Good day, everyone, and welcome to The Williams Companies Incorporated Third Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. John Porter, Head of Investor Relations. Please go ahead.
Thanks, Todd. Good morning, and thank you for your interest in The Williams Companies. Yesterday afternoon, we released our financial results and posted several important items on our website. These items include press releases and related investor materials, including the slide deck that our President and CEO, Alan Armstrong, will speak to momentarily. Joining us today is our Chief Operating Officer, Michael Dunn and our CFO, John Chandler and Chad Zamoran is with us as well.
In our presentation materials, you will find an important disclaimer related to forward looking statements. This disclaimer is important and integral to all of our remarks, and you should review it. Also included in our presentation materials are various non GAAP measures that we reconcile to generally accepted accounting principles. And these reconciliation schedules appear at the back of today's presentation materials. And so with that, I'll turn it over to Alan Armstrong.
Great. Well, thank you, John, and thanks everybody for joining us this morning. We're pleased to review with you a very strong quarter for Q3 for 2018. We demonstrated continued predictable and sustainable growth in all of our key financial metrics and we also think this is a great platform the more dramatic growth that has just begun. But before we get into the presentation, I want to take a moment to officially welcome our new Senior Vice President and Chief Human Resources Officer, Debbie Cowen to Williams.
We are really excited to have such an outstanding leader join us and join our Executive Officer team. Debbie is an accomplished human resources professional coming to us from Koch Industries and we're excited to add another great member to our very talented team here at Williams. I'll pause briefly now and point to our cover slide, which highlights just a couple of the many exciting construction projects that are going on in
the company right now. Honestly, it's
kind of hard to pick because we have so many projects going on. But here on the left hand side is a photo of the $200,000,000 a day Fort Lupton Plant 3 gas processing plant. So this is the 3rd train at this Fort Lupton site and it's expected to be in service by the end of this year. And the photo on the right is from our Oak Grove complex in Oak Grove, West Virginia, where you can see the construction of both TXP II, which is well underway now as well as TXP III, which is in the background there. So it's an exciting time for Williams now as a robust domestic natural gas demand growth is fueling demand for our fee based natural gas infrastructure services.
Natural gas usage is growing across almost all categories and has proven to be a good companion fuel for renewables as well as we saw demonstrated this summer. And in fact, this summer was a great example of the kind of demand growth we're seeing as net power generation was up by 4% or about 15 1,200 Gigawatt hours. But natural gas fired generation was up 17,000 300 gigawatt hours. So not only did natural gas capture all the growth during the summer period, it also made up for coal and hydro losses as well. So again, it actually outstripped got all of the growth and then some in the space and we're continuing to see that big pull.
In fact, if you really study the EIA numbers that just come out recently, you'll see that natural gas has been more than holding its own even in the face of large investments in renewables and currently accounts for over 57% of the new generation capacity that's currently in late stage development. So it's really interesting to see this emerge and see natural gas starting to become baseload now as well as following load as renewables come online. And so a lot of new renewables, but actually natural gas is outstripping that growth. So let me just list the other things we're going to talk about today real quickly. First off, we'll spend a little time providing perspective on some of the key investor focus areas for Williams.
Then we'll discuss the key drivers behind our financial and operational metrics for the Q3 year to date. And we will highlight the major project contributions in the Q3 and provide an update on other key achievements that have happened during the period And I will wrap up by revisiting how WMB stacks up as an investment against the broader U. S. Market. So let's move to slide number 2 and look at some of those key investor focus areas.
First of all, we enjoyed a great quarter with many highlights. But before we get into the details of those results, I want to discuss the strong fundamentals that insulate us from many of the investor concerns in this broader space. And so on this slide, we thought we quickly hit some of the most frequent investor topics and provide our own current perspective on how we stack up against these areas of concern. So first of all, we do get a lot of questions on our views of Northeast G and P growth and so that's our fee based gathering and processing business in the Northeast. And as we all know Atlantic Sunrise has opened up new markets for Marcellus producers and that is now driving even more accelerated growth in our Northeast G&P Business segment.
There is a strong demand pull from pipeline commitments and as sorry, Atlantic Sunrise's startup collapsed the local basis providing much stronger economics for producers in the area. As an example, on the day that Atlantic Sunrise was placed into service, which was October 6, Northeast Leidy gas prices rose from $1.20 Mcf to $2.70 per Mcf. Now that by in just one day wouldn't tell you a whole lot, except that gas prices have continued to drift upwards now for the balance of October. So probably in my career that's been the most significant change that we've seen from any major piece of infrastructure changing entire base and not just the Leidy Gas, but also Dominion South and the Tennessee gas price as well. So where is the Northeast G and P headed?
Right now, we're wrapping up our annual budget cycle where we've worked closely with producer customers to understand the very specific project needs that they're going to have over the next few years to meet their own business plan. This is a very detailed well by well work, which over the last few years has led us to internal forecasts that have been very accurate. And for example, through September of 2018, we are within 2% of the plan expectations and that's on over 7 Bcf a day of operated volumes with a number of different drivers going on. And so that's a plan that was generated about this time last year. So we do think we have a very good handle on the drivers.
And right now, our forecasting work along with the minimum volume commitments to continue to build as we build out our facilities tells us that we should expect steady growth in our Northeast segment amounting to a volume CAGR of 15% from 2018 through 2021. And additionally, we also expect to realize significant operating margin uplift during this time, which should drive even higher overall growth in EBITDA than that 15% CAGR. So as evidence of our improving operating margin, you can actually see it here in the Q3 2018 results versus Q3 2017, where the EBITDA per Mcf, which is a measure we've often pointed you to in our Analyst Day that we've seen that now increase in that period, again, 3Q 2017 to 3Q 2018 by 8%. So we are seeing that come through as we had forecasted and as our volumes build we're going to see more and more of that benefit. So not only growth in volumes, but even faster growth in our EBITDA.
Secondly, we filled questions about our overall EBITDA growth beyond 2019. And while we are not providing specific guidance beyond 2019, I think we can be pretty clear about our general expectations in this area. As you probably know, our guidance for 2019 reflects approximately 10% EBITDA growth over 2018. We feel comfortable sharing our expectations of approximately 5% to 7% EBITDA growth on the longer term. And of course, as we have new projects that growth could improve further.
