Earnings Call: Q4 2011

Mar 7, 2012

Annual report

Welcome to the Gibson Energy 2011 fourth quarter and year-end results conference call, in which management will review the results of the three months and the year ended December 31st, 2011. During today's call, forward-looking statements may be made. These statements relate to future events or the company's future performance and will use words such as expect, should, estimate, forecast, believe, or similar terms. Forward-looking statements speak only as of today's date, and undue reliance should not be placed on them as they are subject to risks and uncertainties which could cause actual results to differ materially from those described in such statements. The company assumes no obligation to update any forward-looking statements made in today's call. Any reference during today's call to non-GAAP financial measures such as adjusted EBITDA or pro forma adjusted EBITDA is a reference to a financial measure excluding the effect of certain items that would impact comparability. For future information on forward-looking statements or non-GAAP financial measures used by Gibson, please refer to the 2011 year-end report management's discussion and analysis issued yesterday by the company and, in particular, the sections entitled "Forward-Looking Statements" and "Non-GAAP Financial Measures". All financial amounts mentioned in today's call are in Canadian dollars unless otherwise stated. I would now like to turn the call over to Mr. Ken Hall, Vice President of Investor Relations and Communications. Please go ahead, Mr. Hall. Thank you, operator, and thanks everyone for joining us this morning. Joining me on the call today are Stu Hanlon, President and CEO, Rick Taylor, Executive Vice President, Finance, and CFO, Don Fowlis, Senior Vice President of Finance, and Brendan Kelly, Corporate Controller. Format for the call will be that Stu and Rick will provide a short overview of our fourth quarter and year-end results, followed by a question and answer session. I'll be available after the call to answer analyst modeling questions. With that, I'll turn it over to Stu. Thanks, Ken, and good morning, everyone. 2011, and Gibson's debut year as a public company, has seen Gibson deliver a strong performance for investors while laying a solid foundation for continued future growth. Our diversified portfolio of integrated businesses continues to provide cash flow stability through various pricing cycles and presents a broad spectrum of opportunities to grow, which I will discuss in more detail shortly. With respect to our financial and operating execution, I am delighted with both our annual 2011 and our strong fourth-quarter results. Adjusted EBITDA for the fourth quarter was approximately $67 million, a 19% increase over the same period in 2010, and a corporate record for the best quarter in our 58-year history. While annual adjusted EBITDA for 2011 was $231 million, a 52% increase over 2010. This quarterly performance was mainly because of the strong performance from our terminals and pipelines, truck transportation, and propane and NGL marketing and distribution businesses. Segment profit in our terminals and pipelines business was CAD 22 million in the fourth quarter, a 55% increase over the same quarter in 2010. This increase is largely due to increased volumes at the company's Hardisty terminal, the effects of new contracts for dedicated tank usage, and income from our recent acquisition of Palko Environmental Ltd. Segment profit from the truck transportation business increased 34% versus the fourth quarter in 2010, largely due to increased activity levels in the United States, as well as the impact of increases in rates and accessorial charges on both sides of the border. The propane and NGL marketing and distribution segment profit increased by CAD 1.9 million, or 15% in the fourth quarter of 2011 versus the same quarter in 2010. This increase was mainly a result of higher retail propane and wholesale NGL marketing margins in both Canada and the United States. The segment profit recorded during our processing and wellsite fluids and marketing business was 6% lower than the fourth quarter of 2010, primarily due to narrowing crude oil differentials in the quarter. This was consistent with our expectations, which we conveyed on the third-quarter conference call. Going forward, we expect overall corporate segment profit in the first half of 2012 to reflect the seasonality we historically experience. We expect, on a quarterly sequential basis, our first quarter of 2012 will drop off slightly from the fourth quarter of 2011, and consistent with prior years, a further decrease will occur in the second quarter of 2012. This is due, in part, to the propane and NGL marketing and distribution business segment providing significantly higher profits in the winter months. 