KNTK - NASDAQ

Hello, everyone, and welcome to the Kinetik First Quarter 2023 Earnings Call. My name is Chach, and I'll be the coordinator for this conference. After the presentation, there will be a Q&A session [Operator Instructions] And now I will hand over to Maddie Wagner, Director of Investor Relations, to begin. Please go ahead.

Thank you. Good morning, and welcome to Kinetik's First Quarter 2023 Earnings Conference Call. Here with me is our President and Chief Executive Officer, Jamie Welch, as well as Matt Wall, our Chief Operating Officer; Steve Stellato, our Chief Accounting and Administrative Officer; Tod Carpenter, our General Counsel; Trevor Howard, our VP of Finance; and Chris Kendrick and Tyler Mylan, our VP of Commercial. The press release we issued yesterday, the slide presentation and access to the webcast for today's call are available at www.Kinetik.com. Before we begin, I would like to remind all listeners that our remarks, including the question-and-answer section will provide forward-looking statements, and actual results could differ from what is described in these statements. These statements are not guarantees of future performance and involve a number of risks and assumptions. We may also provide certain performance measures that do not conform to U.S. GAAP. We've provided schedules that reconcile these non-GAAP measures as part of our earnings press release. After our prepared remarks, we will open the call to Q&A. With that, I will turn the call over to Jamie.

Thank you, Maddi. Good morning, everyone, and thank you for joining us today. As the degree of interest in the Kinetik story increases, we have decided to shift our approach to our quarterly calls. We will be more selective with our prepared commentary to avoid unnecessary repetition with our press release and accompanying earnings presentation. Our goal with this change is to be respectful of your time and emphasize more of an open forum with the broader leadership team, which we hope leads to a more interactive and informative Q&A session. So let me get started. Yesterday, we reported first quarter 2023 adjusted EBITDA of $187.5 million, in line with our internal budget. Beginning in March, we saw a ramp-up in activity and volumes across our system. To put things into perspective, most of our turn-in-line activity in any year and certainly after winter storm Yuri occurs during late first quarter and continues through the third quarter. We expect 70% of our new wells connected to the system in 2023 to occur during the 6-month window from March through August. Today, gathered and processed natural gas volumes are at all-time record highs. In April, we processed an average of 1.52 billion cubic feet per day, representing a 21% increase over the equivalent fourth quarter 2022 volumes. We expect sustained momentum throughout the year, supported by an active customer base and our performance from recent wells connected to the system. We are certainly seeing rising GORs across our system, indicating that the basin is getting gassier. To succinctly frame our situation, we exceeded our 2023 exit rate guidance of 1.5 billion cubic feet per day of processed volumes in April and currently expect to exit 2023 at 1.6 billion cubic feet per day of processed volume. This new exit rate represents a year-on-year increase of over 25%. In late March, we closed on a small acquisition of a midstream infrastructure system in Reeves County, supported by a new 20-year agreement with one of our largest customers. The $65 million acquisition represents a less than 4x EBITDA multiple right out of the gate. We also executed a win-win incentive agreement with the customer, accelerating additional near-term drilling activity on dedicated acreage for gas processing and produced water services. The material revenue uplift from this incentive program will effectively start in 2024 and results in less than a 4x setup multiple. As Kinder Morgan remarked last week, we are making progress on the PHP expansion. However, due to supply chain constraints for certain components and materials, the expected in-service date has been delayed to December 2023. During the first and second quarters, we have actively hedged our 2023 and 2024 commodity exposure. As of March 31, 94% of our remaining 2023 gross profit is from fixed fee contracts and hedges. We now anticipate achieving the high end of our 2023 EBITDA guidance of $800 million to $860 million, even with the delay in service of the PHP expansion. Our exit rate for 2023 is now well over $900 million of annualized EBITDA and our EBITDA step change from 2023 to 2024 remains intact. Our 2023 capital expenditures are trending towards the upper end of our guidance range, due principally to the accelerated producer activity requiring additional compression to support these higher volumes. We are continuing to evaluate portfolio monetization opportunities, particularly our stake in Gulf Coast Express pipeline as a means to accelerate the achievement of our capital allocation priorities. A potential monetization of GCX would have an immediate impact to the DRIP, accelerate the achievement of our 3.5x leverage target and allow us to pull forward the point at which we return capital to shareholders. On the operations front, our team has done an exceptional job ensuring flow assurance and reliability for our customers while keeping operating costs down. Despite higher-than-expected volumes and continued materials and labor cost inflation, remaining 2023 operating expenses are right in line with internal expectations from our budget in February. In April, we placed the Diamond Cryo expansion in service. The project was both on budget and on time. Now our installed processing capacity exceeds 2 billion cubic feet per day. Our gathering system expansion into Lea County, New Mexico is proceeding as planned. The project is on budget and on schedule and should be in service in January 2024, well ahead of the expected contract start date of April 1. We are currently in commercial discussions with several New Mexico producers and are excited about the potential near-term opportunities. We will continue to provide more commercial and operational updates related to our New Mexico activities as they occur. Delaware Link, our 30-inch residue gas pipeline to Waha is on budget and on schedule. We are targeting an in-service date in October. And with that, I'd like to hand the call over to Trevor Howard, our VP of Finance.

