Hello, welcome to the LyondellBasell teleconference. At the request of LyondellBasell, this conference is being recorded for instant replay purposes. Following today's presentation, we will conduct a question and answer session. At that time, to ask a question, please press star one on your touch-tone phone. I'd now like to turn the conference over to Mr. David Kinney, Director of Investor Relations. Sir, you may begin.
Thank you, Amanda. Hello, welcome to the LyondellBasell teleconference. I'm joined today by Bob Patel, our CEO, and Michael McMurray, our CFO. During this call, we will review this morning's announcement of LyondellBasell's Louisiana integrated polyethylene joint venture with Sasol. Following the review, we will open the line for your questions. Before we begin the business discussion, I would like to point out that a slide presentation accompanies today's call and is available on our website at www.lyondellbasell.com. Today, we will be discussing our business while making reference to some forward-looking statements. We believe the forward-looking statements are based upon reasonable assumptions. Nonetheless, the forward-looking statements are subject to significant risk and uncertainty. We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements in the presentation slides and our regulatory filings, which are available at www.lyondellbasell.com/investorrelations.
Finally, I would like to point out that a recording of this call will be available by telephone beginning at 2:00 PM Eastern Time today until December 2nd by calling 800-333-0467 in the U.S. and 203-369-3627 outside the U.S. Passcode for both numbers is 3652. With that being said, I would now like to turn the call over to Bob.
Thanks, Dave. Good morning, and thank you for taking the time to join us on such short notice. We hope that you, your colleagues, and your families are all staying healthy during these challenging times. This morning, we announced the completion of definitive agreements to form a new joint venture with Sasol. This transaction builds upon the measured strategic approach we have been taking to position our company for the future. This deal offers a unique opportunity to grow one of the core areas of our business by investing in new, already operating high-quality assets that have tremendous upside as market conditions continue to improve. We recognize that this announcement might come as a surprise after we continue to pursue our highly disciplined financial strategy focused on maximizing liquidity during the first six months of the pandemic.
We believe that this joint venture uniquely fulfills all of the highly selective criteria we outlined for identifying and capturing value-minded inorganic growth during industry cycles. We believe this acquisition will place LyondellBasell in a stronger position as the economy recovers and our industry returns to normalized volumes and earnings. Please turn to slide three of the presentation we posted to our website this morning and allow me to describe this value in more detail. LyondellBasell will purchase a 50% interest in the newly built ethylene cracker, two polyethylene units, and associated utilities and infrastructure located in Lake Charles, Louisiana for $2 billion. LyondellBasell will operate the assets on behalf of both partners for the joint venture. This joint venture enables both partners to maximize the value of these world-class assets while advancing our respective strategic objectives.
We expect to be able to obtain customary approvals and close the transaction before the end of this calendar year. While the agreements do not set out a formal process, LyondellBasell has the potential to acquire the JV assets in full at some point in the future. Today's acquisition has much in common with the integrated cracker joint venture that we established and started up with Bora in China just a few weeks ago. When the two JVs are taken together, we are essentially acquiring the full capacity and immediate financial benefits of a new and operational world scale integrated cracker complex with minimal exposure to the risks from project execution, timing uncertainty, and opportunity costs that are typically incurred during the multi-year construction of these facilities. We are acquiring this world scale integrated cracker at a very attractive valuation.
In addition, we're not placing a big bet by building a project that depends upon a single geographic market or feedstock position. Between our Bora JV and this transaction with Sasol, we expect profitable returns shortly after closing, with half of the capacity in the world's fastest-growing market and the other half benefiting from some of the world's lowest feedstock costs. Turn to slide four. Let's specifically talk about the joint venture with Sasol in Louisiana. The Lake Charles joint venture's integrated polyethylene business is at the core of the largest value chain in LyondellBasell's portfolio and will serve to increase the extent of our global production arising from advantaged low-cost North American feedstocks. We believe that our share of the joint venture will generate approximately $50 million in synergies for LyondellBasell over the next few years.
Both partners believe the value of these assets will be enhanced by leveraging LyondellBasell's global operational experience and know-how, which will encompass over 17 million tons of annual olefin capacity and 16 million tons of polyolefin capacity upon the completion of this transaction. Let's turn to slide five and review the assets in more detail. Our diligence confirmed the assets are very well built with the scale, technologies, and feedstock advantage required to succeed in the global market. The partners have identified quick, low-cost opportunities to de-bottleneck capacity that will enable the joint venture to capture synergies. In addition, we believe that LyondellBasell's knowledge and experience in operating similar facilities provides opportunities to increase utilization by improving operational uptime. The joint venture's low-density and linear low-density polyethylene capacity complements LyondellBasell's existing North American capacity, which is predominantly high-density polyethylene.
