Earnings Call: Q4 2017

Mar 6, 2018

Good day, ladies and gentlemen, and welcome to the Gibson Energy 2017 fourth quarter and year-end results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. If anyone should require operator assistance, please press star then zero on your touch-tone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host for today, Mark Dickinson, Vice President, Investor Relations. Mr. Dickinson, you may begin. Thank you, Sonia. Good morning, and thank you for joining us on this conference call discussing our 2017 fourth quarter and full year operational and financial results. On the call this morning from Calgary are Steve Spaulding, President and Chief Executive Officer, and Sean Brown, Chief Financial Officer. I'd like to caution you that today's call contains certain forward-looking statements that relate to future events or to the company's future performance. These statements are given as of today's date, and they are subject to risks and uncertainties as they are based on Gibson's current expectations, estimates, judgments, projections, and risks. Actual results could differ materially from the forward-looking statements expressed or implied today. The company assumes no obligation to update any forward-looking statements made in today's call. Additionally, some of the information provided refers to non-GAAP financial measures. To learn more about forward-looking statements or non-GAAP financial measures, please refer to the December 31, 2017 management discussion and analysis, which is available on our website and on SEDAR. Now, I'd like to turn the call over to Steve. Thank you, Mark. Good morning, everyone, and thank you for joining us. As we close out 2017 by reporting our operational and financial results for the year, I think it's important that we recognize that 2017 was the start of a dramatic transformation of Gibson. We're very pleased with the progress we've made and what we see on the horizon. When I joined the company in June, Gibson had already taken the first steps on our current path through the sale of the industrial propane business. As we worked through our strategic review of the business, it quickly became clear we needed to exit our U.S. Environmental Services business. These are among the first steps to make Gibson a more competitive investment proposition for the Canadian energy infrastructure space. As we outlined at our Investor Day just over a month ago, we're going to accelerate the shift in the business to an oil infrastructure-focused company with high-quality cash flows. We also want to have a business that delivers an attractive growth profile on a per-share basis, which will underpin a secure and growing dividend. What hasn't changed is that our terminals, particularly Hardisty, are the heart of this company. At Hardisty, we have a strong competitive position that is due to our existing connectivity to all the inbound and outbound pipelines, plus exclusive access to the only unit train facility. As I spoke at Investor Day, we expect the oil sands production will continue to grow through small to medium scale brownfield SAGD projects and the debottlenecking of existing projects, adding anywhere from 20,000-50,000 barrels a day. Perhaps further evidence that oil sands players intend to keep growing over the long term is a recent application by Suncor for their Lewis project, which will add 160,000 barrels a day over 4 stages in the latter part of the next decade. In September 2017, we sanctioned the construction of an additional 1.1 million barrels of tankage at Hardisty and expect to realize an EBITDA investment multiple of 5-7 times on these types of projects, which is consistent with the other tanks over the last several years. This January, we placed two tanks in Edmonton in service, adding 800,000 barrels of capacity ahead of schedule and below budget. We remain confident we can sanction at least 1-2 tanks per year on a run rate basis in the current price environment, with the potential to increase with higher oil prices or if continued egress concerns result in producers seeking more security by extending their available residence time and adding additional storage. This confidence in the 1-2 tanks or greater is also predicated on our current commercial discussions with existing and potential customers. We are confident that a portion of these negotiations will lead to the sanction of additional tankage over time. We also appreciate the need for Gibson to grow beyond incumbent tankage opportunities and to fully surface the value within our asset base. At Investor Day, we talked about several opportunities we see, so let me provide some color on the progress we're making. In terms of additional opportunities inside the fence line, similar to our tankage opportunities, these conversations are ongoing as several customers have indicated an interest to add additional services. Again, typically, these are the 5- to 10-million-barrel opportunities, but they add up over time. Perhaps one tangible example that we can grow beyond tankage is the CAD 50 million Viking pipeline project that we sanctioned a few weeks ago. When we talk about leveraging the core assets while being commercially and customer-focused, opportunities like the Viking pipeline are a