Kirby Corporation (KEX) Earnings Call Transcript & Summary

All right. Let's get going with our 3:00 fireside chat session. Thanks to everyone for joining us here. I know it's been a long day. We've got, I think, a really interesting stock here and company talk about as we go into 2022 and beyond, and that's Kirby Corporation. For those of you that don't know me, I'm Jack Atkins. I'm the airfreight and service transportation analyst here at Stephens. And really pleased that everyone is taking the time to join us here at Nashville for the 2021 fall investment conference here for Stephens. So without further ado, let's get started talking to Kirby Corp. As you guys know, these guys are the largest provider of inland marine tank barge capacity. They're also the largest provider of coastal marine tank barge capacity, and they have a large distribution and services business; engine, transmission, repair, maintenance and fabrication. So a lot going on with the company and a lot of their business cycle in front of it. So looking forward to having a great discussion. So from the company, we've got David Grzebinski, Kirby's Chief Executive Officer; Raj Kumar, who's been on the job for 3 days, and he's fully briefed and ready to answer all of our finance questions here, the company's new Chief Financial Officer; and Eric Holcomb, Vice President of Investor Relations. So Eric gets to deal with me more often than he'd like. So David, without further ado, let me turn it over to you for some introductory comments, then we'll go into Q&A.

Yes. Thanks, Jack. Well, thank you for having us, and I thank everybody for their interest here. Jack gave you a good summary of the company. I would tell you that our Inland Marine business is probably the biggest earnings power in the company. We have over 1,000 barges in a market that's got about 4,000 barges. So we're about 25% market share. We're 3x larger than our nearest competitor. And I would say the vast majority of our competitors, well over half, have less than 50 barges. We're large there. We generate a lot of free cash flow in that business. In this deck, you can see kind of our free cash flow slide. It has been on a downturn for 7 years. And I think COVID and variants willing, we're starting to see us come out of the cycle in a meaningful way. I can describe that more, I'm sure Jack will ask questions about our utility and pricing and stuff. But it's -- COVID has been rough, but we're starting to get pricing going the other way, our utilities coming back, our customers are moving more products. Typically, what we move is liquids. About 65% of what we move on the inland waterways are petrochemicals. Then the balance is black oil and refined products, which are products that go in and out of refineries, right? Refined products are gasoline, diesel and jet fuel. The black oil can be things like asphalt and heavy parts of barrel. And we also move crude oil. So we move liquids in the United States. We're 100% United States. It's in the Jones Act, which basically, if you're not familiar with the Jones Act, says if you're going to move cargo from 1 U.S. port to another U.S. port, it has to be done in a U.S.-owned vessel, a U.S. crude vessel and a U.S.-built vessel. It's one of the cabotage laws. Many countries in the world have the same cabotage laws, as it relates to their marine transportation. Other industries have that as well. I mean if you think about airlines, they have a cabotage law, right? You can't take British Airways from Nashville to Houston. You can only come in and out of the U.S. Anyway, the business is a strong business, and we're about to hit, what I believe, to be a multiyear up-cycle. We do coastal barging as well. These are much larger increments of capacity where we have 1,000 barges in the inland side. We have less than 40 on the coastal side. An inland barge can be 10,000 barrels or 30,000 barrels. The offshore barges are anywhere from 30,000 barrels all the way up to close to 200,000 barrels. So the increments of capacity are much larger, the costs are much higher as well. That's had a rough go of it. The coastal barge market used to move a lot of crude, and then when the U.S. removed the ban on exporting oil, a good portion of the demand went away, and the market has been oversupplied. It is on its slow recovery track now. We think we'll come back close to breakeven in 2022 in that business, maybe a slight loss. In our Distribution and Services business, Jack described it pretty well. Basically, we got into it because we couldn't repair our towboats back in the early '80s. So we bought a mechanic shop that repair diesel engines and basically continued to grow the business, and we repaired other people's towboat engines and gearboxes, grew it to a nice business that was kind of $0.25 billion year-in, year-out business that trended about 10% to 12% operating income margins every year. If you think about why, that's because there's a huge installed base of marine engines that have a replacement and a maintenance cycle, and it just happens every year. So it was a great business. We decided to grow that business in 2011, and we bought a company called United which basically made frac equipment, and that was back at the start of the frac boom. And if you think about a frac unit, it's a diesel engine, a gearbox or a transmission and a pump, which is very similar to what we were doing in the marine side. We viewed it as a business that had a repair and replacement cycle. We were right. We just underestimated probably the volatility of those cycles. And anybody that follows oil service understands that well. And then we bought a company called Stewart & Stevenson and put it together. And that business can be roughly the same size in terms of revenue as the marine business, about $1.5 billion in normalized times in terms of revenue. We basically are doing about 40% of that business in oil and gas and the other 60% in what we call commercial and industrial. And that is things like repairing marine engines, which we still do. Backup power generation, we provide backup power to nuclear power plants. We provide backup power to financial institutions, data centers, nursing homes, hospitals, et cetera, Walmart and the like. We repair diesel engines on Class 8 trucks and transmissions on Class 8 trucks. And of course, we do oil and gas equipment. That business obviously was impacted by COVID, but is now starting to come back in a meaningful way, both on the commercial and industrial side, but also in the frac business. The frac business in the last 6 months has taken off, not in a conventional manner that the fracking used to be diesel engine-driven. And now it's becoming electric. So basically, what we do is we make that power generation equipment, we put it on a frac site, and we're making what we call a microgrid that helps drive electric drive pumps on frac sites. And that's been very exciting recently. So that's an overview of the company. A little more detail than what Jack provided. Again, we tend to generate a lot of free cash flow. We're -- in our industries, we're probably one of the few investment-grade companies. We tend to deploy capital countercyclically. We've been a consolidator in both of our industries -- in both of those industries, and we typically do it at the bottoms of the cycle, and we have some charts to show that if you're interested. Anyway, that's a long overview.

