Keyera Corp.

Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the CAERS 2024 first quarter conference call. Note that all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. And if you would like to withdraw from the question queue, please press star followed by two. And I would like to turn the call over to Calvin Locke, Manager of Investor Relations. You may begin.

Thank you, and good morning. Joining me today will be Dean Setaguchi, President and CEO, Eileen Maricarp, Senior Vice President and CFO, Jamie Urquhart, Senior Vice President and Chief Commercial Officer, and Jared Bisvilny, Senior Vice President, Operations and Engineering. We will begin with some prepared remarks from Dean and Eileen, after which we will open the call to questions. I would like to remind listeners that some of the comments and answers we will be giving today relate to future events. These forward-looking statements are given as of today's date and reflect events or outcomes that management currently expects. In addition, we will refer to some non-GAAP financial measures. For additional information on non-GAAP measures, and forward-looking statements, please refer to Kiara's public filings available on CDAR and on our website. With that, I'll turn the call over to Dean. Thanks, Calvin, and good morning, everyone.

We've carried the positive momentum from last year to 2024, leveraging the strategic advantages of our integrated value chain to drive solid performance across all three business segments. We continue to see the growth in high-quality fee-for-service cash flows and remain on track to reach the upper end of our 6% to 7% EBITDA growth target out to 2025. Our liquids infrastructure segment delivered a fifth consecutive quarterly record for realized margin, reaching $137 million. Driving this performance was the continued ramp-up of long-term contracted volumes on caps and growing demand for our fractionation, storage, and condensate businesses. Our gathering processing segment delivered its second highest quarter ever, with $104 million in realized margin. This includes the first full quarter of contributions from the Pipestone gas plant expansion. This segment has undergone a significant transformation. In 2017, over 70% of our GMP realized margin came from our South Region gas plants. Today, more than 70% comes from our three north region gas plants. Over this time period, our GNP realized margin has grown by more than 40%. Producer economics in the north are driven by higher condensate content, making them less sensitive to natural gas pricing. Our north region also has longer contract durations with strong counterparties and a high degree of taker pay. The growth we're delivering in our fee-for-service business segments is driving high-quality cash flows, which supports sustainable dividend growth. Our marketing statement continues to perform well, generating $114 million in realized margin in the quarter. On a four-year basis, we now expect marketing to deliver between $430 and $470 million of realized margin. This includes the impact of a six-week outage at AEF, which is now complete. This significant increase is mostly due to the expected strength of our iso-octane business. Our marketing segment continues to provide Kiera with a distinct competitive advantage. Strong cash flows from this segment have enabled us to consistently deliver above average after-tax corporate returns. These cash flows are then reinvested into long life infrastructure projects, in turn driving growth and high quality fee for service cash flows. We expect to generate significant free cash flow in 2024 as we continue to benefit from investments made in prior years. Our capital allocation priorities have not changed and remain grounded in a long history of disciplined financial management. Our balance sheet is strong, allowing us to further create value through increasing returns to shareholders and investing in capital-efficient growth opportunities. These opportunities will leverage and enhance our existing core asset position in Western Canada. They include a Fracti bottleneck, a new factory expansion, and a CAPS Zone 4 extension. To move ahead, these projects will need to generate a strong return supported by long-term contracts. I'll now turn over to Eileen, who will provide an overview of our financial performance for the quarter and touch on our revised guidance for 2024.

