Gibson Energy Inc.

Good morning everyone and welcome to the Gibson Energy Second Quarter 2025 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. Good morning and welcome to our Second Quarter Earnings Call. Joining me today from Gibson Energy are Curtis Fileton, President and Chief Executive Officer, and Riley Hicks, Senior Vice President and Chief Financial Officer. The rest of our management team is also present to help with questions and answers as required. Listeners are reminded that today's call refers to non-GAAP measures, forward-looking information 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+. With that, I will turn the call over to Curtis.

Thanks, Beth. Good morning and thank you for joining us today to discuss our Second Quarter Financial and Operating Results. Q2 was a great execution quarter for Gibson. We achieved many key milestones, including the safe and efficient execution of several major capital projects. These efforts underscore the momentum we have across our five strategic priorities – safety, gateway execution, growth, cost focus and building high-performance teams. During the second quarter, we completed the Gateway Dredging Project and turnarounds at the Moose Jaw Facility and the Hardesty DRU, with all projects safely executed on time and on or under budget. We also made significant progress on the Cactus II connection at Gateway and advanced construction on the crude infrastructure in the Duvernay being built as part of our new long-term producer partnership with Baydex. Both are on track and are expected to come online as planned in Q3 and Q4 respectively. I'd like to thank Marcus Engel's team at Gateway, Ken Martin and Cody Johnson's team at the DRU and our Moose Jaw team. It was impressive to see the pride these teams took in the preparation and safe execution of their projects. Their hard work set us up for a strong quarter. These projects will open up additional capabilities for Gibson going forward. These major projects were completed with zero recordable incidents and we are proud of our continued top quartile safety performance. Gibson has now achieved a new milestone of over 9.5 million hours without a lost time injury. Our safe operations provide a critical infrastructure bridge to enable the reliable flow of energy to key markets across North America and globally. We continue to grow with our customers and year to date we have safely moved over 260 million barrels in Canada and over 120 million barrels in the U.S. representing year over year increases of 6 and 5 percent respectively. Turning our focus to Gateway, during the second quarter we completed dredging and observed the benefits of the project immediately. With the draft now increased to 52 feet we are able to load VLCCs up to 1.6 million barrels and Suezmax vessels in full up to 1.1 million barrels increasing revenue per loading window and increasing average volumes for VLCC and Suezmax vessels by more than 20 percent. Following the completion of the project average throughput at Gateway rose from approximately 600,000 barrels per day to over 700,000 barrels per day and with a new record of 755,000 barrels per day achieved in June. Higher volumes at the terminal resulted in our Corpus Christi market share increasing to over 30 percent a new high for Gateway. Looking forward we expect the positive momentum to continue into the second half of 2025. The Cactus II connection is on track to come online in Q3. This connection constructed to meet our customer needs will provide them with long term access to an incremental 700,000 barrels per day of crude supply. Completing this connection is an important step to unlock further growth potential at Gateway. To date we have grown to over 30 percent market share in Corpus while only having access to two thirds of the supply. Access to this additional supply enables more options for our current customers, increases operational efficiencies and expands the pool of customers for Gateway. Commercially we see an infrastructure EBITDA per share growth rate of greater than 5 percent over the next five years. To drive this growth program we have been adding key talent to our teams in Canada and United States, including the recent addition of a new senior commercial director in Canada, Ryan Highland. Across our business we also made significant progress with respect to our We Are All Owners cost focus campaign. If you recall we set a target of realizing over $25 million of run rate cost savings by the end of 2025 and to do it with high levels of participation. We are on track to exceed the $25 million target and the participation across the organization has been impressive with 80 percent of Gibson employees implementing a change that contributes to this cost challenge. This is a great example of the power of the ownership culture at Gibson. Over 95 percent of Gibson employees are shareholders and it helps drive a differentiated performance culture that is aligned with shareholders. During the quarter we realized a mix of one time and run rate cost savings across all areas. From a distributable cash flow perspective this amounted to approximately $9 million or 5 cents per share bringing the total year to date DCF impact to over $15 million or 9 cents per share. Financially, the strength of our infrastructure business was showcased in Q2 as we finished the quarter with $146 million in adjusted EBITDA and $81 million in distributable cash flow. Continued strong infrastructure performance in Canada at both Edmonton and Hardesty as well as in the US at Gateway following the completion of the dredging project offset the cash flow impact of business interruptions at Gateway, Moose John, DRU while capital projects were completed and the muted marketing environment. Overall, Q2 was an important quarter for Gibson as we successfully advanced our crude infrastructure strategy with the strong execution of major capital projects. We're looking forward to maintaining this momentum through the second half of the year. With this, I'll pass it over to Riley who will discuss our financial performance in more detail. Thank you Curtis