Thanks, Jamie. We reported pro forma adjusted EBITDA of $187 million in the first quarter of 2023. Looking at our segment results, our Midstream Logistics segment generated an adjusted EBITDA of $119 million in the quarter. As Jamie mentioned, we saw a ramp-up in volumes beginning in March, and we have seen meaningful growth in April, which will benefit our second quarter and full year results. Shifting to our Pipeline Transportation segment, we generated an adjusted EBITDA of $72 million, up 4% year-over-year. Growth within the segment was driven by volume and margin expansion at Shin Oak and Epic crude as well as the receipt of a tariff settlement at GCX. Throughout the quarter, we de-risked and strengthened our balance sheet. Through our commodity hedging program, we reduced our remaining 2023 commodity linked gross profit to 6%, down from 10% when we initiated 2023 guidance. Next, from a capital investment standpoint, total capital expenditures for the quarter were $121 million, which is approximately 23% of expected capital expenditures in 2023. $49 million was within our midstream logistics segment and $72 million was at the Pipeline Transportation segment. For the quarter, we generated an adjusted distributable cash flow of $127 million and free cash flow of $26 million. Turning to the balance sheet. Kinetik exited the quarter with a 4.0x leverage ratio. Furthermore, we swapped a significant portion of our floating interest rate exposure to fixed in March. In total, since our comprehensive refinancing last June, we have executed $2.25 billion of fixed rate swaps for the May 2023 through May 2025 period. Our average swap rate implies an attractive 6.1% average cost of debt across our bank facilities and our 2030 senior notes. Currently, only 8% of our total current debt is exposed to floating interest rates. On April 19, we declared a $0.75 per share quarterly dividend to be paid on May 17. This represents a dividend coverage ratio of approximately 1.2x for the full quarter. During the first quarter, we opportunistically repurchased approximately 82,000 shares for $2.4 million under the previously announced $100 million repurchase program. The repurchase Kinetik shares will partially offset share issuances under the DRIP. Turning to our sustainability initiatives. I am pleased to share that we have made significant progress. We reduced our 2022 Scope 1 and Scope 2 greenhouse gas emissions intensity by 8% as compared to 2021. Similarly, we reduced our Scope 1 and Scope 2 methane emissions intensity by 13% year-over-year in 2022. This was achieved in part through our LiDAR program, compressor blowdown best practices and new equipment installations. As a direct result of our emissions intensity reduction efforts and corporate diversity initiatives, we achieved our sustainability-linked financing framework performance targets for 2022, which will result in interest savings beginning in July 2023. And with that, I would like to open the lines for Q&A.

[Operator Instructions] The first question today comes from Spiro Dounis from Citi. Please go ahead.

Thanks, operator. If we could maybe start with Gulf Coast Express. It sounds like you're moving a little bit closer there to a more formal sales process. Team, can you maybe talk a little bit about the timing around that? And if you could maybe even see recommencing the dividend growth as soon as this year and now we until 2024? And then lastly, if there's anything else you'd consider maybe less core to you?

Spiro, I think as far as GCS is concerned, obviously, we are ready to start formally exploring the sale of that particular interest as evidenced by the fact that we put it in writing as part of our press release. I think that process typically should take you inside 3 months. So look, I think expectations if a successful outcome was to eventuate, which we, I think, feel a high degree of conviction with would see an announcement in or around that second quarter earnings for us in the beginning of August, which would obviously be ideal. As far as your question on accelerating the potential for the dividend, we still obviously have a significant capital program that we need to knock down for the balance of this year. Obviously realizing significant proceeds from a GCX sale at a very attractive multiple would make a significant inroads from both a balance sheet credit profile standpoint. And I think set you up for achievement of the capital allocation priorities and targets that we've laid out and identified for 24. It's a long way of saying, I think the first thing is to moderate the DRIP. That obviously reduces dilution to our equity holders. I think that's the first step. I think 24% is probably the first time that one could reasonably and conservatively consider doing something on the dividend or otherwise incremental return of capital to shareholders.

