Tidewater Midstream and Infrastructure Ltd. (TWM) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Tidewater Midstream and Infrastructure Limited Second Quarter 2020 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to turn the conference over to your speaker today, Joel Vorra, Chief Financial Officer. Thank you. Please go ahead, sir.

Thanks, Chris. Welcome, everybody, to Tidewater's Second Quarter 2020 Conference Call. On the call with me today is Joel MacLeod, Tidewater's President and CEO. Before passing the call over to Joel, as usual, for a review of the quarterly highlights, I would like to remind you that some of the comments made today are forward-looking in nature based on our expectations, estimates, judgments and projections. Forward-looking statements we may express today are subject to risks and uncertainties, and actual results may differ from expectations. Further, some of the information today refers to non-GAAP measures, and to know more about these forward-looking statements and non-GAAP measures, you can refer to our various financial reports, which are all available at tidewatermidstream.com or on SEDAR. With that, I'll pass it over to Joel MacLeod for a review of the quarterly highlights.

Thanks, Joel. Good morning, everyone, and thank you for joining our Q2 2020 conference call. Since our last conference call in mid-May, we are pleased to say that we have seen a material improvement in our business, and we are nearing pre-COVID cash flow levels. Our Q2 was in line, where we delivered a record quarter with $41.9 million of adjusted EBITDA and an over 90% increase year-over-year on a per share basis. We see a strong second half of the year, where we are reiterating guidance of $175 million to $185 million of EBITDA. Our #1 priority remains deleveraging and free cash flow generation. And we are confident in our ability to achieve our target of 3x to 3.5x debt-to-EBITDA with the closing of the Pioneer Pipeline sale. We remain impressed by the resiliency of our business through COVID, and this is the result of the location and contracted nature of our assets, with over 70% of our EBITDA coming from long-term agreements and approximately 50% of our EBITDA from investment-grade counterparties. Over the past 3 months, we have seen our -- seen 3 of our largest customers all access capital, and again, I wish to thank our customers for their support. I congratulate the Kelt team on their sale of their Inga/Fireweed property and will eliminate all that and they will be sitting on cash. Further, we saw Pipestone Energy, one of our other large customers, access $70 million of convertible preferred equity and accelerate their capital program, and I wish to congratulate them. And last, we saw our largest customer in Husky access $1.25 billion of debt at an impressive 3.8% interest rate. Great to see 3 of our largest customers strengthen their balance sheets. Our business, although not untouched, has remained resilient, and to only to have an impact of 10% to 20% to our business has been an impressive accomplishment. We're not aware of another infrastructure company in Canada that delivered adjusted EBITDA per share growth of over 90% year-over-year in what is likely to be one of the toughest quarters of our generation. It is important to also note that we will be one of the only companies that is a leader on the recovery, and we have seen demand in diesel and gasoline increase dramatically in the past 60 days and demand is currently outpacing production at Prince George, where throughput is currently over 12,000 barrels a day after several successful debottlenecking projects. We are likely to continue to see significant government stimulus in an intensive infrastructure capital deployment period over the next 12 to 24 months, and Tidewater is positioned very well to take advantage of this. This includes some of the largest capital projects in Canada and even North America, in and around Prince George, including Site C dam, Coastal GasLink, LNG Canada and the TransMountain pipeline, all of which are multibillion-dollar projects. We have seen a significant activity ramp on Coastal GasLink, which runs just north of Prince George. Further, the activity around the Montney over the past 3 months has been significant, with Conoco stepping in and paying over $500 million for Kelt's Inga/Fireweed property and more recently, CNRL purchasing Painted Pony in the BC Montney. This further validates the prime location of our assets and infrastructure, including our Prince George Refinery and related tankage and infrastructure. To see several refineries across North America and the world realize negative margins in Q2 while our margin at Prince George has held above $44 a barrel also emphasizes the strategic nature of our assets and infrastructure. To see the Marathon Martinez Refinery in California announce closing later this year and yesterday, to see the Phillips 66 Rodeo Refinery announce conversion to renewable diesel are both very positive for Prince George as diesel and gasoline production on the West Coast will be reduced significantly, and Prince George remains advantaged with our