Keyera Corp.

Thank you, and good morning. Joining me today will be Dean Setoguchi, President and CEO, Eileen Marikar, Senior Vice President and CFO; Jamie Urquhart, Senior Vice President and Chief Commercial Officer; and Bradley Lock, Senior Vice President and Chief Operating Officer.

We will begin with some prepared remarks after which we will open the call for questions. I would like to remind listeners that some of the comments and answers that we will provide speak to future events.

These forward-looking statements are given as of today's date and reflect events or outcomes that management currently expects. In addition, we will also refer to some non-GAAP financial measures.

For additional information on non-GAAP measures and forward-looking statements, refer to Keyera's public filing available on SEDAR and on our website. With that, I'll turn it over to Dean.

Thanks Dan, and good morning, everyone. I'd first like to take a moment to acknowledge frontline workers, and those working to administer vaccines and the fight against COVID.

We appreciate your effort and dedication. We'd also like to acknowledge our employees, many still remotely for their commitment of safety and their continued efforts to keep our assets running safely and reliably for our customers.

At Keyera, our top priority continues to be the health and safety of our people and the community in which we operate. About this time last year, global energy market face significant uncertainty.

I'm pleased to share that Keyera remain resilient and in this last quarter we've seen an encouraging signs of recovery. That's reflected even strong performance across all three segments of our integrated business, and in our first quarter financial results.

Volumes in our Gathering and Processing business increased by 7% compared to last quarter, including 5% growth in our south region leading to strong financial performance from the segment. This results represent a year of hard work and close collaboration with our customers, which aligns with our goal of being number one in customer recognition.

Our liquid infrastructure segment delivered record results for the quarter, resulting from continued high demand for all services, including strong deliveries from our industry leading condensate systems. Our liquid segments provide essential services to our wide range of customers throughout the basin and continues to deliver the best returns in our portfolio, which stable contracted cash flow.

These attributes will remain our focus for future growth capital which includes the KAPS pipeline project. We also have solid performance from our marketing segment reported by strong pricing across the commodities we service.

Yesterday we announced a significant increase to our 2021 guidance for the segment, as Jamie will speak to you shortly. We're pleased to deliver these first quarter results, but we also continue to focus on our goal of delivering superior shareholder returns over the long term.

And that means, we must continue to maintain our strong financial position, keep improving our safety and reliability, delivering our effort to maximize efficiency and prepare for energy transition. A strong balance sheet and financial disciplined have long been a hallmarks of our business.

Our conservative approach again have begin to serve us well through the last commodity price downturn. Today, our balance sheet remains in good shape with low leverage and ample capacity to fund our KAPS pipeline project.

We continue to take steps towards improving our safety and reliability performance. We recognized importance of pull factors and delivering superior customer recognition and total shareholder return.

And we continue to hold ourselves accountable. We continue our pursuits of being the most efficient operator for our customers and growing margins through efficiency gain and reducing costs.

Our customers relied on infrastructure assets, as well as our commercial, operational and logistics expertise. This allows them to get their product to the highest value markets.

We also see opportunities that buy technology and innovation to improve safety, liability, and lower emission. We recognized the world is undergoing a transition towards the low carbon future and venture support and government policy are future enabling this transition.

We believe the Canadian energy industry has an advantage and its ability to continue to response we deliver, the energy that world need. At Keyera, we want to be part of its solution.

And views this transmission as a opportunity. Later this year, we will set emission target that will consider a wide range of efforts that we have underway.

We close in more general notes that Canadian energy industry is also showing some positive signs that points recovery. For the first time in many years, pipeline export capacity for both oil and natural gas will soon be adequate to meet industry needs.

And with growing local demand from the Petrochemical industry and better connections to Overseas market, the trends for natural gas liquid such as propane also look encouraging. In addition, recent consolidation amongst producers are also good for our industries as it creates stronger players who are better positioned for the long term.

I'll now turn over to Jamie to provide an update on our commercial activities.

Thanks Dean, and good morning. As Dean mentioned, we have increased our 2021 marketing segment guidance.

The higher guidance is based on year to-date performance, a disciplined hedging program and false inclusion of successful negotiations for natural gas liquid supply agreements for the contract year beginning April 1 and ending in March 2020. As a result, we have raise our 2021 realized margin guidance for the marketing segment between $260 million and $290 million.

This replaces our previous guidance range of between $180 million and $220 million. The marketing segment continue to contribute to enhance our overall corporate returns and provides funding or investments in more highly contracted infrastructure assets.