While it might be unlikely that integrated polyethylene margins will soon return to the high levels we saw in 2015, we believe the joint venture is well-positioned to capture cyclical upside over the coming years. I've spoken many times about our desire to identify acquisitions where LyondellBasell's skills and competencies could add value through our ownership. Turning to slide six, allow me to highlight some of the ways that our company can contribute to this joint venture. We believe that our partner and the Lake Charles employees are well-aligned with LyondellBasell's fundamental focus on safety. That cascades benefits through reliable operations, reduced waste to the environment, and superior financial performance. The joint venture will also benefit from implementing the best practices identified by our benchmarking and continuous improvement initiatives across a global system of 13 ethylene crackers and dozens of polyethylene production lines.
LyondellBasell's global innovation capabilities will serve to further enhance value creation on these assets. Finally, please turn to slide seven and allow me to describe how this transaction is consistent with our commitments to disciplined capital allocation and our investment-grade credit rating. We've been clear that LyondellBasell has no intention to begin building a new integrated ethylene cracker in North America for the foreseeable future. Instead, we are making deep value investments in recently built existing capacity without the risks that frequently hamper returns from capital-intensive projects. Our investments will provide returns within the first months instead of a distant future. The joint venture is expected to provide an unlevered internal rate of return in the mid-teens for LyondellBasell, and it is expected to be accretive to both earnings per share and cash flow within one year, exceeding our value-minded thresholds for investment.
We expect to fund the acquisition with a combination of debt and cash on our balance sheet. We believe that we can continue to largely fund our dividend with cash from operating activities over the coming year. As we prioritize de-leveraging over share buybacks and grow our earnings following the transaction, we should rapidly improve our credit metrics to ranges that are consistent with a solid investment-grade rating. Let's turn to slide eight and conclude today's presentation with a few key takeaways. LyondellBasell is making a deep value investment in leading assets during trough conditions where we believe there is significant opportunity for cyclical upside. We are leveraging our advantaged positions to maximize joint venture returns for both partners. We remain steadfast to our disciplined capital allocation principles with a dual focus on maintaining the dividend and our commitment to an investment-grade rating.
In conclusion, today's joint venture announcement represents another measured approach to extend one of LyondellBasell's core businesses and increase free cash flow. Over the next three years, we look forward to new sources of annual recurring EBITDA as we harvest the fruits of our recent growth investments. This additional EBITDA will come from the following: over $200 million in annual synergies from the A. Schulman acquisition, $180 million-$200 million in annual estimated EBITDA from our capacity to produce the targeted product slate at our new Hyperzone polyethylene plant based on historical margins. Initial returns from our Chinese joint ventures with Bora and Sinopec, as well as today's joint venture in Louisiana with Sasol. Lastly, $400 million-$450 million in annual estimated EBITDA in 2023 from the capacity at our new PO/TBA plant, again, based on historical margins.
The end result is over $1 billion of incremental EBITDA from our recent growth investments. In addition, we expect substantial additional EBITDA improvement as margins normalize and volumes recover from the depths of the pandemic across our existing asset footprint, particularly in value chains that serve transportation fuels and automotive manufacturing. When combined with our aggressive management of working capital, incremental cost-saving initiatives, and reductions in CapEx, we believe LyondellBasell is well-positioned to increase free cash flow. We will continue our highly disciplined approach to capital deployment. This additional free cash flow will initially be directed towards de-leveraging our balance sheet, followed by strengthening capital returns for our shareholders. With that, we'd be pleased to take your questions.
Thank you. We will now begin our question and answer session. If you'd like to ask a question, please press star one. Please unmute your phone and record your name slowly and clearly when prompted. Your name is required to introduce your question. Please limit yourself to one question at a time. Again, that's star one if you'd like to ask a question, and star two if you need to withdraw your question. Our first question comes from Jeffrey Zekauskas with J.P. Morgan. Your line is open.
Thanks very much. Two questions. The first is, what's the level of leverage of the joint venture at its inception, and what might be the likely leverage ratio of the joint venture over time?
Jeff, this is equity finance, so there's no joint venture level debt.
There's no joint venture.
