Gibson Energy Inc.

Good morning, everyone, and welcome to the Gibson Energy Third Quarter 2023 Conference Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Beth Pollack, Vice President, Capital Markets and Risk. Ms. Pollack, please go ahead.

Thank you, Operator. Good morning, and thank you for joining us for this conference call discussing our Third Quarter 2023 operational and financial results. Speaking on the call this morning from Gibson Energy are Steve Spaulding, President and Chief Executive Officer, and Sean Brown, Senior Vice President and Chief Financial Officer. We have the rest of the senior management team in the room as well to help with questions and answers as required. Listeners are reminded that today's call refers to non-GAAP measures, forward-looking information, and pro forma financial information. Proforma information is derived in part from historical financial information from the South Texas Gateway Terminal LLC financials and is subject to certain assumptions and adjustments and may not be indicative of actual results. Descriptions and qualifications of such measures and information are set out in our investor presentation available on our website and our continuous disclosure documents available on CDAR+. Now, I would like to turn the call over to Steve.

All right, thank you, Beth. Good morning, everyone, and thank you for joining us today. The third quarter of 2023 was a transformative quarter for our company, marked by the successful closing of the Gateway Terminal on August 1st. As you may recall, prior to this acquisition, we had consistently communicated that any M&A opportunity would need to be on strategy and deliver high-quality cash flows through take-or-pay contracts with high credit quality customers. This transaction met all of these objectives and provides us an additional core platform that is competitively advantaged. I'm also pleased to report that over the two months since closing the Gateway acquisition, the asset has exceeded our expectations with respect to both the financial and operational performance. During the month of August, the terminal loaded 12 very large crude oil carriers, or VLCCs. That's a record for the facility and something that sets us apart from other terminals in Corpus Christi since we are one of only two facilities in the Texas Gulf Coast with the ability to load VLCCs. This high watermark also speaks to the continued demand for the terminal services and our facility located and the advantaged outer harbor of Ingleside. At the same time, our focus is on expanding the contracted loading windows and committed volumes per loading window at the facility. During the quarter, I'm excited to share that we hired a new head of commercial for Gateway, Andrew Kaplan. He joins us from Buckeye, where he was commercially responsible for the Gateway terminal. He brings a solid relationship with our existing Gateway and a deep understanding of Gateway's competitive advantages and the overall value proposition, which will ensure we retain these customers and attract new ones to continue to grow the terminal. Since we acquired the facility in August, we've met with all six of the existing customers at the facility, which as a reminder, all of our existing customers, all of the existing customers at the terminal are customers of ours in Canada, four of which are among our top 10 customers. While negotiations do take time, the constructive market dynamics in the region have increased our optimism around our ability to enter new contracts and or extend existing contracts at or above current rates. Turning to our financial results, which include two months of contribution from Gateway, We achieved consolidated adjusted EBITDA of $150 million for the quarter. This performance, above our previous outlook for the quarter, was driven by a strong infrastructure quarter, as well as a solid quarter for marketing. Our distributable cash flow of $93 million in the quarter resulted in a payout ratio of 61%, well below our 70% to 80% target range. Our leverage ratio pro forma where the full-year contribution from Gateway acquisition was 3.1 times, which is at the low end of our 3 to 3.5 times target. From an ESG perspective, we had some notable milestones during the quarter as we announced a 15-year renewable power purchase agreement with Capstone Infrastructure and Salt Ridge First Nations. In conjunction, we also released our new sustainability update report. The power purchase agreement demonstrates Gibson's commitment to low carbon transition and achieving our emissions reduction target, including net zero by 2050. Power prices under this agreement are below current rates and competitive in context to historic rates in recent years. In summary, we are proud of Gibson's third quarter financial and operational results. We successfully closed the Gateway acquisition during the quarter with financial results exceeding our expectations. Infrastructure continued to deliver consistent performance with a non-marine infrastructure business ahead of Gibson's previous expectations for the quarter and a strong contribution from Gateway from the first two months of ownership. Marketing delivered in line with last quarter's guidance, benefiting from the storage opportunities and strong refined products volumes. We made meaningful strides towards our emissions targets, including net zero by 2050, by entering into a renewable power purchase agreement during the quarter. I'll now pass the call over to Sean, who will walk us through our financial results in more detail.

