Mark Chyc-Cies - VP, IR Steven Spaulding - President, CEO & Director Sean Brown - CFO

Linda Ezergailis - TD Securities William Kawas - JPMorgan Chase & Co. David Noseworthy - Macquarie Research Andrew Kuske - Crédit Suisse AG Robert Kwan - RBC Capital Markets Robert Catellier - CIBC Capital Markets Benjamin Pham - BMO Capital Markets Robert Hope - Scotiabank

Thank you, Mariana. Good morning, and thank you for joining us on this conference call discussing our third quarter 2017 operational and financial results.

On the call this morning from Calgary are Steve Spaulding, President and Chief Executive Officer; and Sean Brown, Chief Financial Officer. I would like to caution you that today's call contains certain statements that relate to future events or to the company's future performance.

These statements are given as of today's date and they are subject to risks and uncertainties as they are based on Gibson's current expectations, estimates, judgments, projections and risks. Actual results could differ materially from the forward-looking statements expressed or implied today.

I would like to caution you that today's call content future events and to the company's future performance. These statements are as of today's date and they are subject to risks and uncertainties as they are based on Gibson's current expectations, estimates, judgments, projections and risks.

Actual results could differ materially from the forward-looking statements expressed or implied today. The company assumes no obligation to update any forward-looking statement made in today's call.

Additionally, some of the information provided refers to non-GAAP financial measures. To learn more about forward-looking statements or non-GAAP financial measures, please refer to the December 31, 2016, and third quarter 2017 management's discussion and analysis, which is available on our website and on SEDAR.

Now, I would like to turn the call over to Steve.

Thanks, Mark, and good morning, everyone. During the quarter, the operational performance of our businesses remain strong, and we continue to advance our strategy to focus on growing our long-term high-quality cash flows within the Infrastructure segment.

As Sean is going to walk through the third quarter results in more detail. I wanted to focus my comments on some of my takeaways from the reviews of our business.

Discuss some recent changes we made to our organization, and provide some color on the direction we're headed. As some of you may have heard me say before the competitive positioning of our Hardisty asset is second to none.

Demonstrating this once again, is the building of 3 new tanks representing an incremental 1.1 million barrels of storage capacity sanctioned in this quarter. With the new capacity, we will now have 10 million barrels of storage, up significantly from 2011 when we had 3 million barrels of storage capacity.

We have a sectional connectivity offering access to all incoming and outgoing pipelines. Also, the interconnectivity we have developed between our tanks, we offer tremendous flexibility to our customers.

And we have the only unit train access at Hardisty. It is this type of asset you can build the company around.

At Edmonton, we are continuing to build out the connectivity required to optimize our competitive position. And we are excited about commissioning 2 new 400,000-barrel tanks, expected to be placed in service in the beginning of the first quarter of 2018, which will double our storage capacity at Edmonton.

Looking forward, for both our Hardisty and Edmonton terminals, I believe this is a business where we will do steady but modest growth. Based on ongoing discussion with customers, we are confident that we would be able to sanction the construction of 1 to 2 tanks per year driving the EBITDA growth in the mid- to high single digits.

We also continue to focus on growing our crude oil gathering systems in and around our Hardisty and Edmonton assets. We have and continue to be -- we have and continue to have meaningful discussions with producers in the area, and look forward to disclosing these developments in the near future.

Another asset, where I feel a lot of potential is, is in our U.S. injection stations.

Coming from the U.S., I would tell you that Gibson is known as a trucking company. But our real asset in the U.S.

is the 60 and -- to 70 premium injection stations in the best basins in the Lower 48. The Permian, the SCOOP/STACK and the Powder River.

We really have some of the best injection stations in these plays, in the very best areas. And exceptional pipeline connections and takeaway.

To put this in perspective, we have a 30 mile crude oil gathering system with 10,000 barrels of storage setting idle in Ward, Winkler and Loving County. This is in the heart of the giant Delaware basin.

Their acreages is still in a $40,000 an acre. This is just one example of the singles and doubles we're going to develop in these basins.

As we discussed in our last earnings call, we are aiming the agreement which provided exclusive use of our injection stations to a third-party marketing company. The strategy of using the third-party to optimize our assets in trucking business is a fundamental shortcoming.