50% of the retail propane division's peak months profits are related to servicing heating needs in all sectors. A continuation of current above normal temperatures could have some impact on volumes in this business in the first quarter as well. Road bans relating to spring breakup typically impact the second quarter volumes in our truck transportation, custom treating and terminals, and wellsite fluids businesses in Canada and the northern interior United States. Moose Jaw Refinery undergoes its annual turnaround in the second quarter for approximately 3 weeks in preparation for the road asphalt season in the summer months. In our marketing segment, while we have seen significant crude differential volatility and tightening in late 2011, it has been followed by widening in the first part of 2012, and we expect differentials to continue to be favorable throughout the second quarter. We will continue to look for arbitrage opportunities at our various terminal locations. I'd now like to focus on Gibson's growth opportunities. In the fourth quarter of 2011, Gibson spent an additional CAD 34 million on internal growth projects, bringing the total annual spend to CAD 111 million. This was primarily directed towards the construction of tanks backed by long-term contracts at Hardisty and meeting continued growth demand requirements in both the truck transportation and propane and NGL marketing and distribution segments. As announced previously, on December 8th, 2011, we closed the acquisition of the remaining shares of Palko Environmental Ltd. not already owned by Gibson, and we have substantially completed a very successful integration process, which included rolling our existing custom terminal assets into a custom treating and terminals operational unit within terminals and pipelines. At the end of January, we opened a new water disposal facility at Unger, Saskatchewan, and by the end of the first quarter, we will open the Stoughton, Saskatchewan water disposal facility. Both of these new facilities were in-progress construction projects acquired through the Palko acquisition. In addition, construction continues on our Plato pipeline and treating facility, as well as the oil treating facility at Rimbey. Plato is expected to be operational by the end of March 2012. The combination of these assets provides us with the critical mass to be a significant participant in the emulsion treating, water disposal, and oil field waste management space in Canada. As well, it provides a pipeline of additional high-quality organic growth opportunities along with the business development and operational expertise to evaluate and move into the space in the United States. Toward mid-year, we will provide a more detailed update on our capital expenditure program. In the meantime, we continue to see tank opportunities at Hardisty in spite of the delay of the Keystone XL decision, opportunities for treating facilities in the custom treating and terminals division and truck transportation requirements for more units related to the growth in both Canada and the United States. We took delivery of two rail transloaders in the fourth quarter of 2011, with one in service at our Edmonton terminal and another to soon be operational at our Sexsmith facility, where the first phase of our build-out is now complete. We see additional demand for transload capacity in the Canadian market and have three more transloaders on order. They are expected to be delivered before the end of the first quarter. Evaluation of the expansion opportunity at Moose Jaw Refinery continues, and a decision is expected to be made before the end of the second quarter. In the meantime, a commissioning date of May 1st is targeted for the Stoney Beach pipeline expansion at Moose Jaw, which provides us with transportation and supply benefits. Growth opportunities for Gibson Energy's continue to be many and varied. As plans are firmed up and contracts are signed, we will of course, release details to the market. Now I'll pass it over to Rick, who will briefly discuss our financial position. Mr. Taylor? Thanks, Stu. Our balance sheet remains in good shape on the back of excellent 2011 cash flows and the debt refinancing and IPO completed last June. At the end of 2011, our debt to debt plus capital ratio was 37%, below our long-term target range of 40%-45%. Our ratio of net debt to trailing 12-month Pro Forma Adjusted EBITDA was 2.5 times, below our long-term target range of less than 3.5, and our interest coverage ratio to 12-month trailing Pro Forma Adjusted EBITDA was 6.0 times, well above our target of being above 3-to-1. We believe that the company's cash on hand of CAD 65 million, together with cash from operations and borrowings under the company's revolving credit facility, will be adequate to meet the company's working capital needs, planned capital expenditures, debt service, and other cash requirements for at least the next 12 months, including the planned 4.2% dividend increase announced yesterday. Our capital program is progressing as planned. Significant growth capital will be spent in the first half of 2012 as construction on capital projects initiated in 2011 continues and new budgeted capital