Diversified Energy Company (DEC) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Diversified Energy Company plc investor presentation. [Operator Instructions] Before we begin, I'd like to let the following poll. And I'd now like to hand you over to Rusty Hutson, CEO. Good afternoon, sir.

Thank you. Appreciate it. We're going to spend some time going through parts of the corporate presentation that we presented on Monday at our earnings call. We're not going to go through every slide, but we're going to try to go through the pertinent slides that I feel, you, as potential investors, would want to know about the company, about our strategy, kind of where we sit in the space today and kind of what our future plans are as we move forward. So with that, I'd like to turn to Slide 4 and start here. Wait for the slide. Slide 4. Thank you. So Diversified, obviously, we are a publicly traded company here in London. However, all of our operations are onshore U.S., specifically in the Appalachian Basin, of the Mid-Atlantic part of the United States; and also in the Central Region of Texas, Louisiana and Oklahoma. A few things that are really pertinent to our business. Number one, our long-life, low-decline production. We have the lowest decline rate in the sector in the U.S. at 8.5%. We have a long-life, low-decline production, which means we're able to have a lot of visibility into our production and what it's going to be over time. So we hedge a significant amount of that to lock in cash flows and ensure that our business can be operated efficiently, pay down our leverage and our debt, and then also pay dividends to our shareholders. We're currently about 90% hedged through the end of '22. And then we have one of the -- not only one of the largest, but one of the most consistent free cash flow yields in the industry at around 22% this year, which has been that way for multiple years in a row. We like to buy. We're an acquirer of assets. We're an acquirer of production. We're not a driller or completing wells. But we're buying wells, optimizing and enhancing production, driving operational efficiencies through the business, driving cash margins and then cash flows that we then can service and pay dividends to our shareholders. You can see some of the differentiated descriptions about the business that makes us different than everybody else. We look to vertically integrate the business, reduce expenses throughout our operation and expand margins over time as we grow areas like our Central Region, which we just entered last year. We're shareholder return-focused, and we'll talk about that in a minute on our strategic objectives. And then we've always been a steward and an ESG-motivated company. But what has really happened in the last 12 to 15 months is just we've accelerated the emission reduction aspect of that, and we'll go through that in a minute. You can see some of the trading metrics of the company. We went public in 2017. $50 million IPOs. As we sit here today, $1.4 billion market cap. Enterprise value of $2.6 billion. And as we sit here today, pre-Conoco deal, which is one we just announced in the last 2 weeks, with over $400 million of liquidity for additional acquisitions. We've produced at about 138,000, 139,000 BOE per day, but with Conoco, it will be about 147,000. We're 90-some percent natural gas, which I think is important in the environment we're in today. We talked about our decline rates and we own midstream assets, which makes it a very vertically integrated business and being able to cut the cost of what it takes to move our gas to market. If you'll flip to Slide 5, please. The strategic objectives, and these are really things that we set with our institutional investors when we went public. We talked to them about the fact that we're going to prioritize shareholder returns. And we're going to really do that through a sustainable dividend policy, which now we have executed on for the last 5.5 years. And we're going to take free cash flow, we're going to reduce our debt. and we're going to grow our business in a nondilutive way. And we've been very successful in doing that over the course of our public life. We're going to drive value through an accretive acquisition approach versus a drill bit. We look at the -- on a risk-adjusted basis, we look at acquisitions, the internal rate of return on those, to be much more sustainable and higher than the drill bit for us. And so -- and much less capital intensive for sure. And we're able to not only do acquire these assets, but then drive additional efficiencies and synergies in the business that creates more sustainable and larger cash margins that we can then pay dividends to our shareholders, and we'll talk more about that in a minute. We're committed to ESG narrative specifically being very aggressive as it relates to reducing emissions. We've done a significant amount of projects related to emissions reduction, related to emission detection equipment that we're utilizing on our wells to identify and correct methane emissions. We're flying over our midstream businesses or operations with fly-over LiDAR, which is identifying any kind of emissions related to the pipeline and midstream business. And then we're also in the process of transferring all of our methane-actuated pneumatic devices to other methods that reduce and zero out those emissions on those devices. And then the last thing that we told our -- that we've committed to our shareholders is that we're going to keep the balance sheet strong. We'll never risk the balance sheet just for the sake of growth. And so we're going to -- we have a leverage profile that we're very comfortable with in terms of maximizing shareholder returns, and we've stayed there very consistently over the last 5.5 years as we told the industry -- or the institutional investors we would. And that's supported with our decline profile being so low and our ability to hedge and create predictable cash flows. Flipping the page -- all the way over Page 8, please. So all of these things really drive what we see here on this slide, and that's in this right-hand corner, is our production profile, low declines, our ability to hedge production in any type of market, our ability to execute on the transactions and the acquisitions that we've had over the last 5.5 years, and also the ability to pay dividends and progress that dividend over those 5.5 years as we've grown the business. You can see here since our IPO, we have a total shareholder return of 250%. And that compares to the rest of the E&P sector over that same time period of 17%. And most of their total shareholder return has been really in the last 1.5 years. As prices have went up, they've been