Parkland Corporation

Scott Stickland - Investor Relations Bob Espey - President and Chief Executive Officer Mike McMillan - Chief Financial Officer Irfhan Rawji - Vice President of Strategy and Corporate Development

Kevin Chiang - CIBC Trevor Johnson - National Bank

Good morning. Welcome to Parkland Fuel Corporation's fourth quarter 2014 results conference call.

My name is Scott Stickland, Investor Relations for Parkland Fuel Corporation. At this time all participants are in listen mode only.

Yesterday afternoon Parkland released its Q4 and 2014 year-end results which can be found on our Web site at parkland.ca. This morning's call is hosted by Bob Espey, President and CEO of Parkland; Mike McMillan, Chief Financial Officer; and Irfhan Rawji, Vice President of Strategy and Corporate Development.

Following their presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up your questions.

I would like to remind everybody that today's discussion may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements.

For more information on Parkland's risks and uncertainties related to these forward looking statements, please refer to the company's annual information form and our recently filed Management Discussion and Analysis which is available on our Web site at parkland.ca or on SEDAR. Dollar amounts discussed in today’s call are expressed in Canadian dollars and are generally rounded.

Now I would like to turn the call over to Bob Espey, President and CEO of Parkland.

Great. Thanks, Scott, and good morning and welcome to our year-end conference call.

We achieved a significant milestone in the last few days here. We went one year without a lost time incidence within Parkland.

And that’s a very significant accomplishment for the Parkland team. This safety milestone of no lost time incidence is something that we work hard to achieve and every day we have 400 operators that go out into the field in their trucks and I am very proud of their safety record and it also speaks to the operational effectiveness of our team on a day to day basis.

We are very proud of our team's accomplishments and want to thank them for putting safety first. When we look at our results for the year, we have had a fantastic year coming out of the -- in a post-refiners margins environment.

On a full year basis, we recorded adjusted EBITDA of $183 million which is well within our guidance range. A strong contributor to that was our wholesale supply and trading division which delivered roughly $64 million in the EBITDA during the year and really thanks to the [hard] [ph] team in both Elbow River and Parkland for their contribution in this area.

We integrated SPF successfully and it delivered exceptional performance this year. We acquired 23 Chevron-branded service stations, 12 in the year and 11 in the subsequent period.

And of course we announced the largest acquisition to date with Pioneer which is in the final stages of closing. And lastly, to further reinforce the success of the business and reward our shareholders, we have announced the $0.02 increase in our annual dividend.

In terms of specifics across all segments, we have seen strong performance in the retail business. Our volume, or growth is up.

Over average volume per site is up and our same store sales are up. Our commercial business continues to perform steadily with increased volumes and profits despite softening market conditions in the latter quarter of the year.

The wholesale supply and distribution segment's volumes and revenues were up with a strong contribution from Elbow River and improved margins from the refined product line. These improvements helped dramatically to offset the impact of the expiring refiners margins contract.

On the whole, given the strong economic environment and crude prices in the second half of the year, we entered 2015 in a strong position. Our track record of successful acquisitions, Elbow River, TransMontaigne, SPF, Chevron stations and soon Pioneer, will enable us to continue to deliver strong growth and expand our supply network and increase our operating efficiency.

With that, I will turn it over to Mike to run through the financial highlights.

Great. Thanks very much, Bob.

I'd like to thank everyone for joining the call early this morning as well. I certainly look forward to working more closely with everyone on the call going forward.

As Bob mentioned, it was a strong quarter. Our acquisitions were the main driver for volume growth experienced year-over-year.

An increase of approximately 21% reaching 2.3 billion liters for the quarter. We reported record adjusted EBITDA of $51.1 million in the quarter.

Although a modest increase of 1% year-over-year, it is a significant accomplishment as we manage this without the benefit of the refiners margin contract. This performance demonstrates the solid contribution of our base business and our newly acquired company's, which is SPF Energy.