Canadian crude supply. We continue to forecast an increase in adjusted EBITDA of approximately 80% from 2019 to 2020 and are one of only a very few companies that have 80% of per share EBITDA growth from 2019 to 2020. We do expect to continue to deliver material debt-adjusted per share EBITDA growth into 2021. Counterparty risk continues to be a focus of the market. I want to reiterate that 50% of our EBITDA is from investment-grade counterparties, with Husky being our largest customer on the 5-year offtake at Prince George. As previously mentioned, to see our 3 largest customers access material capital and improve their balance sheets over the last 3 months reiterates the strength of our customers and contracts. We currently are not aware of any material customers being at risk of going into receivership. Prince George continues to perform well, where Q2 was impacted by reduced demand in April, which quickly recovered in May and into June, and we have seen demand levels at or above pre-COVID levels for the past couple of months. Q2 was also impacted by our 2-week maintenance and debottlenecking program on the refinery where we success -- where we were successful in debottlenecking the refinery and are now seeing over 12,000 barrels a day of throughput. When we acquired Prince George, we emphasized that this would be a key defensive asset in a crude collapse. And although not completely immune, we have seen Prince George crack spreads hold at $44 a barrel or above what is likely to be the largest oil price shock that we will see in our careers. While deleveraging remains our focus, we continue to grow our significant material-related projects that are over -- or sorry, that are under 24-month payouts. Capital expenditures are currently planned to be minimal in 2020 as we focus on deleveraging. But I do want our shareholders to be aware that we do have a significant inventory, which continues to grow, of projects with 50%-plus rates of return. The Pipestone Gas Plant had its strongest run times and cash flow generation to date in the second quarter, and we expect this to continue throughout the remainder of 2020. Tidewater processed an average volume of 72 million cubic feet a day in the second quarter of 2020, an increase of 10% over the first quarter. Liquids production also increased by 65% with the commissioning of the Pembina C2+ line and the deep cut processing unit. Facility uptime and availability for the quarter averaged 96% and 92%, respectively. The Pipestone Gas Plant is fully contracted, with over 80% committed on take-or-pay arrangements. Throughput on the Pioneer Pipeline continued to be strong and is supported by a 15-year take-or-pay contract with TransAlta. The sale of the Pioneer Pipeline continues to proceed, where we believe -- where a definitive agreement was executed on June 18, and Tidewater expects to close the transaction by year-end 2020. However, delays in obtaining regulatory approvals could delay the expected closing date into 2021. We continue to be committed to our ESG performance by investing in infrastructure to increase energy and natural resource efficiency, reduce emissions and enhance environmental performance. We have developed an interface on our website for the investment community to view as part of our transparency to communicate key environmental safety and other sustainability metrics. Tidewater is evaluating certain small- and medium-scale green projects in conjunction with government funding programs at many of its sites, including our Prince George Refinery. To reiterate, after enduring what is likely the worst shock to the global economy and the oil and gas industry, we do feel the worst is behind us and we are well positioned for what is likely to be one of the largest economic stimulus and infrastructure buildout periods in our lifetime. Our business remains resilient as a result of the location and contracted nature of our infrastructure assets, accompanied with strong defensive assets. We are confident in our ability to deliver $175 million to $185 million of adjusted EBITDA in 2020, with debt-to-EBITDA, assuming the closing of the Pioneer Pipeline sale, to be 3x to 3.5x at year-end. Our focus remains free cash flow generation and debt reduction. And we do feel strongly that we can continue to show material debt-adjusted cash flow per share growth for years to come. We are also pleased to welcome Mr. Michael Salamon; Mr. Neil McCarron of Birch Hill Equity Partners; and Ms. Gail Yester to the Board of Directors. I do want to thank our staff, Board shareholders, credit syndicate partners and all stakeholders for all your support through what was likely one of the toughest quarters in our careers. We look forward to delivering strong results in the second half of 2020 and remain confident in our ability to deliver debt-adjusted per share free cash flow growth into the future. Our #1 priority over the next 6 months continues to be debt reduction and achieving 3x to 3.5x debt-to-EBITDA with the closing of the Pioneer Pipeline sale. I'll pass it back to Mr. Vorra, and he can walk you through some of the details around the financial side of our Q2.