And we think consistent decline in the use of our assets in these best crude oil plays in the North America. Therefore, we have shifted towards an integrated business model focused on providing producers to the services they need in and around our injection stations to gathering systems in these basins.

Over the next several quarters, we plan to stand up more of a producer-basin organization on the trucking and producer services side of the business. Over time, this will allow us to grow a network of gathering systems in the basins around our injection stations and through our producer relationships.

As I've said before, strategy is focused on growing our long-term high-quality cash flows within the Infrastructure segment. We want to grow organically, leveraging the great asset basins we have, particularly our terminal footprint and injection stations.

And we want to ensure that our lines of business not only have leveraged the core term lows injection stations but also complement them as well. Business lines that don't meet this criteria will be devastated.

To sell the Industrial Propane business officially closed in September. And we have announced our intention to devastate our U.S.

Environmental Services business. I'm also very excited to announce that we have scheduled an Investor Day at the end of January.

At this Investor Day, we will provide a thorough discussion of our strategy including executional tactics, and we'll identify which business lines we will divest. As we have discussed previously, we view being disciplined regarding our portfolio of assets as being vital.

And transparency within our investors is very important to us. It is our intention to be clear of where we're going?

How we get there? And why we will win the business we've retained?

To ensure that we are commercially focused to grow our Infrastructure business in the current price environment, we've recently made a series of structural changes within our organization. The changes made, will also strengthen our commitment to environmental, health and safety and operational excellence.

These changes are going to drive commercially focused throughout our organization, remove any previous silos we have remaining, and place emphasis on the producer or major customer. We will work more closely with the producer to better understand their infrastructure needs.

The structural changes also sought to flatten and streamline the organization. And we were forced to make several difficult decisions around some very talented individuals.

Both in the field and at the head office, we removed extra layers and started to decrease the number of senior leaders, as we move towards a more innovative and commercially focused mentality. We expect these changes will result in a cash and share-based cost saving of between $15 million to $20 million per year on a run-rate basis.

In all, I'm very happy with the progress we've made, since I joined in June. And we still have work to do.

We continue to actively review each of our businesses. But what we won't change is our focus on our core infrastructural assets and our desire to grow our business organically, and our commitment to the dividend.

I look forward to discussing with you in more detail at our Investor Day in January. I will now pass the call over to Sean who will walk you through the quarter in more detail.

Thanks, Steve. Looking at the financial highlights for the quarter.

Revenue in segment profit from Infrastructure [indiscernible] new highs, which is important as it is our core business representing approximately 75% of segment profits after the sale of U.S. ES, moving approximately 85% once the tanks currently under construction are in service.

As the point of reference, at IPO, the Terminals and Pipeline segment represented approximately 1/3 of segment profit, truly demonstrating the dramatic transformation that company has experienced. Segment profit for Infrastructure increased 21% over the third quarter of last year, an 8% relative to the second quarter of 2017 with over 80% derived from the company's core Terminals business.

Contribution from Terminals was up over last year as a result of new assets being put into service in late 2016. As both Hardisty and Edmonton are highly contracted under long-term fixed fee arrangements, earnings were up modestly relative to the second quarter with the next up function increase expected when we effectively doubled our tankage capacity at Edmonton next year.

Constructure progress at Edmonton remains ahead of schedule, with the expectation that the 2 new tanks will start earning income before the end of the first quarter of 2018. As Steve discussed, during the quarter, we sanctioned an additional 1.1 million of new tankage at the Hardisty Terminal, which will further extend our Infrastructure growth program into the third quarter of 2019.

Logistics results were consistent with the prior quarter and the third quarter of 2016 on a revenue and EBITDA basis. In Canada, our trucking business remains steady.

In the U.S., as we discussed in our last earnings call, we've seen a significant decrease in volume as we ended our exclusive relationship with our largest customer and our transitioning to a new business model. Trucking volumes with other customers are increasing due to focused efforts to shift our business model to being more complementary term for structure assets.

However, they are not yet sufficient to overcome the overall negative effect. We expect these challenges to persist through the remainder of 2017, though we are optimistic that we will see a gradual recovery with the new business model some time in 2018.

U.S. Environmental Services continue to perform well in the third quarter, with the results in line with the second quarter and well above the third quarter of 2016.

We continue to advance the U.S. Environment and Services sale process.