It was acquired in January of 2014. Turning to Slide 5.

I would like to talk now to our annual highlights. Volumes overall were up 33% to 8.9 billion liters, driven primarily as I mentioned, by the increase related to the acquisition of SPF Energy and our wholesale supply and distribution segment, which includes the volume from Elbow River as well as TransMontaigne.

Our full year adjusted EBITDA of $183 million as Bob mentioned, is comfortably within the range of our guidance that we put up for 2014. The variance on EBITDA reflects the impact of the refiners margin contract that we enjoyed in 2013 as well.

All totaled, it's a solid result given the headwinds the broader sector experienced in the second half of 2014 with falling crude prices and [mellowed] [ph] economic activity. We think that 2014 provides us with a stable base year from which to judge our growth in 2015, especially with the question around the refiners margin contract now well behind us.

With respect to distributable cash flow, we have reported $107 million for the full year which equates to a payout ratio of approximately 80%. This is tracking as expected.

The strategic benefit of the Pioneer brand and business and the accretion we expect to drive from that acquisition will provide us with an improvement in our cash flow per share and continue to reduce our payout ratio in 2015. The overall [annual] [ph] impact of course will depend on the timing of the acquisition and close.

So stay tuned. We are strongly positioned for growth with considerable financial capacity as demonstrated by our net debt ratio.

Please note that we now report this ratio on an MD&A as defined under our credit facility for greater clarity. The ratio at year-end was 1.4 times.

This includes our senior debt on the revolver, high yield offerings, but excludes the Series 2 convertible debenture of which approximately $44 million is outstanding as at year-end. With that, I will turn it back to Bob who will provide some context on the segmented business results.

Great. Thanks, Mike.

So this slide continues to show the strong performance we had in 2014. By segment, the retail business had an exceptional year on a same store sales basis.

C store sales were up and the 12 Chevron sites that were purchased earlier in the year had a positive impact. On the commercial side we continue to optimize our operations.

Volumes were steady while adjusted gross profit and EBITDA are up. The wholesale supply and trading segment delivered significant volume growth.

And we are also pleased with our SPF performed in its first year. If we go to the next slide, the waterfall.

Again, some impressive results here in the quarter that show really all of our divisions are up year-over-year with commercial fuel slightly off because of a softening environment in Western Canada in Q4. And wholesale supply and trading as you are aware and those who have listened in the past, this does include last year had significant refiner margin contribution.

And again, that division performed very strongly to offset significant portion of the decline. So again a $51.1 million adjusted EBITDA quarter is a record for Parkland in this quarter and we are really pleased with the results.

On a year-over-year basis, you can see that with SPF, growth in our retail fuel, savings in our corporate environment and commercial fuels, we contributed over $40 million of EBITDA on a year-over-year basis. And again, if you look at the big red, which there is some significant growth underneath that on a year-over-year basis to offset the decline in the refiners margin contract.

So we close the year out at $183.2 million which again in an environment where we no longer have a refiners margins contract is very strong performance and well within our guidance range. Very happy with the results and very pleased with the success that the Parkland team has delivered to its shareholders this year.

Mike, I will turn it over to you to talk about our guidance.

Great. Thanks again, Bob.

As I mentioned earlier, at $183 million of adjusted EBITDA, we came in comfortably within the range of our guidance for the year. As I mentioned previously as well, 2014 was a solid year and we are very pleased with the results given, you know the acquired business contribution, our strong base business performance and the challenges that we faced in the wholesale market and western Canadian commercial business.

In 2015, we expect our quarter-over-quarter seasonality to begin to smooth out a little as we see the benefits of the retail additions that we have spoken about, such as Chevron, and specifically the addition of the Pioneer business. We continue to work on closing the Pioneer acquisition and once this has completed, we will update our 2015 guidance accordingly.

With that I would like to actually pass it over to Irfhan Rawji, our President of Corporate Strategy and Development.

