Keyera Corp.

Thank you, and good morning. Joining me today will be Dean Setoguchi, President and CEO; and Eileen Marikar, Senior Vice President and CFO; Jamie Urquhart, Senior Vice President and Chief Commercial Officer; and Jarrod Beztilny, Senior Vice President, Operations and Engineering.

We will begin with some prepared remarks from Dean and Eileen, after which we will open the call to 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 refer to some non-GAAP financial measures.

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

Thanks, Calvin, and good morning, everyone. I want to start by reflecting on the past year and recognize the success we achieved, delivering several new financial and operational records.

The 2021 results reinforce our strategy, and they highlight the value we can create for customers and shareholders. Along with higher commodity prices and a more favorable industry outlook, our strong results were a direct result of our focused efforts in 5 key areas.

First, we improved our safety performance and decreased our total recordable injury frequency, while nearly doubling the number of hours worked compared to last year. Second, we demonstrated ESG leadership by setting meaningful emissions reduction targets, and advance our diversity and inclusion programs.

Next, we maintained financial discipline through conservative leverage metrics and incorporated a revised and more rigorous capital investment framework. We increased our competitiveness by completing the optimization program of our South gathering and processing portfolio, which has led to lower per unit costs and higher per unit margins.

We also improved reliability across the business, most notably at AEF, where we set a new annual production record. And lastly, we strengthened our integrated value chain by bringing on more underground cavern storage and building a direct propane supply connection to the Heartland Petrochemical Complex near Fort Saskatchewan.

We also made meaningful progress on KAPS, which comes into service in the first quarter of 2023. While we advanced our strategic priorities, the business delivered strong financial results in 2021.

In Gathering and Processing, we delivered record annual realized margin and processed 1.5 Bcf per day of gas in the fourth quarter, volume levels we haven't seen since early 2019. Contributing to these results were the Pipestone plants, which ran at above 90% capacity through the second half of the year, higher throughput at our Wapiti gas plants and continued positive momentum in the south region.

The Liquids Infrastructure segment also delivered record margins for the quarter and the full year. Record volumes flowed through our industry-leading condensate system, and our underground storage business delivered its best ever margin contribution.

We also had strong performance from our fractionation business, which continued to operate near capacity. With highly contracted and consistent cash flows, these assets form the cornerstone of our NGL business.

We'll see the strength of this segment further enhanced when the KAPS pipeline is complete. The Marketing segment delivered $323 million of realized margin, which exceeded the top end of our guidance.

Shifting to our priorities for 2022. We've identified several key priorities.

They include: a continued focus on safety performance; maintaining our strong financial position; successfully executing the KAPS project materially in line with our sanctioned expectations. The project is currently over 40% complete and on schedule to start up in Q1 of 2023; continuing to optimize returns on previously deployed capital by filling and debottlenecking capacity while continuing to improve reliability; and effectively managing costs across our business.

Now I'll turn it over to Eileen to provide an update on our fourth quarter and 2021 financial performance.

Thanks, Dean. Adjusted EBITDA was $294 million for the quarter and $956 million for the full year of 2021, the highest annual adjusted EBITDA ever, as both the Gathering and Processing and Liquids Infrastructure segments delivered record margins in 2021, and Marketing delivered contribution of $323 million for the full year, exceeding the top end of the guidance of $320 million.

Net earnings were $90 million for the fourth quarter and $324 million for the full year 2021. Dividends declared and paid for the year were $1.92 per share, resulting in a dividend payout ratio of 63%, which remains well within the company's targeted range of 50% to 70% of distributable cash flow.

Now moving on to capital spending. Growth capital spending was $438 million for 2021, which is below the previously provided annual guidance range of $460 million to $490 million.

The difference is mainly due to a timing difference of approximately $45 million in spending, largely related to the KAPS project that was expected to occur in 2021, which will now occur in 2022. As a result, the capital guidance range for 2022 is being revised upwards to $570 million to $610 million.

Our year-end 2021 return on invested capital was 14%. All other previously provided guidance for 2022 remains unchanged.