I'll now take a moment to provide some broader context for our return expectations on KAPS. KAPS is transformative for Keyera.

The product is highly desired by industry and it provide the link in our value chain that fully integrates our business. It brings a much-needed alternative transportation solution for condensate and natural gas liquid from the Montney and Duvernay plays in northwestern Alberta to Keyera's liquids hub in Fort Saskatchewan.

Initial capacity remains 70% contracted under long term transportation agreements within average term of 14 years. Based on our engagement with new and existing customers and the expected ramp-up in industry activity, we remain confident that we'll be able to secure the additional contracted volumes to meet our return expectations of 10% to 15% by 2025.

A reminder, that this return is for the project on a standalone basis. I'll now turn it over to Brad to provide an update on how preparations are going for the KAPS project.

And also speak to other operational highlights.

Thanks Jamie. I'm pleased to share that during the quarter we've made significant progress on the KAPS project in preparation for mainline construction kick off this summer.

In Q1, we completed clearing almost a 150 kilometers of pipeline right-of-way and pipe fabrication is well under way. The project is a great made-in-Alberta story.

The clearing work in both five local indigenous owned and affiliate contractors who delivered outstanding performance. And pipe fabrication is currently being done in Camrose, Alberta.

At the Wildhorse crude oil storage and blending terminal in Cushing Oklahoma, mechanical completion was declared on January 29 and commissioning activities are underway. Our operations team continues to make steady progress and we expect that facility will be fully operational this summer.

At Wapiti, there's been a lot of great work done by the team. We had strong safety and reliability performance so far this year, and we continue to grow facility volumes.

In the third quarter, we'll have a short plan to further ensure the future long term reliability of this asset. We also have scheduled 10-day terminals at Zeta Creek in June.

And the Brazeau River plant which is currently underway. I'll not turn it over to Eileen, who will run through our financial results.

Thanks Brad. Keyera delivered solid first quarter financial results.

The strong performance from each business segment. Adjusted EBITDA for the first quarter of 2021 was $225 million, while distributable cash flow was $165 million, net earnings were $86 million.

The gathering processing segment delivered margins of $79 million as we reach new throughput highs at both the Wapiti and Pipestone gas plant. We delivered a record $105 of realized margin in our liquid infrastructure business.

This performance can be attributed to the continued high demand for all services, including increased storage activity and strong delivery from our condensate systems. And our marketing segments delivered a realized margin of $61 million.

We can take continue to maintain a solid financial position. We ended the first quarter with a net debt to adjusted EBITDA ratio of 2.7 times.

This is within our conservative target range of 2.5 to 3 times on a covenant basis. The company has $1.5 billion in available liquidity with minimal near term debt maturity.

In addition, we completed a $350 million hybrid note offering in March. This positions us well to fund our 2021 to growth capital program of between $400 million and $450 million.

The majority of this growth capital will be directed toward the construction of the KAPS pipeline projects in the second half of the year. With that, I'll hand it over to Dean for closing comments.

Thanks, Eileen. Keyera's value proposition continues to be the delivery of a sustainable dividend underpinned by low debt leverage, and a deep inventory of investment opportunities, aimed at expanding the distributable cash flow per share.

Looking ahead, Keyera will continue to be a safe, reliable and sustainable operator dedicated to serving our customers and generating value for our shareholders. We're excited about the future.

And we're confident we have the culture, people and assets for continued success. On behalf of Keyera's Board of Directors and our management team, I thank our employee, customers, shareholders and other stakeholders for their continued support.

With that, I'll turn it back to our operator for Q&A.

Yep. Good morning, everyone.

First question is on KAPS. Just given the improving commodity price environment as well as some of the other dynamics that we're seeing in the basin.

You have discussions for additional contracting capacity accelerated there? And then as well, are you seeing incremental interest from producers in Northeast BC with some potential to get Northeast BC volumes down into Alberta there as well?

Maybe I'll just start with your second question first. I mean, the announcements and the notification that was filed by NorthRiver Midstream.

It's an independent system. That's a BC system, ours independent system, which is in Canada.

Both systems are open access. So, we like the whole concept of more competition in our basins, which is just good overall.

And so, we're happy to see that project continued to develop. Certainly, with more volumes being collected in BC, obviously, the potential for us being able to capture some of that volume in KAPS is more promising.

