Pembina Pipeline Corp. Ordinary Shares (Canada)

Ladies and gentlemen, thank you for standing by and welcome to the Pembina Pipeline Corporation 2020 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Scott Burrows, Senior Vice President and Chief Financial Officer. Thank you. Please go ahead, sir.

Scott Burrows C.F.A. are perhaps past the peak. Part of the economy Scott Burrows C.F.A. While the first quarter results are indeed strong, Since early March, Pamina has taken significant action to respond Scott Burrows C.F.A. The decision to continue spending on the remaining projects was informed by the fact that all were well-advanced or nearing completion and therefore expected to contribute incremental adjusted EBITDA in the near future. By contrast, the deferred projects were in the early stages of planning or construction. Planning, engineering, and regulatory work done to date on the deferred projects will allow Pemina to resume these projects to meet customers' needs when global energy prices and the broader economic environment are supportive. The recent action complements our longstanding commitment to our financial guardrails, which have positioned Pemina well to address today's challenging business environment. To recap the key points underlying Pemina's resiliency, we are currently benefiting from the following. First, the underlying business remains highly contracted, with between 90% to 95% of 2020 adjusted EBITDA supported by long-term They are currently rated BBB with stable outlook by both Standard & Poor's and BBB with stable trend by EGRS. Both agencies have publicly affirmed those ratings within the past two weeks. Finally, the company has ample liquidity with $2.5 billion of available cash and borrowing capacity, including a new $800 million revolving credit facility Canada recently announced and the proceeds from a five-year, $250 million U.S. non-revolving term loan that we announced yesterday. With our recent May note repayment, we have no further maturities in 2020. Given the challenging circumstances facing us, we feel we have taken steps necessary to protect Pemina's financial position, and we are demonstrating the strength and the resiliency of Pemina's diversified and integrated business during the most difficult period in Pemina's history. In addition to our own actions, we are carefully monitoring our customers' responses. As energy prices The volume declines across Thank you for joining us today. We do, however, look forward to providing an update at our AGM, which is held today at 2 p.m. Mountain Time, 4 p.m. Eastern Time. This year, the AGM will be held as a virtual-only meeting, which will be conducted via live audio webcast. Participants are recommended to register for the virtual webcast at least 10 minutes before the presentation start time. For further information on Pemina's virtual AGM, including a copy of the AGM presentation, please visit the shareholder information page under the

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, number one on your telephone keypad. Your first question comes from Jeremy Thomas of JPMorgan. Your line is open.

Hi, good morning.

Morning, Jeremy.

I just wanted to go into the assumptions in your guidance a little bit more, if that's possible. When we think about slowing activity, possibly curtailments, Are you able to share kind of any more color as far as like the depth and duration that might be kind of baked into ranges in your guidance and I guess what levels would push you below that bottom end there?

Jeremy, we've studied what's going on in the markets and we've done quite a forensic analysis around where the shut-ins might happen, what the impact on Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Jason Metcalf Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth, Scott Arnold, Christopher Scherman, Eva Bishop, Jason Metcalf You know, we do have some inbounds, as you would expect, everything from, you know, reductions on subleases to blend and extends to lower fees. And, you know, of course, we're willing to consider all requests. But, you know, our view is they have to be a bargain. Scott Burrows C.F.A.

That makes sense. That makes sense. And just one last one if I could. Wanted to see, you guys had talked about asset sales being a possibility and didn't know if you had any kind of broader thoughts about M&A that could happen in, you know, the industry here or if that doesn't make sense given all the dislocation and back to your last purchase with KMLs, everything kind of Thank you all for participating in today's webinar. We hope you enjoyed it.

Our safety record is as good as it's ever been. Our reliability is as good as it's ever been. We've moved every MCF a gas, every barrel of oil tendered, and so doing great. Our kinder integration is completely on track. The synergies are tracking well. The last kind of thing on the list is training U.S.-based operators that we're going to come up and and we do that face-to-face, doing that remotely now. So the Kinner integration has gone out without a hitch. Our getting the quarter out was very well done. The projects continue in the field. So all going very well. It's astonishing and part of the topic of the AGM, what we've been able to accomplish to really I wrote the guys a note yesterday after our board meeting saying the stabilization effort is now formally over with the board meeting and now we can get back to doing what we love to do, which is making money. We are now looking forward. I'm pretty sure shareholders and all stakeholders are glad with the actions we took. But now it's game on again, so we'll be looking at everything.