But we have great visibility as we look at our 5 year planning cycle, we have great visibility into that 5% to 7% growth just as the business we have contracted today. And what's more, this growth is steady and predictable because it's based on fully contracted demand payment projects and our existing fee based business model that is not impacted by volatile commodity margins. And over the long term, it is impacted by natural gas demand and those fundamentals just keep getting better. So next up, let's talk about leverage. There's been significant deleveraging over the last few years and I can assure you that focus will continue into the future as we move toward a 4.2 times book leverage target over the long term.
We have been deleveraging through an asset sale program not by issuing undervalued equity. And as we all understand, that is going to drive long term value and this certainly is a driver as we look at the kind of growth that we're seeing in our EPS right now. So very focused on the per share growth metrics and by continuing to go do asset sales that have been very attractive, we think that's the best way to continue to grow shareholder value there. Our management team focus is focused on very rigid capital discipline. We passed up many opportunities over the last couple of years where the risk adjusted returns just no longer match up with our principal focus on improving returns and decreasing our leverage.
And this focus has also led to creative portfolio optimization strategies like the sale of assets in a maturing basin in our former Four Corners area at attractive multiples and redeploying some of that capital to the higher growth DJ Basin. In this transaction, we received an over 13 times multiple highlighting the valuation discount that exists even the bottom quartile of our portfolio. The announced sale of the Dominion's interest in our Blu Racer Midstream JV that just came out this morning is one more piece of evidence to support this assertion, where they quoted on that transaction of 14 to 16 multiples. So we see people running some of the parts, but it's very clear to us as we're involved in a lot of these transactions that the private side money is putting a lot more value on these reliable cash flow assets than certainly the public market is right now. And so we will continue to work to take advantage of that situation.
Next up, we've definitely heard a lot of confusion in the investment community about this year's FERC actions. Their FERC rate making environment appears to have weighed on the natural gas focused names like Williams. So I want to remind our investors that our Transco rate case was filed on August 30 1 with an overall increase in rates, keep in mind an improvement from 2018 Transco rates would be an upside to what we've provided in our 2019 EBITDA guidance. But also of importance is pointing out that we do not expect our major natural gas pipelines, not Transco, not Northwest Pipeline and not Gulfstream to be impacted by the 501 gs process. We've seen various writings and people expressing concerns out there.
And we're just here to tell you that is not a concern from a Williams perspective. And finally, we continue to be pleased with our joint venture DJ Basin acquisition. Operationally, the newly renamed Rocky Mountain Midstream is performing well and we are seeing even more growth than we expected. We have sites with permitting underway for greater than 1,000,000,000 cubic feet per day of gas processing. And certainly, we've had many questions about the Colorado Proposition 112 based on the incredible importance of the oil and gas industry to the state of Colorado and the fact that this is a campaign run by out of state interest, we tend to think that the measure will not pass or that it will get significant common sense revisions from the Senate legislature if it does pass.
And we've certainly seen that. We've been in Colorado for a long time, not in the DJ Basin, but in other parts of Colorado. And we've seen these kind of things come up before. And we've always found the state there to be fairly pragmatic as a whole. And so we really feel are not overly concerned.
We do think it's a very important issue for the state and for the oil and gas industry and wouldn't try to understate that in any way. But we have seen the state be pretty pragmatic over the years. But even if it does, we want to make it really clear that 100% of the forecasted wells that are supporting our growth have been permitted through 2020 and over 2 thirds of the forecasted 2021 wells have also been permitted. So really feeling good about the growth that we're seeing in that area and the proactive effort that the producing customers up us have taken to have their wells permitted. So thanks for letting us take a little time to share perspective on these key investor focus areas.
And let's move quickly to slide number 3 and take a look at Q3 2018 results. Lots of numbers on this page here with our unadjusted GAAP results in the upper portion of the slide and our normalized numbers in the lower portion. But looking first at our GAAP net income, we see an improvement of $96,000,000 increasing to $129,000,000 This favorable change was due primarily to $227,000,000 increase in operating income. Partially offsetting this improvement was an increase in the provision for income taxes driven by valuation allowance on certain deferred tax assets following the WPZ roll up. And turning now to the adjusted metrics, we can see our adjusted EPS of $0.24 was an impressive $0.09 or 60% versus the Q3 of 2017 and adjusted EBITDA grew 7.5% in that period.
This improvement was driven primarily by a $68,000,000 increase in fee based service revenues due largely to Transco expansion projects brought online in 2017 2018 and also higher gathering volumes in the Northeast G&P segment. The quarter also benefited from higher commodity margins in the West. However, these were largely offset by the changed accounting practice on revenue recognition. So if you normalize WMB's Q3 2017 adjusted EBITDA for the change in the revenue recognition, you would have seen a 10% growth through the same period. At the business segment level, Atlantic Golf adjusted EBITDA increased by $49,000,000 in the Q3 of 2018 to to $480,000,000 The improvement reflects a $43,000,000 increase again in fee based service revenues primarily on Transco's Big 5 expansion projects who were placed in service in 2017 and an additional expansion project placed into service in 20 18.
Our Northeast G and P segment increased by 14% or $35,000,000 to $281,000,000 and this increase reflects a $33,000,000 improvement in fee based revenues due to higher volumes at the Susquehanna and Ohio River systems and improved operating margins as we discussed earlier and we expect both of these trends to continue for quite some time. I might also note that William's other segment you can see on the slide includes historical results of our petchem services business. Now let's move on to slide 4 and take a look at the year to date results. Year to date net income is down on a GAAP basis by $71,000,000 the same period in 2017. Even though operating income was up by $320,000,000 the 20 18 net income year to date is missing a large gain on asset sales that was recognized in March of 'seventeen and that really drove that difference.
Focusing now on these on those adjusted metrics, you see down below, we see year to date adjusted income per share attributable to Williams was up 45% versus the same time period in 2017. Adjusted EBITDA increased by 70,000,000 $3,440,000,000 even after the lost EBITDA from the Geismar plant sale and a $65,000,000 unfavorable impact from the adoption of new revenue recognition standards in 2018. All three of our current business segments showed growth over the period sorry, over the prior year, driven by a 2.30 $3,000,000 increase in service revenues due largely to the Transco expansion projects, as I mentioned earlier, and higher gathering volumes in the Northeast G and P segment. So fairly similar drivers between the Q3 and the year to date results. Now let's move on to slide 5
and take a look here
at the tremendous accomplishments and solid execution that our teams continue to deliver in a very predictable manner. We are very pleased with the recent announcement of the Leidy South expansion project, which I will talk a little bit more about here in just a moment. Very recently, the FERC approved the start of construction for our Riverdale South to market project that will take place primarily in New Jersey. We're targeting the 2019 to 2020 winter season for completion of this project, which will help meet the growing heating and power generation demand for the Northeastern customers, primarily in New Jersey and New York. So yet another fully contracted high return project that we have gotten permitted in very difficult territory.
