Earnings Call: Q2 2020

Aug 13, 2020

Earnings release

Ladies and gentlemen, thank you for standing by, and welcome to the Tidewater Midstream and Infrastructure Limited Second Quarter 2020 Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Joel Vora, Chief Financial Officer. Thank you. Please go ahead, sir. Thanks, Chris. Welcome, everybody, to Tidewater's Q2 2020 conference call. On the call with me today is Joel McLeod, Tidewater's President and CEO. Before passing the call over to Joel as usual for a review of the quarterly highlights, I'd like to remind you that some of the comments made today are forward looking in nature. Based on our expectations, estimates, judgments and projections, forward looking statements we may express today are subject to risks and uncertainties, and actual results may differ from expectations. Further, some of the information today refers to non GAAP measures. And to know more about these forward looking statements and non GAAP measures, you can refer to our various financial reports, which are all available at tidewatermidstream.com or on SEDAR. With that, I'll pass it over to Joel McLeod for a review of the quarterly highlights. Thanks, Joel. Good morning, everyone, and thank you for joining our Q2 2020 conference call. Since our last conference call in mid May, we are pleased to say that we have seen a material improvement in our business and we are nearing pre COVID cash flow levels. Our Q2 was in line where we delivered a record quarter with $41,900,000 of adjusted EBITDA and an over 90% increase year over year on a per share basis. We see a strong second half of the year where we are reiterating guidance of $175,000,000 to $185,000,000 of EBITDA. Our number one priority remains deleveraging and free cash flow generation. And we are confident in our ability to achieve our target of 3x to 3.5x debt to EBITDA with the closing of the Pioneer pipeline sale. We remain impressed by the resiliency of our business through COVID and this is the result of the location and contracted nature of our assets with over 70% of our EBITDA coming from long term agreements and approximately 50% of our EBITDA from investment grade counterparties. Over the past 3 months, we have seen 3 of our largest customers all access capital and again wish to thank our customers for their support. We congratulate the CELT team on their sale of their Inga fireweed property and we'll eliminate all debt and they will be sitting on cash. Further, we saw Pipestone Energy, one of our other large customers, access $70,000,000 of convertible preferred equity and accelerate their capital program and wish to congratulate them. And last, we saw our largest customer in Husky access $1,250,000,000 of debt at an impressive 3.8 percent interest rate. Great to see 3 of our largest customers strengthen their balance sheets. Our business although not untouched has remained resilient and to only to have an impact of 10% to 20% to our business has been an impressive accomplishment. We are not aware of another infrastructure company in Canada that delivered adjusted EBITDA per share growth of over 90% year over year in what is likely to be one of the toughest quarters of our generation. It is important to also note that we will be one of the only companies that is a leader on the recovery, and we have seen demand in diesel and gasoline increase dramatically in the past 60 days and demand is currently outpacing production at Prince George where throughput is currently over 12,000 barrels a day after several successful debottlenecking projects. We are likely to continue to see significant government stimulus and intensive infrastructure capital deployment period over the next 12 to 24 months and Tidewater is positioned very well to take advantage of this. This includes some of the largest capital projects in Canada and even North America in and around Prince George including Site C Dam, Coastal GasLink, LNG Canada and the Trans Mountain Pipeline, all of which are multi $1,000,000,000 projects. We have seen a significant activity ramp on Coastal GasLink, which runs just north of Prince George. Further, the activity around the Montney over the past 3 months has been significant with Conoco stepping in and paying over $500,000,000 for Kaltzinga Fireweed property and more recently CNRL purchasing Painted Pony in the BC Montney. This further validates the prime location of our assets and infrastructure including our Prince George refinery and related tankage and infrastructure. To see several refineries across North America and the world realize negative margins in Q2, while our margin at Prince George has held above $44 a barrel also emphasizes the strategic nature of our assets and infrastructure. To see the Marathon Martinez refinery in California announced closing later this year and yesterday to see the Phillips 66 Rodeo refinery announced conversion to renewable diesel are both very positive