Got it. That's very helpful. That's it for me. Thanks.

Your next question comes from Matt Taylor of Tudor Pickering Holt. Your line is open.

Hey, good morning, guys. Thanks for taking my questions here. Yeah, just following up there on Jeremy's question, if you mind, can you just give a bit more detail there, especially on the level of pricing weakness, duration that you're assuming, and then a bit more on what you mean by large-scale shut-ins? And the reason I'm asking is one of your competitors was out saying Canadian shut-ins can be as high as a million to a million and a half in the near term, so any further thoughts there of being less helpful?

Yeah, what we've done is a customer-by-customer analysis Scott Burrows C.F.A. and what order of diluent supply or demand disruptions will occur. For example, will Southern Lights turn off before quotient or will WCSB suffer diluent demand erosion? So we've come around this in great detail and we're comfortable with what we said. Now, you know, the shut-in words, and I know that got attention from some of you, you know, those are lawyer words. Please don't interpret that as that we don't really stand behind our guidance, because we do. What that meant to address is, you know, for a while, I think we all lived in, you know, what happens if Enbridge shuts down entirely and the whole system gets backed up and And I think you'd all acknowledge that is possible, but not that likely. And so, you know, we put those words in to reflect, you know, that kind of Armageddon scenario, but please don't interpret it as that we're not standing behind our guidance.

and what peers are generally looking at which is Q2 is probably going to be the hardest hit with a recovery through Q3 and then through Q4. So we're not assuming Q2 is the worst and it stays that way. We are assuming some recovery through Q3 and Q4.

But again, those aren't things we're guessing at. Those are based on what we know from our customers.

That's great. That's really helpful. Thanks. Thanks for that, guys. And just to help clear the air a bit, can you provide some thoughts just on what your expectation is on base level EBITDA? Because I mean, obviously, your assets are highly contracted. So even if there is some potential downside there, you know, just framing that against the backdrop of highly contracted assets.

Yeah, for sure. I mean, if you just zoom out for a minute, you know, we came into the year Scott Burrows C.F.A. Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth,

You'd be willing to combine there, or is there any contractual provision that prevents your partner from moving over to that project, which is, you know, as everyone knows, is currently under construction versus staying with your currently deferred project?

I mean, yeah, I mean, in terms of our project, job one was to safely defer all of the projects Scott talked about. You know, we proceeded with the ones that were Well advanced and we could safely execute in this market and which will once in service provide incremental EBITDA. So that was job one. Job two is to safely defer the projects that were early innings, phase 7, 8, 9, and then the petrochemical project. And we have hundreds of millions of dollars invested in those Thank you for joining us today. So that was job one. As I said earlier, we have now, I think, very successfully safeguarded Pemina. We are extremely resilient at this point. And your question would be something that we wouldn't dare to dream about until we got here. We're aware of the situation there. We have a great relationship with InnerPipeline. Thank you. Good morning.

Switching to your cost savings, I'm wondering, first of all, how much of that $100 million is already reflected in Q1?

And if it's not fully reflected, which I'm assuming it's not, how might we think of the ramp over the year? How much might be deferred versus sustainable prospectively, i.e. temporary versus permanent? And can you just also confirm that it's all incremental to any sort of previously identified synergies relating to Kinder Morgan, Canada, and the various integrations?

Yeah, Linda, the $100 million was an internal target that we set. And it is what we consider a permanent saving. But that saving was for the balance of this year. And that saving did not double dip any kind of Kinder Morgan synergies. I think that's what you're after. It's truly incremental. Most of it has to do with taking a billion dollars out of our investment plan, and it takes a lot of talented people to invest a billion dollars wisely, but we're not going to do that this year, most likely. When we look forward to next year, your question might be, Well, if the $100 million was for 7-12ths of the year, and by the way, none of it was prior to this reporting period, could that be more annualized next year? I don't want to get too much into forward looking, but I think most of that can be maintained for the foreseeable future.