But again, it's still early days. And maybe on contracting front, you could help some of that, Jamie.

Yes. So certainly as we've finalized and confirmed our commitment to KAPS and as we shared -- starting to clear trees, manufacturing pipe, that in our customers eyes has made the project, solidified is a real project.

So, certainly we've had more meaningful conversations with respect to incremental volumes. With just temper people's expectations around timing of when we might be in a position to make further announcements around additional contracting is, most customers will really do want to see and say, as to when that project is going to be complete.

We hope and we will continue to keep our customers apprised of the development of that project. To remind everybody that that project is scheduled to be completed in Q1, 2023.

We certainly expect that's going to be the case. But to reconfirm.

Yes. Much more conversation happening with our customers, more meaningful conversation, particularly at the top end of our pipeline up in the Pipestone area.

Yes, Rob. In overall, we've seen some pretty robust results from our producers in this basin.

And obviously, projections are that their balance sheets are going to be pretty healthy here in another quarter or two. So, just a lot more discussion about future drilling plans and growth.

And obviously, that only makes it more encouraging for our KAPS pipeline and the rest of our business.

Excellent. And that leads me to kind of my next question.

Taking a look at the northern plants, good to see the volumes ticking up there. How are volumes tracking to take your pace?

And at what point do you start having discussions about the incremental capacity at Wapiti being coming available?

Yes, Rob. I mean, we've always said that fairway, the Montney is -- if not the most economic, it's certainly talked to your within the Montney.

And we're actually surprised at how quickly drilling activity has responded based on our sort of some of the communications we had with our producers just in the fall. So, we think that's very healthy.

But again, as commodity price environment remains, which we feel pretty good about. We think that's only going to increase in the fall.

So there's some producers in the area that aren't even delivering to us that are now much more engaged about the potential of reactivating drilling plans, and potentially delivering to our gas plants. So, again, that's very positive.

And again, we've always said, we're in the best stretch of that Montney, and we should be able to capture more volumes over time.

Yes. The only thing I'd add is that there are some new players in the Wapiti area that have made some acquisitions in the car [ph] Wapiti area that we are very familiar with in other parts of our business.

So we're upbeat, obviously, with respect to the Wapiti gas plant.

Thank you.

Thank you. I'm wondering if you can elaborate a little bit more on your experiences over the past year with respect to leveraging technology, and transforming your -- some of your business processes that way?

Clearly, many of us have accelerated our use of technology in many ways during a pandemic. And I'm wondering what practices you might keep as permanent and further evolve the business to realize efficiencies and opportunities beyond what you currently have in your plans?

Maybe I'll start with. First of all, good morning, Linda.

I think the pandemic, there are some benefits that came from that in terms of just help understanding what we could do remotely. We've operated our business very well, especially last year through very challenging conditions.

And I credit our technology team for enabling us to do that. So, as we look forward, we're really thinking about how do we leverage off of that in the future.

So, we will have some more flexible sort of work environments. We do like to collaborate still together.

So we'll make sure that we continue to do that on some basis. But we'll add some more flexibility.

But overall, as a company, we think that technology and innovation is something that's a big opportunity for our company, and something that we want to leverage in a much bigger way in the future. So maybe with that, I can just pass it over to Jamie or Brad as you can maybe talk about some things in your areas that you're looking at.

Hi, Linda. I think certainly from an operation side, utilizing data management and data access to more centralized some of our operations and business process is something that we're spending a lot more time and energy on right now.

And I think over the long term that has a real opportunity to reduce our operating costs, and ultimately provide more value added services to our customers on that line.

Yes. So on the commercial side, Linda, we've got a couple of projects that were in the latter stages of implementing with respect to using some machine learning, to allow our people to make better business decisions.

We deal with a lot of data and asking people to be able to process that data and make the best business decisions possible. They do a great job.

But, using machine learning, and artificial intelligence, just allows our people to make better business decisions. So we've got some applications as it pertains primarily to our commercial marketing team that we're implementing and we've seen some positive results out of that so far.

Yes. And just maybe lastly, Linda.

I think from a safety perspective, I think that, again, the technology we've been using just to communicate virtually been very effective. So, especially in the cold winter months here in Alberta, I think it's a big benefit if we don't have as many people on the roads, and we can do things virtually, and for the safety of our people.

Thank you. And on a separate note, another trend that we're seeing is inflationary pressures on many fronts.