Sean. Thanks, Steve. Further to Steve's comments, the third quarter was a very exciting quarter for Gibson. To start off, we closed the gateway acquisition for US $1.1 billion, which expands our liquid infrastructure footprint, enhances the strength and stability of our cash flows, and will serve as a platform for future growth. Speaking to our financial results, total adjusted EBITDA of $150 million was largely flat to the third quarter of 2022, with year-over-year growth in infrastructure being offset by a more normalized marketing contribution in the current quarter. Specific to infrastructure, infrastructure adjusted EBITDA of $140 million was $29 million higher than the third quarter of 2022 due to strong performance from the non-marine infrastructure business, which was well ahead of our previous guidance, and two months of contribution from Gateway. Delving further into the non-marine infrastructure business performance during the quarter, results were above our historic run rate for this business as the impact of previously anticipated items, which we had thought could total between $6 and $10 million, did not materialize or were more than offset by base business outperformance. Turning to the gateway business, while we have only owned the asset for two months, during these initial months, the EBITDA contribution exceeded initial expectations. As Steve noted, we are very pleased with the first two months of performance and believe they clearly demonstrate that we can achieve the nine times forward-looking transaction multiple quoted at announcement of the acquisition. Looking at our marketing segment, we continued to build off the strong first half of the year with solid performance during the third quarter. With crude marketing realizing some storage-based opportunities, and the refined products division continuing its strength from earlier in the year, driven by strong drilling fluid demand, which was partially offset by tighter, heavy differentials. Consistent with the guidance we provided on the second quarter conference call, we generated adjusted EBITDA of $24 million in the third quarter, but would note that the timing of certain opportunities were pushed into, and will be realized during the fourth quarter. In terms of our outlook for marketing, though likely not as strong as we saw at the beginning of the year, the environment remains constructive, specifically in our crude marketing business where we continue to see storage and location-based opportunities. As such, with the benefit of the previously mentioned opportunities we expect will now be realized in the fourth quarter, our current expectation is that our marketing segment will have another strong quarter and generate adjusted EBITDA of around $25 million. Before concluding the discussions of the results for this quarter, I will briefly walk you through the items leading to distributable cash flow. During the third quarter, we reported distributable cash flow of $93 million, which was a $10 million increase from the second quarter of this year and a $22 million decrease from the comparable quarter last year. Sequentially, much of the increase in distributable cash flow relative to the second quarter of 2023 can be attributed to incremental cash flow from the infrastructure business and, more specifically, the gateway terminal, which was only partially offset by a lower contribution from marketing and higher interest expense. On a year-over-year basis, With adjusted EBITDA being largely flat, the main driver for the decrease can be attributed to increased interest expense, resulting primarily from the new debt issued to finance the gateway acquisition, but with other smaller drivers, including higher maintenance capital, which was only partially offset by lower cash income tax. In terms of our financial position, our payout ratio now sits at 61%, which is well below the bottom end of our 70% to 80% target range. On a pro forma basis, our debt to adjusted EBITDA decreased to 3.1 times, which is also at the low end of our 3 to 3.5 times target. We also continue to remain focused on our infrastructure adjusted leverage and payout ratios. On this basis, on a pro forma basis, our leverage is 3.7 times, and our payout ratio is approximately 79% compared to targets of below four times and 100% respectively under our financial governing principles. Before providing my closing remarks, as touched on briefly in the prior quarter, I did want to briefly update our approach and actions to date as it relates to mitigating currency fluctuations with the acquisition of the Gateway Terminal. Since closing of the transaction on August 1st, we have entered into hedges to mitigate some of the near to medium term currency risk. Currently, between two thirds and 80% of our first year of gateway free cash flow has been hedged. And beyond that, we hedged approximately one third of second year free cash flow to provide flexibility in the future. In summary, the third quarter was a very strong quarter for Gibson. Infrastructure results were ahead of our expectation due to strong non-marine infrastructure performance and two months of contribution from Gateway. Marketing was in line with prior guidance, though some opportunities will now be recognized during the fourth quarter. And we remain well within our key governing financial principles and continue to maintain our industry-leading financial position. Thank you for your time today. I will turn the call over to the operator to open up the line for questions. Operator?