product of that. Energy infrastructure can be a competitive space for investment opportunities, and I believe Gibson Energy can compete, and more importantly, we will win. While $50 million may sound like a small number relative to our peers, putting it in context, it represents one-third of our target capital investment per year. The underlying economics for this project are strong, and we like the cash flow quality and the basin. We like the potential of increasing that capacity over time. We continue to actively evaluate other pipeline investment opportunities in Western Canada and seeing the Viking project as really a first step. In terms of our U.S. strategy, in 2017, we canceled our exclusive use agreement with respect to our injection stations with a third party. This agreement prevented us from building out our buy-sell business, and it granted that third party a 25-mile area of exclusive use around our injection stations, really blocking the growth of infrastructure in the U.S. As part of this focus, I'm pleased to say that while our strategy in the U.S. is still in early stages, there's meaningful progress being made. As we talked about at Investor Day, we intend to focus our U.S. presence strictly on the Permian and the Scoop Stack, where we have a competitive advantage through our injection stations located on some of the most important egress pipelines. These two basins can grow 1 million barrels a day in next year, which is about as much as Western Canada is expected to grow in the next 10 years. For this reason, we certainly believe there will be opportunities, and we will execute on them. As part of this focus on the Permian and SCOOP Stack, we are continuing to see month-on-month increases in our load counts in our trucking business, with volumes in February in these core basins approximately 25% higher than any time last year. We are still in the early stages of building back our $10-$15 million EBITDA business, but are encouraged that we're winning new business. It's important to be clear that our U.S. strategy is focused on securing infrastructure opportunities, focused on gathering systems rather than building out a large trucking presence. One of the critical elements to our strategy is to have the local relationships necessary to win the business. While I have done a lot of business in the U.S. in both these target basins, I'm very glad we've been able to hire a very talented vice president of business development in the U.S. We've only had Oren on the job for two months, but the quality and quantity of opportunities he's surfacing provides optimism that we'll be able to sanction some capital investment opportunities this year, which would be ahead of schedule. As you've likely noticed, I believe it's very important that we have the right people in the key roles and that we have the right organizational structure. Toward the end of the year, we made a series of changes to drive commercial focus throughout our organization and remove any previous silos that were remaining and place more emphasis on the producer, our major customer. We've also removed extra layers and sought to decrease the number of senior leaders as we move toward a more innovative and streamlined organization. As we said before, these changes will result in a cash and share-based cost savings of between CAD 15 million to CAD 20 million per year on a run rate basis. Over time, I believe this will also have other cost-saving benefits, as I've found from my experience that people spend money, and with less people, you do the project that you really need to do and avoid the ones that are not required. We expect that we will continue to provide opportunities to reduce costs in each of our businesses, and we're thinking about how we will grow our distribution cash flow. When we think about how we'll grow our distribution cash flow, cutting costs has a direct impact and is something that is within our full control. While we will continue to drive costs, the other benefit we are seeing from our organizational changes is the quality and the execution on our opportunities, both in our wholesale segment and on our commercial front. We are seeing a difference from the changes we've made. To conclude my comments, what I want to leave you with today is that we see many indicators that the transformation is taking hold and we're starting to turn the corner. We are confident in our ability to grow 10% a year through 2019 and are already taking steps to secure opportunities that will drive that from 2020 and beyond. I will now pass it over to Sean, who will walk us through the financial results in more detail. Thanks, Steve. As Steve mentioned, from a financial perspective, we had a strong 2017 with continuing infrastructure segment profit, total segment profit, adjusted EBITDA, and distributable cash flow all increasing meaningfully over 2016. Looking to our strategy, one of our achievements in 2017 was that over 75% of our segment profit was from infrastructure, with approximately two-thirds from terminals and pipelines. As a result, we are well positioned to reach our targets of 85% infrastructure and 75% terminals by the end of 2019 through additional infrastructure growth and as we divest of non-core businesses. As Steve mentioned