That's helpful. And recognizing that your reporting systems might be a little bit more challenging to access remotely while everyone's working safely, I'm wondering if you could give us a sense of what April looked like for your marketing business. Did you see any sort of reductions in volumes on the condensate side, whether it was in Cochin or on your local production? Can you talk about your NGL contracting year? and how things might have shifted versus the attributes of the contracts that you established on April 1st this year versus last year.

That's a fair amount of detail. I don't know if we can get into that, but Linda, what we're seeing on the ground week by week is more favorable than what I think people might expect. And so the, you know, I know there's obviously lots and lots of press on volumes going down, but, you know, if you would, you know, if you zoom out and you think about the, you know, for example, the curtailment program that the Alberta government, the Notley government put in of half a million barrels, that came and went and Pemina had absolutely no impact from that. and so, you know, we have, and again, we'll talk a little bit more about it at the AGM, but we are surprisingly resilient when you go into what our product mix is. So, you know, our oil sands pipelines, for example, are synthetic crude and so, and cost of service, so they're not impacted. You know, we don't have a lot of touch points with, say, these producers other than diluent supply and, you know, Southern Lights We are very, very resilient. In terms of the marketing business, you know, again, I don't want to get too forward. April is, you know, looking kind of the same as March, and then it looks like it's getting, you know, a little bit better again, but it's highly volatile. See forward-looking information.

Thank you. Just as a follow-up on your marketing, you're always finding different ways to make money under different market conditions, and I'm just wondering, one of the opportunistic aspects that might manifest itself but might not is around storage and maybe finding opportunities for the industry to potentially store product. Are you seeing any opportunity to kind of bring back asset capacity to help the industry, or is that something that's not really a possibility?

Well, I mean, commend Enbridge for their brainstorm to use a large-age pipeline. and a great example of how the infrastructure companies can work with the E&P companies. We've got 30 million barrels of storage and so our teams are working very, very hard. Even storage that we use typically for NGLs, can we use it for For crude, can we use storage that's normally reserved for operations for the next number of months? So that is something we're certainly looking at. Do we have tanks that are fully leased out financially but aren't full? And is there a sublease possible? So you're bringing up a good point that those are some of the gems that may provide us additional resilience and We're not factoring a lot of good news right now into our guidance, but undoubtedly there'll be some good news in the event there's more bad news.

I'll just add, just really quickly, we've taken an approach to term out our storage capacity in many cases, and it's not as if it's sitting there being unutilized and The team is exploring every opportunity that we can to find, as Mick described, if there is spare space not being utilized, we're looking at that. We have contracts. That's the model that we've gone forward with. So as contracts roll off, we'll look at what we're doing with that capacity. But right now, we've turned most of that out and are looking at only the available capacity that isn't being utilized.

And Linda, just a little finer detail on your question about the savings. Some amount of that savings, I guess, is in the first quarter when you consider our compensation plans and things like that. Obviously, it's not going to be the best year for our staff in terms of comp. Our plans are designed to be correcting for when we Thank you. Appreciate the context. I'll jump back in the queue. Your next question comes from Patrick Kenny of National Bank Financial. Your line is open.

Hey guys, hope everyone's keeping well. If we assume that quite a few of your Montney customers will be accessing the $100 million federal EDC loan program, which obviously they'll need to pay back in 12, 18, 24 months. I'm wondering if that relatively urgent need for them to raise cash and deliver presents a unique opportunity for you guys to not go on the offense or anything, but acquire some Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth, Scott Arnold,

Thank you for joining us today. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A.

At the same time, we're seeing the propane market has tightened up a little bit here. So just curious if your marketing team is able to take advantage of some seasonal arbitrage on the curve right now, which could help support your marketing cash flows into next winter and into 2021.