We will take on debt at our level, at the LyondellBasell corporate level.
Okay. With the 300 kilotons of excess ethylene beyond the polyethylene that you'll pick up, are there any constraints on the sale of that ethylene for you? That is, do you have to sell it at a cost plus basis back to Sasol or some other entity? Or are you unconstrained?
Well, we presume that, as what occurs with other merchant sales, there's probably a combination of market-based and cost-based sort of sales. I think, Jeff, where we potentially can create more value with those pounds is that we have a very strong network in terms of pipelines on the Texas side, if you will, of the Gulf Coast. Now with the network and some connectivity that we'll get through this transaction, we'll be able to sell ethylene in both Louisiana and in Texas directly.
Just to be clear, Jeff, each partner's unencumbered. It's essentially a tolling JV rather than something more complicated.
Okay, good. Thank you so much.
Thank you. Our next question comes from Steve Byrne with Bank of America. Your line is open.
Yes, thank you. It's our understanding that Sasol had planned to push at least two-thirds of the polyethylene from this complex into the U.S. market. What will you guys do with that net increase in production? Is it possible you would export more out of the Houston ship channel and move some of this more into the U.S.? Basically, what's the net effect? Is it likely to reduce the risk of putting pressure on the premium price in the U.S.?
Yeah. The plan is for LyondellBasell to market 100% of the product of the polyethylene and LDPE and LLDPE. Our plan, Steve, is to plug that into our global network. The idea is to maximize value wherever we can do that. As you know, we sell directly in many parts of Asia. We don't have LL capacity in Europe, so we could potentially supplement through sales through Europe. I think that's one of the other values we bring to this venture is a global marketing network that sells directly in most of the major markets.
Thank you.
Thank you. Our next question comes from Arun Viswanathan with RBC Capital Markets. Your line is open.
Great. Thanks. Good morning, guys. Congratulations on the transaction. I did want to dig a little deeper on the strategic rationale here. I guess our perception was that Lyondell was potentially moving a little bit more into LyondellBasell into harvest mode, and yet you have made some significant investments here, with the Bora JV and this one with Sasol. I guess we do understand that effectively you're making lower risk investments here later in the production process, and effectively adding about a cracker's worth of production. I guess, is it just a great value for you or, again, maybe that $2 billion could have been redirected towards capital return or de-leveraging a little bit sooner. How did you kind of get to this position that this was absolutely essential at this point? Thanks.
Yeah, thank you, Arun. That's a good question. Some of the things I'm going to repeat back to you, which you said, which is that certainly lower risk. As I mentioned in my prepared remarks, both projects essentially were running at the time we put the equity in. Certainly Sasol, the JV is running. Bora was ramping up at the time. I think really what this does is it strengthens our core business. We're able to be opportunistic, and strengthen our core business. The cyclical upside that I highlighted, we think is a big driver in terms of why do this as opposed to de-lever or do buybacks. We think it's just a unique opportunity to acquire world-scale new assets in both JVs, frankly. In the case of the Bora JV, remember that's one-third equity, two-thirds debt.
Our capital or equity required there was a lot less. The other thing I really like about both of these ventures is that, in one case, we're leveraging low-cost feedstocks. In the other, we're producing in the fastest-growing market in the world. We're not just betting on one thing here. We're doing both. I think in the case of our Bora investment, it'll really give us far better insights into the market in China. Remember, for that project, all of the production will stay in China. Our intention is not to re-export any of that. Lastly, we think all of this kind of positions us for higher returns, especially when you think through new build cost versus what we paid in both, frankly, and then the cyclical upside that still lies ahead.
We really saw these as unique opportunities, strengthen the core, right time in the cycle, low risk.
Thank you. Sorry, if I could just ask one quick follow-up. Some of those numbers you gave, I guess when you say historical margins, which period are you referring to? I guess, is that like the 2014 through 2019 period or maybe a little bit longer, or how should we think about how to frame the benefit from this?
I wouldn't go all the way back to 2014 because we don't think oil prices are going to get back to those kind of levels. Think about the last three years. That's really how we think about historical margins.
Thank you.
Thank you.
Thank you. Our next question comes from Kevin McCarthy with Vertical Research Partners. Your line is open.
Yes, good morning and congratulations, Bob.
Thanks, Kevin.
Could you tell us about the option that you have to acquire the balance of the 50% ownership to achieve full ownership in these assets over time?