and good morning everyone. As discussed, the second quarter was another strong quarter for our core business. In our infrastructure segment we reported adjusted EBITDA of $153 million consistent with the same period last year and close to the high watermark of $155 million achieved during the first quarter. The solid results were driven by continued strong demand for services at both Edmonton and Hardesty as well as increased throughput at Gateway which helped to mitigate the impact of minor business interruptions during the execution of our dredging project and the planned turnarounds at both Moose John and the Hardesty DRU. Marketing results continued to improve during the quarter with adjusted EBITDA of $8 million landing at the top end of our prior guidance range of $0 to $10 million. This represents an $8 million improvement over our first quarter results although it remains $12 million below the same period last year. Marketing performance reflected continued tight commodity differentials, limited storage opportunities and the impact to our refined products business resulting from the planned turnaround at our Moose John facility. Looking forward, with increased visibility into the second half of the year, we remain confident in our full year marketing outlook of $20 to $40 million consistent with the guidance we shared on our first quarter call. As for the third quarter, we expect marketing performance to be substantially in line with second quarter results. While crude marketing is expected to benefit from an improved WDI price structure, this impact will partially be offset by tight grade differentials driven by egress capacity out of the basin. Further, while crack spreads impacting our refined products segment have improved, this will be partially offset by reduced North American drilling rate activity which will impact sales of our drilling food products. On a consolidated basis, second quarter adjusted EBITDA of $146 million was $13 million lower than the same period last year, primarily driven by the muted marketing results. Looking at distributable cash flow, we generated $81 million in the second quarter, a $20 million decrease compared to the second quarter of 2024. As noted earlier, this is primarily due to the lower marketing performance which was only partially offset by the success of our cost savings initiatives which have resulted in $9 million of operating, G&A and replacement cost savings during the quarter. Turning to our financial position, we remain committed to our financial governing principles and maintaining both a strong balance sheet and a sustainable growing dividend. As expected, our debt to adjusted EBITDA ratio of four times was above our long-term target range of three to three and a half times, while infrastructure leverage of 3.8 times remained below our target of less than four times. On a consolidated payout ratio of 83% was slightly above our target range of 70 to 80%, while our infrastructure-only payout ratio of 73% was below our target of less than 100%. Our consolidated metrics are temporarily above our long-term targets, reflecting the impact of a heavy capital program during the first half of 2025 combined with softer marketing results, and is fully aligned with our expectations heading into the year. The majority of our 2025 growth capital projects are now complete, and with line of sight to a more stable marketing environment, we have a clear pathway to having both consolidated leverage and payout back within our target ranges by early 2026. Finally, and in support of our conservative financial profile and our commitment to our investment-grade rating, DVRS has maintained our solid BBB low rating with a stable trend, reaffirming their comfort with our long-term financial plan. With this, I will now pass the call back to Curtis for a few closing remarks.

Thanks, Riley. To close, we are pleased to have ended the first half of 2025 with another solid quarter. We achieved key milestones through the execution of major infrastructure capital projects. We generated strong quarterly infrastructure segment EBITDA, which benefited from the new tanks at Edmonton and increased throughput at Gateway. We delivered improved marketing segment EBITDA. We maintained a strong and sustainable balance sheet. And while infrastructure-adjusted metrics remain within targeted levels, we are cognizant that a consolidated leverage and payout metrics are currently above and have line of sight to both returning within target ranges by early 2026. And finally, we have made considerable advances with respect to the Cactus II connection and the new Duvernay infrastructure as part of our producer partnership, setting us up for a strong second half of the year.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jeremy Tone from JP Morgan Securities, LLC.