for Prince George as diesel and gasoline production on the West Coast will be reduced significantly, and Prince George remains advantaged with our Canadian crude supply. We continue to forecast an increase in adjusted EBITDA of approximately 80% from 2019 to 2020 and are one of only a very few companies that have 80% of per share EBITDA growth from 2019 to 2020. We do expect to continue to deliver material debt adjusted per share EBITDA growth into 2021. Counterparty risk continues to be a focus of the market and want to reiterate that 50% of our EBITDA is from investment grade counterparties with Husky being our largest customer on the 5 year off take at Prince George. As previously mentioned, to see our 3 largest customers access material capital and improve their balance sheets over the last 3 months reiterates the strength of our customers and contracts. We currently are not aware of any material customers being at risk of going into receivership. Prince George continues to perform well, where Q2 was impacted by reduced demand in April, which quickly recovered in May and into June, and we have seen demand levels at or above pre COVID levels for the past couple of months. Q2 was also impacted by 2 week maintenance and debottlenecking program on the refinery, where we are successful in debottlenecking the refinery and are now seeing over 12,000 barrels a day of throughput. When we acquired Prince George, we emphasized that this would be a key defensive asset and a crude collapse. And although not completely immune, we have seen Prince George crack spreads hold at $44 a barrel or above what is likely to be the largest oil price shock that we will see in our couriers. While deleveraging remains our focus, we continue to grow our significant material related projects that are over or sorry, that are under 24 month payouts. Capital expenditures are currently planned to be minimal in 2020 as we focus on deleveraging, but do want our shareholders to be aware that we do have a significant inventory which continues to grow our projects with 50% plus rates of return. The Pipestone gas plant had its strongest run times and cash flow generation to date in the Q2 and we expect this to continue throughout the remainder of 2020. Tidewater processed an average volume of 72,000,000 cubic feet a day in the Q2 of 2020, an increase of 10% over the Q1. Liquids production also increased by 65% with the commissioning of the Pembina C2 plus line and the deep cut processing unit. Facility uptime and availability for the quarter averaged 96% 92 percent respectively. The Pipestone gas plant is fully contracted with over 80% committed on take or pay arrangements. Throughput on the Pioneer pipeline continued to be strong and is supported by a 15 year take or pay contract with TransAlta. The sale of the Pioneer pipeline continues to proceed where we believe where the definitive agreement was executed on June 18 and Tidewater expects to close its transaction by year end 2020. However, delays in obtaining regulatory approvals could delay the expected closing date into 2021. We continue to be committed to our ESG performance by investing in infrastructure to increase energy and natural resource efficiency, reduce emissions and enhance environmental performance. We have developed an interface on our website for the investment community to view as part of our transparency to communicate key environmental safety and other sustainability metrics. Tidewater is evaluating certain small and medium scale green projects in conjunction with government funding programs at many of its sites including our Prince George refinery. To reiterate, after enduring what is likely the worst shock to the global economy and the oil and gas industry, we do feel the worst is behind us and we are well positioned for what is likely to be one of the largest economic stimulus and infrastructure build out periods in our lifetime. Our business remains resilient as a result of the location and contracted nature of our infrastructure assets accompanied with strong defensive assets. We are confident in our ability to deliver $175,000,000 to $185,000,000 of adjusted EBITDA in 2020 with debt to EBITDA assuming the closing of the Pioneer pipeline sale to be 3x to 3.5x at year end. Our focus remains free cash flow generation and debt reduction, and we do feel strongly that we can continue to show material debt adjusted cash flow per share growth for years to come. We are also pleased to welcome Mr. Michael Salmon, Mr. Neil McCarron of Birch Hill Equity Partners and Ms. Gail Yester to the Board of Directors. I do want to thank our staff, Board, shareholders, credit syndicate partners and all stakeholders for all your support through what was likely one of the toughest quarters in our careers. We look forward to delivering strong results in the second half of twenty twenty and remain confident in our ability to deliver debt adjusted per share