Tammi Price - VP, IR & Corporate Development Stew Hanlon - President & CEO Don Fowlis - CFO Cam Deller - Manager, IR

Linda Ezergailis - T.D. Securities Rob Hope - Macquarie Matthew Akman - Scotiabank Jeremy Tonet - J.P.

Morgan Robert Catellier - GMP Securities Andrew Kuske - Credit Suisse Dirk Lever - AltaCorp Capital Robert Kwan - RBC Capital Markets Steven Paget - FirstEnergy Capital David Noseworthy - CIBC David McColl - Fort Washington

Thanks, Girod, and thanks everyone for joining us this morning. During today's call, forward-looking statements may be made.

These statements relate to future events or the company's future performance and will use words such as expect, should, estimate, forecast, believe, or similar terms. Forward-looking statements speak only as of today's date and undue reliance should not be placed on them as they are subject to risks and uncertainties, which could cause actual results to differ materially from those described in such statements.

The company assumes no obligation to update any forward-looking statements made in today's call. Any reference during today's call to non-GAAP financial measures such as EBITDA, adjusted EBITDA, pro forma adjusted EBITDA, or distributable cash flow is a reference to financial measures, excluding the effect of certain items that would impact comparability.

For further information on forward-looking statements or non-GAAP financial measures used by Gibson, please refer to the 2015 second quarter Management's Discussion and Analysis issued yesterday by the company, and in particular sections entitled Forward-Looking Statements and Non-GAAP Financial Measures. All financial amounts mentioned in today's call are in Canadian dollars unless otherwise stated.

Joining me on the call today are Stew Hanlon, President and CEO; and Don Fowlis, Chief Financial Officer. The format for the call will be that Stew will provide an overview of our results and Don will highlight a few items regarding our financial position and capital spending pounds for the remainder of 2015 and into 2016.

This will be followed by a question-and-answer session. Cam Deller, our Manager, Investor Relations, and I will be available after the call to answer analysts' modeling questions.

With that, I'll turn it over to Stew.

Thanks, Tammi, and good morning everyone. We are happy to have this opportunity to update you on our second quarter in which we generated $425 million in pro forma adjusted EBITDA on a trailing 12-month basis.

Adjusted EBITDA of $76 million in the second quarter represents an approximate 9% reduction over the same period in 2014. I am pleased with our overall performance in the face of industry-wide headwinds and non-recurring impacts in certain of our business segments.

Most importantly, I believe these results reflect the resiliency of our business model, given the volatile and difficult environment we faced. That resiliency, coupled with our large liquidity position, low leverage, and conservative payout ratio makes us confident that we will continue to execute on capital projects and grow our dividend going forward.

In the second quarter, spot WTI price increased by approximately 20% and Canadian heavy oil prices increased by 27%. While we were pleased to see that our customers are benefitting from improved cash flows, extremely tight heavy oil differentials we witnessed in the second quarter, at some point as low as $7 per barrel, reduced margin opportunities in our marketing segment.

Furthermore, despite the improvement and stability in oil prices in the second quarter, oilfield activity levels remained depressed. These conditions resulted in continued weakness in both of our Environmental Services and Truck Transportation segments.

Offsetting this, were strong results in Terminals and Pipelines which reflect our continued infrastructure focused investment thereby increasing our take-or-pay based revenue and helping to somewhat mitigate against commodity price volatility. I'll now discuss the individual segment profits in more detail.

As I mentioned, segment profit in our Terminals and Pipelines business was strong, increasing 45% over the same period last year to $35.8 million. This year-over-year growth was possible due to the commissioning of 1.7 million barrels of new storage capacity, the unit rail loading facility, and the enhanced connectivity to the recently twinned Cold Lake pipeline at Hardisty.

This new storage and pipeline infrastructure is underpinned by long-term take-or-pay contracts and enabled us to increase the average total Hardisty terminal throughput volumes to approximately 550,000 barrels per day in the second quarter. I'm particularly proud of how well our terminals and pipelines and marketing teams collaborated and worked together to enable us to achieve the record volume throughput, despite challenging conditions created by unplanned supply disruptions in the quarter.

As previously announced in April, we secured commercial support for the construction of four additional tanks at our Hardisty terminal creating 1.8 million barrels of new storage capacity. These latest tanks, along with other tanks currently under construction, will result in 2.9 million barrels of additional storage capacity at Hardisty, bringing total storage capacity to 8.9 million barrels by mid-2017.

Also underway at Hardisty, is our connectivity enhancement project related to the twining of the Athabasca pipeline, which is progressing on budget and according to plan and which will bring additional volumes to the terminal upon completion. In addition to the expansion initiatives at Hardisty, we're currently constructing a 300,000 barrels storage tank and expanded rail loading capability at our Edmonton Terminal.

As highlighted in our second quarter press release yesterday, we have maintained our 2015 capital spending plans for this segment and continued to expect strong segment profit growth in our Terminals and Pipelines business well into 2017. Our Environmental Services business earned segment profit of $15.1 million in the second quarter, which is a reduction of approximately 30% year-over-year.

Due to continued weak oil build activity levels, we experienced a 44% reduction in production services revenues when compared to same period in 2014. This service line is leveraged to drilling and completion activity, in addition to ongoing production maintenance.

And it was impacted by unprecedented depressed activity levels. As an example, horizontal well completions from U.S.

Bakken declined an additional 15% sequentially in the second quarter. Our environmental services include handling business line was also impacted but to a lesser extent, as taper and crude oil production levels in our market areas began to reduce volumes.

