assuming mid cycle differentials going forward? As far as contracting butane, butane was pretty has been pretty beat up, especially early in the year. And we did contract some up early in the year at attractive pricing. We're still we still are in the spot market though on butane. We didn't go long on our butane purchases. So and so we're still in the spot market, but that has been part of the benefit of that $20,000,000 to $30,000,000 Pat, maybe I'll add to the mid cycle. The question on the marketing performance specifically, as you heard in the call, our expectation for Q3 is $20,000,000 to $30,000,000 in performance. We certainly are not going to move off of having mid cycle be our sort of expectation or what we would ask people to model in beyond that. Just to give a bit more clarity though, as we sit here today, if we were to provide guidance or an expectation to the Q4, it probably would be close to where we are in the Q3 certainly, just given some of the factors. So think of that being somewhere in the range of $10,000,000 a month or probably that $20,000,000 to $30,000,000 We're not in a position to provide that as we sit here today. But as we look through to the Q4, we don't see things changing materially off the Q3, certainly. Got it. Thanks for that. And then just at the Herc facility, with activity ramping up towards the 3 unit trains per day and given continued delay in additional pipeline egress at Hardisty, do you get the sense that customers are finally getting more serious about building some DRU infrastructure? And if so, any color you could provide on potential size, cost, lead time would be helpful. Thanks. Last year at this time, there was no real discussions with very many parties on the DRU. But we are in active discussions now with parties, both producers and refiners. We see them a really long term benefit on the refining side, especially down in the States where they can get that neat deal or that meet the neat bitumen that doesn't have the 30% condensate injected in it. The States are they're pretty long C5. Bellevue is trading 80% or less than around 80% or less than 80% of WTI. And the U. S. Production continues to grow in that C5 production along with all of the really light crude that's being produced in the U. S. So the U. S. Refineries are flushed with the lighter product and that neat bitumen gives them the capacity to keep their refineries running at full capacity. As far as size and we think we have a competitive advantage capital wise. We won't really state that right now, but we do believe we have a competitive advantage in capital because of our storage tanks, because of the 3 unit train, because of the pipeline property that we own, we think we have a considerable competitive advantage over most other players. Thanks for that, Steve. And just to confirm, would that infrastructure 100% Gibson owned or would it have to fall within the JV with USD? Yes. I've never said it was going to be 100%. I've always said that it would if we move forward with the DRU, it will be with our partner, USD. Yes. Okay. Perfect. And then just last Just on that one, I mean, if you listen to USD's call yesterday, they did provide some specifics. They're anything, probably a bit more descriptive on their calls, but they did talk about facility in a range of 100,000 barrels a day. And on their call, they said they expected it to take somewhere in the range of 28 months to build. So I'd encourage you to go look at their call as well, given Keith's prepared remarks. Great. And then last one here for yourself, Sean. Just wondering if you could provide a more color around the timing of refinancing the notes. Just wondering if the math goes around right now for both the 2022s and 2024s Or do you need to wait a little bit for the callable terms to step down over the next couple of years? Yes. No, thanks. So the next call period or the last call period for both or for the 2022s was July of this year. The first call period for the 2024s would be July of next year. I mean, it's fairly obvious that it's economic to refi those 2022s in the relative near term. So you'd expect that would be our plan, given where the call price is there, given it's near term to maturity. So it's extremely NPV positive to do that today, especially with those notes being 5.38. I mean, you're seeing BBB low credits getting financed on a 10 year basis in the last day or 2 even at prices less than 3.5. The 2024s, if we are to refi them today, it's probably in around NPV neutral. So that's something we'll continue to monitor certainly. At a minimum, I would expect that we would refi those at the next call period, which is July of 2020, where the cost to refi them goes down by about a half and the NPV of that trade goes up significantly. The other consideration for us as we think about it is just the pure capacity for us as a first time issuer in the investment grade market. Now I think doing a $900,000,000 offering in one swoop as our inaugural offering would be a rather large ticket right now. So in short answer, expect the 2022 is relatively soon. 2024s will likely wait until July of 2020, but we'll continue to market monitor what the market does. That is excellent. Thanks guys. You bet. And our next question comes from Linda Ezergailis with TD Securities. Please proceed. Thank you. Just a follow-up on your marketing. I don't want to belabor it, but how are you thinking of layering on hedges opportunistically? And do you see any liquidity out there? Or are you just focusing more on your short term opportunities there? If the opportunity does present itself, we do hedge some of the margin at Moose Jaw. We don't have any significant really any significant hedges on right now for the Moose Jaw itself. But if the opportunity would present itself, we would put it on hedges. Okay. That's helpful context. Thank you. And any activity in the U. S? There was some mention that some of your volumes there went up, but I'm assuming it's still relatively modest? Yes. There's nothing significant going on in the U. S. Right now. The size of the construction itself, which we're very excited about. On any marketing activity or anything like that, there's nothing drastically different than what we've done in the past. We continue to I think we've increased our lease purchases out there to 30,000 barrels a