Release Date: October 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) reported a strong third quarter with an adjusted EBITDA of $151 million, driven by near-record contributions from the Infrastructure segment.
- The construction of two new tanks at the Edmonton Terminal is on schedule, expected to add 870,000 barrels of storage capacity by year-end.
- The company has started work on the Cactus II connection at the Gateway terminal, which will provide access to approximately 700,000 barrels a day of incremental Permian supply by Q3 2025.
- Gibson Energy Inc (GBNXF) maintains a strong financial profile with a leverage ratio of 3.2 times, within their target range, and a payout ratio of 65%, below their target range.
- The company is focused on disciplined growth and maximizing shareholder value, with a commitment to capital allocation priorities, including potential share repurchases.
Negative Points
- The Marketing segment's adjusted EBITDA was $14 million, below guidance and a decrease from the previous year, primarily due to weaker refined products results.
- The refined products segment faced challenges with softer-than-expected drilling fluid demand and tight heavy differentials.
- Gibson Energy Inc (GBNXF) anticipates modest Marketing segment performance in the fourth quarter due to low Western Canadian storage levels and reduced volatility.
- The company's distributable cash flow decreased by $5 million year-over-year and $13 million quarter-over-quarter, impacted by lower marketing results and higher replacement capital expenditures.
- Despite strong infrastructure performance, the company does not foresee buybacks in the fourth quarter unless there is business outperformance, due to current market conditions and financial principles.
Q & A Highlights
Q: Can you speak to the longer-term expectations for the Marketing segment? Are there positive tailwinds in the future?
A: Curtis Philippon, CEO, explained that the Marketing business will have some variability, but they remain comfortable with the long-term guidance of $80 million to $120 million. The Marketing segment is a valuable part of Gibson's portfolio, capable of generating strong earnings, especially during times of market volatility.
Q: What are the expectations for organic growth at the Gateway terminal, and how are you progressing against those opportunities?
A: Curtis Philippon, CEO, stated that there is a 15% to 20% upside opportunity for Gateway through both capital and non-capital improvements. He is optimistic about these opportunities and finds them actionable, with progress being made.
Q: What impactful changes have you made in your first 60 days as CEO, and what are your plans for the next 60 days?
A: Curtis Philippon, CEO, focused on understanding the business and its people, emphasizing the importance of having the right team. He initiated a return to office policy to enhance company culture. Looking forward, he aims to explore growth opportunities around existing assets and ensure the organization is set up for success.
Q: Could you elaborate on the energy transition strategy and potential growth opportunities outside of crude oil infrastructure?
A: Curtis Philippon, CEO, mentioned that while energy transition projects are part of their strategy, they must meet the same infrastructure fundamentals and compelling returns as other projects. He sees interesting growth opportunities around the current asset base and is exploring potential new platforms for growth, including energy transition projects.
Q: What gives you confidence in maintaining the $80 million to $120 million range for the Marketing segment, given recent market changes?
A: Sean Brown, CFO, noted that the crude marketing business performed as expected, providing confidence in the long-term guidance. The budgeting process supports the view that the $80 million to $120 million range remains valid, despite some structural market shifts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