So I would tell you it's no easy task, but our team is very good at it and continues to build a great reputation with the regulators. You may recall, we announced our Bucking Horse expansion project with our joint venture partner, Susswood, in late July. When finished in 2019, this expansion will increase processing capacity to 345,000,000 cubic feet per day to serve growing customer demand in the Powder River Basin. This growth is on top of the growth we are also experiencing in the Wamsutter Basin and just to the south in Wyoming as well. We have already spotlighted our entry in the DJ Basin.
That transaction occurred in the Q3. And on October 1, we closed the Four Corners sale for $1,125,000,000 The cash proceeds contribute to funding our portfolio of attractive growth capital and investment opportunities and of course that gain on that sale would be recorded in the Q4. We completed the Williams acquisition of Williams Partners on August 10, providing Williams with a simplified corporate structure and streamlined governance, while maintaining investment grade credit ratings, great execution by our corporate teams on that effort. And then most of you know that we placed Atlantic Sunrise project into service on October 6. But what you may not know is that the Atlantic Sunrise project was awarded the International Association for Public Participations project, sorry, Project of the Year award.
So this is a very large international organization that looks at big projects that require public participation and engagement and we and that award was granted here in the Q3. Really proud of that team. That's a very prestigious award and they look at projects all over the world for that. And so I think a great example of the way our teams are doing things on in a right way. We are not running over the top of people.
We're looking for win win solutions with all of our stakeholders and we're focusing on environmental and regulatory compliance from the start of the project and working very closely with regulators to keep them informed. So we do things the right way and it's while it sometimes doesn't make us start off the fastest, we tend to win the race at the end of the day and Atlantic Sunrise is a great example of that. Atlantic Sunrise segues into an impressive list of 2019 drivers as we'll have a full year of revenue from ASR, the 1.7 Bcf per day Transco expansion And this increases Transco's capacity now to 15.8 Bcf per day and provides 35,000,000 dollars of revenue per month just on that asset proper, not including the upstream gathering revenues that will flow behind that. As we already discussed, it also plays a role in debottlenecking the Northeast where we already hold the largest gas gathering position across the Marcellus and Utica shales. This increase in gathered volumes is facilitated by gathering and processing expansions that are going on as we speak.
We have another Transco expansion that will soon enhance our customers' LNG export needs. We are closing in on placing the Gulf Connector project into service much earlier than originally planned. This project is designed to deliver about 400,000 echotherms per day to Cheniere Energy's Corpus Christi liquefaction terminal and an additional 75,000 echotons per day of natural gas to Freeport LNG Development liquefaction project. And we're going to be able to deliver those about 3 months ahead of what our original plans were for that project. So great effort by the teams on bringing that project in ahead of schedule.
Our Northwood pipeline in Gulf East is expected to be placed in service in mid-twenty 19 and this will deliver some results in 2019 and then will be a bigger driver in 2020. That's in the Shell Appomattox field. They actually have 4 other fields that are dedicated to us in that area as well. We have completed our work on the Mobile Bay plant and are ready to take on that gas as soon as they complete their offshore line, also well ahead of schedule. And if you recall, if you look back in our earlier notes on this project, you would have seen we were expecting that to come on in 2020.
So another project that we're well ahead of schedule on. Let's move to slide number 6 and check-in on a couple of key projects providing access to new Northeast supplies. When we spoke to you at Analyst Day in May, we referenced 2 expected Transco expansion projects to provide access to new Northeast supplies. First of all, known as project number 2 at Analyst Day, project 2 is actually our Leidy South project. We have a 15 year commitment with Seneca Resources and Cabot for 100 percent of the 580,000 dekatherms of firm transportation capacity.
And this will continue to grow our strategic footprint. The Marcellus adding to the 62% growth in Transco design capacity since 2013 and adding
to the
already 3,000,000,000 cubic feet per day of Transco's Marcellus takeaway capacity over that same time period. We are targeting a 4th quarter 2021 in service date that will provide attractive returns consistent with the recent Transco expansions. And then additionally now on Project 1, this project is very much alive and well. We are awaiting final Board approvals from our customers and on that project and expect an announcement in the Q4 of this year. So again, great work that's been going on and that's a very strategic project that we're all very excited about.
These two projects just keep adding to the string of hits that give us confidence and use the transparency you seek for our growth for years to come. So with that update, let's move on to the last slide number 7 and wrap up and we will take your questions. On this final slide, we have recapped many of the key points. We've made detailing why Williams is a strong, stable, conservative and growing company. Many of these themes link back to things we've discussed previously in the presentation.
So I won't drag you back through all that detail here again. Rather in summary, as I said in the beginning of the presentation, I am extremely pleased with how the company is positioned right now. Natural gas demand is experiencing strong growth and the fundamentals continue to build on the backs of low price natural gas for demand and that's really what's going to drive our success. We've experienced strong execution across our irreplaceable natural gas focused asset base. We've built an earnings base that is highly predictable and not subject to commodity price volatility.
We've improved our balance sheet position and we have visibility into continued improvement primarily through capital discipline and visible earnings growth on a per share basis and earnings across all of our businesses driving that. On the right hand side of the slide, you can see the continued very favorable comparison. One finds between Williams and the median S and P 500. And as we discussed on slide 2, after what is going to be a terrific 2019 with 10% EBITDA growth, we have a clear line of sight to 5% to 7% EBITDA growth for many years to come. And this quarter's strong execution results highlight why we are so bullish on the future and we look forward to coming back quarter after quarter showing how Williams is delivering on the opportunities created by our natural gas infrastructure focused strategy.
And with that, I thank you for your time today and we'll turn it over for our first questions. Operator? Thank
We'll take our first question from Shneur Gershuni of UBS.
Good morning, guys. Good morning. Thanks, Alan. As a question here, in your prepared remarks, you sort of talked about the Blue Racer asset selling for 14 to 16 times EBITDA. You're obviously trading below that.
