USD Partners LP
Q1 2017 Earnings Call Transcript

Published: 7 May 2017

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the USD Partners LP First Quarter 2017 Results Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Ashley Means, Director of Finance and Investor Relations for opening remarks. Please go ahead.

[Ashley Means:]

Good morning, and thank you for joining us. Welcome to our first quarter 2017 earnings call. With me today are Dan Borgen our Chief Executive Officer; Adam Altsuler, our Chief Financial Officer; Brad Sanders, our Chief Commercial Officer; as well as several others members of our senior management team. Yesterday evening, we issued a press release announcing results for the 3 months ended March 31, 2017. If you would like a copy of the press release, you can find one on our website at usdpartners.com. Before Dan and Adam proceed with the prepared remarks, please note that the safe harbor disclosure statement regarding forward-looking statements and last night's press release applies to the statements of management on this call. Also please note that information presented on today's call speaks only as of today, May 4, 2017. Any time-sensitive information provided may no longer be accurate at the time of any webcast replay or reading of the transcript. Finally, today's call will include discussion of non-GAAP financial measures. Please see last night's press release for reconciliations to the most comparable GAAP financial measures. And with that, I'll turn the call over to Dan Borgen.

[Dan Borgen:]

Thank you, Ashley. Good morning, everybody, and as always, thanks for joining us. We're happy to be here today to report on results of the business and the progress we are making on various commercial fronts. The macro continues to point in our favor, as you all have obviously read, and we're continuing to be very bullish about the prospects of our business. We're going to do things a little different today, I hope you don't mind and would love to hear your feedback on it. But Adam's going to start us off and go over the highlights of the quarter. Then I'd like to give a few comments and thoughts on recent industry developments and address a few of the commonly discussed topics and maybe questions that aren't asked. We'll try to ask them ourselves and try to have an effective way of communicating what we feel like the answers are to some of those, and responses. And we really appreciate you all letting us know how this works for you. And with that, I'll turn it over to Adam and let him go over the last of the scripted remarks, so.

[Adam Altsuler:]

Thank you, Dan. And thanks for joining us on the call this morning. For the first quarter, we reported net cash provided by operating activities of $12.8 million, adjusted EBITDA of $15.4 million and distributable cash flow of $12.3 million. Our results reflect the stable and predictable nature of our cash flows from primarily investment grade customers, with approximately 95% of our adjusted EBITDA before corporate expenses generated from take-or-pay contracts. For the first quarter of 2017 relative to the first quarter of 2016, net cash provided by operating activities increased by 39%, while adjusted EBITDA and distributable cash flow increased by 7% and 12%, respectively. These increases were primarily driven by a reduction in operating expenses due to one-time costs associated with the integration of the Casper terminal during the first quarter of '16 and were partially offset by higher interest expense associated with the Partnership’s revolving credit facility. Distributable cash flow for the first quarter of 2017 also benefited from an approximate $1.1 million decrease in cash paid for income taxes, primarily due to the receipt of the remaining cash refund, which is approximately CAD 860,000, as well as lower Canadian income taxes paid during the quarter. Net income, which increased 142% relative to the first quarter of 2016, also benefited from additional Terminalling services revenue due to the recognition of greater amounts of previously deferred revenues in the current period as compared to the prior year. Additionally, the value of the Canadian dollar relative to the U.S. dollar strengthened to a lesser extent during the quarter as compared to the first quarter of 2016, which resulted in smaller non-cash losses from changes in fair value of the Partnerships derivative instruments. On April 27, the Partnership declared a quarterly cash distribution of $0.335 per unit or $1.34 per unit on an annualized basis, which represents growth of 1.5% relative to the fourth quarter of 2016 and 8.9% relative to the first quarter of 2016. The distribution is payable on May 12, to unitholders of record as of the close of business on May 8. During the first quarter, the Partnership repaid all amounts previously outstanding on its Canadian term loan facility. As a result, the Partnerships revolving credit facility comprises the full $400 million of capacity under its credit agreement, subject to limits set forth therein. As of March 31, the Partnership had total available liquidity of approximately 192 million, including 4.2 million of unrestricted cash and cash equivalents and undrawn borrowed capacity of $188 million on its $400 million senior secured credit facility, subject to continued compliance with financial covenants. The Partnership is in compliance with its financial covenants and has no maturities under its senior secured credit facility until October 2019. And with that, I will turn the call back over to Dan.