Thank you, sir. Ladies and gentlemen, if you would like to ask a question at this time, please press star followed by one on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw from the question queue, please press star followed by two. And if you are using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and press star one now if you do have any questions. And your first question will be from Jeremy Tonnet, At JP Morgan, please go ahead.

Good morning. This is Eli Johnson on for Jeremy Tenet. Just wanted to start off on gateway recontracting. Previously, you've discussed adding term and higher MVCs, recontracting at higher rates. What kind of specifics can you provide on those negotiations, and how much incremental uplift could this add to asset run rate levels? And then how do those negotiations kind of tie into competitive dynamics with Ingleside?

Thank you for that question. This is Steve Spaulding.

I would say, you know, we have six existing customers there. Currently we're in negotiations with three to actually extend those existing agreements and add existing, add additional capacity and storage. with that, and with those, we are proposing higher MVCs. And then on top of that, we have four other customers that are now off-takers at the terminal that have asked and we have given proposals to actually enter into new contracts at the terminal.

All right, yeah, thanks. I appreciate the color. And maybe just kind of turning to equity shareholder returns as well. Do you guys have any updated timing or thoughts on share repurchases? And how do those kind of tie into your overall capital allocation prioritization?

Yes, thanks. You've got Sean here. So no update on timing. As everybody aware, we come out with our budget in December of this year. And we do it every year. And, you know, concurrent with that budget, we'll come out with any expectation we have on share repurchases. But from a broader perspective, I mean, capital allocation doesn't change. We will take a look at what our excess cash flow is, basically do the cash flow waterfall. And that's going to be after growth capital. So that's a key determinant in, you know, what the level of buyback may or may not be for 2024. and any excess cash flow after payment of dividends, et cetera, will go to share buybacks. I mean, as you would have seen on the call, we do think still there's an opportunity to get leveraged down somewhat, but on a pro forma basis at 3.1 times, and that's reflective of a full year contribution from Gateway or the forward earnings potential of the facility. We're very comfortable with leverages. What more of the story is, we'll come out with more formal guidance in around both our capital budget and, you know, any potential share buybacks for 2024 concurrent with their December release.

Got it. I appreciate it, guys. Thanks. Thank you.

Next question will be from Linda Ezegelis at TD Cowan. Please go ahead.

Thank you. Maybe you can just give us a sense of how the integration is going. It sounds like commercially it's going to be pretty seamless with Gateway, but from a physical operations perspective, have you started discussions or put any thought to which folks you might hire from Buckeye or which might be willing to come over? Do you expect your cost base or anything else to change or your processes in terms of how you manage the facility once you take over from Buckeye and the timing of that?

Linda, that's a great question. And one we've been working on, right? So day one, when we, you know, we put a large contingent down to actually develop a transition team. But more importantly, all 27 people located at the facility, including the scheduler, and the commercial person that's responsible for the asset all come on board. So we're very excited about bringing all those people on board, and we expect to bring those people on board very soon. And we put together a transition team really across all of our functions to make sure this is a seamless operation, and we're very confident that we'll be able to take that over 100% in the near term.

Okay, thank you. And just a follow-up question. My understanding is that your cash tax situation at Gateway is quite efficient, but can you maybe, Sean, maybe provide kind of a longer-term outlook as to your cash tax situation in terms of conceptually how it might be kind of a run rate or how it might be changing over time?