In response to this challenging environment, we have, and continue to take steps to reduce costs and create efficiencies, primarily through payroll reductions and supply renegotiations. These initiatives helped us to improve our gross margin percentage in the second quarter by 2%.

We currently have four organic projects underway to build or upgrade processing recovery and disposal for PRD facilities in Canada. These projects remain on time and on budget and they will start to contribute cash flow near the end of 2015.

Given marketplace uncertainty, we have elected to defer new PRD construction in the U.S. that was planned to cost approximately $29.

However, we remain committed as activity levels warrant to organically grow our environmental services business in the U.S. Further on July 1, we acquired T&R Transport, a transporter of oilfield water and waste for approximately $35 million.

The acquisition completes the vertical integration path and is a synergistic fit with our oilfield waste and production treating facilities in the U.S. Bakken.

The acquisition of T&R gives an expanded customer base in the basin and should increase volumes at our Bakken facilities by creating efficiencies in our operations. Segment profit in Truck Transportation division was $13.1 million in the second quarter of 2015, down approximately 34% from the same period in 2014.

We experienced a 15% year-over-year reduction in volumes. Our Canadian operations were more significantly impacted this quarter with some contributing factors being the curtailment of certain uneconomic heavy oil production, a reduction in new well activity, and intense competition resulting in us rejecting certain business that did not meet our economic or safety thresholds.

We are responding to the weak environment by repositioning assets to basins where logistics demand remains solid. Additionally, we are undertaking further cost reduction initiatives; irrespective of the important role transportation has in the integration of overall GEI operations.

Our outlook for oil related development in North America in the second half of 2015 has weakened in recent weeks. We now expect crude oil prices to remain lower for longer.

Therefore, we expect that the year-to-date performance in this segment is representative of performance for the remainder of the year. Propane and NGL marketing and distribution segment profit was $6.2 million in the second quarter, representing approximately 13% decrease over the same period in 2014.

Our second quarter results included strong contributions from our industrial propane business which was offset by weaker wholesale propane and NGL activities. Despite a 22% decline in heating degree days, industrial propane volumes increased to 25% in the second quarter over the same period last year due to the contributions from a 2014 acquisition activity.

As a result of the rack plus nature of supply contracts within our industrial propane division, we were insulated from the low benchmark propane prices in the second quarter, generating gross margins per liter that were consistent with historical performance. Unfortunately, margin opportunities in our wholesale business were negatively impacted by significantly compressed differential pricing between geographic markets.

Despite the successful utilization of our expanded railcar capacity as evidenced by the 70% increase in second quarter wholesale propane and NGL volumes, we were unable to capture the same margin levels obtained in 2014, given these unfavorable market conditions. We look forward to the coming cooler winter months to realize the full benefits of increased capacity within this business segment, which is well-positioned to deliver solid year-over-year earnings growth in 2015.

Our Processing and Wellsite Fluids business generated second quarter segment profit of $5.1 million, which is a modest decline compared to the same period in 2014, but in line with our expectations. We successfully completed our annual maintenance turnaround during the second quarter, plant throughout increased by 11% over the same period in 2014, and we elected to accommodate stronger and earlier than expected road asphalt demand.

The expansion of rail loading capacity at the facility was commissioned on time and on budget and we have begun to realize improved transportation costs as intended. Additionally, expanded rail loading capacity enabled us to distribute Bakken gas oil, a new high margin market for volumes that would otherwise be relegated to lower price markets.

While small in scale, these activities enabled relatively healthy segment profit in the second quarter, despite only modest improvements in demand for oil based drilling and completion fluids. Given a weakened outlook for oilfield activity, we have decided to defer the planned expansion of that facility that was originally planned for later in 2015.

Our marketing segment contributed $6.3 million in the second quarter, which is down 50% approximately from the same period last year. Unplanned facility related production curtailments and forced hires in the cold acreage in Alberta challenged our ability to deliver strong margins given the sudden and very material supply disruptions we faced.

Unfortunately, these non-recurring impacts, compressed already narrow heavy oil difference to level that, in some cases were below marginal transportation cost. This situation significantly reduced lending opportunities in the quarter.

Now, while heavy oil differentials have widened in recent weeks, marketing conditions remain challenging in the near-term and will not likely improve until Q4. Our focus with marketing will continue to be to source and direct incremental crude oil and liquids volumes, through our transportation and midstream infrastructure to enable us to earn incremental fee-based revenue in other business segments.

I would like to focus on Gibson's capital expenditures in the second quarter. We spent approximately $74.2 million on growth capital and $7.6 million on maintenance capital in the second quarter.

Our second quarter growth capital expenditures were primarily directed towards the following key initiatives. The Edmonton Statoil tank and the expansion of related infrastructure, the storage tank expansion project on the east side of our Hardisty terminal, the addition of new and the expansion of existing PRD facilities in Canada and the Athabasca pipeline connectivity enhancement project at Hardisty.

So in summary, the second quarter of 2015 offered numerous challenges for Gibson's. I am pleased with how our team performed.

We achieved some key successes, such as announcing additional contract with storage tank projects at our Hardisty terminal and successfully progressing our strategic expansion plan for the environmental services division as just after the quarter we completed the acquisition of T&R Transport. Now, I'll pass it over to Don, who will discuss our financial position and revisions to our capital spending plans.

All right. Thanks, Stew.

I'm pleased to report that Gibson holds a significant amount of cash, in way of sufficient liquidity debt to execute our business plan. At quarter end, we had $171 million of cash and $461 million available under our $500 million revolving credit facility, which we recently extended for one-year to August 2020.

