Earnings Call: Q2 2019

Aug 7, 2019

Good morning. My name is Colina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Keyera Corp Second Quarter 2019 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you. Ms. Lavonne Zdunik, Director, Investor Relations, you may begin your conference. Thank you, and good morning, everyone. It's my pleasure to welcome you to Keyera's Q2 conference call for 2019. Joining me today is David Smith, President and CEO Stephen Kroeker, Senior Vice President and CFO Brad Locks, Senior Vice President and COO and Dean Saniguchi, Senior Vice President and Chief Commercial Officer. As we released our financial results yesterday, the focus of our call this morning will be on our business strategy, operations, business development opportunities and financing. After our prepared comments, we will open the call to questions. I would like to remind listeners that some of the comments and answers that we will provide speak to future events. These forward looking statements are given as of today's date and reflect events or outcomes that management currently expects. In addition, we will also refer to some non GAAP financial measures. For additional information on non GAAP financial measures and forward looking statements, please refer to our public filings, which are available on SEDAR and our Web site. With that, I'll turn it over to David. Thank you, and good morning. Keyera delivered outstanding financial results in the Q2 of 2019. Adjusted EBITDA increased 19% over the same period last year and net earnings doubled. We are on track to deliver another year of strong financial performance. Our midstream services remain in high demand and our capital projects are on schedule and on budget. Favorable market fundamentals are supporting higher fractionation fees and iso octane margins that are both expected to extend into the Q1 of 2020. We continue to successfully execute our long term growth strategy, which is focused on extending and enhancing our integrated value chain. Over the past few years, we have been extending our infrastructure into Northwestern Alberta to support the liquids rich Montney and Duvernay developments. Wapiti Phase 1 was commissioned in the 2nd quarter and the latest Simonette expansion will be completed this quarter. Once we complete Phase 1 of the Pipestone gas plant in 2021, Keyera will be one of the largest gas processing and condensate handling companies in the region. To further enhance our integrated value chain, recently announced that we are proceeding with CAPS in partnership with SemCAMS and KKR. This pipeline system will transport growing liquids production from Northwestern Alberta to Fort Saskatchewan, where Keyera can offer fractionation, storage and rail services as well as access to our industry leading condensate hub. We remain confident in our long term business strategy and are committed to providing our shareholders with stable long term dividend growth. As a result, we are increasing our monthly dividend by 7% to $0.16 per share per month or $1.92 per share annually. This extends Keyera's long history of steady dividend growth since our IPO in 2003. I will now turn it over to Brad to discuss our operations. Thank you, David. During the Q2, our facilities operated very well and we continue to advance our capital program. In May, we completed Phase 1 of the Wapiti gas plant and in July, the acid gas injection system at our Simonette gas plant began operating as well. We also completed a 3 week turnaround at Rimbey, one of our largest and most complex gas plants both on time and on budget. Even with the activity in the quarter, safety remains a priority with Priera, and we continued our outstanding performance in the Q2, representing the 6th consecutive quarter without a lost time incident amongst our employees and the 3rd consecutive quarter without a lost time incident amongst our contractors. Keyera also held our annual safety stand down with each of our executives spending time in the field listening to worker feedback and discussing the importance of safe operations to our workers and our communities. At Keyera, we recognize that providing a safe and healthy work environment is an integral part of being a responsible employer, operator and good corporate citizen. Looking ahead to the second half of the year, our operations will be affected by planned maintenance turnarounds at our Cynthia and Vracinas gas plants in the Q3 and a planned outage at AEF scheduled for the Q4. This 6 week outage at AEF is to perform preventative maintenance, which will ensure optimal performance of the facility through the next 2 years, allowing the next full turnaround to be deferred until 2021. This is an exciting time for Tiara as we are beginning to realize the benefits of our capital program and generate incremental cash flow. In addition to Wapiti Phase 1, this year we expect to complete the North Wapiti pipeline system and the Simonette gas plant expansion. And over the next 3 years, the Wapiti Phase 2 and Pipestone gas plants, Wildhorse Terminal and Cass. These projects will extend our secured growth into 2022. I'll now pass it over to Dean to talk about our business development opportunities. Thanks, Brad. As David mentioned, we continue to successfully execute our growth strategy with a focus on extending and enhancing our integrated value chain. We're very pleased with the recently announced CAPS project, which