Hi, good morning. This is Eli on for Jeremy. Congrats on a strong quarter. Maybe just wanted to start on the progress of commercialization at post-SGT. If you can talk about some of the longer-term growth opportunities you see at Gateway, whether those are vertically integrated, Permian bolt-ons, or what that opportunity set looks like.

Sure, thanks. Good morning, Eli. We're pretty excited about what we're doing right now at Gateway. The dredging just recently completed, and with this Cactus tie-in, you're going to see those benefits being something we're working on over the next few years, really. There's some immediate volume increases that we're seeing, but the big benefits come from us fully utilizing this new capacity and re-contracting customers at higher MVCs in the future, now that we're able to fully load Suezmec's vessels and fill VLCCs to much larger capacity. I think you're going to see us use that over the next few years. There's a lot of wood to chop still to fully realize the benefits we got out of the capital projects we've put in this year. Longer-term, you get pretty excited about what else you can do with Gateway. There's obviously interesting vertical integration options that you can have now that you have this Gateway platform with this type of incredible capability out of Ingleside. We'll watch for that. Even longer-term, we've talked about that as crude exports increase in the US, Ingleside is the most cost-effective place to export crude out of the US. We see a good path to building a third dock at that location as well to facilitate that as exports grow in the US. That's still a number of years out, but that's still a very attractive project, I think, in time for Gibson.

That's helpful. Then maybe shifting over to marketing, I appreciate that there's some push and pull factors that you see progressing through the second half of the year, but maybe just confidence in a turnaround in 26 and understanding what that could look like for the business, what would drive stronger performance next year, and what you guys are seeing now. Thanks.

I think you're seeing a lot of factors all coming together this year that temporarily have our marketing segment pretty muted this year. We're pleased to see the sequential improvement. We're seeing quarter over quarter as things are improving. As you get into 26, I expect that you continue to see that happen, that things do improve, whether that's egress efficiency, refinery crack spreads, or even things like drilling fluid demand. We see some line of sight, the things improving as you get into 26. I still would say that we're still cautiously watching that as it's progressing. It is improving, but it's still a little bit out. Really the marketing business depends on macro impacts. I think we've done quite well to capitalize on macro events. I think as you go forward, you'll see us do that in 26 as well. The one interesting thing in 25 is there's been a lot of macro events that have happened in 25, but because of exceptionally low inventory levels in the basin, some of the impact of those macro events have been fairly muted. It's not that these events have stopped happening. It's just that because of very low inventory levels driven by this very efficient egress currently, you're not seeing the same scale of marketing opportunity. I think as you go forward, you see some of that return to more historical norms that you're going to have a little bit more inventory, you're going to have a little bit more efficiency challenges around egress, and you're going to continue to see macro impacts. I would argue that's something that's going to only increase in time and increase opportunities for the marketing segment.

Then just really quick, one last one if we could. Was there any sort of change in July volumes at Gateway? I think there were some folks looking at seaborne exports data showing a drop. I'm not sure if you're seeing anything there. Sorry.

There's always going to be a little bit of weather-related timing things that will come up for an export terminal, so nothing notable to comment on.

Thank you. One moment for our next question. Our next question comes from the line of Aaron McNeil from TD Cowan.

Hey, morning all. Thanks for taking my questions. Curtis, on Gateway, you disclose the record volumes growth in excess of 20% versus when you acquired the asset on a volume basis, and we're yet to see the impact of Cactus II, so volumes could continue to increase. In that context or in the context of your 15% to 20% EBITDA growth target, do you think we could see Gibson exceed this range or do you think that there's some nuances in terms of why growth at the asset level in terms of volumes may not translate into EBITDA?

More on Aaron. I think so. Volumes, we're already seeing the volumes upticking already today with Cactus tie-in that will help us and you'll see another increase in volume. We have one customer in particular that initially backstopped the connection that will bring additional volume to Gateway, so you'll see a bit of an uptick related to volume. I would say, one, from an EBITDA impact, we feel very good about what we've been messaging that in Q4 that we will meet or exceed the 15% to 20% EBITDA growth rate that we said we were targeting is when we did the Gateway acquisition that we're going to hit that run rate increase by Q4 this year. Feel very good about that. But I would also say that, boy, we would have just got Gateway connected to Cactus II, so we're still pretty early days on fully realizing the benefits of that connection. As you get into Q26, you're going to see us use that in an even bigger way and find additional efficiencies. We'll see what it does on the volume perspective. On the volume side, we're always relying on the activity of our customers, but what we'll find is that there's just a lot more efficiencies that we can drive with additional capacity connections. I think it just drives some good EBITDA opportunities in there and we'll see what it does to volume. I might expect a small uptick in volume with the Cactus connection.