Thanks, Joel. I'll just go over a brief overview of the quarterly highlights, mostly a comparison to Q1. Given significant changes in the business from the same period in the prior year, I think, more appropriate to compare to Q1. Starting with top line revenue of approximately $178 million. It was a decrease over Q1 primarily related to the change in commodity prices. We had a commensurate decrease in operating expenses of approximately 30%, which resulted in gross operating margin of approximately -- adjusted for hedging gains of approximately 23% versus 18% in the prior quarter. So although revenue moved down, operating costs also moved down and overall adjusted operating margin for hedging gains increased from 18% to 23% primarily as a result of increased contribution from the Pipestone Gas Plant, the connection to the Pembina pipelines and the uptime that Joel MacLeod mentioned. Adjusted operating margin was approximately $43.5 million compared to $45 million in the prior quarter, so in line and in line with our expectations given impacts from COVID in late Q1 and in early Q2 and then again saw a pretty quick recovery into the end of May and into June. EBITDA margin was approximately $42 million and 23%, again, increased contribution from the Pipestone Gas Plant being in the summer injection season, also the increased margins from gas storage, which is a high-margin business, higher margin in the summer, and then a little bit of impact in the early part of the quarter from the refinery, but overall, adjusted EBITDA of approximately $42 million and EBITDA margin of 23%. Distributable cash flow was $10.5 million for the quarter, a payout ratio of approximately 32%. We're generally targeting under 25% payout ratio for the year. Maintenance capital would have been one of the drivers for that distributable cash flow number, which was our planned 2-week outage at the Prince George Refinery, but expect that distributable cash flow number to increase and be sub-30% and even sub-25% for Q3 and Q4. Again, committed to reducing debt, of applying free cash flow to that net debt amount, net debt decreased approximately $9 million quarter-over-quarter, which I think was sort of in line with expectations, not a massive movement from Q1 to Q2, but across that number and deleveraging to increase into the end of the year. I think with that, we've touched on the main financial highlights. And I think we'll open it up to -- the call for questions.

[Operator Instructions] Your first question comes from Patrick Kenny of National Bank Financial.

Just starting with the closing of Pioneer, you're still shooting for year-end, but with respect to mitigating any delays there, can you just provide some detail on what you guys can do specifically to expedite the approval process and maybe, at the same time, just clarify what the bottlenecks are that could push closing towards mid next year?

Yes, for sure, Pat. Not necessarily an easy answer. I think we just want to assure our shareholders that it's daily. Our partner in TransAlta has been a huge help in the full-court press to move through the regulatory process. So step 1 is to make all the related filings, and we're close to doing so and then just ensuring we have all our ducks in a row to be as supportive as possible. But I want to assure our shareholders that it's all hands-on-deck. We're not all away on holidays. 50%-plus of our staff are in the office, and it's full-court press. I think some of it, Pat, we would like to keep internal and confidential, just so we don't set off any alarms or flags through the process. And overall, it's going well, and we're feeling, I would say, good about closing before year-end, but there is risk that we slip into Q1.

Okay. Fair enough. And then speaking of somewhat confidential agreements, but the Husky force majeure, I mean, didn't appear to be a big factor in the quarter at the end of the day. Like you said, June demand pretty much back to normal there. But maybe just an update on Husky potentially backfilling any volume commitment shortfall that was experienced back in April and May, potentially coming back to the remaining months of 2020 here. And if that revenue recovery is baked into your $175 million to $185 million EBITDA guidance, or does that represent a bit of upside potential to those numbers?