We exited the year in a strong financial position. The company ended the year with net debt to adjusted EBITDA ratio of 2.4x, which is stronger than the target range of 2.5 to 3x.

We will continue to actively manage our leverage profile in 2022. As we continue to fund KAPS, we expect our net debt to adjusted EBITDA to temporarily go above our target range of between 2.5 and 3x.

That said, we expect our debt leverage metrics to return to the target range in 2023, as capital expenditures are reduced, and KAPS and other areas of the business generate incremental EBITDA. We also continue to look at opportunities to recycle capital into higher return and more strategic opportunities.

For example, last month, the company closed the sale of the Hull Terminal. Net proceeds to Keyera were USD 40 million, which includes approximately $32 million for the asset and $8 million for the value of the inventory.

Proceeds from the sale will be applied towards further strengthening the company's balance sheet. I'll now turn it back to Dean.

Thanks, Eileen. To wrap up, we see several macro factors that support a positive longer-term view of our basins and our business.

These include: Canada's abundant low-cost supply of natural gas combined with natural gas broadly gaining recognition as an important fuel for a lower carbon future; continued egress expansion to high-value markets fueling strong demand and increased investment in the basin; and lastly, strong government support for petrochemical sector growth and for emissions reduction initiatives such as carbon capture and storage. All of these factors combined to create a multitude of opportunities for Keyera to leverage our existing footprint to generate strong returns for decades to come.

We can play our key role in Canada's energy future. On behalf of Keyera's Board of Directors and our management team, I thank you for your continued support.

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

First question is on KAPS. So what are the natures of the cost pressures that you're seeing there?

And can you remind us some of the puts and takes that you're seeing on costs? And -- sorry, and then remind us how much of the costs you have seen locked up so far?

Robert, it's Jarrod here. We are seeing some cost pressures on KAPS certainly.

And I think despite that, we don't materially expect it to differ from our sanction estimate. I think one important thing to note is -- that we've talked about before is escalation in steel costs, and that's largely behind us.

We expect dollar pipe to be in hand by the end of this quarter. So that's a significant challenge that's no longer on the table for us.

In terms of locked-in costs, we're on the order of about 2/3 that have been secured. I think it really speaks to the early contracting strategy we used with our -- when we were initiating construction and that's been beneficial for us.

So again, we remain on track with -- to come in, not materially different than our sanction.

All right. Appreciate that.

And then just moving over to the Pipestone and the Wapiti plant. We're seeing Wapiti being held back by its water handling.

Pipestone's operating at high utilization rates. How are the conversations moving along to potentially debottleneck or expand these plants?

Yes, Rob. Maybe just as a starter, I'll brief before I turn it over to Jamie.

That is a very desirable area, and we certainly see a lot of activity already and talked to a lot of producers, not just our existing customers, but other customers as well that have plans to grow in the area. So we think that's incredibly exciting for our facilities and especially where they're located.

So yes, we continue to have those discussions, and we don't have anything firm to report at this point, but we certainly feel encouraged. You have anything you want to add, Jamie?

Yes, Rob. It's a great question.

The way that we -- the focus right now is on the debottleneck at Pipestone. We consciously put in a larger refridge unit than we thought necessary just to get after the liquids because that's a big part of our business.

And that gives us an opportunity now to pursue a debottleneck at the facility. So more on meaningful conversations right now with what that would look like contracting-wise.

On the expansion, yes, we have to be just really disciplined around how we contract for that expansion to ensure that if drilling plans change in the future with our customers that -- we're ensured that we're going to get the desired rate of return on that capital spend. Expansions can be very quickly filled up and then very quickly actually become very empty if you don't have the right contracts in place.

And maybe just to add to that. At Pipestone, we are working at a small debottleneck project there, but it's backed by a contract.

If I can start by coming back to KAPS. And I'm just wondering are you over the $800 million by a modest amount at this point?

Or are you just signaling that you've maybe eaten through the contingency, and you're just seeing the pressures out there?

Yes. Robert, I'd say that we are feeling that pressure, but it's -- we still got a long way to go in the project.