will be a very strategic investment. Not only does this pipeline system provide Keyera with strong returns and secure long term cash flows, it improves the integration of our value chain. With stronger integration, we expect to attract additional volumes to our gas plants, fractionators, storage caverns, condensate system and marketing supply book to generate incremental margin. These additional volumes provide Keyera with a foundation for significant future investment opportunities that could include additional gas and condensate processing investments, fractionation and additional storage caverns. There's no shortage of business development opportunities for Keyera where we can leverage our expertise. In addition to looking at opportunities which provide long term growth, we will continue to focus on maximizing returns on our existing assets. With that, I'll turn it over to Stephen to talk about our financial position and strategy. Thanks, Dean. Keyera continues to experience strong growth in its fee for service realized margin, growing 16% during the Q2 compared to the Q2 of 2018. In addition, our marketing business continues to be a strong contributor to our cash flow, generating record realized margin this past quarter. For 2019, we still expect realized margin from marketing to be between $280,000,000 $320,000,000 even with the planned 6 week maintenance shutdown at AES in the 4th quarter. Maintenance capital is now expected to increase modestly to between CAD105 1,000,000 CAD115 1,000,000 given the planned outage at AES, but partially offset by the deferral of some other maintenance capital. Cash taxes continue to be forecast at between $90,000,000 $105,000,000 for 2019 and at less than $10,000,000 for 2020 since capital projects like the Wapiti plant have become available for use. Keyera continues to grow shareholder value through prudent capital investments that are expected to generate attractive returns on capital. We have now invested $1,300,000,000 of our $2,900,000,000 multiyear capital program currently underway. We remain committed to a strong financial position and in June issued $600,000,000 of Subdivor Subordinated Hybrid Notes. These notes provide us with attractive all in financing costs given we received 50% equity treatment from the credit rating agencies. With the hybrid notes being subordinated debt, our net debt to EBITDA covenant ratio fell to 2.3x at June 30 compared to 3.0x at the end of the Q1. We continue to believe the remaining $1,600,000,000 of our current capital program, which is expected to be incurred over the next 3 years, can be funded without issuing common equity, apart from the DRIP and premium DRIP. With our strong balance sheet and financial flexibility, Keyera is well positioned to take advantage of the right investment opportunities and will continue to focus on delivering attractive returns on our invested capital. With that, I'll turn it over to David for closing remarks. Thanks, Stephen. While our industry continues to have challenges accessing global markets, we are encouraged with the federal government's decision to proceed with the Trans Mountain pipeline expansion and the progress being made on LNG projects on the West Coast of Canada. To help continue this positive momentum, we are working with other energy companies and organizations to spread the word about the importance of our industry, not only to Canada, but to our world. Canada is one of the most responsible energy producing countries in the world, and the world will continue to need Canadian oil and gas for the long term as it makes the transition to cleaner sources of energy. I am proud to lead a team that wants to be part of this important change. We are dedicated to safety, operational excellence and environmental responsibility, while adding value for our customers and our shareholders. On behalf of Keyera's Board of Directors and management team, I would like to thank our employees, customers, shareholders and other stakeholders for their continued support. With that, I'll turn it back over to the operator. Please go ahead with questions. Thank you. Your first question is from Linda Abengailis with TD Securities. Please go ahead. Thank you. I'm wondering if you could give us some more context around your maintenance activity beyond this year. Is it reasonable to take the prior 2020 maintenance capital guidance, I believe it was $100,000,000 to $110,000,000 and reduce it by about $50,000,000 to reflect the deferral of the AES and then just kind of add it to a run rate for 2021? Or are there a few other moving parts? Yes, it's probably a fair assumption there on the maintenance capital there. There's a little bit of maintenance capital deferred from this year into 2020. But as we had highlighted before, I don't think we actually gave guidance on 2020 before, but that would have had any turnaround, which would have kept it relatively comparable to 2019 levels. But yes, it's probably fair to back off that kind of a number or smaller for 2020. And given some of the accelerated maintenance into this year for ADF, what would be the scope of the 2021 outage? Would it be typical or maybe a little bit shorter? Or can you provide some context around how things have shifted around and if that will continue processively or if this is just kind of an opportunistic one time shift? Yes. Linda, this is Brad. I think our 2021 would be of normal size and scope. So we