Thank, Mike and good morning everyone. For those that have been shareholders, you know in 2011 we set an aggressive growth target through the penny plan to grow both organically and by acquisitions.

In that plan on the organic side, we targeted growing 100 million liters a year. We are proud to say that in 2014 we tripled that target with over 300 million liters of growth.

On the acquisition front, we continued to outperform. We have surpassed our target on a volume and adjusted EBITDA basis two years ahead of schedule post to closing of Pioneer.

And as we have mentioned earlier on the call, this was driven by SPF Elbow River and Sparling. The market for us on the acquisition side continues to remain exceptionally active and we are very very busy, continuing to try to add individuals to the corporate development teams to help us process this pipeline.

And for those candidates that we are talking to that may be on the line, we hope that you make the right decision to join Parkland. Once we have closed Pioneer Energy which we expect to be in the first quarter still, as we are working through the final approvals and regulatory process, we will come to market as Mike has mentioned, with our next wave of growth.

As we have been successful in what we have done here organically and by acquisition, we expect that that plan which we will release in our investor day later on in late spring, we will probably feature more of the same given what we are seeing in the market. With that, I will turn the call back to Bob.

Thanks, Irfhan. In closing, 2014 was an exceptionally strong year for Parkland.

And as I look forward into 2015, I am very excited about the prospects for the business and our ability to continue to execute against our plan and to continue to grow our business. Thank you for joining us today.

I will turn the call over to the operator to open up for questions.

Maybe just firstly, and I know you will provide 2015 guidance when the Pioneer deal closes here, but when I think of your base business ex-Pioneer, is the run rate EBITDA you put up in 2014 plus some sort of modest organic growth and then the Chevron stations you picked up towards the end of the year there. Is that kind of a good way to think of your base business ex-Pioneer or is there more flex to that number.

Yes, Kevin, it's Bob Espey. There is seasonality in the business and there are conditions that affect our business year-over-year.

One of the things that we benefitted from in 2014 was an exceptionally cold winter that helped both our commercial business and our propane business. So just to take last year and apply it forward, we are probably slightly less than that on a year-over-year basis.

But we are within the range that we have given out. So the guidance range was 235 to 265.

That EBITDA range is accurate based on things like weather and local economic conditions.

Okay. And when I think of Pioneer, would the seasonality of Pioneer be similar to the seasonality of your existing retail business or would the seasonality be different because of its more concentrated geographic portfolio.

Hey, Kevin, it's Irfhan. Thanks for the question.

That’s a great question. And I would say that’s materially the same on the retail side.

You don’t tend to see retail gasoline businesses really anywhere in North America that have quite different seasonality. And so you know it's like the rest of it is summer peaking.

So Q2, Q3. On seasonality we are likely to probably not provide much more guidance on seasonality going forward.

We did it historically just given the mix of business that we had with Q1, Q4 being substantially larger quarters for us. Looking at the mix of business right now that we have, I would hesitate to say that its' flat but it is much more muted across quarter-by-quarter.

And so when you would have historically seen us give you guidance to say, you know we have quarters that could be 20% of our cash flow or EBITDA and quarters that could be 30%. So there is a broad range there.

I would say that it's closer to be between 23% to 27% at any given quarter and that will depend on things like weather and summer gas demand and economic factors. But pretty much tighter.

And some of the reasons we actually like Pioneer is we think it makes the cash flow much more ratable.

That’s a very helpful comment. And maybe just a couple of more here.

Just in terms of the overall fundamentals. You did highlight some weakness in commercial given, I guess, some of the challenges in Western Canada.

How are volumes, whether in retail or commercial trending now, two months or more than two months into 2015? Are you still seeing significant headwinds or are you seeing some pickup in other parts of the country that are being a bit of an offset.

If you can provide some color there that would be helpful.

Sure. Yes.

Thanks, Kevin. It's Mike speaking.