able to execute on a decent strategy. But up until that point in a very low price environment when -- and then drilling through cash flows, like they were over that period of time, they weren't able to keep up. Our business strategy has been very consistent and really doing what we said we would do and has paid off in long-term shareholder returns for our shareholders. On Page 9, real quick, you can see down here to bottom this is just another view of this -- of that return, but you can see the progression of the dividend over the last 5.5 years in terms of per share, and that has went up even in lower price environments. When prices have went down, Henry Hub prices at $2.08, we actually increased our dividend. Through the pandemic, we increased our dividend. And the only way that you can do that and manage that is through the kind of business and the model that we deploy in long-life, low-decline assets and hedging and making sure that we're locking in those cash flows. You can see we've paid over $492 million of dividends since our 2017 IPO. We continue to see a peer-leading dividend yield at 11%. We protect our margins with the production that we hedge. Our -- over the last 5 years, our margin has remained in that 48% to 52% range through all the different price environments, and we continue to generate a very strong free cash flow yield at 22%. On Page 10, 11, I won't stay here very long, but I'll just want to walk through kind of -- as we looked at the business and we started coming into this earnings season, one of the things we saw was let's look at how we are disconnected in terms of the share price and the valuation of the company to some of our other industries and some of the other peers in our -- in the E&P sector. You can see here on Page 10, our free cash flow to enterprise value, so not to market cap but to enterprise value, is almost 13%. If you look at all these other industries and what their free cash flow yields are in the same metric, they're about 1/3 of what our free cash flow yield is. But when you look to the left and you look at the multiples that all these companies in these industries are trading at, we're 1/3 of pretty much of what they're trading at. And so it's disconnected. We're earning a lot more cash and free cash flowing a lot more, but we're trading at a much less multiple than the other sectors are. And if you turn to Page 11, you get another look at this from a -- even from our own sector, we have the top dividend yield in the E&P sector there on the left. We also have the #2 free cash flow yield as it relates to market cap in the sector. But if you look at the 3-year historic average over that same period of time -- over those 2 same metrics, we had a 10.2% dividend yield over the last 3 years on average versus the rest of the sector, less than 3%. And again, most of that has been generated in the last 12 months. And the same for the free cash flow yield. 3-year historic average for us has been at 23.5%, and that really has been 20-plus for the last 5 years. And then if you look at the rest of the sector, it's 10.2%. And that, again, has all been really generated in the last 12 months. And the other sectors don't even come close to any of these numbers. In fact, if you look at the E&P sector in general and compare it to the total -- the weighting of the S&P 500, we're about 1.5% -- the sector is 1.5% of the S&P 500, but generating almost 40% of free cash flow of the S&P 500. So there's a tremendous undervaluation of the E&P sector and specifically diversified. Turning to Page 12 and then -- yes, and this right here is clearly shows what I'm talking about. If you look at Diversified, the blue line at the bottom, it's tracked pretty -- up until last year when the prices started to go up significantly, we tracked right along with the commodity. But since the price has increased, you can see that we have kind of stayed consistently flat over the last several months, but the market -- the commodity price has went up tremendously, and this is a 10-year NYMEX strip from the year-end '21. So you can see that huge share price dislocation as it relates to the commodity at this point. And then the final comparison is on the right. If you take our current share price, which this was as of beginning of the week or so, $1.48 per share, and you compare that to the value of the assets that we have today on a future cash flow basis, present value back to today of 10%, which is the way that the industry typically will value these assets. And you take that value, what we call PDP value, you subtract out the debt and you subtract out the mark-to-market on our hedge portfolio, we should be at -- that represents a $2.82 per share. Again, a 50% discount to our current price. So there's definitely market valuation dislocation here that we wanted to highlight. And if you look at Page 13, real quick. As it relates to -- and again, this goes all into the valuation because the natural gas macro in the U.S. continues to be extremely strong. Production has remained relatively flat and really muted by the inability to get new infrastructure built that will help to move the product to market that -- and it's really kept companies from drilling more wells because of that, continues to be -- the weather has been very supportive from electricity generation and demand, tightened global balances, obviously, with the Russian situation that we have today and the pipelines that are going into Eastern Europe. There's difficult problems and a lot of issues from a macro perspective related to that and tightened global balances. We have extremely low storage levels in the U.S. right now, which again is playing into gas prices. We are a large LNG exporter, and we'll only get larger from here as we double the capacity of LNG exports going into 2026, there's going to be almost 1/4 of the natural gas production in the U.S. that will be exported on an annual basis to other countries. That's going to continue to put tightness into the U.S. domestic market as you're exporting almost 25% of the existing production. And then lastly, producers have remained very resilient in capital discipline and making sure that they're not going against their shareholder wishes, which is don't spend -- drill through your cash flow, we need a return. And so all of these things have resulted, as you can see to the left, in a very tight natural gas macro in the U.S., which will play well for long-term gas prices. With that, I'm going to quickly pass it over to Eric to just do some brief overviews of some of the financial highlights from the first half, and then I'll come back on at the end to talk about where I see the rest of the year as it relates to Diversified.