earlier, Gibson is undergoing a dramatic transformation with the shift to infrastructure driving a material improvement in the quality of our cash flows, the security of our dividend, and the strength of our balance sheet. Before speaking to the results, please let me note that as we progress in the disposition process, certain businesses will be classified as held for sale or discontinued operations, so the geography may change a bit between quarters. To provide the most consistent comparison between periods and to focus on the results that are most indicative of where the business is heading, we'll generally speak to our results on a continuing basis rather than a combined basis. The exception to this will be distributable cash flow, which we'll continue to consider on a combined basis. Inclusive of divested businesses for the period we held ownership, as this is the most indicative of the cash generation by our operations and the amounts available for distributions. Turning to the financial results, adjusted EBITDA from continuing operations of CAD 278 million for full year 2017 was a 14% increase over the CAD 244 million earned in 2016. While each of the segments provided a higher contribution in 2017 than in prior year, CAD 36 million of the CAD 46 million increase in total segment profit was from the infrastructure segment. This increase within infrastructure was largely driven by additional revenue from the new tanks commissioned in the fourth quarter of 2016. Partly offsetting the increased revenue was a couple of one-time items with a CAD 4.6 million revenue adjustment and the recognition of CAD 2.3 million in environmental remediation costs, decreasing infrastructure segment profit by approximately CAD 7 million in the fourth quarter of 2017. In our logistics segment, full-year segment profit was about CAD 3 million higher in 2017 than in 2016, with contribution from Canadian truck transportation increasing approximately 25% as a result of stronger margins and a modest increase in volumes. U.S. Environmental Services was up $14 million or about 140%, reflecting an improvement in water hauling volumes and margins in the SCOOP, Stack, and Bakken. Partly offsetting this was a weakness in U.S. truck transportation as we ended the exclusive injection station relationship with our largest trucking customer to transition to a new business model, leading to a 27% decrease in trucked volume for the year. Contribution from the wholesale segment improved by CAD 6 million in 2017 relative to 2016. Refined products saw a meaningful improvement in 2017 as the drilling fluids and roofing flux markets both strengthened. Partly offsetting the strength in refined products was NGL Wholesale, where we continued to see narrower winter-summer spreads, reducing profitability of our propane activities. Crude wholesale in 2017 was generally in line with 2016. Looking at the fourth quarter, our 2017 adjusted EBITDA from continuing operations was CAD 82 million relative to CAD 84 million in 2016. Contribution from infrastructure was flat from the fourth quarter of 2016, as additional tankage and service was offset by the negative impact of the CAD 7 million in one-time items as already discussed. Another driver of the decrease was a lower contribution from logistics due to ending our exclusive injection station relationship with our largest trucking customer in the U.S., as already discussed, as well as weaker margins in Canadian truck transportation. Turning to distributable cash flow from combined operations, the CAD 184 million in 2017 was a 39% increase from 2016, while CAD 65 million in the fourth quarter of 2017 was also 35% ahead of the CAD 48 million earned in the comparable quarter last year. On a full year basis, the increase in our continuing business was effectively offset by the sale of industrial propane, with decreased financing costs and de minimis cash taxes in 2017 accounting for the majority of the improvement in distributable cash flow. Through the refinancing of our notes and repayment of debt over the course of 2017, aggregate financing costs were CAD 17 million lower in 2017 than 2016. On a run rate basis, interest costs were reduced by over CAD 35 million, while improving our debt maturity profile with the first series of notes due in 2022. Additionally, the realized foreign exchange loss from the repayment of notes significantly reduced our taxable income in 2017. On a payout ratio basis, over the full year of 2017, we are at approximately 100%. As we talked about at our Investor Day, we expect that our payout will be at or below 100% as we work through our dispositions. We are confident that the high-quality cash flows from our infrastructure segment will continue to underpin the current level of our dividend, and the payout ratio will continue to decrease towards our target range of 70%-80% as new projects are placed into service and cost-saving initiatives are realized. Total growth capital investment during the year was CAD 157 million, inclusive of CAD 59 million in the fourth quarter. Over 90% of growth capital was incurred in the infrastructure segment as we advanced the expansions of the Edmonton and Hardisty terminals. The decrease in spending in 2017 relative to plan was a result of both cost savings