Gotcha. Okay. Then maybe to follow on Eli's question on the marketing outlook, what assumptions do we need to believe in terms of the heavy differential or -1-1 crack spread or inventory levels in order to get to the lower end of the previous guidance range?

I think on the marketing side, one of the big things I would look at is, is there production growth coming in Western Canada? We see that. We're seeing Western Canadian production growth coming at us and that will inevitably lead to some tightening of egress and that will increase marketing opportunities. For us, that's probably one of the big levers. There's a number of different levers in this business that we're able to pull on, but that's one to watch for sure. Thanks, Al, for the back.

Thank you. One moment for our next question. Our next question comes from the line of Robert Hope from Scotia Bank.

Morning, everyone. Appreciate the commentary on the South Texas growth outlook. Maybe moving north on the border, can you give us an update on how the next wave of projects are progressing across the business there?

Morning, Rob. For the growth in Canada, the next wave of projects, the big one right now that's live is the producer partnership agreement with Batec. That's progressing really well and we expect that that will be fully online by the end of Q4. That sets a bit of a template out there that I expect that there's some other interesting projects we can get into and there's also additional phases potentially with Batec that we could get into with that as we get into 26. That's one interesting growth leg in Canada to watch. Just to remind everybody, we love the nature of that agreement and that good guaranteed take or pay long-term agreement on that infrastructure, but importantly, the barrels are driven to our core facilities in Edmonton in this case and just drive additional throughput through our facilities and just a great way to help out our customers as well. We love that type of agreement. We'd be happy to do more of that with Batec and with other producers and so we see some good opportunity around that. Then the second part of the growth in Canada, I think near-term, that I get excited about right now is there's a number of optimization type projects that we've been chipping away at some fairly significant major capital projects at Gibson over the last 18 months. I would argue we've got a bit of a backlog of some of these optimization projects that we've got to get around to. No one of these is that significant that we'll talk about in great detail, but they're typically projects that are anywhere from $1 to $15 million, but good, excellent return projects that also help out our customers and are on the lower end of the five to seven payback range as well. Nice projects to get done that we've got a bit of a backlog that we're working through in engineering and our BD team right now.

Appreciate that. Just in terms of capital allocation, the commentary that the debt deep dial will remain a little bit above target this year, getting back to the range next year. How are you thinking about share buybacks just given the continued mutual outlook for marketing and where the leverage is?

Thanks, Rob. It's Riley here. As we think about capital allocation and share buybacks specifically, they're always going to be executed within the context of our balance sheet. So as we sit here today and look at our leverage profile, we wouldn't expect to be executing any buybacks here in 2025, and it looks like more likely a 2026 buyback program.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Maurice Choi from RBC Capital Markets.

Thank you and good morning, everyone. I just wanted to speak about the five to seven times bill multiple that you have referenced in terms of capital deployment. You've been clear that you're going to be remaining disciplined and I just wanted to highlight that some of your opportunities are at the lower end of that range. Not that you need it, but when you look at M&A, what are some of the must-haves for you to go beyond this five to seven times?

We for sure are focused on the organic opportunities. We see a nice set of opportunities that are in that five to seven build multiple. M&A, though, is something we constantly look at. And so one of the big things that we look at is, is there an integration with our current assets in some way? And so that's important that we look at. So is there a connection? Obviously, crude focus that tie to our current assets are very interesting things we spend time looking at. The other big thing is, I would say, is Gibson has done a phenomenal job over the years to accumulate what I call sort of crown jewel assets. These are truly differentiated assets that are best in class and are integral to the energy story in North America and will be that for the rest of our lifetime. And so those types of assets are often, they cost you something to acquire. And so those are the types of things that we'll look at. And so in the case of Gateway, that was one of those assets. So we looked at it and said, that is an incredible strategic fit that has a long term role to play, a significant role to play in the U.S. energy picture. And we saw the value of stepping above that five to seven build multiple for sure to go acquire that asset. And so it would require things like that, the things that we think are truly additional crown jewels to add to the story that have just that long runway in front of them. With strong contracted cash flows in particular as well.