Our plan is to utilize an appropriate amount of debt, as we invest growth capital on long-term infrastructure projects that are underpinned by fixed fee contracts. We have a relatively low leverage ratio, which at the end of the second quarter was 2.5 times, and our interest coverage ratio was 5.2 times.

The company generated distributable cash flow of $251 million in the 12 months ended June 30, 2015, and we declared dividend of a $155 million, resulting in a gross dividend payout ratio of 62%. On a net cash basis, after considering our DRIP and SDP participation, the net dividend payout ratio was 47%.

Our next quarterly dividend of $0.32 per common share is scheduled to be paid on October 16, 2015. As announced yesterday, we have suspended our DRIP and SDP programs effective with this dividend.

At this time, because of our strong liquidity position, coupled with our current share price, we feel it is not appropriate to continue to dilute existing shareholders by issuing shares under these programs. We will continue to monitor circumstances and may initiate the DRIP and SDP programs again if we feel it is appropriate to do so.

We entered 2015 intending to spend $435 million of growth capital and $75 million of upgrade and replacement capital. In the first half of 2015, we invested a $154 million in growth capital.

This is approximately 35% of the annual plan. Based on our revised view of anticipated activity levels for the remainder of 2015 and into 2016, we have reduced our 2015 spending plan by $40 million to $395 million.

The reduction is mainly due to deferring certain flexible growth capital expenditures as follows: Approximately $20 million related to Greenfield PRD infrastructure in our Environmental Services segment, approximately $10 million related to the Moose Jaw expense and projects in our Processing and Wellsite Fluid segment, and lastly, approximately $10 million related to new trucks and specialized trailers in our truck transportation segment. We have made good progress in July and with the remaining busy summer and fall construction period still ahead, we remain on track to spend approximately $280 million of growth capital in our Terminal and Pipeline segment in 2015.

This is consistent with our earlier guidance. We are on time and on budget with all of the Hardisty projects.

However, our Statoil storage tank and rail loading facility expansion at Edmonton is behind schedule due to delays in executing third-party connection agreements. We now expect to commission this project in mid-2016 versus the original plan of late 2015.

Year-to-date spending on upgrade and replacement projects at the end of the second quarter was $19 million. Given current activity levels, and the flexibility we have with asset utilization in certain of our segments, we are now forecasting to only spend $55 million on upgrade and replacement projects this year, and approximately -- this is approximately 25% less than our previous guidance.

We have better visibility regarding our 2016 spending with the announcements we made in April to construct 1.8 billion barrels of incremental storage at Hardisty. Right now, approximately 45% of the 2016 capital plan is related to projects that are under construction or committed under long-term contracts.

We had originally planned to expand the Hardisty unit train facility in 2016. However, given current oil price volatility, and the narrow heavy oil price differentials, we are not expecting to get sufficient customer support to proceed with the expansion as originally planned.

This plus other smaller adjustments result in a reduction in our estimated 2016 growth capital expenditures from $450 million to $400 million. Our cash on hand and available credit facilities provide us with sufficient financial resources to execute on our growth capital plans.

Looking forward, we expect that by executing on these plans we will generate higher overall cash flows and a higher proportion of our cash flow will be backed by long-term take-or-pay contracts. This provides us with confidence to continue with our growth initiatives and to remain committed to growing our dividend in spite of current industry conditions.

That concludes my comments. I'll turn it back to Stew.

Thanks very much, Don. So to summarize, notwithstanding the volatile backdrop we believe in a time tested resiliency of the energy industry and of our integrated business model and despite the year-over-year compression in segment profit we are pleased with our second quarter results.

History has proven time and time again that this industry will adapt, cost structures will realign, fear will be replaced by optimism, and Gibson's will continue to strive. And on a final note, I'd like to acknowledge our recent announcements regarding our company's CFO succession plans.

And specifically, I'd like to thank Don Fowlis for his outstanding contributions to the success of Gibson's over the past 22 years in providing strong financial leadership during what has certainly been the most dynamic time in Gibson's 63-year history. Don and I have been colleagues for many, many years and I have enjoyed and benefited from his guidance and leadership over his 22-year career.

We're going to miss Don steady hand. We wish him well and certainly do appreciate his commitment to remain on board during the transition process to ensure a smooth transition at the CFO level.

So that concludes our prepared comments. Operator, at this time, we'd like to open the call up to questions.

Thank you. First of all Don, congratulations on the announcement of your retirement.

Thank you, Linda.

So, just a question, I don't know if it's for you or Stew, but with the suspension of the DRIP and given that we're in a what appears to be maybe a little bit of a longer low commodity price environment, how do you think of you are given that appropriate dividend payout ratio and growth rate given that on the converse side there might be acquisition opportunity that may be you might want to retain a little bit more operating cash flows to finance opportunities given that the DRIP is now off?

Well we obviously have modeled this fairly extensively, Linda, and made the decision fairly thoughtfully. And as Don mentioned in his prepared remarks, certainly don't think that at the current what we think is undervalued share price of Gibson's that's it's appropriate to be diluting our shareholders.

And when we look at our cash flow position and our liquidity position it's very, very strong. So we think we've got the flexibility to take advantage of the current environment should accretive and appropriate acquisition opportunities arrive at the same time as maintaining our growth in the distribution.

We're on a growth payout ratio basis 62% on a TTM basis and as we model it, certainly believe modest growth in the distribution is achievable while leaving us with the financial flexibility to take advantage of situation should arise.

May be just as a follow-on you can comment on what size of acquisition you think can be done given your current balance sheet liquidity before needing to access external equity to finance those?