Thanks, Dean. Adjusted EBITDA for the quarter was $314 million, compared to $292 million for the same period last year. This result includes another record contribution from our liquids infrastructure segment, and continued strong performance from our gathering and processing and marketing segments. Distributable cash flow was $205 million or $0.90 per share compared to $227 million or $0.99 per share for the same period in 2023. Net earnings were $71 million compared to $138 million for the same period last year. The decrease was due to an unrealized non-cash loss on risk management contracts. higher financing costs and depreciation expense. CARE continues to maintain a strong financial position, exiting the quarter with net debt to adjust EBITDA at 2.2 times, below our targeted range of 2.5 to 3 times. This positions us well to self-fund organic growth opportunities that will further strengthen our business and continue to drive shareholder value. Moving on to our guidance for 2024. As Dean mentioned, we now expect our marketing segment to contribute between 430 million and 470 million of realized margin in 2024. This is up from our previous base annual guidance of 310 million to 350 million. This increase reflects the continued strength of our iso-octane business. Due to the increase in expected marketing contributions, cash taxes are now expected to range between $85 million and $95 million. This is up from $45 million to $55 million previously. Growth capital for 2024 remains unchanged at $80 million to $100 million. A reminder that this includes $20 million to $40 million of capital that is contingent on sanctioning of Capstone IV and advancing opportunities at KFS. Maintenance capital remains unchanged at $90 million to $110 million. I'll now turn it back to Dean.

Thanks, Eileen. The long-term outlook for volume growth in the basin remains strong. This growth will be supported by key developments, including TMX expansion, LNG Canada, a growing petrochemical industry, and increasing NGL exports. With strategically placed assets, Kiera remains well-positioned to help enable this growth. On behalf of Kiera's Board of Directors and management team, I want to thank our employees, customers, shareholders, Indigenous rights holders, and other stakeholders for their continued support. With that, I'll turn it back to the operator for Q&A.

Thank you. Ladies and gentlemen, as stated, if you would like to ask a question, 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're using a speakerphone, you will need to lift the handset first before pressing any keys. Please go ahead and press star 1 now if you have any questions. Your first question will be from Robert Hope at Scotiabank. Please go ahead.

Good morning. Thanks very much. This is Jess Coyle on behalf of Rob Hope. So thanks for taking my question. To start, just conceptually, how do you think about what to do without performance on marketing cash flows? Can they be attributed to share buybacks, or are you thinking about it in terms of pre-funding some future unsecured growth?

Good morning, and your voice sounds much better than Rob's.

I'm just kidding. Listen, that's a great question. What we've always said is that our marketing performance and margins that we generate there is the competitive strength of our company. And really, it's like a free equity offering. So we have this excess cash flow that we're able to reinvest either back in our business to create more value, more efficient service for our customers, but also a long-term cash flow stream that's usually backed by, you know, taker pays and fee-for-service cash flows, which helps drive future dividend growth. But we also have the option to buy back shares if we – choose to do so. So having that optionality with strong marketing margins is a great advantage for us. Eileen, is there anything you want to add?

No, other than I think we're well aware we can add shareholder value by reinvesting in the business and through buybacks. They do remain an option, as Dean mentioned, and we certainly understand the compelling value proposition. They can be activated very easily at any time. And, you know, at this point, as Dean mentioned, you know, we believe we have opportunities that can deliver even better value for shareholders.

Great. Thanks for that. And then just looking at some of your future growth opportunities, can you give an update in terms of where you stand on, let's say, Zone 4 or FRAC expansion in terms of contracting discussions and timing, things like that?

Yeah, well, that's also a great question. I'll turn that over to Jamie in just a minute. But what I'd say is that, you know, we see tremendous growth in our basin out to the end of the decade. I think it's tremendously exciting that, again, TMX is in service and also we'll see Coastal GasLink and LNG Canada come into service in the next 12 months or so. So, you know, that's going to unlock a lot of growth in the basin. And with that growth, we have a lot of critical basin infrastructure that helps to enable the growth. So that creates a lot of opportunities for us in terms of investment opportunities. And I'd say that App Zone 4 and FRAC expansions are part of those opportunities. So I'll just turn it over to Jamie and let him add to that as well.

