Earnings Call: Q1 2019

May 7, 2019

Earnings release

Morning, ladies and gentlemen. Welcome to Gibson Energy's 2019 First Quarter Conference Call. Please be advised this call is being recorded. I would now like to turn the meeting over to Mark Hitesh, Vice President, Strategy, Planning and Investor Relations. Mr. Hitesh, please go ahead. Thank you, operator. Good morning, and thank you for joining us on this conference call discussing our Q1 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. This is another strong consistent quarter for Gibson Energy with adjusted EBITDA from combined operations of $124,000,000 adjusted EBITDA from continuing operations, dollars 118,000,000 and distributable cash flow from combined operations of $83,000,000 We've been able to continue to strengthen our already strong balance sheet and fund our dividend in infrastructure projects. Infrastructure had another steady quarter and continues to grow. The increase was driven from placing 1,000,000 barrels of Hardisty tankage and the Viking pipeline into service. Marketing was very strong and in line with the outlook we provided on last quarter's conference call. We are very happy when there is an opportunity to realize outside earnings from marketing. We use it to pay down debt and fund growth capital. And in terms of growth, we continue to execute our capital projects. Both the first tanks in the Hardisty Top of the Hill build out and the Viking pipeline were placed in service ahead of schedule and on budget. Our customers were able to benefit from the early use and we started earning early. With tankage, we realized the revenue as soon as it's placed in service as it's mostly from the lease fee. The pipeline, there can be a ramp up period. Throughput on the Viking pipeline has grown steadily since we placed it in service in December. It is now operating near its current capacity and consistent with our expectations. We have several low cost options to expand the capacity as needed. The expansion of the HURT rail facility also went into service in the Q1, increasing the capacity from 2 to 3 unit trains a day or about 180,000 barrels per day. This is fully contracted through our partner on a take or pay basis. All our capital projects under construction are proceeding very well. They are on budget and most are ahead of schedule. At this rate, we have a new project entering service each quarter across the next 4 quarters. We are currently performing a turnaround at Moose Jaw and hot work connections for the expansion project are being completed during the turnaround, allowing us to place the expansion in service without a shutdown. We expect the expansion will enter service at the end of the second quarter. Late in the Q3, we'll be ready to start up Piote East, including the connection into Wink. We've ordered the pipe and plan to start construction by the end of June. At Hardisty, there's 2,500,000 barrels of additional tankage under different phases of construction. We expect to place 4 tanks or 2,000,000 barrels of tankage into service across the Q4 of this year and the Q1 of next. If we have a good summer of construction, we could place the tanks in service a couple of months early. It's a bit early to say at this point as winter continues hanging on here in Alberta. As winter breaks, we will begin construction on the foundation of the storage tank we announced earlier this year. We are targeting Q4 2020 in service date for this tank. Ideally, we will build the foundations for the last two tanks at the top of the hill this summer. This will reduce cost as we leverage our ongoing work. We're also executing on the commercial side. As discussed, we sanctioned 1 tank so far this year. And as you heard us say at the Investor Day last month, we are very confident we will sanction 1,000,000 to 2,000,000 barrels of tankage per year over the next several years. Our confidence for this year and next is based on current commercial discussions. The U. S. Team is currently pursuing several exciting opportunities, both on the gathering front, around our pile gathering platform and on contracting tankage at Wing. We will remain measured in our approach, but are optimistic we will sanction projects through the balance of the year. As we talked about at Investor Day, a major accomplishment was the completion of our divestitures. We have sold all our non core businesses, leaving us with a very focused infrastructure asset base, and we achieved our targets on proceeds and timing. With our existing platform of businesses, Gibson Energy is in great position today. The projects we have under construction will drive 10% plus distributable cash flow per share growth through 2020. Our balance sheet is very strong with leverage and payout well below our target ranges. And we are very pleased to see the strength recognized by DBRS through our 1st investment grade rating. In summary, the results in