free cash flow growth into the future. Our number one priority over the next 6 months continues to be debt reduction and achieving 3x to 3.5x debt to EBITDA with the closing of the Pioneer pipeline sale. I'll pass it back to Mr. Borra, and he can walk you through some of the details around the financial side of our Q2. Thanks, Joel. I'll just go over a brief overview of the quarterly highlights, mostly a comparison to Q1 given significant changes in the business from the same period in the prior year, I think more appropriate to compare to Q1. Starting with top line revenue of approximately $178,000,000 it was a decrease over Q1 primarily related to the change in commodity prices. We had a commensurate decrease in operating expenses of approximately 30%, which resulted in gross operating margin of approximately adjusted for hedging gains of approximately 23% versus 18% in the prior quarter. So although revenue moved down, operating costs also moved down and overall adjusted operating margin for hedging gains increased from 18% to 23%, primarily as a result of increased contribution from the Pipestone gas plant, the connection to the Pembina pipelines and the uptime that Joel McLeod mentioned. Adjusted operating margin was approximately $43,500,000 compared to $45,000,000 in the prior quarter. So in line and in line with our expectations given impacts from COVID in late Q1 and in early Q2. And then again saw a pretty quick recovery into the end of May and into June. EBITDA margin was approximately $42,000,000 23%, again, increased contribution from Pipestone Gas Plant being in the summer injection season, also the increased margins from gas storage, which is a high margin business, higher margin in the summer, and then a little bit of an impact in the early part of the quarter from the refinery. But overall, adjusted EBITDA of approximately $42,000,000 and EBITDA margin of 23%. Distributable cash flow was $10,500,000 for the quarter, a payout ratio of approximately 32%. We're generally targeting under 25 percent payout ratio for the year. Maintenance capital would have been one of the drivers for that distributable cash flow number, which was our planned 2 week outage at the Prince George Refinery, but expect that distributable cash flow number to increase and be sub-thirty percent and even sub-twenty 5 percent for Q3 and Q4. Again, committed to reducing debt, applying free cash flow to that net debt amount. Net debt decreased approximately $9,000,000 quarter over quarter, which I think was sort of in line with expectations, not a massive movement from Q1 to Q2, but that number and deleveraging to increase into the end of the year. I think with that, we've touched on the main financial highlights, and I think we'll open it up to the call for questions. Thank you. Your first question comes from Patrick Kenny of National Bank Financial. Your line is open. Yes. Hey, guys. Just starting with the closing of Pioneer, you're still shooting for year end. But with respect to mitigating any delays there, can you just provide some detail on what you guys can do specifically to expedite the approval process? And maybe at the same time, just clarify what the bottlenecks are that could push closing towards mid next year? Yes, for sure, Pat. Not necessarily an easy answer. I think we just want to assure our shareholders that it's daily. Our partner in TransAlta has been a huge help and full court press to move through the regulatory process. So step 1 is to make all the related filings and we're close to doing so. And then just ensuring we have all our ducks in a row to be as supportive as possible. But I want to assure our shareholders that it's all hands on deck. We're not all the way on holidays. 50% plus of our staff are in the office and it's full court press. I think some of it, Pat, we'd like to keep it internal and confidential just so we don't set off any alarms or flags through the process. And overall, it's going well. And we're feeling, I'd say good about closing before year end, but there is risk that we slip into Q1. Okay, fair enough. Thanks for that. And then speaking of somewhat confidential agreements, but the Husky force majeure, I mean, didn't appear to be a big factor in the quarter at the end of the day, like you said, June demand pretty much back to normal there. But maybe just an update on Husky potentially backfilling any volume commitment shortfall that was experienced back in April May, potentially coming back to the remaining months of 2020 here and if that revenue recovery is baked into your $175,000,000 to $185,000,000 EBITDA guidance or does that represent a bit of upside potential to those numbers? Yes, Pat. Husky has been a great partner. Obviously, we always got to think through risk and definitely had legal counsel ready. But to see Prince George demand recover as quick as it has and Husky has been doing an incredible job and gone on of their way. We've seen, I'd