Yep, absolutely. Thanks for that, Linda. As you noted, with the full step-up in basis and then existing tax pools we had in the U.S., we don't expect to be taxable in the U.S. for the foreseeable future. So as you noted, very tax efficient. Specific to the quarter, you would have noticed that cash taxes were lower than perhaps was expected, and that's really from the deduction we got from the acquisition and integration costs. but also from some of the other benefits. We had cash taxes of circa 40 odd million last year. This year we expect it to be in the range of 30 to 35, which is reflective of a cash tax position prior to Texas and then where we sit now. And then on a go-forward basis, we expect it to be in the 20 to $25 million range annually. And that is reflective of really the benefit that we get of having a business that's not really taxable or isn't taxable south of the border. And then as well, the fact that, you know, the capital we raised to finance that acquisition, or at least the debt capital was financed in the Canadian capital markets. So it's deductible against our Canadian income.

That's great. Thank you. I'll jump back in the queue.

Thanks, Linda.

Next question will be from Rob Hope at Scotiabank. Please go ahead.

Morning, everyone. Two cleanup questions. Just taking a look at South Texas, the commentary seems to imply that volumes were tracking ahead of expectations for the two months that you owned it. Can you maybe talk about kind of what were the key drivers of that? And as we move forward, you know, is there a reason why or, you know, what are the outcomes? I can see you maintain these levels versus step down to what your plans were.

Yeah, thank you for the question, Rob. There are two drivers. The first one is, you know, we talked about the 12 VLCCs that we load. You remember when, so our MVCs are set up on Afromaxes. So if, and that's a 750,000 barrel vessel. And we load 1.2 to 1.25 on VLCCs. So that incremental amount gets charged a throughput fee. So that drives our incremental revenues up. And then the other is we do have some spot windows available, and our existing customers are utilizing those spot windows.

Thanks for that.

And then maybe for Sean, if we go back to the Q2 call, you mentioned the $6 million to $10 million of headwinds that were potentially going to show up in Q3. It does look like those did not show up. But as we take a look at Q4, was part of this just a deferral of maintenance? I would imagine the rail step down is in there. But maybe can you talk about how the headwinds didn't show up in the quarter and how that plays out into Q4?

Yeah, absolutely. Great question, Rob. So as you noted, the headwinds did not show up. And quite frankly, actually, we outperformed above, you know, what our historical, you know, run rate would have been for that business. You know, it's really from two factors. One being, as you noted, some OpEx efficiencies. So that's nothing that is going to move to another quarter. It's just we operated a bit more efficiently than at least we had initially budgeted. There was some deferral that would move into the fourth quarter and perhaps early into next year. We don't think that that's overly material, so would not really bake that into sort of any forecasted amounts. And we did see increased revenues through most of our facilities. So that would be not only, you know, at our both Hardesty and Edmonton terminals, and this is relative to what we had expected going into the quarter, but also in our sort of other pipelines division, which would include both our Canadian pipelines and small terminals.

It's a bit of a mix of all of it. Good stuff. Thank you.

Next question will be from Robert Cotelier at CIBC. Please go ahead.

Hey, I'd like to, first of all, congratulations on getting off to a good start with Gateway. But I'd like to go back to the capital allocation and share repurchase question here. As we sit today, do you see more opportunity for value creation through reducing leverage or through share repurchases?

I mean, from a pure economic perspective, I mean, just given where our yield is relative to our interest rate and the tax deductibility, you know, it's certainly point to share repurchases. I think, you know, there's other factors other than pure economic factors. I mean, we are very focused on staying, you know, certainly within our leverage range and would very much like to be at the lower end of that leverage range. I mean, at 3.1 times on a pro forma basis, we're basically there, you know, so. As I said, I think, you know, we will look to reduce some leverage, but I don't think there's really a need to reduce material leverage. So, you know, that will be the balance that we have, Rob. I'm not sure if that answers your question.