Thanks, Rusty, and for everyone's. I'll do a quick spend through the operations update that Brad gave just to set the table for the financial update and give context. I would encourage -- and many of you know we did our full earnings call on Monday and we have that audio presentation on the website as well as the slide deck that we're going through, those comments are more fulsome and may give a better full, well-rounded view of some of the materials we're covering here. But we wanted to make sure there was a good time for Q&A so that we could really address the things that are directly on your mind. So keeping all of that in focus. Turning to Page 17. One of the things that Brad did a great job of highlighting is giving you context to the significance and the importance of our asset retirement strategy and the tremendous progress we've made here to continue to demonstrate to the market just how it is that we'll ultimately meet those obligations. Starting in 2018 with our commitment to work with the states on long-term agreements. That was affirmation not only of the work that we had to do, but also of the long-life nature of the portfolio that we've accumulated. We worked with the states to put in place 10- to as long as 20-year agreements that really outlined the amount of work that we have to do. And then beginning in 2021 and fast-forwarding into '22, you can see that significant growth in our internal plugging capacities. By our estimates, we now have about 20% of all the plugging capacity in the basin moving from one crew all the way up to -- our 1 rig all the way up to 15 rigs, that gives us the ability to plug about 600 wells per year, and then simultaneously using that capacity to begin to plug more and more of our own wells. And you know we have a track record of doing a great job of plugging those very inexpensively at $25,000 per well back in 2020. Today, as of the half year, our average was $21,000. So a 16% reduction, and that's on a blended using external plus internal capacities. If you look just at our internal plugging jobs, they're about 30% lower versus continued market rates. So there's a nice downward bias to that. But that's something that we made a big commitment to expand within our business, and we certainly have successfully done so. 18 is just a quick snapshot. We are an acquisition model, but importantly, our strategy is to acquire similar asset types. So we call that asset profile. And whether it's Indigo all the way across the page to the ConocoPhillips deal, that asset is very similar, long-life, low-decline. We match that with a very consistent cost structure, thanks to our vertical integration that now includes that P&A we just talked about, and then we'll talk about hedging in just a little bit. But Brad's theme as part of our operation strategy is to standardize our operations across that larger footprint. And so we integrate, we optimize, we consolidate. And ultimately, we operate as one company, harvesting the best of all the ideas, because a key tenet of our growth has been to retain the operational talent that understands these assets better than anybody. And so under our ownership, they lead us to the opportunities that we then empower the men and women in the field to bring forward value. If you flip to 19, and we'll just quickly flip this, are specific examples of those ideas that the field brings us that we then turn into dollars and cents that are the cornerstone of the dividends and debt repayments that we make. 20 is just a quick -- I'd call this a case study of one of the acquisitions that we've done. You can see we paid an incredible -- just 1.6x the next 12 months' cash flow, so less than 2 years of cash flow to buy that asset. But we quickly went to work on that asset. You can see some of the examples of ways that, that operations team continued to add more value. And if you took the economic benefit from those projects, the now multiple that we've paid is about 1.4x. And so that gives you a sense as to just how differentiated an operations-centric model is versus one that's focused on development. Ultimately, on Page 21, you can see how that rolls through to our asset base. You see a tremendous increase in production going from 109 barrels of oil equivalency per day a year ago -- or 2 years ago, to just under 150 barrels of oil equivalency per day, inclusive of our most recent ConocoPhillips sale that we've announced. And similarly, you see a tremendous step change in the value of those proved reserves, i.e., the reserves that are in the ground that are the cornerstone of our future cash flows growing from just under $2 billion in 2020 to, as of year-end and adjusted for what we've acquired this year, over $4 billion. And if you fast forward and look at current prices, that number could be north of $5 billion. So tremendous reserve growth, and that is the future cash flows of the business. Ending in Brad's section on Page 22 is just a reminder, and this goes to the -- so it really tie together with what Rusty was speaking to with respect to the way that we think about valuation and why we're differentiated in the market and where we should trade within that universe, is that our asset profile is unlike anybody else's because we're not trying to outrun the declines of new wells that come off very quickly. We've built an entire portfolio now on very low-decline assets because we buy them in their more mature status. You can see our corporate decline, meaning the amount our production would fall based on engineered estimates, each year is 8.5%. And our nearest peer is 3x that at 21%. And you can see the peer average is nearly 4x higher at 27%. So we sit in a very nice place that gives us a very comfortable ability to reinvest into the business to sustain our cash flows, which makes our dividend that much more durable. I'll move now into the section that I talked about on the call, which is our financial update on Page 24. Here, we talk more about margins than we do about price and expenses. Because pricing differs by region, expenses can differ by region, and what we like to do is deliver a consistent margin to the investors that, again, underpins those debt repayments and dividend distributions that we make on a regular basis. And you've seen Rusty highlighted that growth in our dividend over time, and it's because we've gotten more and more efficient with the assets, built strong margins and now have a multiyear track record of maintaining those. And here, you can see that while costs are notionally higher, that's really a product of the production mix. Back in the first half of 2021, we were an entirely Appalachia-based company. So while we had a nice operating cost including G&A of $7.84 per BOE, we were realizing a little under $16 per BOE in revenue. But as we've added the Central Region and some of the macro themes that are going on in natural gas that Rusty talked about, access to the Gulf Coast where we get premium pricing. And candidly, as the U.S. is becoming a larger and larger exporter