the Q1 of 2019 were very strong for both our operational and financial perspectives. We will continue to execute. We are very focused on the delivery of our capital projects, and we expect commercial teams north and south of the border will keep securing new projects to keep our engineering team busy. Our financial position is very strong. Leverage and payout both remain well below target ranges. We will remain fully funded. The objective for the next couple of quarters is very clear. We need to keep executing on our strategy, keep doing what we said we would do. I will now pass it over to Sean, who will walk us through our financial results in more detail. Sean? Thanks, Steve. As Steve mentioned, we had a strong Q1. Results were very much in line with our internal expectations and our outlook remains consistent with what we outlined at Investor Day at the start of last month. I will say that we are very glad to have the dispositions completed and we expect to close Canadian Truck Transportation in the next couple of months. It also makes our business much simpler to talk about on our earnings calls with only 2 segments, one of which is very consistent quarter to quarter. In terms of the financial results, adjusted EBITDA from combined operations of $124,000,000 in the quarter was a $22,000,000 increase from the Q1 of 2018. On a more comparable basis, adjusted EBITDA from continuing operations of $118,000,000 in the quarter was $32,000,000 increase in the Q1 of 2018. Distributable cash flow increased $26,000,000 over the Q1 of 2018. Digging into the main drivers of the increases over the Q1 of last year, Infrastructure segment profit was up $6,000,000 with projects coming into service as Steve indicated and a $34,000,000 increase in contribution from marketing. On an adjusted EBITDA basis, this was partly offset by about $7,000,000 in foreign exchange losses and unrealized gains on financial instruments largely attributable to activities within the Marketing segment. On a sequential basis, marketing segment profit in the Q1 was a $16,000,000 decrease from the Q4 of 2018. Contribution from infrastructure was up $3,000,000 which is reflective of each of the new projects we placed into service only providing revenues for part of the quarter, meaning we will see the full increase in the Q2. We also had a small gain on the sale of the S North, which closed in February. However, most of the variance to the 4th quarter is explained by the $20,000,000 decrease in marketing as differentials peaked in the Q4 of last year. And while some may have thought that our market that our outlook for marketing on the last call was a bit conservative, the $61,000,000 that marketing earned was fairly close to the outlook. Where the WCS to WTI differential in the 4th quarter was nearly US40 dollars per barrel, it decreased to US12 dollars in the Q1 with the curtailment. As a result, most of the segment profit from marketing in the quarter was realized in January from positions put in place during the December cycle for 1 month for delivery. And with the differential for the Q2 looking like little average about US10 dollars as well as the turnaround at Moose Jaw during the quarter, our current outlook is that marketing will be towards the bottom end of the $15,000,000 to $20,000,000 per quarter mid cycle run rate we have previously discussed. As a result, the 2nd quarter should be the weakest of 2019 for marketing. That said, differentials are trading wider for the second half of twenty nineteen, likely needing to approach US20 dollars in order to support incremental crude by rail and we will also have to see the impact of the new Alberta government. To the extent we do see differentials push out towards $20 that would be upside likely pushing marketing above US20 $1,000,000 per quarter. Working down to distributable cash flow from combined operations, the Q1 results of $83,000,000 was effectively in line with the 4th quarter and as mentioned before, a $26,000,000 increase over the Q1 of 2018. In terms of notable items, G and A in the Q1 was a bit higher than our 2018 run rate as we incurred severance costs related to the departure of 1 of our senior executives. Also as part of our 2019 budget, we reviewed the allocations to the businesses. While these costs are flat or lower than 2018 on an absolute basis, the allocation change between corporate expenses and business unit segment profit results in a $1,000,000 to $1,500,000 increase in quarterly run rate G and A. With the strong results, distributable cash flow from combined operations for the trailing 12 months increased to $309,000,000 pushing the payout ratio down to 62% and further below our 70% to 80% target range. Similarly, debt to adjusted EBITDA of 2.3 times remains well below our 3 times to 3.5 times target. As we showed in our Investor Day materials, marketing moves to mid cycle levels for the balance of 2019 and as we