No, no. That's great, David. Thank you. Maybe to start, if we could talk about inland utilization and trends you've been seeing there and pricing. I want to think about it in the context too of this rise of this new variant. I remember things are going really well this summer until the Delta variant kind of popped up. I know it's early, but just curious if you can talk some on that too. So kind of a 2-part question there. What are you seeing kind of currently on utilization and pricing? And then any concerns about this variant?

Yes. So in the Inland business, we typically have a positive pricing environment when utilization is above 85%, and the customers think it's going to stay there. Conversely, when it's below 85%, we have a negative environment. We -- I'll point, since we passed this out in 2 slides, 21 and 23, to kind of contextualize that. In '21, that's a complicated slide, but the bars are basically the industry barge capacity. The dark blue is our share. The shaded areas are barge recessions, and those are when pricing are going down. The little call-outs are when we've done acquisitions, and you can see basically that we tend to buy companies during the down cycles. But if you flip over to 23, this gets to the utilization question that Jack was asking. First, let me explain the chart. The green line is our operating income margin and the blue line is our EBITDA margin. And this, again, is just the inland barge industry. The blue bars are utilization -- our barge utilization. You can tell from the chart there's about a year lag between utilization and margins. And that's because we have a big contract portfolio that takes a while to roll over. The gray bars -- the gray shaded area, again, are barge recessions, and you see, I coined this phrase earlier, the puke green is associated with COVID. And you can see we've had a pretty solid downturn, the worst utilization we have ever had. Now, long way to get to your answer, Jack, in this quarter so far, in the fourth quarter, we've seen utilization in the 85% to 90% range, closer to the higher end of that. Just this last week, we averaged 90% utility. It feels like the rest of the industry is probably similar in terms of utilization, maybe a little lower. But I referenced in my early comments, when we get above 85%, it feels like it's going to be there for a while. We get pricing. We are seeing pricing increasing. Our spot prices are up. We've got big contracts that rollover in the fourth quarter. This will probably be the first time in years that we have contracts rolling over higher. That remains to be seen. We're in negotiation with those. But spot pricing is above contract pricing, which is a healthy thing and should help bring up pricing. So we don't see anything that -- outside of the Omicron that could derail it in the near term. Demand has come back nicely. Our chemical customers are basically running at pre-COVID levels. The refineries are now back up in the 86%, 87% utility range. I would say the only thing that still hasn't come back is export volumes. And if you think about that, that's pretty much COVID-related, rest of the world, whether it's Europe, India, Latin America and South America. The volumes for exports are just down. But demand is up, and it's come back nicely. We're not at pre-COVID levels, but we're getting much better. And importantly, supply of barges is down. Companies like us have been retiring barges during this downturn. And the cost of building new barges is up 25% in the last 2 years. It costs about $4.2 million to build a brand-new 30,000-barrel barge. Pre-COVID that was $3.2 million. And probably 6, 7 years ago, it was $2.6 million. So the cost of building new capacity is up substantially. Much of that is due to steel prices. So supply is in check -- new supply is in check, retirements are happening. So we're actually getting a shrinkage of the fleet as demand is growing. So we're actually pretty excited about where in the market is.