[Dan Borgen:]

Thank you, Adam. Appreciate it. All right, now, we're going to go to more of an informal kind of Q&A here. And so what I'll do is I'm going to just through some of the topics. We'll try to answer -- you'll hear from as many of us as can comment on it, and then we'll finish up at the end with some Q&A. And I'll give a few closing comments as we close the meeting. So again, thanks for being here. Let's talk about recent industry activity, so recent events in Western Canada, some announcements of consolidation. You've seen the announcements by Suncor, CNRL, Cenovus and others up there. So what does that mean? Is that good for the Partnership? Not good for the Partnership? What does that look like? Our view is, and in talking with -- many of these are our customers, so we have a good opportunity to talk with them. We now have a situation where some of these were partnerships, Joint Ventures, we now have owned in strong hands, single ownership and investment grade hands, we're increasing their ownership in the oil sands in Western Canada. We think that this is very positive because now, this is their primary focus. They don't have Permian. They don't have other areas that they're looking at outside of Canada for the most part. They are strictly focused on developing this significant resource that they have and significant asset base. So we think that that's very positive. We think that there will be more production than has been contemplated to date. They're not carrying along a partner that was distracted with other capital projects. They now have a very renewed focus. And quite frankly, a fresh spend that they need to return on. They're going to return on that, obviously, by synergistic benefits, lowering their cost in the field, as they've been able to prove and do and also, to be able to grow and add additional reserves by production. So I think that's exciting for us, and I think it just further proves the point that folks are doubling down up there in strong, strong hands. The additional thing is syncrude fire. What's happened up there relative to in-plant fires and different things like that? So obviously, it's a supply, inventory, production type of model. So you get production, production goes into inventory, you sell out of inventory into the market. If you're down on the production side, you've got, what's going to happen? You're going to continue to sell produce out of inventory. So then when you start coming back online, you're going to fill inventory back. So that has a potential delay in an oversupplied market in that localized area. Not, it doesn't disappear. It's simply a short delay. As you've seen announcements in the press recently, that has restarted and looks to be running in excess of 140,000 barrels a day today. And they look to ramp up to full production sometime early June to mid-June. So we're still very confident in the upcoming demand cycle that we've been talking about, and that's been more commonly reported now across the board, both in Canada and here in the U.S. by distinguished sources. So we continue to feel very bullish. I know we've been a bit alone on that coming out of the gate 2 years ago, talking about the demand story in Canada. But it's real. It's happening. We're seeing it. And it's being confirmed in the market. Brad, do you have any other thoughts on that?

[Brad Sanders:]

Yes. Thank you, Dan. So what the upgrader fire represents are all the things that Dan shared with you; it was unplanned, was temporary in nature, so it's basically a blip on a macro story that we've been sharing with you all, and so that's, I think the key point is that the macro story's intact. There are unplanned events that will, in most cases, potentially delay when that materializes. For example, the 4 MAC fires of last summer materially impacted supply available in the market. Therefore, that supply impact and the eventual impact on the supply versus take away balances up in Western Canada were impacted this winter. It's well-known, well-documented that production was impacted by the extreme cold. We have new pipelines being built, we have new tanks being built. Those are one-time demand events that take oil off the market. So the point of even talking about the upgraders is to remind folks that the path to the likelihood of moving to rail parity for a significant period of time can be impacted temporarily by events that we cannot predict or influence by any means. So we feel very, very strongly about the macro, and that is being validated by the quality of our discussions on recontracting, both at CCR and at Hardisty. We're in detailed discussions with both producers and refiners, and they are validating the macro story we're talking about, and very much validating the value story that we've shared with you in previous discussions, about the role of rail and their portfolio, and specifically, the role in rail when you're in an imbalance of supply versus demand.