And just a quick follow up to that, that what consideration is there between an opportunity in Canada versus the U.S.?

Now that we've got this platform on both sides of the border, it's interesting. We had asked this question a lot and I see good opportunity on both sides of the border. The U.S. with the Gateway platform, there's lots of interesting things to do around that. But on the Canadian side of the border, we've been in business in Canada for 70 years. We know this market exceptionally well, have a great footprint and a lot of great relationships to the customers. And so there's good opportunities on both sides. Maybe I'll give you the wish you wish, the answer or that Morris. But I think, so I see it. I think there's good opportunities both on the capital deployment and on the M&A side on both sides of the border.

Great. And just to finish off on marketing, Curtis, I know that on the last Q1 call you suggested that you may reach the low end of the 80 to 120 million dollar marketing guidance next year. Can you reconfirm this outlook or given your comments earlier about the macro as well as the need to see production growth, do you sense that this outlook has materially changed?

I'd say it's constructive that we're seeing that it's sort of quarter over quarter improving. So it gives you confidence that you're tracking towards that. I'd say probably a little bit too early to come out and say confidently it's absolutely back in that range. But we're pleased with how this is tracking and some of the good work being done by our marketing team this year to add additional capabilities to our marketing effort and whether it's at the refinery or some of our U.S. marketing activities that we're doing just to sort of expand the toolbox a little bit. That also gives you some good confidence that we're trending in the right way for that.

Thank you very much.

Thank you. One moment for our next question. Our next question comes from the line of Sam Burwell from Jeffreys.

Good morning, guys. Apologies for another gateway related question, but wondering if we could dig in a little bit more on how you might be able to take share from the existing facilities in Corpus. I understand that you guys have a nicely advantaged position, but just curious, is that a function of existing contracts rolling off or was the lack of connection to Cactus II something that was really holding back? And just curious how quickly any sort of share gains might be able to be realized.

Yeah, when you look at Gateway and you look specifically at Ingleside, Ingleside is just going to win. Ingleside is the most advantaged location to export crude out of the U.S. So you will see consistently more crude moving out to Ingleside. And so you're going to see both ourselves and our neighbor do quite well with that. This is by far the most advantaged location. The bulk of crude exports are exiting the U.S. on VLCCs and Suezmax vessels. This is by far the best location to load those vessels in the U.S. And so you'll see volume continue to shift in that direction. It was really important for us to get the dredging completed and the Cactus connection completed. And so we have sort of all the advantages available to our customers. And then I'd agree with your comment that the other factor is really just time. There is a certain amount of contracts rolling off at other locations and volume being able to shift over to Gateway.

Okay, understood. And then just sort of for the rest of the year, I mean, are there any maintenance items or construction related matters that might influence volumes? I mean, notwithstanding the comment that you already made about sort of normal course of business, months and months volatility, but any sort of data items to call out there?

We're completed all the major turnarounds for the year. So we have a number of tank turnarounds, but those tend to have very minimal impact. So there is there is maintenance work that's going on for the remainder of the year, but nothing that has a material impact on the results.

Got it. Thank you.

Thank you. One moment for our next question. Our next question comes in the line of Patrick Kenny from National Bank Financial.

Thank you. Good morning, everyone. Just hard to see and on the pullback in volumes and I guess overall demand for storage being experienced at the terminal. I know Trans Mountain is mainly to blame here pulling barrels west, but I'm just curious if there might be any other factors at play driving that trend as well. And, you know, how you're thinking about mitigating the impact over the near term and just your overall outlook for hardest to you rebounding to the back half of the year and into 26.

Thanks. Hard to see seven, a very solid year for us, actually. So we're definitely seeing the impact of Trans Mountain and we've been very impressed with the volumes that are in facilities been moving on Trans Mountain. But I'd also say that we've we see our customers in the oil sands with very good projects that are bringing more and more volume online. And so I expect you'll see that impact positively impacting hardest the over the next couple of years. We know we see 600,000 barrels of capacity growth in Canada between now and 28. And I think that's a good chunk of that volume increase is going to come through Gibson facilities and will be a beneficiary of that both in Edmonton and in hardest. The. Also, also in hard to see would note that we just recently welcomed Strathcona into the hardest the rail terminal. So that's that is a great new partner for us in that facility. We're excited about what we can do with that partner on the rail facility. That's still very early days, but that's an interesting positive relationship that we look to grow.