say, record lift. We've days where we see as much as 10,000 barrels a day of diesel only move, especially with Coastal GasLink ramping up. We get an updated forecast from Husky and right now they're set to meet and or potentially exceed their off take, which is pretty exciting. So what I say there's significant upside to our base 175 to 185 of EBITDA 2020. No, I wouldn't say it's material or significant, but there's definitely some upside there and continue to see more growth in demand than we definitely would have debated. Okay, great. And then I know it's still early days on the biofuels frontier or even the low carbon fuel standard opportunities, but maybe you can just give us a sense as to what sort of capital commitment we're looking at here and outside of the ESG accretion. I think we saw 50% IRRs in the release. Just how should we be thinking about the upside potential to your run rate EBITDA from these more green investments? Yes, Pat. I'd say it's a little early to say. Even when we acquired the Prince George Refinery, the team, Husky, prior owner did a great job, continually received LCFS Part 3 credits, low carbon fuel standard credits. Example would be before we took over the refinery on the turnaround, they changed the catalyst to run canola oil and co process canola oil. So we're still evaluating if we're actually going to do that. We're continuing to work through the studies, continue to keep it moving forward and do have some Part III credits that we'll receive even into the end of the year. And the funding on that piece is near 100%, which has been very helpful. As we speak today, we don't have anything of significant size and scale. So we're talking about more of studies in that $1,000,000 to $5,000,000 round even combined with all the pieces. I think that the larger discussions are a full renewable diesel component. But again, we'd like to keep some of that confidential. And today, there's no certainty. We wouldn't even be 30%, 40%, 50% certain, but we want to do the studies, do the work. And if all goes well, we're more than happy to evaluate and the support from even the federal and the provincial governments. Maybe there is a higher probability and we're excited to explore those opportunities. Okay. That's helpful, Joel. And then last one for me, if I could, just on gas storage fundamentals, looking, I guess, fairly attractive heading into this winter. Can you just remind us between Pipestone and Brazo, how much is contracted versus available for you to take advantage of any strength in spreads through the winter? Yes. Good question, Pat. I'd say, we're generally contracted. We'd be north of 80%. That being said, we have seen operationally the reservoirs exceed our expectations at times. But when we look forward to the winter, I'd say we're north of 80%, maybe even north of 90% contracted with a little bit of a cushion there. So I'd say there's some ability to utilize some of that space ourselves, but for the most part, we are fully contracted. Obviously, if we see some volatility in AECO Gas prices that obviously always helps storage, but for the most part, those reservoirs are fully contracted. Okay. That's great. Thanks guys. I'll jump back in the queue. Thanks, Pat. Your next question comes from Rob Hope of Scotiabank. Your line is open. Yes. Good morning, everyone, or afternoon. Just taking a look at PGR, with your Q1 results, you're targeting around $75,000,000 there. We have seen demand kind of pick up stronger than anticipated and cracks remain, we'll call it robust. How did Q2 play out and how does the rest of the year look versus your prior guidance? Rob, good question. I'd say April was definitely an under underperformed, but to see demand come back as quick as it underperformed, but to see demand come back as quick as it did, May was probably close to in line, maybe a touch under, but with refined product pricing moving up and crude being relatively cheap that we had moved into our tanks, May probably was in line. And then June, I would say, was getting close to kind of an outperformance month on that base $75,000,000 of EBITDA. And we are hopeful that, that will continue here into the end of the year. We don't want to get ahead of ourselves, but we do see our daily demand. And today, things are feeling pretty darn good. All right. That's helpful. And then when you're speaking about these, we'll call it quick payback projects, I realize that debt repayment will be a focus over the next 6 months. But how big is the portfolio of these projects? And how quickly would you want to move on these following a Pioneer close? Yes, Rob. We're starting with small projects. Butane blending would be a great example, kind of magnitude of $1,000,000 and sub 2 year payout. But we've also debottlenecked a lot of our units. We're working through our unifiner. We did debottleneck our ISOM unit and our reformer. We're close to debottlenecking and these are 100 