haven't finalized the time line, but it will be in that 40 day outage time line as well. The work that we're getting done this year is really just an opportunity to get ahead of some of this work and take advantage of the deferral that we can get on next year's turnaround into 2021. Okay. That's helpful. And maybe given the reduced tax rates in Alberta, are you able to provide any sort of cadence of cash taxes or outlook for 2021 and beyond? Yes, we haven't come out with formal guidance for 2021, but in 2020, it largely depends on the capital being brought on stream. And so in 2020, we indicated to be less than $10,000,000 for cash taxes. And you can see a pretty good visibility of continued capital and projects coming on in the next couple of years. So I would draw my continued conclusions from that. Okay. That's helpful. And maybe just in terms of a bigger picture strategic question before I jump back in the queue. What is your latest thinking on value chain extension downstream into LPG exports and your thoughts on the merits of continuing to railcar down to the U. S. Versus potentially participate in any sort of West Coast initiative? Linda, we continue to look at diversification opportunities into areas that we think makes sense, leveraging the competitive advantages and capabilities that we have. To this point, when it comes particularly with respect to propane, our approach has been to make sure that we have the flexibility with our facilities in Western Canada along with our facility at Hull, Texas to be able to move that product to the highest value markets. We are moving propane to the West Coast for exports through the terminals that exist there. And I think we'll continue to kind of monitor how that develops. But we currently have no plans to be an equity participant in that kind of an investment. Having said that, those are the kinds of opportunities that we'll look at all the time. Your next question is from Rob Hope with Scotiabank. Good morning, everyone. First question is just on your financing outlook. With the strong cash flow performance in 2019 and 2020 should benefit from lower maintenance as well. Just want to get a sense of how you're thinking about the DRIP in share count and the potential to shut down that early just given your strong balance sheet? Yes. No, it's a good question. Niraj, Steven here. I mean, from our point of view, we just continue to regularly monitor that situation. As you can appreciate, it's a large capital program. And so we just want to be careful about when we make any kind of commitments about shutting down a DRIP. Our overall goal is to continue to have a prudent capital structure, continue to have its financial flexibility to look at projects or whatever might come about. And so I don't see anything imminent in terms of shutting it down. And it is a very effective cost for us to raise equity if we are raising equity, but there's nothing imminent about that. And then when you look at a prudent balance sheet, does that evolve as you add more contracted cash flow? Yes. I think we've always been careful over time about committing how we would move that view. The reality is we have a very strong commercial team and when we get new assets, they continue to think of ways of making money that way. That being said, I would think it's a natural evolution of the company that when there are material shifts in the fee for service nature of the business, we have to continue to look at what the optimal capital structure is. That's helpful. And then just finally, just given some share price performance of your customers, how are you looking at credit for some of your counterparty risks? Well, we've always had a pretty robust way of looking at counterparty risk. We employ various mechanisms. I think you can see that in our AIF and disclosure, especially around year end. But really, we try and make sure we have the proper continued due diligence and scrutiny on how receivables are going, very close monitoring of collecting receivables in that respect, letters of credit, netting agreements, if we can net NGLs. You have to remember, a lot of times we're buying NGLs off of producers. And so we get to sometimes net those kind of commitments as well. At the end of the day, over the last 5 years, we've had a very strong record in terms of doubtful accounts. I think we're at sort of $3,000,000 right now for doubtful accounts. So we continue to monitor. No doubt, it is a little bit more tougher in this kind of environment, but we just continue to watch it very closely. Thank you. Your next question is from Ben Pham with BMO. Please go ahead. Okay. Thanks. Good morning. On marking AES, I know, RBOB, you can't predict that in butane costs. I mean, there's just some inventory you can manage there. But on the utilization, I guess that's something you can manage and control a little bit of maintenance and whatnot. And since the beginning of 2018 or so, utilization has been a little bit above nameplate capacity. And maybe can you refresh us on what's driving that? Is it just a pace of your maintenance downtime more frequently than before? And then just how do you think about utilization on a sustained basis? I think certainly, AEF has had a has when it's up and running, we get very good utilizations. We normally run it above nameplate capacity and it likes to run there. And that's certainly good from the ability to generate iso octane and take