Got it. That's helpful. Second question, just thinking through 2024 CapEx. It sounds like activity levels have picked up dramatically since the last update, as evidenced by your guidance increase here. I remember last quarter, you sort of talked about this less than $150 million of CapEx for 2024. Is that still a good number to use here or we see pressure higher?

I think that's still a very good number to use. I think we have been very consistent in our discussions, whether it's with you or investors in general that we will walk the talk. The only thing that you see in the context of this picture, particularly when you look at the investor presentation that we put out on Slide 5, is if that ramp continues into next year, what we should -- what investors and you and we should be discussing is, are we FID at the end of next year a new processing facility. And if so, well that is because this trend line, I think what has surprised us Spiro, is the outperformance is not specific to just one particular producer. We probably have almost a handful that have brought wells online in areas that are dedicated that have far exceeded type curve expectations. And we have a lot of data to look at type curves. And we've been in this basin now for 10 years. So we really think that we actually understand the nuances of the rock. But what's interesting to us, whether it's Cowen, whether it's Diamondback, we see it with PR, most recently with Caterra with -- back on their resolute acreage. The results were just were quite surprising. It's positively surprising. So what that tells us is the basin is just getting gassier, much, much gassier. And so this ramp on Page 5, it is not unreasonable to expect that extrapolation of growth will continue, and you will be knocking down that remaining balance of $400 million of open space within a very short space of time.

The next question on the line is from Tristan Richardson from Scotiabank. Please go ahead.

Just maybe curious on the volume ramp you're talking about, particularly in April. Maybe just where are you seeing the concentration of that strength? I mean, is this some of the new projects added in June of last year, some of those step-ups in MVCs, the DXL contract. Just maybe kind of curious where you're seeing some of the strength on the volume side.

Sure. Good morning, Tristan. And I didn't think you changed your name, but that's okay. I think the long and the short of it is, we are seeing it in various pockets more on the Northern end and certainly on the Western end in the context. We've always known the Western side of our system is very, very gassy. But we're seeing it also in particular -- as we sort of migrate up into Reeves County -- the top end of Reeves County up into Loving County. I think it is not a case that we have a little bit of catch-up on some of the MVCs because as you -- as we announced back in February, we saw a little bit of softness in the context of volumes versus the MVCs for at least one of our customers. But that is, I would say, inconsequential relative to the real driver here. And the real driver here is it is the handful of producers I talked about and their level of activity. What you and I have talked about before is so much of our activity is a March through August. That is pretty much we see the cadence for our customers. And I think more generally, particularly post Winter Storm Uri. I think Winter Storm Uri changed producer behavior. People are very reticent to bring wells on in February and rightfully so. I mean that was catastrophic. It was a tragic event and one that obviously had significant monetary consequences for everybody, including producers. And I think they've learned and said, look, the better part of ALLY is why don't we think about our turn on live forecast really starting at the beginning of March and ramping forward through the end of -- going into September, October. That's the time frame you think about. And November, December can be sort of a little bit of potluck because it depends on how people are tracking, I think, in large part, particularly for the public against their guidance. So I think just generally, we've always looked at Central Southern Reeves as being solid, not spectacular. We're now seeing some really outsized performance. We are seeing some different ventures, and we are seeing some of the benefits of these different benches. And I think that is a real -- that really does move the needle as far as GORs are concerned and overall activity. It does make for Matt's job and Lane, who runs of their job of challenging -- of how to balance the system and more importantly, get the compression in the right places, right? So sizing compression and getting it to where it is. And this is all within sort of what I'll call the footprint we have today. The commercial guys are actively engaged in New Mexico, and that changes the game yet again for us, right, because it's an entirely new catchment area for us. underpinned by that contract that starts in April, which is imported by one of our largest customers in that large NBC. And there is significant activity up there that we are able to capitalize on with customers that I think have become very comfortable and are very happy with our overall performance and execution.