[Dan Borgen:]

Great. I like it. Great summary. All right. Let me move to re-contracting. We've addressed that point. I know it's probably towards the top of the list for you all in terms of, as it is with any midstream company, is the re-contracting risk and around that. And you've heard me say before, the ideal situation is to have those re-contracting periods come up during high demand so that there's proper leverage in the market to get the same price to higher price or extended term because of demand on cycle. We're fortunate that our contracts that are coming up are -- will be in that cycle. They -- all market trends point to that. So how do we confirm that? How do we see that? Well, we have customers at the table now talking about renewals, extensions, offers, counteroffers. We also have industry knowledge from folks like the railcar providers, those kinds of folks, that some of our customers and new customers that are connected in and around our assets are seeking to expand and -- their need for additional railcars to support the growing demand story. So it's not just us saying it. It's -- we're seeing it in the market. You're hearing from leadership at the -- a lot of our customers and potential new customers that are saying, we didn't think we were going to need rail, use rail. But we're going to be using rail. And one CEO, as recent as yesterday, made a public statement around, don't fear, rail is here. We're going to use that. I should have used that term, quite frankly. That sounds pretty good to me. But anyway, the rail is here and we -- rail's been around a long time. It's a proven delivery source. We've got competitive rates out there from railroads. We've got -- it's a good position to be in as it relates to being able to move product ratably, dependably, safely through the system. And so customers, existing, are looking to fully utilize spots and grow that. We have new customers at the table that are looking to sign up for multiyear agreements that we look forward to announcing and talking about in the near future. And remember, the underlying value of rail is that, if you want to talk about it in a, I'll say a worse case, is a peaking facility, to be able to handle the overload, to be able to handle pipeline disruptions, and it's a low-cost alternative for that. We've seen that for 25 years. And so this is nothing new that I'm talking about. We -- you've heard me to say that we are not an opposer of pipelines. We think that pipeline's do a wonderful program. They do -- if you want to go from point A to point B, it's great. If you have high-quality product and you put in a pipeline, unless it's really batched and moved in batches, you lose some of that value. So if you're a spec quality guy coming out, which a lot of the customers in Canada are, they want to preserve that quality. They feel like that they can best preserve that quality running it through rail alongside pipeline. So there are different means. We think this is a strong portfolio contributor to the overall transportation message coming out of Canada. Brad, thoughts?

[Brad Sanders:]

Yes. One thing I would like to encourage people on the phone to do is to reference our investor deck. And on the investor deck, you'll see a lot of this information. You'll see the producer deck that shows the oil, the various producers, the locations of their production when it comes on, the quality of their production. And equally important, you'll see that most of that oil is headed towards Hardisty. And you'll also see that a lot of this new production is being produced by customers who are current and are comfortable with rail commitments and have seen the benefits of it. That's what's really important here. We're in,\ the Canadian market is unique. We're talking about a 5-year investment, 5-or-longer year investment cycles from a production side and from a takeaway standpoint. That creates an enormous amount of uncertainty and an enormous amount of consequences, potential consequences if the production cycle and the takeaway cycle aren't aligned. Rail bridges that uncertainty. It has a sustainable demand for that single purpose. As an example, when we were at 40 under 2 to 3 years ago and it drove incremental commitments and build outs of rail takeaway capacity, that was a tailwind, a benefit for prices going from 40 under to 15 to 10 under as they are today. So even though during that period, we had utilization rates lower than what was planned, the price benefit was enjoyed by the industry, primarily, the producers, who, quite frankly, are the ones who worry most, if not the singular people who worry most about takeaway. So the role of rail bridging this uncertainty, whether it's 110% utilized or low utilization, the benefits are real. So that's a key story for rail, sustainability, why it fits in a portfolio and the ultimate benefits of value.