And I'm wondering how you can comment on whether you're starting to see that in your operating or capital expenses. And if you can specifically comment on what percentage of your costs for KAPS have been locked down, both in terms of what's incurred to date, but as well as more importantly, prospectively, and also confirm that there's no scope change contemplated for KAPS at this point?

So, from an operating cost perspective, I think it is fair to say that we're seeing some inflationary pressures, certainly, power is one of those components. I think we do have, like all of our other commodities we do have -- we do actively manage our power price, and hedge that out over time to take to mitigate some of the impact of that.

So that's a benefit to us. Certainly other commodities like steel and copper and some raw materials are seeing inflationary pressures as well.

We're fortunate with KAPS. The fact that we had a one year delay allowed us to really lock in some of those opportunities early on.

So we had ordered our pipe in over a year ago and secured that under contract. That doesn't take all the inflationary pressure out of there.

But it takes a lot of it out. So that's been real positive for us.

On KAPS, we've locked down our pipe. We've locked down our mainline contractors.

We've locked down another, a number of key services as well. So I don't have an exact number, but it's going to be well north of 50% of our costs are already locked in for that project.

So we're feeling pretty good about our confidence in delivering that within the budget that we've contemplated.

And may I asked what contingency you've got embedded in that budget?

No, we don't usually disclose that. But certainly, we use good project management principles to assess contingency on the basis of thoroughness of engineering to-date.

Thank you. It was worth the asking.

Maybe on a separate note, your presence in the U.S. has expanded with Wildhorse.

It will be operational soon. Has your expectation for the facility changed since it was originally contemplated given that we're going through a pandemic, there was the unfortunate winter storm Uri?

And maybe there's some changes in some of the market dynamics there as a result among other considerations. Can you comment on, I guess, how Wildhorse fits into your approach to the U.S.

and how it might have evolved?

Yes, Linda, thanks for the question. Nothing's changed as a result of the business thesis of Wildhorse.

We're still very encouraged and excited about getting that facility up and running and being part of our vertically integrated value chain and enabling us to find the highest value markets for the products that we do market on behalf of our customers. In particular, our U.S.

assets, Wildhorse will be very integrated with our OLT asset. That's been -- we've been very pleased with since we started owning that asset.

And so, yes, no, there's no change as a result of any anything that's happened over the last 12 months.

Thank you. I'll jump back in the queue.

Yes. Thanks for taking my questions here.

I wanted to first start on your run rate marketing guidance. We've now seen three consecutive years of guidance revised higher with a major reason being those low butane costs.

So, can you talk about those assumptions? Do you think they're still relevant or do you think their run rate level is actually higher?

Yes. Well, we will be likely at the end of the year looking to revise that that base guidance, Matt.

I think, well, I know one of the reasons why we're hesitating to do that is just to get a better line of sight with respect to the contributions that both Galena Park and Wildhorse will make to our marketing business. But also, it's a significant contributor to our liquids infrastructure side of our business as well.

And as it pertains to butane, the contracting year that we just completed, a successful contracting year. But butane prices within North America, we look at it, they're still dynamic with respect to the demand of butane within Western Canada relative to the supply.

So, those things do play into ultimately, how market is going to perform going forward, specifically, as it pertains to AEF. So we're obviously looking to having the ability to stabilize the marketing contribution as much as possible, but just recognizing that, butane pricing is still dynamic and fluctuates year to year.

That's great, Jamie. Thanks for those comments there.

And then, I wanted to address, you mentioned a standalone comment on your KAPS returns projects expectation. So I just wanted to clarify that.

So the opportunity to source volumes from this other open access pipeline is not considered in your return guidance. And then, maybe more broadly, does this give you an opportunity to pull forward your assumption of running that return by two years after in service?

Well, our return expectations are based on our forecast with respect to bringing pipe volumes into that pipeline. And when we say returns on a standalone basis, it's just looking at that pipeline, net investment that we've announced.

Obviously, there would be upstream benefits potentially with respect to some of their gathering and processing assets, that would feed into that pipeline, or some of our downstream assets that ultimately that pipeline will feed into. And that's what we're referencing when we say standalone.

Was that your question, Matt?

Yes. And then just to extend a bit further.

So then, yes, if you're looking at your own system and integration on the value chain side, if there's more volumes from the separate system coming in, obviously, that's not considered. And so there might be some wiggle room and moving within that range?

Is that the right way to be thinking about that?