we realized on construction at Edmonton, as well as the timing of when capital is incurred relative to initial estimates. As Steve mentioned, the Edmonton expansion was placed into service at the start of the year ahead of schedule and under budget. We continue to expect the Hardisty expansion will come into service in Q3 2019, with the project trending to be on or ahead of schedule and at or below budget costs. For 2018, with the sanction of the Viking Pipeline project, we updated our 2018 growth capital outlook to be between CAD 165 million and CAD 205 million, implying that our capital investment in 2018 will exceed 2017 based on the projects we have sanctioned today. We continue to seek additional investment opportunities with the potential to invest up to CAD 250 million in 2018. Maintenance capital in 2017 was CAD 28 million. We expect to be in line or below those levels in 2018 as we focus on driving down costs and divest of several more capital-intensive businesses. We remain well-positioned to fund our capital program with significant available capacity in our revolving credit facility. Leverage at the end of the quarter was just under 4x trailing 12-month pro forma adjusted EBITDA. As we outlined in our financial plan at Investor Day, although our leverage is currently higher than our target range, we have comfort as a result of our high quality of cash flows and fully funded capital plan. In particular, the majority of our EBITDA is from our steady, highly contracted infrastructure business, and our limited cyclical businesses are already at or emerging from trough earning levels. We expect our leverage metrics will remain elevated above target through 2018, but will move towards our target range of 3-3.5 times as a result of the additional tankage that will come into service in 2019, as well as improvements in EBITDA as we focus on our cost structure. As we talked about at Investor Day, we view our capital program through 2019 will be fully funded through the $275-$375 we conservatively expect to receive from our non-core divestitures. With respect to our non-core divestitures, the sale of ES South continues to progress very well, and we believe we will be in a position to announce a transaction in the first quarter and are confident we will be able to close in the second quarter. As part of the realignment of the U.S. business, we are rationalizing our non-core injection stations and trucking assets. We launched this realignment at the start of February and are encouraged at the interest for these assets from potential buyers. We've received multiple bids and are hopeful we can close certain regional divestitures through the second or third quarter. The divestiture of NGL Wholesale is progressing well, and we continue to target a third quarter closing. Between U.S. Environmental Services and NGL, we'd expect to have our 2018 capital fully funded. Looking to 2019 funding, we are now in the preparatory phase with respect to our Canadian truck transportation divestiture and expect that we'll put that into the market sometime in the second quarter of this year, with the potential that we are ahead of our mid-2019 target. Overall, we are very happy with how the divestiture process is going and believe that we will meet, with the potential to beat, both our aggregate proceeds range and our timeline. We are also very pleased to see yesterday's announcement by S&P that has upgraded its outlook for Gibson to positive on the back of our infrastructure-focused strategy. We are also encouraged by S&P's upside scenario, under which our credit rating could be upgraded as we continue to deliver on our strategy in terms of executing our divestitures and securing organic growth that increases our weighting towards take-or-pay and stable fee-based cash flows. Looking ahead to our first quarter results, we want to remind everyone that we will be early adopting IFRS 16, as we had previously indicated. There is no impact to distributable cash flow from this adoption. However, the non-cash component of both segment profit and EBITDA will be approximately CAD 55 million per year higher or just under CAD 15 million a quarter. In our business, the majority of the lease costs relate to rail cars in our wholesale segment. Of the approximately CAD 40 million in lease costs within wholesale, about half are in our NGL business. To provide an example, we expect that segment profit in wholesale in the first quarter will be between CAD 20 million and CAD 30 million, including the impact of IFRS 16, which would be comparable to the CAD 20 million-CAD 30 million we talked about as our expected range for the fourth quarter of 2017 without IFRS 16. I would note that to the extent that differentials remain wide, there is potential upside in our wholesale segment over the course of the year, primarily through wider margins in refined products. In all, operational performance of our business remains strong, and we continue to improve our financial position while advancing our strategy to focus on growing our long-term, high-quality cash flows within the infrastructure segment. At this point, I will turn the call over to the operator to open up for questions. Thank you. Ladies and gentlemen, if you have a question at this time, please