Kevin, it's not formulaically kind of hardwired into the agreements. The partners have an understanding that over a period of time, Sasol have indicated that they would focus on other derivatives at the site and doing 100% of the marketing and operating the site positions us to take that next step at the right time when both partners are ready. I think that's probably the firmest indication of the next step is that essentially we're operating and marketing.
I see. Secondly, can you talk a little bit about the specific sources of the $50 million in synergies that you envision and how that might flow through over time?
Kevin, a lot of that is just increasing the uptime, and really kind of running closer to nameplate capacity through our experience with running multiple units around the world, whether it's crackers or polyethylene assets. Secondly, thinking through value on the marketing side by marketing directly through our network globally.
I see. Thank you very much.
Thank you.
Thank you. As a reminder, please limit yourself to one question. Our next question comes from David Begleiter with Deutsche Bank. Your line is open.
Thank you. Good morning, and congrats on the deal, Bob.
Morning, David.
Bob, how much new debt do you expect to issue in conjunction with this transaction?
Hey, it's Michael. Just a couple of things I'd point out. We ended the second quarter with liquidity of almost $6 billion, we ended the second quarter with cash of just over $3 billion. It would be our intention in the not so distant future to finance this asset, probably a little bit of cash, and the majority of it being debt. We'd probably take that opportunity to do some refinancing of some of our near-term maturities as well.
Good. Michael, how will this JV count for, consolidated or equity?
Yeah. It's going to be accounted for essentially very similar to our PO/JV in Europe. It won't be consolidated, so equity accounting, but we will be able to record our proportional share of both revenue and EBITDA.
Thank you very much.
Thank you. Our next question comes from Vincent Andrews with Morgan Stanley. Your line is open.
Good morning. Thank you for the question. This is Angel Castillo on for Vincent. Just a quick question to follow up on your investments. Are there any other assets out there that you're considering or in terms of potential future acquisitions that would continue to expand on this strategy of kind of acquiring things that are further down the construction path? Should we assume that you're kind of done with M&A or investments at this point?
Angel, we don't really see any other assets that are like this that have the kind of strategic rationale that I laid out. Our focus now is going to be to get to closing as quickly as possible, get the rates to where we want, get a solid marketing plan in place, and as I mentioned, we're coming into a period as a company where we're going to harvest the value from these investments we've been making over the past five years. I'm looking forward to riding kind of the cyclical upside here with more assets than we had going into the pandemic. The cash flow, again, our aim is to delever first and foremost, and get to a solid investment-grade rating. We think there's still going to be opportunity to do buybacks a couple of years down the road.
Understood. Maybe just one quick follow-up on this asset. What's the cost basis of the assets that are going to be included in the JV, as opposed to the full project cost?
No, it would be our acquisition cost essentially is what we bring across. I think if you're asking me if there's some kind of write-down associated with our acquisition, that would not be on our side.
Got it. Thank you.
Thank you. Our next question comes from P.J. Juvekar with Citi. Your line is open.
Yes. Hi, good morning, Bob.
Morning, P.J.
I have a follow-up question on a previous question, and then I have another question. Just quickly on this, your option to acquire the entire joint venture. Is there a trigger for that? Is that your option or is that Sasol's option?
Well, as I'd mentioned earlier, it's not hardwired, but it's sort of the intent of the parties. I think what sets us up for that is that we're essentially the marketer and the operator. It's a principle that we've aligned around between the two partners.
Okay. Your deal, this deal may be opportunistic, but how should we think about Lyondell staying upstream in commodities versus going downstream into specialties? Excuse me. Based on your Schulman acquisition, some people thought that you might be going downstream. Can you just give us your thoughts about how you think about that?
Sure. I think of Schulman as an extension of the value chain that we participate in today. You'll remember that when we acquired A. Schulman, we essentially doubled the existing compounding business. At the time, we had about $200 million of EBITDA in our base business. We acquired $200 million of compounding EBITDA from Schulman, we put in about $175 million on Catalloy and polybutene-1 to comprise what we call today the APS segment. P.J., I don't think about that as a specialty versus commodity. I think about it as value chain, I think about sort of differentiated commodity or differentiation and participation closer to end users with our compounding business. Don't look for us to do a lot in real specialties. That's really not our business.
We'll stay within the value chains where we participate today, going as far downstream as compounding makes a ton of sense for us because we make the base resins and polyethylene, polypropylene. We have the technology, we have the olefins, we make the catalyst for the polyolefins. If you think about integration, it makes a lot of sense in our ability, in the case of compounding, to be able to bring innovative solutions to the market quickly because we also make the base resin.