As Dean noted, we're 40% -- a little over 40% through. So there's still a lot of work to go.

We're in the midst of our peak construction right -- season right now. This winter is key for us, so we'll know a lot more next quarter.

But again, at this point, we're -- we don't see anything significant from that $800 million.

And on that comment that 2/3 has been secured. Is that 2/3 of what's left to spend?

Or is that 2/3 of the total, call it, just the $800 million? But you've already spent $328 million of it.

And if you can just comment in terms of the 1/3 that's exposed, like what are the major buckets within that 1/3, which is construction?

Yes. The 2/3, Rob, was intended to represent the overall cost of the project.

Again, in terms of the materials, I think that's a piece that's largely behind us. What's really left to go now is labor and the construction effort.

A good portion of that is locked in, but there's still a number of variables, whether COVID, factors like that, that could influence productivity.

Got it. Okay.

And if I can just finish with a question on the way you're approaching returns. It seems like there's a little bit more focus here on ROIC.

So ultimately, the question relates to how you're thinking about project deployment of capital going forward with respect to your comfort with deploying capital, with returns that maybe just are a little bit more on the comp by partially contracting similar to what you did with KAPS. What's your comfort level with that?

Or should we expect more of a take-or-pay fully contracted approach going forward?

Yes. I mean Eileen is on us all the time.

So she cracks the whip. Yes.

Definitely, Robert, I think the amount of risk that we're prepared to take on a given project would be certainly less going forward. So we're going to look for a much higher contracted return in order for us to deploy capital in the future.

Okay. And just how do you think about using ROIC though?

Because when you look at the definition, it benefits from shrinking the denominator, and this quarter is -- has a couple of different things in that and selling an underperforming asset in Hull or the impairment at Rimbey, all things being equal, that improves ROIC, yet, it's not really improving profitability.

Yes.

I'll let Eileen comment about this as well. But I guess what I can say is that we have different investment hurdles internally.

But I think for simplicity, and something that people can calculate based on public information, we've used simple calculation. But we have -- we put a lot more rigor in terms of, again, the financial hurdles that we expect to achieve internally.

Great. I just wanted to go back to Wapiti, Dean.

And can you start filling that Phase 2 today? Or do you have the Liquids handling bottlenecks?

I just want to be clear on that point.

You want to answer that, Jamie?

Yes. So Matt, thanks for the question.

Yes, we certainly have the ability to fill Phase 2 today. We did some work back in December with one of our customers that assisted in some of the water handling bottlenecks that we had at the facility.

So obviously, our customer and us invested some capital to enable their growth aspirations. And we've obviously seen some of that materialize early in this year, but we fully expect that we'll see further growth.

Now there is limitations with respect to how much we're going to be able to grow without having to handle some additional bottlenecks at that facility. But yes, our expectation is you'll -- we'll start to see some inlet volumes that would be in excess of the first phase, which is 150 million a day at Wapiti.

Yes. Matt, if I can just add to Jamie's comments.

I mean, certainly, we can use a portion of the second train capacity, but we would have to invest more capital to use the full capacity of the second train. I think the things that we've been -- Jamie's team has been working on is, as he mentioned -- we're trying to also use third-party facilities in the area.

We're trying to minimize the amount of capital that we have to deploy to fill that white space. And so as Jamie said, we've actually tied into a third-party water disposal facility.

And instead of us, again, making that investment, let's use someone else's facilities and bring the gas to our facility. So that's one of the strategies.

Another thing that's also maybe going to help us in our favor a bit going forward is one of our customers where they're drilling now is going to be in more of a gassier area, and with lower liquids cuts, including water. So again, that just helps us bring more of a pure stream of natural gas to the plant.

So not creating further bottlenecks in areas that are already tight. So those are some of the things that I think that we have kind of go in our favor that might help us add more volumes here to that facility.

That's great. And then just in terms of using a more temporary solution in a third-party versus getting to that full capacity on Phase 2 of having to spend CapEx.

Is that something that's contemplated in your CapEx guidance today? Or would you need just to assess how much that may cost and your customers' needs, and then update the market at some other point?

