Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gibson Energy Inc (GBNXF, Financial) announced the extension of a long-term contract at their Gateway Terminal, underpinned by a high-quality investment-grade counterparty.
- The company sanctioned the Cactus II connection, expected to be in service by Q3 2025, providing access to approximately 700,000 barrels a day of incremental Permian supply.
- Construction of two tanks at the Edmonton terminal is progressing as planned, with completion expected in late 2024, supported by 15-year take-or-pay agreements.
- Gibson Energy Inc (GBNXF) released their 2023 sustainability report, highlighting progress towards their sustainability goals and recognition as one of Alberta's top 80 employers and Canada's best diversity employers for the third year in a row.
- The company reported a strong financial performance with adjusted EBITDA of $159 million and distributable cash flow of $101 million for Q2 2024, driven by the addition of the Gateway Terminal.
Negative Points
- The marketing segment's adjusted EBITDA of approximately $20 million was a $15 million decrease relative to Q2 2023 and a $14 million decrease relative to Q1 2024, driven by fewer storage-based opportunities and tighter heavy differentials.
- The company's leverage of 3.5 times is within the target range but still on the higher end, indicating a need for careful financial management.
- The payout ratio of 63% is below the target range of 70% to 80%, which may indicate a conservative approach but also limits immediate returns to shareholders.
- The timing of the second renegotiation for the Gateway Terminal contract remains uncertain and is dependent on customer decisions.
- Higher finance costs partially offset the benefits of higher infrastructure EBITDA, impacting overall distributable cash flow.
Q & A Highlights
Q: Can you comment on the potential timing of the second renegotiation for Gateway recontracting?
A: Timing is in the customer's hands, but we remain positive that we will execute this agreement in the near term, potentially adding additional volume at the same rates. (Steven Spaulding, CEO)
Q: Does the Cactus II sanction and CapEx change your view on share repurchases towards the end of the year?
A: No, it doesn't. Our capital guide for the year included this, so it has been in the plan and budget for the entire year. (Sean Brown, CFO)
Q: Was there anything unique about the recently extended Gateway contract that would form the basis for future extensions?
A: No, it was executed earlier than anticipated, showing the terminal's strength. Each contract is tailored to our customers. (Steven Spaulding, CEO)
Q: Has there been any appreciable change to your long-term marketing outlook with TMX being placed into service?
A: No, we still expect $80 million to $120 million annually. Opportunities may arise to exceed $20 million per quarter. (Steven Spaulding, CEO)
Q: Can you explain the higher NGL and crude inventory at quarter-end and its impact on the $20 million guidance?
A: The weakening prices in Q3 allowed us to do tank rolls into the quarter, resulting in higher inventory. (Steven Spaulding, CEO)
Q: Is there any update on the waste-to-energy FEED studies and expectations for finalizing the FEED?
A: We continue to progress the FEED, aiming for 100% commercial security. We hope to provide more updates next quarter. (Sean Brown, CFO)
Q: Is there any thought to increasing the payout ratio given the solid financial position post-Gateway?
A: No, we are comfortable with our current payout ratio range of 70%-80% and focus on steady annual dividend growth. (Sean Brown, CFO)
Q: Can you update us on the potential to grow EBITDA in South Texas by 15% without any capital?
A: Growth is expected through adding additional windows and month-to-month contracts, bringing in new customers for long-term contracts. (Steven Spaulding, CEO)
Q: Can you provide an update on the deepening project, its engineering, potential capital cost, and timeline?
A: We are close to understanding the costs. Deepening the terminal will allow us to load more barrels per ship, increasing income. (Steven Spaulding, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