of 1,000 of dollars pump changes. Some are even changing valves or testing control valves. So again, our team has done an incredible job and seeing opportunities. So if you said, Joel, a small one is interesting, helpful. I would say we're not spending a lot of time yet on big expansions, a $20,000,000 a $50,000,000 a $75,000,000 expansion. For us to have success on these low capital, high rate of return projects is meaningful and we have to focus on deleveraging today. But over the next 2, 4, 6 months, I do think we'll have some meaningful capital projects of size and scale. I think the question will be, can they truly hold sub-two year payout. So I'd say we have an inventory of 10 plus projects, none over $3,000,000 to give you a sense. So we haven't been spending time on a new FCC unit, a new crude unit, a major tankage build out. As today, it's been smaller projects, high rate of turn. But over the next 3, 6 months, I think we'll start looking at some of those bigger projects, especially if we had government funding on some of the green projects, then there is potential that those returns are strong. But we don't want to set the expectation that we have $50,000,000 $100,000,000 projects today that we know are going to be sub 2 year payouts. All right. Appreciate the color. Thank you. Thanks, Rob. Your next question comes from Robert Catellier of CIBC Capital Markets. Your line is open. Hey, good afternoon, everybody. First question is on your outlook for 2021. So if the drilling continues at the current pace, which I think we can all agree is pretty anemic, what degree of throughput declines are possible in light of the relatively high level of contracting you have? Yes. So do you mean declines, Rob, kind of around our assets if to your point drilling activity stays? What would we see as kind of our main act? So Prince George has a refinery. We wouldn't have a concern today. There's the refinery is small, which is helpful. It's only a 12,000 barrel a day refinery compared to the production in BC and that we can bring in Pipestone itself, is fully contracted. So it's a good point. But to see Kelt remove all their debt, now they're focused on WembleyPipestone and Oak, our sense is they're probably going to drill a couple of wells. I don't want to speak for themselves. And obviously, if we see a continued uptick in commodity price, they could accelerate. Pipestone Energy itself did raise $70,000,000 on their convertible preferred and did come out and say we are going to accelerate capital and that's right in our backyard, which is helpful. So I would say Pipestone, you probably see production fairly flat and we are fully contracted. If we go to a Brazo, I want to kind of go in order of magnitude and materiality. If we go to Brazo River, this is public data, but you'd see Westbrook continuing to run 1 rig, which has been helpful. And we've been able to hold Brazo volumes fairly flat and potentially even increase with Keyera shutting in some of their plants and producers asking if they can get into Brazil. But again, want to be careful not to overpromise and say, Brazo River is going to have a massive ramp in throughput. I think if we said, we expect it to be fairly flat, that would be conservative. Ram River itself, which would probably be our next largest chunk of cash flow, has been fairly flat. But this morning AECO at above 2:30 is helpful. We saw per day, one of our larger customers release the results and they generated I think around $15,000,000 of quarterly cash flow. So that $2.30 to $2.20 to $2.10 gas price is very helpful to even around River. So our view would be if gas prices hold where they do or they're in line with the forward strip and oil, yes, we would probably conservatively say a 5% to 10% would be the driver and be helpful at Ram River and Brazil where liquids pricing would be more of the driver up at Pipestone. It's very good detail. The 5% to 10% though seems like a lot relative to the contracting of the tools you have at some of the plants. But maybe we could segue into the marketing business. There was a comment in the MD and A that the marketing business has found new ways to enhance producer netbacks and create some operational flexibility. Can you provide a little bit more color on that, please? For sure. Our Pembina C2 plus connection came online at Pipestone, which is very helpful to liquids marketing to the producers. We are able to deliver a small ethane premium to producers, which 4 or 5 years ago, even prior to Tidewater, I'd never seen ethane premiums. So that comes from initially from Brazo and our team doing a great job of negotiating with some of the large ethane buyers at Edmonton. So that would be a lever that Pipestone has and is significant. And even to have now the C3 molecules, the C4 molecules tied in at Pipestone gives us another lever to help optimize improved customers' netbacks, but leverage some of our relationships and our