Good day and thank you for standing by. Welcome to the Targa Resources Corp. 2nd Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After speaker presentation, there will be a question and answer Please be advised that today's conference may be recorded.
And if you require I would now like to hand the conference over to your speaker today, Mr. Sanjay Lad, Vice President, Finance and Investor Relations. Please go ahead.
Thank you, Victor. Good morning and welcome to
the Q2 2021 earnings call for Targa Resources The 2nd quarter earnings release along with the 2nd quarter earnings supplement presentation for Targa Resources that accompany our call are available on our website at to our website. Statements made during this call that might include Targa Resources' expectations or predictions Actual results could differ materially from those projected in forward looking statements. For a discussion of factors that could cause actual results to differ, Please refer to our latest SEC filings. Our speakers for the call today will be Matt Molloy, Chief Executive Officer and Jen Neal, Chief Financial Officer. Additionally, the following senior management team members will be available for Q and A.
Matt McDonough, President, Gathering and Processing Scott Feier, President, Logistics and Transportation and Bobby Muraro, Chief Commercial Officer. And with that, I'll now turn the call over to Matt.
Thanks, Sanjay, and good morning, everyone. We're excited to announce another great quarter at Targa as our overall business continued to perform well, led by our position The Permian Basin and our integrated NGL business. As we continue to execute on our key strategic priorities, We are very pleased with our positioning. Taking into consideration our first half performance and the strength in our business outlook for the second half of this year, 2021 EBITDA is now estimated to be 19% higher than last year based on the midpoint of our new guidance range. Our prioritization of free cash flow for debt reductions mean we reduced our debt balance by $780,000,000 in the first half of the year And our consolidated leverage was 3.8x at the end of the second quarter, within our target range of 3 to 4 times and well ahead of schedule due to our strong performance.
This provides us greater flexibility and bolsters Targa's financial position. We now expect to end the year at about 3.5x leverage With a strong balance sheet and well positioned to repurchase the DevCo interest in the Q1 of next year. We are also very proud The efforts of our Targa employees over a difficult last year and a half. Our employees have continued to perform exceptionally well for our customers and have done so with a continued focus on safety and we are very thankful for their efforts. Let's now turn to our operational Starting in the Permian, 2nd quarter system volumes rebounded quickly following the major winter storm During the Q1, our system inlet volumes increased 15% sequentially.
We now expect our 2021 Permian inlet volume to Increase at the high end of previously disclosed 5% to 10% growth over 2020. Our Permian Midland system ran above nameplate capacity for much And we're pleased to announce our new 200,000,000 cubic feet per day Hines plant is mechanically complete and expected to begin full operation In early September, a special thanks to our operations and engineering teams for safely bringing Online Heine well over a month ahead of schedule We expect time to commence operations highly utilized and given our outlook for continued production growth, We announced this morning our plans to move forward with the construction of our new 250,000,000 cubic feet per day legacy plant, which is expected to begin operations during the Q4 of 2022. Even with the addition of legacy, there is no change to our 20 21 net growth capital spending estimate of between $350,000,000 to $450,000,000 Our Current year spend on legacy is estimated to be about $70,000,000 In Permian, Delaware, completions and activity levels Continued to ramp and we currently have adequate processing capacity to accommodate our anticipated near to medium term growth. The stronger outlook across our Permian Basin footprint coupled with our new plant announcement will continue to drive incremental volumes through our downstream businesses.
Moving on to the Badlands, we saw sequential increases to our gas and crude volumes during the Q2. Producers are completing wells and we continue to have positive producer dialogue. Turning to our central region. Gas inlet volumes during the 2nd quarter also rebounded from the winter storm and Shifting to our Logistics and Transportation segment. Overall system volumes during the Q2 meaningfully rebounded from the effects of prior quarter's major winter storm.
Our Grand Prix pipeline continues to perform very well with total deliveries in the Mont Belvieu increasing 14% volumes to ramp through the balance of the year. We also achieved record fractionation volumes at our Mont Belvieu complex, averaging about 644,000 barrels per day during the 2nd quarter, representing an 18% sequential increase. In our LPG export services business at Galena Park, 2nd quarter volume sequentially increased 20%, averaging 10,300,000 barrels per month. While we remain highly contracted, the current higher NGL prices are causing reduced short term demand for spot opportunities. However, Overall, the long term fundamentals remain strong for LPG exports and the current strength in propane prices is still a net positive for Looking ahead, with our leverage already in the target range and on track to be even lower by year end, we expect to be in a position to Earn incremental capital to our shareholders in 2022 after repurchasing the DevCo joint venture interest.