Yes. What we're saying, I mean, now we have more capacity that we can add to that facility without adding capital.

So that is going to be step one. And as we get to the point where we think we need to debottleneck, we think that that's some point in the future, like maybe second half of next year or maybe 2024.

So we'll address it at sort of that time. Our first priority right now is to utilize the capacity that we have available.

Great. And then I just wanted to move over to liquids, really strong print there.

I wanted to get some sense -- I know you've messaged previously a decent run rate is about $100 million a quarter just in terms of us thinking through that business versus what you printed there in Q4. Can you give us some sense of how much of that performance was tied to higher storage revenues from a good pricing environment and higher interruptible condensate volumes above your take-or-pay levels?

I'm trying to get a sense of how much of that you could continue to see above -- in 2022 above that run rate, $100 million level.

Maybe I'll start, and then Jamie can certainly add in. There is still a little bit of seasonality.

So typically, in that Q4 to Q1 period, there tends to be a bit of a pop mainly because of the propane, like Joseph Burke is certainly more active with all of the propane that's moving out. So that's what we tend to see in that Q4 to Q1 period.

Yes. So just the underlying fundamentals, Matt, is that -- you touched on them.

I mean, obviously, we're starting to experience some record volumes through our condensate system. Frac capacity is tight in the province.

Regardless of the Plains outage, we fully expect, as we have in the last couple of years, to have our Fort Saskatchewan assets fully implemented. Storage continues to be valued by our customers in high demand.

So really, it's all of the above. Just our customers are -- commodity prices are very strong, and our customers are seeing the benefit of that.

And as a result, so are we.

Great, Jamie. And one last one, if I may, on U.S.

butane blending. You mentioned in the report there that margins are currently economic in that you might see some underutilization at Wildhorse, which might push out the returns on that project there.

My understanding is most of that is contributions that would show up in Marketing. So is that impacting the way you're thinking about run rate guidance?

Obviously, more to come on that, whether or not you release run rate guidance. So I'm just trying to think in terms of some of these facilities on the U.S.

butane blending side that might not be normal and how that might be impacting your thinking on Marketing.

Yes. So as you point out, look, I mean, we'll be in a better position at the Investor Day, in 6 weeks, to give guidance.

We'll be through our contracting season in Western Canada, which really drives the primary contributions to the organization. But as it pertains to the U.S., yes, certainly, the fact that butane has softened substantially in the U.S.

is going to be a favorable contributor to the commercial value that a terminal like Wildhorse contributes. Having said that, it's still a challenge.

That facility is going to be challenged to really provide, in my mind, a strong contribution consistent with what we would have assumed at sanction based on the huge backwardization of crude right now. It's like -- it's a challenge to make money on the crude blending side.

And you would see right now Cushing -- the storage levels at Cushing are at a historic low just because of that fact. So we're still confident in the asset going forward.

But certainly, there's a challenge for the conventional blending operations out of Cushing given the current conditions. Those conditions are very favorable for other parts of our business.

But for this specific part of our business, I would say, better days ahead with respect to Wildhorse.

Just on this asset sale program, could you provide any color on which other assets might be considered to be noncore? Curious if Wildhorse would be in that bucket just given the cash flow challenges you mentioned relative to the potential price take there and I guess the credit accretion on that one.

And also, if you could maybe comment on your Edmonton assets thinking ACT baseline. Just wondering how you're thinking about your crude oil terminals in general being core to the business or not at this point.

Pat, it's Dean. We're not in a position right now to sort of share with a lot of detail, I guess, what we plan to dispose of.

I think generally, what I can say is that we're trying to get more focused on our operations, though, and really focus on the parts of our business that are just very highly integrated. And again, areas that we can continue to grow at and also transition.

So that would be just sort of a general overview. We're trying to match that also with -- again, just the ideal timing for the crystallization of value of assets.

So that, again, we're maximizing that value for our shareholders as well. So we're just trying to marry some of those factors together.

But overall, we do have a sort of ongoing disposition program.

I might just add to that. Sorry, it's Eileen.