I guess, Matt, we -- I think we've always been sort of open to say that we have a base level of contracting 70% of initial capacity. And if you get to our 10% to 15% hurdle rate, we still need to secure more volumes.

And we have a number of different ways that we can do that. We can capture a larger market share.

We're talking to more producers that are on the upper side of the border bode [ph] additional volumes, that we hope to contract as well. And also there's a potential for these volumes.

And so we're not specifying exactly where it comes from. But we think on a risk basis, through those three sort of sources that we're going to get to that 10% to 15% threshold.

That's great. Thanks for that, Dean.

And one last thing, if I may. We saw an announcement by a competitor this morning on a new NGL system.

Does that -- any thoughts there on how this may impact your Petcam feedstock strategy or any downstream conversations you're having on new frac capacity? Or just even more broadly, what this means in terms of the Alberta Petcam strategy just generally?

I think more supplies of NGL and feedstock are good for our basin. And we know the people that --I'm presuming you're referring to NorthRiver Midstream.

We know them very well. And if there's any opportunities for us to work together to increase, enhance the efficiency of NGL extraction and delivery, we're happy to work with them.

But overall, it's good for our basins. And the competition is what attracts more business to our province, which is what we want.

Yes, Matt. I think you're aware that those are incremental volumes that will be straddled off of the natural gas system.

So, we don't view those as being competition with respect to our designs to potentially expand KFS in the future.

Yes. I was preferring to competition in the sense of competing sources of feedstock for [Indiscernible] players.

Yes. No, fair point.

Thanks, guys. I was also referencing the fact that they're looking to build out a frac as well.

So, yes, thanks for addressing that question. And I'll jump back in the queue.

Thanks.

Thanks, Matt.

Hey, guys, good morning. I guess the first question, just to sort of follow up on something Matt was asking.

Given the return of activity that we're seeing in the basin today. Does it make sense at this point in time to sort of contemplate maybe expanding KAPS further west out of Gardendale?

In the Northeast BC, is that, some of you guys are actively investigating. You think maybe that's something that would make sense to do further down the road.

Just curious to hear kind of where your heads are at on that at the moment?

Large KAPS system is in Alberta only based NGL solution, transportation solution. So if there's demand to build it to the border, whether it's -- the producers that are up in the Gardendale area, or whether there's a pipeline system in BC that wants to connect to our system, it has to be underpinned by contracts to justify the incremental capital.

So -- but we think there's potential for that? Absolutely.

But we will not make investments. And that's we have adequate rational support for.

Understood. Okay.

The rest of my questions have been asked. Thanks, guys.

Thanks Chris.

Yes. Good morning.

Just on the colonial pipeline outage here, and the impact we're seeing on RBOB. Any comments on how this situation is playing into your spot iso-octane margins?

And I guess, maybe just to confirm if this short term tailwind for Q2 at least is baked into your new marketing guidance range for the year?

Yes. Pat, its Jamie.

Thanks for the question. Yes.

As you're aware, RBOB pop up a little bit over the weekend, and it's settled primarily. I know, it's pops again a little bit this morning, and we expect there's going to be some volatility in the short term.

It really will be determined on the extent of that outage. I think it's fair to say those that can take advantage of optionality tend to benefit from this type of disruption.

And we build our business off of the ability to lock in stable cash flows, but also be able to take advantage of optionality when it presents itself. So hopefully that answers your question.

It does. Thanks, Jamie.

And then, maybe just looking at more on a sustainable basis for the iso-octane business, perhaps you can just walk us through some of the opportunities around clean fuel standards, and what this emerging demand trend could mean for your realized premium going forward relative to historical?

Yes, sure. Happy to.

Yes, certainly, we're looking at the clean fuel standard at AEF and the opportunities that it does present to us, particularly around some potential efficiencies at that site to get our intensity, our carbon intensity down at that facility. So a little early days on that.

But we certainly see once again an opportunity at a with respect to that clean fuel standard. Part of that clean fuel standard and we look at this, and I think we've telegraphed this to the market is that we are focused on trying to find higher value markets within North America.

Traditionally, we've sent a lot of product down to the Gulf of Mexico, and sold it out of there where we've realized higher margins, frankly, if we can find sales points within North America, both from a real cost perspective, but also just frankly from a realized premium perspective. So that's going to be a continued focus for us.

We've actually hired an individual that's dedicated to AEF and increasing margins out of that facility. So it's obviously really important to us.