Yes, we obviously, we just stopped issuing shares because we suspended our DRIPs we don't have any current plans to go to the equity markets. We're not really in the market today looking for anything that's large and transformational, in terms of an acquisition, you saw us do the acquisition of T&R Transport which is immediately accretive and very, very complementary to our PRD infrastructure in the Bakken.

Those are the type of opportunities that we would be continuing to look at.

Okay. Final question, so are you seeing a lot more of those types of tuck-in acquisitions like T&R now in this environment, given your relatively stronger scale and financial strength versus some of these smaller independent operators?

Yes. There's fair bit of deal flow that's available.

Certainly, I would characterize it as being more abundant probably as we move to the second half of 2015 than it was in the first half. Having said that, we are going to remain as disciplined as we always have been with respect to evaluating opportunities.

We'll try and attack when we believe it's appropriate to do so, but just because stuff is cheap we're not going to go and buy it.

All right. Good morning everyone and congratulations on the upcoming retirement, Don.

Thank you, Rob.

May be just talk about your 2000 outlook that you had previously talked about on your Q1 call about lower for longer oil price environment, you got the EBITDA down 10%, the trucking down 10%, environmental services down 10%, marketing down 30%, and T&P up, just want to know those are still the bogies you're looking for or whether or not you want to amend your prior views?

No, I think, Robert, we've talked about more ranges. Lately, we've been talking about trucking being down somewhere on a year-over-year basis 10% to 15%.

Obviously the second quarter was a little bit lumpier than we had expected it to be in both the trucking and environmental services. On balance, we said look at growth in T&P is going to offset some expected weakness in those other segments.

And on balance, our expectation for GEI as a whole would have been maybe down 10% to 15% on a year-over-year basis and I think that's -- our performance year-to-date is consistent with those remarks. It's -- there are ebbs and flows amongst quarters and amongst the different business segments because we do provide such granularity I guess with respect to our reporting.

So I wouldn't say that our outlook for the business as a whole has changed materially from our previous guidance.

All right, good to hear. And then may be just one granular question then.

In terms of your propane acquisitions in 2014, would it be possible to get a sense of how much these have been contributing so far in 2015?

Notwithstanding the fact that the first quarter volume performance in the entire propane business on the industrial side was impacted by extremely warm weather. The performance of both the Cal-Gas and Stittco is exactly on plan based on the economics that we were running when we did the acquisitions in mid-2014.

That's a business that is weather impacted certainly, and as we mentioned in our prepared remarks, as we get into Q4 and Q1 we expect that those businesses which are now fully integrated will perform as we had expected it to.

Couple of questions on capital allocation, I guess first a specific one and then a more general one. My specific question relates to the Moose Jaw facility and I think the expansion has been deferred twice now, if I'm not mistaken, but it makes me wonder whether an expansion of that facility ever makes sense because if it never makes sense in a down market and is not contracted why ever put capital to expanding it?

We have -- we had news to both a major expansion of that facility probably 24 months ago or so, Matt, where we had talked about perhaps a 50% expansion in the overall plant capacity. That project we've backed away from because we didn't believe that -- we believe that there was too much execution risk on a large scale capital program in a processing environment, particularly given the very, very strong economic conditions at the time.

What we did was we sort of refocused, repurposed our engineering talents and we have incrementally been expanding the capacity over the last couple of years with the expenditure of very, very little capital. So where we were originally looking at going from 16,000 barrels a day to 24,000 barrels a day, and the capital we were thinking about was in the $115 million range.

So with the expenditure of very little capital we've actually achieved approximately 19,000 barrels per day throughput. This latest expansion would have taken us up another 10% or so with relatively modest expenditure of capital again.

Now we have backed away from that or deferred it simply because the extended capacity there would provide us with the ability to sell, to manufacture, and sell more drilling and completion fluids, and of course in a depressed drilling and completion environment. We don't believe that those markets are going to be there.

That expansion is readily doable. It would be immediately accretive and will proceed when it's appropriate to do so.

It's been the nature of our less heavily contracted businesses, you're right, but the asphalt that we do so particularly into the roofing flux market we have the ability to contract on a take-or-pay long-term basis.

Okay. I guess just most generally steering in your language and the press release you talked about delivering increasingly stable cash flow and I think, Don, added an emphasis on contracted cash flow in his remarks which suggest an emphasis on the contract terminal business which is a great business and you guys have a great track record of demonstrated success there.

But yet there were 47 million I think of services acquisitions in the first half still. So I'm just wondering if you can clarify the strategic direction of the company and the oil downturn is it to deliver an improved business mix and just grow terminals and minimize CapEx and the others or is it kind of to acquire services at the bottom of the cycle and try and play the upswing or maybe you haven't decided but I think those are critical questions that seem unclear by the comments versus the actions.

Sure. I think we've been -- well we've tried to be reasonably consistent with our messaging around the allocation of our capital to the terminals business because of our strong franchise positions which you've noted at both Edmonton and Hardisty.

As when we will look at the $395 million of growth capital we expect to spend before acquisition in 2015, 70%, 75% of that is allocated to terminals business and we're growing that business as quickly as we're able to contract it out, which we think is an appropriate strategy. Now, in the meantime, $35 million of the $47 million you've mentioned was for the T&R Transport Division, which is a T&R Transport acquisition, which is immediately accretive and supportive of our PRD infrastructure in the Bakken.

So it's a infrastructure related type of investment. And then the balance of the services acquisition activity which you've referenced just really the acquisition of Littlehawk and that was essentially the internalization of a service we were using anyway with the ability to again have those assets be very, very complementary to our existing PRD infrastructure business within Western Canada.