We have the ability to return capital to shareholders in a number of different ways through additional dividends, share repurchase, Repayment of preferred equity and or continuing to reduce debt. We are currently evaluating along with our Board the best way to deliver value to We expect to articulate more details in February with Our 2022 outlook and capital plan for the year. Target continues to benefit from the strength of our business and our talented employees, and we remain very well positioned for the long term. With that, I will now turn the call over to Jen.
Thanks, Matt. Target's adjusted EBITDA for the 2nd quarter was $460,000,000 as second quarter volumes across 2nd quarter EBITDA was sequentially lower predominantly due to storm related benefits and seasonal opportunities in our marketing businesses realized during the Q1 and from higher OpEx from additional volumes moving through our systems and higher G and A. Through the first half of twenty twenty Sorry, through the first half of twenty twenty one, Targa has generated free cash flow of $593,000,000 versus $171,000,000 over While still benefiting from higher prices across our unhedged equity volume exposure and prices above C4s, you can find our usual hedge disclosures in Quarterly earnings supplement presentation. As Matt mentioned, we are increasing our full year estimated 2021 adjusted EBITDA to be between 1.9 $1,000,000,000 to $2,000,000,000 Our updated financial estimates assume full year 2021 WTI crude oil prices averaged $65 per barrel NGL prices averaged $0.70 per gallon and Henry Hub and Waha natural gas prices averaged 3.20 And $3.10 per MMbtu. The biggest drivers of our continued performance relative to previous expectations for 2021 Our commodity prices, particularly as we benefit from prices above before, also higher volumes and continued cost management relative to expectations.
Inclusive of expected spending this year for the newly announced legacy plant, our Our 2021 net growth CapEx estimate remains unchanged at between $350,000,000 and 4.50 And we now estimate net maintenance CapEx to be lower at approximately $120,000,000 Our continued strong performance means we expect to end 2021 with consolidated leverage around 3.5 times. This puts us in Excellent position to repurchase our debt co interest in the Q1 of 2022, while still maintaining consolidated leverage within our target of 3 to 4 times. Looking forward, we believe that existing in the lower half of our target consolidated leverage ratio range provides for more flexibility, which is why we are continuing to prioritize free cash flow for debt reduction, particularly in advance of our debt co repurchase. As we look forward, Our balance sheet is well positioned. We have an excellent liquidity position with no near term debt maturities.
Also In early June, Fitch issued their inaugural ratings for Targa and assigned us with a BB plus rating. We really appreciate the amount of work that the Fitch team invested to We are now rated by the 3 leading agencies and are continuing our dialogue with each related to our trajectory towards investment grade, which remains a priority for Cartagena. Shifting to our focus around sustainability and ESG, we continue to advance our efforts And we plan to publish our next sustainability report in the fall. In closing, on behalf of all management, We say thank you to our talented Target team for all that they do. And with that, I will turn the call back over to Sanjay.
Thanks, Jen. We kindly ask that you limit to one question and one follow-up after the Q and A line if you have additional questions. Victor, will you please open the lines for Q and A?
Of course. Our first question comes from the line of Shneur Gershuni from UBS. You may begin.
Hi, good morning, everyone. Maybe to start off a little bit, just wanted to chat about your guidance. Obviously, it was taken up today and you sort of cited the fact that you expect to be at the higher end of the volume or volume growth range. Just kind of curious, there's been a lot of discussion around increased activity, specifically in the Delaware. I'm curious if that's Around your assets and that's what's driving the guidance increase?
Or is there a potential that if this activity in the Delaware continues to Increase that we could actually see an even higher exit rate for Targa when you close out the year? Just kind of curious what was baked in.
Sure. Hey, good morning, Shneur. Yes, we are seeing stronger volumes. We pointed at the high end of our range. I'd say it's In both the Midland and the Delaware, we are seeing, I'd say, higher activity.