Thanks, Scott. I'll start with that. So we have a systematic hedging program that will Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth, Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A.

Yeah, no, we're tracking it, Pat. And again, right now, the opportunity to secure the product at very low cost, we're undertaking it. And we do believe there's some upside in the near future for that commodity and are tracking it closely. So we're looking and following that on a daily basis and planning for across the valley, as Scott has described, and

Yeah, we've got a lot of, like our position in terms of how full we are, we've got a lot of capacity available right now to store through the summer and sell through the winter. So it's not like we're, you know, full here like the oil situation. It's a very different animal and, you know, again, that would be something we talk about a little bit at the AGM. People may have forgotten that we're only 40% Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth,

Okay, that's a great color. Last cleanup question, if I could, just on Alliance, if we can get an update on both the recontracting process, you know, to extend commitments beyond 2020, and then also the Balkan expansion, just, you know, given the pullback in North Dakota production, what's the status there and when we might see the need for incremental takeaway capacity?

The pullback in the development of crude oil within the Bakken has obviously impacted the associated gas. It's definitely a bit trickier to keep that expansion moving forward. For the time being, I'd say that project is a bit more challenged than I would have Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth, and some of those rolled over annually last year. We're also working through details with a number of our customers in terms of extensions. Again, in the first quarter of the year, obviously, with what's been going on, the conversations on the upfront have been pretty quiet. I don't think fundamentally things have changed much. At the moment, the spreads between Alberta and Chicago aren't great because the Alberta prices are looking good, If you look forward into winter in 2021, those things start to widen out. So we think there's some strength on the alliance in the long term in terms of recontracting.

Hey Pat, Jared here. Also, any disruption that we have seen on the processing side in the Bakken through the auxable assets hasn't been due to fundamentals. It's been that the customers haven't been able to access storage. So it's kind of a short term. So in the areas that we're processing, Your next question comes from Robert Kwan of RBC Capital Markets.

Your line is open.

Good morning. So when you refresh guidance, it's been almost two months since then, so kind of since that time, what's come up that's Thank you. So, you know, headwind is really the continued degradation of marketing earnings and that's fully baked in. We don't have

I think with the previous questioning, we think there could be upside there, but we don't think it's prudent to forecast that. But I think it's just really when you kind of get into the guts of how Pembina works, and it would be easy, and I think when I see how our stock price has been correlated to Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth, Right now, gas is paying for people's costs, and so people are going to produce that to harvest the gas, maybe a little more than condensate. And then you look at where does the condensate come from? Well, 100 to 150 of it comes up Southern Lights, and I think the industry generally knows that the largest customers on that line are marketers, and that's out of the money right now, so they're probably going to shut it off or whereas our customers are actual users of the product and so the underlying economics of continuing to flow that product are pretty good and then you kind of go in behind all of that into what protection do you have from the contracts. It's pretty good and I think demand ETHANE backbone of the whole country and demand because of all the packaging and medical supplies and things like that. Demand stays pretty good there. It's really going from the original view we took on guidance that a bunch of our interruptible volumes were going to go away and that was obviously correct. But then taking the time between then and now to work it through based on what order oil output in the basin would drop. And, you know, so obviously the least economic reservoirs will probably stop producing first. And then who are those people? And is it SAGD? Is it mining? Is it SAGD? Where do they get their dilliance? Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth, Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth, Scott Burrows C.F.A. We've taken amazing steps forward in diversification since the 2015 oil price crash, including buying a $10 billion natural gas-based company and buying a $4.5 billion company that owns a major import pipeline and has all investment-grade credits in behind. Scott Burrows C.F.A.

You know, there is something on the commodity side. If you do go below on the commodity side, how much of that might just be shifting into 2021? If you think about what you talked about earlier of the commodity hasn't even go this year and you just put it in storage and that's in theory should future spreads into 2021.