So like I said to the earlier question we're not going to go out and just Hoover up our services companies because they happen to be cheap in this environment, but we do everything with a view to our longer-term strategic plan, and we have been messaging and will grow the proportion of our cash flow which is contracted and take-or-pay as opportunities present themselves particularly around our franchises at Hardisty and Edmonton but we also have opportunities which we're looking at that are infrastructure related and contractible throughout all of the operating areas that we focus on within North America.

Good morning. Congratulations Don on the retirement.

Thank you, Jeremy.

Good to see the DRIP being turned off here. I think that really does send a strong signal as far as balance sheet strength.

I think it's a difficult question to answer but I want to try anyways, as far as your internal planning goes how do you guys think about the WTI outlook at this point. Are you guys thinking about a certain inflection point for crude?

Is that later this year or is that next year and how does that influence how you're going about your process right now?

We really aren't directly impacted by the overall price of crude oil and some of our businesses are impacted by the strength and volatility within differentials for different crude oil commodities. So when we look at our outlook for the balance of 2015 and into 2016, I don't think we are any smarter than anybody else in the industry.

So we're planning our outlook based on a sort of a lower for longer scenario as we outlined in our prepared remarks. Our business has really impacted by activity levels.

We do watch the recount; we do talk to our customers about their capital spending plans, and their plans for drilling and completion activities. And we plan our capital allocations and our growth plans in accordance with that.

I would say that right now our outlook for the balance of 2015 is certainly cautious and we are prudently planning to ensure that we take advantage of the commodity price cycle where we can and we certainly project a very, very strong balance sheet and plan to emerge from the commodity price down cycle manufacture stronger as we always have.

Yes, that makes sense. I was just thinking price levels would impact drilling activity which would influence environmental services and trucking.

And if you're thinking lower for longer is that 4Q '15 is longer or 4Q '16 is longer?

My crystal ball is in the shop right now, so I can't say for sure. Jeremy, I think a couple of things sort of influenced the way we think about our business.

Number one, certainly still the majority of our cash flow is Canadian, and so Canadian producers are impacted by a number of factors not only WTI, but also differentials and also currency. And so that adds an additional level of complexity, but with a lower Canadian dollar and certainly as we walk through the second quarter of 2015, our producers were helped by tighter differentials and that improved on a Canadian Dollar basis cash flow for some of our -- for a lot of our customers.

So we view that as being a positive. Certainly we don't see the Canadian dollar improving until oil prices improve and so that provides us with some level of support and comfort.

On a macro basis, it's hard to predict but I think I would be in the camp as others are of looking at the commodity price cycle and saying the investment in energy at $48 WTI is probably not going to be sufficient to maintain a growth profile that will match the growth in expected demand and accordingly, as we move into 2016 our outlook is for stronger commodity price.

And then on the back of that as far as 2016 CapEx is concerned it's a bit of a step-up over 2015, numbers came down a little bit today. How do you see the rest of that $400 million being higher or lower as we progress through 2016 at this point?

Yes, as Don mentioned in his remarks nearly half of that is already contracted and so it's a continuation of capital projects and programs that we have underway in 2015. We have a fair bit of visibility because a lot of the capital does go into the terminals and pipelines business and those are long dated and long-lived contracts -- contracts and opportunities.

So obviously we're speaking about those with our customers as we speak. So we're still quite confident that $400 million is an appropriate number going into 2016, particularly because again 70% to 80% of that will go into terminals business.

At this 10 seconds I would suggest that we felt that meaningful increase in commodity prices and a return to meaningful -- and a meaningful return to activity levels, the $400 million isn't likely to increase materially.

Just a follow-up on your comments there on WTI outlook. Can you just help us for that a little bit with the -- I think I caught you saying marketing might increase in the fourth quarter, so presumably that's associated with volumes rather than recovery and price given your outlook for WTI.

Can you just help us with that a little bit?

Yes, as you know, we don't take positions in terms of commodity price movements the way we make money in our marketing division is two different ways. Number one, we offer a very, very important aggregation service for our smaller customers allowing them and providing them with the infrastructure to get their barrels from the wellhead into the export pipeline systems as an aggregator and marketer of those barrels.

And then we capture a spread between the price that we pay as a wellhead and the price we're able to achieve as we sell to the refiner. We also offer aggregation and quality management services, which allows us to take different qualities of crude oil and manage them to get them up to an appropriate quality, so we can sell at a market rate.

So what is important for us is wider and more volatile movements in oil pricing differentials. As I mentioned in my prepared remarks that we saw unprecedented tightness in differentials $7 WTI to WCS just in the second quarter, as we moved into the third quarter we have seen widening of those differentials which should provide us with better margin opportunities in the fourth quarter almost irrespective of the great movement in commodity prices and so.

Although we would love to see WTI go up. That's not necessarily going to provide us with increased marketing margins.

Where we make our money is capturing the spread between -- based on the value differential between various grades on any given day.

Okay. So while historically it looks like differentials do up a little bit, the absolute price of various crude grades, you're more kind of on the volatility to increase and things like that?

Yes. The quantum and the volatility of differentials, is important for us.

Just wanted to go back on Matt's question there on the current cyclical acquisitions I mean there is no doubt they can help you, but lower for longer is reality, you seem to be prepared for. I'm just wondering if there is a quantum of those types of acquisitions, sort of a limit that the board imposed or that you think is prudent in terms of what you made either?

Or is it simply you take them one at a time and if they fit at that time then you make a move?

I think it's more of a latter rather than the former. Certainly, we aren't under any restrictions from our board.

Our board remains very, very supportive. We have I think -- and if you drew out a history, proven that we are quite prudent when you do make an acquisition.