That's great. That's great. So, yes, Richie, go ahead.

On the contract rollover, can you be able to -- whatever you can say, just to be a little more specific. Are you saying like the contract rollover will be rolled over in this quarter -- the first quarter, excuse me, they -- those contracts go out into December?

Yes. Let me describe our portfolio. So again, we have thousands of barges, right -- or 1,036 barges, and all of them are in different contracts. 35% of our business is in the spot market. And that is a business that's less than a year long. So it could be a barge move for just the day -- I want to move it from point A to point B. It could be a 3-month contract or a 9-month contract, we call that spot. So the average duration of our spot business is about 3 to 4 months. So that will reprice every 3 to 4 months. The remaining 65% is -- about 20% of it is multiyear, so kind of 2, 3, 5-year in nature. So that takes a long time to reprice. The remaining 40%, 45% generally reprices within a year. As you would expect, it's fourth quarter heavy. So of that 40%, about 40% reprices in the fourth quarter. So to boil all down, about 16% of our contract portfolio -- or 16% of our overall portfolio on the contract side will reprice in the fourth quarter. Obviously, the spot stuff should reprice. So it's a long way of saying it takes a year to get margins moving the other way.

You haven't had the right time or right utilization if I understand that. Is 16% more than typical?

No, that's about typical.

It's just that the difference between what you're rolling to versus what you're rolling from is more than typical.

Right. I mean we have been rolling from something higher to something lower for the last 6 years. And now we're starting to change that.

Did you roll?

Well, there was about 18-month period...

Well, yes, that's -- 2008 -- you can look at the margin chart. The margin chart tells you what. I mean, we started...

[indiscernible]

No, no. We started to reroll a little higher '18 and '19, and we were getting excited until COVID hit.

Yes. The first quarter that we've renewed lower was really of any magnitude was Q4 of last year. So coming off of that.

Mike?

In multiyear contracts you referenced 20%, how many of those are going to be priced lower once they -- just given where rates were or even back to a level where most of the rates will be priced higher as they reprice?

Yes. I would say almost all of them should reprice higher, say, almost -- yes, almost all. And we do have PPI or CPI and labor indexes in the multiyear contracts. So actually, the GDP -- excuse me, the CPI and PPI numbers helped us here -- should help us in the fourth quarter on those multiyear contracts as well.

Yes, sir?

Dave, I believe historically, most of your consolidation or acquisitions have come earlier in the recovery side or well at the bottom. And I'm curious with barges getting retired, cost of new barges going up, [indiscernible] as you move to the next year or so?