We've provided data room access to a select group of potential buyers with first-round indications of interest due shortly. We expect to receive final bids before the end of the year.

Proceeds from the sales, we directed to further delever the company's balance sheet providing added capacity to fund future Infrastructure growth. Wholesale results were below expectations due to several factors, with the primary two being timing issues on financial hedging positions and now light heavy spreads.

With respect to the first item, during the quarter, we saw a meaningful improvement in crude prices, with WTI increasing over the quarter from approximately USD 46 at the end of the Q2 to USD 51 at the end of September. As a result, the market value of our long physical positions increased with the value for our short financial hedges offsetting these long physical positions decreased.

We are required to record any changes in the value financial instruments realized or unrealized. However, with physical inventory, we are only able to recognize a gain upon sale to a third-party.

We cannot record an upward mark-to-market above cost and physical inventory within our reported financial results. On the NGL side, we also utilized storage to bill propane and butane inventory through the summer to capture seasonally higher prices in the winter, while hedging out most of the flat price risk.

However, due to timing differences between the settlement date of the hedging contracts and the physical sale on delivery of the commodity, and the rising market we will realize hedging losses despite the value of our physical positions also increasing. During the quarter, we recorded losses on financial instruments of approximately $8 million, with over 90% of those being realized losses.

However, on a market value or replacement cost basis, the inventory was worth approximately $10 million more than book value at the start of the quarter. And ended the quarter a bit $35 million above book value, implying a net gain of $25 million in the quarter.

We expect to realize these gains through Q4 2017 and Q1 2018, as we move this physical inventory to market. Outside of hedging activity, in terms of business drivers within the Wholesale segment, compression of light heavy spreads to reduce the contribution from our crude oil activities despite higher volumes than in either the prior quarter or comparable quarter 2016.

NGL volumes are seasonally lower in the summer quarters, although margins in the NGL space have also weakened as a result of increasing pipeline egress in shale plays, and increased competition for barrels. In both our crude oil and NGL activities, we continue to unload our existing railcar leases to decrease fixed cost.

Contribution from refined products was up over the comparable quarter in 2016 with stronger distillate and drilling fluid margins. Road Ashwell margins were weaker than forecast due to lower demand in both Canada and U.S.

We expect both drilling fluid and distillate margins to remain strong as a result of distillate inventory levels in the Gulf having been impacted by Hurricane Harvey. We also expect that Harvey and Irma will boost roofing Ashwell margins in the first half of next year.

In aggregate, we expect segment profits for Wholesale for the fourth quarter to be in the $10 million to $20 million range which will result in a full year contribution, similar to 2016. Total capital investment in the third quarter was $55 million, inclusive of $49 million in growth capital.

Over 95% of growth capital was incurred in the Infrastructure segment as we advanced expansions of the Edmonton and Hardisty Terminals. In terms of our capital spending over the balance of the year, we have updated our 2017 outlook to be less than the bottom end of our prior range of $170 million to $200 million.

The decrease in spending as a result of both cost savings, we are realizing on construction at Edmonton, as well as the timing of when capitals incurred relative to initial estimates. The changes in capital are positive outcome with all our projects on or ahead of schedule, and trending to be at or below budget cost.

The capital spending outlook for 2018 remains within our preliminary range of $150 million to $250 million. And we'll provide an update after we finalize our budget in December.

Subsequent to the end of the quarter, we issued an addition $250 million in notes. And we completed the repurchase of the remaining high coupon U.S.

dollar nodes we held. Through the refinancing of our notes and repayment of debt over the course of the year, we have reduced run rate interest cost by about $35 million, when improving our debt maturity profile with the first series of notes due in 2022.

Leverage at the end of the quarter was 3.6x, trailing 12-month pro forma adjusted EBITDA, just outside of our target range of 3 to 3.5x. In the next few quarters, our leveraged metrics will benefit from additional infrastructure coming into service and an improved contribution from Wholesale, in part due to the recognition of the gain on existing inventory.

We remain well positioned to fund our capital program with $360 million in available capacity in a revolving credit facility. We also expect proceeds from the sale of U.S.

Environmental Services as well as future divestitures of other non-core businesses will provide of additional flexibility. With distributable cash flow of $182 million over the last 12 months, our payout ratio at the end of the third quarter was approximately 100%.