continue to fund our capital program, we would expect our leverage and payout to be around the bottom end of our target ranges at the end of the year. To the extent marketing is above our mid cycle range, we should remain below our target ranges. And as I mentioned in my prepared remarks at Investor Day, through the divestiture of non core businesses, the continued improvement of our balance sheet and the strong consistent performance of the business, all contributed to our 1st investment grade credit rating, which we received from DBRS last month. This has already helped decrease costs in our credit facility and could further decrease borrowing costs if we were able to secure a second investment grade credit rating. In summary, the Q1 was very much in line with our expectations with both infrastructure and marketing right where we thought they would be. Importantly, we remain fully funded for our low sanctioned capital, our payout and leverage are well below target levels and the strength of the business will continue to build as we place additional infrastructure into service over the coming quarters. We are very pleased with how things are going and we'll look to sustain the momentum during the rest of the year. At this point, I will turn the call over to the operator to open it up for questions. Our first question comes from Jeremy Tonet with JPMorgan. Hi, good morning. Just wanted to kind of touch base on the Permian a bit more, and follow-up with what you're talking about at the Investor Day as far as really getting some gathering systems, getting the work behind that to secure that to backstop the potential for storage at Wink. Just wondering if you could provide a bit more detail there and how you see those conversations progressing with your customers And any change in your thoughts since the Analyst Day realized that's just a short while back at this point? I think I'll just expand it. We've ordered the pipe. The right of way is well long. We expect to place it in service late Q3. It looks like it's going to come in as expected or really near expected case on volumes. Really what we're chasing out there, Jeremy, would be kind of those bunts and singles. So those type of volumes that we're chasing would come on in 2,000 to 5,000 to 10,000 barrels a day, but not very much more not a large amount of incremental capital on top of that. But kind of just bunts and singles with high rates of returns. Great. And with the bunts and singles, is this kind of referring to potential other gathering systems beyond buyout, just to be clear or kind of Biote there? Just extensions out from Biote, Jeremy. That's helpful. Thanks. And Viking, I think you touched on there's a bit of a ramp there and there was also some kind of noise in the segment with regards to the ESN sale as well. Just wondering, how we should think about run rate for volumes in the pipeline segment given kind of those gives and takes there and where you see that progressing over the year? I think in our prepared remarks thanks, Jeremy, it's Sean here. In our prepared remarks, we talked about that the Viking pipeline is ramping up as we speak. I think they're at 75% right now. We'd expect that to continue to ramp up as we move through the Q2. I'd have to get back in a specific volume number, but that's sort of the quantum that we've been talking about. That's helpful. I'll stop there. Thanks for taking my question. Our next question comes from Rob Hope with Scotiabank. Good morning, everyone. Just want to continue on the Viking pipeline. So if I understand correctly, volumes were at 75%. When will you start looking at kind of adding some additional kind of horsepower there as an expansion of that asset or other gathering lines in the area? I would think it's probably going to be more in the 3rd or 4th quarter, Rob, before we do something. Many of those smaller producers, they've reached their limit at that 10,000 barrels a day limit. And so that's kind of slowed down their drilling. And then, of course, a lot of them got hurt in the Q1 of last year as far as cash flow. But we expect it to ramp back up and be running near capacity in the 3rd or 4th quarter. We can put some drag reducing agent in there and then we can put a small pump station to really probably come close to adding an additional 50% capacity pretty easy. All right. That's helpful. And then just more of a bit of a granular question. Just on the Q2 outlook for marketing, if it's at the lower end of the mid cycle economics, yet you have an outage at Moose Jaw as well as really tight diffs. I'm just wondering what would put you below that range in terms of a negative outcome? I mean, it's not really a scenario that we expect to see, Rob, to be candid. But I mean, for that to occur, we'd have to see differentials well below $10 for the entire quarter. And you'd have to probably be like Q2 where you'd have Moose Jaw out for at least a month