advantage of that margin. I think it's like any other facility, it's complex in nature and we've got a really good team out there that pays attention to kind of the forward looking measures and tries to predict potential upsets. And I think our outage that we've got coming up is really just doing that. It's not impacting operations today. But as we look out over time, we think by taking the plant down in the 4th quarter of this year would be prudent to allow a more stable operation through 2020 and that also allows us to extend our turnaround into 2021. So it's really a predictive kind of maintenance opportunity that I think is going to play well in terms of the overall value generation for the facility. So are you finding that rather than this big 4 year overhaul, what you got to do anyway, is that you kind of opportunistically put it down from the ATMs for a shorter period of time and you're booked into to run out of very high utilization in other periods that's online? Yes. I mean, I don't think the utilization that we've seen has impacted the reliability of the facility. I think if you go back before Keyera was an operator of that plant, that plant ran in the 50% to 60% to 70% utilization. And their facility reliability was actually not as good as what we're seeing today. So I think when we put all that together, we think continuing to run that plant at nameplate or slightly above nameplate gives us the maximum value out of that plant. Okay. The second question Sorry, Ben, it's Dean. I think the other thing is that every time we do a maintenance, a big maintenance turnaround, our team at AEF finds looks for opportunities to employ strategies to try to debottleneck the facility each time and also enhance our reliability. That's why our run times over if you look at the history of that facility have improved, and they'll continue to look for opportunities like that. All right. That's great for that. Second question, gathering and processing, I wanted to check-in the $70,000,000 is pretty clean EBITDA? There wasn't any sort of prior capital recoveries from that? And then, I'm just curious, outside of the Montney, you flagged a plant shutting down in a few months. Just how does the volume outlook outside of the Montney? So, yes, we've been pretty pleased with how the gathering and processing business has performed even in what's a challenging environment. I think certainly, we all know that commodity prices are out there today make natural gas drilling somewhat challenging. So we think certainly over time that may have some impacts on volumes. But I don't think it's as we've seen over the past little while, those impacts tend to be modest, and we continue to find ways to provide additional value add to our customers that allows us to generate incremental margin as well, things like enhanced liquid recovery, things like healing pipeline and things like that, that allow us to provide value to both ourselves and our shareholders as well as the customers who flow through our plants. Yes. And Ben, maybe just to expand on that. I mean, obviously, our results this quarter were affected by our mainly by a Ruby turnaround. So and we have a couple of turnarounds next quarter as well at Racinas and Cynthia. But I'd say that if you look at the activity in province, I mean, certainly, it has slowed down in terms of the levels of activity. But we certainly see the Montney facilities being Simonette and now Wafi that's on stream being very active areas. And again, those are the most economic areas in the province. So we feel pretty good about what's happening there. When you look at our Central Alberta facilities, they've still been fairly resilient. And part of that is because it's a mature production base. So the declines there aren't near as deep as the new production that you see up in the Montney Duvernay. So I think we have that benefit. And as Brad mentioned, we're always looking for ways where we can deliver our services more efficiently for our customers to make it more economic for them. All right. Thanks. I mean, you've proven the demand cost quite well during the past declines. Thanks for that. Your next question is from Patrick Kenny with National Bank Financial. Please go ahead. Yes. Good morning, guys. Just with Phase 1 of the Pipestone plant now fully contracted out. Wondering if we can get an update on the level of demand for a Phase 2 expansion, say, versus 6 to 9 months ago, especially now that you're looking forward with caps and still have 30% or so white space to potentially bundle with Phase II commitments? Pat, it's something that we're I mean, we don't sleep. We're always looking for opportunity, obviously. We like the site. It's a brownfield site. Makes a lot of sense that if there is demand for capacity if and when that happens for us to be able to provide that service. So I think we have we don't have any update today, but it's something that we're certainly very well engaged with the producers in that area to assess when they'll be drilling and they'll meet that demand. Great. And then maybe just David, back to your comments around the strategy of supplying propane to the West Coast terminals. Just wanted to confirm if this is mainly on a fee for service basis or the marketing group looking to take advantage of any pricing arbitrage opportunities on a quarter by quarter basis? And if so, do you have any hedges in place on Asian propane prices going