Yeah, and on the customer front, I guess on the potential acquisition of Meg here, you know, depending on how things play out, just wondering if you have any thoughts, Curtis, on what a takeout could mean for your business just in terms of presenting perhaps new commercial opportunities or, you know, on the flip side. If you might need to manage any downside risks associated with a change in ownership.

We're watching that like everybody fat and just curious to see how that plays out. It goes to show that these oil sands assets are very attractive, and I think there's going to be a lot of interest in those assets and just the growth. You look at North America and the most attractive areas of oil growth are clearly the oil sands. And I think that's a great macro story for Gibson. And we're watching how this Meg story plays out as well.

Last one for me, I guess for Riley. So you had the notes mature in July and looks like you just utilized your bank lines for now, but just wonder what the plan is to refile those notes timing wise, whether or not you have any concerns about, you know, what terms you can tap the markets at here over the near term.

Yeah, yeah, thank you. No real concerns about refinancing the notes. We did put them on our revolver for the short term as we had any kind of the summer, the summer months here. We'll look to refinance those in the fall here at the long term notes. So no, no step change in what we're doing on the financing side.

Okay, that's great. I'll leave it there.

Thanks. Thank you. One moment for our next question. Our next question comes from the line of Robert Cotilia from CIBC Capital Markets.

Hi, good morning. I just wanted to go back to the marketing for a second here. Curtis, you touched on the fact that your US assets can contribute over the long term. I'm wondering what you think is possible there. What do you think those US assets can eventually contribute to the marketing business?

Yeah, more than Rob. On the US marketing side where I get most interested in that is I think our customers are craving more supply options at Gateway. And I actually view the marketing business as a key way for us to increase the utilization at Gateway. We move a significant volume to fill VLCCs out of that location. One of the bottlenecks for our customers is being able to get access to the supply they need when they need it. I think we're early days in doing a bit of this, but we're working in helping our customers through our marketing business to help increase and give them access to more supply. I think that's the key thing. There is obviously a marketing EBITDA benefit out of doing that. But I would say more importantly for us is it's a way for us to really provide a service to our customers and increase that utilization even further at Gateway.

Okay, that makes sense. And then I wonder if you could give us your view on the outlook for the Permian. Well, I'm going forward and I think there's some competing views out there, but what are you hearing from the major producers in the area about their plans and how that informs your outlook?

It's interesting to watch, right? You see rate counts and frac spread counts sort of dropping to very low levels. From our perspective, one, Ingleside is the most cost-effective place to export barrels, and so we're not chasing the sort of the incremental Permian production growth barrel to get to Ingleside. And so it's interesting for us to watch what happens in the Permian, but it doesn't impact what Gateway does for volumes. We'll find the most efficient barrels going to market will come through Gateway and regardless of what Permian production does, we're going to have great activity out at Ingleside with Gateway. But when we watch the Permian, I still would have a strong view that the Permian is an incredible resource, and there's a lot of great companies out there, a lot of great resource, a lot of great people in the Permian. I do think it will be muted in the near term, but I'd be a view that the Permian's got a lot of legs left in it still, that there's still some very good growth years to come out of the Permian. But we'll watch that. It's not something that we need for the success of Gateway, but I believe there's a lot more to come still from the Permian.

Okay, maybe finally for Riley. I'm wondering how the Budget Reconciliation Act in the US impacts your US strategy, the cash tax outlook in particular?

Yeah, I know it's a great question. You know, I think as we looked at the one big beautiful bill, we obviously saw some impacts from Section 899. That got pulled from the bill, and so that would have been the major impact to us as Gibson. You know, we do sit back and look at our kind of tax planning strategy for the long term, and we'll be going through that process over the next few months to ensure that we're set up for success in the future.

Okay, thanks everyone.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Our next question comes from the line of Benjamin Pham from BMO.

