Inter Pipeline's (IPPLF) CEO Christian Bayle on Q4 2015 Results - Earnings Call Transcript

| About: Inter Pipeline (IPPLF)

Inter Pipeline Ltd. (OTCPK:IPPLF) Q4 2015 Earnings Conference Call February 19, 2016 11:00 AM ET

Executives

Jeremy A. Roberge - VP, Capital Markets

Christian P. Bayle - President and CEO

Brent Heagy - CFO

Analysts

Linda Ezergailis - TD Securities

Paul Lechem - CIBC World Markets

Ben Pham - BMO Capital Markets

Steven Paget - First Energy Capital

Robert Kwan - RBC Capital Markets

Operator

Good morning, ladies and gentlemen. Welcome to Inter Pipeline Limited's 2015 Year-End Conference Call and Webcast. I would now like to turn the meeting over to Mr. Jeremy Roberge. Please go ahead, Mr. Roberge.

Jeremy A. Roberge

Thank you, Mary, and good morning everyone. Welcome to Inter Pipeline's fourth quarter 2015 conference call. Joining me today are Chris Bayle, Inter Pipeline's President and Chief Executive Officer, and Brent Heagy, Chief Financial Officer. Today, we will discuss fourth quarter and full year financial and operating results and provide an update on other corporate activities.

To start, I would like to remind you that certain information in this conference call may contain forward-looking information that involves risks, uncertainties, and assumptions. Such information, although considered reasonable by Inter Pipeline at this time, may later prove incorrect and actual results may differ materially from those stated or implied by our comments today. Undue reliance should not be placed on such information. A discussion of the related risk factors, uncertainties, and assumptions is available in our MD&A which you can find on our Web-site at interpipeline.com or at sedar.com.

At this point, I would like to turn things over to Chris to provide an overview of the year's highlights and then onto Brent for more context around our operating results. I will wrap up the formal portion of the call with a focus on the financial results before opening the call to questions. Please go ahead, Chris.

Christian P. Bayle

Thanks, Jeremy, and good morning everyone. I'm pleased to report that Inter Pipeline generated record financial results in 2015, even when faced with very challenging market conditions. On a financial basis, we set new record for funds from operations, increased cash flow, and in November 2015 we announced our 13th consecutive dividend increase of C$0.09 per share to C$1.56 per share on an annualized basis.

We were able to deliver these strong financial results, safely transport over 1.25 million barrels per day on the oil sands and conventional gathering pipeline systems for two important reasons. First, in 2015, Inter Pipeline successfully completed and commissioned more than C$1.6 billion of new oil sands pipelines and facilities on our Cold Lake and Polaris pipeline systems. This included new connections to Foster Creek and Christina Lake oil sands projects and the Athabasca Oil Corporation Hangingstone oil sands project. We also expanded capacity on the Polaris pipeline system in support of the second phase of the Kearl oil sands project operated by an affiliate of Imperial Oil.

Second, these investments as well as a majority of our commercial activities are underpinned by stable long-term cost of service contracts with investment grade counterparties. The quality of our assets and the revenues they provide have been a source of considerable strength in these uncertain times.

In our Conventional Oil Pipelines business, Inter Pipeline completed the largest capital investment in our history. A C$112 million expansion of the Mid-Saskatchewan crude oil pipeline system was completed in mid-2015 to service growing volumes from the Viking light oil formation. This expansion is supported by a number of contracts that are expected to generate approximately C$25 million to C$30 million in incremental annual EBITDA.

Our European Bulk Liquid Storage business generated record results in 2015. In June 2015, we acquired four petroleum and petrochemical storage terminals in Sweden which increased our total storage capacity in Europe by 40% to 27 million barrels. Commercially, our European management team continues to secure, renew and extend storage contracts that should continue to expand our business in 2016.

On a personal note, I'd like to congratulate David Fesyk, our current Executive Vice Chairman, on his pending retirement at the end of June. David served as President and Chief Executive Officer of Inter Pipeline for over 16 years and will continue to serve on our Board of Directors. It has been my pleasure to work with Dave throughout my career at Inter Pipeline.

As we look ahead into 2016, we note that many of our customers have been impacted by the rapid decline in global oil prices and oil producers have sensibly curtailed their capital budgets. Many planned expansions have been deferred until a stronger commodity price environment returns.