T&R is a perfect example of that. It's immediately accretive and very, very supportive of the infrastructure that we constructed in the Bakken last year.

So that's the type of opportunity we'd looking for, we're not looking for just bolt-on trucking or environmental services, water hauling acquisitions to add immediate EBITDA. Overtime our focus is going to be on increasing the proportion of fee-based and contracted revenues that we receive from our infrastructure.

Okay. And then my last question just has to do with the propane business.

I'm just curious. So what you're doing operationally or through marketing strategies to take advantage of the weak propane price from your propane distribution and marketing business?

We're not necessarily completely price agnostic in that business, but we're certainly not -- we're not dependent on the overall price of propane. And when we looked at the historically -- the historic highs of propane in 2014 and the historic lows of propane in 2015, as we mentioned in our prepared remarks, our margins have remained very, very stable through both of those price cycles.

How we think about the historically low propane pricing that we have today is just in terms of market expansion. It will likely provide us with the opportunity to expand the use of propane and other NGL liquids and hopefully increasing our volumes.

And as we again mentioned in our prepared remarks and as we go into the back half of this year and the first half of next year hopefully we get a return to more normal weather patterns and that will provide us with the opportunity to take advantage of the infrastructure, not only in the industrial acquisition activities, the bridge, Cal-Gas and Stittco, but also the expansion of our railcar capabilities in our wholesale NGL and propane trading operations as well.

I guess more of a big picture question and it just relates to inventory levels that we see for crude in the U.S. and we can look at a lot of different data and we're clearly well above historic averages.

So just on a big picture basis, do you think we're in some kind of new paradigm as far as crude oil storage goes in the North American landscape?

Andrew, that's a question that comes up more often today than it did a year ago or two years ago. And certainly, as we watched crude storage builds in -- that cushion in the back half of last year and the first half of this year, we were answering that question as well.

And I really think it has more to do with refinery activities, with supply/demand production, and supply/demand equilibrium in the producing and refining sectors. As we continue to see inventory builds in the U.S.

potentially that provides a better impetus for removal of FX or restrictions in the United States. But from a macro perspective we watch those things with interest, but they really don't have a direct impact on our business.

The storage positions that we do have is largely Canadian, that's largely working stop and storage. And it's largely a logistics play just to make sure that we can get a Western Canadian barrels into the export pipeline systems and into their eventual markets.

So then just following up on that theme. Given your asset footprint and really land hold-on positions you have in primarily, Hardisty how do you think about just the expansion capabilities in the post '18 world?

And I know it's in the MD&A got into this commentary around Keystone XL, Energy East and the other ones that may happen into the future. Like what is the ultimate upside with your land position that you have with Hardisty?

Well, that really goes to worldwide demand growth as we move through the current supply block and see better supply/demand equilibrium probably post '15 and into '16 and '17. Our growth profile in 2018 is absolutely going to be -- beyond 2018 at Hardisty and Edmonton is absolutely going to be dependent on continued low cents investment.

And so we do have a pretty good feel for that over the next four to five years as we continue to see investment in the oilsands and expect that 150,000 to 200,000 barrels a day of supply growth will come out of Western Canada. You can kind of do the math and suggest that we will probably start to get into a situation where the export pipeline capacity out of Western Canada gets very, very tight 2018 and beyond.

I think we're in a pretty good position, especially at Hardisty to take advantage of that as well, because we have a rail facility that's immediately, well, not immediately, but readily expendable from a 120,000 barrels a day to 240,000 barrels a day. So absent the West Coast takeaway, I'm not sure Northern Gateway either or TMX expansion happens within the next four or five years, the vast majority of Western Canadian barrels go to Edmonton and then to Hardisty or directly to Hardisty.

We think that that's very, very positive for us. We are building -- we're adding about 50% to our storage capacity between now and then 2017.

We're in discussions with customers about tankage and other investments post-2017 and think that the growth profile at Hardisty and Edmonton is in fact over the medium and longer-term.

And just finally, we've seen some kind of conversations from the pipeline providers with the major producers on rationalization of projects where two players might have had individual pipelines now rationalizing down to one on just a temporary basis given the environment we're in. Has that tone carried through with any of your customers on the terminal side, just on a short-term basis?

I would say no, especially at Hardisty, which is of course is our major terminal. We have and/or building connectivity to all pipelines that come into that area.

And so whether it's that connection or two connections really what is important to us is that the volume arrives and then we have the ability to manage that volume with our infrastructure and tankage.

Thank you very much. And Don, congratulations to you.

I can see your handicap is going to go down and mine is going to go up.

Well, thanks, Dirk.

Well, toasted birdie juice.

Some time.

I have a couple of questions. On the terminal side, if you're still having ongoing conversations and with the backlog of expansion of major takeaway pipelines, typically you've have telling us about 1 barrel of production is 9 to 10 barrel or of throughput is about 9 to 10 barrels of storage requirement.

Has there been a bias to move that up, because of the problems with apportionment et cetera that we've been going through in Western Canada?

Our outlook hasn't changed materially in that respect, Dirk. I mentioned we did 550,000 barrels a day on average in Q2 I believe through our Hardisty infrastructure, utilizing about 6 million barrels of tankage so.

So far that ratio seems to be holding. As we move into tighter takeaway situations probably as we get through 2017 and into 2018, we would expect that scheduling becomes more of a challenge, but that has not yet translated into additional demand on a per barrel basis for tankage well from our customers.

Okay. If we're going to shift over to the processing side, so if we're looking at the business is it safe to assume that the volumes are there.

It's just this has been a margin issue or have we seen as it been a combination of volumes and margins because I know we've had a little bit of expansion there?