[Dan Borgen:]

Well said. The other thing we talk about, there's always a pipeline. When is Excel going to come on? Is it going to come on? There are different views of that from folks in Canada. We're a believer that it probably will come on. But when, that continues to be, probably, a debate. There continue to be barriers placed in front of some of those programs. So again, these production, new production volumes are completed, being brought on. You can't turn them off. These are production facilities, I guess, you could turn them off, but at the risk of billions of dollars sitting idle, which is not the intent of the customer. So they're going to bring them on, turn them on and run them and produce them. So we don't know when the pipelines are going to be built. People ask us, "What do you think?" Some say 2020, some say 2022, some say not at all, some say they'll be tied up in court. That's not ours to pine. We're not going to pine on it and give a view, but all we know is we've got customers at the table that need what we have to offer, plan on using it, and we look forward to fulfilling that. Let's talk about -- shifting gears, talk about our M&A process. Last call, we talked about purchasing a new destination terminal. And what I can update you on, and I was hopeful that we would be able to have an announcement of its closure. We are closer. We are -- it's a multi-agreement-type transaction, and so it's a bit more, as everyone is, complicated. But we're nearing the conclusion of that. We are highly confident of that. And what that will do is, I think it will continue to show the market the capability of rail, the customer commitment to rail, the ongoing use of it as a solution and the flexibility of rail. And I'll talk a little bit more about that, hopefully, in the near future, as we can make additional announcements around that. Sometimes, we get asked about, what is the division of the Partnership in terms of diversity? Are you always going to solidly rail? Look, we think rail -- as we've said, rail for us, for 25 years -- over 25 years, has been a core component of the business. We think we know it as well as anyone. We think it drives the solutions that -- provide solutions that we've talked about previously. But do we have plans to diversify into more conventional, I'll call it midstream-type assets? And yes, we do. We have -- we've been purchasing, as you've seen, more conventional tank -- shore pipeline positions. We're looking to diversify into that space even more. We're looking to -- as we develop out our TexasDeepwater facility, we're -- that's more of a conventional docks, tanks, pipeline connectivity, traditional solutions. But we do look for that. And remember that our rail terminals today and our products terminals today are both inbound and outbound. We've got -- we just -- we made a recent announcement on an NGL at the parent. It's a new product. It's underpinned by a five year deal. It's small today, we're growing it but totally inbound into the terminal. And so as we have said before, we will continue to grow that, and once the commercial risk is out of it, then we'll look to drop it into the MLP, as appropriate. I think it also shows that we're working well and being creative with our customers and fitting the needs that they have of both outbound and inbound, whether that's Hardisty, Casper, any of the terminals that we have and looking to grow, we're looking for that -- continue to look to meet customer demand and create flexibility and optionality around that, that we're uniquely positioned to be able to provide. We also announced that we had increased our capacity at -- for a LACT unit at Casper, again, driven by customer activity; again, small-scale, growing, we've commercialized it, it's working, it's producing revenue, and we'd look forward to talking more about its growth in the near term. I mentioned TexasDeepwater. And let me just remind you of how that strategically fits us. So whether you're a heavy crude barrel coming out of Canada, it needs, if you talk to our producing customers, what they will tell you that they need is they need access to deepwater, they need access to a strong refining market; they need access to blend components; they want to be able to barge it, ship it, blend it, pipeline it. And so we're not sitting here saying we've got the solutions to everybody. But with TexasDeepwater, we can, we are developing that exact facility with the traditional way that we've done it; with commercial agreements that are multiyear, primarily investment grade-backed; that we will get that program developed to meet the need of that heavy barrel coming out of Canada. Where does that barrel primarily want to go? If you ask our customers, it primarily wants to go to a heavy demand center; heavy, pun intended, both a large demand as well as a heavy crude oil demand. And that's what we have in the Houston Gulf Coast with over 74% of refineries burning intermediates to heavies. Our refining customers, on the other hand, that's why they made commitments at Casper, which will be able to take low-cost feed coming out of Canada and creating a, reaching further up the supply chain to be able to deliver barrels into, by rail, into the Houston Gulf Coast. Again, they have the need for inbound rail, destination rail facilities, and that's what we're developing at TexasDeepwater. In addition to that, pipeline barrels coming out of the Permian, what do they want? What are they going to need? As we all know, we've got light sweet abundance here in the U.S. As the marginal producer, arguably here in the, globally, we have an overabundance and a growing potential overabundance of light sweet that is going to need to find export alternatives. Now, if you know you want to go export, there're markets that you can go, Corpus, other places that you can pipe into, load out and run ships. But if you want optimum flexibility, you'd like to come to the Houston Ship Channel. Come to the channel, be able to blend off with a heavy barrel, be able to make a refiner spec, have a barge capability, have a deepwater capability. Again, that's what we're trying to do. Whether it be pipeline from West Texas, whether it be rail or pipeline coming out of Canada, they all need the same thing. That's what we're providing at TexasDeepwater. That's how it fits us strategically in terms of a large destination catcher's mitt in the Houston Gulf Coast. So with that, let me turn it over to Josh, and he can talk a little bit more about the specifics around that, and what you'll be hearing more about us talking about with that project.