Yes, Pat. Husky has been a great partner. Obviously, we always got to think through risk and definitely had legal counsel ready. But to see Prince George demand recover as quick as it has, and Husky has been doing an incredible job and going out of their way. We've seen, I would say, record lifts. We've seen days where we see as much as 10,000 barrels a day of diesel-only move especially with Coastal GasLink ramping up. We get an updated forecast from Husky. And right now, they're set to meet and/or potentially exceed their offtake, which is pretty exciting. So would I say there's significant upside to our base $175 million to $185 million of EBITDA in 2020? No, I wouldn't say it's material or significant, but there's definitely some upside there and continue to see more growth in demand than we definitely would have anticipated.

Okay. Great. And then I know it's still early days on the biofuels front here or even the low-carbon fuel standard opportunities. But maybe you can just give us a sense as to what sort of capital commitment we're looking at here. And outside of the ESG accretion, I think we saw 50% IRRs in the release. Just how should we be thinking about the upside potential to your run rate EBITDA from these more green investments?

Yes. Pat, I would say it's a little early to say. Even when we acquired the Prince George Refinery, the team, Husky, the prior owner did a great job, continually received LCFS Part 3 credits, low-carbon fuel standard credits. Example would be before we took over the refinery on the turnaround, they changed the catalyst to run canola oil and co-process canola oil. So we're still evaluating if we're actually going to do that. We're continuing to work through the studies, continue to keep it moving forward and do have some Part 3 credits that we'll receive even into the end of the year. And the funding on that piece is near 100%, which has been very helpful. As we speak today, we don't have anything of significant size and scale. So we're talking about more of studies in that $1 million to $5 million round, even combined with all the pieces. I think that the larger discussions are a full renewable diesel component. But again, we would like to keep some of that confidential. And today, there's no certainty. We wouldn't even be 30%, 40%, 50% certain, but we want to do the studies, do the work. And if all goes well, we're more than happy to evaluate, and the support from even the federal and the provincial governments, maybe there is a higher probability and we're excited to explore those opportunities.

Okay. That's helpful, Joel. And then last one for me, if I could, just on gas storage fundamentals, looking, I guess, fairly attractive heading into this winter, can you just remind us, between Pipestone and Brazeau, how much is contracted versus available for you to take advantage of any strength in spreads through the winter?

Yes. Good question, Pat. I would say we're generally contracted. We would be north of 80%. That being said, we have seen, operationally, the reservoirs exceed our expectations at times. But when we look forward to the winter, I would say we're north of 80%, maybe even north of 90% contracted, with a little bit of a cushion there. So I would say there's some ability to utilize some of that space ourselves. But for the most part, we are fully contracted. Obviously, if we see some volatility in AECO gas prices, that obviously always helps storage. But for the most part, those reservoirs are fully contracted.

Your next question comes from Rob Hope of Scotiabank.

Just taking a look at PGR. With your Q1 results, you were targeting around $75 million there. We have seen demand kind of pick up stronger than anticipated, and cracks remain, we'll call it, robust. How did Q2 play out? And how does the rest of the year look versus your prior guidance?

Hi, Rob. Good question. I would say April was definitely an underperformance mainly due to demand with COVID and demand moving down. We also had our 2-week maintenance. So I want to be upfront and admit that April underperformed, but to see demand come back as quick as it did. May was probably close to in line, maybe a touch under, but with refined product pricing moving up and crude being relatively cheap, that we had moved into our tanks, May probably was in line. And then June, I would say, was getting close to kind of an outperformance month on that base $75 million of EBITDA. And we are hopeful that, that will continue here into the end of the year. We don't want to get ahead of ourselves, but we do see our daily demand. And today, things are feeling pretty darn good.

All right. That's helpful. And then when you're speaking about these, we'll call it, quick payback projects, I realize that debt repayment will be a focus over the next 6 months. But how big is the portfolio of these projects? And how quickly would you want to move on these following a Pioneer close?