Yes, I think you can think about the criteria that I think we use is like we think about how the asset contributing current and in the future. How does it impact our leverage metrics?

How does it fit within our overall emission reduction targets and goals? And then how does this fit with our goal of increasing stability of cash flow and that take-or-pay?

So those are some of the things we'll think about as we think about divestment.

Yes. And this may come out at Investor Day, but would you be looking to establish perhaps a target range with respect to total sale proceeds that you'd be looking to bring in over, say, the next 12 to 18 months?

Probably not something at this point that we can talk about, but maybe more at Investor Day.

Great. Moving over to carbon sequestration.

Can you just confirm if you guys did participate in the Industrial Heartland RFP process? And if not, maybe what other sequestration opportunities across your portfolio might be, say, on the front burner through 2022?

Yes. I guess -- Pat, I guess we won't comment on, I guess, maybe confidential kind of situations like that what we participate or not.

But generally, I can say that we are interested in CCUS, and we do have a strong asset position already in the Industrial Heartland that we think we can leverage, also for CCUS as well. So we do have interest generally in that area, and we think that we have other areas of interest in our operations in the South G&P portfolio and also the North as well.

Okay. Great.

Last one for me, guys. Just on the contracting front for KAPS.

This is probably another confidential one, but just directionally, can you provide a bit of an update as to how much of the initial capacity you've spoken for? I believe you were at 70% this time last year.

And maybe just any comment on whether or not there's been any change to scope or the reach of the project, given some of the activity levels that you've been witnessing over the past 6 months or so?

Yes. We haven't updated our initial guidance, Pat.

So I guess I'll let that stand. But generally, as we've been saying, is that the discussions that we're having with our customers have been more and more engaging for sure.

I mean if you just look at their balance sheets, they're starting to think a lot longer term now versus, obviously, a year ago. And we obviously follow the Blueberry First Nations and also the Government of BC and what's happening there.

But when we talk to our customers, we get a sense that they're feeling a lot more confident in terms of some resolution happening here in the visible future. So with that, I would just say in the both sides of the border in terms of that Montney Fairway with just more optimism.

And again, that's just leading to more engaging discussions with our customers in KAPS.

If we could maybe focus just on the interplay of your business activities and just some of the increased exports of butane and propane off the West Coast. You don't necessarily have direct involvement all the time in that business, and you don't know the assets that ship it.

But how do you think about the tension there of -- is that a threat or an opportunity? And then maybe related, do you have any benefit or burden from just the flooding activity that happened in British Columbia during Q4?

Andrew, first of all, we think it's great that there's higher value -- access to higher-value markets for all of our products in Western Canada. I mean it's something that we've lacked for forever.

And it's never been about the amount of resource that we have in our basin. It's -- again, it's market access.

So when we think about NGLs, in particular, it's great that we have access to Asia off the West Coast of Canada. And we see volumes continuing to increase in our basin.

In our asset base, our strategy has always been to give our customers maximum flexibility. And most of them like to be able to access a basket or portfolio of markets, just so they're not captive to one place.

And also logistically, they don't want to be maybe just totally exposed to the logistics of getting their products by rail to the West Coast either. So we can offer, again, access to the West Coast, to the U.S.

markets, Mid-Continent has been very strong, but also local markets, including -- obviously, there's a PDH facility that's about to start up. There's a local industrial propane market.

And we see a growing demand for solvents -- propane and butane solvents in Western Canada. Again, we think it's an opportunity that we can serve in the future as well.

So again our strategy has been to offer our customers maximum flexibility to access all those markets, and we think it's good for the basin.

Okay. That's very helpful color and context.

And then just on the flooding, did you have any detriment or benefit in the quarter?

Andrew, it's Jamie. No, we did not.

It did not impact us. In fact, probably it was a slight benefit based on where our flexibility, as Dean said, with respect to the markets that we're able to add.

Okay. Great.

And just as a follow-up, and you mentioned a little bit of this PDH that's coming up and running later on. Have you seen any behavioral difference just from willingness to contract or just by way of doing business with the new owner of those assets and Cochrane and everything that goes with it versus the past and what you dealt with?