[Joshua Ruple:]

Thanks, Dan. I think first, just a quick description of the asset. Size and scale matters in regards to these types of development activities; and TexasDeepwater is 1,000 acres in size. It's located right in the middle of all of the activity in regards to the movement of energy products within the Houston Ship Channel. Pace also matters. We've worked really hard over the last year to position that asset, to be able to develop that asset quickly as the commercial opportunities materialize. We're in a position now at TexasDeepwater where our permitting activities are nearing completion in the next few months. We literally will be in position to start development very near term. That's a good thing for us from a competitive perspective. It's also a good thing for us as it relates to meeting our customers' needs because those needs are now and we're able to deliver a now solution. Another thing that's important, I think, for us to know, in regards to TexasDeepwater is that it's an asset today that's producing revenue. We have railcar activities, both storage and working on some transloading revenue plays. We have a soon-to-be waterborne activity related to some barge movements on the Houston Ship channel. We have revenues generated by our dredge site, that is the largest and most competitive dredge spoil facility on the Houston Ship Channel, something we're extremely excited about. And also, we control a large number of pipeline easements that are critical, not only to our own development activities but also to all the who's who in the Houston Ship Channel that are looking to connect to each other to serve customers, moving barrels to water. So ultimately, TexasDeepwater is a really important part of our diversification strategy. It allows us to move into new areas of business, to build new types of assets. And those assets are long-term in nature, come with them really strong customers. And also, come with them the type of contracts that fit very well into the MLP story.

[Dan Borgen:]

Okay. Thanks, Josh. Appreciate the update there. All right. Let's -- I think we've tried to cover most of the hot topics, but would love to -- anything we didn't answer, we'd love to handle now. So if there's anybody who's got questions, we'll move to those and try to answer those.

[Operator:]

[Operator Instructions] Our first question comes from Derek Walker with Bank of America.

[Derek Walker:]

Appreciate the new format, guys, and a lot of good color there. Just some small questions for me, I guess. Just around the anticipated CBR terminal that you talked about, Dan. I guess, is there any kind of nuances there to the extent that you can talk about it as far as kind of what you need to get that kind of where to go on?

[Dan Borgen:]

You know me, Derek. I'd love to tell you everything I know, but I can't. So I'm looking across at Keith, our General Counsel and Compliance Officer and he's shaking his head. So I can -- I guess what I can...

[Brad Sanders:]

I would say -- this is Brad, Derek. I would say time and not much [indiscernible] if that's encouraging at all.

[Dan Borgen:]

We feel very bullish about that. I don't know what more -- how much more confidence I can lean in on that. But we're close. We're close. I think once we announce it, you'll be able to see maybe the moving parts and why it took a little bit longer in terms of just the parts on it. But like I said before, it's going to be a good thing for the Partnership. It's going to be a strategically important asset. It's going create some additional destination connectivity. Anyway, you've heard me say before that anything that we look at, whether we build it or we buy it, it has to have its own independent terminal value, plus a good network contribution to the overall network. And this asset will do exactly that.