railcars to find new markets. That's probably the biggest lever on the marketing piece. The refined product piece, I would say, we do expect to see dislocations and we have seen some when we saw demand in April get crushed at Prince George. We had to get creative, leverage off some of our historic relationships and move our products outside of Prince George and Pacific Northwest on the U. S. Side to even Eastern Canada and our team did a great job there. So that would be another piece that we're excited to continue to grow and explore. Okay. Final question for me is, we've seen a number of cost reduction programs in the industry. I wonder if there's a similar opportunity for Tidewater? And then should we expect any other asset sales in the second half or twenty twenty one? So cost reduction, I may get Joel to jump in. I know at Brazos River team has done a great job there to find some options definitely across our assets. For the first time, as most of you know, we've been on the offensive and been very aggressive over the past 4 years. We've had time to reflect internally and optimize. To your point, Rob, I know Brazz River is an area where we've had success, but across all our assets, we've been able to trim costs. I'm specific examples, Joel? I know in general, it's just grinding through costs, even maintenance. You'll see from our quarter, we're under forecast, under budget as we speak, and it's a function of labor being hungry to work and having 5, 45 year history. I know it doesn't seem like a lot, but for Tidewater, it's a big deal to have 4 5 year history with some of the contractors and they want to work rather than sit at home. So they're willing to bring their rates down. But Joel, anything else you think I'm missing? No, I think I'd just reiterate those comments, Rob. We were sort of towards the end of 2019 into Q1 2020, we were in hunker down mode. So when things started to shut down into Q1, we had put a lot of those measures in already cutting CapEx, looking at maintenance capital, 3 year type turnaround to 4 years, those types of things. And then even looking at vendors operating costs at all the plants. So we had started that initiative before there was a big downturn, but I would reiterate the comments that in Q2, we probably saw maybe even more than we would have expected some opportunities in cutting costs. Brazo would be the biggest example, looking at opportunities at our other larger assets. I know the Pipestone team, we don't have 12 months under our belt yet at that plant, but that would be one where commissioning through Q4 and then a pretty early cold winter. The team is now getting close to having a year under their belt at the plant, and I would say that's probably the next biggest opportunity and they're laser focused on reducing OpEx there. So a lot of it has been looked at and we saw some of that come to fruition in Q2. But yes, there's some more opportunities. I think Pipestone might be one of the other examples. And then there's a number of optimization opportunities even outside OpEx now that we've had some time to focus internally. And Rob, you had a second part to your question. I want to make sure we answered it. Yes. Just on asset sales, should we expect anything else on the asset sale front in the next 6 to 18 months? Yes. I mean, they're small. The pieces we're looking at are small. I think in our previous quarter, you probably saw and most saw the small gain from the sale of 1 of our small ancillary businesses. And yes, we're working through a few others, but they're small. We're talking sub $6,000,000 type of pieces, even at times, maybe $1,000,000 ish just to focus our staff. To your point, Trim, even a little bit of G and A, but focus our team on our larger contracted assets. So I would say, Rob, unlikely you'll see anything material, but you may see a $3,000,000 or $4,000,000 piece or a $1,000,000 piece even to reduce some liabilities here the end of the year. But no guarantees, it's still pretty tough to get deals done given the uncertainty in general. Okay. Thanks everybody. Thanks, Rob. Your next question comes from Robert Kwan of RBC Capital Markets. Your line is open. Hey, good morning. First question here is just on the payout ratio. And in Q1, the language was for it to be under 30% and now you've introduced that range of 20% to 30%. And you mentioned earlier on the call that you're targeting tends to be below 25%. But just wondering what was behind introducing the 20% on the low end? Is that just tightening up the guidance range? Or are you looking at potential to actually modestly increase the dividend? Yes. It's a good question, Robert. I think we're we've got a little more Q1, Q2 would have impacted. I would have probably told you end of Q4 2019, we'd be targeting under 20%. With Q1, Q2, that's moved up, I'd say 5% to 10%, but still expect to be well under 30%. I think we're going to see that payout ratio come down and