of it. I mean, as we talked about on the call, even with Moose Jaw out for a month and differentials being below what we would think as being the sort of mid cycle levels, which if you remember is more in that sort of 12 ish dollar range, we still expect to be at that sort of lower end of the $15,000,000 to $20,000,000 So, struggle to really see where we would go materially below that in really any scenario when you take that into context. All right. That's helpful. Thank you. Our next question comes from Patrick Kenny with National Bank Financial. Yes. Hey, guys. Just on the Wink Hub here and thinking about your discussions that you may be having with some of the larger pipeline operators here to sign agreements to connect the 160 acres into those pipelines. Just wondering if you have an update on timing, when we might hear something on those connections? So we've signed I believe we've signed 2 connection agreements. We've got right of way that goes up into Wink and connecting into those facilities. Just like I said, I think we'll place those in service late Q3. Some of those pipes are going to come in, in the late Q3 too. So those export pipes. But we're not we'll be able to flow even if the export pipes aren't up because we're connecting to some of the infrastructure there that has capacity. Okay, that's great. Sean, appreciate the near term outlook here on the marketing with dips where they are. But just back to your comment around the strip pricing showing $20 a barrel kind of late 2019 into 2020. Just wondering if you're starting to layer on any hedges to sort of protect the upside the high end of your guidance range there, the $60,000,000 to $80,000,000 We have layered on some hedging because of the 3rd Q4 and the stronger pricing. But I can't say that we've hedged a tremendous amount, not as much as we hedged last year. Is there a target percentage that you want to be hedged kind of as you enter the second half of the year if differentials if strip pricing remains where it is? We don't have a target right now. It's we like that $20 to $21 So we would probably if it got above $21 we would start to think more serious about hedging a larger volume. I think we placed a lot of our hedges last year around $25 to $26 We lost a lot of money on those hedges, but we benefited on the actual physical flow. Yes. We don't have a specific target. I think what we try and do is remain rather fluid in around what we're seeing in the market and what we expect in the market as we move through the year. So not a specific target, but we'll continue to look for opportunities if we can to lock in like Steve said. Okay. Sounds good. And then just lastly, Sean, any update on your discussions with S and P or the timing where you might be under review for an upgrade? No real update from Investor Day. As you might imagine, I am in active dialogue with all of our rating agencies, including S and P. They normally do their annual review in August. Of course, we'd like them to take a look at the company sooner than that, just given the dramatic transformation we've seen and not just in sort of business profile, but really cash flow, quality and credit quality, quite frankly. So we are in active dialogue. But again, really what they do is out of our control. We can just try and work construct with them. So I'm still quite hopeful, but no real update from Investor Day at this time. Okay, that's great. Thanks guys. Our next question comes from Linda Ezergailis with TD Securities. Thank you. I see in your refined products you gained some market share. I'm wondering if it's reasonable to assume that continues or potentially trends even higher. Can you talk about some of the competitive dynamics in some of your refined products? Gaining market share, I would say, in Canada, the market has been weaker this year for our drilling fluids, just because of the down cycle in drilling in Canada. And where we've gained market share was probably in the Permian Basin, where we've moved a lot of drilling fluid. Yes, I think there's really not much more to add to that, Linda, unless you had further you wanted us to elaborate on. No. That's I guess we can just assume that it's a steady state going forward is reasonable? Well, what happens is during the Q1, what we do is we build considerable inventory in our refined product, such as our roofing blocks and our asphalt. We store that and then sell it and then we start to move it out late in the second quarter and into the third, Linda. Okay. And then so none of the working capital build was related to line fill or anything else going out on another part of your business then? Some was, but it was really kind of a joint between line fill and really the refined products that we had in storage really down in the States. We took out storage this year, which is a little bit different than we've done in the past and filled that storage for our roofing flux