forward? Pat, first of all, it's these are barrels that we're moving as principal. So this would be some of the portfolio of propane supply that we have and what we purchased from the producers in Western Canada. I'm not at liberty to talk about what the pricing basis is for some of the product movements that we have in place to different points. But we are managing things prudently and making sure that whatever we have a portfolio of different pricing basis for the propane that we move and we're monitoring that, as you know, through our risk management committee on a weekly basis to make sure that we're that the exposures that we have are being managed conservatively. Okay, great. And then just lastly, it might be a bit early, but just on the back of the TMX reapproval, any update on timing or customer interest in fully expanding the baseline terminal by another couple of 1,000,000 barrels, I believe? We've certainly been engaged with our customers on that front. But I would say it would definitely be a catalyst if Trans Mountain expansion were there's more certainty around that, and we feel pretty confident about it. But again, once we see that moving forward, I think we'd see more demand for above ground storage and we have a great facility to provide that opportunity with our expansion lands at BTT. Got it. That's it for me. Thanks guys. Your next question is from Robert Catellier with CIBC Capital Markets. Please go ahead. Just one quick question on Nevis. What are the implications of suspending operations there? And does it accelerate or bring forward any environmental remediation obligations? Yes. So I think it's certainly from a cash flow perspective, it's going to have no impact on our business. The facility has been a marginal facility for a number of years as we've tried to find opportunities. Over the certainly from a reclamation perspective, we will begin the process of deconstruction and reclamation in alignment with the Alberta Energy Regulator who basically has to approve our reclamation plan. That will be a long term project. So it will be kind of a small investment for a large number of years that will work towards getting that facility completely deconstruction, decommissioned and reclaimed back to native state. So it will be an ongoing project, but it will have minimal impact to our financials. So there's no chance of keeping it up. You're just not going to turn it into a compressor or keeping it running? Hopes for recovery, so you're going to decommission? That's our plan today. We've explored a number of opportunities out there to try to find ways to keep it viable and it just wasn't something that we could find a suitable way to do that. Rob, I would add that at this point, obviously, as we get into the process, it will we'll learn more. But at this point, we think that the cost of the decommissioning and remediation is pretty much fully covered by the asset retirement obligation that's on our balance sheet. So on that basis, you wouldn't expect that it would have any material kind of earnings impact. Okay. And then just on AEF, obviously, you have more control during a planned outage. But when the I think when the facility went offline last time for an unplanned outage, there was difficulty with the butane costs and you were taking butane in and selling it for a loss. What's the outlook for how you manage the outage in Q4? It sounds like you have more access to stores to be able to manage that situation. Yes, absolutely. I mean, certainly with the planned outage that we're scheduling now for the fall, we do have we have made provisions to make sure that we have ample storage capacity to handle the supply volume that we're purchasing and we can put in the storage. And again, we're acquiring a pretty attractive price. So that will certainly help our margins going forward once the plant comes up and is running again. And Dean, does that advantage last through Q1 and into Q2 of next year? Or is that pretty much at the vagaries of your 2021 sorry, your 2020 contracting? Well, if you recall, our contract season does actually end in March of 2020. So for that very nature, it will extend in 2020. But the inventory that we build, it will have lasting benefits in the 2020 beyond that. So it will help us with our margins in 2020 is the bottom line. Okay. Thank you. Your next question is from Robert Kwan with RBC Capital Markets. Please go ahead. Maybe just continuing here on the topic for just looking at marketing more broadly. So you're holding the guidance and even with the 6 week downtime. I'm just wondering, as you think about, say, where the original budget was for Q3 and Q4, is there anything else that's moving around, for example, with the downtime? Did you or do you need to close off some hedges? Yes. Yes, we do have some hedges that we are unwinding. It wouldn't be significant. I wouldn't consider it to be material in any way. And but yes, we're managing that. I'd say with respect to your comment about just our budget and us being able to hold it even with our 6 week outage, Part of that as well is, again, the octane premiums have been very strong. And part of that is because of the Philadelphia refinery that is offline now. But it's also because of a lot of the light feedstocks that are going through the refineries and it creates it's suboctane, so it requires extra octane to meet spec, gasoline spec. So it's been very positive for our business. And