day, but that's still relatively insignificant. Okay. That's helpful context. Thank you. And maybe you can comment on the Enbridge open season for their mainline. How might Gibson be participating either to secure capacity for your Moose Jaw facility or how your marketing operations might choose to participate in that, if at all? Yes. We're definitely reviewing that. Protecting Moose Jaw is very important to us. Downstream marketing on Enbridge is not we've never been a real big shipper on Enbridge, so that's not a giant opportunity for us, but we will review that opportunity. But protecting Moose Jaw's earnings is extremely important to us. Thank you. Thank you. And our next question comes from Robert Catellier with CIBC Capital Markets. Please proceed. Hey, good morning guys. I just have one question left. I did notice some marketing volumes were pretty strong. I thought maybe that was related to the U. S, but judging by your answer to last question, it's probably coming from somewhere else. Can you provide a little bit more color on that, particularly with respect to sustainability? So I mean, you look at marketing margins, they're driven by Moose Jaw itself, which we'll see that expansion coming on in 3rd Q4. So we'll see marketing margins on from the refined products business move up. Then we did talk about the potential for blending butane. That's still strong through the second and third quarter and fourth quarter. We see that butane market still being depressed. Other activities or just marketing activities in and around our terminal at Hardisty Yes. What I'd say, I think the question was specific a bit to volumes as well. What I would say, Rob, is you'll notice that we did have a decent increase in volumes. And this goes to the structure of our business as well, where it's not all that volumetric dependent. So you would have seen a decent size if you looked into the details behind the numbers, you would have seen a decent size jump in volumes, certainly at our terminals, where that was underpinned by take or pay contracts. So even the volume was somewhat lower last year, we are still getting paid for it. So I would say, and the increase in volume is not something that I would view as being sort of either a risk or necessarily an opportunity just given the contractual nature of our infrastructure assets. Okay. Thank you. That was the color I was looking for. Thanks. Thank you. And our next question comes from Ben Pham with BMO Capital Markets. Please proceed. Hi, thanks. Good morning. I wanted to check your target of 2 to 4 tanks sanctioned PRAM. I mean, I think that's more kind of a high level way as you think about your growth. I guess you've always suggested Tompa Hill is the next potential growth target. So you just reading through thinking about your comments, are you thinking more maybe you won't get the 2 tanks this year, but you start to see a bit of a lumpy pickup in 2020? We've contracted 1 already this year. And we're pretty confident that we'll contract another 2 this year. Okay. Okay. So no change there. Okay. Just wasn't sure about your comment around Papa Hill being maybe into next year on sanctioning? Yes, there's other places we can build tankage though. Okay. All right, got it. Okay. And then on some of the questions around some pre work that's being done foundations, I mean, would you guys ever build storage uncontracted first in the front end, pick up a higher toll and then you get some visibility on securing that ultimately, you'd move ahead merchant first? We haven't done that. That'd be something that we would need to discuss with the Board before we would do anything like that. That's nothing that we have actually discussed with the Board. Okay. All right. And then the second topic, I wanted to dig in this provision that you made. And I wanted to clarify, I mean, in no way does this impact your tank operations. Is this simply just costs removing these samples that you found? All I can say is really what I said in my prepared remarks. From advice from counsel, we're not going to really talk more about that issue, but thank you for the question. Yes, it doesn't impact the operation of the facility though, indirect answer to your question. Okay. All right. All right. Thanks very much. Thank you. And our next question comes from Andrew Kuske with Credit Suisse. Please proceed. Thank you. Good morning. I think the question for Sean and I appreciate the color on your expectations on where you could place that into the market with the investment grade. I guess the question really is, clearly there's a financial benefit from lower interest rate costs, but are there other benefits that you get just from a counterparty standpoint as far as some of your operating agreements? And just the contracts you have, has it become easier to negotiate with people now that you've got the investment grade versus where you were before? It's really a commercial question, but absolutely. We would have viewed ourselves as being at least a pseudo investment grade credit profile previously. But for things such as posting LCs and credit that people will provide us or open credit, clearly, as an investment grade entity, that improves relatively materially because similar to bond pricing, it's sort of a formulaic thing where there's a step change as you move from investment grade from sub investment grade to investment grade. So absolutely, there are benefits on the commercial side as well. With respect to open credit, we get and requirements post LCs. Okay. That's helpful. And then if we just think about this a little bit differently and if you thought about having the investment grade and then maybe sourcing alternative capital, whether it be private equity or accelerate expansions, is that something you anticipate being easier? Should you go that route? I think a big we didn't talk about it in our prepared remarks, but another big benefit of getting investment grade is not just access to a much lower coupon and longer tenor, But in other is accesses to hybrid sources of capital. I mean to be abundantly clear here, part of our strategy is to be fully funded with the distributable cash flow or internally generated cash flow we have and our current capital plans, including the increase we spoke to today, we remain fully funded. So what that means is we don't need any other