press star then one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. Our first question comes from Robert Hope of Scotiabank. Your line is now open. Hello? This is Robert Hope of Scotiabank. Your line is now open. Can you hear me? Yep, we can now. Okay. All right. Sorry about that. Good morning, everyone. Just in terms of tankage opportunities at Hardisty in Edmonton. With the recent widening of differentials and I would imagine storage levels picking up, are you seeing, I guess, A, additional interest from producers for additional tankage opportunities that we could see cross the line in the near term? And then, B, have you been able to clip incremental margin in any way due to those dynamics as well? I'll address that one. This is Steve. We have several opportunities that we're chasing there at the terminal. There's opportunity to gain market share at the terminal. There's opportunities around the rail-driven opportunity, which is part of that spread, so people expanding their use of the rail terminal and adding additional storage. Then probably a focus with some of the big downstream players that are wanting to add storage there at our Hardisty terminal. As far as specifically taking advantage of the opportunity within our infrastructure asset, no. That's very much a steady business. We have seen very little impact to that business from the spread itself. It's still very early in the process as far as people adding additional storage because of the impact of the pipeline maintenance that occurred and because of Fort Hills coming on as we speak. All right. That's helpful. Just as a follow-up, the Viking Pipeline kind of seemed to be exactly what you're pointing to at the Investor Day in terms of expanding kind of the reach of your terminals. Is that the low-hanging fruit for 2018? Are you looking at additional investments probably further down the line? Could we expect some additional movement in 2019 there? That's a good question. That one we were pretty confident at Investor Day. We did hold it back because it wasn't quite wrapped up at that time. Of course, we do continue to drive for opportunities around that Hardisty terminal and development out of that Hardisty terminal. Probably other opportunities would be in the U.S., really in that Delaware Basin and the Midland Basin right now. Those would not be very large projects in the U.S. All right. I appreciate the color. Thank you. Thank you. Our next question comes from Linda Ezergailis of TD Securities. Your line is now open. Thank you. It's interesting to note that S&P is already acknowledging all your initiatives by revising your outlook to positive. Maybe you can provide some context around some aspects of the plan that you're presenting to them in terms of your base case scenarios and sensitivities around upside, downside. Specifically as it pertains to the dividend, I'm assuming that your base case plan presents it as flat for the next number of years. Did you have a discussion with them under what scenarios and when might you consider increasing it? Under what sort of unusual scenarios would the debt rating agencies expect you to reassess the appropriateness of that level? Thanks, Linda. There was a lot in that question. I'll address. Absolutely we were pleased to see the announcement by S&P yesterday, as you note, is reflective of the change in business mix that we have seen certainly over time and continue to see through the strategy. What I would say is that was an S&P-initiated exercise. Their upgrade, or sorry, their move that they made was not as a result of us going in to see them recently. That was a result of sort of them taking a look at what we talked about at the Investor Day. I'd imagine getting some feedback from investors, and just reflecting some of the changes we had made. It's not like we had gone in recently and provide them substantial scenario analysis. Typically, we do go in and see them sometime in the first half of the year and still intend to do so. Specific to your question around sort of upside, downside, they would've received, when we last went in to see them, certainly, and even more recently, our budget for the year, which I think, as I've said to people, is quite conservative, especially as we think about our wholesale segment, which as I noted in my prepared remarks today, we do see some upside on. With respect to sort of different dividend scenarios, we didn't present to them any different scenarios that would contemplate an increase, decrease in dividend, because we didn't give them recently any numbers sort of beyond the 2018 timeframe. Okay, thank you. Maybe as a more detailed question, can you help us with understanding what sort of expectation for cash tax trends you would have the next couple of years as well as maintenance capital? Yep. Absolutely. From a cash tax perspective, we actually expect it to be relatively de minimis in 2018, once again. We'd expect it to be relatively close to call it zero in 2018. On a run rate basis, we would expect that probably be closer 2019 and beyond in sort of the CAD 10 million-CAD 15 million range. From a maintenance capital perspective, as I had in my prepared remarks today, I'll just get an exact number, CAD 28 million was the number for 2017. Our budget would indicate