It's Jamie, again. I wouldn't say we've noticed any noticeable difference certainly around the PDH facility.

We've already -- as Dean said, we've got an interconnection there, and we're helping our customers facilitate being able to access that market. On the other parts of the business, certainly, there's opportunity in our eyes to do business with Inter Pipeline regardless of whether it was the previous management team or the current management team, and we continue to have dialogue with Inter Pipeline on what might hold value for both our organizations.

Okay. Sorry, Dean.

And I'll just add, we have or good relationship -- yes, we have a good relationship with Brookfield and both their entities, North River and now Inter Pipeline. So we see them as a valued partner.

Just wondering if you could maybe give some high-level thoughts around the guardrails of your financing plan in the next couple of years, not just to fund KAPS but also refinancing some maturing debt securities in a potentially or very likely rising interest rate environment. How do you balance maybe like prefinancing, prefunding, locking in long-term capital financing versus potentially retaining some flexibility depending on how your asset sales work out?

And I guess the two-pronged question to that is, and how are your discussions with the rating agencies kind of influencing how you think of those guardrails and what your options are?

Yes. Thanks, Linda.

Yes, as we think about our guardrails, I mean that 2.5 to 3x leverage is kind of what we use. That keeps us very well in line with the rating agencies.

So those -- we have good relationships with both DBRS as well as S&P, and have recent reviews with both of them. As I think about 2022, certainly, we do see that debt level going up towards the end of the year, especially with AEF coming -- having their 6-week outage and then the maintenance capital.

But we do see that coming back down in line. So when you think about capital allocation and our priorities, we would look to reduce our debt through 2023 to bring that back into those guardrails of that 2.5 to 3x.

And then it's looking at our other options between weighing in -- as we look into '24, '25 growth capital versus returning capital to shareholders. Those are kind of how we're looking at it.

In terms of interest rates, yes, absolutely. The good thing is we don't have anything material really coming due until 2024.

So that's very, very positive for us. And I think about we were about a little over $250 million drawn on our line of credit at the end of the year.

So certainly, I think we always look to term out debt. And so potentially, it makes more sense to do that earlier in the year versus later when there are several interest rate hikes expected.

And recognizing that capital markets can change and how you return capital to shareholders will change over time. Any thoughts evolving around the merits of discrete dividend increases potentially tied to new assets coming into service versus maybe a smooth profile over time?

Again, I step back and I think our -- at the end of the day, our goal is to focus on increasing that distributable cash flow on a per share basis, and we will weigh all of those options, again, grow capital, dividend, share buybacks. So I'll leave it at that.

Maybe I can start -- go back to the noncore asset conversation, asset recycling. And maybe I can ask it in a way, are there any assets in your portfolio that are highly core to you, sacrosanct, and that you would never sell at any price.

You mentioned integration is important for you, but maybe I'll take it from the perspective of core assets.

Well, I guess, we'll say -- never say never because we're always trying to add value for our shareholders. But really, the -- I'd say the nucleus of our asset base is Fort Saskatchewan.

I mean that's the product of probably 30 or 40 years of all the connectivity that's been built over that time period to get to where that property is today. And obviously, we have those same advantages now because we have great connectivity to the Josephburg undeveloped land that we acquired in 2017.

So that would be sort of core of our business. But as Eileen said, I mean, we're also looking at areas where, first of all, that we have very strong competitive advantages.

But where we can bring more of that contracted cash flow into our business, and also feed the whole integrated value chain because that's really the benefit of Keyera is that every time we touch a molecule and it moves through our integrated value chain, we generate a fee or we earn a margin at the end. And so we want to continue to build on that sort of concept in that part of our business.

So KAPS will be tremendously important once that's in place. And we certainly think that our Montney assets are actually very valuable as well.

But again, we're also looking to try to continue to increase our long-term contracting on the G&P part of that business.

And maybe if I can follow up, would you ever consider of [indiscernible] a core asset? Like would you consider selling down, say, 10%, small slice, charging an operating fee that you mentioned around boosting returns.