We are comfortable that the visible contracted growth within our Infrastructure segment, combined with the interest cost savings from our recent refinancing initiatives, will continue to support the current level of our dividend. We continue to expect an improvement in our dividend payout ratios moving into 2018.

In all, operational performance of the business remain strong. And we continue to improve our financial position, while advancing our strategy to focus on growing our long-term high-quality cash flows within the Infrastructure segment.

At this point, I will turn the call over to the operator, and open it up for questions.

Maybe you can help us understand with the most recent restructuring last month. How might we think of this in terms of cost savings going forward?

Thanks, Linda. I'm happy to address that.

It's Sean here. So Steve alluded to the way we're looking at it is that going forward, we'll see an annual reduction in cost of fully burdened about $20 billion.

So $15 million of that would be cash savings, the other $5 million would be in the form of different things like that. And to think about those cash savings, about $25 million to, call it 1/3 of that will show up in G&A.

And then the other 2/3, or 75% would show up in the operating performance of the units.

And that $20 million is versus full year 2017?

Yes. So that's basically looking at -- on an [indiscernible] basis what the cost savings are for them.

And as Steve alluded to the vast majority of the -- reorganization activities were completed in the past 30 or so days.

And is that viewed as being sustainable i.e. as your business scales up, might you have to add business development or other people to capture that growth?

Yes. That's a great question, Linda.

The numbers that we're providing today actually encompass that. So if we looked at the actual cost savings, I have the spreadsheet in front of me, from all of the reorganization activities, it's probably about 20% or so higher than that.

And so we have already reflected the cost to sort of rebuild or to put a team in place in the U.S., for example, or things like that. So that is reflective of what we view is being sustainable.

And with respect to your injection stations in the U.S., I guess this is more of an operational question. What is the vision or the thought as to when they can be fully utilized?

And what might that mean in terms of contributing to EBITDA growth?

Well, I mean that's two part question. But first one, as you know, we just took over those injection stations to use as we can use them November 1.

So we just got them this month. So we will see steady growth in those injection stations, especially in the very premium play.

So literally, when I was in Houston last -- and talking to several customers, there's 4 and 5 hour wait line in terminals that are literally 2 miles away from these terminals, which were basically almost sitting idle. So they will ramp up fairly quickly because of the just the time and dollars.

That the other trucking companies, including ours, were waiting not using the -- sitting there at other terminals. So we'll quickly ramp up our terminals.

Our trucking business will quickly ramp up. We're already seeing, in the Permian basin, we can't get enough drivers.

But we are actively recruiting and putting drivers to work on the daily basis in the Permian basin to put our truck fleet in service. And so we will be moving our truck fleets around to these premium assets or Permian basin over the next couple of months.

So we plan to see a steady ramp through 2017. We think this quarter will be pretty bumpy especially because of the October's business, being the last business with that one customer.

So we see a pretty steady ramp up over the year. We think by the end of the year, we could be close to where we were in 2016 as far as our trucking and injection stations.

That's helpful. And maybe we can get another update at the end of January at your Investor Day, which I'm looking forward to attending.

Yes, absolutely.

This is Bill on for Jeremy. Just on the Permian idle gathering system that you mentioned, what level of CapEx would that take to resume operations?

And have you had any conversations with shippers there?

We've just begun our conversation with shippers and the evaluation of the asset is ongoing. I just discovered the asset about a month ago.

So we're just now doing the engineering and constructional review put place in the back service.

Okay. And just given the very high multiples that Permian gathering systems attracted, have you thought about selling that at all given the valuations?

Not at this time. We want to grow our Infrastructure business.

And really the Permian basin is one of the areas we want to grow that Infrastructure business.

Great. And then do you have any thoughts on the Fort Hills ramp through 2018?

And how do you see your marketing business in Hardisty crude by rail facility benefiting, is that comes on mind?

Yes. No, thanks for that.

I think there's a couple of impacts from Fort Hills that we'll see. I mean specific to our crude-by-rail facility, as everyone expect, we will have a lack of pipeline egress here at Western Canada.

We would share a similar view as everyone. And given that our crude-by-rail facility will be utilized quite a bit more than it certainly has historically.

We've already started to see that. I mean for us, and I think everybody to be aware of that, activity levels are almost irrelevant from a cash flow perspective, because it's fully contracted on a take-or-pay basis.