a number pretty close to that for 2018, but we would expect that there certainly is some opportunities to improve that. Think of that probably closer to the CAD 25 million range as we work through. It'll depend partly on sort of the timing of the divestitures as we move through and the continued focus on cost savings, which, in our mind, includes maintenance capital that Steve's talked about really since he's joined the business. Okay. 2019 plus run rate? Yep. CAD 25 million as well? Yeah. Think of it 2019, CAD 25 million or less is the way I would think about it. Great. Thank you. Thank you. Our next question comes from Robert Kwan of RBC Capital Markets. Your line is now open. Good morning. If I can come back to rail, I'm just wondering if there's any update on the recontracting side of things, and Steve, you alluded to it a bit just with potential for expansion, but as well any discussions you're having around expanding the infrastructure and the facility itself with your partner? Our main focus there is not to expand first, but actually to recontract the existing contracts. There has been considerable discussion that's really been led by our partner. We're starting to get involved, and we've seen significant increase over time in the rail use. Right now, I believe that our rail facility is being held back as the rail companies start to staff up and bring in the power. They're not going to do that without long-term commitments from our customers. That commitment is much larger than the commitment when you look at as the rail facility commitment. We believe that the two commitments combined, we will see some longer-term extensions of those agreements relatively within the next several months. Got it. Maybe just to finish on the U.S. Environmental Services sale. In your disclosure, there's some statements around structure that you've agreed upon. I'm just wondering if you can elaborate on what that might mean and if it refers to the form of consideration, cash, papers, or deferred payments. As well, did S&P know what the price is prior to their action yesterday? Thanks for that, Robert. I'm not going to comment specifically on structure. We would anticipate with respect to sort of your direct question, that it'll be all cash or largely cash consideration. I would say the structure comment within there was probably more around the vagaries of the accounting assessment that we had and the different tests you have. If you went through the note, it's whether or not it was held for sale at year-end and what's happened since then. The determination was made by management in conjunction with our auditors that it wasn't held for sale at year-end. Subsequent to that, it would have met the test, and the structure of the transaction is one of those. I wouldn't read into that specific part of it overly, but that being said, it is contemplated to be all cash consideration. With respect to the rating agencies, again, there hasn't been a very recent update with them, but we have kept them updated as we've moved through the process, and they are aware of what we expect the value of that business to be. Okay. The realized value. Oh, sorry, Sean. It was S&P move based on the expectation not knowing the price that you've agreed upon? No, no. Sorry, Robert. We've kept them updated as we've moved through the process. They are aware of what we would expect the price to be for ES South. Okay. That's great. Thank you very much. Thank you. Our next question comes from Jeremy Tonet of J.P. Morgan. Your line is now open. The line, the CAD 250 million potential growth CapEx for 2018, and what kind of projects that could entail. Sorry, Jeremy, you cut out at the beginning. It's Sean here, but I think your question was, our capital guidance is CAD 160-CAD 205, but you also note the potential for CAD 250 million in growth capital in 2018. I think the question is, what are the type of projects that could push that number up to the CAD 250 million? Is that- That's correct. Sorry. You cut off at the start. Yep, that's correct. The 250, our guidance really is around that 165 range. To 205. To 205. To push up around to 250, that would be really successful, probably build out a tankage in the Hardisty area. That would be probably our biggest opportunity right now. The things in the U.S. would be relatively small. We're talking 10s and 20s. Probably our Hardisty asset would be our main focus there. Yeah, I think Jeremy, from a large scale, as Steve said, it would probably be in and around Hardisty and initiation of either new tank builds or some of the plumbing in the facility. As you are aware, and I think your question was specific to what are some of the larger scale projects that could increase it. As we think about the ability to get up to that 250 number, I think certainly, some of the smaller scale things is what could push it up as well. As Steve alluded to, that would be being successful in our U.S. strategy, through 2018 and actually deploying some capital into the infrastructure side there or even some of the smaller opportunities inside the fence line at Hardisty and/or Edmonton. The 250 number could be achieved either through the announcement of something more material or, equally likely, is just through small scale opportunities that