Okay. Our throughput actually has remained fairly constant and is quite strong.

We are taking advantage, as I said, of very good market for road asphalt this summer. And margins for our road asphalt products are quite high.

Traditionally, where we have made a lot of margin in that business is the manufacture and sale of RDA-22 our intra-drilling mud based well, and a clear fracking tool at Gibson clear, obviously, with reduced drilling and completion activity. The volumes of those products, sales are down and the margins for those product sales are down.

But when we don't sell into those markets and we sell into rather the BGO market as we mentioned or into tops, which is essentially bottomless light sour crude barrel. So the volumes move, but in that situation then the margins that we would have garnered through the sale of the specialty completion and drilling products is lower.

So what's different this year than last year? Last year we were selling very little road asphalt, this year we're selling a lot of road asphalt.

Last year we were selling a lot of drilling and completion fluids, this year we are selling less of those products. And so clearly it's been a volumes steady, but margin shift situation for us.

And that's why you've been deep bottlenecking, because the volumes are always there, right?

Yes. Particularly, because we can sell virtually everything we manufacture in terms of asphalt into the roofing industry within United States.

We make a very, very high quality straight run roofing flux, which is in high demand. So that gives us a very, very steady takeaway for basically the bottom half of that barrel.

And there will always be some margin between the heavy side of the crude that we run and the light side of crude that is the result of the manufacturing process. And so we really don't expect that volumes will be a problem at Moose Law.

It's a matter of like I said shifting margins.

And on the $400 million in CapEx from 2015, does that include capital maintenance or is that strictly growth CapEx?

It's strictly growth CapEx. Our capital -- our maintenance capital we have revised from I think $75 million to what $55 million.

And last question on the marketing side, your commentary was you thought things would kind of turn in Q4. So we should expect I guess I was like Q3 is going to be similar to Q2.

What's going to happen in Q4 that gives you the confidence that you should probably see things turn in Q4?

It's just based on the marketing cycle. Of course we are already trading at the back end of the August month and then having a pretty good view on what September looks like.

As I had mentioned in my prepared remarks, we have seen differentials wide enough where we saw as tight as $7 WCS to WTI in second quarter. I believe yesterday that same different was in the $17, $18 range.

And so that gives us pretty good visibility in terms of where the DRIPs are going to be. The volatility and movement of those DRIPs and that gives us opportunities to provide those marketing services for our customers.

But it also provides this with better margin and margin capabilities. And we see that in the fourth quarter rather than in the third.

Right. You almost got the view into it now?

That's correct.

Stew, you mentioned earlier on the call that the original kind of thought that the company as a whole would be down to about 10% to 15% and that hasn't materially changed. But I believe that original guidance was on a little bit more of a v-shaped recovery second half better oil prices and now you're talking about for longer.

So I'm just wondering if you give some color on that. Is it because you don't think there's as much production sensitivity or is it because it just takes decline rates, some time to buy?

I guess what -- the way that we're thinking about the balance of the year is basically -- we're at -- we're going to take along the bottom here for the balance of 2015 in terms of activity levels and in terms of volumes that we have. So I wouldn't have said that the original plan was for a v-shaped recovery.

I think we were probably being pretty cautious in our thought process earlier in year when we were talking about 10% to 15% down. That's based on our current forecast and based on our current sort of scenario planning.

We think that what you see in the back half of this year is going to be likely what you see in the first half of this year, which is no meaningful recovery, but not a material degradation from where we currently are as well.

Got it. I guess with the talk about preserving the dividend growth rate.

When you stress test your model, especially looking at 2016 giving you do expect better oil prices. I'm just wondering when you've done that in the model, is the dividend covered under all reasonable scenarios that you've modeled out for 2016 with cash flow room to grow?

I wouldn't call the current scenario reasonable, but as Dan suggest we have stress tested and modeled fairly extensively, what we think our cash requirements will be under $45 forward strip under a $60 forward strip. And we'll give as Don said; currently we are very, very comfortable that our liquidity position is sufficient under virtually all of scenarios that we can envision.

Okay, that's great. Thank you very much, and best wishes to Don on retirement.

Thanks, Robert.

Just a quick follow-up to the question that was just asked. With regards to the stress testing, your image is basically the $45 strip; you said that you have sufficient liquidity.

So is that indicative of the fact that you would continue to fund the distribution by drawing on the liquidity that you have obviously cash balance is coming down. You got the revolver, but effectively you would be comfortable funding the distribution with the revolver?

Well, when we look at various scenarios, you have to temper $45 crude price strip on a forward basis with a probable reduction in your growth capital particularly beyond 2016 when we have somewhat less visibility to do with for the next 18 months. So when we look at use of our cash, we think in terms of going into our line, our revolver, to fund those investments not to fund the distribution certainly our cash generation under any scenario is sufficient to pay.

All of those fixed cost that we have including our interest coverage and our distribution coverage.

Okay. And then if you don't mind this is a little bit more basic.

But could you just state again in terms of your fixed fees, the percentage of your revenue that you would consider to be fixed fee based on whether it is just the take-or-pay contracts that you have on the terminal and pipeline business or just if you could tell me like a total of your revenue what percent you think would be based on fixed fee contracts?

Fixed fee contracts probably 25% to 30% with probably 17% to 20% of that being take-or-pay.

Thank you and good morning and congratulations Don.

Thanks, Steven.

Stew, when I look at the map in North America I noticed that Gibson is not the Marcellus, Utica, which is a growing region might be trucking, terminals, environmental services, lots of goods and things. So anyone from Gibson taking a trip to Western Pennsylvania later this year to more than look at the scenery?