Great. Thank you.
Thank you.
Thank you. Our next question comes from Michael Sison with Wells Fargo. Your line is open.
Hey, Bob.
Hey, Mike.
Hope you're happy the Browns have a winning record.
Oh, man. Let's hope.
It's a big investment during uncertain times. I'm just curious, you must have improved confidence, I guess, that the industry can get back to better profitability over the next couple of years. Anything in particular you're seeing near term that gives you confidence that we can get back to those margins over time?
Sure. As I mentioned in one of the previous questions, I'm not implying here that we get back to 2014 kind of margins. I think getting to the past three years, 2017, 2018, 2019, over the next three to five years, very doable. First of all, if you look at how polyethylene demand has developed here during the pandemic, we actually see year-over-year demand growth globally. We see year-over-year demand growth in the U.S. We see year-over-year demand growth back to almost normal in China. Demand growth in China year to date through August has grown something like 4%-5%. U.S. is 1.5% kind of range year-over-year growth. Almost two. Also on the supply side, Mike, we're starting to see delays, cancellations, partly because of visibility on oil price, partly because of financial wherewithal of those who might want to build.
I've been through a lot of cycles over the 30 plus years that I've been in the business, and this is kind of how cycles work. I think what's key is that you pay or have valuations at the bottom of the cycle that reflect bottom of the cycle. I think, in a way, we've been able to achieve that. Really high quality assets that we're going to participate in here. Great partner. We're looking forward to working with Sasol, and I think together, both Sasol and ourselves can ride the cyclical upside with the world scale assets.
Great. Thank you.
Thank you.
Thank you. Our next question comes from Jonas Oxgaard with Bernstein. Your line is open.
Good morning.
Hey, good morning, Jonas.
I have 45 questions, but I might settle for the top two or so.
You can ask me one now and the other 44 to Dave later.
Fine. I blame the pandemic.
That's right.
I was wondering, so you're already quite long in ethylene, and with this deal, you're getting longer still. Does this change your strategic thinking about your ethylene position, and should we expect some derivative units being built soon?
First of all, Jonas, after the start of our Hyperzone plant. We're about 500,000 tons long before this deal. If you add another 300,000, we end up at 800,000, which gets us to under $2 billion roughly, in terms of pounds of ethylene in the U.S. We've been kind of in the one to two range for a few years now. I don't think that's too long. We have a very extensive pipeline network, many longstanding relationships. Sasol is selling some of that ethylene today. I think it's still modest. When you think about our overall portfolio and % merchant position, on a % basis, it's still quite low. Your second question about would we consider building more derivative units? Not now, but in time, perhaps.
I think we need to see how the business develops, how operating rates develop over the next three, four years. That could be a middle of the decade or second half of the decade sort of decision. To be clear, I do not anticipate us doing anything on derivatives in the next three to four years. We will maintain this net long position, and we think it's very manageable.
Thank you.
Thank you.
Thank you. Our next question comes from Matthew Blair with Tudor, Pickering, Holt. Your line is open.
Hey, good morning, Bob.
Morning, Matthew.
It was reported there were other parties interested, and it looks like you got a pretty good deal to us. Does this just simply come down to who had the highest bid? Or were there some non-monetary considerations that helped you win out?
Well, it's always hard to gauge competitive dynamics, and I don't want to speculate on a call like this. I think, for us, what I hope our partners saw was the value that we brought from an operating and marketing standpoint, ability to plug into a global network on marketing immediately from day one. The possibility for them to retain 50% and ride some of the market upside before they made a decision on the second 50%. That's kind of what I hope and know. The remaining competitive dynamic's difficult to really say.
Thank you.
Thank you.
Thank you. Our next question comes from Hassan Ahmed with Alembic Global. Your line is open.
Morning, Bob.
Morning, Hassan.
Bob, a question on valuation. If I take a look at greenfield replacement value of most of the projects that came on stream in the U.S. over the last couple of years. On a sort of replacement value basis, you guys seem to be sort of purchasing these assets at a significant discount relative to those replacement values. The question really is, does that just highlight what a good deal you guys have gotten? Or have you seen a meaningful sort of decline in new build replacement values as sort of the E&C side of the business has slackened a bit, with sort of the flurry of new builds slowing down?