Despite these challenges, we have made meaningful progress advancing our commercial objectives, particularly on our Conventional Oil Gathering and Bulk Liquid Storage business segments this past year and continued to stay positive on future opportunities for growth in Canada as well as Europe. Our record results clearly demonstrate our ability to produce predictable and stable financial results despite the volatility of the market.

So now, I'll turn things over to Brent for some additional commentary on our operating results.

Brent Heagy

Thanks, Chris, and good morning everyone. Operationally, 2015 was a record year for Inter Pipeline. We set new throughput records on our Oil Sands and our Conventional Oil Pipeline systems. This number was supported by strong Q4 2015 results where transportation volumes averaged over 1,320,000 barrels per day, up 7%, or approximately 90,000 barrels per day compared to the same period a year ago.

We also invested approximately C$356 million in our business in 2015. Much of this capital was directed towards capacity expansion projects and various system enhancements within our Oil Sands and Conventional Pipeline business segments. For 2016, Inter Pipeline expect to invest approximately C$260 million with the bulk of the capital directed toward new connection and storage opportunities on our conventional and oil sands pipeline systems.

Inter Pipeline's Conventional Oil Pipelines business enjoyed its growing year in 2015, despite the poor commodity price environment. Annual throughput volumes on our three conventional gathering systems totaled over 211,000 barrels per day, representing an increase of approximately 3% compared to 2014. This increase was supported by strong volume growth on the Mid-Saskatchewan pipeline system.

Now as Chris mentioned, as part of our 2015 capital program, C$112 million expansion on Inter Pipeline's Mid-Saskatchewan pipeline system entered commercial service in mid-2015 to provide additional delivery capacity. Drilling activity in the Viking formation that underlines the region surrounding Mid-Saskatchewan pipeline system remains active despite the low commodity price environment. Fourth quarter throughput volumes on the Mid-Saskatchewan system benefited from this expansion and averaged 84,700 barrels per day, which is a 16% increase over the same period in 2014.

Our Bulk Liquid Storage business in Europe had a successful year as stronger contango pricing relationships in certain petroleum markets drove overall utilization rates higher. Average utilization rates were 94% in 2015 compared to 79% in 2014. Utilization rates for the fourth quarter increased to 97% compared to 84% a year ago. Now we plan to invest approximately C$40 million into storage expansions in Europe in 2016, with the majority of our growth capital focused on our U.K. and German terminals.

Our NGL Extraction business continues to be influenced by weak frac-spread prices, which impact propane-plus sales at the Cochrane extraction facility. Frac-spread prices averaged US$0.32 per U.S. gallon, down from US$0.76 per U.S. gallon for the same period last year. This was partially offset by stronger natural gas throughput levels at our Cochrane plant that led to higher propane-plus production.

Although, frac-spreads were low during the quarter, propane-plus volumes from the Cochrane facility are priced to stronger markets at Mont Belvieu, Texas rather than the Edmonton markets where frac-spread pricing was considerably weaker during the quarter.

In summary, despite the challenging environment, it's great to report another record year for Inter Pipeline. Our outlook does remain positive and we are well-positioned to develop and expand our asset base when market conditions are favorable, but we will remain disciplined.

I will now turn things over to Jeremy for a more detailed look at our financial results.

Jeremy A. Roberge

Thank you, Brent. Our strong operational performance helped generate record financial results, both for the full year and the fourth quarter of 2015. It's also worth noting that the percentage of cash flow that originates from highly stable cost of service contracts grew from 48% of EBITDA in 2014 to 63% in 2015, as various long-term oil sands expansion projects entered commercial service during the year.

Now for a bit more detail on our full year and fourth quarter financial results. In 2015, funds from operations hit a record C$774.1 million, increasing by C$210 million or 37% over 2014 results. These strong financial results kept our annual payout ratio at an attractive 68%. Net income for the year was C$463 million or 33% higher than in 2014. Funds from operations in the fourth quarter of 2015 were C$211.4 million, representing an increase of 32% over the same period in 2014. Net income for the quarter was C$138 million, up over 73% compared to the same period in 2014.

Financial results improved primarily due to gains in the Oil Sands Transportation segment where incremental revenue was largely generated from expanded transportation services on the Cold Lake and Polaris pipeline systems. Funds from operations in this business segment improved by more than 62% to C$157.8 million in Q4 2015 compared to C$97.2 million in Q4 2014.