But It's really the dynamic we talked about last call, I'd say, is still for the most part there, which is the larger producers are really staying within what they told us. The smaller and some of the private guys we are seeing ramp up more. You've seen a steady increase in the rig count, but not a huge So I think we're just seeing, just continued strong activity across the board for our producers. Yes. Pat, is there anything else you want to add to that?
I'd just say that we're seeing activity in both basins. Obviously, Legacy plan announcement, we're seeing continued strong growth on the Midland side of the basin. We have seen more activity in the Delaware Basin, But delineated just as Matt described. The big guys staying kind of on the programs and more little guy activity. So Both sides are growing.
Cool. Definitely appreciate the color there. And then maybe to follow-up, In terms of the whole simplification approach, I mean, you've been pretty consistent in saying that this is really a 'twenty two event. I think in your prepared remarks today, you talked about DevCo probably happening in 1Q. I imagine you have to give notice and you'll let us know that ahead of time.
And if I remember correctly, your prep steps down in March as well too, which is another component to that. But At
the same time, you're kind
of in this interesting position today where you can actually write that you're going to be at 3.5x leverage by the end of this year. Does that increase your flexibility to be a little bit more opportunistic around buybacks? Or right now everything is parked to take out the DevCo and maybe work on the pref later in next year.
Yes. I'll start, Jim, and then if you want to add in. We did say we are targeting 3.5% through year end, and that Does assume that we're prioritizing our free cash flow to go towards debt reduction. That is our base case plan is to get there, and that just puts us in good position to be able to Take out the DevCo in the 1st part of next year. We do have a share buyback authorized.
But what you've seen us do this year for the first part is prioritize that free cash flow towards debt reduction. That's my expectation that we'll Continue to do that while still having the ability to do share repurchases. And then we're taking a hard look at that with our Board, and we'll Kind of lay out what the 2022 capital plan is in February for our free cash flow.
All I'd add, Shneur, is that I think The flexibility of our outperformance the flexibility as a result of our outperformance this year positions us really nicely to be able Take out the DevCos in the Q1 and still have our leverage within that long term target range, which is great. And then as we think about the prep, we've got a lot of There, it steps down to 105 in mid March, but that's something that we also could look at taking out ratably over a number of quarters in To maintain that balance sheet flexibility that we've worked so hard to get.
Great. So it sounds like a lot of Flexibility here in the outperformance and guidance increase sort of positions you to have a lot of options. Is that kind of the takeaway guys?
That's right. Yes, that's right.
Perfect. Thank you very much. Really appreciate the color today.
Okay. Thank you.
Our next question comes from the line of John McKay from Goldman Sachs. You may begin.
Hey, everyone. Good morning. Thanks for the time. Maybe for our first one, I'll just circle back on Shneur's first question On Permian volumes, so I'm thinking if we look at where you guys sit right now, you're kind of at the top end of the range or close For the growth guidance, even if you're kind of flat for the next couple of quarters, just curious, to balance that against Your comments of activity overall picking up and whether or not that's just some conservatism or you see anything else going on?
Yes, sure. We typically see, especially on the Midland side, a lot of growth as we get into the Q2 and into Q3, so some of it is seasonal. We see a lot of activity. We see that continuing and something that feels like the activity is more ratable, but the volumes tend to grow more in the second And we are seeing that this year, I think, which is part of that. So while we do expect some growth as we kind of Continued to the back half of the year and into 2022, it may not be at the same rate that we kind of experienced the last few months.
Pat, anything? No, I agree. We're lumpy in
the second, third quarters, but we do expect growth through the end of the year, probably not as lumpy as what we've seen over the last 6 months.
Okay. That's fair. Thank you. And then just on CapEx, the first half was lower than we expected. Looks like the Heim plant is coming in sooner than expected.
You guys reduced the maintenance guidance, but not the growth guidance. I'm just curious on kind of what else is kind of filling out that second half of the year Spending and is that because of more activity we're seeing more well connects and that can kind of Give us a readout on 'twenty two or anything else going on in there?
I think the biggest piece, John, is the announcement of the legacy plant. So as Matt mentioned in his scripted That moves essentially $70,000,000 of spending into this year that we otherwise were probably likely going to spend this year. And so when you think about where we are year to date, we spent, call it, around $150,000,000 and then we now have that additional $70,000,000 So the remainder of our expected spending is for additional gathering lines and compression to support the continued growth of our gathering and processing footprint And then some small downstream projects that are consistent with what we've been forecasting previously.