projects from the 2012 expenditure program get underway. On January 17th, we paid a 24 cents per share dividend to shareholders. Approximately 50% of shareholders participated in Gibson's dividend reinvestment plan, including our largest shareholder, Riverstone Holdings LLC, who fully participated. At the end of the fourth quarter, Riverstone's interest in Gibson had reduced to 29% from 100% at the beginning of the year. Gibson's board approved a dividend policy at yesterday's board meeting, which provides for the review of the dividend after each year-end, keeping in mind the targeted payout ratio of 50%-60% of our operating cash flow, less maintenance capital, over the medium term and cash flow growth. That concludes my comments, so I'll turn it back to Stu. Thanks, Rick. In closing, 2011 has been a highly successful year for Gibson's, having completed the Toronto Stock Exchange's largest IPO of 2011 and delivering notable stock appreciation from CAD 16 at the IPO close to the end of the year, a price at CAD 19.02. It's an increase of 19%, still rising through the first quarter of 2012. Gibson has a full suite of growth prospects across our integrated oil-levered assets, and we are optimistic about our ability to provide continued cash flow stability and growth and meaningful yield to our shareholders through 2012 and beyond. That concludes our prepared comments. Operator, at this time, we would like to open the call for questions. Thank you. We will now take questions from the telephone lines. Operators, if you have a question, please press star one on your telephone keypad. If at any time you wish to cancel your question, please press the pound sign. There'll be a brief pause while participants register for questions. Thank you for your patience. Our first question is from Carl Kirst from BMO Capital Markets. Please go ahead. Thanks. Good morning, everybody. Nice results. Rick, congratulations. Don, congratulations. Thank you. Hey, two questions if I could. The first is, Stu, I appreciate the update on the Moose Jaw potential expansion here, a decision before possibly the end of the second quarter. How do you view the current environment as far as signing additional long-term contracts? That's something we've touched on from time to time in the last six months or so. I guess what I'm trying to figure out is, going forward with a Moose Jaw final investment decision, is that something that is contingent on getting some of these longer-term contracts, or is that more of a nice-to-have? It's probably somewhere in between, Carl, I guess. We have signed one customer to a long-term contract with a take or pay provision. We are very close with two other of our major customers to signing those contracts in sort of final detail negotiation. We remain confident that we'll be able to contract out additional capacity. Of course, we're only talking about the roofing flux product that we manufacture at the Moose Jaw facility. To say that it's contingent is probably too strong a word, but we remain confident that by the time we get to a go, no-go decision on the expansion, which you're correct, we expect to be in a position to talk about sometime before the end of the second quarter, we will have additional long-term contracted capacity taken. Is that something at this point that you can share sort of potential size, just so we can ring-fence as far as investment or capital or sort of in your past jargon, I guess it was large but not scary. I don't know if there's anything to build on there. Let's leave it at that. Our internal estimate for the CapEx spend has not changed materially as we continue to hone in on an AFE quality capital estimate. I think we'll certainly be in a position to talk very specifically about what our projected spend is when we do make an announcement. At that point in time, I think we'll have done sufficient work so that we are very confident in the number we'll be talking about. Again, it's large but not scary. Fair enough. Last question, I'll jump back in queue here. I just wanted to get a better sense for perhaps the drivers in marketing for the fourth quarter, I guess as we were sitting in October, November, we'd had very good third quarter results, but looks like differentials were narrowing at that point. Sequentially, we were thinking that we might have a little bit more of pressure. I guess what I'm asking is that, was there any one thing in particular that drove fourth quarter? Gee, as we look at differentials today, do you expect, even with, granted, your comments on first quarter overall being under fourth quarter, is it possible that marketing can maintain its strength? The answer to the last question is yes, we do anticipate that through Q1, marketing will maintain its strength. We have the ability to be quite flexible in what we do within the marketing segment, taking advantage of market conditions as they sort of present themselves. When we talked about the last half of 2009, the first half of 2010, we had a very tight compression across all crude