Yes. We could probably transact now if we wanted to. There is a lot of pain in the industry, as you would expect. We can go through the shopping list on Page 20, if you want. But we have been -- we've been more cautious. We are on negative outlook from Moody's. We're Baa3, a BBB-. So we're 1 notch from junk. And Moody's at the beginning of the pandemic put us -- or basically in 2020, early 2020 put us on negative outlook. They put the whole industry on negative outlook. They haven't removed that. They keep hinting that they will, but they haven't yet. So in the meantime, we've been paying down debt. I think we paid $500 million or $600 million down in the last -- well, since the pandemic. So our balance sheet is starting to get there. Our debt to total cap is, what, 29%?

29%.

29%. The issue right now is probably debt-to-EBITDA, right, because EBITDA is still down. But that's correcting itself even as we speak. So that said, we're -- we want to do if we were to deploy any real capital would be -- it would be in the inland side, and we can't be predicting acquisitions. It's a tough game because there's 2 parties involved. But I would say 2022 could be an interesting year for that.

Mike?

Can you give your thoughts on eventually spinning out the oil services business or is that something that you want to consider? I mean, you probably answer this all the time. But if you're going to do it right now, it seems like it's fairly up than downhill.

Yes. I mean it's one of -- when we bought Stewart & Stevenson back in 2017, that was -- one of the rationales was to give us that optionality to have an entity that had enough EBITDA on revenue that we could either spin or split it or something. Look, we talk about it at every Board meeting. I would tell you, whether you sell it, spin it, split it off or do an RMT, numbers haven't worked out yet. It's something we look at. We don't talk about a lot because we have employees that are listening. But our view is we're not going to do it unless it creates some shareholder value. You're right, it's getting very interesting now with what we're seeing in the frac market. We could have an upswing. The issue to make the numbers work is if you were to do anything, spin-off or something like that, you wouldn't want anything oil related to have much debt at all. So that would leave a lot of the debt in the RemainCo, which would limit kind of our ability to go out and do some transactions. So that's the calculus that we continually look at. We're not under an illusion that there's a lot of synergies between the Marine and the Distribution and Services business. We kind of grew into it because we couldn't repair our towboat engines, but the good news about distribution and services, it doesn't take a lot of capital. The capital needs are really low. So we do believe we can get our returns on capital and -- through cycles. We know it cycles. But it's a good question, and it's something we look at with the Board pretty much every Board meeting.

Yes, sir?

Yes, Massi. Thank you for this. I have a handful of financial questions, and I'll just knock them out real quick. So one, I don't see your coastal business EBITDA margin broken out. Do you disclose that? I mean, could you tell us what that is?

Sure. Look at -- but the -- we used to have a margin chart in for coastal. We don't have it in the book. We change the book all the time. Yes, it's about 10% to 15% EBITDA margins, but it's been negative operating income margin. It still generates cash, obviously. I would tell you, we -- you probably saw it in the third quarter, we took a write-off on our coastal business. We exited the Hawaii business, which we were losing $5 million to $10 million at year-end. We are laying up for sale the wire equipment that we had, which -- given the market dynamics, we did -- we felt that was impaired. Just for those that don't know the offshore market, there's 2 types of barge configurations out there. One is an ATB, which the tug goes into the back of the barge in a notch and it's connected. They call it articulated tank barge. The other is a wire barge where the tug has a wire and pulls the barge. So they're disconnected. There used to be -- nobody wanted ATBs, everybody wanted wire, but now the market says that ATBs are safer, and they're less prone to weather disruptions. So the market has gravitated towards ATB. So we wrote off our wire fleet and our Hawaiian. So we've taken some tough decisions there. I think the coastal business should be back to P&L breakeven in 2022. If there's a loss, it will be a small one. We've restricted...

I think the coastal business generated a positive ROIC or -- over the past several years or...

No. '12 and '13, well, we've gotten into -- we started -- we bought K-Sea in '11. We added a couple other companies in '12. We got -- with oil being moved coastwise, we got probably into the high-teens margins in the '14, '15, '16 timeframe. But when you collectively look at it, we do not believe we've earned our cost of capital back in it.

What about the inland -- inland business, obviously, I have seen in the past. What's your target on your inland business? You said you kind of manage according to a return, what's -- what would that -- what would you recommend?