Would you be open to something like that?

Again, without going into specifics, we're here to create value for our shareholders. So can we be creative and looking at different alternatives, yes, we'll look at everything, but it's got to be, again, a net value add for our shareholders, not just for today but long term.

And maybe one more for me. Going back to the KAPS project.

Has your view on how the volumes and returns are ramping up when you first announced it changed at all, just seeing how the trends have been? And do you think or do you -- that there could be maybe repositioning on scope in response to maybe some of the petrochemical buildout that you could be seeing?

We -- like I said before, I mean, I think we feel pretty good about KAPS and the interest in KAPS with -- based on the discussions that we're having. And again, the outlook that we have for the basin, and the need for competition, a competitive alternative for NGL pipeline transportation out of the Montney.

We do believe that KAPS could be -- could create other opportunities like potentially providing ethane feedstock as an example in the future. But again, the only way we would pursue that type of opportunity is if it were highly contracted to secure our rate of return in advance.

Yes. And maybe just to clarify that point.

I mean the returns you're targeting is 10% to 15%, and you've maintained that even with the last CapEx increase. But you also, I think, when you first announced that there was a phased return approach over 3 years or so.

Is that still what you're expecting? Or maybe you pulled forward a better return in the front end?

Yes, it's still phased. And again, the target range, the simple range is 10% to 15% return on capital.

Again an asset like KAPS, you don't get your -- all your volumes on day 1. There's certainly a ramp up to that profile.

And that's just on the pipe. There's all the downstream benefits as well on top of that.

A couple of follow-up questions last. In the CEO message, you mentioned implementing a new rigorous capital investment criteria.

Can you please describe that? And what's really changed there?

Yes. In order to be honest, we probably invested in some areas that we wouldn't invest today.

And today, we certainly see a lot of -- I know there's a lot of background noise on the line, but maybe you mute your line. Yes.

Sorry, Robert. We -- first of all, we want to be more focused in terms of the type of businesses that we invest in our assets that we invest in.

And as I said before, we're looking for a much higher contracted profile before we sanction the project. So again, we're not willing to take as much risk as we did in the past.

We really want to focus on, again, assets that are really integrated and probably more so focused on our Canadian business now. Again, with all the egress that is getting built -- has been built and getting built, we certainly see more growth in our base, and we're very well positioned here and have a lot of competitive advantages.

So we want to continue to build on that. And obviously, KAPS is a great example, but we see a lot of good downstream opportunities like in Fort Saskatchewan and some of that is like fractionation and storage that Jamie referred to earlier.

But beyond that, we think we can continue to find great opportunities in that area with good counterparties.

Okay. That's helpful.

And then there's also a comment about increased supply of octane blending components being imported into the U.S. So can you provide more color there?

And do you think this is an ongoing impact? So what do you expect from this development?

Sorry, I missed the first part of what you just said. Can you repeat that, please?

Sure. I think the MD&A had a comment about increased supply of octane blending components being imported into the U.S.

So my interpretation was some product competition for AEF. So can you describe what you're seeing there, and whether there is expected to be an ongoing impact?

Yes. So Robert, it's Jamie.

So yes, I wouldn't characterize it as it's a competing product for our products because our product is a superior product from an RVP perspective and an octane perspective, but it's certainly weighed temporarily on the premium that octanes have in the North American market. And that, frankly, is just as a result of the world's not -- gasoline demand not responding and recovering as quickly on other parts of the world as it did in North America.

And as a result, the refineries that were creating octanes as part of their process saw North America as a higher value market. And so that product was diverted to North America for that period of time.

What we've seen in the last couple of months, however, is that those octanes are now staying frankly, where they belong, which is where they're produced. And as a result of that, we've seen a rebalancing in the North American market, and premiums have come back to historical levels, which is a positive outcome, obviously, for our isooctane business.

Because once again, that product is -- we don't have any issues selling the product. It's just ultimately the price that we're going to garner as a result of what those octane premiums are.

Thank you all once again for joining us today. Please feel free to reach out to our Investor Relations team for any additional questions.

Thank you.