oil grades within Western Canada. That presented as a situation where our marketing profitability was in fact impacted and muted in that situation. We have the ability to swing from focusing on the heavier side of the barrel to the lighter side of the barrel at both Hardisty and Edmonton, and elsewhere through our small terminals. Of course, the flexibility that we have within the trucking business, our ability to go out and access and purchase specific grades of crude continues to provide us with multiple opportunities to take advantage of different market conditions. In the fourth quarter, yes, we did see some tightening with differentials, particularly heavy to light. Some of the non-sort of market grades, we continue to be able to market and manage. As we walk through Q1, we have seen a widening of differentials, particularly, again, those heavies to lights. That's provided us with some negative impact on our inventories. I think we've been largely able to offset that negative impact by some of the quality management and blending activities that we do take on. Our outlook for the first quarter, at least as far as marketing goes, is positive. Great. Thanks, guys. Thank you. Thank you. Our next question is from Matthew Akman from Scotiabank. Please go ahead. Thanks, guys. Congrats on a great year. Thank you. In terms of, Stu, what you're saying about Hardisty Terminal, you mentioned continued growth opportunities there. We know the TransCanada's ambition to continue to expand their terminal facility. How do you see your positioning versus their proposed expansion? Do you see theirs as more kind of operational related to Keystone, and yours as more opportunistic? Is there room for continued expansion in the next couple of years for both of you, even though Keystone is obviously delayed here? What are your thoughts on those fronts, please? Great question, Matthew. I think you sort of telegraphed the answer that I would give. I think there is opportunity for both TransCanada and ourselves to continue to grow capacity. I'll sort of talk about that in the context of how we have fared while Enbridge was building out their capacity in the last four or five years. We were able to complete the Battle River terminal in a joint venture. We were able to purchase those tanks, and we have constructed another large tank. Of course, we're building the 1.2 million-barrel facility, our Hardisty West facility, in a joint venture with a major producer. We continue to believe that with our land position at Hardisty, we are essentially right on top of the TransCanada Keystone right of way, and on top of the right of way where Keystone will go when it is eventually approved. I did say when. That's just a personal view. We believe that we are in as good a position as anybody to continue to expand our tankage offering to large customers. Particularly customers that will have a contractual obligation to deliver barrels to Xcel. One of the benefits that, of course, we provide is that we're not necessarily. We are, I would say, agnostic. We're an independent terminal provider, and we provide multiple avenues and access for both barrels coming into Hardisty as well as going out. I think that folks that need operational tankage may well want to talk to somebody like Keystone. Folks that need tankage with more flexibility, of course, will see Gibson's as being a fairly compelling opportunity as well. Okay, thanks for that. As a follow-up, and I guess related, you guys did tie in Cold Lake and Inter Pipeline is talking about expanding that pipeline, more volumes coming through that pipeline. What are you seeing, I guess, as initial thoughts on how the Cold Lake tie-in is benefiting your terminal assets there and what you're seeing as a result of the potential expansion in terms of by way of opportunity? We're delighted to be connected to Cold Lake, which was one of the last sort of major import sources that we had not been connected to at Hardisty. That connection and the utilization of it by our major customers has proven to be very, very beneficial to volumes coming through the Hardisty terminal. Of course, an expansion of the Cold Lake system, we would be very supportive of, as it would increase the volume of crude coming to Hardisty. We would be able to anticipate larger volumes coming through that connection and into our terminal, and of course, that benefits Gibson's. We'd look at that the same way as Enbridge's proposed expansion of the lower half of the Athabasca pipeline. The more crude that comes to the Hardisty terminal that we are connected to, I think the more the better. We would benefit from that volumetric growth at our terminal. Okay, thanks, guys. Those are my questions. Thanks, Matthew. Thank you. Our next question is from Steven Paget from FirstEnergy. Please go ahead. Good morning. You've had significant year-over-year growth in propane and NGL marketing, EBITDA. Do you see this being sustained through 2013? Our plan is to continue to grow that segment, Steven. Certainly, on the