Appreciate it, Jamie. And then maybe just on the tuck-in in Reeves County. Just thinking about the 4x multiple, do we grow into that over time? Or is that sort of just base EBITDA, what you're seeing today? And then maybe also thinking -- I appreciate the commentary on the high end of the guide, thinking about that maybe splitting between volumes coming in ahead of schedule versus the contributions from the infrastructure system in Reeves?

So as far as the midstream acquisition we did, the $65 million, we said it's less than a 4x acquisition multiple. That's out of the box, right out of the gate. It is a very small -- it is a smallish produced water gathering and disposal asset. It's with our friends at Permian Resources. We have a tremendous amount of respect for these guys. If nothing else, I think Will and James have done a phenomenal job of growing that business and very creative. And we love doing people with creative people -- and we love doing business with creative people. And so then we looked at it and we went, this is a win-win for both of us. From our standpoint, the actual that system sits on acreage that's already dedicated to us from a gas standpoint. So we actually know the entire footprint. From their vantage point, they -- I think they've been very impressed and happy with our overall run times and overall consistent performance. What is important for them as they thought, as we said, well, that's just a tip of the iceberg. The real sizzle on this is to create a unique alignment with them and us to accelerate drilling on some of the gassier acreage they have, which is the legacy Centennial Silverback acreage and give them an economic incentive to do so, that to them is the equivalent almost of a contribution in aid of construction. It's just one more ingredient that goes into their decision on where they allocate capital for the drill bit. And from our vantage point, it allowed us to accelerate activity over and above their base plan. And that was really the interesting thing. So what that meant was money was -- we gave them the $60 million. They are basically being held to account. They've got to actually execute a certain amount of lateral foot. It's done by a particular area, and it gets measured on a very -- on a high-frequency basis. And you'll see in 2024, the upside over and above base plan, which when you look at your numbers, Tristan or you look at your peers, their plan is pretty much predicated into your 2024 number already. This is upside. So if you look at the 60, we said it's less than 4x. So say, on -- just on the gas side, it's going to be more than $15 million of incremental EBITDA that you'll see. And what we like about it is we've got -- as I said, it's one of our more tenured or seasoned contracts. So the rates are good. We get to control residue, we get to control -- we've got NGLs. So the gas value chain to us was the critical component of coming up with that creative arrangement. So that's -- when you look at it, your last piece, which was your last question in the context of how much is outperformance. I would say the overall increase just because of the water business is in the sort of teens as far as contribution. The balance is outperformance. Offsetting that, puts and takes. Obviously, we said PHP. We had already made adjustments with Apache. So we've got those takes and the gives were, meaning the positive contributions were the outperformance and this sort of acquisition. So I feel really proud of the team that, look, at this point in time, with all of the volatility we have. And obviously, things don't go quite according to plan that we are looking at that high end of our $860 range as far as EBITDA for this year.

The next question is from Indraneel Mitra from Bank of America.

Jamie, I wanted to take the other side on the GCX sale, I know you want to get to investment-grade status as fast as possible. But I know the rating agencies also look at scale and getting to $1 billion of EBITDA as well as earnings mix. So you'd be giving up, let's just say, roughly $50 million of high-quality take-or-pay contracts and moving more towards the GMP side, which has more volumetric risk. How do you weigh those issues and when you consider the sale in the coming investment grade with the sale of GCX?

Indraneel, it's a very good question and one we debate -- we have debated numerous times. And I think the way we look at it is this, yes, it is $50 million of high-quality cash flows. And, what's interesting on the midstream logistics business, take it from what we have actioned in the last 12 months, our biggest announcements have all been backed by large-scale commitments and slash MVCs, right, MVCs. And the counterparties that we've been signing MVCs with are of the same quality as underpinned shippers on GCX. In other words, strong investment-grade counterparties. And so we look at that and say, well, what's the difference? An MVC is an obligation to pay money, an obligation to take or pay and ship on a pipeline is an obligation to pay money, if deficient. It's one and the same. So I do agree with you, but I think we've looked at it and said, listen, that yes, it means that pipeline transportation would go down by $50 million. Obviously, offsetting that, you obviously have the increase with the expansion for PHP coming up. And the MVC contributions, most recently with New Mexico, the two that started in October, we've got more in the hope, all of MVCs. I think by moving to an MVC, we're moving to a more de-risked GMP business that has typically existed within the footprint of the Permian. And I think that, to me, sort of can offset the question on cash flow risk.