based on expected light production out of the U. S, that should be a structural positive, should that not? Yes. I mean, there's always other variables at play, but certainly this season, it's been very strong. Okay. I guess maybe just the last kind of question on this topic. I'm guessing just given how strong Q2 was, it doesn't sound like there's a whole lot impacting Q3, so that should be continued strength. In Q4 though, my understanding is that AF was not a huge driver of the quarter. That's kind of where propane starts to kick in. So I'm just wondering with how the second quarter shaped up and the other factors that seem to be driving above expectations for AEF. Are you at least trending like put differently? Is the guidance conservative at this point? I guess, Robert, what I would say is that we're still comfortable with the guidance that we provided. I don't think there's I don't think it will be appropriate to provide any additional color at this point. What I would reiterate is that in planning the outage at AEF, we have the ability to minimize the impact, but 6 weeks of lost production is still 6 weeks of lost production. And so it will be a significant impact. I think that's been that's being offset by the stronger margins that we're seeing in Q2 and in Q3. And so overall, we're comfortable that we're still in the same range. Okay. Just turning to frac fees, we've seen that come up and you've talked about that extending into Q1 '20, I guess, just with the NGL year. I'm just wondering as we think past that, unless NGL production comes down a bunch in Western Canada without new capacity being built, is the expectation that fee should stay relatively high past that Q1? I think that would be a fair statement, yes. Okay. And then just maybe to finish. Stephen, you made a comment talking about balance sheet that you're well positioned to take advantage of the right investment opportunities. So just kind of more broadly, I'm wondering, is there anything on the front burner, some color you can give as it relates to the brownfield initiatives, greenfield initiatives and especially interested in any color you have on potential acquisition activity, whether that be from producers or otherwise? It's a good question, Robert. I would say, from our point of view, we've always been pretty good at disclosing what we're working on in projects. And so I would say we do have a strong plate full of projects that we're focusing on and concentrating on. I would say the observation is that we're seeing is that we are seeing more assets come available or at least people exploring monetization of different assets. I think from our point of view, we just want to continue to be very prudent about how we deploy capital, how do we view returns on a risk adjusted basis, making sure we get strong returns. But apart from that, as you know, we've said in the past, we don't generally comment on acquisitions, etcetera. But I would say, on the G and P side, you are seeing more things come about. But I would say, we're also pretty focused on our current organic capital program. Okay. And I guess just on the G and P, like what's the appetite to take that part of the business higher and just with all the capital in front of you for mostly long term contracted initiatives? Yes. No, I think that's a good question. From our point of view, we look at what's on the plate right now and so that's a pretty full plate in terms of projects, continued gathering and processing exposure. We like increasing that exposure in the Montney and Duvernay, but we also recognize the OSAT to keep that within balance within the broader portfolio. We obviously concentrate a lot on the liquids infrastructure side and continue to look at projects on that side as Dean alluded to earlier. And so as you've seen us in the past, we try and keep a pretty balanced portfolio. Maybe, Dave, you have another comment or 2? Yes. We're Maybe, Dave, you have another comment or 2 there? Yes, Robert. I guess what I would reiterate is that we've got a pretty well established set of criteria, both economic criteria and also the strategic nature of the assets, and we stick and we've been pretty disciplined about that. We're very encouraged by what we see around Simon Adam, Wapiti and Pipestone and those facilities have and will have the characteristics that we really like in terms of long term sustainability. There's as Stephen indicated, there are assets for sale, but they a lot of them don't have those sorts of characteristics that we would look for. And as you're probably aware, there have been 2 transactions announced that come to mind in 2019, and we were not the successful acquirer of either of those assets. So I think that's an indication that we will continue to be disciplined. That's great. Thank you very much. Your next question is from Andrew Kuske with Credit Suisse. Please go ahead. Thank you. Good morning. Just some commentary on the MD and A about the GMP business where you reduced fees for some of the producers in exchange for long term volume commitments. Could you just give any incremental color beyond what was in the MD and A? What I would say is that we try to work with our customers and we understand the predicament that they're in. And so when we can create a win win situation for both them and us, we try to pursue opportunities like that and solutions like that. So for us, it just gives us a longer term commitment from