Yeah, that's a, you know, with so many moving parts, I understand that your desire to understand is very, very difficult. Question to answer. You alluded to it in your note this morning, the lawyer words we put into our guidance. Those lawyer words reflect hitting tank tops, the scenario where you have massive system-wide shut-ins, and it looks ever less likely that that's going to happen. that the industry will continue to work curtailed rather than shut down. But what could take us below our guidance, for example, is if we had a major mid-cap failure, a mid-cap customer failure, something like that, but with a little bit of backstopping from the federal government and credit to our mid-caps. They're starting to announce. They're announcing stronger than I expected. They've got some support from the federal government, hopefully more to come. And, you know, they're making money on gas. Like they're supporting themselves on gas. Like all of our larger Metcalf customers, 7G, Eventiv, they're doing okay on the gas side. And so they're showing to be quite resilient. But what could take us lower there would be an unexpected failure of one of those companies or a violent second wave of COVID in the U.S. and reversing the slowly improving gasoline demand picture. Things like that could take us lower. We don't think those are on balance likely, but we thought it was prudent and responsible to point out that those are still possible. And I would say it a different way. Had we not put those words in, you would have qualified the guidance that way anyway yourself. You would have said, yeah, Pemina is still guiding, but man, if we hit storage costs, and their guidance is probably not going to hold. So you would have inferred those words anyway.

So just to maybe summarize, either commodity prices stay flat and don't recover or go down is one. Second would be much more significant studies than what we're seeing today. And then the third would be a fairly major cost for bankruptcy.

Yeah, and I think your item one and two are the same. Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth, Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca,

That's all I've got. Thank you very much.

Your next question comes from Robert Petelier of CIBC Capital Markets. Your line is open.

Hey, good morning. You've answered most of my questions. Just a couple of follow-ups here. Now, first of all, I want to thank you for your comments on the blend and extend and the importance of protecting your own stakeholders. But to follow that up, what has the force for your claims activity been like?

I don't think we've had a single FM, and that doesn't surprise us because our legal teams don't believe that that condition would be met in our current agreements.

Okay. Just a little bit of a detail here. I see there was a little bit of a support payment for Ruby, and you've also guaranteed something for CKCC. So, my question is how much support do you think Ruby would need for the rest of the rest of the way and is that including your CapEx things?

Yeah, I'll take that. I mean, CKPC, I mean, that's really just it's more of an accounting. So, remember back in February, we entered into a project finance agreement with our partners for CKPC with both Pemina and PIC guaranteeing that loan. So, really that guarantee is The discounted future difference between what the rate would have been had Pamina done it versus the rate on that facility. So it's really, I'd call it almost a counting noise. We wouldn't expect that number to change as we proceed through that project, but of course that's deferred right now. So I would almost call that a counting noise right now, Rob. And then on Ruby, I mean, Ruby consistent with, I mean, every quarter, Scott Burrows C.F.A. Scott Burrows C.F.A.

In 2021, you might have to defer capital again for those projects that were deferred from 20. In that circumstance, you'll be in what I would call a meaningful free cash flow positive situation. I just want to know what your view is on dividends in that circumstance. You've clearly indicated that for 2020, it doesn't make sense to bump the dividend any more than you already have. which is perfectly understandable. What would your outlook be for 2021 in the circumstance where there's more project deferrals and very minimal capital?

You know, certainly if that were to occur, you know, I think right now the committed capital for 2021 is about $300 million, $400 million. So you're right. If we maintained our current level of EBITDA, we've got a bunch of projects that are coming into service that ought to supplement what we have now. So you could argue it ought to go up. But if we had offsetting weakness in the market, maybe let's say a downside case would be that it would be flat with our current guidance. We'd still Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Janet Loduca, Stuart Taylor, Allan Charlesworth, Scott Arnold, Christopher Scherman, Eva Bishop, Jason Metcalf Scott Burrows C.F.A., Cameron Goldade, Jaret Sprott PEng, Jason Metcalf I think it would be, you know, in that circumstance, I don't think our first use of capital would be further debt repayment. You know, we're going to be, you know, we're extremely well positioned now. We'll be extremely well positioned then even in a position of weakness. So it would be probably first a dividend increase and second to take advantage of a An ongoing weaker market.

That's very good, Calderon. Thank you.

Your next question comes from Ben Pham of BMO. Your line is open.