Yeah. From a Zone 4 perspective, you know, just to remind everybody, the B.C. Mountain is home to, you know, a large-scale world-class resource, you know, that has decades of run room in that resource. So, you know, the conversations that we're having all along the CAPS fairway, but also, you know, along Zone 4 and ultimately, you know, into B.C., where we'd be looking for a North Rivers project to ultimately potentially deliver some volumes into CAPS. Those conversations are gaining momentum and we're extremely optimistic with respect to our ability to be able to get sufficient volumes to sanction that project sometime in in 2024. Now, having said that, and we'll always reinforce this, is that, you know, we have to have sufficient backstopping from our customers in order to proceed with those projects. It's not a philosophy of ours to build it and they will come. So, you know, once again, very constructive, meaningful conversations happening along, you know, Zone 4 and into Northeast BC. From a FRAC perspective, I would characteristic is, you know, extremely constructive conversations. I think everybody's aware that frac capacity is very tight right now. And as we've mentioned in the past, we've got a couple of ways to be able to enable growth in our Kiera Fort, Saskatchewan facility. So the first being the de-bottleneck of frac two, you know, this allows us to leverage our existing equipment in a very capital efficient way. So, As we're positioning ourselves for that project, we look probably to be able to order long lead items towards the back end of this year with a targeted service date of 2026 for that project. Then on Fract 3, this would be a new build on our existing KFS lands. We're advancing feed as we previously communicated and given recent discussions with customers, we are gaining more and more confidence that we'll be moving ahead with that project as well. It's important that it's not an either-or. If we have the right level of support, we'll be proceeding with both those projects. But to reinforce, we need the appropriate customer underpinning in order to do so.

Thanks very much. Thank you. Next question will be from Robert Kwan at RBC. Please go ahead.

Great. Good morning. If I can just start with your approach to new investments just off the back of some of those comments on specific projects. So you talked about long term contracts. You talked about wanting strong returns. And I think on prior calls, you said you want to be at the upper end or even above the high end of that 10 to 15 percent pre-tax range. So if you can just confirm that, but also just. How are you thinking about managing the capital cost side? Because that's obviously the other component of returns. How do you manage that going forward? What would you do differently than what you did on CAPS?

Well, good morning, Robert. And lots of good questions there. First of all, with our integrated system now with CAPS, we see opportunities to invest in growth projects all across our value chain. And again, that's to accommodate a lot of growth that we see happening in the basin, supported by sort of the global macro views, but also discussions with our customers. So I think it's exciting times for our company as we look forward. And so any new infrastructure project, we wanna make sure that we have sufficient backing from a contractual perspective to support a strong return. And on a standalone basis, we do view that as the higher end of that 10 to 15% return on capital range. And knowing that we're going to have an opportunity to bundle our services together to generate a much higher return at an enterprise level. So that's the value of our integrated platform. It's providing a a very efficient value-added service to our customers. And at the same time, when we create more value providing those services, it creates value for our shareholders as well. In terms of managing the capital cost side of it, certainly contractually, we always like to try to build in provisions to try to mitigate our exposure on that front. But that will depend on the type of asset and what we're looking at. But I know that Jared and his group, they're also doing a lot of work and making sure that we have a high level of confidence in anything that we go to execute. And with that, maybe I'll just turn it over to Jared to add to that comment.

Yeah, I think what I'd add, I mean, CAPS in particular was a great learning experience for us. And, you know, when we think about capital management, it's that whole life cycle of a project from development through execution and all the way to commissioning and startup. And it's really, regardless of the project, it's about identification and characterization of risks. and really doing the appropriate work at the front end to understand what those risks are and be able to mitigate that throughout that execution cycle.

Great. Thanks for that. If I can also just ask, you know, some of the upside, you focused a little bit of the earlier comments on gas and gas liquids, but just with Trans Mountain's expansion coming in, your condensate system and an expectation that volumes are going to grow through the end of the decade to fill all of the pipes. What's the latent capacity in your existing system? And then are there any bottlenecks where you would foresee needing to allocate capital as oil production grows?

Yeah, sure. I'll turn that over to Jamie in just a minute. But Robert, we're extremely excited about both export pipelines to the west coast and obviously tmx is a big part of that and you know we have a lot of services that we provide to the oil sands and you know we do have really the the market hub for diluent in in edmonton with our our pipeline system and and all the receipt points to receive condensate and also deliver to the oil sands uh we have a working interest in the norlight pipeline which has more capacity that we can continue to work with ambridge to fill that We have storage services that we provide on a long-term basis, and that's been a great business. We have 50% ownership in the baseline tank terminal. So that is very well connected to all the tankage and the connections that go into TMX. So there's a lot of services that we provide the oil sands that we think are going to benefit from more growth in oil, largely from the oil sands. But also keep in mind that that growth in oil sands, bitumen production is going to drive more condensate demand, which also supports our GDP business and all the developments that we see along the fairway where we have three gas plants in our northern GDP system. So they're all linked together, and we think that's going to be a huge tailwind for our business going forward. But Jamie, anything else you want to add?