Okay. Thanks. I guess Just to clarify that, the so the legacy plant, that is still the same one you guys were, I guess, evaluating last quarter and now it's Kind of formally in the budget, is that the right way to think about it?
That's right. It's formally board approved now and the spending has begun on it.
Great. All right.
Thanks for the time. Appreciate it.
Okay. Thank you.
Our next question will come from the line of Michael Blum from Wells Fargo, you may begin.
Thanks. Good morning, everyone. I wanted to just clarify, just looking at sequentially the marketing margins were down. Is that just due to The absence of Yuri opportunities or is there something else going on with NGL marketing that just want to make sure
It's really 2 pieces, Michael, and we talked a little bit about this on our Q1 earnings call that within the Q1 On the marketing side, we benefited from both the winter storm and then there were also some benefits from contango opportunities that we entered into In the sort of early in Q2 and late in Q1 of 2020.
Got it. And then I want to ask about LPG exports. You mentioned perhaps some fewer spot opportunities. But In light of just how high propane prices are, do you think in the second half of the year you're going to see actual cargo Cancellations? It just seems like something's got to give.
Yes. Michael, this is Scott. I would first point to the fact that our export performance was strong The 2nd quarter, a nice recovery from what we saw in the Q1, which was impacted by the February winter storm. Certainly, as you pointed to of late and really throughout this year, the increased price on both propane and butane here in the U. S.
Versus global pricing has impacted some opportunities for spot. So I think when you look at it, the international market is choosing at times to look Other places as opposed to U. S. Gulf Coast for exports. And at times, quite frankly, Target may choose to not participate at certain pricing levels.
So as a result of that, I think spot opportunities may be impacted. As Matt pointed out, though, Higher prices here on propane in the U. S. Help us in other areas of our integrated platform, so we benefit from that. We have not experienced any cancellations to this point.
But again, the fundamentals with inventories here in the U. S, About 20,000,000 barrels behind this time last year. That supports propane prices, which could have an impact on spot opportunities. We're well contracted. And should we see cancellations, obviously, we collect the cancellation fee as a result of that.
Understood. Thank you.
Okay. Thanks, Mike.
Our next question will come from the line of Jeremy Tonet from JPMorgan. You may begin.
Hi, good morning.
Hi, good morning.
Hi, good morning.
Just want to Start off on the credit side here and we get to some more numbers you guys being around 3.5x levered at the end of the year, delevering rapidly into next year, dollars 2,000,000,000 being of quite notable size and scale. I'm just kind of curious why the Agencies, I guess, haven't been moving a bit quicker towards IG here. I mean, it seems like you check all the boxes, those metrics, that leverage is actually Better than all the other C Corp peers. So am I missing something here or is there something else for the agencies?
I think We're in a consistent dialogue with the agencies, and we certainly, I think, share your view, Jeremy. I think part of what they're looking for is just continued sustainable performance and delivering on what we said we were going to do related to our deleveraging, Related to our continued discipline around CapEx spending and the like. So I believe that we already have incredibly strong metrics, and I'm really proud of the organization for getting us in the position that we're in where we could end this year with leverage Around 3.5 times. Certainly agree with you, and I hope that the rating agencies similarly will continue to assess our strong performance thus far this And really over the last 18 months and we'll start to take positive credit actions. All we can do is continue to stay in front of them and I think that we have an excellent dialogue with all three agencies and appreciate the amount of time that they've been willing to spend with us over the last 18 months too.
So I do feel like it's just a matter of time.
Got it. Yes, just wanted to make sure they knew you at the lowest leverage of all C Corp peers because that kind of stood out to us. But maybe moving on here to Carbon capture, it seems from the maps that we can tell, some of your processing plants in the Permian are kind of a stone's throw away from some CO2 plants. So I'm just kind of wondering, Is that something you see in the near future? If there's all this kind of ESG Green PE money out there, is there any reason not to invite them into a JV where they put up the capital, You guys put in the assets and kind of get something going together there that's positive ESG, doesn't cost a lot for Targa?
Yes, Jeremy, we are looking to carbon capture up our processing plants and evaluating what that project could look like. We are as we go through it, I agree with you. I don't know that there's going to be a shortage of capital is going to be the issue, just kind of getting through some of the operational Where we're going to sequester it and permitting and some other things that we're working hard on. So and you also said in the near I think this is also it is going to take a while, right, for us to figure if we have a viable project here or not. I'd say we're making good progress.