On a margins perspective, we're still seeing, we're not we're not back to sort of the levels we were pre COVID with respect to the octane premium component of pricing of our iso-octane. Certainly crude and on RBOB are at a historic high, certainly on the RBOB side.

But the premiums still are there -- they're decent, but they're not back to those levels. And frankly, our view is that they're not going to get back to the historic levels until octane worldwide gets more balance.

We're still seeing a lot of octanes coming from the rest of the world into North America, because octanes are priced off of RBOB, and RBOB is very, very strong in North America right now. But until we see demand for gasoline in the rest of the world, catch up to the production capabilities of the rest of the world, we're going to continue to see octanes being pushed into North America and keep those premiums at the current levels.

So, we expect that's going to happen, probably going to happen over the next period of time as the vaccines take hold, and we see that that global demand get back to normal levels. Hopefully, that helps give some flavor to how we see our iso-octane business.

Okay. Thanks.

That's great color. Last one for me, I guess for Eileen.

Wondering if there could be a credit rating updates here on the horizon with S&P just given, I believe the downgrade last year was largely related to the lower commodity prices at that time, which of course, we're now back to pre pandemic levels. Not sure.

And I guess they would also view the recent hybrid issues being positive to your credit ratio. So just curious, on the potential timing for a reading review?

Yes. Thanks, Pat.

They are S&Ps actually currently undergoing their annual review. And based on our discussion so far, everything is significantly more positive, certainly than it was a year ago, especially as we showed 2020 results much stronger than that they always tend to work out.

Overall, we don't expect any significant changes from where we are today with the BBB minus stable, but overall really positive in terms of their outlook.

Okay, great. I'll leave it there.

Thanks.

Thank you. Good morning.

I guess, it’s a big broad question where we've got an environment where egress is improving across product spectrum out of Western Canada. Commodity prices have clearly improved.

Volumes have improved across the board for producers. So when you start to think about the environment on a go forward basis, how does your risk management activities either stay the same, or change and evolve and adapt to market that we see now?

Overall, I mean, we want to remain disciplined, Andrew, and we know that there's always a risk of price shock. So, we want to -- we definitely want to generate upside returns.

But we also want to protect the downside too. And number two, no one predicted the pandemic last year.

And there could be other ways, OPEC could maybe not be as aligned as they are today. Other factors could happen.

So we're just trying to be very responsible to our shareholders. So, when we look forward, if we see sort of commodity prices that we can lock in better than sort of five year averages, we've started to take advantage and layering some of that, recognizing that prices could go even higher.

But again, just securing that base.

Okay. That's helpful context.

And then just maybe a bit of discussion on what you view as being more captive volumes or committed volumes across your portfolio versus areas where you have maybe a bit more of a competitive dynamic?

You mean, you're asking like a percentage or..

Rough percentage or whatever way you'd like to characterize it?

I mean, I think from a G&P perspective, we I don't have the exact numbers. Generally in the north -- in our north facilities where we made new investments, particularly at Wapiti and also at Pipestone is contracted.

So, we do have some producers that are producing above their initial commitments, which is always nice to see. As we said earlier, there are other players in the area that we're talking to that could be contracted volumes as well.

And those, they're more typically on a evergreen basis. I mean, we do -- we have been locking up more longer term, generally less than five years.

But once they're captive to your system in a lot of circumstances, not always though. As long as we're competitively priced [Indiscernible] are pretty sticky.

So I know, just general comments, we can follow up with maybe a bit more specifics after this call, if it's important to you.

It's helpful. And then, maybe one final one if I can just sneak it in.

And along the lines of just egress improving. What are your thoughts on just baseline expansion with line of sight on Trans Mountain?

Yes. Andrew, great question.

We're talking and we're not the operator baseline. But we're very connected with the operators that have baseline.

And obviously, we through our condensate system, we have all the major players out as customers. So we have great relationships with them.

And we love to bring those relationships to our 50% ownership in baseline. Baseline is in our mind is going to have great connectivity to Trans Mountain.

And as a result, we see that there's no reason for us not to benefit off of TMX [ph] and the expectation of additional storage requirements off of that system.

Okay. That's great.

Thank you very much.

I'd also mention that our baseline terminal, I mean, we can add another few million barrels of capacity, but 1.8 million barrels of capacity. And that capacity is going to be a lot lower costs than the original phase.

That's because all the all the infrastructure, like the flanges and the pipe racks and bridges and things like that are already in place. So we think that we can be very competitive as demand increases with Trans Mountain pipeline.