[Derek Walker:]

And then Dan, I think in your remarks, you mentioned the -- kind of the NGL service at Hardisty is rather small right now, but could eventually be a drop down to USDP. I guess how do you see that kind growing over time? And is that something you'd like to see over the near-term, or it's just more of a kind of a medium to long-term kind of thought process?

[Joshua Ruple:]

Derek, this is Josh. I can just give you a quick comment on that. We're already working on plans to scale that facility up. We have work going on right now, both technically and from an operating perspective, to scale it up. As far as our vision in drop down, Adam, you're probably best to answer that.

[Adam Altsuler:]

Sure. I mean, as you saw in the press release, it was a take-or-pay contract. As we said, it's relatively small. It's less than $1 million of EBITDA. So we're, as we scale it up and continue to grow it and derisk it and make it more of a mature asset, we would love to drop it down.

[Dan Borgen:]

But Derek, on a follow-up to that, I think, what that shows is the optionality that rail has, both outbound, inbound, right? So inbound, truck out; inbound, pipeline out, those types of things. And so as we have rail capacity that is evolving, we're always looking for valleys, potential valleys in the operation that we can fill. We've done that for years, to be able to look at the seasonality, fit the seasonality with new inbound or outbound opportunities that are multi-product, multi-model, that, again, fit the needs of the customers. That's the business we're in, and rail is truly flexible to be able to do that.

[Derek Walker:]

Got it. And then just switching over to Casper. I know you're trying to capture some spot volumes there. I guess, do you have a, I know that there's some variability, but do you have a sense on how the spot volumes may kind of evolve and how that may compare to the prior contract expiration in August?

[Brad Sanders:]

Derek, Brad. Well, given the disruptions we've talked about earlier, starting with the [MAC] fires last summer, you can see that the differentials have continued to tighten. And given that they have, the incentives to do spot volumes or utilize the assets have been reduced as a function of just incentives. So that's where we are today. That's not where we're going to be in the future. And so when we return to where there is an incentive as a function of price, to leverage rail facilities, we think we'll be, this is our opinion, we think we'll be very active either commercializing on a term basis or on a spot basis, specifically at CCR as a function of 2 critical drivers

[Adam Altsuler:]

And one minor point, Derek, this is Adam. Just wanted to mention that the customer we mentioned last quarter, continues to be the most active shipper at the terminal.

[Operator:]

Our next question comes from Mike Gyure with Janney.

[Mike Gyure:]

Probably the one topic that you might not have touched on and I'll ask about it is, I guess, the crude -- I'm sorry, the two ethanol terminals in San Antonio and West Colton. How does that kind of fit into the grand scheme of things, and maybe what you're seeing in the markets kind of at those facilities? I realize they're small, but kind of just understanding kind of what you're thinking longer-term with those terminals?

[Adam Altsuler:]

Sure. With -- it's Adam. So with regard to the whole portfolio of cash flow, it's relatively small. It's less than, I think, 5% of the cash flows of the Partnership. But we do have particular expertise in that with the senior management team, so it's something that we're always looking at expanding. We do see opportunity there both at the parent and the MLP. And we've got a good relationship with this customer. So to the extent that we could grow it, and grow it in the same way that we think about our crude business and refined product business and things like that, whether it be take-or-pay contracts supported by high credit customers, I think it could be a growing part of the portfolio, but it's just going to be kind of opportunity-based.

[Brad Sanders:]

Mike, this is Brad. So I would actually be more positive about the space. We think that it's a great space. We think the underlying macros supports growth. We think the existing asset-base out there is probably, through time and spontaneous order, or probably the right assets at the right location. So growth can happen two ways when you go beyond E10 to -- and I'm just using E15 as an example, then you're going to get more volume through that space, but you're -- or the existing assets, but you're also going to drive new development. We think the opportunity to move beyond E10 is real as a function of just environmental demand and drivers. But we also think, just to remind folks, that -- and we talk about ethanol specifically, but it's truly just a gasoline blending component. And as a blending component, it's got some really good things like octane value. It's got some not-so-great things like RVP. But when you combine the two, it is the cheapest octane available in the market. So we're very bullish. We think the underpinning macro, even without regulation, is very strong, because of its component value in a gasoline world. So we'd like -- we're very purposed about identifying opportunities and trying to grow that space.