and our heavy asphalt. Okay. Thank you. And can you give us is there any update or change in your cash tax outlook for this year and beyond? We saw a little bit lower than expected, I guess, current income taxes, but you had a high actual paid cash tax. I'm just wondering if you can kind of walk us through the cadence of how it might unfold for the rest of the year and beyond? Yes, happy to. So I'll maybe touch on the high cash tax paid this quarter, if you recall. Just the way installments work for taxes, we actually guided people to using current tax last year, because the way we had budgeted previously didn't have that marketing outperformance, marketing outperformed that's largely taxable, didn't have to pay taxes last year, actually had about a $14,000,000 refund, but then had a large installment that was due for last year's performance in Q1. So that's the high cash tax payable. We really tried to get in front of that last year and guide people and they think that DCF to use current tax because of it. We did have some offsets in the Q1 here where cash taxes were somewhat less than what we would have otherwise guided or current taxes. As we move forward to the rest of the year, our guidance would remain consistent with what we have previously indicated to people, which is basically, I assume the U. S. Is not taxable and in Canada assume that our cash taxes or current taxes will be primarily off of our marketing business. So 27% times whatever your forecast for marketing and that's where we guide you from a tax perspective throughout the rest of the year. That's helpful. Thank you. Thank you. Our next question comes from Robert Kaller with CIBC Capital Markets. Hi, good morning. What are the opportunities or implications for Gibson if producers take up the railcar commitments that the previous government made, but the current provincial government wants to cancel? Robert, I don't see it as any real change. Our agreements with our contracts in place would remain in place. And any contracts USD might have would remain consistent. Okay. So you don't see any disruption where maybe the rail the cost of rail plummets a bit and then there's sort of half cycle thinking on rail costs? That wouldn't affect our business. We're not big in railing ourselves. So Yes. I was thinking more on the follow through impact on differentials. So you got cheaper rail and maybe differential payments, right? Yes. But maybe that pushes you down to the $18 versus the $20 to 21 that Right. So it's only a marginal impact if any? Yes. Okay. Just Steve, now that you have an investment grade rating, does it make sense to refinance any of the notes that are outstanding early or do you wafer maturities or for developments at the other rating agencies? Robert, I'm going to let Sean answer that. Maybe I'll take that one, Robert. Yes. Sorry, Sean. No, absolutely. I mean, if you look at so really, we only have 1 investment grade rating. So the catalyst for those sort of decisions will be the 2nd investment grade credit rating. But you hit it dead on the nose. I mean to the extent that we do get that 2nd investment grade credit rating, as I understand it or I'm being guided to, there's material interest savings for a new term debt issuance, somewhere in, call it, if you're thinking about our 5.25 percent, probably 175 basis points or something in that range depending on the term. If you look at the call premiums on our existing bonds, the math is not hard. Our 5.382022s, our callable next call period is in July. That's extremely economic to call, especially in the 3.5 ish range for a new 5 to 7 year issuance. The 2024s are less economic to call. So the extent that we were to get that second investment grade credit rating, we'd likely look to do something with the 2022s and then probably wait until it's a bit more economic to the 2024s. But that's all things we're looking at right now. Okay. That sounds promising. And then what's the thinking on preferred shares? Under what circumstances would you issue prefs? I know what point does it make sense to include prefs in the structure? What point does it make sense to include press in the structure? Right now, it's well, again, the catalyst there first would be the 2nd investment grade credit rating. I would think of prefs and hybrids as being sort of fungible products, just depending on the after tax pricing of each. We have been fairly clear though that we're fully funded. And so that's staying within our leverage targets and retaining using our retained cash flow. So where I could see the necessity for Preston, we absolutely think it's something that makes sense for a company like us, especially deploying capital primarily in the tankage. But that would be the extent that capital gets to a level that we don't we are not fully funded solely off of leverage in our leverage target range and our retained cash flow. So no necessity for prefs right