That's great.

Thanks. Can you start with the G&P segment in the south region, specifically, your guidance and moving utilization from below 50% to roughly 70% by mid 2022.

Just as time has progressed, you've done some of the work and the basin recovery continues. Like how much of that move up in utilization?

Do you think we'll just be consolidating from your existing plants versus volumes? You think it will be produced or be migrating from competitor plans?

How much of that is locked in from your view?

Yes. It's interesting.

A lot of it is just by putting redirecting volumes from all the facilities that we're going to be sustaining to our most efficient facilities. Now, having said that, last year, where we had basically three quarters of virtually no drilling.

Obviously, volume fell off more than originally expectations. The great thing is that, we've seen that volume base sort of stabilize, and producers are starting to drill.

So the last volume, we expect to recover that at the next year or two is as producers resume drilling. So I'll look at a player like Spartan, who's one of more active players in the south.

One of the taglines on the release from research report was, Brazeau River as well as [Indiscernible] less than six months. And that's not surprising to me based on current commodity prices.

And the other thing is that we've helped economics a lot with our optimization program and the competitive feeds that we've offered to our customers, it's really going to incent them to drill. So, we're just seeing a little bit of that in the first quarter.

Again, producers are staking their balance sheet. But I'm really interested to see what happens in the fall here and into 2022.

It sounds like though vast majority been a year from 50 to 70 is, I don't want to say it's locked in but are we confident just moving the molecules around?

Yes, a lot of it is, yes. And again, we have to make up now with the clients of last year.

Right. If I can come back to KAPS in contracting and recognizing you don't want to be too granular as to where these additional contracts or volumes are going to come from.

But based on your answer, are you expecting anything to come off of Northeast BC connector? Or do you think that's really just gravy and could actually underpin an expansion?

Do you think there's enough stuff on the Alberta side to contract?

We think that there's enough volumes on the Alberta side. But again, I mean, when we look at our projections, we're just taking a risk view of the basin and then what's likely to happen.

So it could come from Alberta, but it would certainly enhance the project that from -- we're able to capture volumes from the Alberta BC border from a connecting system there. Again, our systems is the Alberta based solution.

Right. Understood.

And maybe just to finish then. Turning to marketing, and specifically for Wildhorse, have you hedged out any of that in the second half?

Or just as a new facility? Are you leaving it open to make sure it runs smoothly up from an operational perspective to give you confidence to deliver product in the future?

Yes, Robert. No, I can verify we haven't hedged anything out of Wildhorse.

And just to remind everybody that the value of Wildhorse, the players that are leasing capacity out of Wildhorse are more traders and blenders, right. So if there's contango in the market, which there isn't right now, they certainly that would be within their toolbox to be able to realize value.

But traditionally, that terminal would turn products on monthly, and it would be as a result of blending activities. That is the way people make money out of Cushing.

That's great. Thank you.

Good morning, and thanks for taking my call. A little bit of a follow up, I guess on Rob's question, I wanted to maybe dive into the GP segment.

We do have or you printed with an improvement in operating margin, improvement of 20 to 30 million run rate in the future. I'm wondering, although you've sort of printed the number, how do you feel about that as you, are part way more than partway through it?

Do you think that might be trending towards the upper end, middle end, and would you give an update at some point?

Thanks Elias for the question. So far, everything is trending according to plan, as we said earlier.

We are starting to see the benefits as the plants have to shut down and look at qualitative volume. And those operating costs are coming out of our system.

So, we really expect to see the majority of that benefit by the end of the year, and to be well within that range.

Yes. Elias, sorry to interrupt.

I think we're probably going to be more towards the lower end of the range. And some of that is because some of our optimization work is going to be done in 2022.

So that savings is going to be ongoing. The other thing I'll mention is, when we refer to that reduction, it's controllable costs.

As you heard from Brad earlier, obviously, things like power, there's only so much that we can mitigate exposure to rise-- rising costs. So it's just mainly our controllables that we're addressing.

Great. Thanks for that color, Dean.

I understand increased volumes, potentially, and all sorts of offsets, like power, but I was simply trying to use calibration points off the number of plants that are shut down and being the analyst, being very high level using data sort of ratios, but I appreciate the color. And that's it for me.

This is Dan Gustafson. And just thank you all again, for joining us today.

Feel free to reach out to the Investor Relations team if anyone has additional questions or contacts that they're seeking. Have a great day everybody.