retail side, we do grow in lockstep with activity levels and growth within the WCSB. Most of the retail business that we do is directed to commercial and industrial and oil patch activities. To the extent that the construction sector and production sector within Western Canada continues to grow, we would expect both that we can grow our retail business accordingly. On the NGL marketing and distribution side, we continue to build out our marketing capabilities. We have added a fair bit of human talent to our U.S. operation. We have a marketing office now in Houston, which gives us exposure to that very large, very liquid market on the NGL and LPG side. On the wholesale propane side, we continue to work with customers like AmeriGas and others to expand our service offering to them as well. Our outlook for 2013 is—sorry, for 2012, is for continued growth in that sector, yes. If I could ask a more general question. Looking back a year ago, which division has surprised you most to the upside that it was able to generate in 2011 versus what you were forecasting a year ago? Boy, that's a great question. I would have to say probably we are most pleased with the performance of our processing and wellsite business. Now, surprise is a strong word. We had a game plan in mind where we were continuing to work on the quality of the roofing flux. We continue to be delighted with the acceptance of that product within the United States roofing materials market. We have been beneficially affected by a fairly favorable differential environment within that group or within that business. Of course, as additional coating capacity comes on stream and asphalt supply is destroyed across North America, we continue to see strengthening margins on the lower half of the barrel. That's, I think, where we are particularly pleased. Whether we're surprised or not, I'd use the word pleased. Thank you. Pleased is a much better word. Those are my questions. Thanks, Steven. Thank you. Our next question is from Robert Hope from TD Securities. Please go ahead. Good morning, and congratulations on a great year. Thank you. I was just hoping you could comment on trucking volumes in the quarter. Seemed relatively flat year-over-year. I'm just wondering, is this mainly to do with the lower coke volumes? Maybe you can also comment on how volumes are looking based on, I guess, U.S. and Canada or your other main place. Yeah. Sequentially, year-over-year, as you know, we do truck a variety of products within Western Canada, and so fourth quarter petroleum coke was somewhat muted. We were trucking some, but not as much sulfur as we had planned to. That was somewhat offset by our crude and liquids volumes, which continued to grow in the United States, however, remained relatively flat year-over-year in Canada. As we move through the first quarter, we continue to see volume growth in all sectors. Keep in mind that by the fourth quarter of 2010, we had fully integrated the Taylor business and had made a fairly significant investment in growth there as well. As we look forward in 2012, we continue to look for and plan for continued growth across all of the sectors with trucking. We will be impacted, as I mentioned in the script, by road bans and breakup in the second quarter. Our hope and belief is that the seasonal weather impact in the second quarter won't be as severe as it was in the second quarter of 2010, where we had the severe flooding in Southern Saskatchewan, in the Bakken, and other weather-related impacts across North America. Great. That's very helpful. Maybe just switching gears just a little bit, seeing operating expenses and G&A creeping up. I'm just wondering if you can comment on the trends that you're seeing. Is this just mainly related to a growing business, or are you seeing labor tightening as well? It's mostly related to just the growth in the business. We are impacted somewhat, as are other operating companies, particularly in the northern part of Canada with respect to the trade level increases for manpower costs. Our mechanics are costing us a little bit more, gas fitters, that sort of thing. The impact of that is certainly not as severe as if we were a major construction company, that sort of thing. I would characterize most of the increase in operating costs and G&A as being related to growth in the business. Certainly, when we buy something like Palko and integrate it into the organization, that will have an increase in G&A, for instance. Great. Thank you. Thank you. Thank you. Our next question is from David Noseworthy from CIBC. Please go ahead. Good morning, gentlemen, and congratulations on a great year. Thank you, David. As well, I'd like to pass my congratulations on to both you, Rick, and Don. Thank you, David. Quick question on, and I'm not sure if it's too early or not, but how is the tendering process going for asphalt sales? A little bit early for that. We've seen some early activity, and it's sort of in line with our expectations. Really, the tendering process gets going towards the end