now, but it is a fantastic tool as we move forward. But definitely need the 2nd investment grade credit rating. Okay. Thank you. Thank you. Our next question comes from Ben Hahn with BMO. Okay. Thanks. Good morning. On your infrastructure results, you mentioned a couple of different moving parts in the quarter. And I'm curious, what do you think your directional run rate would have been if you think about Viking phased in fully projects and then service and perhaps some of the curtailments easing a little bit here? I'll take that, Ben, and maybe speak to Matt if he wants. I mean, if you think about really what we're referring to, it's that the mid quarter sanctioning of number of projects, so that Turk, Viking ramping up in the 1,100,000 barrels. So from a run rate perspective, it's probably a couple $1,000,000 above where we are today. The only caution I would give there as we think about the Q2, we would have had a partial contribution from some of our PRD assets that we sold in the Q1 there. And so having sold that February 28, you will see that roll off in the Q2. And the second one being, if you recall, the Moose Jaw facility is basically that the ICP they pay comes down in the second quarter based on the fact that it's not available for the turnaround. And so from a Q1 perspective, I think a couple of $1,000,000 above where we were there. But again, I'd caution for the Q2, there are some offsets that we'll see. Okay. Okay. That's great. And then so when you then think about the full year guidance you guys have put out, there's a $20,000,000 range and it sounds like you're really hitting the midpoint of that. But more to check-in, what do you think are the biggest factors to think about when you think about that $20,000,000 range? Again, I mean, our infrastructure is incredibly ratable. That's why we're comfortable giving a range for this year and quite frankly, a range for next year and even a run rate as we exit next year. So there's not a lot of factors. I mean, we've already brought these in service early. As you know, we're bringing another 1,000,000 barrels of projects into service in Q4 of this year. And to the extent that that came in early, that could be some upside to that certainly. Volume doesn't play a tremendous part there, but if you did see symmetric volume metric revenue, that could drive it. And then also as we think about bringing on some of the U. S. Infrastructure initiatives we have that we expect to bring on sort of at the latter part of the year. That would all be sort of in around that, but absolutely remain confident within that sort of guidance that we gave for the infrastructure segment at Investor Day. Okay. And I noticed a question about taxes. Is there anything I think about in terms of taxes on your asset sale processes? No, no. We have been very efficient as we structured these asset sales. So we have largely there has been very little cash taxes as we've moved through them and we would expect that to be the same as we move through really what is the last asset sale that needs to close, which is our Canadian trucking business. All right. That's great. Thanks a lot, Sean. You bet. Thank you. Our next question comes from Andrew Kuske with Credit Suisse. Thank you. Good morning. I appreciate the timelines that you've given on the callable debt and your annual review with S and P. So let's just go into the assumption that you get the investment grade rating from 2 of the raters. How do you think that sets you up for really pursuing some of the activities in the Permian? Because that's pretty distinct from a U. S. Standpoint and you've got the operational excellence. So does that really change your offering from what you're pursuing in the U. S? I think that's more of a commercial question. I mean, if we think about our business development activities, I mean, to be clear, we are chasing what we view as being the highest quality project within being fully funded. But it's not like if we all had a bunch of extra funding capacity that it would change what we're doing in the U. S. But I think if I'm reading your question correctly, Andrew, it's more of a, does being fully investment grade make us more attractive as a counterparty? Is that the genesis? That's essentially the essence of it that you're a more attractive counterparty to deal with. Yes. I don't see that as a big driver in our negotiations north or south of the border. It may help us on it will reduce some of our LC costs potentially in our marketing business, but that would be really the largest impact. Right now, I don't I have not seen that impact any new commercial negotiations, Andrew. Okay, that's helpful. And then when you look at some of the transactions that have happened in the market, there's been quite a few on the year to date in the midstream space. And you think about the investment grade rating that you'll have on all likelihood in the future, how do