distributable cash flow increase into Q3, Q4. On the dividend increase, it's a good question. And maybe I don't want to say too much, but a modest dividend increase isn't overly impactful to cash flow. But at the same time, we are focused. Number one priority is reducing debt, reducing leverage. So yes, is there a dividend increase behind that guidance? No, not at the moment, but it's something that we're always talking about. Even our Board meeting yesterday, it came up. But are there plans this second? No. But it's something that we're always evaluating and there's potential for that. Got it. Just turning to your planned maintenance activities for the second half of the year. And I guess, first, just the nature of whatever maintenance we should be aware of and downtime and the second being just a projection of what total maintenance CapEx spends would be in the second half? Yes. Total maintenance CapEx, I'd say, would be similar to Q2, maybe a little bit higher. We did defer some planned maintenance in the second quarter. So you may see Q3, Q4 come in a little bit higher. That being said, we do expect distributable cash flow to be higher. So I would still expect that metric to increase. So I'd say you may have a 20% increase in maintenance CapEx for Q3, Q4. And then when we talk about downtime, I think we've got, I wouldn't say anything material. There are 2, 3 tight day maintenance projects across the assets, but nothing material. And I wouldn't expect us to have to disclose or guide to any material downtime in the second half of twenty twenty. And just to add to that, so sorry Rob, capital maintenance for 2020 still reiterating that $25,000,000 range just to help you triangulate to a number. And then as far as downtime, we've seen I think we've seen more down definitely more downtime in the first half than you will in the second half. There's no downtime anticipated at Prince George, our largest asset. And at Pipestone, you may see a day or 2 down by a small amount, but nothing material. Just to clarify, so did I hear $25,000,000 but you've only done $5,500,000 in the first half? Yes, Rob, there's some tank maintenance at PGR that wouldn't result in some downtime, some of that potentially. I think with still evaluating whether we end up in Q4 ish or we end up in 2021, our prior guidance would have been $25,000,000 I'm not saying we're going to come right on the nose. We may come a sneak under, but that's a result of pushing some of that potentially into 2021. It could also happen late Q4. So there's actually a fairly material pickup on a quarterly run rate basis then into Q3 and Q4 or however it falls versus what you did in Q2? I think we just want to give ourselves room to go back to our initial guidance on and public guidance would be $25 ish million of capital maintenance in 2020. Some of it will be COVID related, work related to get a few additional tanks ready to go before the end of the year is ideal. But to Joel's point, some of it may slip into Q1 of 2021. Got it. If I can just finish on leverage, I think it's very clear that the number one focus is to get into that 3x, 3.5x range post Pioneer. You've also put out the 2.5x to 3x long term range. And I guess I'm wondering, is there some color you can give as to over what timeframe you want to get there or put differently post Pioneer? Do you stay capital light until you get below 3x? And does 3x then form a ceiling for any other larger initiatives as you go forward? It's a good question, Rob. For now, we're focused getting down to 3x to 3.5x. And then 2 it will be a function of our cost of capital and I think if the market signals by our share price moving up, we will start to consider capital projects. But to your question on the dividend, that was also a question from our Board as well. Again, there's no commitment to bump our dividend, but when we receive that $138,000,000 from the Pioneer sale, we're starting to determine how we're going to deploy that capital. Number 1 is definitely debt repayment. But to your point, at what point do we start to allocate free cash flow or a portion of that $138,000,000 to capital projects. It won't be significant initially unless the market signals that they're supportive of us going back into growth mode. But right now, we feel it's very clear from our shareholder base to focus on deleverage, get to 3x to 3.5x. And longer term, we'd like to be down in that 2.5x to 3x range. But depending on the opportunity as well, the rate of return, the contracted nature of the opportunity, we may look at capital projects, but for the next 6 to 12 months deleveraging and you won't see any material capital projects. That's great. Thank you. Thanks, Rob. There are no further questions at time. I will now return the call to our presenters. Thanks everyone. We really appreciate your time today, all your support and have a good day. Thanks everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.