Yes, Rob, we're starting with small projects. Butane blending would be a great example, kind of a magnitude of $1 million and sub-2-year payout, but we've also debottlenecked a lot of our units. We're working through our unifiner. We did debottleneck our isom unit, and our reformer were close to debottlenecking. And these are hundreds of thousands of dollars pump changes. And some are even changing valves or testing control valves. So again, our team has done an incredible job and is seeing opportunities. So if you said, Joel, the small one is interesting and helpful, I would say we're not spending a lot of time yet on big expansions. A $20 million, a $50 million, a $75 million expansion for us to have success on these low capital, high rate of return projects is meaningful, and we have to focus on deleveraging today. But over the next 2, 4, 6 months, I do think we'll have some meaningful capital projects of size and scale. I think the question will be can they truly hold sub-2-year payouts. So I would say we have an inventory of 10-plus projects, none over $3 million, to give you a sense. So we haven't been spending time on a new FCC unit, a new crude unit, a major tankage buildout. As today, it's been smaller projects, high rate of return, but over the next 3, 6 months, I think we'll start looking at some of those bigger projects. Especially if we had government funding on some of the green projects, then there is potential that those returns are strong. But we don't want to set the expectation that we have $50 million and $100 million projects today that we know are going to be sub-2-year payouts.

Your next question comes from Robert Catellier of CIBC Capital Markets.

First question is on your outlook for 2021. So if the drilling continues at the current pace, which I think we can all agree is pretty anemic, what degree of throughput declines are possible in light of the relatively high level of contracting you have?

Yes. So do you mean declines, Rob, kind of around our assets if, to your point, drilling activity stays, would we see kind of our main assets?

Yes.

So Prince George, as a refinery, we wouldn't have a concern today. There's -- the refinery is small, which is helpful. It's only a -- it's a 12,000 barrel-a-day refinery compared to the production in BC and that we can bring in. Pipestone itself is fully contracted. So it's a good point. But to see Kelt remove all their debt, now they're focused on Wembley/Pipestone and Oak, our sense is they're probably going to drill a couple of wells. I don't want to speak for themselves. And obviously, if we see a continued uptick in commodity price, they could accelerate. Pipestone Energy itself did raise $70 million on their convertible preferred and did come out and say, we are going to accelerate capital, and that's right in our backyard, which is helpful. So I would say, Pipestone, you probably see production fairly flat, and we are fully contracted. If we go to Brazeau, I want to kind of go in order of magnitude and materiality. If we go to Brazeau River, this is public data, but you would see Westbrook continuing to run one rig, which has been helpful. And we've been able to hold Brazeau volumes fairly flat and potentially even increase, with Keyera shutting in some of their plants and producers asking if they can get into Brazeau. But again, I want to be careful not to overpromise and say Brazeau River is going to have a massive ramp in throughput. I think if we said we expect it to be fairly flat, that would be conservative. Ram River itself, which would probably be our next largest chunk of cash flow, has been fairly flat, but this morning, AECO at above $2.30 is helpful. We saw Pieridae, one of our larger customers, release their results, and they generated, I think, around $15 million of quarterly cash flow. So that $2.30, $2.20, $2.10 gas price is very helpful to even Ram River. So our view would be if gas prices hold where they do or they're in line with the forward strip in oil, yes, we would probably conservatively say a 5% to 10% decrease. But as we walk through our core assets, today, we don't necessarily see a big move down. And I would say gas price would be the driver and be helpful at Ram River and Brazeau, where liquids pricing would be more of the driver up at Pipestone.

It's very good detail there. The 5% to 10%, though, it seems like a lot relative to the contracting of the tools you have at some of the plants. But maybe we could circle into the marketing business. There was a comment in the MD&A that the marketing business has found new ways to enhance producer netbacks and create some operational flexibility. Can you provide a little bit more color on that, please?

For sure, for sure. Our Pembina C2+ connection came online at Pipestone, which is very helpful to liquids marketing, to the producers. We are able to deliver a small ethane premium to producers, which, 4 or 5 years ago, even prior to Tidewater, I had never seen ethane premiums. So that comes from, initially, from Brazeau and our team doing a great job of negotiating with some of the large ethane buyers at Edmonton. So that would be a labor that Pipestone has and is significant. And even to have now the C3 molecules, the C4 molecules, tied in at Pipestone, gives us another lever to help optimize and improve customers' netbacks, but leverage some of our relationships and our railcars to find new markets. That's probably the biggest lever on the marketing piece. The refined product piece, I would say, we do expect to see dislocations, and we have seen some when we saw demand in April get crushed at Prince George. We had to get creative, leverage off some of our historic relationships and move our products outside of Prince George in the Pacific Northwest on the U.S. side, to even Eastern Canada, and our team did a great job there. So that would be another piece that we're excited to continue to grow and explore.