Hi, thanks, Sagamore. I wanted to go back to your leverage guidance, early 2026 target of hitting that ranges that you have there. Can you comment on what you're assuming in the marketing side of things to achieve that? And then, better question I had on the leverage is once you do reach there, what do you plan or target in terms of being within the portions of the range, or do you eventually plan to be below the ranges over time?

Yeah, thanks, Ben. I think when we think about getting our leverage back down to where we like it within that 3 to 3.5 times in early 2026, that would assume still remaining a pretty muted marketing assumption in there. So that doesn't require marketing getting back to the midpoint of our long term range. In that scenario, we would deleverage quite a bit quicker. So when we think about where our range is at, that we like the 3 to 3.5 times, we think that gives us lots of financial flexibility. I think anything below that is probably a little bit under levered and we'd look to buy back shares at that point. So being within that range gives us lots of flexibility to kind of execute our long term capital allocation priorities. Got

it. And the next question on the growth side, one example of a project to be quite positive on is the third doc. You mentioned perhaps a couple of years out, and you mentioned a couple of smaller projects. So I think about 26, then, do you anticipate that it's going to be more a year of cash harvesting and maybe more of these single-digit projects and something that's larger in terms of sanctioning?

Yep, Ben, just for clarity on the third doc, I'd say the third doc is still more than a couple of years out. I think we're doing some good work on that, on regulatory and things like that to keep that advancing. Realistically, long term for third doc, you need to see that trend on the premium production increasing. You need to see pipes to corpus getting some expansions. So there's a couple of things that we want to see before we're moving forward with that. We'd also like to, we would need a customer backstopping that as well. I wouldn't put that in your model for the next couple of years, but the near term growth, there's a number of these projects. I don't know that I'd go to a sort of cash harvesting sort of strategy for 26. There's a number of good projects we've got in the queue for 26. These producer partnerships are quite interesting. These optimization projects are quite interesting. And then additional tank capacity at, you know, really at a few different locations, there's still things that we're looking hard at for 426. And that, we'll see as we see it depending on timing of customer award, we'll dictate that.

And Claire said, thank you for that context. I also want to clarify the third document, we see it a few years out. Is that more cash generation or is that more FID in a few years and then the cash comes later subsequently?

Yeah, you're going to need to see a premium expansion, corpus pipe expansion before you're at the point of FID. So you're still at least a couple years out, I believe, from an FID situation. So that's just to be clear on that. I think there's a lot of work we're able to do in the near term though to sort of advance the engineering on that and the regulatory side of that so that we're effectively shovel ready on that project as demand comes for that. But that's something we're going to be working out in the background.

Got it. Maybe one final one, if I may, on the cost reduction side of things. You've mentioned potentially exceeding the $25 million. Can you share what portion of that is recurring? And then of that $25 million, is there a portion that flows back to your customers versus the GI shareholder?

So in the $25 million, I'm glad you asked about the $25 million. This is one of my favourite initiatives for the year. We've just seen such tremendous participation across the entire company and in every department in the company, people are really challenging costs and where do we find opportunities. Boy, there's been winds all over the place from eliminating waste to sort of working with our vendors to find better solutions. And now we're moving into the next phase of actually implementing process changes and technology changes and capital projects to drive additional levels of cost savings. So it is one of the big success stories of the year for us. I couldn't be prouder of the team for the great work that people are doing around this. So we feel very confident that we'll be by the end of the year achieving the $25 million of run rate savings. That, when I think about $25 million of run rate savings, I look at that as sort of Gibson run rate savings and there's a mix of DCF and EBITDA impacting things, but those are true savings for us. I also would, I think you're picking up on a good thing as well. I think some of these savings we've found are also in some of our capital projects. So we've thought about different ways of doing some of our capital project execution. We've found some real savings, which I believe going forward provide us with an interesting opportunity for us to increase our competitiveness with our customers, still drive great returns on our projects, but also offer a great low cost solution for our customers as we're developing projects with them. So there is absolutely a customer benefit to this program as well.

Okay, got it.

Thank you.

Thanks.

Thank you. There are no further questions. I would now like to hand the call back to Beth.

Thank you. And thank you for joining us for Gibson Energy's Q2 2025 earnings call. Additional supplementary information is available on our website, gibsonenergy.com. For follow-up questions, please reach out to investor.relations at gibsonenergy.com. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.