of this month. Okay, fair enough. In terms of the Moose Jaw expansion other than clear contracts, what are the other determining factors on the go-forward decision? Really, out of an abundance of caution, we're being very disciplined around ensuring that we do have enough engineering and enough costing done so that we are very confident in the capital spend. It's a pretty simple expansion job as far as expanding a process unit goes. Most of the construction will take place on a greenfield basis. It's essentially new modules which we can construct and then plug and play, so to speak. We won't be taking the plant down for extended periods of time, and I think that gives us some confidence. Really, we are more focused on just ensuring we get to a rock solid AFE quality capital estimate before we pull the trigger. Given your acquisition of Palko, or I guess completing your acquisition of Palko, you really haven't taken any breather in terms of the organic growth opportunities. Do you see opportunities for perhaps drop-down or maybe not drop-down, but producer sales of these type of assets? What are you seeing in the market? It's possible that we will see producer sales of those types of facilities. It's a different business than the natural gas gathering and processing business where you do see more producer sale of processing facilities as midstream companies move in. These facilities tend to be more multi-customer, more sort of geographically specific things as we go ahead. What we do see, I think, is investment in Gibson is exposure to oil and liquids production and oil and liquids production growth throughout North America. Our investment thesis, why we're so excited about Palko and growing the custom treating and terminals business is because we do fundamentally believe that as those oil and liquids volumes grow across North America, related water and waste streams will grow probably even at a faster clip. To the extent that we can expose ourself to that marketplace, as you've already seen, we do believe that that opens up a tremendous pipeline of organic growth opportunities throughout Canada and the United States, building on our platform that we have within the Taylor organization in the U.S., the 75 pipeline injection stations and our very robust presence in all the major operating areas throughout the U.S. I guess that brings up an interesting point. You've made this acquisition in Canada with Palko. Are you looking to do a similar oil field waste management acquisition in the U.S.? Do you see opportunities to employ capital there around that? We are always in the marketplace looking for interesting and accretive growth opportunities, both acquisition as well as organic. We don't have to do an acquisition to grow that business in the U.S. I think with the management capability and the business development capability we've got on both sides of the border, we can look for organic growth opportunities, which we believe will exist south of the 49th. To the extent that an interesting acquisition opportunity presents itself and we can complete and close on that acquisition, while it being accretive immediately to our shareholders, we'd certainly look at that. Thank you very much. Those are my questions. Thank you. Thank you. Our next question is from Robert Catellier from Macquarie. Please go ahead. Hi. Thank you. Just following up on Palko. In the past, you've been somewhat conservative in discussing how large the growth opportunity there can be. Now that you've had it under your wing for a couple of months, is there any way you can provide additional clarity in terms of the timing and maybe the ultimate development on the organic growth side there? All we're prepared to talk about right now are the things that we have publicly disclosed. We did complete the Unger facility. It's now on stream in southern Saskatchewan. Stoughton will be on stream within the next few weeks. We continue to build out the Plato pipeline and emulsion treating facility in the Kerrobert area in Saskatchewan. We believe that there's expansion capability within that facility that will be complete, at least its initial phase, by the end of the first quarter. We continue to build out a treating facility at Rimbey. We have a number of very interesting growth opportunities in the hopper within the custom treating and terminals segment of our terminals and pipeline segment, just as we have growth opportunities, I think, that we're looking at throughout all five of our business segments. I did say in the script that we will come to the market with a more concrete update with respect to our capital spend, and hopefully at that point in time, we'll be able to talk more specifically about some of the opportunities that we hope to complete and close on within 2012. Okay. That's fair enough. On the trucking side, there seems to be pretty strong demand for trucking. My question is, on the margin side, how should we look at the increase in the cost of transportation fuel and what impact it will have on the