Yeah, it does. I mean, the point was you're already pretty low on your leverage range. So I just wondered how much value you saw in reducing that further. But you answered that question. Thank you. And then I'll move on to the currency. Glad to see the detail you put out there. But as you go forward, how do you plan to manage the currency risk? And I'm thinking about maybe hedging targets in terms of the amount and how far out you might go with the hedge book.

Yeah, our philosophy right now is we are going to look to hedge probably roughly two-thirds to 80% of the next 12-month cash flows. And really what we're trying to do there is protect ourselves from the downside risk. We're not looking to profit off of that. So we will utilize different strategies to potentially do that. And then we'll look to hedge, you know, probably around a third of, you know, the months 12 to 24, and that'll be on a rolling basis. So, again, what we're focused on here is really protecting ourselves from the downside and ensuring, you know, that the cash flows we receive from this facility are in line with what we had expected when we first purchased it.

Okay, that's helpful. And then just on a As you look at Gateway on an operating basis, I know it's early days, but what opportunities do you see to leverage some of Gibson's existing infrastructure or marketing expertise to enhance the competitiveness of Gateway, understanding it's already pretty competitive as it is? So I'm thinking about things like, are there any asset additions such as pipelines that might help you even augment that competitiveness even further?

Yeah, Rob, this is Steve.

Thank you for that question. You know, I think right now our main focus is making sure this thing runs right on top, right? And recontracting or bringing in new customers. So linking our contracts mix, adding additional tankage, additional pipelines, and probably growing that business 10 to 15% of what on a long-term run rate of what we are today. So- I think one of the questions earlier was what rates we think we can get, and currently we believe we can get at or above the existing rates at the terminal.

All right, so more of an organic growth focus currently.

That's right, Rob.

Yeah, and the last question for me, I wondered if you had any initial thoughts on what the recent E&P consolidation in the U.S. means for your operations. Thank you.

Yeah, I mean, Chevron Hess, I mean, Hess is not a big producer in the Permian Basin. Then you look at Exxon and Pioneer. Most of the Pioneer volumes are pointed towards the Beaumont and the Houston Ship Channel. So those aren't big shippers into the Corpus area. None of those are big shippers into the Corpus area currently, Rob.

Okay, great.

Thanks, guys.

Thank you.

Next question will be from Bantam at BMO. Please go ahead.

Hi, thanks. A couple of questions on going back to Gateway. And I know you mentioned negotiations take time. Could you comment on timing when you think you get new contracts? And then you also mentioned indications of rates being at or above 1%. current i mean what's what's driving really not moving on those contract indications because that that seems pretty good versus perhaps initial expectations yeah thank you ben um so as far as what's driving that i think it's just

As you can see, as we talked earlier in the prepared remarks, we keep adding VLCCs every month to this terminal. And that competitive advantage of the Ingleside and the ability for Ingleside to load VLCCs overshadows the rates of most people even in the Inner Harbor. So we'll continue to draw barrels away from the Inner Harbor. There's numerous Inner Harbor customers that they have docks in the Inner Harbor and space on our side. And they forego and pay the taker pay in the Inner Harbor and move all their barrels over to us. And the reason being is that we're just that competitive advantage. I mean, there's definitely docks in the Inner Harbor of Corpus Christi that they would have to pay to actually versus go to us. That's how large our competitive advantage is. As far as optimism on, you know, I'm actually surprised. I thought it would be a little bit more difficult to actually recontract. And so as far as recontracting discussions, they're further along than I would expect. And we have more interest from new parties, which is stronger than I expected at the beginning. Part of that was bringing on that commercial person from Buckeye. You know, if I ask him, he's going to be very aggressive and say he's going to have it done, you know, quite early. But commercial takes time. And so, you know, we'd hope to actually have one or two of those sometime in the second quarter. If it occurs earlier, you know, we'll be very pleased. But right now the discussions are going very well.