So it's increasing activity levels is better for our customer, which is better for everyone. So from a financial impact, that's it.

But certainly, we'll continue to see increase crude-by-rail activity as Fort Hills comes one. I mean the other part is, in our prepared remarks, we talked about one of the impacts in the quarter being light heavy spreads.

And with Fort Hills coming on, we would expect those to widen out again, which would create opportunities, once again, in our crude oil Wholesale business.

Maybe I can just start with your commentary on the crude-by-rail and the egress towards -- how do you think about the impact on your customers as differentials widen if we stay in kind of flat oil price environment, the realized pricing for Canadian producers goes down, how do you think to that? And how does that impact your business?

I mean if you think about -- again this is more of a holistic question, as I think of it, David, is that obviously, what is best. And I think we've talked about it.

We would like to see more egress to Western Canada. And for two reasons, one being, because that would create demand for additional tankage be at Hardisty if it's KXL or Edmonton if it's TMX expansion.

So there is definitely an immediate impact from that. But I mean, probably the bigger impact for us is that it's good for Western Canadian producers.

And what's good for Western Canada is good for Gibson, ultimately. We're not looking at this as a sort of 1- to 3-year time frame only, we're looking at this as sort of a long-term sustainable one.

So that is absolutely true. I mean to the extent that netbacks of the producers are going down because differentials widened out, though we may benefit modestly on our crude oil Wholesale business.

Quite frankly, that is not the focus for the company. The focus is on our Infrastructure assets in businesses that complement those Infrastructure assets.

And to the extent that netbacks are low for our producers, it's going to be difficult for us to grow the Infrastructure assets at a pace that we'd like. So certainly, there is a short-term benefit, on our crude oil Wholesale business.

But I think that'd be rather short-term of us to look at it with that lens. And we obviously would like to see more pipeline egress set out of Western Canada.

So that those netbacks are as high as they can be for our producer, customers.

And just with regards to crude-by-rail. The take-or-pay, when does that end?

And what's your thinking around taking advantage of the spirit of high crude-by-rail demand to contract here further? What are you thinking there?

So the contract expires mid '19. And I would say we have not initiated discussions in earnest around recontracting, but that's something we would expect.

The pace to pick up probably mid-to late '18, certainly. You know probably, it is in around now to 2018 that we start thinking about those discussions.

What I would say is, given the current outlook for egress out of Western Canada. We are relatively confident in our ability to recontract that at rates that we would think would be similar contract that's somewhat similar to where we are today.

Perfect. And just one last question.

You mentioned that once you change per year, will drive EBITDA growth mid-single digit -- mid- to high single digit. Was that for the overall business or is that just the Infrastructure segment?

And then I guess the other question is, is that like an absolute number or you're also thinking in per share as well?

So that would be the Infrastructure business that we're talking about. Again, I know it may seem like we're trying to [indiscernible] a point here.

But if you look at our business, Infrastructure and the business in totality are very quickly becoming very similar. With Infrastructure, when we bring the new tanks on and ES [indiscernible] being 85%.

So I'm not sure if I distinguished between the 2 of them. And that is -- we've already stated previously that we expect given improvements in EBITDA that we'll see from new infrastructure we're bringing on that we'll be able to fund, certainly the near-term capital on balance sheet.

So we do view things on a per share lens. That is important to us, but we also -- again, at least certainly in the near-term per share.

And total would be the same.

Probably, I'll add on it. I just will comment on that.

Really does the mid to -- that growth of single digits to low double digits there, that was specifically targeting our tankage at Hardisty and Edmonton. And so we're looking for additional platforms in gathering systems in Infrastructure on both Canada and the U.S.

to increase that into the double digit growth on a go-forward basis.

Thanks for adding additional color. I had my interest into joining you at your Investor Day conference.

Excellent, thank you.

I guess questions for Steve. And you've mentioned a number of times since joining that you want us to Gibson to shift to more producer-based organization.

So at this stage in time, after being in the seat for several months, what needs to be done at this stage? And really how do you think about the opportunity?

Well, in Canada, we did do a large reorganization. And in that, we put together a producers-services-focused organization, which encompasses our environmental North business, our trucking business, our lease acquisition business and our gathering system business.