So I think you have essentially captured the essence of what we are seeing leading into the year and late Q4. So what we are seeing is a little bit lower volume and so forth in Western Canada as you expect based on the crude market.

And I think, keep in mind when we think of our business and how we are segmented geographically and by product. We are benefitting today from a cold weather in the east and both, as Bob mentioned, propane and heating oil and so forth in the eastern part of the country.

And in the west side of the country we would see some impact certainly on the price of crude and the activity in the western part of the country. Although those two things seem to be offsetting and managing very well.

So I think it's early to say how that will pan out through the course of the year. But as we lead into this year, we are quite comfortable with the range we have provided so far.

Okay. That’s very helpful.

And just a housekeeping question, Mike, when you look at your adjusted EBITDA and I know back out the acquisition cost because that can be lumpy but from [qualification] [ph], would those acquisition costs that you exclude just before deals that you don’t close or do they include all acquisition costs that you incur even for deals that you do close. And when you think of the lumpiness of that from a quarter-over-quarter basis, how do you think of that or how do you think we should model it or maybe something we don’t model.

Sure. Let me start with that and I think Irfhan could probably give some color.

I think one of the things to keep in mind, I mean we are very cautious about how we -- as we look at the last year and the work and the effort that went into say the Pioneer process and SPF early in the year, and the pipeline that Irfhan mentioned. I mean there is certain level I think of acquisition cost that you would see us that we consider ratably but then as projects pickup such as Pioneer, we do see that picking up as we do diligence, quality [indiscernible] and other processes.

So I think what you will find is, last year was probably one of the most significant years of spend given the activity and that we landed the largest acquisition in our corporate history and the robustness of the pipeline. So I think you will see that it's a little bit lumpy but why don’t I let Irfhan add to that if there is something more he would like to put on.

Yes, thanks, Mike. Kevin, it's a good question.

We do separate it out because we believe that it is quite volatile and so a couple of things to think about in terms of what that number represents. So as we get closer and closer to an announcement about the transaction, those costs ramp up as we are incurring legal costs, quality of earnings cost, tax structuring cost.

On something like Pioneer, acquisition of this size, we also do management assessment to make sure that we get a cultural fit and those come at a cost. So you see those costs ramping as you get close to an announcement and those costs also ramp as we get close to or on closing day as we are sort of finalizing the whole thing, bringing down another things.

And so 2014 was quite a high number relative to 2013 because we closed SPF because of Chevron transaction, we announced Pioneer and we were in diligence on the second Chevron transaction that we just have announced and a couple of [those things] [ph]. So the market will see visibility unfortunately to -- they will see the cost before they see enhancement and I would expect that you will see that first quarter 2015 acquisitions cost will also be relatively high relative to 2013 as an example or a comp because we are trying to close Pioneer.

And so some of it you can predict because you know we are trying to close this transaction right now. Some of it you are going to see before you see the announcement of a transaction we are working on and some of it is, to your question specifically, are there broken deal costs in here, they are.

But I would suggest, they tend to be so far from what I have seen here in the past couple of years, it's going to be quite minimal. We are not likely to spend much more than about $100,000 for a transaction, maybe $200,000 for a transaction that’s to close, because we will do a quality ratings report and decide if we don’t like that business so we are probably going to walk early on and we haven't really spent much on legal support or other support or travel, or some of the more detailed tax structuring work that really only happens once we have a higher degree of confidence in a deal.

Yes, I had a question on your Chevron transactions. Are these part of some framework relationship with Chevron or they one off packages, or how is this coming about?

So these -- I mean we have been working a relationship with Chevron over the last three or four years and one of the trends in the industry is that the refiners are moving back towards their supply orbit. So if you look at the geography of these sites, they tend to be far from the refinery and probably serviced through some sort of wholesale deal with another refiner.

So from a strategic perspective, there is not a lot of value there to the refiner from a refining supply perspective. So as a result Chevron has decided to divest those assets to Parkland and it demonstrates Parkland's ability to be a proven operator to operate those sites effectively.