And I'm sort of thinking about your guided dividend growth rate of 10% to 15%. Sort of given that valuation disconnect, has there been any thought about altering your return of capital plans to maybe lower the dividend growth rate and then do a share buyback to fill the gap? I'm just kind of wondering how you're
constantly monitor and discuss with the Board. I would say that we certainly are very focused on deleveraging. And so I would say that is front and center. But as you've seen, being able to continue to do asset sales at these kind of multiples drives a lot of value as well and frees up capital for those kind of things. So we certainly constantly look at those opportunities and we think there's a lot of value to be driven in the stock as we consider those various alternatives.
But I wouldn't want you to lose sight of our focus on that 4.2 metric that I would tell you both the Board and the management team are pretty laser focused on right now.
So is it fair to say that you would if you're offered a very attractive price that you would consider selling assets as well also?
I would say, we look at things first from a strategic standpoint. And as you've seen, the Four Corners asset really wasn't integrated into our asset base and we didn't see the growth in that business and didn't have the kind of operating margin ratio that we typically enjoy there. So that's one example where an asset is not really all that strategic to our future any longer. So we certainly look we'll look at assets like that. We also have a transaction that we're working for the purity pipes in the Houston Ship Channel area that's not it was part
of our
petchem business and really not strategic to us any longer. So I would say it's a combination of the kind of value that we think the assets can build in terms of our overall strategy. But I think as we've proven, we're willing to pull the trigger when we see a valuation upgrade that doesn't damage our strategy in any way.
Got it. That makes total sense. One last follow-up, an operational type question. I was wondering if you can discuss what you're seeing in the Northeast in terms of producer behavior. You had strong dry gas gathering volumes, but you also had higher NGL production.
And at
the same time, processing volumes are down. Are we starting to see a shift from dry to wet? Just kind of wondering if you can give us some color around that or if that's just really more driven from JVs and so forth?
Yes. The shift, I think we're going to see some dry gas volume pickup obviously with Atlantic Sunrise coming on. And I would just say the ability for producers in the Northeast PA, the wells are so large up there and can come on so fast that if you're looking at volume, you might see a little quicker reaction up there just because of the size of the wells and the production up there and the number of pads that already exist. But I would say that over the last 9 months or so, several of the producers, namely Southwestern, probably being the largest of those has really ramped up their efforts and we are ramping up our efforts putting a lot of infrastructure in the Ohio Valley Midstream area. And so we are going to start seeing some pretty impressive volume ramp up in that area as our infrastructure starts to come on there.
So I think really we're going to see a pretty balanced approach to both the wet gas and the dry gas. Again, it doesn't really sneak up on us because we've got to build the infrastructure out to allow that gas flow and we're well on our way to getting that infrastructure built out right now.
Perfect. Thank you very much. Appreciate the color today.
Thanks.
Thank you. We'll take our next question from Danilo Juveen of BMO Capital. Thanks everyone and good morning. Alan, now that the Atlanta Sunrise is online, how transformational do you see this being for the North Sea T&P segment? You outlined in your prepared remarks that you expect EBITDA growth in the segment to actually be higher than the 16% volume CAGR you outlined.
So I'm trying to understand how big this could be for Williams going forward?
Yes, Danelle, thank you. We've been investing in the Northeast for a long time, kind of waiting on things to finally get debottlenecked. I don't think anybody has doubted the resource. But one thing I might point out because we've seen a variety of different producer reports come out here in this quarter, in this earnings season. And I would just point out to folks that much of the production behind our system has been held up for various reasons in terms of the production growth in those areas.
Cabot obviously and our Bradford County and our Susquehanna County area has literally had no way out of there at a price that made any sense. That has opened up. Even gas in the Southwestern PA area and in the West Virginia area, even though it's had takeaway capacity, the pricing has not been all that attractive in till here more recently. But one thing I think people really miss is the amount of acreage that is set behind our systems that have not been drilled on. And so if you looked at the density of drilling on our dedicated acreage versus a lot of our peers, you would see that our density of drilling is much lower than our peers, partially because there was a number of high priced contracts that have been resettled.
There was the Chesapeake contract that Southwestern picked up and then we reformatted for them in a way that allowed them to get after the drilling in that area. And then even in the Utica, if you think about the Utica, Chesapeake was undercapitalized to produce the Utica and now we have Encino with the right capitalization to bring that up. So really across all these areas, we've kind of been sitting right up against those points of resistance and we're now seeing those various points of resistance cleared. And so that's really what is driving a lot of this rapid growth here as we look for the next 3 years.
Thanks for that. And within that CAGR that you outlined for the volumes, how much get back are you assuming annually?
I don't know that we've put that actual number out there. I think if you go back to look at the Analyst Day package there, Michael. Yes. At Analyst Day, we talked about $500,000,000 a year for our Northeast investments. And let's ramp up a little bit with the projects that we approved earlier this year
at Oak Grove. But we see that as a pretty good average there in the Northeast. And I'll just add a little bit to Alan's previous answer in the Northeast growth. We're seeing a lot of our producer customers that are capturing market that never has to hit the interstate pipeline. There's a lot of large power plants, gas fired power plants that are being built right on our gathering system.
So we move those volumes in our gathering systems from the wellhead to these power plants for our producer customers and they don't even have to leave the basin. So there's a lot of growth there that you see from our customers that are capturing this business.
Thanks, Michael. Last question for me, Alan, you stated in your prepared remarks, focusing on capital discipline. As you evaluate growth going forward, have your thoughts involved on Bluebonnet Market Express?
Yes. I would say that we certainly see another project needing to
be built there. We see a
lot of interest. Chad Zamoran and our team there have done a great job of looking to see what kind of joint ventures are possible out there for us. And so I would say stay tuned on that. We're certainly going to remain have a lot of remaining capital discipline. But we've got a pretty creative team and they're doing a great job there of matching up our capital discipline with opportunities in the basin.
And so I'm encouraged by their activities and the kind of feedback that they're getting right now.
Those are my questions. Thank
you. Thanks, Annette.
Thank you. We'll take our next question from Jimmy Tonet with JPMorgan.
Good morning. Just want to build on the topics of portfolio management and leverage here. And it seems like in the marketplace, there's a very there's a strong preference still for getting leverage lower. And I know you have the 4.2 kind of longer term target there. But just wondering what your thoughts were as far as possibly accelerating the kind of approach to that target, given as you said, Blue Racer fetched a very strong price tag.
You've listed other kind of assets were non core, especially things that came along with Access in the past. And especially because you guys have such a great suite of growth projects in front of you, there's so much capital to be deployed there. Just wondering your thoughts on maybe being looking to sell some more assets here and really kind of grab the bull by the horns and move that leverage now?