external sources of capital. To the extent that we had a customer come to us and say they want an additional 10 tanks and it took us above that fully funded status. One of the real benefits to investment grade is access to either the hybrid or preferred market, which are 2 non dilutive leverage neutral sources of capital. So as I would think of that as being the real benefit as opposed to being some step change with respect to private equity helping us source some of our capital. I mean, at the end of the day, I would expect that anything private equity would provide would be much more expensive than what we could do in either the term debt or the hybrid debt markets. That's great. Thank you. Thank you. And our next question comes from Robert Kwan with RBC Capital Markets. Please proceed. Good morning. I think you were generally in prior comments leaning this way, but you used the word stay from Moose Jaw, natural fit and the hedge or the physical hedge it provides you. So in terms of kind of looking at your business and stabilizing it, is Moose Jaw very much core to the business going forward? We've discussed that with the Board and we believe Moose Jaw is core to us on a go forward basis. Okay, got it. Moving to the DRU, I'm just wondering what are the plans, at least as it's on the drawing board right now, to get the condensate back into the 3rd party systems? Just on the DRU, what's the plan to get the condensate back into the 3rd party systems to be recycled? It really depends on the size, right? I mean the current size, we don't really need to get it into 3rd party systems. We can kind of use it. We can use it there at Hardisty with our additional customers. We don't need to get it into the pipeline. If we expand further, Bill, we'll need to connect into condensate pipelines headed to Ford. Got it. So I think it was 100,000 barrels a day, delved in, 70,000 out. So you could use the 30,000 then of Conte just to blend in to your activities in Hardisty? That can be used at the Hardisty area in Hardisty. Got it. Okay. And maybe just last then coming back to marketing, are you able to be a little bit more specific about what happened in June? Was it things that because we didn't it didn't look like there was a lot of vol in the month ahead market. So what types of things kind of happened in June to drive the big quarter? It really wasn't a June thing, Robert. It was pretty consistent about all 3 months. So I didn't see a big jump in June that caused the earnings stream. It was pretty consistent across all three months. Okay. But by the time you held your call, didn't you have 2 months in the bag given the months ahead nature? Yes. We didn't have quite 2 months in the bag. And what I would have said, we had the and it's similar to the visibility we have right now. We had the 1st month in the bag. We had what we thought was relatively good visibility in the 2nd month, and we had less visibility in the 3rd month. That second half or that second month materialized stronger than we expected, and June materialized stronger than we expected both. Really, the outperformance there was primarily in the crude marketing business. And it wasn't specific to one specific optimization strategy or one specific thing they do. It was just, in general, stronger almost across the board within that crude marketing business. I mean, as you know, Moose Jaw was down in the 2nd quarter. So that really, if anything, Moose Jaw would have been slightly below budget as we thought about it, visavis sort of what we talked about. We expected that in the quarter, but if you look at our budget at the beginning of the year, but it really wasn't the crude marketing business. Got it. Was it less than about kind of locked in activities where you were seeing things in that month ahead? And maybe were there just more kind of spot opportunities where you were seeing dislocations? Spot opportunities, majority. Yes. Okay. That's great. Thanks very much. Thank you. And our next question comes from Elias Foscolos with Industrial Alliance. Please proceed. Good morning. I've got a couple of questions. First one is related to CapEx for 2020. I believe I heard you were talking about $200,000,000 to $300,000,000 for CapEx? Or did I mishear that? No, that's correct. In Steve's prepared remarks, he said he would expect that our CapEx will be somewhere in the range of $200,000,000 to $300,000,000 We haven't formally come out with that. That's just based on sort of what we see from commercial discussions today and what we've sanctioned today. Okay. Is there any color that you can add on to that? And I appreciate if you can't. It's just a little higher than I would have expected at this point. No, I don't think we're in a position to provide color above that right now. Again, Steve talked about in his remarks, we remain confident in 2 to 4 tanks a year. He mentioned that it's a possibility of something like a DRU. And also mentioned that on the U. S. Side, commercial discussions were advancing well. So we'll come out with formal guidance at the tail end of the year as we do every year, and we'll provide more granularity at that time. But the comment on the $200,000,000 to $300,000,000 is not formal guidance. It's just based on what we're seeing today, that would be our expectation. Okay, great. The last thing is maintenance capital. That was a little lower than I would have expected. Would that be sort of a below average run rate? Or could you add some color on to what that might be like? And the reason I'm focusing on that is distributable cash flow. So our estimates on maintenance capital were $25,000,000 to $30,000,000 in the year. Maintenance capital is a lumpy thing. It doesn't happen perfectly through the year. So we still expect to spend that $25,000,000 to $30,000,000 in the year. Okay. That's it for me. I'll turn it back. Thank you very much. Thank you. And this concludes our Q and A session for today. I'd like to turn the call back over to Mark Itzchess for closing remarks. Thank you, and thank you, everyone, for joining us for our 2019 Q2 conference call. Again, I would like to note that we have made available certain supplementary information on our website, gibsonenergy.com. Also, if you have any further questions, please reach out to us at investor. Relationsgibsonenergy.com. Thank you, and have a great day.