So I just want to make sure I understand. So it sounds like you're balancing – spot rates versus MVCs, and you're seeing a nice tick in volumes, and that could come more to your favor if you continue to see that going forward.

Yeah, so yeah, some of the existing customers are taking up some of those spot, are taking up the spot spaces. Those existing customers want to firm that up because a spot basis, you get no priority in your loading. You don't get to schedule it six months out, and it's at higher risk, right, the spot rates are. And also, when we go firm, we do require eight-day storage with a firm contract, so that's going to drive the storage build-out there at the terminal. Okay.

And on new contracts, is there something you're giving up? on new contracts versus your commentary on existing?

No, it's at the same rates. They're basically side-by-side look very similar.

Okay, gotcha. My last question on the marketing guidance side, are you able to share what percentage of that is coming from the Q3 timing difference?

Yeah, I mean, it's a couple million bucks. I mean, something like three to five, something in that range. So just something where, you know, we did carry a bit through and we thought that might get realized in the current quarter and it got pushed to the fourth quarter.

Understood. Thank you.

Thank you.

Next question will be from Robert Kwan at RBC Capital Markets. Please go ahead.

Good morning. Just on the infrastructure EBITDA on the 140, are you able to break down how much of that came from Gateway versus the Western Canadian terminals and then kind of the pipeline segment that you thought you were going to get the headwinds?

Yeah, we don't, Robert, as you know, we don't typically provide that granularity down to that level. But I mean, what I can tell you is, you know, it would have been an outperformance of call it, you know, just under 5% of our, you know, what I would call our sort of legacy business with, and that would be both terminals and sort of other pipelines and small terminals with the rest being from Gateway.

Got it. And then just as you think about your comment on recontracting rates, possibly being a little bit higher. I know Stevie said, look, side by side, the contracts look very similar. I just want to make sure though, are there, is there any capital that you need to put in? You also kind of link that to increased storage. So is it the same rate, but you got to put some capital in, or is it really just the same rate, very minimal capital and any storage expansions would draw an additional fee?

That's a great question, Robert. So So in a service, what we do is we have an MVC, right? And that MVC in the past had been an Afromax. And so the new proposals are 50% Afromax and 50% partial loaded VLCC, which increases our MVC in these proposals from 25,000 barrels a day to 33,000 barrels a day. We'll see how successful we are, but that's what's in our proposals. I assume some of the customers will push back on that. And then as far as rates, embedded in those proposals is storage, right? So with a firm capacity window, you also are required to take out a minimum amount of fungible storage, and that is eight-day storage. And with that, we're currently kind of full on all of our storage is fully leased out in our existing contracts, which we'll, which will push forward the more development of storage at the facility. You know, we have cost estimates on that. Those cost estimates, you know, they're probably, it's about half the cost of the build out of tanks probably at Edmonton or some of the new tanks at Hardesty, but part of that is just currency, FX, US versus Canada.

So, sorry, Steve, do you need to build out the tankage to maintain the current rates or is it current rates on loading and then you're going to get an additional fee for the storage? Okay. Last question. Just as you look at the current marketing environment, Sean, you talked about it being constructive. Can you just frame the current environment though with respect to that $80 to $120 million range? Are we... kind of at that midpoint, recognizing that I know you had $25 million for the quarter, but just seasonality?

I mean, we've got Kyle in the room here, so I guess he can talk about the market in general and what we're seeing. I mean, we had roughly $25 million this quarter. Our guide for next quarter would be for the $25 million, so that would point generically to that midpoint. We had a much more successful... First half of the year, so it's always tough to pin that quarter that far into the future. But I know, Kyle, do you want to talk about the environment in general?