[Dan Borgen:]

Well said. I really don't have anything to add. But when I think of ethanol, and when anyone else thinks about ethanol, you really just need to think of it as an octane. And it really is a -- that's its primary function. It -- and so within demand in every gallon of gasoline from an octane enhancer. So in markets, certainly in the markets we're in.

[Brad Sanders:]

And globally. So it's TexasDeepwater as well.

[Dan Borgen:]

That's right. That's exactly right. So as we think about that at TexasDeepwater -- and remember, TexasDeepwater is crude, refined products and blend components. So as a blend component, for a gasoline blend stock, ethanol is the most efficient for that, and so you will see that at a, TexasDeepwater development as a component to that. So both for local and for export. Does that help answer that?

[Mike Gyure:]

That absolutely helps answer that. And then maybe completely unrelated follow-up on kind of the rail car, I guess, supply-demand equation that you see out there, maybe compared to where you were kind of a quarter ago, 6 months ago, versus, I guess, maybe expectations for the back half of year, if you believe that sort of the demand is picking up and kin of what you see in there?

[Dan Borgen:]

Yes, sure. Matter of fact, I had senior folks in the office yesterday talking about just the shortage. They have no cars available today. They will have to manufacture all new cars, which is a change and a positive, again, additional demand on story. And you know, it runs in cycles. And then there's a transition in the railcar space to move to a heavier picker line car which fortunately, the cars that we have, we saw that coming and got ahead of that curve. And have, as part of our portfolio, the availability of those cars. But we continue to see tightness in the market for the heavy demand cars, for cars needed to come out of Canada. Those are the ones that are preferred to, for transportation by the railroads, and there's price incentive to do that. So we, there's a tightening in that market, as I said earlier, and we're getting it first hand from the railcar providers.

[Operator:]

[Operator Instructions] With no further questions coming into queue, I will hand the program back over to Dan Borgen for any additional remarks.

[Dan Borgen:]

All right. So thanks again, and we appreciate the patience on this new format. Hopefully, it's been helpful and more interactive. That's our intent. We want it to be not a scripted message. I know some of this stuff has to be, but we want to be able to share openly with you what we've got and what, how we feel about the market and the demand that's coming. We're, I'll say, comforted. People ask me a lot of times, what keeps you up at night? What doesn't keep me up at night is the demand. The demand is coming. We've verified it with the customers, by customer. And again, refer you to the investor deck, you can see the list of that. We don't give the customer, but, for proprietary reasons, but you can see the demand on that it is coming. So I don't, I sleep well at night about that. Timing of that? Obviously, buyers disrupt that, different things. But we feel very, very bullish about that that is going to be the event. You can't buy a spot at Hardisty today. There are no sellers of spots. Therefore, further evidencing that the customers are going to be utilizing the full extent of their spots. The operational planning in terms of ramping up that volume, crew availability, locomotive availability, all of those kinds of things are discussions on the way to ramp up to full value and full volume. So we feel good about that. There's, all we're trying to do is keep our head down, get this transaction closed that we've been talking about, get that done, continue to look for good opportunities that fit us from a corporate development standpoint, both organically as well as acquisitions, and we've got additional parties that we're talking to about additional opportunities in that. And we look forward to talking more about those opportunities in the future. So with that said, thanks, again, for being on the call. Please, give your feedback, if there is something we could tweak a little differently to provide additional information. Ashley is the perfect person to feedback on that. And we'll close with that. Thanks for spending the time with us today.

[Operator:]

And ladies and gentlemen, that does conclude today's conference call. We thank you for your participation. You may now disconnect.