we chip away at through the year. Okay, thanks. Could you update us on the progress for the Moose Jaw strategy realignment? That's going very well. We continue to have negotiations with several parties when it comes to that kind of take or pay tolling agreement across the facility. Most of all of the cost cutting at the facility has been done. We see that transformation really kind of going forward. We're currently reviewing a small project there to expand the facility. Approximately 20% on a go-forward basis. Okay, thanks. Just one last one. Could you share the expected multiple for the Viking pipeline project if you've given it? We've talked about the Viking pipeline in the base case being kind of in the 8-10 range, Jeremy, and then if we can fill up the pipe, we think that we could get into that 5x or 7x EBITDA range. Great. Thanks for taking my questions. Thank you. Our next question comes from Ben Pham of BMO. Your line is now open. Hi. Thanks. Good morning. On that last question on the build multiples, you mentioned 5-7x today, a bit of a notch difference than the 6-8x you mentioned at the Investor Day. Wanted to more ask what's driving that change? Also given the take or pay nature of the tankage, more maybe a bit of context on what would drive the high and low of the range. Thanks, Ben. Appreciate that. As we talked about previously, the 5-7 is really consistent with where the build multiple has been sort of throughout. Immediately post-Investor Day, we had put sort of the 6-8 specific to those tanks in there. To be direct, in the 6-8, I don't think that was a change in messaging. We have had a philosophy that we certainly brought forth that we're looking to underpromise and overdeliver. The 6-8 was really a conservative view. If you looked at the specific multiples there, one of them was sort of at the very low end of the 6, and one of them was at the sort of 7 range. If you think about the 5-7, still very much in line with that. Nothing really inconsistent with what we've had before other than through Investor Day, again, was looking underpromise, overdeliver, take a conservative lens towards things. Really no change in build multiples from today's messaging from what we had brought forth at Investor Day. Can I then follow up on the ranges of returns? Is that included? Can address that one. Robert, where the range of the returns are really depend on the build-out of the facilities. Many times, when we build these facilities, we'll build the piping infrastructure and the retaining infrastructure, so we can build three to five tanks within that facility, kind of within a defined area. If we build just one or two tanks, that can be up in the higher multiples. When you build out those final two tanks, that can drive you down into that five and six multiple. Okay. Does that help you, Robert? Yes, it does. Ben. I'm sorry. Yeah. No problem. Can I ask you then on the messaging on the payout at or below 100% with Viking now being announced? Doesn't seem there's a change in the payout messaging. Is that because you had Viking in the thought process already at Investor Day? Yeah. Certainly. I mean, Viking, we wouldn't expect to cash flow in 2018, so that wouldn't change that view. As Steve alluded to, Viking was very well advanced as we went into Investor Day. We are pretty direct on the opportunity we thought to build that pipeline network. Even in his prepared remarks at Investor Day, Steve specifically referred to the Viking Basin as a place that we viewed as being potential or attractive. That was absolutely in the numbers we had at Investor Day. That's also something we tried to get out post Investor Day as we thought about or projected that we feel we're fully funded through 2018 and 2019. The Viking capital was in the slides that we had through Investor Day, so that was absolutely anticipated and included in the numbers. Okay. Can I ask you quickly also the U.S. ES sale in December when you were going through the bidding process, did buyers know that ES was going to see a tripling of EBITDA versus 2016 numbers? Or that has placed some upward momentum on the pricing expectations? No. This is largely in line with budget. Whenever you put forth a sale process like this, you produce a budget that you feel is credible and defensible, and that's exactly what we did here. The numbers that ES South has achieved are largely in line, maybe modestly above budget, but not so materially that it would change the narrative. This is the nature of a business like ES South, and trough years, it doesn't perform extremely well, and when things turn, there's fair bit of torque to recovery. This is absolutely consistent with what we would have budgeted, modestly above and consistent with what we would have presented to buyers throughout the process. Okay, got it. Thanks, guys. Thank you. Our next question comes from Robert Catellier of CIBC World Markets. Your line is now open. Thanks. Just a quick update on the Viking here, a follow-up. I'm wondering if you could disclose or give us bookends as to how much is contracted and for what term? Thanks, Rob. We are not coming out with specific level of contractedness. I think as Mark had indicated. We've got base economics, sort of that 8%-10%. Think about that as being sort of the