Well, I would just say, as I said earlier, we are constantly looking at that and then the opportunity is not lost on us. So but again, we really don't want to damage our future in the process. I would say that continuing to work with the private infrastructure fund money that's willing to pay and evidently has a much lower cost of capital than the public space does right now. We see ways to work with them that provide us growth potential in the future upon exit opportunities for them. So I think that's a pretty attractive vehicle for us.
And so, we think we can continue to build our backlog of portfolios through looking at that. But I would just tell you, as I mentioned earlier, we are wanting to make sure we don't damage our long term strategy on the one hand and on the other hand we take advantage of this. But I would say we are dead serious and very anxious to get down to that debt levered metric that we see out there. So I would say we are working pretty hard towards that.
That's helpful. Thanks. And just want to turn towards the guide here for a minute. And you said you're heading towards the top end of the 'eighteen guide, but even if you do hit the top end, it seems like it'd be kind of Q4 flat versus 3Q. And granted you have the Four Corners sale, but you also have Sunrise the GMP upstream of Sunrise really providing some nice operating levers there.
So wondering what line of sight do you have to that, exactly how that bump is materializing? And is the 4Q guide just being kind of conservative here or any other headwinds we should think of?
No, I don't think there's any particular headwinds. Just a couple of things that you should consider in that math. First of all, I would say we are making a lot of room for much lower NGL margins and certainly we've seen NGL margin. And so that's not a big number for us. But within the margin of error you guys are talking about here, then it is, a) something to consider.
And I would just say we're trying to make sure we've got plenty of room and you could argue we're being conservative, but we have seen these things swing hard before. And then secondly, I would say as well, we have operating costs in across our systems. And if you think about our asset integrity program, where we go out and smart pig our pipelines and we're constantly in the process of doing that. We want to make sure we leave plenty of money in our operating budgets to repair things when we find that. Said another way, we really don't know until we run those tests and dig systems up, we really don't know what we're going to get into in terms of repair costs.
So we're trying to make sure we leave plenty of allowance in there for that. I would also tell you that is pretty conservative in terms of how we have that built into the plan right now. And then finally, you've got to take out the Four Corners sale out of there as well. And remember as you're calculating kind of that increase on ASR that we have the AFUDC that would have been in the Q3 as well. So that goes to earnings on Atlantic Sunrise.
So those are some finer points that we get there. I would say in summary, I think it's fair to say that we feel very confident in being able to come in at least at the high end of the guidance range.
That's helpful. Thanks. And just finally, when you talk about the 2019 EBITDA guide being 10% higher, that relative to the midpoint of 2018? Or if you hit the high end, would it
be off the high end? Or how do you think about that?
Yes, it would be off the midpoint. I mean, we haven't changed our guidance for 2019. The midpoint there was 5,000,000,000
dollars Got you. That's it for me. Thanks for taking the question.
Thank you. We'll take our next question from Dennis Coleman of Merrill Lynch.
Yes. Good morning. Thanks for taking my questions. I'd like to just hit on the leverage for a couple more questions here. The 4.2 number that you're talking about this morning, How did you come to that number?
Is it I mean, we see a lot of targets out there. Oftentimes, it's 4.0 or 4.5, but it comes to such a precise number of 4.2?
Yes. This is John Chandler. We obviously in preparing for the WPZ roll up, we spent a lot of time talking to rating agencies. And we have a desire to be a solid BBB, BAA2 rated company, solidly in that category.
It became pretty clear to us
during those discussions that, that meant on their calculation, using their the way they do their calculations that, that was around 4.5 times. So about a 2 to 3 tenths difference between our book, debt to EBITDA ratio and how they calculate 4.5x, that's where 4.2x came from. So at a 4.2 level, in my mind, and of course, that's always subject to validation, again, with rating agencies, that puts us squarely in a BBBBA2 solid category.
Perfect. Makes sense. And so you talk about a long term target. Any guidance or any thoughts you might have as to how quickly you can get there?
Well, in 2019, we guided to inside 4.75x. And we obviously, in 2020, we'll continue to see EBITDA growth. That will help bring that down further. And as Alan pointed out, we continue to look at that for opportunities for asset sales. And ultimately, to bring that down further, it will require some additional asset sales.
I don't want to give you an exact time when we're going to get there, but I can tell you we're very focused on moving towards that as quickly as we can.
Okay. That's great, Bruce. Worth asking. On the DJ, if you could, you talked about on your slide 2 having all the wells permitted out through 2020 and mostly through 2021. Can you give us any more specifics on what the forecasts are?
How many wells you're thinking of or how what that forecast entailed?
Good morning. This is Michael. Right now, we've got about 16,000,000 processing capacity installed, and we're working to get another 200,000,000 in by the end of the year, 1st part of 2019. So you can look at that ramp and then we actually have construction of another $100,000,000 a day at our Kingsburg facility up there that's under construction as well. So we expect that online in mid-twenty 19.
So once that is online, we would have about $460,000,000 a day of processing capacity there in our new Rocky Mountain Midstream asset. And we do expect, obviously, the first two hundred that's going online late this year or in January to be full very quickly, obviously. And that's why we have the Kingsburg facility under construction for mid-twenty 19 in service date.
Okay. And that just
in terms of number of wells, in terms of total number of wells on that, our math shows us that we've got a little over 800 wells that are already approved.
We're in that 'nineteen
and 'twenty and 'twenty one, correct?
Okay. That's great. And so you would go forward with all of that what Mike just talked about regardless of the outcome next Tuesday?
Yes. As long as we're certainly going to pay attention to the way that gets treated. But I would just say right now as we're moving ahead, there is plenty of gas that is waiting on this infrastructure. So the near term construction is a certain bust and our producers are desperate to see that get installed. Obviously, we'll keep our eyes before we spend, commit any further capital to see what other changes might occur out there.
But right now, there's plenty of volume, plenty of demand for the service to continue with our expansions.
That's great. Thanks, Alan. That's all I have.
Thank you.
Thank you. We'll take our next question from TJ Schultz of RBC.
Great. Thanks. Good morning. Just first, given the private capital available in your comments on its ability to invest at certain multiples, You partnered in the DJ. Are there other opportunities to partner with private capital that may be available to leverage your system as a whole?