Yeah, I guess the only thing I'd add, Dean, and it's a great question, Robert, is that, you know, as Dean alluded to, is that our condensate system has all the major supply and demand pipelines flowing into and out of it. And it's a very dynamic system. So depending on where that supply is coming from and where that demand is being pulled off of our system, you know, you know, will be really imperative to deciding, you know, if we do need to de-bottleneck our system. Now, having said that, we've done a ton of work where we don't envision that there's going to be significant capital required to manage the growth that's been publicly stated most recently around growth within the oil sands and ultimately the condensate demand that goes along with it.

Is there any way to quantify, just say for every incremental 100,000 barrels a day of of oil sand production, what that might mean to you in terms of, you know, millions of dollars of margin.

Yeah, I think that would be tough for us to quantify, I guess, at this point. Okay, thank you very much. It is a tailwind for us. Yeah, thank you. Okay, thanks.

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

Okay, good morning. Thanks for the updates. I'm just wondering, with the two frac units at KFS fully utilized, what's the biggest factor for a frac expansion? What are the biggest pushbacks from the customers in reaching those contracts you need before FID?

Good morning, Rob. And, yeah, good question on the fracs.

I mean, as Jamie said, frac capacity in KFS in Alberta and especially in the hub in Fort Saskatchewan is super, super tight right now. And again, when you just look at the volume outlook of growth in our basin, there's just going to be more demand for all the liquids that get extracted from the natural gas that's going to be produced. So, you know, producers are seeing that this is a bottleneck and so this is why you know, we're having meaningful discussions in terms of, you know, contracting up for more capacity to help back the investments in the bottleneck and also in the factory that Jamie talked about. But Jamie, anything else you want to add?

Yeah, I would just add, Rob, that it's not pushback from our customers. It's really around mostly just marrying timing, right? Like, I mean, The acquisition that we did from Plains for the 21% that we did back in late 22 was really instrumental to being able to really offer our customers some, you know, some frack capacity in the near term that then bridge them to a longer term deal. But also, as we think about people's growth in the basin, How do we marry the timing that they're going to need that FRAC capacity with when we're going to be able to provide that? But it's really not pushback with respect to a need for the service. It's just really marrying the timing.

Yeah, maybe just adding one more thing, Rob. The great thing, too, with CAPS is that we're bundling a lot of our services together. So it's not just FRAC that we're talking to our customers about. It's CAPS in a lot of cases. It's also the GMP marketing services as well. Again, it's a great opportunity for us as we see the basin grow.

Okay, that's helpful. You had some very robust marketing guidance this morning. The MD&A mentions more stringent fuel standards supporting demand. Is that new from last year, the fuel stringency standards?

Yeah, you know what? The one great thing about us is that we have a really great product with our iso-octane. But, you know, Jamie, let's turn it over to you to answer that.

Yeah, Robert, this has been sort of evolving over time, and we're starting to see more and more states down in the U.S. sort of evolve and ultimately adopt these type of standards. So, you know, what I can share is that Every year, our market share in these what we call advantage markets continues to grow. And it's because people are introduced to our product. And as Dean says, once you get introduced to our product, we've never not had a return or repeat customer.

We always joke around and say we should deliver one rail car of it to every refinery that can take it by rail. And they'll be a return customer for life because the product is that good.

Okay, maybe a couple of quick ones for Eileen. What do you think the best option is for your significant free cash flow generation right now, given that you have the strong balance sheet, relative lack of near-term maturities, but also potentially some growth projects ahead of you?