As we kind of learn more, I'm becoming increasingly optimistic that there's potential to do something here, but it's still going to take It's going to take some time.
Got it. So hopefully if the Railroad Commission gets primacy there that things can kind of move a bit quicker, but
Our next question will come from the line of Tristan Richardson from Truett Securities. You may begin.
Hey, good morning guys. Appreciate all the comments. Just a follow-up to earlier question on capital in 2022. Obviously, you guys made very clear priorities in 'twenty two around leverage and DevCo consolidation and cost of capital management. But just thinking, If we've got a very short list of identified projects and really only half of the legacy plant spend in 2022, even on the back of increased completion Should we think capital could come in further next year than even kind of where you've talked about
Tristan, this is Jen. I think ultimately it will depend on activity level. We're certainly continuing to see good growth around our systems, particularly on both the Midland side and also the Delaware side in the Permian. So we certainly Continued spending on gathering lines compression, etcetera, plus we'll have the remaining spending of the legacy plant and then we'll be having to Likely think about the right timing for the next plant in the Midland Basin just depending on how forecast looks. So I think right now, We're not in position to give 2022 capital guidance, but I think that my expectation would be that it would be more similar to this year versus we'd see A material drop off year over year.
That's helpful. And then just
secondly, just Curious thoughts on sort of hedging philosophy in 2022. I mean, I think this time a year ago, the world was very different and you guys were very Intentional on taking out equity links, just taking it out of the question for 2021, but just thinking somewhat more normal world thoughts on Equity links, particularly against the past several years of you all's big shift to a much more fee based model.
Yes. As far as our hedging goes, I mean, we are going to want to stay we call it programmatic Our target is 75% year 1, 50% year 2 and then 25% year 3. I see us continuing to kind of along that programmatic amount and be somewhere around those ranges. But you're right, with our leverage lower and with more fee based, we would have some opportunity To even go inside of that, but I think right now where we are is kind of sticking with that 70five-fifty-twenty 5 is a process work for us and something we're likely to Kind of hover around for a while.
Great. Matt, thank you.
Okay. Thank you.
Our next question comes from the line of Spiro Dounis from Credit Suisse. You may begin.
Hey, good morning, team. Two quick follow ups from me. First one on capital return and kind of tying it back to Jeremy's question around investment grade, Sounds like you guys are on a path there. It's all about execution. Just curious in your discussions with the agencies,
Have they provided any sort
of guide rails for you as you sort of formulate that plan to return capital? And then also kind of imagine you've Getting feedback from investors as you go through this process. So curious what so far has kind of resonated with you as you formulate that plan?
I think clearly our existing investors, potential investors and then the rating agencies are some of the important constituents We have to take their points of view into consideration as we work with the Board through this call really Then be in a position to articulate what our go forward strategy on capital allocation will be. Again, as Matt said, we expect to articulate in February's period. So I'd say that it's an evolving dialogue. I'd say that we're getting a lot of advice and I'd say that, that advice is varied as one would expect just depending on What type of investor we're talking to or certainly the rating agencies want to see More credit positive decision making versus the alternative. So those are all very important voices and we are certainly listening to them and then providing our Board with that feedback That's an important part of the evolving conversation at Targa.
Great.
Thanks for that, Jen. Second question just on asset sales. Obviously, not in a position where you need to do anything, but I know at one point you had contemplated selling some non core assets last It seems like the M and A market has dramatically improved, valuations seem to be coming back, assets are changing hands. I'm just curious where that stands and if there's any interest there?
I think we continue to see us be opportunistic, Spirota, to the extent that we think there is an asset or assets that makes sense For somebody else to own if they have a lower cost of capital for other reasons, and that's something that we'll consider. But as you said in your opening part of the question, the great Part of this is we've got a lot of flexibility and we don't need to do anything. So that means that the bar and the threshold for us willing to sell assets is higher than it We was before when we needed to sell assets in order to be able to finance our growth capital.
Got it. That's all I had. Thanks for the time team.
Okay. Thank you.
Our next question will come from the line of Keith Stanley from Wolfe Research. You may begin.