Absolutely. I think the good news is we are seen as a very reliable operator in the space and we have tremendous footprints already. And so I would just tell you that the Northeast area is an area that provides a lot of consolidation opportunity and ability to reduce capital investment in the area. The consolidations always occur in these basins and we think that we provide a great investment opportunity for these infrastructure funds to invest alongside us. And so, I would tell you that Chad and his team are extremely engaged with a lot of those sources of funds right now and have a lot of irons in the fire right now looking at those opportunities.
Okay, good. If I
just move to the Gulf
of Mexico, my sense is some of the potential growth comes at somewhat lower CapEx needs. Can you just frame that a little? What maybe is the nearest term opportunity to get some of that operational leverage embedded into the system? And where would you see more meaningful investment options to kind of further that maybe around Mexico deepwater realizing that's still a bit longer dated?
Yes. This is Michael. I'll take that. We do have a lot of tieback opportunities there that we're working on, as you indicated, that are low or no capital just because of the infrastructure that we've already put in place there. We're actively working a number of those opportunities and are building those into our future guidance as we speak.
So we are very optimistic about the Gulf of Mexico right now. Our discovery system has several opportunities along it as well. But you also mentioned the deepwater in Mexico off our Perdido system, where we're the only entity out there. And we really do expect some opportunity to come our way there in the future as well. So a lot of great projects in the pipeline, so to speak, there.
And we are going to take advantage of the infrastructure that we have built there with very high return projects with not a lot of capital to deploy there.
And just to kind of name some of those, just to remind you, we've mentioned in the past, we've mentioned the Chevron Valley more prospect in the Eastern Gulf, the shale well prospect in the West. And then there's also several Chevron prospects that we are working with them on in the Central Gulf right now, as Michael mentioned, around our discovery system. So the list actually is pretty long and some of them are more certain than others. Certainly, these very large finds like Ballymore and Well, while they're further out into the future, they are very significant in terms of revenue and EBITDA growth for us with very little capital required.
Okay. Makes sense. Just last one, thinking longer term with the liquids that you will control out of Rockies Midstream, does that provide or present opportunity for more downstream investment? And how are you thinking about the ability to secure access to the coast for those barrels longer term?
Yes. I'm going to dodge that question. I'll just tell you right off the bat here. We are working a number of different opportunities. We are really excited about how we are going to position ourselves for the future on that.
But we're in quite a few discussions right now and doesn't make sense for us to lay that out at this point.
Okay, fair enough. Thanks. Thanks.
Thank you. We'll take our next question from Michael Lapides of Goldman Sachs.
Yes. Hey, guys. Two questions. One, just on the Northeast G and P kind of that CAGR you put out, how are you thinking about the cadence of that, meaning very front end loaded 2019 and then kind
of tailing off? Or are you all kind
of looking at that little more evenly spread out?
Michael, this is Michael. I would say it's obviously expansions come on chunky, if you will. And we've got an expansion underway right now in Northeast Pennsylvania that we're working on that will increase our capacity on the system there by 800,000,000 a day. That will be coming on in tranches in 2019 as we add compression and pipeline looping. And that would put us our capacity up to almost 4 Bcf a day on that system alone in Northeast Pennsylvania and the Susquehanna supply.
So I'll tell you, it will come on in chunks as we obviously expand the capabilities there. But we've got an exciting one underway right now and we're talking to our producer customers up there right now about the next expansion that will come behind that $800,000,000 a day, specifically in Northeast Pennsylvania. The other growth that we're seeing in the Appalachian area in Southwest Pennsylvania, West Virginia and Ohio, we're seeing the producer customers there ramping up their activities. If you saw the transcript on the Southwestern discussions, they are once they have their Fayetteville sale, Fayetteville shale sale executed. They fully intend to ramp up activities there as their call indicated.
And that production is coming right to our Oak Grove processing facility. And we're building a lot of compression up there for them right now as well as processing capability for them and other customers in the area. So it will be coming on in both of those different areas in tranches, but we have a lot of activity underway right now with our teams there getting ready for that capacity.
Got it. Thank you, Michael. Much appreciated.
Thank you. We'll take our next question from Craig Shere of Tuohy Brothers.
Good morning. As far as the average $500,000,000 a year multiyear figure for Northeast G and P to roughly hit the levels discussed at the May 2017 Analyst Day. Since you've already announced projects that kind of placed 2018 2019 above that trend, can we presume that the capital spend necessary in 2020 2021 would be significantly lower to still shoulder that seemingly roughly 11 Bcf a day in 2021?
Yes. I think for the trajectory of growth that we're discussing right now, I think that is a fair assessment. I would add though, I think the big opportunity or incremental opportunity for us that would reduce capital even further would be consolidation of some of the joint ventures in the southwestern part of the place. So between the Utica, the system, Blue Racer OVM and some of the other adjacent assets in the area, there's some pretty big consolidation opportunities out there that would reduce the need for more capacity to be built. So we're hopeful that we're able to execute on some of that consolidation and more rapidly reduce the capital investment in the area.
Excellent. And speaking of the growth, the 15% CAGR seems to imply over 3 years about 11Bs. But then also it looks like in the Q3, your adjusted EBITDA was about almost $0.42 and M versus less than $0.39 for the first half of twenty seventeen. And you're kind of guiding towards that to grow even further, given the combination of Oak Grove processing, increasing wet gas volumes and higher overall system utilization. Is it reasonable to think that by 2021, we could be at $0.50 plus an M implying gross segment EBITDA of over $2,000,000,000 on 11 Bs a day?
Yes. That's a lot of math you went through there, Craig. But I would just say as we continue to look at the marker that we set out there at Analyst Day that we feel very comfortable with that that we're on a trajectory right now that makes us feel very comfortable about that. And so I would say that that was kind of set out there aspirationally that said what if the wood mat growth level occurred and I would just say that we're we'll be moving past that down to more detail based focus in our system starting to support that rather than an analyst broad picture of the basin. So I would say we're moving off of being reliant on somebody else's forecast and becoming more reliant
on our
own visibility to producers' actions there. So the answer is, yes, we are certainly moving to that. And again, I would just remind you that because we had some areas that have been retarded from growth due to lack of very severe lack of infrastructure out of the areas, we are in some of the higher growth areas. And so that's driving and maybe even a little better than what we had laid out there earlier.
Well, to simplify it, if at least in the Q3 my math is correct, you're approaching $0.42 to NIM in terms of adjusted EBITDA. Is it reasonable to think, is it unreasonable to think that you could get to $0.50 plus by 2021?