of natural gas through liquification, much of that gas coming over here to the U.K. and Europe, you're seeing that there's tremendous pricing opportunity on that production. So without the benefit of what's emerging, just where we are today, you see a nearly $3 improvement in our realized price moving up to $18.88, against about a $2 increase in our cost. All in, a very healthy margin. But as I mentioned on the call, what I'm really excited about is that when you look at that unhedged margin moving from 53%, which was great, to today, 76%, because natural gas prices are so much higher and the outlook for natural gas is so much stronger, it's that number that I'm beginning to be able to hedge and capture in my portfolio. So that over time, my realized price can continue to go up both across Appalachia and in the Central Region to allow us to push that margin well above 50% once again. So that's certainly one of our focuses. Moving to Page 25, we wanted to stress that even as we head into a much better commodity price environment, our commitment to hedging doesn't change. The way we approach hedging, we'll certainly adapt to the market. But we believe fundamentally that long-life, low-decline production matched with a stable cost structure should be matched with stable cash flows, and you achieve that through hedging. And so we've always said that over the next 12 months, we want to be anywhere from 70% to 90% hedged. With that number following as you go further out, but giving a clear visibility into the durability of our cash flows that ultimately pay the dividend. What we're reminding is that if you went back to 2017 and 2018 when prices undulated between $2.50 to $3.50, you could get a nice collar that made sense. They gave you a good floor price, let's say, $2.25 and a ceiling of, say, $3.50, $3.75. And so you would see us use those so that we had exposure to upside in the commodity. But as the commodity became very tight in 2019 and certainly 2020 and then early '21, you saw prices moving between $2 and $2.50, $2.60. So a collar would have afforded you a floor of about $1.80 and a ceiling of, say, $2.50, $2.60. And that $1.80 was just a number that we were not comfortable exposing the business to in order to really maintain that healthy dividend. So we use swaps and picked the number that we knew provided a strong margin. I tell that because as you move forward, and we're seeing so much more volatility in commodities, that's going to work to our benefit without introducing risk to the business because what we can do is begin to use collars again, let's say our $4 floor, $7 ceilings, and give us meaningful exposure as gas prices rise, while continuing to provide a very, very healthy foundation for our margins. And if you think about the fact that our realized natural gas price in the last period was around $3, and we're now looking at the ability to put a $4 floor in, therein lies why we talk about having the confidence in the upward momentum for margins on a go forward. Page 26, we talked a lot about financing the business and a key goal of ours was to transition away from using equity in large quantums to grow and lean more on the cash flows that the business generates, and our ability to access low-cost, low-risk financing. And we've been able to do both. As we talked about earlier, we've grown EBITDA alongside that production dramatically. And if you took our first half year EBITDA and doubled it, if you just annualized it without the benefit of Conoco, that's about a $450 million number. And so compare that to our EBITDA at IPO of around $10 million, and you can see just how much we've grown. Well, that cash flow gives us the ability to meet our obligations of debt repayments or dividends, but also reinvest into the business while maintaining a healthy leverage ratio. And I say that to say that now you can see throughout all of these years, from 2017 to 2022, we've grown using debt and equity and kept our leverage in that yellow row between 1.8x and 2.2x, which was well within our stated commitments of 2 to 2.5x. And we've not needed as much equity for even large deals, like the ConocoPhillips deal that we just announced at $240 million, $250 million net, we'll do using the balance sheet. But as Rusty said, we'll never risk the balance sheet. And so we keep a close eye on that dotted box that you see on the top of each stack, and that is our liquidity. And that's the amount of firepower, if you will, that we have to continue to be very offensive as we acquire assets. And the blue stack that sits below that is our securitized debt, that is investment-grade rated, low coupons, well-hedged debt that affords us a blended rate of just 5%, while keeping the balance sheet very safe. So that's been a real success as we continue to finance the business. I'll pass over 27, that's just a continuation of the same narrative around the asset-backed securitization and spend a minute on the financial consequence of our investment in asset retirement on Page 28. And if you'll recall, we highlighted the fact that as Brad's grown our plugging capacity through the acquisition of multiple asset retirement companies, you are seeing that well retirement costs come down from $25,000 a well to $21,000 a well. But not only that, but it also affords us a significant amount of opportunity to generate third-party revenues as we plug wells for others, and as well as continue to grow our knowledge base in how to better and better retire wells that will give us the ability to continue to drive those costs lower. And we continue to carry in the appendix to the presentation, the slide that many of you may have seen at year-end, where we showed that if you took that 30% savings that we've eliminated by taking the third-party margin out and doing it for ourselves, that can have a significant positive read-through by lowering our asset retirement obligation. And just by a 30% reduction, you're looking at about a $500 million advantage to the business. So still very, very significant. Wrap up on Slide 29, just by making the point that. And again, we've built this business to deliver strong cash flows, strong margins and the ability to sustain a healthy dividend. I think we're one of the few that certainly during the pandemic were privileged to be able to raise that dividend. You can see in 2020, we stepped it up to $0.1525 annualized, and the yield went from 11% to 13%. Coming into 2021, we continued to raise that at $0.165 and maintained that double-digit yield. And even today, including all that growth that we've developed over the last 5 years, now at $0.17 annualized and a yield that's still 11%. The dividend is a reasonable payout when you look at that in correlation to the amount of cash flow, that $448 million that we generate. But what we expect to see is our ability to compress that yield by continuing to demonstrate the durability of our business model as we move forward. So with that, I'll hand it back to Rusty for some final comments, and then we'll do Q&A.