And it is a part of a larger agreement. It is not, these are one off deals so we negotiated with Chevron directly.

I would say a couple of more things, Keith. I think it's a really important question and it's something that we are quite proud of the Chevron transaction.

Bob's right that they are outside of the supply orbit of the Burnaby Refinery of Chevron. These is how we tend to see majors exit the marketing channel.

They tend to move first with assets that are out of their refinery orbit before they may consider assets in their refinery orbit. Some have considered them, some haven't, when we talk about sort of assets within their supply orbit, while it's not part of a structured framework with Chevron, these were both exclusive conversations.

They picked up a phone, they called Parkland and we negotiated these deals exclusively with them. In the first acquisition that we did which closed last spring, we have been able to grow same store sale volume in the [back quarter] [ph] and that’s not lost on Chevron.

They see that we are a good operator and have actually proven that we can operate these sites sometimes slightly more effectively than Chevron. It's because of our operating model where we have more people that are actually on the ground in those markets than they necessarily had.

So that they see as a benefit to them as well. We also are a partner with them in the dealer channel.

And so if you want to have a Chevron dealer in British Columbia, there are two places to go to get that relationship in that brand. One of them is Chevron and the other is Parkland.

And so we do think we have an advantage partnership with Chevron that we are continuing to try to make sure that we work on in that province.

And so in British Columbia, I am not sure, do you have Fas Gas there or...?

We do. So we do have Fas Gas sites as well in British Columbia.

And our strategy in the retail business is a multi-brand strategy where we go to market, in a market usually with three brands. So one is a major oil brand.

The other is a strong independent and then the third is a fighter brand. And the consumer segments quite nicely around those brands because there is a consumer that wants higher quality or perceives higher quality with the major oil brand.

For example where that manifests itself is in the mix. The mix of premium fuel to regular fuel.

And if you are familiar with the Chevron offer, they have a very high octane offer that had captured a large part of the premium fuel market. In fact it's considerably above others in the market.

So we cater to a consumer there that's looking for a higher quality offer. There is also a consumer that wants a strong independent, so that’s where the Fas Gas brand fits.

So with our Fas Gas is positioned as a strong, basically an urban site in a non-urban environment. We have got a large C store.

It's well merchandized. It's well lit.

We have got great service. And that caters to a consumer that doesn’t necessarily value big oil or the quality of a major oil brand but looks more for an operator that’s connected into the local community.

And then the final channel is through a fighter brand. So that’s for someone that wants to sell fuel but may not have the brand standards around the convenience stores.

So far example a garage that has a couple of work bays still wants to have fuel outside, would be a prime customer for that brand.

And then, I don’t know if it's -- I am not sure that you will be able to comment on this, but I expect that you are participating in the process that Imperial Oil is underway with respect to their residual sites.

So we get that question a lot, Keith, if we could imagine right now and at this point we know what the market knows in terms of the press release that went out and there was an article in The Globe and Mail as well. Parkland has participated in buying assets from multiple major oil companies including Imperial, Shell and Chevron.

We think this is a core part of how this industry is going to evolve over time. It is our strategy to roll up the industry as independents are selling for generational succession and transfer issues and the majors continue to divest marketing assets.

So we are not surprised at all by Imperial's announcement. It's completely consistent with what we have seen in the, basically in the past ten years for majors both in United States and Canada.

We don’t know very much right now, Keith. I mean though there is lots of activity across our pipeline broadly, but we don’t participate or necessarily entertain every conversation that comes to us.

As many assets that come to us that they don’t fit our model or they are not interesting from an asset quality perspective. Given that we know very little right now, all we can say is that we intrigued and interested.

It's part of what we have expected to see in there but until we know more, I can't tell you our relative level of interest.

And then I just had a question on your diesel business. What is your exposure to oil drilling activity?

Like is it a big part of the business or not really?

Yes. So our western Canadian business, we do roughly 1.5 billion liters.