Thanks, Robert. Yeah, excellent question. We are certainly in a great position when it comes to the balance sheet. It's an enviable position, I'd say. So certainly no need to allocate cash on the debt side. Dividend growth, that's another thing that's obviously very important to us. We're proud of that long history and want to ensure that we grow it sustainably. And so that's always tied and underpinned by the growth in our fee-for-service cash flows. And as I said earlier, it's really then adding shareholder value either through growth and or through buybacks. I think, as I said earlier, buybacks are an option. They can be easily activated when we feel that it's appropriate. It's just that right now we see some really strong opportunities that can deliver even better shareholder value.

Okay, and then last one for me. Understanding that the increase in the marketing guidance attracts a fair amount of cash taxes, do you see any, I won't call them easy, but any near-term opportunities to improve the conversion of EBITDA to FFO?

Yeah, on the tax side, I mean, last year we brought on caps and we acquired the additional working interest in KFF. That added significant tax pools, right? But we delivered record earnings last year and we are set to deliver another strong marketing year this year. So we have significantly accelerated the use of tax pools. So I think this is a good problem to have as we're making a lot of money. It's just important to think managing taxes go forward. It's just another reason why reinvesting in the business in strategic high-return projects is important.

Okay, thank you.

Thank you. Next question will be from Ben Pham at BMO. Please go ahead.

Hi, good morning. Thanks for the update. Maybe on your marketing guidance, you have the 2024 numbers out. And I guess if you adjust for the outage, it's a high $400 million business this year. Can you talk about then, I'm just looking at some of your, reading your assumptions again for your base marketing guidance. And it looks like some of those trends there in your base, you're benefiting modestly from that. Can you talk about a scenario next year, not specifically guidance, but what outcomes or factors could actually get marketing down to that low $300 million range?

Morning, Ben. Thanks for your question. Maybe I'll turn it over to Jamie and he can speak more to our marketing business.

Yeah, Ben, so I think if I understand your question properly, is what outcomes, negative outcomes, could have us be down to our base long-term guidance? And just a reminder of what assumptions are driven around that base long-term guidance, and that's obviously having our facilities run at or near capacity, you know, being able to source butane at or around historic averages, and And some assumptions around WTI in particular. So, you know, those are things that obviously, you know, if commodity prices change materially, that's obviously going to have an impact on our business. And I'll remind you that we hedge, we have a very disciplined hedge program within our organization. And when we did see the significant commodity price shocks back during COVID, we still had very, very strong results. And so, you know, I just, I think as... As we look at our base guidance, it's something that we put out based on a very high level of confidence that we're going to meet long term. In the next while, certainly we've got a lot of positive things that are developing in our business. But beyond that, I think that's about as much color as I can provide. Ben, maybe I just add two points to reinforce what

One is the outlook for our iso-octane business remains very strong, and those are all the points that Jamie spoke to earlier. It's a very high-quality product, and the three main qualities of it that make it valuable, it's high octane, 100 octane, it's low sulfur, and it's low RVP. A lot of the competing products for iso-octane may have one or two of those qualities, but not all three of them. That's what creates a lot of demand for what we have. So I'll look for that, remain strong. I'd say second of all is that our marketing business is really a logistics business. And because of all the connections and connectivity that we have, our logistics expertise and our marketing expertise, we're able to, you know, connect products to the highest value markets and make a margin doing that. So, you know, the more barrel as our system grows and the more barrels that we touch, it helps us enable, you know, that strong marketing result as well.

Yeah, thanks for that. And maybe just to continue on it a little bit and unpack some of the base guidance. You have butane costs to long-term average, but it looks like you're only slightly benefiting from that this year from your disclosures. And then WTI is $65 to $75. WTI is a little bit above that. So is it other, I guess I'm trying to get at it, I mean, there must be really something else that's really driving just such a huge uplift in marketing. Is it the premiums in this octane that is different from the base? Is it condensate, propane exports? I mean, is it just such a premium with a difference in the base?

Yeah, I mean, you're absolutely right.