Thank you, Eric. Just so as I look at 2022, just go through a quick overview of kind of how I see the rest of the year playing out. Obviously, we're going to stay really, really focused on optimizing our operational capabilities. We have a lot of assets. We have a lot of new assets in the portfolio. We're going to look at ways to enhance production on those wells and to take advantage of an organic growth in the production profile, but also looking to lean on efficiencies and making sure that we're operating in the most efficient manner. We'll continue to drive down our emissions. I stated earlier some of the projects that we have going on, that's going to be a continual project, and we will stay really, really aggressive on managing that down. We're going to look at ways to capture higher prices in the portfolio, whether that be through hedges rolling off and entering into new contracts at a much higher price than obviously, the previous ones, but looking at ways to improve our pricing on a going-forward basis. Continue to look at ways to enhance liquidity. Obviously, we have a lot of liquidity, as we sit here today. On the back end of the Conoco deal, we'll still have over $400 million of liquidity that we can then drive and look for other acquisitions and be able to execute on those. And then look at -- continue to look at ways to vertically integrate the business, whether that be upstream, midstream, plugging opportunities. We've grown the plugging business, as Eric said earlier, to a large-scale business now that will continue to pay dividends for us and driving down our plugging costs and being able to show a much smaller liability as it relates to the ARO. But at the end of the day, we continue to look at ways to, with these value chain integrations, drive down our overall metrics as it relates to expenses and costs. So with that, I'll turn it back to the moderator, and we'll open up for Q&A.