So all of that is focused towards the Canadian producer. And then in the U.S., my major priority over the next 1.5 months to 2 months is really recruiting a team that, I believe, can pick up and grow that business on a go-forward basis.

Good. That's helpful.

And then maybe we'll just dive into a little bit your competitive advantage. Is it a combination of cost of capital versus the producers?

And then also your existing network of assets and really just leveraging those things?

Mostly, it's around leveraging the existing assets. We want to build a really tight relationships, but that's going to take sometime.

But right now we are leveraging our existing assets and growing our business around our existing assets.

Just thinking as you talked about evaluating other kind of non-infrastructure businesses if you befit the strategy in its potential devastator opportunities. It also feels like you'd like to really kind of move this transition to -- around your terminals and in the injection stations as quickly as possible.

Just wondering now as you think about that and the payout ratio being in that 100% range. Is that kind of where you really don't want to breach the 100% or do you feel that you can move the asset sales strategy forward quicker and be comfortable, maybe borrowing to make the debut for a period of time until the infrastructure growth kind of sleeves in?

No. It's a good question, Robert.

I think -- so we have already announced the sale of DSO. We are comfortable with -- even with the sale of that.

And if we use the proceeds to delever or sort of pre-fund capital where our dividend payout ratio will be through the remainder of the year. As we think of it further rationalizing businesses, really most of the other businesses that we contemplate would not be material in nature with the one exception, and we'll update people on this being [indiscernible].

That's still under evaluation certainly, as would all our assets, it's core until deemed otherwise. That is something we'll certainly update people on at the IR day.

But other asset sales other than that, I don't think would have a material impact on our payout ratio. If you think of what's left, quite frankly.

And then to the extent that we were to sell something that had a more material contribution to the payout ratio. I mean it really depends on use of proceeds as well.

I mean, certainly something that would be contemplated depending upon where our leverage is at that time, is buying back shares which obviously would help the payout ratio, certainly add a yield of 7.5%. So I don't see us really boring materially to try and sustain the dividend 100%.

Getting the dividend payout ratio very much remains the focus. And we will be aware of it.

But beyond that, I don't know if there's much I can comment on right now. Certainly, all of this will be discussed and outlined at our IR day.

So we will be very clear around what businesses we deem core and what businesses we deem not to be core. And we'll be very, very clear on our dividend policy, which we're not going to change from where it is, which is Infrastructure covering fixed capital charges.

But also how that dividend will be funded.

Sounds good. Maybe I could potentially have a couple of questions on Wholesale.

First just around the hedging disclosure and I appreciate the disclosure around the value, the inventory. So if the inventory is about $35 million now above book value.

And the marks in the quarter are mostly realized so that sort of you have been set. If you're looking at 10% to 20% for Wholesale in Q4, is it fair than not, there's is a similar number, maybe a little bit more that should come into the Q1 '18 results?

Yes, on the margin, I'd say that's probably right as you think about $35 million and sort of mark-to-market above physical. I think the 10% to 20%, and not surprising to you, we had a big debate around what that number should be.

And if anything, we don't want to overpromise on what we say in the call here today. So if you took pure math.

And you took the 10% to 20% and you assume that, that -- the rest could move. Some of these could actually move in Q2, because not all of it is on the NGL side.

Some of that is refined products inventory that might move, probably Q2 as well. So I wouldn't necessarily guide directly to that.

But I mean, directionally, that's probably about right.

Got it. And then, just the second question is just the Wholesale business outside of some of these pricing movements from the next 2, 3 quarters.

But historically, and I recognize this predates both of you, but the messaging was the company could do something in the range of $10 million a quarter. Just purely based on volume irrespective of price movement.

I guess I'm wondering, can you talk about some of the changes that you've seen in that part of the business? And would you be able to give a bit of a sense absent the price movement?

Is there any material margin or is it really kind of starting at 0 and needing to look at commodity prices?

Probably, I mean, obviously, we've had compression in the absolute price crude oil from $100 down to $50. And so that compresses all spreads.

And then as the U.S. production has ramped up in the last week, and as heavy tar production has fallen off across the rest of world, like Venezuela and Mexico, that has given a better market for the heavies and the sour crude which has -- which did diminish the spread between lights we have in the quarter.

And we didn't see some of that impact.