It is that is very reasonable to think that we could get there by 20. Again, it's going to be very dependent on mix between where the volumes show up and that will move around a little bit. But we one thing that's really come our way in a very positive manner is the Utica rich, which had been on a decline and that is a very high margin basin for us and that has been on decline and that is at least stopped declining now and has the potential for growth. And so that was working against us previously, but it's starting turn the other way for us.
And last question, when you say 10% into 2019 and 5% to 7% long term, The 5% to 7%, is that off the 2019 level or an aggregate over several years?
That is yes, that's just off of '19 looking forward. And I would just remind you though that that is based on just our existing contracts and business. And so I would say there's no potential for improvement as we continue to grow new pieces of business that are not included in that forecast yet.
Understood. I appreciate the call. Congrats on the quarter.
Thank you. Thank you.
We'll take our next question from Chris Sighinolfi with Jefferies.
Hi, Alan. Good morning, guys.
Good morning, guys. I got a detail this morning. Two questions from me, if I could. First, in looking through the 10 Q you filed this morning, it seems like you've had roughly a $430,000,000 working capital headwind over the last 4 quarters, which is significantly more than I could find anytime in the last 10 years. So I'm curious what's driving that and then if we might expect it to reverse in the future quarters?
I'm not aware, I'll handle it, really, that some unique working capital draw. If I had to guess, we've had a significant amount of capital spend. And so you probably have a build in payables at the end of the quarter for projects that are underway that we know we've invested but haven't had an outflow yet. We'd have to look into that and give you more details, but I suspect that has probably something to do with capital spend.
Okay. But if that
if your hunch is correct, we should see then some reversal in the future?
Yes.
Okay. And then second, and this is just a curiosity question, but the analyst package last night had listed 35,000,000 dollars in preferred stock contribution to the Williams Foundation. I haven't seen you guys do anything like that before, although one of it made a similar contribution to its own foundation last year. So I was just wondering what the terms of that preferred stock are realizing it's very small and then what your plans are if any for additional future contributions to the foundation?
Yes. The preferred stock has a 7.25% coupon on it. We have no plans to add anything to it. That was part of just planning and structure around the roll up just like Oneoak would have had in their situation. So that will be outstanding.
We annually make a contribution to our foundation anyway. And so, whether we're making it in an actual cash contribution or we're doing it through a dividend, the outcome is really the same to Williams. So, we'll just increase it. We'll be paying a dividend in lieu of some cash contributions we historically have made to the foundation.
Okay. So this is not consistent to historical treatment, but just more of a streamlined approach?
And it accomplished the structural need that we needed in the roll up, but again, much as ONEO did and we saw the light from the transaction. So pretty complicated question. But I would just say in practical terms of so it is very much that activity was very much driven by that structure but and the roll up. But I would say that practically in more pragmatic terms, as John mentioned, we've had that expense out there. This covers that for quite some time for us.
So it's actually a positive against what you would have seen in previous cash flows. But I also would tell you that we the foundation is very strategic to the company. When we go into new communities, we like to show that we are a good neighbor in the communities that we operate as Williams and the Williams Foundation helps support us being a good corporate citizen in those communities. And so it is a very strategic investment for the company to make those investments in the foundation.
All right. Thanks a lot for the time, guys. Appreciate it.
Thank you. We'll take our next question from Colson Bean with Tudor, Pickering, Holt and Company.
Good morning. So Alan and Michael, just circling back briefly to the comments on margin expansion in the Northeast, you kind of noted the overall uplift there at the EBITDA level. But specifically thinking about costs, it seems like unit costs have held pretty steady here through kind of year to date 2018. As you look at the volume ramp and you've dialed in kind of your expectations through the budgeting process for 2019, how should we think about the progression of OpEx over the course of 2019 just relative to where we sit here?
Yes. Good morning. Thanks for the question. We obviously have higher cost as we add compression and we'll add operators to go in and operate the equipment there. But I have to remind you, as I do every quarter, in regard to the electricity cost, a lot of our compression that we're adding is electric compression due to the regulatory constraints on the air shed there.
And so that shows an increase in our operating cost, but the majority, if not all of that, is reimbursable from our customers. And so you won't show that netted out from that reimbursement against our operating costs, our operating cost line. It actually comes to us in other income. So you will see an increase and it will look disproportionate to our actual cost that we've experienced in the past and it's all driven by higher electricity costs that are reimbursed elsewhere.
Got it. So overall expectation is declining unit costs not reflect on a line item specific basis?
That's right. We continue to see our EBITDA per Mcf going in the right direction and our cost per Mcf moved going in the right direction as well.
Got it. And just on the West there, so a slight downtick in volumes. Can you guys provide a bit more detail on the moving parts there at the basin level? And then just a quick follow on. So you mentioned DJ outlook being insulated by permits.
Any thoughts on the impact of the Ponce?
Yes. A lot of the Piazza is, 1, it's not very heavily populated, if you've ever been out there. But 2, the a lot of that is on federal land as well and of course this that 112 doesn't affect federal land. So and a lot of the producers actually own the land that they operate on out there. So very different picture for the Pions and don't expect much impact there.
And so I would just say that that's really the only exposure. The other area down around Durango and so forth, CoreSat was the Four Corners area assets. We've operated in that area for a lot of years, but that now is sold. So we don't have exposure anymore other than the Piazza and the DJ Basin. Sorry, you'd ask the question.
Sorry about that. Yes, don't
have a whole
lot of color to add to you on for you on that. We constantly have some up and downs. The Haynesville growth has been driving a lot of the growth there in the Western volumes. And we've seen as we forecasted last year, we expected that to level off a little bit in terms of that ramping growth. We are seeing a lot of new opportunities with new customers in the basin and really excited about that.
So we may see the growth in the Haynesville come back more from customers outside of the Chesapeake acreage there in the area. Chesapeake continues to be successful, but not seeing the kind of growth we saw from them last year. So that's probably the biggest moving part if you looked at 'seventeen to 'eighteen in terms of what the growth drivers have been behind the basin. I would say both Wamsutter and the Jackalope system are the two areas that we're going to see some growth here as we look forward to the next 6 to 12 months.
Got it. Appreciate the time. Thank you.
Thank you. We'll take our next question from Becca Paolo with U. S. Capital Advisors.