Yeah, sure. I mean, like Sean said, although the environment is not as strong as the first half of the year, we're very much constructive on it right now. Currently, we're seeing wider WCS differentials, which does somewhat benefit Moose Jaw. With that said, throughout the winter months, we do start storing asphalt, so those earnings push into future quarters and can delay some of those feedstock advantage benefits. On our crude marketing side, we're only a month into the quarter, so it's still early, but we're seeing increased throughputs at the assets, which would be normal course for this time of year. Heavy apportionment on Enbridge Mainline came in at 24%, which was a mere material increase from October. And we expect that to continue in the near term. So what does that do? It creates some opportunity for storage and transportation movements. That kind of environment can present opportunities for us, but like I said, it's pretty early, but those would be a couple of the themes that our marketing team is paying close attention to.

Okay, that's great. Thank you very much.

Thank you.

Sure.

As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-tone phone. And your next question will be from Patrick Kenney at National Bank Financial. Please go ahead.

Hey, good morning, guys. Just to come back to Gateway here and I guess looking at the record number of VLCCs that you loaded in August. Steve, I think you mentioned the 1.2, 1.3 million barrel loading capacity right now. I'm just wondering... whether or not this deepening of the channel to 54 feet might represent some near-term upside to your VLCC loading capacity, or if you would need to, I guess, dredge your dock a little deeper as the channel expands, and if that's something you're looking at as part of your contract discussions to underpin that capex.

Yeah, thank you for that question, Pat. The channel has been deepened to 54 plus from 47 plus, and it's also been widened. As to date, the Coast Guards have not allowed anyone that has a deeper port to load any more barrels really on the ships, right? But we do expect some time in the future. We don't know when. I don't know that if it's in the near future, probably but over the next year or so that they'll start to be able to load deeper. we went to all of our customers and said, hey, what advantage is this to you? Because we would love to deepen our docs and provide that ability for you to load your VLCCs from 1.25 up to maybe 1.4, 1.45. It's kind of marginal for them, so I don't know if the project will move forward, right? But we definitely have have asked our customers and provided them a means in which to pay for the deepening of our dock. But it's pretty marginal. It's got like that 125 up to 145, 15. So it's not a, they still have the lighter offshore. So it's not a major advantage when it comes to the VLCCs. Probably the bigger one for us, probably the larger one for us is the widening of the channel. And right now, the Afromaxes and the Suezes, they can come in at night, but they can't leave loaded. So they have a daylight-only restriction on leaving. So we believe that that will be lifted in the future. We don't know exactly when, but that'll be lifted in the future. And that'll allow us more load times, which we believe we can add additional windows down the road.

Gotcha. Okay. And I guess as a related question, so the 3.1 times pro forma leverage ratio, just to clarify, so that would include or assume kind of a nine times run rate contribution from Gateway. I'm just curious what still needs to be achieved from here on in operationally or financially from Gateway to reach that 3.1 times pro forma leverage ratio.

So Pat, just to clarify, that's actually a trailing number. So that would take actual results from Gateway, which have progressively increased over time. So I mean, that is a real number right now. That's not taking a forecasted number. I think notwithstanding, it's a pro forma number. I think our accountants would get some heartburn with putting a forecasted number. The footnote would be very expansive to qualify that. So it's actually trailing numbers. So there's Nothing from a gateway perspective because it's happened and we're actually, if you run rated what we've seen since we'd owned the facility, that number would have been even lower.

Right. So directionally, we're probably sub three times, assuming you achieve the 10 to 15% upside. Yeah.

I mean, assuming, yep. Assuming last 12 months performance from, you know, the, what we'll call legacy business. And if you ran rate, you know, the two months since we'd owned the facility, that's absolutely correct. Okay.

That's perfect. Thanks, guys.

I'll leave it there.

Thank you.

Thanks, Pat.

And at this time, there are no further questions registered. Please proceed with additional comments.

Thank you very much. And thank you all for joining for our 2023 third quarter conference call. Again, I would like to note that we have made available certain supplementary information on our website, gibsonenergy.com. If you have any further questions, please contact investor.relations at gibsonenergy.com. Thank you.

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.