contracted portion of it, and to the extent that we get more interruptible volumes or more volumetric through it, that's what drives it down to the 5%-7%. But we are not sort of coming out and saying specific to what portion of the pipe is contracted at this time. Okay. Maybe you could give us a characterization of how much of your exposure you would have on an EBITDA basis, or maybe the sensitivity pro forma of the asset sales and the capital plan as currently envisioned. Sorry, say that again. Yeah, I'm looking for the EBITDA exposure to the U.S. pro forma all these asset sales. On a LTM basis, our contribution from the U.S. will be basically zero. If you think about our U.S. business right now, it's primarily ES South and TT South. TT South, as we've talked about, with the exit of our exclusive injection station agreement, the TT South or the trucking business south of the border has been sort of what, on an LTM basis, would be de minimis and we'd expect would be sort of in sub-$5 million this year conservatively and, as Steve alluded to, are looking to grow that back to the $10-$15 million range in sort of the next 12-18 months. Yeah, the exposure to the U.S. as we sit here today is small, but that's certainly something that we would look to grow. Okay. That segues nicely to the last question here, is just the progress on realigning the U.S. injection stations. Really what I'm looking for is a timeline as to when you think you might have enough traction and enough volume to consider capital projects. Robert, when we first started to develop this strategy, we thought it would take us a year to get the strategy launched and have the opportunity to start building out some small gathering systems there. Really just the amount of activity in these basins, and the amount of opportunities in these basins, along with hiring that crucial business development person, we believe that we'll move forward with some projects in probably the third quarter. Hopefully, that's a good target for us. Again, these are pretty small projects, Robert, probably in the $10 million range. Okay, thank you. Thank you. Again, ladies and gentlemen, if you do have a question at this time, please press star then one on your touch-tone telephone. Our next question comes from Andrew Kuske of Credit Suisse. Your line is now open. Thank you. Good morning, and probably a question for Sean to start off with, and probably more clarifying than anything. Just for clarity, you anticipate your DCF this year really covering the dividend maybe a little bit better, and then your sale proceeds will cover the totality of your CapEx, your growth, and your sustaining capital. That's effectively what you're guiding to. Yep, absolutely. Payout ratio sort of at or below 100%, we would expect, and sale proceeds to fund growth capital. In that growth capital number, you had Viking really within that number because you had good line of sight on that. Yep. No, absolutely. Yep. That was in sort of the slides we presented at Investor Day, and that is consistent with the messaging that we have. Okay, perfect. Appreciate that. Just on the U.S. business and just the potential, if we think about all the steps of effectively setting up that U.S. business again, realigning what you've already got, how do you think about the potential just in the Scoop Stack and the Permian with existing assets before you get into doing anything else incremental there? I think our main focus is really to just stand the business back up and get to that $10 million-$15 million run rate, which includes kind of our pilot system. The SCOOP Stack is another exciting opportunity for us. We talked about the Permian, but the SCOOP Stack is an exciting opportunity for us. We think that the growth in that area and that there are opportunities for some gathering and some short-haul pipelines into the Cushing area. We will continue to evaluate those opportunities with the customers there in Oklahoma. Finally, if I may, and just maybe a nitpicky accounting question, and this is to Sean, just on termination expenses that you had, I think in 2016, it was about CAD 10 million, 2017, about CAD 16 million. How do you think about that in 2018, given all the heavy lifting you've done in the last 12 to 18 months? I think our expectation is that we will have no adjustment for severance in 2018 as we think about it. We had a significant charge in 2016. We had a significant charge in 2017. There will be continued movement in the business, but that will be reflected in sort of the ongoing G&A. I would not expect another sort of non-recurring charge to show up in 2018. Okay. That's great. Thank you. Thank you. Ladies and gentlemen, this does conclude our question and answer session. I would now like to turn the call back over to Mark Dickinson for any closing remarks. Thank you, Sonia, and thank you everyone for joining us on our 2017 fourth quarter and year-end conference call. I would like to note that we also have made available certain supplementary information on our website, gibsonenergy.com. If you have any further questions, please reach out to us at investor.relations@gibsonenergy.com. Again, thank you very much for joining us, and have a great day. Thank you. Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.