our customer, and we work with them. We're very flexible with them. And then maybe And I think the only thing we would add to is that in aggregate, there it's not a material amount that we're talking about. Okay. That's helpful. And then I guess the extension on that would be, does that kind of approach provide potential M and A opportunities in areas where you don't have exposure in the basin where someone might be looking for an integrated solution or they're laughing at right now, if they have their own assignments, but would you be willing to transact? Again, what I would say, the answer to that is that we look very carefully at what the characteristics are of the facilities and where they're located because we want when we're acquiring assets, when we're building assets, we want to have long term sustainability and visibility to growth. So those are the kinds of things that we look at. We have discussions around opportunities like that with producers on an ongoing basis. But we're pretty disciplined about the criteria that we apply to what we buy. And then finally, could you just give us a quick update as to where you are in cavern development on what's being lost? And what do you expect coming online in the next few years? We have a very comprehensive program of cavern washing. We've got 2 caverns in wash right now. We've got certainly one waiting for wash and we'll have caverns come online. So I mean, the way I would think about it is probably a new cavern comes online about every year, and that's the way we try to set it up. Demand continues to be strong. The contracted nature of cavern storage is something that we really like. So it will be something we will continue to develop going forward. Okay. That's great. Thank you. Your last question comes from Matt Taylor with Tudor, Pickering, Holt and Company. Please go ahead. Hey, thanks for taking my questions here. Following up on marketing, I know you hit on this, but can you just provide a bit more color on what the premium that you're seeing to isooctane there is versus Alkalate and Arbald and how long you expect that to last? That we're seeing some pretty strong premiums on our off game, which is, again, a premium over the RBOB posted prices. And again, part of that was triggered by the outage of or the shutdown of the Philadelphia refinery. And I would say that while that facility is not expected to come back up again, the whole Okane market will rebalance at some point. But certainly through the summer, it's been very strong. And I think longer term structurally, we see Okane to be strong, but maybe not as strong as what we're seeing in the summertime because there will be other sources of octane that can be sourced offshore that can be brought into the U. S. To help balance the market a bit more. Can you give me some sense of what's normal even on a per gallon basis versus what you're seeing now? I'm just trying to get a sense of magnitude. Yes. We don't disclose that. It's called the secret sauce. Fair enough. And then over to condensate volumes. I noticed there is a 13% year over year uptick. I believe Fortesque has capacity of around 600,000 barrels a day or so. I'm just curious what system utilization was for Q2. And then obviously, as you start thinking about expansions and opportunities, especially with that 16 inches caps pipe coming into the market there. I'm just wondering how you're thinking about that system? Well, you might recall, Andrew, that with the South Carolina Rapids pipeline coming on stream, we now have a significant amount of additional capacity in addition to the Fort Saskatchewan pipeline between Edmonton and Fort Saskatchewan. We're now connected, I think, to pretty much every outlet for condensate every source of pretty much every source of condensate. So we are the best connected condensate network within the Edmonton Fort Saskatchewan hub. We don't really see right now any near term bottlenecks in terms of transportation capacity. We are, as Brad mentioned, continuing to look at expanding the storage. And with the CAPS pipeline coming on and getting connected in a little over 2 years' time, that will obviously create more supply. So we're constantly monitoring what the sort of what the next steps are in enhancing the network. But in the short term, we can accommodate a significant growth in volume without having to invest any additional capital in the transportation network itself. Great. That's helpful. And lastly, can you remind me how much of the storage at Fort Sask is more operational versus longer term? And what I mean by that is just to take advantage of contango prices. And I'm just wondering, as we sit here, how are you seeing spreads going into this winter versus last year? Just wondering what expectations are in marketing? We don't specifically disclose the exact allocation of our cavern storage, But I would say that the majority of it is in condensate service, and that's tied to long term contracts with the oil sands customers. And the remainder obviously would be NGLs? Yes. Excellent. Thanks for taking my questions, There are currently no further audio questions at this time. I turn the call back over to the presenters. Thank you very much, everyone, today for listening in on our conference call. If you have any follow-up questions, the Investor Relations team will be available. Thank you and have a good day. This concludes today's call. You may now disconnect.