Yes. So our weighted average cost of capital is about 7.5%. Our hurdle rate is 12%. So we try and get to a 12% return on invested capital. The inland, just to put it in kind of rough terms, to get inland return on invested capital to the right range, we -- above our cost of capital, we need kind of mid-teens margins. If you look at the margin part, we've only been below mid-teens a couple of times. So I would suspect if we can get margins back into the mid-teens, we'll start earning our cost of capital, not the hurdle rate, but the cost of capital in 2022 or '23, depending on how quick the margins come back.

On the distribution, margin there and the ROIC?

Yes. Well, right now, it's low. We -- different businesses there earn different cost of capital. And I have some of that detail. We haven't disclosed much of it. Margins right now are low-single digits in operating income. There's about 5% to 7% EBITDA, so -- dock, so EBITDA margin is about 5% to 8%, roughly there.

Yes.

5% to 8%. The capital deployed is a lot less there. The ROIC probably collectively for that group right now is 1% or 2%, but we're coming out of a...

What were the cost of capital, 1% or 2%?

1% or 2%. So 6% or 7% below cost of capital.

I think cost of revenue should fall.

Revenue...

Normalized what would that -- what would you say there?

Yes, it should be right around that 8% normally.

A little over your cost?

Yes, a little over. Yes. Yes, we have actually a return on invested capital slide we can share with you. It's not in the book.

Sure -- so on the coastal -- on the coastal and inland businesses, are they co-dependent one way or another? Or are they separable?

They're separable. They are different in many respects. The common connection is the customer, right? Probably I could take Exxon and Marathon. They're both big customers in both of those businesses. Different products, but...

That is a cross-sell basically.

It is a cross-sell. But you don't need one or the other. If you look at our competitor base, we're the only ones across both sectors.

And you concluded that there was lot of different -- you concluded that you want all 3 of those lines of business other than maybe the oil and gas piece. And especially your flagship clearly appears to be inland.

Yes. I would say, the way I would phrase it, yes, we think we can earn our cost of capital in each of the 3 businesses. I would tell you, the easier one to do it in is our inland business. And in terms of deploying capital, our large highest preference is in the inland side, particularly consolidating acquisition, not building new equipment.

David, let me ask you. Kind of shifting gears here a minute. Going to this Slide 23 in this chart, on Slide 23, if we go back and look at the peak of the last barge cycle -- inland barge cycle, you're able to see inland margins in the mid-20s or so. Is there anything structural about the business today sort of following this really tough so-called 7-, 8-year period that will prevent you from getting back to this level, if not higher? I mean, I know you've been able to really take out a bunch of costs in terms of back office. You're much larger, it will be much larger the bigger the next cycle from the number of barges, so leverage should be better. Just trying to think through that. Is that a reasonable target? Is that something you should be able to exceed? Or is it going to be tough to get back to it?

Yes. I would say I'd be disappointed if we don't get back to the next cycle peak to the previous cycle peak now. Yes, when you look at that 2014, 2015 cycle of peak, we -- that was a lot of crude being moved by barge at that time. So there was a lot of extra demand. Do we have another bubble like that, that may have helped it, I'm not sure. So maybe we don't get back to it. However, fundamentally, it's a supply and demand business. And the cost of us doing our business has gone up. For example, we used to not -- we only had inspected barges, and now we've got inspected towboats as well. So that adds millions of dollars of cost. Just the environmental compliance, for example, we use 6-pound barges now instead of 3-pound barges because that has a lower emissions profile, but that's an extra 10% in the cost of the barge. So there's structurally higher cost. So in a true supply and demand business, you would think you would ultimately to keep that capital -- fresh capital coming, you would need higher margins to get -- to make those capital investments. So that would be my way to say that it should be higher, not lower. But obviously, there are so many exogenous things that can impact the market.

Sure. Absolutely. Mike, do you have a question?