margin, particularly in the short term? Are you able to cover expected increases in fuel with increased rates, or might there be some short-term margin compression before price increases work through? No. Specifically in relation to fuel costs, virtually all of the contracts that we have within the truck transportation segment have fuel surcharge mechanisms built in. To the extent that we do see an increase in the cost of diesel, we're able to pass that through to our customers. I wouldn't anticipate margin compression with respect to that aspect of rising costs. As I mentioned before, we do see some cost pressure with respect to just the overall operating costs, repair, maintenance, that sort of thing. I think that's also in relation to a continued strong demand for the services that we provide. We're certainly able to maintain our margins within a fairly favorable pricing environment. Okay. There's been some weakness in the NGL market of late. Is there any more color you can provide with respect to the short-term earnings outlook, particularly on the propane side? The winter, obviously, was much warmer than normal. I'm just curious as to what degree of volume change on the propane side you might expect. Our volumes have actually held up quite well as we've moved through the first couple of months of Q1. As I said earlier, the majority of the volumes that we sell on the retail side are impacted more by construction activity and oil patch activity. We continue to be relatively pleased, notwithstanding the fact that it has been a very warm winter, with the volume performance of our retail side. Pricing has been interesting. The rack price for propane has come off reasonably dramatically in the first quarter. That benefits our retail side, where we are able to maintain our margins with a falling rack price. It does have a somewhat negative impact on the wholesale side. Perhaps you're specifically alluding to some of the other companies in this area having inventory valuation impacts from WTI going up and related propane pricing going down, that sort of thing. That will have a modest negative impact on our wholesale business, but overall, the business remains very solid. Okay. When we say rack price is off dramatically in the first quarter, can you quantify that at all? Or just even ballpark? Yeah, not without getting it wrong. We can follow up with that specifically, but it has been fairly volatile within the first quarter, and that has allowed us to maintain our margins on the retail side. Okay. Thank you. My final question has to do with the credit rating side. Obviously, your business is performing well, your payout ratio leverage and everything else is where you want it. Yet, you went with a dividend increase before you actually had a credit rating increase. Can you maybe talk about how you're trying to balance those two items? Do you think a credit rating increase is in the offing? How do you look at that versus the cost of equity and the cost of debt? We have had meetings with credit rating agencies. Moody's currently looks at us with a positive outlook. We have recently met with Moody's and talked with them. We're hopeful we'll continue to see improvement in that. I guess we looked at our performance and the metrics that we had set, and we talked to the market about our payout ratio. We felt comfortable with the cash flow from operations that we're generating, our outlook for cash flow the next year, and felt that the dividend increase was in line with market and the competition or the comparable companies that we have. We were comfortable with that dividend increase, and we don't believe there should be any downside impact on the credit rating. Okay, thank you. Thank you. Our next question is from Robert Kwan from RBC Capital Markets. Please go ahead. Great year and like the divvy increase. Just coming back to Hardisty and Stu, you talking about you seeing demand for both the TransCanada project and what you're doing. They're out for an open season for 2 million barrels in the 2015 timeframe. Are you seeing demand over and above 2 million barrels, or do you just think that you'll probably both split that type of demand somewhere down the middle? I'm not sure that we're smart enough to quantify the overall demand of the market. All I can tell you is that, we continue to work with customers, both existing and potential, with respect to additional tankage projects at Hardisty. We remain hopeful that those discussions will allow us to move forward. I think there is room for additional tankage at Hardisty when you look at increased production growth throughout the WCSB. Until we get a West Coast takeaway, every additional barrel produced in Western Canada is going to go through Hardisty. That's going to require more tankage, particularly as markets become, I don't want to say more fragmented, but the importance of additional markets served by proposed projects like Keystone XL, the U.S. Gulf Coast, etc. You have more segmentation in terms of where volumes go, and that requires