Of that roughly 400 million liters is delivered, distilled in western Canada. And I would say a portion of that's going directly in/or supporting the oil fields.

Again the best macro -- sorry, it's a little more, it's about 500 million liters that delivered into commercial use in western Canada. And the best proxy for demand for there is local GDP.

So it will likely reflect GDP growth in or decline in Alberta. It correlates pretty tightly to that.

So we will expect to see it come down. Now it's interesting.

Our big heating business in the east which is propane and heating oil where we do roughly 150 million liters of propane and then another 240 million liters of heating oil, is from a gross profit perspective is about the same size. And we are seeing a cold winter.

So we are not overly exposed to the market in western Canada. And again, it speaks of the strength of the Parkland being geographically diverse and operating in multiple markets.

So we are seeing demand increase in Eastern Canada but fall off slightly in the west.

You know I think that, Keith, it's Irfhan here, one thing that we tend to look at -- if you are looking at the presentation that we had just given you -- if you would look at volume of our commercial business in Q4, you will see it's relatively flat. And that’s all the puts and takes.

When you do think about it and the reason why I do think it's an important segment to look at, is when you look at Alberta and you look at the resource sector, we are exposed to both oil and gas. And that’s exploration and production.

So on the production side, that’s propane, and we are not really seeing anything happen there. People are continuing to produce, as [pumpjack] [ph] on the exploration side which is a subset of this that while we have seen a little bit, I think we may even see more of headwinds.

I think that would be fair and we are doing the things that we can to make sure we offset that.

Yes. And to Irfhan's point, we do service both oil and gas, gas exploration.

And the gas exploration really hasn’t fallen off to the same extent that the oil has or will.

Just looking at your retail platform. You mentioned the volumes were down just modestly year-over-year, I guess about a point.

But you cited some competitive market conditions primarily in Eastern Canada. Just wondering if there is any rethroughs to Pioneer on the back of that statement.

Yes. That’s a good question.

And we have been reporting those challenges now for a few quarters. It's primarily in our -- well our business is primarily a dealer business in Ontario.

And in the areas that we have operated, it's been particularly susceptible to some price competition, mainly in the area between Kingston, Peterborough down to the eastern side of Toronto. So that’s been the challenge there.

In terms of Pioneer. So first Pioneer has been operating in that environment and so has a very proven track record of being effective in that.

Bit of a different model with the corporate model versus the dealer model. So they are able to defend much more effectively.

And then on the dealer side they have also proven that they can support dealers through that. So actually what we expect is with the operating capability that Pioneer brings to Parkland, it will help us in those markets where we have -- I wouldn’t say we struggle, but we have had some headwinds.

I will -- and again, at a topline measuring our retail business on a pure volume basis, it is one metric and we do like to see that go up year-over-year, but the key metrics to me running the business are average volume per site, which have gone up at a higher rate than industry. And the second is same store sales growth on the fuel side and on the merchandize side in which case -- in both cases we have been at or above industry.

On the merchandize side we have been significantly above industry in the year. I mean those are the key metrics that we look at to measure the performance of our retail network and we are very pleased with those this year.

Trevor, just in terms of the Pioneer re-through as well, I mean obviously we stay close to the guys and we gave you some financials when we announced the transaction. We do continue to stay close in terms of monitoring their performance, both on a volume and cash flow perspective and they continue to be at or above prior year in our expectations.

Great. Okay.

Just curious about -- more housekeeping for my last couple, but for SPF, are you still planning on just placing that out for 2015 or was that just kind of a convention this year just given that it was the new acquisition and then now there were going to be lapping comps it will be buried.

Yes. That’s a great question, Trevor.

I think if you look back to last year what we had done as we looked at it, it is a mini Parkland and where it fell into a number of segments. And I think for simplicity -- most of you on the phone will note that we have completely re-written our MD&A going into year-end here as part of that process.