You stole my question. That was exactly what I was going to ask. But I do have a follow-up on that with respect to lower oil demand in 2014. And 10 years ago, there was a bit more case for [indiscernible]. How much of that has played out? And how much of that is yet to play out overall?

Yes. Great question. So at the peak of the crude by barge market, there were probably 500 barges moving crude oil. So if you go back to 2014, 500 barges on a base of 3,600 barges or 3,700 barges. It was a huge percentage.

And a lot of ton miles too, right?

There were a lot of ton miles because it was coming from upriver and incoming from the Utica and the Marcellus. Yes, we got on our call and kept saying, don't build barges, pipelines are going to come on. And they did. And that's what happened in '15 and '16. The market got down to 133. It was kind of a low end of how many inland barges were moving crude. My estimate right now, it's about 250 moving crude. There is another pipeline coming on. It's a cap line. It's not -- it's on. They're going to reverse the cap line. That could take 70, 80 barges out of crude. But there will always be some crude moves. We'll see. With us, we have -- of our 11 -- or 1,036 barges, I think we had 52 moving crude on Monday. So I think crude will bounce around there. I don't -- wouldn't expect it to grow a lot more or -- I think there will always be some one-off moves just because of where the crude is. The offset has been the chemical. So if you saw that, where the margins were coming down from 2015 through 2017 and then started going back up in '18 and '19, that was basically -- those 250 to 290 barges that were excess got absorbed by the chemical plant build-out. And there's still some chemical plants being built. We've got a chart on that, too, if you want to see.

[indiscernible].

So we got a chart for everything. Page 14 shows all the chemical plants. You'll see all the ones in green are online, blue are announced and under construction -- or will not, they've been announced. The red are ones under construction. And there are some deferred ones, obviously. So there's still some stuff happening. It should help. It should help. But the bulk of it, as you can see, has probably played out. And that's what helped to offset those crudes. The way I used to think before crude and petrochem build-outs was that our volumes moved with GDP. And if you think about them, it kind of makes sense, right?

Just following up on that though. As we sort of look forward with electric vehicles and all sorts of things on that front, does it change the way you're thinking about the market growth? I mean, does that kind of make GDP minus versus GDP plus or GDP, the right way to think about it, given these additional investments barely coming in?

Yes. It's -- well, it's hard to be definitive. I would say, clearly, gasoline demand will go down with EVs. But we're building 3% now, but the installed base is enormous, right? And typical cars have at least a 10-year hold cycle, right, if not 15 years now. So the installed base is there. But yes, it will eat away at gasoline demand. And then ultimately, if they get EV Class 8 trucks or hydrogen fuel cell trucks that will eat away a diesel. Frankly, I don't think it's going to happen in my career in a meaningful way.

Maybe...

But I don't think it's -- maybe by 2030, it takes 1% or 2% of the refined product demand that we move away. But we've tried to pencil out. We've had consultants, and we've talked to them, and we just...

Got it.

It's hard. I will tell you, there's alternates that you should probably put in the calculus. In shipping, everybody is looking how do we get carbon neutral in shipping. So everybody loves to talk about hydrogen, but the fuel density is very prohibitive and then there's the handling problems. You can go to ammonia, but ammonia kills people very easily. So the real marine fuel is going to be methanol.

Which is great for you guys?

Which -- we're the largest methanol mover in the United States. Maersk, who is on the forefront of trying to change the shipping emissions profile, they're building 1 ammonia ship right now and 8 methanol ships. CNG and LNG, kind of everybody has passed that up in terms of ship propulsion. So as I think about things, at least on marine bunker fuels, I think it will go from heavy diesel or ultra-low sulfur diesel to methanol over time. I don't know about hydrogen fuel cell trucks and electric trucks. I think electric trucks, the range is the real problem, right? But hydrogen is -- again, there's a density -- energy to density ratio that's hard to overcome. So we'll see where it goes. Certainly, I'm not trying to dismiss EVs as a demand to structure, I think it will be there. But just in the next 10 years, I don't think it will be material.

Yes. Exactly. Richie?