more tankage. We look at our large undeveloped land position and land holdings at Hardisty. The fact that we are very centrally located to all of the major export pipeline systems, not just the Keystone systems, but also to the Enbridge systems, to the Express systems, Avon, Bow River South, et cetera. We think we're in as good a position as anybody to offer very competitive tankage solutions to our customers. I guess just in the discussions that you've had with the customers, how price sensitive do you sense they are versus your competitive advantages? You touched on having all the different pipeline connections and therefore offering a lot of different optionality for the customers. Having a larger established footprint probably helps as well. Weighing that off against TransCanada, which at least traditionally how they've looked at projects, probably is likely to come in with a lower hurdle rate for returns than the premium returns that you've tended to target. We believe that customers see value in the services that we offer. We don't spend a lot of time benchmarking ourselves, I guess, against TransCanada or Enbridge with respect to returns. We deal more specifically with individual customers and satisfying their needs. We have our own internal hurdle rates, which we have talked about. We believe that there's expansion capability that we can bring to bear while maintaining our hurdle rates. To the extent that those rates are higher than, perhaps, Enbridge's, I don't sit in a lot of their planning sessions, so I don't know that that's necessarily true. To the extent that they are higher than those competitors we have competed successfully in the past, and we expect that we will compete successfully in the future. That's great. Just last question I've got is just a small kind of numbers question. On the maintenance CapEx for the year, it did come in lower than the general run rate guidance you'd been giving. Just is there any color as to whether that's just a timing issue or whether we'd expect 2012 to be a little bit higher? I think for the majority of it, you have hit it on the head. It's a timing issue. We've talked previously that on the trucking, there are longer lead times that we've been experiencing over the last year on the delivery of trailers and equipment. That would be a large part of it. Okay, just with that timing then, would we expect 2012 to be about CAD 10 million higher than the run rate you've tended to give? Or is it just a full everything shifted out? It could be somewhat higher than the original number we gave, but again, it will depend on timing, whether that timing continues to shift or whether we start to see the manufacturers decrease that lead time. Yeah. It's not atypical that we see lower actual spend than our plan and forecast on the maintenance and capital side of the equation. We tend to be relatively conservative when we do budget that, and sometimes you just don't get to everything that you had planned to do. Okay, that's great. Thanks a lot, guys. Thank you. Our next question is from Eric Busslinger from Marret Asset Management. Please go ahead. I'm just wondering if you guys can update us in terms of your cash tax status or tax pools or tax horizon. As far as the cash tax, right now, this year, we shouldn't be very cash taxable at all. Our forecast going forward, though, I'm not sure if everyone's aware, but there was a change to the partnership legislation and the partnership deferral in 2011 that'll have an impact of essentially increasing our cash tax from 2013 to 2015. In those years, we'll be higher cash taxable, and then it should come back down. Does that help? Yep, thank you. Thank you. Once again, please press star one at this time if you have any questions. Our next question is from Steven Padgett from FirstEnergy. Please go ahead. Thank you. Maybe if you could comment a little bit on competition on the trucking side in Western Canada with Plains' purchase of BP Canada Energy Company, and including how big is the NGL trucking opportunity in general? We don't anticipate that Plains' acquisition of BP's NGL infrastructure will have a very material impact with respect to competition in the trucking business. Plains' focus has traditionally been on oil and liquids within their trucking business, and they truck for their own account. The NGL business continues to be relatively steady within Western Canada. We did see some muting of profitability last year and the year prior just because of lower liquids growth related to lower gas drilling. We're starting to see some of that come back. We're anticipating that 2012 is going to be a positive year for us on the NGL side. Thank you. Thank you. We have no further questions at this time. I would now like to return the meeting over to Mr. Ken Hall. Thanks again, everyone, for your interest in Gibson Energy. As mentioned earlier, I am available after the call if there are more questions. Have a good day, everyone. Thank you. The conference has now ended. Please disconnect your lines.