Yeah, Hassan, it's a great question. It is not an indication of lower costs on the new build side. I think it's more reflective of the cycle, and kind of where we are in the cycle today. As I mentioned in my earlier remarks on one of the other questions, is that it's opportunistic, but I do think that we're kind of at the bottom of the polyethylene cycle. As there have been many public announcements about delays or cancellation of projects on the supply side and on the demand side, we're really seeing good growth even through a pandemic. With a recovery, we might even see a year of above kind of average growth. We think that the cycle should turn up here.
I think it's just timing in terms of where we are in the cycle and the ability to get this done at this time.
Perfect. Thanks so much, Bob.
Thank you, Hassan.
Thank you. Our next question comes from Roger Spitz with Bank of America. Your line is open.
Thank you. Good morning.
Morning.
What do you estimate the replacement cost of the assets, including the associated infrastructure you are buying is on 100% ownership basis, meaning your and their part?
I think, I'm gonna give you a very kind of round number here or round range. My sense is that a really well-executed project that is low cost, relatively speaking with including the utilities and the infrastructure, likely close to $6 billion for a well-executed project, 100% basis. Half of it would be about $3 billion.
Perfect. Thank you very much.
Thank you. Our next question comes from Duffy Fischer with Barclays. Your line is open.
Yes. Good morning, Bob.
Morning, Duffy.
Quick question to help us with the cash flow from this, maybe like the first three years. You talked about there won't be any interest because there's no debt. What would the CapEx look like the first couple of years? Will you want to make some tweaks that maybe would indicate more CapEx than normal for a new project? How much working capital will you need cash to put into? Is there any reason to think that the taxes on this will be different than U.S. corporate taxes?
Yeah, good question. First of all, in terms of CapEx, we do not intend to do anything unusual in terms of CapEx. It'll just be a little bit of maintenance capital, but as you know, these are new facilities, so should not require much CapEx at all. On interest expense, there will be some interest expense incrementally because we will borrow partly to fund, but at today's rates, it's very low in terms of interest expense. There could be some tax benefits for next year that we're thinking through. Don't have anything really firm to discuss today, but we'll work our way through that. Duffy, my sense is that, as I mentioned earlier, I think, well within the first year, we're going to see positive cash flow. It's going to be by mid-year, hopefully even sooner than that. There's not a lot of integration work to do here.
It's single asset. We don't intend to have kind of incremental costs or be a little bit of cost to achieve in synergies. It's nothing like what we've talked about on A. Schulman, which was a global company that we acquired. This is a single asset deal in a way. The size turns out to be very similar in terms of value. I expect that this JV will be contributing cash flow for a good bit of 2021.
Perfect. Then, can you walk through maybe big picture, what are the contractual obligations with the other Sasol assets that sit on the site in your JV?
We'll supply some utilities here and there, but for the most part, they're separate. The cracker and the two polyethylene plants are really segregated because they were built new. There'll be some small utility type agreements back to Sasol at the site.
Perfect. Thank you, guys.
Thank you.
Thank you. Our last question comes from John Roberts with UBS. Your line is open.
Morning, this is Matthew Skowronski on for John. You said you think of the historical margins as the ones we saw the last three years. I imagine this deal shows your confidence in ethane advantage longer term, but what's your view of ethane in the near term and maybe over the next three years?
Yeah. Good question. On ethane, I think you've seen some of the price volatility recently, with some supply offline. We've seen ethane come back off again. Likely, I think we've kind of chop around in the range where we've been recently. As oil prices recover and a few rigs come back in the Permian, maybe it's not until the second half of next year. I think, given that sort of modest outlook for supply, there's enough ethane to supply the crackers that are here on the Gulf Coast, and the exports that are already committed, if you will. Your broader question about feedstock advantage, the way I've kind of thought about this is that it's unlikely that the feedstock advantage goes back to what it was back in 2014, when we had oil-to-gas ratio of like 40 and 50.
I do think that we can see oil-to-gas ratio in the 20s very consistently. That provides significant advantage for assets that are already on the ground, but it may make challenging new investments that looked a lot better when oil-to-gas was 40-50 instead of mid-20s. To be clear, with a mid-20s kind of oil-to-gas, I feel quite good about the cash flow generation capability of the assets that we have on the ground, including now our JV with Sasol.
Very helpful. Thank you.
All right. Thank you. All right, that was the last question. Well, thank you very much for joining us on such short notice, and we look forward to engaging with all of you further and answering your questions. Hope you have a great day and a great weekend. Thank you.
That concludes today's conference. Thank you for participating. You may disconnect at this time.