Just back on the inland margins -- sorry, to get on it...

It's the future.

I am a little bit more short term. But you guys did like mid-20s margins in inland, right? And I think people expected to be like 16% in 2024. And I know you said that you can't get all the way back there because there's not much crude moving around [indiscernible]. I mean...

If we're not in...

1000 basis points seems a lot.

If we're not in 16% margins by '24, something is wrong.

Well. Yes.

Yes. No I -- maybe I misphrased your question, right? Yes. Yes. I honestly think the supply and demand dynamics are shaping up as good as we've seen in the last 1.5 decades or so.

Let me. Let me.

But I would have said that in '19, too, to being fair.

Did you anticipate a pandemic?

No. No. No.

Okay. So maybe just a kind of a follow-up on the demand side. The higher natural gas prices, David, how did that flow through and impact your business on the petrochemical side? I think there's some confusion around that.

Well, as you saw in that chemical chart, many of those were ethylene plants that were ethane feedstock ethylene plants. So ethane pretty much follows natural gas prices, right? So that's probably a negative for the straight ethane to polyethylene plant. But frankly, we don't move much associated with that because there's -- basically, you put a gas in and out comes a pellet. We don't really touch anything. We do some of the -- for example, to make linear low-density polyethylene, you need octane. So we may move a barge full of octane. But -- so that's not really going to impact us a whole lot. The good news is the heavier feedstocks on the flexi cracker has now become more economic. So if you start cracking naphtha and heavier feedstocks, there are more byproducts like butene, butane, butadiene, some pygas, there was more pygas. And all of those end up being barge moves. So it's a long way of saying, I'm not sure, but -- it...

Produces more -- it should produce more feedstock. It depends on the feedstock than byproduct...

Yes, more byproducts, which are good for barge, thanks, but the health of our chemical customers is important. So -- but their margin -- if their margin -- I mean their prices should go up too. And I think you're seeing prices for end-market chemicals are going.

And if natural gas prices though -- and again, I'm a history major, so I can barely add. But in theory, if natural gas prices in the U.S. are rising, they're also rising in Europe and other places. So it doesn't disadvantage U.S. petrochemical production, I think, that...

I think that's fair. I mean these are some of the most efficient petrochemical plants in the world, right? So -- and I also think if -- and we're seeing it in the Haynesville now on the frac side that they're starting to actually frac for gas now. So...

David, just kind of thinking of -- we're down to the last few minutes here. I want to make sure we touch on cash flow because I don't know if people fully appreciate just how strong your cash flow is, and you mentioned how much deleverage has been going on for the business here. But I want to make sure we touch on cash flow and how like that for people -- and also talk about M&A, but how do you balance that with potentially allocating some capital towards buybacks?

Yes. So Slide 43 is a good snapshot to begin the discussion on free cash flow. Slide 43, the light blue bars show our operating cash flow. The dark blue is our CapEx, right? So the point of the slide is the light blue bars are always larger than the dark blue bars. So we do a pretty good job generating cash. I would tell you, when you look at '18, '19, '14 and '15, those were very high CapEx spending years. '22, we haven't given guidance, but I would think it's on the order of $150 million to $200 million in CapEx. And I would expect free cash flow to be up from where it is in '21. So we do generate a lot of free cash flow. Our preference almost always is to find a consolidating acquisition in the inland space. I think we wouldn't deploy a lot of extra capital into the distribution and services business or even the coastal business. The only way we do it in the coastal business is wind. We are working on some projects right now to use tugs and barges to transport windmill components out to -- offshore to the installation sites. We're working with a partner. I can't tell you much more. We're under multiple NDAs on certain things. But if we were to deploy capital in coastal, it would be most likely in kind of a wind support barge or wind installation barge and tug boat. But our preference would be to do inland acquisitions to be frank and continue that consolidation. That's where we have the most leverage and synergy opportunity.

Okay. Well, great. We are out of time, but I want to thank you guys for joining us today and everyone for your questions. So thanks.

Thanks.