Okay. Thanks. Good morning. I know a couple of questions on your guidance and puts and takes and whatnot, but I guess we got to appreciate that you guys are working with some pretty tight ranges there. on guidance. So really going down to the lower end is really not that big in terms of materiality. So I guess my question really is on your dividend payout and your yield and you mentioned sustainability and also your leverage. I mean, even if you do move below the lower end of your range, perhaps, I mean, it has to be really dramatic for you to see concern around your dividend, your balance sheet or that, correct?

Correct. We have no concerns about the dividend.

Okay. And as you mentioned, two times coverage, which is pretty conservative relative to peers there. You've been through several cycles, 15, 16 and financial crisis there. Is there a right level or range that you're comfortable with and where you want to get to a long term?

Are you referring to payout ratio?

Yeah, exactly. Is that a good range, just in up markets and down markets?

Yeah, I would say longer term will probably be between 55% and 65%.

Okay, so you're at a lower end. Okay. Can I ask, and I know you had some good commentary around 1516 and how resilient you were during that time, and and the facts are pretty clear. 15, 16, you were quite resilient. Maybe one or two quarters you saw pressure and high TAPX, you had a drip program on. So you're in a much better position now. But I'm curious that the way that you're responding to this uncertainty or downturn is much more dramatic or quicker than 15, 16. So is this really a function of this downturn? Is this so uncertain or is it something to do with Scott Burrows C.F.A. Scott Burrows C.F.A.

Rewind eight weeks. Nobody knew what mortality rates would be, things like that. No idea what productivity might be like trying to build a world-scale petrochemical facility. And so our initial reason to delay those projects was for safety, not putting people at risk that we didn't need to put at risk. The secondary was preserving capital. And also the third was our customers. I mean, did our customers really need us to put another billion and a half dollars of pipe in the ground for volumes that they don't have? And so when we, I called most of the CEOs associated with Scott Burrows C.F.A. Scott Burrows C.F.A. Scott Burrows C.F.A. You know, in a scenario like we could pull back even more capital on those projects, but then we would destroy value. And so we're investing more than we need to to ensure that we, for example, the petrochemical facility, that we complete long lead items rather than turn them into scrap metal because that would destroy value. So we're and those are completed modules so that we can bring them back. So it's much more than a financial exercise. It's an exercise that contemplates all of our stakeholders.

Okay, that's great. Thanks, everybody.

Your next question comes from Rob Hope of Scotiabank. Your line is open.

Morning, everyone. Just a follow-up question just on the nitty-gritty of how the systems work. I guess I just want to get a sense of what your view is of dealing with storage in the base and whether or not Southern Lights will move down enough of its volumes and potentially coach into offset the demand of offset the lower demand of the oil sands. And then a follow-up there would be If there is no storage, would that be a force majeure claim for your customers?

So the answer to your second question is we don't believe so. The answer to your first question is absolutely, you know, as SAGDs go down, there is a lower dillion demand. And what we see so far is that that's not coming at our expense. I mean, we're seeing slight reductions in quotient. but still at or above contracted levels on piece. We're at or around our contracted levels with physical barrels. And so we are not seeing that coming out of our systems. So there's only one other place that can come from so far. We've asserted that for years because our customers on quotient are the users of that product. and on Peace, they have gas economics to help support them whereas importers don't have that on Southern Lights. So we've asserted for some time that that would be the initial shock absorber and as it rolls past the entire import there to Coast and to Peace, we have the contractual backstopping.

All right. Appreciate the call. Thank you.

There are no further questions at this time. I will now return the call to Mr. Mick Gilder for closing comments.

First, thank Scott for doing all the reading for me. He's a voracious reader, so he's a lot better at it than I am. I don't read a lot, so thanks, Scott. I want to thank all the listeners, those who are supporting us through this tough time. I'm very proud of the actions we've undertaken. I've got some great charts and graphs this afternoon for the AGM, which I'm looking forward to sharing with you. I'm feeling cautiously optimistic where we are today, so thank you, and we'll see you at the AGM.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.