Indraneel, this is Trevor. I'm just going to jump in. I think one other point that's important is with our stock right now trading with a double-digit yield, it's a cost of capital discussion at this point. And so with using GCX proceeds, which on an unlevered basis, compared to our sale could be a less than 10% cost of capital, and you're subsidizing that instead of dripping is really how we're looking at it at this point. And frankly, from our vantage point, to the extent that we're able to significantly reduce or turn off the DRIP, when you actually look at it on 2024 numbers, it's accretive to per share financial metrics. Which is a little bit unique when you think about selling an asset to pay down debt. And really, the offsetter is that you're avoiding a fair amount of dilution that would otherwise take place in the third and fourth quarter dividends.

But to be fair, there is some capital intensity associated with the G&P business, right, to get that extra business. So how do you look at that when you look at adding the incremental EBITDA from GMP versus what you already have with GCX?

And that's -- and look, that's a fair comment. I think the way to look at it is when we announced the deals with -- in October, the build -- the overall capital was pretty -- was very manageable. And it was less than a 1x build for probably 1 in contracts and virtually nothing on the other. We -- as we think about the straw into New Mexico, that obviously has with it, the capital component and the -- but once we put the store in, we're able to source additional capacity over and above the MVC obligation that obviously bring without incremental -- without significant incremental capital that brings, obviously, the overall multiple down and get to your return and recovery of capital. So I -- look, I do hear you versus $50 million. You don't have to putting more capital in, it's money that's sunk and you just get that for -- on the remaining contract life. I think as Trevor mentioned, it's -- I would say the driver for us is not as much just because we don't control the rating agencies, the investment grade. It's getting to the 3.5x and it's really being able to, in fact, take -- be on the front foot as it relates to the balance of our DRIP through '23, which, as Trevor pointed out, equity is expensive and that DRIP obviously, every quarter given the magnitude, that creates significant incremental shares, and we've managed it and we see a way to actually correct that and actually now change the overall dynamic.

Okay. Understood. And if I could sneak one more in there. Could you comment on what the initial build multiple is for the New Mexico contracts to build the pipe from New Mexico down into Texas. And then I understand that build multiple is going to compress over time as more volumes are able to flow into that pipe. So what is the maximum volume that you can flow, I guess, into that 20-inch pipe that you're building across the state when we look at it? And what is the build multiple now? And what do you expect it to eventually drive into?

So the build multiple today, just based on the MVC is less than 5x. It is the 20-inch can move about 200, 250 that we can move across that pipeline. And so if you add incremental volume, you would bring that multiple down by half? I think it's very compelling. I mean I don't know too many deals that you can do that sort of like at a 2.5 multiple if you sell it all out. So that should be a pretty good proposition.

That's why I ask...

Yes, Neil, just one more thing just in conclusion, kind of combining those last 2 questions together. I think another thing in how we're thinking about the GCX sale is free cash flow from our business today is being earmarked towards deleveraging. And to the extent that we can subsidize incremental growth projects that are mid-single-digit multiples, with harvesting a double-digit multiple sale allows us to recycle in an accretive way capital back into the business, which we think is value accretive to shareholders.

The next question is from Keith Stanley from Wolfe Research. Please go ahead.

So first, just curious if you see any potential for other tuck-in type acquisitions with your existing customers like you did with the water system agreement today? And just any general commentary on how many of your customers still own midstream related assets in your areas?

There's probably one or two that -- and I think they may be of an even smaller size. So you got to ask yourself whether it's worth it. But I think we're a creative bunch Keith, as you know, and I think we've got some ideas on doing some things. We're always looking to try to create what we think are great win-win opportunities for customers that obviously give them -- that creates the right alignment on both sides. So I would say it's not -- there's not an abundance. Don't expect that there's 15, it's like one or two that potentially could fit that opportunity set.

Got it. And sorry to beat the dead horse here, but one just clarifying one on the potential GCX sale. So you made it clear the priorities to turn off the DRIP. I guess one alternative you could do is to use proceeds to actually repay debt and get to the leverage target sooner. Do you see that as one option on the table? Or do you see achieving the leverage target as more just a function of EBITDA growth into next year?

Do you want to take that?

Yes, sure. Thanks for the question. No, I mean, really, the DRIP right now is being used towards deleveraging. And to the extent that we're successful with the sale of GCX, that will get us very close to achieving our capital allocation priorities. And so when we get to that point, and we actually are ready to present the results, we're going to also provide an update on the DRIP and what that could look like. But the intent is that we're trying to get to our 3.5x as soon as possible. And so that -- I guess, that message from us is still intact. But I don't necessarily think that you need -- you definitely -- you don't need to do both in order to achieve that 3.5x leverage in the near to intermediate term.