That's great. Rusty, Eric, thank you very much indeed for updating investors this afternoon. [Operator Instructions] I just wanted Rusty and Eric take a few moments to review those questions submitted already. I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via our Investor Meet Company dashboard. Eric, Rusty, as you know, we had a number of pre-submitted questions, and we received a number of questions throughout today's presentation. So thank you to everybody that's taken the time to let us have your question. So perhaps, if I may start with the following, which reads as follows, are you expecting the recent acquisition with its 20% hedge adjusted EBITDA to lead to an increased dividend?

Well, I'll answer that real quick. We obviously have been very clear as we grow the business, as we grow cash flows, that the one way that we focus on returning to our shareholders and returns for our shareholders is through the cash dividend. And so as the business grows, as the cash flows grow, we obviously will always look at ways to increase the dividend in a way that's meaningful. But at the same time, protecting our ability to grow the business organically so that there's less reliance over the long haul on the equity to do that. So the answer is we're always -- as we grow the business, we'll raise the dividend and -- but we'll do it in a way that's methodical and make sure that we're protecting our ability to do business going forward and grow the business.

That's great. Let's turn, if I may, to the next question. This one was presubmitted and reads as follows. Can [indiscernible] still participate in the recent acquisition? And further to that, is this likely?

Yes. Well, the Conoco deal, they are not participating in. So it's 100% us. They obviously still have a $500 million commitment that -- in our contractual obligation with each other. But they don't have to. They're not required to participate in anything. They can look at it, decide whether they want to or not, but at the end of the day, it's their decision. And we're indifferent. I mean we'd love for them to come alongside us in a lot of the deals. But if they don't, most of the deals that we're looking at. And if we want to do it, it just means it's a little bit bigger for us, but we'll be more than happy to close on those deals. So yes, they still have $500 million of capabilities but they are not going to participate in the Conoco deal, that's 100% us.

That's great. We've received a number of questions from John from [indiscernible], thank you for both of your questions and we had pre-submitted question as well relating to your U.S. listing. And really asking when will you have a U.S. listing? And perhaps if you could expand around that, that would be great.

Yes. So what we talked about on the year-end call was that the nice thing about having the 2021 audit completed was we had all the historical financial information that we needed to begin that process with the SEC in the United States. So you can expect we did. We've been hard at work on that over that period of time. We continue to have good dialogue with U.S. investors, while simultaneously progressing those documents. And just to give a general framework, if you -- if that process were to go as it typically does, and we certainly can't predict timing in the conversations back and forth through the comment process on those documents, we could be in a position by the -- certainly late third quarter, which gives us, I think, a nice runway to look at the right catalyst opportunity sometime this year. So yes, it is -- it continues to be certainly a big project from my team working closely with our legal team.

That's great. Thanks so much, Eric. Next question, I know you did touch on, but if there's any other clarity you can give. Is your gas used only in the U.S. market? Or is some of it exported?

Well, we don't have any direct contracts with the LNG export facilities. But I will say, it is used in the U.S., but because we have Gulf Coast natural gas exposure, we definitely are benefiting from the pricing of that gas. So even though we don't have a direct feed into the LNG facilities, indirectly, we still get a gas price in the Gulf Coast that equates to what those LNG -- the companies that are producing into the LNG facilities get. So we do produce everything in the U.S., everything we produce is used in the U.S. but we do benefit from the LNG export facilities and the prices that they get.