The octane premiums are very strong. So that's not something that is published like RBOB and not tradable. So it's more negotiated. But if you go to the gas pumps and you see the difference between 89 to a 91 octane spec, you can just look at how much extra you have to pay for each point of octane, which is pretty high right now. So that's a good indicator of where our premiums are. And they are very high, certainly at the top end of what we've seen over the last five to seven years. So that's been a big boost. But again, as the volumes in the basin grows, we're a supply-based basin and those barrels have to clear somewhere. So because of our system and our logistics capabilities, we're able to capitalize on that service of finding markets for those NGLs. So that's also been a big driver as well.

Okay, got it. And maybe you can update us on your hydrogen opportunity with the federal government recently confirming commitment or strategy there and support. Maybe talk about progress of late. How do you plan to fund maybe a potentially larger project? And do you think it's going to be more of a demand-driven market or more of an export market?

Well, what we see a pretty big opportunity for, potential for at least, is ammonia. And there are several industrial players in the industrial heartland that are sort of advancing some projects. I would say that still relatively early days on that. But there seems to be demand in Asia, especially in Japan, you know, because they do want to lower their emissions footprint with some of their coal production. So, you know, some of the things that we're looking at is a rail, a unit train rail terminal, and we're working on that with CN Rail. We do have a very large tract of undeveloped land, 1,300 acres of land that's industrial zoned and very, very well connected from a pipeline perspective, very close to, you know, a time to do carbon production carbon sequestration, so a carbon delivery line. So we're trying to work with industrial players in the area, plus also work with potential companies to develop on our own lands opportunities like ammonia or other products. But I'd still say it's still very early stages, and a lot of it is going to be driven by government policy. Okay, got it. Thank you. Thank you.

Next question will be from Cole Pereira at Stifel. Please go ahead.

Hi, good morning all. As we think about the 2024 CapEx plan, you gave some good colour on capital priorities. Realise some of your growth CapEx is contingent on FIDing these projects, but could that get flexed higher depending on when and if you FID those projects, or is it pretty locked in for this year regardless of timing?

Yeah. Eileen, you want to speak to that?

Yes. I would say that, you know, assuming we can get those other projects that we talked about, Zone 4, Fractal Bottleneck, et cetera, that that is built into that $80 to $100 million. And I feel pretty good that it wouldn't go higher than that for 2024.

A lot of the capital associated with those projects would be in future years, like 2025 and 2026.

So, you know, if we continue to advance, you know, the authority factor into the numbers is, I think, set.

Okay, great. That's good color. Thanks. And then thinking about some of the volume headwinds in the south region, should we essentially just think about those recovering in line with natural gas prices?

Yeah, that's a very good point. And, you know, I think people sometimes get fixated too much on the spot price of natural gas at this second. When you look at the broader fundamentals and what's happening with coastal gasoline coming into service, more inter-Alberta demand, coal-to-gas switching, and more capacity into the U.S., we think that this is a temporary situation. The demand for LNG continues to grow globally, so we certainly believe once we get past the next couple of quarters that we're going to see better days for natural gas, but Maybe just specifically on what we see in activity, I can turn that over to Jamie.

Yeah, so Cole, yeah, it's a great question and good observation is that, you know, we have seen some shut-ins in the south in particular. You know, Dean's identified the north is driven around Constate, so we've seen nothing but growth and people putting money into the drill bit. But, you know, there's some really exciting stuff going on in our south assets as well. And, you know, I'm sure everybody's seen a couple of recent announcements, which are very exciting around the Duvernay area. in the south behind our Rimbey gas plant. And just, you know, it's maybe not as, you know, from a granularity perspective, but those DuVernay plays are very high in ethane and natural gas liquids. And to remind everybody, our Rimbey gas plant has a deethanizer and a pipeline connection to eggs, and we have a deep cut at that facility. As we see the evolution of that play, we look at Rimbey and it's just naturally suited to be the landing spot for the associated gas with that play. But that play is driven off of liquids. It's a light oil or a heavy condensate play that, similar to the North, will be driven off of WTI pricing. And, you know, we look to, as we're talking to those producers, we'll be looking to put some term and some take-or-pay provisions on those contracts, obviously, as we look at Rimby being, you know, and the frack at Rimby being really a highly demand-driven sort of offering. And then around Strachan, we're seeing a lot of development in the deep basin as well. And those plays are very high liquids rich as well and remind you that we have a deep gut at the Strachan gas plant as well. So I look at the South having a very meaningful role to play in NGL growth within our organization and ultimately the connectivity that we have up to either the Rimby frack, which is a 28,000 barrel day frack, which is full, or then seeing some gas getting or NGLs getting ultimately forced up through our Rimby pipeline and up to KFS.