We looked at that segmentation and split it out. And I think it makes the most sense and it's most transparent for us as we go forward.

So we don’t anticipate blending that back in. I think it gives better clarity and it does resemble more how we look at the business.

You might recall with SPF we talked about scope and scale when we acquired the company. We tend to look at it as more of a scope acquisition being in the U.S.

and we are managing with a proportional amount of integration. I think it makes the most sense.

So you could look to that go forward.

Yes. Just to build on that.

Couple of points. One is, you will see our revised MD&A is about half the size of the last one we put out.

So the team did a great work slicing it back and focusing it. The other thing is -- and one of the thing I didn’t talk about is we saw -- and we don’t have year-over-year comparison or number on SPF, but that business grew a significant amount which was part of our investment thesis.

The business had been supply starved because there was shortage of volume in that market. And with the logistics capability of Elbow River, we are currently bringing about 100 railcars a month into the market which enabled that business to grow year-over-year by a significant amount.

So really pleased not only how the SPF team has performed because they are excellent operators and good marketers but also that broader Parkland team has been able to come together and support the success of that business.

Is there still some, I don’t want to call low hanging fruit, but is there still some opportunity to kind of integrate or are we close to kind of end of that theme?

So on SPF, again, as Mike had indicated, we look at our acquisitions at both scope and scale. So scope is new capability, new geography.

Really the opportunity to integrate on an operational basis is limited. And really what we are -- our focus is to maintain the team and make sure that the team can continue to deliver, successfully deliver the business.

Which again the SPF team has proven. The main integration point is supply and, again, that was achieved through working with Elbow River to import product into the marketplace.

And that portion has exceeded our expectations.

Last one from me. For the kind of non-recurring or onetime acquisition cost, you adjusted for EBITDA.

I am just curious if you ever thought about adjusting it for cash flow just so that you could have maybe more of an apples to apples comparison when you look at payout ratios and that sort.

Yes. I think it's a great idea.

I think as you look at that it can be lumpy as well. And what we are trying to be is somewhat transparent on that to make sure people understand that cost.

So it's something I think we will consider and I think you will hear from us quite a bit as we monitor our payout ratio going forward.

Thanks. We do have one question from a caller through our web portal.

It is, what is the expected schedule for closing with Pioneer and debenture conversions. And what will the debt equity ratio be?

Yes. Let me take part of that.

I think, as we mentioned, I think we are targeting [indiscernible] as Irfhan mentioned for Pioneer, subject to the regulatory process. And those are things that we are working to.

So we are optimistic looking at that and I think we will continue to communicate as we look forward. If we look at our debenture conversion, so there is -- it's sort of a mix of questions there but I think the debenture conversion, just to take a step back, we had our Series 2 debenture.

Our Series 1 debenture came up in November of last year and that was essentially fully redeemed with the exception of about 99% converted to equity and the remaining was paid out. So that was about 6 million shares we saw come in.

The only remaining debenture we have is Series 2. There is about 44 million of principal value.

It's up December 31 this year with an $18 conversion price. So well on the money and we expect to enjoy the interest there [reduction] [ph] throughout the course of the year.

But we will monitor that carefully and you will see that, it would likely go to equity if things maintain where they are today by the end of the year. On the broader question about debt, the debt ratio.

If I read into that I think you are asking two part. I think one is just post-Pioneer pro forma.

I think what we have tried to signal and we are maintaining that guidance is that our overall leverage ratio or debt ratio would be in the low-2 range. So that’s how we think about it today.

I mentioned earlier that it's at about 1.4 today because of the pre-funding in Pioneer. Keep in mind that we also have about a third of the purchase consideration as equity that the Hogarth Family is taking and that would blend us out.

I think we will end up at about in the low 2 range in terms of the debt to equity and I think our debt as a percentage of capital will be in the mid 40% range as you would expect.

Great. Well, okay.

Thanks for joining the call. I appreciate the questions and look forward to talking to you at the AGM in May.