Hi, good morning. I wanted to clarify one thing on return on capital for next year. You listed options of buybacks, Dividends and buying in the preferred equity. So I guess how do you compare buying in the prefs versus the other alternatives? And You talked a little bit about maybe buying it in gradually.
Is it fair to say you have a more patient tone on the pace of taking out the prefs than perhaps in past quarters?
I think from our perspective, the TRC prep is a material amount of capital that would That we need to deploy in order to be able to redeem it. So as we look at it, it is higher cost to us at 9.5%, but we also have a lot of flexibility in terms of The amount of time that we have that we want to redeem it. So I think you are hearing from us that our base case assumption right now is that there really Isn't a driving reason to have to take it out in the Q1 in mid March when it steps down to 105. We can maintain and even enhance our balance sheet flexibility by being a little bit more deliberate with the CRC prep and taking it out more slowly over time. And so that's the base case assumption that we're running, Keith.
Of course, that can evolve as we move through this year and into next year as we have more flexibility with increasing free cash flow, But that's the current assumption that we're running.
Got it. And second question, You've talked about increased activity in the Permian and I feel like we've heard some mixed things this earnings season on that. And the one thing I'm wondering just last year Associated gas production meaningfully outpaced oil. Are you seeing any changes in that dynamic? Or Do you think gas NGL production growth from here continues to outpace the oil production growth in the Permian?
No, we see it continuing. As you described, it's exactly right. And obviously, the Delaware is a little more oily On the Midland side of the basin, it's dependent upon where our overall volume growth could affect it a little bit, but absolutely more gassy.
Thank you.
Okay. Thank you.
Our next question will come from the line of Robert Moskow from Mizuho. You may begin.
Hi, everyone. Thanks for taking my question. One of them was already asked, but just curious, One of your G and P peers in the Bakken seems to be benefiting from rising oil gas oil rising gas oil ratios and assets there and in the Permian, we're just curious to hear whether longer term you expect to see a similar sort of GOR trajectory in the Permian as that base matures or Whether the Permian is a bit of a different animal in terms of underlying geology, just curious to hear your thoughts.
Yes. I mean, I think we are benefiting similarly to others. As you see, higher GOR go up, you have seen that help us out in the Permian and you've seen our gas performance be even a little bit better than our crude here when you look at this quarter. I think the higher GOR is a tailwind for us across multiple systems.
Okay, thanks. That's all for me.
Okay. Thank you.
Our next question will come from the line of Sunil Sibal from Seaport Global. You may begin.
Yes. Hi, good morning, everybody.
Couple of questions from me. There has been a fair bit of industry discussion on AqCan recovery. I was just curious if you could talk about some trends that you are seeing on your systems And also kind of remind us with regard to your commercial contract with the customers, is those Seasons on ethane recovery made at the target level or is it primarily at the customers, especially considering that Seems like you do have some frac capacity and also ability to expand Grand Prix.
Sure. Yes, on ethane recovery, I'd say it varies across our systems for whether producers have elections or we make the elections, so it varies by On track by system, but for the most part, our assets are in recovery and kind of have been in recovery. So That's how most of our assets are operating. You did see if you look you saw an uptick in South Texas where it wasn't rejection and Elk and Recovery sees on NGL But for the most part, the other systems were really already in recovery.
Okay.
Then second question was related to the margins in the logistics segment. So clearly, there was a bit of a downtick there. I was just curious on the transportation and services side, Are you seeing any kind of movements in the rates or that part of the business is fairly steady and most of the dynamics or the changes are on the marketing side of things.
Yes. So most of our volumes that are going downstream business, whether it's transportation or fractionation, are under So there's not a whole lot of movement in terms of rates there for where the volumes that are going through our assets. I think when you look at the unit margin, you look at the reported numbers, what Jen talked about was we had some marketing gains in the Q1. So we had some outperformance due to The winter storm and some marketing gains, which kind of skewed the unit margins higher. But overall, just Run rate business is performing well and are generally under long term contracts.
Okay, got it. Thank you.
Okay. Thank you.
And I'm not showing any further questions in the queue at this moment.
Well, thanks to everyone for being on the call this morning and we appreciate your interest in Targa Resources. The IR team will be available for any follow-up questions you may have. Thank you and have a great day.
This concludes today's conference call. Thank you for participating. You may now disconnect.