Okay. Final question for me is we've seen a number of cost reduction programs in the industry. I wonder if there's a similar opportunity for Tidewater. And then should we expect any other asset sales in the second half or 2021?

Yes. So cost reduction, I may get Joel to jump in. I know at Brazeau River, our team has done a great job there to find some options definitely across our assets. For the first time, as most of you know, we've been on the offensive and been very aggressive over the past 4 years. We've had time to reflect internally and optimize. To your point, I know Brazeau River is an area where we've had success, but across all our assets, we've been able to trim costs. I'm trying to think of specific examples, and I'll let Joel jump in. Can you think of any other specific examples, Joel? I know, in general, it's just grinding through costs. Even maintenance, you'll see from our quarter, we're under forecast, under budget as we speak, and it's a function of labor being hungry to work and having 5 -- 4- and 5-year history. I know it doesn't seem like a lot. But for Tidewater, it's a big deal to have 4- and 5-year history with some of the contractors. And they want to work rather than sit at home, so they're willing to bring their rates down. But Joel, anything else you think I'm missing?

No, I think I would just reiterate those comments, Rob. We were, sort of towards the end of 2019 into Q1 2020, we were in hunker-down mode. So when things started to shut down into Q1, we had put a lot of those measures in, already cutting CapEx, looking at maintenance capital. A 3-year-type turnaround will move them to 4 years, those types of things, and then even looking at vendors' operating costs at all the plants. So we had started that initiative before there was a big downturn. But I would reiterate the comments that, in Q2, we probably saw maybe even more than we would have expected, some opportunities in cutting costs. Brazeau would be the biggest example. Looking at opportunities at our other larger assets, I know the Pipestone team, we don't have 12 months under our belt yet at that plant, but that would be one we're commissioning through Q4 and then a pretty early cold winter. The team is now getting close to having a year under their belt at the plant. And I would say that's probably the next biggest opportunity, and they're laser-focused on reducing OpEx there. So a lot of it has been looked at, and we saw some of that come to fruition in Q2. But yes, there's some more opportunities. I think Pipestone might be one of the other examples. And then there's a number of optimization opportunities, even outside OpEx now, that we've had some time to focus internally.

And Rob, you had a second part to your question. I want to make sure we answered it.

Yes. Just on the asset sales, should we expect anything else on the asset sale front in the next 6 to 18 months?

Yes. I mean they're small. The pieces we're looking at are small. I think, in our previous quarter, you probably saw most of the small gain from the sale of one of our small ancillary businesses. And yes, we're working through a few others, but they're small. We're talking sub-$6 million type of pieces and even at times, maybe $1 million-ish, just to focus our staff, to your point, trim even a little bit of G&A, but focus our team on our larger contracted assets. So I would say, Rob, unlikely, you'll see anything material, but you may see a $3 million or $4 million piece or a $1 million piece even to reduce some liabilities here into the end of the year. But no guarantees. It's still pretty tough to get deals done given the uncertainty in general.

[Operator Instructions] Your next question comes from Robert Kwan of RBC Capital Markets.

First question here is just on the payout ratio. And in the first quarter, the language was for it to be under 30%. And now you've introduced that range of 20% to 30%. You mentioned earlier on the call that you're targeting potential to be below 25%. But just wondering what's -- what was behind introducing the 20% on the low end. Is that just tightening up the guidance range? Or are you looking at potential to actually modestly increase the dividend?