Okay. I guess there is really kind of the thought that Wholesale starts at 0 and it's all about price movement at this point that there's no kind of volume base part of the business in Wholesale that's going to make you money quarter in or quarter out?

Well, the NGL business I mean we talked about the money that we're going to make in the fourth and the first quarter. The NGL business is a business in which you store product in the second quarter or in the third quarter.

You retain all your cost of running that business but you have no margin. And so the NGL business actually loses money in those quarters, both the second and third.

And then it makes the money in the fourth and the first.

And Robert, I would say on the crude business, I wouldn't necessarily say it starts at 0. I think overall -- and I do appreciate the bookends that you're referring to.

Historically, I certainly will not be referring to bookends like that as we move forward. I mean the expectation is still that the crude business will be profitable.

It's just the spreads have been much, much lower than they were historically. So I mean if the bookends were at $10 million, and we're not going to provide bookends, but if the bookends were at $10 million a quarter, certainly, it is 0 to something.

But I mean we still expect that business to be profitable quarter-over-quarter as we move forward.

You've actually answered the majority of my questions. But maybe you can clarify on the hedging loss in the quarter.

How much of that was attributable to the NGL business as opposed to some of the other products like crude?

Yes, the vast majority of that would be on the NGL side.

Okay. So you've had this exposure previously.

But we've never quite seen this degree of loss coming from the hedges. So has anything changed in your hedging strategy?

Or is this just the way the price move-ins occurred in the quarter and the timing of your closing out the hedges?

Yes. No, nothing has changed fundamentally in the business, that's certainly true.

I think the biggest difference is -- and hopefully, people have seen a trend here, but we're trying to increase their disclosure and transparency. And really, so we have had periods, previously where we have had hedge losses like this.

And it's just the transparency quite frankly hasn't been quite as high. So nothing has changed fundamentally in the business.

We discussed it as well, but certainly on the crude side, the light heavy spreads had impacted the profitability of the business. And it's just on an overall basis, has increased the overall effect.

So, no understanding just defer the question that Rob Kwan just asked, but I'm going to reiterate it here. I'd be interested to know what you think, in the current market conditions, the Wholesale business can generate in terms of EBITDA on an annual basis?

I mean, it's a loaded question. You're asking us to provide guidance moving forward.

Again, what I would say is that the NGL business, the crude losses are here on the -- sorry the losses are here on the financial perspective, certainly. But the NGL business is largely the same as it has been in previous quarter.

We've got -- or previous years. We have a significant mark-to-market range now that we hope to move to market in Q4, Q1 which is similar to previous years.

What is different this quarter, just to be clear, is that the crude business, its performance was less than we have historically seen. And that is almost entirely due to the tighter light heavy spreads.

And that's the genesis of the question. Actually I understand the timing and on the NGLs and whatnot we've seen it with other companies.

But it's really -- it does appear as though the state of the market such that the volatility and the spreads seem to be compressed? And it seems like that's the new normal.

And then if just -- what does that mean exactly for the bookends as you've previously discussed?

Yes. No, I understand the question.

I mean maybe the -- we're not going to provide bookends going forward, certainly. As we move forward, Infrastructure will be a larger percentage of the business.

And so the emphasis on sort of something like the crude business, hopefully, will go down over time. And that is certainly the goal of the management team here.

All that being said, I would say, certainly what the [indiscernible] and what's happening in Venezuela, the light heavy spreads are abnormally tighter. We would have viewed them being as somewhat abnormally tight within the quarter.

Our view is that, that crude business will continue to be profitable going forward. But we're not going to provide bookends beyond that.

I understand. Just finally, my last question here.

So I don't know if you want to talk on this one, but when do you exactly expect, under the current business plan, the dividend payout ratio will get below 100%?

When will it be below 100%?

Yes, on a run-rate basis?

On a run-rate basis, I'd expect -- we were basically at 100% right now -- just over 100% right now. And we're going to bring in 2 new tanks in Edmonton in Q1.

So I would expect on a run-rate basis, Q1 will probably be very modestly below a 100%.

Hate to go back to the Wholesale. I had a follow-up question on that.

And is there anything going on with marketing Wholesale driving some benefits to Infrastructure this quarter? Just I know it's a small item there, just got a $1 million more, but is there maybe a bigger push for that, that you're executing on?