Hi, guys. Thanks for taking my question. On the DJ Basin, I understand your comments on where you think you've got wells permitted in DUCs, etcetera. But let's say hypothetically that this does pass, how much of your 5% to 7% EBITDA growth is attributable to DJ Basin growth?
In fact, it's really since it's in that outer period, it's really not factored into that so much at all right now. So it will start to add up in 2020 'twenty one. It will start to be meaningful. But as we look forward to that right now, it's really not a very big factor in our overall 5% to 7% growth. So we're hoping that it will be, but just given the limited size of the investment there, it's not that meaningful against the number right now.
And just wanted to dig a little bit deeper on your thought process on making investments, assuming that this does not pass. But there's still, I think, a view that this is still going to be an issue in Colorado and it may come up either legislated or 2 years from now. So how does that play into you making decisions for long term capital investments on plants besides these first two plants?
Again, I think we're going to see responsible development. I think Williams is very good at being responsible. I think the industry is going to shape as it needs to, to merge with Pottery. And by the way, if somebody thinks this is going to be limited to Colorado, I would tell you that this move came from outside of Colorado. And I'm not sure that the move against development in areas is going to be limited to just Colorado.
And I think producers and midstream infrastructure providers are in a different world today than we were 5 years ago and we are going to have to learn to
deal with the various stakeholders.
I think Williams is extremely good at that. And because of our school of hard knocks that we have had in the Northeast, I think we are very good at that. And so I would say, I think these kind of areas present responsible manner in the area. So, yes, it's an area that I think will slow growth down. But if you think about that from a midstream infrastructure provider standpoint, this is a something that's lost on people a lot of times, because people are focused on the short term too often.
But to the degree that you have acreage dedicated to you, if that acreage all got drilled at once, the efficiency of your infrastructure would be very low, because you'd have to build all your capital at once, all the cash flows would come through in one spike and you wouldn't have the longevity of the cash flows and you'd have to build for a bigger peak. And so I would just tell you that a rate of development that is more sustained is actually a positive for long term returns on midstream infrastructure. And I think that's missed on people pretty often as they think about this issue.
Thank you. And then the next question is just I wanted to clarify that in your guidance there is 0 uplift from Transco rate case?
That's correct.
Okay, perfect. Thank you.
Thank you.
Thank you. We'll take our next question from Christine Cho with Barclays.
Hi, everyone. I just have one question on the Northeast. The 15% CAGR, could you give us a general idea of the breakdown of that growth between Northeast PA and Southwestern PAWest Virginia? Just trying to get a sense of like if one is higher growth than the other?
Yes, Christy, let me see give you a little bit of color here. Probably on a percentage basis, the 2 highest areas are the Ohio River Supply Hub area, particularly on a margin basis And then Susquehanna supply hub is probably right behind that. And towards the bottom of that would be the Bradford Supply Hub and then last would be the in terms of what we have assumed in here right now would be Utica's supply hub. But I would tell you there is a remarkable small amount of difference If you looked at the CAGR for each one of those, it's actually pretty balanced in our current forecast.
Okay. That's helpful. And then I just wanted to touch on the equity method investments in the Northeast.
Quarter over quarter, we saw
a bit of a jump from 2Q. I was just wondering if you could just talk about which JV specifically drove that and how we should think about that going forward?
Yes, I'm looking at Steve, Michael or John. I
think that's probably in the Bradford.
Yes. I would say that's where we saw the biggest volume growth is in the Bradford.
That's correct. Bradford and Marcellus South. And both are strong.
And Marcellus South is part of our Ohio River supply hub. And so it sits on the eastern flank of our Ohio River system and feeds processing volumes into Ohio River.
Got it. We had about a 9% increase in volumes.
I'm sorry?
We had about a 9% increase in volumes quarter over quarter.
Okay, perfect. Thank you.
Thanks.
Thank you. We'll take our next question from Jenann Salisbury of Bernstein.
Good morning. Just two quick ones for me. First, have you noticed interest from different classes of generalist investors since the buy in of WPZ or nothing really changed that much?
Nothing has changed that much as we speak or I think our price will be performing a little bit stronger than it has been. But I can tell you we are extremely focused on talking to new investors. We spent some time in Europe. We'll spend some time in Asia here very soon. We spent some time in Canada and with the sole focus of identifying new investors attracting new people to our name.
We think we've got a powerful story to tell with their stability, our strong yield and the growth that we've got in our business. So we've just got to get that out in the marketplace. But our goal is to accomplish that within the next year for sure.
That makes sense. And then could you give a little more color on the mood of the Permian E and Ps and signing up for gas takeaway? Do you feel like most believe that they'll be able to flare if they need to, so that kind of puts less pressure on signing up at all? Or is it more that they probably will sign up, but perhaps with competitors other than Bluebonnet and it's just gotten very competitive out there?
Chad, do you want to take that? I'd just say, I think there have been 2 projects that have been sanctioned so far. That's 4 Bcf a
day of takeaway capacity.
So that does, I think, provide some relief to the basin in the near term. But I will also say that those projects had a variety of different investors and I would also say risk adjusted returns that wouldn't really look attractive to us when we look at our opportunities for investment. So, I think that we're going to continue to watch the basin. There is additional need for takeaway over time, but we also want to make sure that we don't participate in any overbuild coming out of the basin. And so we're going to continue to be thoughtful and disciplined.
We're certainly out there talking to every producer. We're looking at every opportunity. But we'll if we do something with respect to a project from the Permian to our Gulf Coast assets, we're going to make sure it's a smart investment. I would say though that even if we don't in the near term participate in building a pipe from the Permian to our Gulf Coast assets, we're seeing a lot of interest in those volumes wanting to get to the Transco system and deliver into markets along our footprint. So we will participate in moving Permian gas through to Transco markets one way or another.
And like I said, we'll continue to look for opportunities to build that larger infrastructure. But right now, those projects just aren't as attractive as I think they need to be to make it to
the top of our list.
Sure. That makes sense. That's all for me. Thank you.
Thank you. That concludes our questions for today. I'll turn it back to Mr. Armstrong for closing remarks.
Okay. Great. Well, thank you. Thanks for the great questions. And we continue to be really excited about the way the Q3 turned out.
And importantly, obviously, as you heard today, the catalyst that we think that sets up in the nice platform for growth that we've got established going forward. So very stable cash flows, very predictable as we continue to make our numbers and we look forward to reporting more good news to you next quarter. Thank you.
You. Ladies and gentlemen, this concludes today's conference. You may now disconnect.