Yes. It's a good question, Robert. I think we're -- we've got a little more certainty on where the payout ratio is going to land. Q1, Q2 would have impacted. I would have probably told you, end of Q4 2019, we would be targeting under 20%. With Q1, Q2, that's moved up, I would say, 5% to 10%, but still expect to be well under 30%. I think we're going to see that payout ratio come down and distributable cash flow increase into Q3, Q4. On the dividend increase, it's a good question. And maybe I -- I mean I don't want to say too much, but a modest dividend increase isn't overly impactful to cash flow. But at the same time, we are focused. #1 priority is reducing debt, reducing leverage. So yes, is there a dividend increase behind that guidance? No, not at the moment, but it's something that we're always talking about, even our Board meeting yesterday, it came up. But are there plans this second? No, but it's something that we're always evaluating, and there's potential for that.

Got it. Just turning to your planned maintenance activities for the second half of the year and I guess, first, just the nature of whatever maintenance we should be aware of or downtime, and the second being just a protection of what total maintenance CapEx spend would be in the second half.

Yes, total maintenance CapEx, I would say, would be similar to Q2, maybe a little bit higher. We did defer some planned maintenance in the second quarter. So you may see Q3, Q4 come in a little bit higher. That being said, we do expect distributable cash flow to be higher. So I would still expect that metric to increase. So I would say you may have a 20% increase in maintenance CapEx for Q3, Q4. And then when we talk about downtime, I think we've got -- I wouldn't say anything material. There are 2-, 3-type day maintenance projects across the assets, but nothing material. And I wouldn't expect us to have to disclose or guide to any material downtime in the second half of 2020.

Just -- and just to add to that, so, so sorry, Rob, capital maintenance for 2020, still reiterating the $25 million range, just to help you triangulate to a number. And then as far as downtime, no, we've seen -- I think we've seen more -- definitely more downtime in the first half than you will in the second half. There's downtime anticipated at Prince George, our largest asset. And at Pipestone, you may see a day or 2 down by a small amount, but nothing material.

Just to clarify, so did I hear $25 million, but you've only done $5.5 million in the first half?

Yes. Rob, there's some tank maintenance at PGR that wouldn't result in some downtime, some of that potentially. I think we're still evaluating whether we end up in Q4-ish or we end up in 2021. Our prior guidance would have been $25 million. I'm not saying we're going to come right on the nose. We may come a snick under, but that's a result of pushing some of that potentially into 2021, that could also happen late Q4.

So there's actually a fairly material pickup on a quarterly run rate basis into Q3 and Q4, or however it falls versus what you did in Q2?

I think we just want to give ourselves room to go back to our initial guidance on -- and public guidance would be $25-ish million of capital maintenance in 2020. Some of it will be COVID-related, work-related to get a few additional tanks ready to go before the end of the year, is ideal, but to Joel's point, some of it may slip into Q1 of 2021.

Got it. If I can just finish on leverage, I think it's very clear that the #1 focus is to get into that 3x, 3.5x range post Pioneer. But you've also put out the 2.5x to 3x long-term range. And I guess I'm wondering, is there some color you can give as to over what time frame you want to get there. Or put differently post Pioneer, do you stay capital-light until you get below 3x, and does 3x then form a ceiling for any other larger initiatives as you go forward?

It's a good question, Rob. For now, we're focused getting down to 3x to 3.5x, and then two, it will be a function of our cost of capital. And I think if the market signals by our share price moving up, we will start to consider capital projects. But to your question on the dividend, that was also a question from our Board as well. Again, there's no commitment to bump our dividend. But when we receive that $138 million from the Pioneer sale, we need -- we're starting to determine how we're going to deploy that capital. #1 is definitely debt repayment. But to your point, at what point do we start to allocate free cash flow or a portion of that $138 million to capital projects, it won't be significant initially unless the market signals that they're supportive of us going back into growth mode. But right now, we feel it's very clear from our shareholder base to focus on deleverage, get to 3x to 3.5x. And longer-term, we would like to be down in that 2.5 to 3x range. But depending on the opportunity as well, the rate of return, the contracted nature of the opportunity, we may look at capital projects. But for the next 6 to 12 months, deleveraging, and you won't see any material capital projects.

There are no further questions at this time. I will now return the call to our presenters.

Thanks, everyone. We really appreciate your time today, all your support, and have a good day.

Thanks, everyone.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.