No, no. Absolutely, that's a good question and sort of the microphone is on a mute here, we talked about it a little bit, but no.

Absolutely, I mean the focus is certainly on the crude oil side of our Wholesale business is -- and we've talked about it previously, the strategy is focused on Infrastructure and businesses that competent help growth or optimize that infrastructure. That is certainly the lens that we look at our crude business -- crude marketing business on.

Its primary goal is to drive volumes or infrastructure to help us grow our infrastructures through being a producer-facing business. And then beyond that, it is looking to optimize the assets that we have.

So certainly, the crude business, notwithstanding over the very modest quarter, certainly relative to historic perspective, they continue to drive volumes to our infrastructure. And we would view it, holistically, as being a very profitable business for us because of that.

So the actual segment profit, specifically again was quite modest in the quarter, but that doesn't take into effect the impact it had on our Infrastructure business.

Okay. Because I mean, if you are back to $8 million realized loss and you're almost break even on Wholesale.

But you -- are guys breaking even on the crude marketing at all? Is that -- or is that weighing on Q3?

It's essentially breakeven. If we looked at the crude business's inflation, it was a very, very modest negative.

But so I mean, overall we would have looked at it as largely breakeven. And again, given it's contribution to the Infrastructure segment, we would still view it as being a very positive segment.

Okay. And as well -- also on debt-to-EBITDA, and I know I've asked this question probably 2 or 3 quarters ago, and you still below the levels that the credit facility and whatnot.

But where are you now roughly? And do you expect that to improve next year?

And is there anything that's concerning you right now in terms of where that metric goes going forward?

So similar to previous disclosure, we said we want to be in the 3% to 3.5% range. At this quarter, we are at 3.6%, which is slightly higher than what we expect to have these or we did a forecast these realized losses when we talked about it on financial hedges, and when we talked about it on the last call.

With sort of moving some of that physical inventory to market, we would expect, certainly, a recovery in the Wholesale business and in Q4 and Q1 which will have that LTM basis. And then with the tankage coming on.

Then Edmonton in Q1, that will help it as well. So we expect to see sequentially improving EBITDA profile which will allow us to continue to fund capital and balance sheet.

We keep that target of 3 to 3.5x remain. So we will be very focused on keeping that leverage at levels that we think make sense.

We'll monitor it through Q4 and through Q1, certainly. We'll talk about it a bit more at the IR day.

But I mean, right now, like any quarter, it's something that I am acutely focused on. But still comfortable with the previous disclosures that we'd given.

Just a couple of cleanups. Just regarding Steve's comments on building the business around Hardisty and the potential to have some pipelines around that asset.

Just want to get a sense of magnitude or scope of the gathering systems that you're looking to potentially add there is -- and would these be greenfield or would it be easier to potentially partner with someone there?

There are extensions of existing gathering systems in the area, majority of them. One of them is a greenfield opportunity north of the Edmonton area.

But south of Hardisty is really just extension of the existing gathering systems. And that's probably in the $50 million range on a capital extent.

All right. That's helpful.

And then just in terms of the commentary on moves drawn and you are evaluating that. Just to give us -- just given the new disclosure over last couple of years, it is in a couple of different buckets now.

On a stand-alone basis, what is that asset done on an LTM?

We think about that business as being probably run rate around $40 million business, give or take. I think certainly there's upside from that.

But the LTM, that's probably not far off where it's been.

All right. That's helpful.

And then just finally, the U.S. Environmental Services, first index of bids seem to be coming up soon.

The expectation, I guess that this now is in early Q1 close?

From a close perspective, certainly, I think, even when we came out at the original sort of guidance of -- by the end of the year, we acknowledged that it was aggressive. We have hired a bank.

They have been engaged for quite a while. I think that the process is progressing nicely.

We are expecting binding bids prior to year-end. I wouldn't expect that there's going to be a tremendous time gap between binding bids and close.

We'll see. But yes, no; that'd be accurate.

We are looking for nonbinding bids here very shortly. We're looking for binding bids prior to year-end.

And certainly, we are very hopeful that we can give people any much more fulsome update at our IR day at the end of January.

Thank you for joining us for our third quarter conference call. We hope you can join us, either in person or on the webcast, when we host our Investor Day on January 30 in Toronto.

Again, thank you for joining us and have a great day.