And maybe just to add to Jamie's comment, you know, at RIMBY in particular, we have a lot of unutilized capacity. So that's a 400 million a day facility, triple expander facility, and right now it's only running at about half of capacity. So we think this is a tremendous opportunity for us.

Okay, perfect. That's a great caller. Thanks. I'll turn it back. Thank you.

As a reminder, ladies and gentlemen, you will need to press star one should you have a question. Next is Linda Ezegelis at TD Cowan. Please go ahead.

Thank you. Recognizing that cash tax planning is complicated at the best of times, I'm wondering if you could help us understand kind of the rate at which you might be able to draw down your $3.3 billion of tax pools and also how potentially additional acquisitions might contribute to bolstering your cash tax outlook?

Great question, Linda. I'll turn that over to Eileen in just a minute. As she said earlier, this is a product of having very strong results. When we generate a lot of money, unfortunately, we have to pay more taxes over time. You know, I do want to just say maybe a comment on M&A is that, you know, we do see that there is potential opportunities out there, but we'll be very disciplined and it'll be driven by, you know, it's got to be on strategy. You know, it has to be within our financial framework in terms of managing our balance sheet and it's got to be value created to our shareholders. So, you know, I know you know this already, but we'd never do anything just for taxes, but that could be a, an added benefit, I guess, if we're able to find something that fits within that criteria. But, Alina, I'll turn it over to you.

Sure. Excellent question, Linda. I wish there were a magic bullet for the taxes. But, you know, as Dean said, whenever we're, we do have pools, but it depends on the type of pool. So things like pipelines, they have much lower CCA deduction rates, especially like a condensate pipeline. Things like GMP facilities or FRAC, Those have very, very good tax tools. They're more at the 25% rate. So those are the types of things that can certainly help to manage the taxes going forward. And to Dean's point, I just want to reiterate, you know, again, whatever we do, project or acquisition needs to be strategic and then, you know, fit within our financial framework.

Okay, maybe, thank you. Maybe this is a follow-up question for Dean. Now that you own significant strategic pipe caps, can you comment on your interest in further integrating value chain by potentially looking at buying pipes in the future optimistically, whether it be an interest in Trans Mountain or something else, and also kind of what might prompt consideration of a significant, another greenfield build of whatever product type.

Thanks for the question, Linda. You know what, I think that, you know, first of all, what our goal is, is we want to provide the best value-added service for our customer. you know, when we see opportunities, we're always trying to make our system better so we can offer that, you know, the most competitive service. And that's going to create opportunities now that we have integrated systems. So I could see us potentially building more gas plants in the future and could be greenfield or it could be expansions of our existing sites that we have. You know, certainly, you know, on the frack side of it or when we add more storage, We'll have to likely build that. I'm not sure that there'd be a lot of opportunities to buy anything there. But, you know, so that'll be more of a brownfield type expansion. We also like, you know, trying to expand our system on the downstream side to access end markets. So, you know, if there is a requirement to maybe build a pipeline to the oil sands for solvent or things like that, we would be certainly interested in it. Big projects like TMX, that doesn't really have a lot of synergies with our existing business, so that wouldn't have a lot of appeal to us. To sum it all up, it has to be really on strategy. It has to really make our system better and our ability to have a better value proposition for our customers. You know, we're not specifically targeting pipes, but certainly there could be some opportunities where some pipes would make some sense with our system.

Thank you.

Thank you.

Thank you. And at this time, we have no other questions registered. Please proceed.

Thank you all once again for joining us today. Please feel free to reach out to our investor relations team with any additional questions. Thank you.

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