you think about your relative valuation versus the transactions that have happened with generally lower quality assets versus your ability to actually underpin longer term debt at much cheaper than you've got now. How do you think about that dynamic or disconnect? I mean, so there's always going to be a bit of a private public disconnect or the extent there is. I think all I'd say there is we look at where we trade certainly visavis some of our peers and we see our cash flow quality, we see our credit quality and we see have our absolute visibility to delivering the growth we've talked about in a very risk controlled manner and the fact that it is doing exactly what we're doing right now. So we think if you think of us relative to our peers, certainly that we are there's still room for multiple compression, if not even growth beyond that. So I'll probably leave it at that as opposed to commenting specifically on sort of public private multiple differentials. Okay. That's great. Thank you. Our next question comes from Robert Kwan with RBC Capital Markets. Great. Good morning. Just kind of digging in around what you're seeing for additional tankage in Western Canada and the nature of the customer discussions. Just have you seen any changes as you think about a few things around earlier this quarter, the Line 3 delay, anything coming out of the Alberta election as well as Keystone XL and TransCanada acknowledging it's missed the summer construction season this Robert, we're still we said 2 to 4 at the Investor Day, which was several months ago. Yes, a month ago. I would say we're still at 2 to 4. Obviously, if those pipelines move forward, that would accelerate additional tankage. But I think currently, we're still at 2 to 4 this year and feel good about 2 to 4 next year too, Robert. So anywhere from 1,000,000 to 2,000,000 barrels this year and next year. And I guess, Steve, just by to clarify, by virtue of you talking about pipelines going ahead, driving more storage. I guess the nature of the discussions really are customers that are looking for the storage for those future expansions rather than storage to stage barrels and the optionality trying to figure out how they can just get any barrel out at this point? It's really both. I mean, we're having discussions with obviously, we're having discussions with the end users, the big U. S. Refiners. And then we're also having discussions with oil sands customers. We're having discussions on both sides of the fence. And we think we can continue to grow without those pipelines, that 2 to 4, but I think the pipelines would accelerate it. Got it. And then just to finish, how should we think about the economics to you from the HERC volume expansion just given the way the agreement works between you and USD? Is it really just fee based volumes through your portion of the assets? Is there upside there? How much capital did you put out just to support the expansion? We haven't really talked about the capital number. But the way to think about the cash flows similar to the initial contract, it's really all take or pay. And so somebody signs up for space, they don't use it at all, we get paid our take or pay amount. They do use it, we get paid the same. Where we are and so if you recall, Robert, the original one is we actually own the pipe going to the facility. USD owns the facility, the original contract, the take or pay revenues were split based on capital contribution, not quite fifty-fifty, but for all intents and purposes, it is a relatively even split. The way to think about the expansion is very similar. It actually took a bit less capital for us on the pipeline side to allow for the expansion. So we actually topped up our capital a little bit to maintain our pro rata share. So as you think about the contribution is to take or pay. And then the other part, which is distinct from USD is to the extent that there's additional volumes that are moving through that terminal, which there would be with the 3rd unit train, that volume most likely needs tanks. And so that has helped drive additional tankage demand that we've seen. Got it. Okay. And you did top it up. Sorry, go ahead. Yes, we did top it up. But Robert, the project economics are very, very good here because this is really just an expansion project and it's all with 0 terminal value when we look at the economics. Perfect. Okay. Thank you very much. Thank you. And I'm not showing any further questions at this time. I'd like to turn the call back over to Mark. Well, thank you everyone for joining us for our 2019 Q1 conference call. Again, I would like to note that we have made certain information available on our website atgibsonenergy.com. If you have any further questions, please reach out to us at investor. Relationsgibsonenergy.com. Again, thanks for joining us and your continued support of Gibson Energy. Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.