We would attend one or two of the GOP debates well those seem to be pretty entertaining.

It is one every day.

We obviously are aware of activity levels within the Utica, Marcellus. We have small scale infrastructure and trucking activities moving into those areas.

Today where they're focused is where we have economies of scale and the sufficient footprint to provide us with the ability to be very, very competitive in those market place. And so to the extent we do look at those areas, we would be interesting, like I said with prudence and a view point to building a sufficiently large business that we have the economies of scale and would be competitive in any kind of a scenario.

Go big or go home then?

Well just have sufficient size so that you can win most of your battles.

Okay. Trucking is down 26% year-to-date in EBITDA, if trucking stands 16% full year '15 it means there is a bit of a turnaround in the second half.

So what drives this turnaround better per unit margins or better volumes than the first half?

Well, typically the second quarter is our weakest quarter in terms of activity levels because of turnaround and sort of thing. I think what we mentioned in sort of message in my prepared remarks is that our current view is that trucking is probably going to what you saw in the first half is probably what going to be what you see in the second half.

And so although we are cautiously optimistic and we will see improvement in performance there. Perhaps our earlier messaging is being tampered somewhat, but that hasn't changed our overall outlook for GEI.

Thank you, Stew. There's a lot of crude oil storage tanks at Edmonton and Hardisty that are owned by non-infrastructure companies.

Is Gibson approaching these owners and in the stressful time to see if they might like to sell their businesses?

We are talking with all of our customers all the time about anywhere and anyway that we can help certainly we're an infrastructure player and we would be prepared to invest in infrastructure whether it's Greenfields or whether it's been previously owned. And so, the short answer to your question is yes, obviously we're talking with people.

And finally the start oil tank in Edmonton what you said it was a third-party issues that had caused the delay?

That tank and infrastructure includes connectivity to various pipelines in the pipeline allay it requires us to build a rack in conjunction with other third-parties that sort of thing and I wouldn't call the delay anything more than just the complexity of negotiations with multiple counterparties to get contracts in place and build out that infrastructure. We're very, very confident it is done, it's just -- let me put it this way there's lawyers involved.

And let me add my congratulations to you, Don. I'm more than a little bit jolt.

All right. Thank you, David.

Now, may be just a bigger picture in your transaction you highlight growing suppliers Canadian crude oil from the oilsands increasing demand for diluent over the medium to long-term which is two to five years and I just trying to understand why that the long-term perspective when there is such rapid growth rate now in the current 1 to 12 months so to speak. What's -- how do I rectify those two things?

I think it's all of the above. Certainly we do see ongoing growth in demand for diluent every barrel of bitumen that gets produced in Western Canada requires anywhere from 25% to 30% addition of diluent type material depending on the density of the two products that you're putting together.

So when we look at our trends sections we really are typically just those trying to forecast out two, three, four, five years, with a viewpoint that the immediate market in front us is should be apparent.

Okay. May be then put it in a different way.

So you have a reasonable expectation beyond the current build out that will be immediately following that another build out.

Our expectation is that the growth prospects for Western Canada over the medium-term are intact simply because the majority of that is going to be impacted by growth in the new oilsands regions and those are largely, very large scale capital programs that are underway, under flight, and will continue and we completed almost regardless of the commodity price environment that we currently face. And so when we look at 800,000 to a million barrels a day of additional heavy oil coming out of Western Canada that drives our viewpoint that's going to drive the neediness for another 250,000 to 300,000 barrels of diluent material just based on what you need to do to get heavy barrel 250,000 to 350,000 stock reference point so you can flow through a pipeline system.

Right. I guess the only confusion I was talking about was timing there, because I think you're talking about was next year or so versus next year but on only that one.

Maybe just another comment in your MD&A historically production related service revenue with the environmental service business as being considered that's having a stable revenue stream. But given that you saw a 44% decrease in production service revenue year-over-year.

Has your perception of the stability of these revenues changed is there anything in particular that explains the greater sensitivity of production service revenues the commodity price change and may be just a follow-on to that is does the change -- does this change the way or the multiple you might pay for those kind of assets in an M&A?

The production services declined the 44% we talked about is there is a sensitivity to drilling and completion activities there. In the Bakken as an example we do offer services around construction and maintenance of wellhead facilities that sort of thing and so as companies differ maintenance and/or differ a completion of wells overly drilled that will have an impact.

So I wouldn't say that the sensitivity is manifestly greater than we had expected it to be. Certainly the reduction and severity and the quantum of the reduction of drilling and completion activities is probably more severe than we had expected it to be as we entered into this year.

In response to your question would it change the multiple that we were prepared to pay we've historically transacted on small scale acquisition basis in that 46 times run rate EBITDA basis. In this trend market environment we can probably towards the lower end of that pricepoint but we invest with a viewpoint that this is a cyclical industry.

We will go through cycles. We have performed, we will in the future and the way we built our business is to be resilient and to survive through those cycles.

I want to talk about you guys going out there and doing some acquisitions but given how cheap you're trading right now and how the Canadian dollar has come down, is anyone knocking on your door?

We haven't -- we get asked that question on a normal daily basis but a year ago when we were trading at an all-time high we got asked that question as well. The short answer is that we don't believe that we're a target; we don’t focus on those things.

Our viewpoint is that as a management team we work for our shareholders and we're out there trying to build the value of this business on a daily basis.

So I guess you won't oppose some of those chatting with you guys for nice merger vehicles?

It's not a focus for us at all.

Thanks again for your interest in Gibson Energy. As mentioned earlier, Cam and I are available after the call if there are more questions.

Have a good day, everyone.