[Operator Instructions] The next question is from Robert Mosca from Mizuho Securities. Please go ahead.

Just a follow-up on the incentive agreement. Are there any specific return requirements within that arrangement or the penalties like only tied to activity. I think you mentioned the lateral foot metric. Just trying to understand how sticky that reference 4x multiple is beyond 24 or I guess whether you're a familiarity with the rocks kind of with these comfort that those return thresholds are going to go that in a certain amount of activities undertaking?

Yes. So Rob, I see -- if I think I understood the question. The question was how much insight and how confident and comfortable are you in the context that the overall are the ingredients that go into that incentive arrangement. And I had mentioned on my prepared remarks, actually on one of the questions, the dollar per lateral foot. Short answer -- now, so let's knock down each component. First, this is one of -- these are 2 of our most tenured contracts. In other words, we have lived through a lot of drilling activity on these -- this particular acreage positions. So we know the rock very well. We've got years and years of data, right? And so we know what is higher GOR, what is lower GOR, the overall contracts themselves are slightly different. One has a percentage POP in it. One is more fixed fee. And I look at -- we look at it and we say, it was -- it starts as of -- year -- sort of towards the end of this year because obviously, when we've closed the deal at the end of March, it's hard to change drilling activity within the current year. And so the PR guys said, listen, by the time we start to basically adjust what we're going to do on this acreage, it will be fourth quarter before we're starting to think about drilling. And therefore, 2024 is when you see the benefits. The benefits happened, as I said, it's on a -- we have on a regular frequency basis. It's measured every 6 months. There is a -- you either drill to a certain lateral footage depending upon which area you've got. And if you don't drill, then there is a refund and that includes a -- I would say, a penalty, which is far in excess of our cost of capital. So there's quite a bit of detail into how it all works, but our confidence level is 24 is solid in the contrast of that 4x, we should see significant activity through '25 and through '26. So I think you will see it's a nice accelerated runway on that acreage that's got still a lot of remaining inventory on it. And I think as I said, it's a very -- it's a nice win-win arrangement with the folks at PR.

Great. That's helpful color, Jamie. And maybe switching gears. I guess even with the increase in the trust and volume exit rate, you still have a lot of spare capacity on your system. And I'm wondering if the conversations around offloads are changing at all? I think you've noted the rising Permian GORs. And it just seems like some of your peers might be more comfortable building plants now. So the expectation that your dedicated volumes are going to be with filter capacity rather than offloads?

So I think the first thing, Rob, is offloads aren't a core part of our business. We get very few offloads. For us, offloads maybe we got a plant down for maintenance. And that's about it. It might be for a couple of days. It may be 3 days, it may be for 1. Yes, who knows. Or it may be an unexpected outage, but it's not something we forecast, and it's not something that when we talk to you, offloads are never really -- are never part of the narrative. They are never part of how we think about our business. So we've never thought about that in the context, look, we'll get all these uploads. That to us would just be gravy, right? Something we just didn't expect, Manna from heaven, maybe a better way to describe it. The way I think we think about the overall basin, as evidenced by we saw Target with long lead times this morning. We saw Western make an announcement that they may need more capacity, more pricing capacity. All of those things, I think, point you in the direction that the basin is getting gassier, yes, activity remains strong. Obviously, it's very different than making a decision then on a purely dry gas basin, such as the Haynesville, Marcellus, Utica, where obviously, gas prices start to impact drilling activity. But from our vantage point, we still -- in fact, what's interesting to us is we believe the narrative by getting into New Mexico would open up a significant volume opportunity for us that we will be able to capitalize on. And thus far, in the now almost 3 months since we announced it back on February 27, it has not -- it has certainly lived up to expectations. I think we are incredibly excited by the -- all the opportunities that we've got in front of us and that will allow -- see us, obviously, not just sell out the balance of our $400 that you would see against the 1.6 expectation into this at the end of this year but also think about the prospect of adding additional capacity going into late next year and thinking about and making an announcement on a build at that point in time.

We have no further questions. So I'll hand back to Jamie to conclude.

Thank you very much for your time. I know it's -- everyone's slammed right now just given the announcements on earnings from everybody. So we look forward to seeing you at EIC in the next couple of weeks. Thank you.