Inter Pipeline's Conventional Oil Pipelines segment realized a 10% increase to funds from operations in Q4 2015, hitting a new record at C$51.5 million.

Our European Bulk Liquid Storage business finished the year strong, generating record funds from operations of C$28.2 million in the fourth quarter of 2015, which is a 79% increase compared to the fourth quarter of 2014. This is primarily a result of the acquisition of Inter Terminals Sweden in June of 2015 and higher utilization rates.

In 2015, dividend payments to shareholders totaled C$497 million, while fourth quarter dividend payments increased C$128 million resulting in a conservative payout ratio of approximately 63.8%. Financial flexibility is a core focus for Inter Pipeline and we continue to maintain a strong balance sheet with significant liquidity available on our committed revolving credit facility.

As at December 31, 2015, Inter Pipeline had approximately C$585 million of available capacity on our C$1.25 billion revolving credit facility. We also ended the year with a consolidated net debt to total capitalization ratio of 52.8%, which is within management's targeted ratio of 50% to 55% and well below the maximum covenant ratio of 65% under our credit facility.

The majority of Inter Pipeline's cash flow originates from highly stable cost of service contracts that are typically not subject to commodity price or throughput volume risk. Adjusted EBITDA for the full year 2015 was approximately C$980 million, and the breakdown by contract type was 63% from cost of service agreements, 30% from fee-based contracts with no commodity price risk and 7% from commodity-based agreements that are subject to both commodity price and volume risk.

For the fourth quarter, adjusted EBITDA totaled C$273 million. By contract type, 64% was cost of service, 29% fee-based and 7% was derived from commodity-based agreements. In aggregate, almost 95% of Inter Pipeline's EBITDA was derived from cost of service or fee-based contracts which further demonstrates the stability of our cash flow stream.

Now this concludes the formal portion of the comments call. I'd now like to turn the meeting back to Mary to open the floor for questions. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] The first question is from Linda Ezergailis from TD Securities. Please go ahead.

Linda Ezergailis

Congratulations on a strong quarter. In one of your outlook commentary, there was a mention of aggressively pursuing growth and I'm just wondering if you could provide some context around that. Are you looking at acquisitions potentially from producers or other weakened midstream players or corporate transactions or do you see maybe some possibility of investing in significant other platforms or other geographies?

Christian P. Bayle

I think broadly speaking, when it comes to acquisitions, I think we're always active in the market, Linda. We do think there is – historically we have executed some I think very good opportunities both in Canada and overseas and I think that view really hasn't changed in this current market. There have been and I think will continue to be some interesting packages that will come to market that we will look like we always do. But again, I caution everybody, like I think first of all, Inter Pipeline has a very strong track record I think of what I would call disciplined growth and that methodology will not change in the future. We will only do deals that we think are good strong fits for our business and of very high quality.

Linda Ezergailis

Okay, thank you. And just a follow-up question, you also mentioned in your outlook something about cost control. Can you maybe describe what sort of initiatives you're looking at, whether it would be from a capital efficiency or other perspective, and what an appropriate run rate for corporate expenses would be here if there will be some cost control in the business segments as well?

Christian P. Bayle

Sure. Like everybody else I think in this environment we're looking for ways to lower our cost structure to improve our funds from operations performance, and that's across our operations as well as within our G&A. So there's a number of initiatives underway. We are investing in new business processes today, new financial systems, things like that that we believe will improve our efficiency, our operations people are looking hard at renegotiating service contracts and essentially reducing waste wherever they find it.

We do have some internal targets that I'm not prepared to publicly disclose today on what our cost-reduction efforts could yield, but we think it could be, it will be modest but meaningful. We've always been a lean organization and we intend to get just even a little bit leaner.

Linda Ezergailis

Okay, thank you. I'll jump back in the queue.

Operator

The next question is from Paul Lechem from CIBC. Please go ahead.

Paul Lechem

Just to follow-up on Linda's question there, I think the second part of the question was around the run rate on corporate expenses. Both Canada and Europe were down G&A in Q4. Just wondering, is the Q4 level the run rate level we should be looking at going forward?

Brent Heagy

The one thing that you have to keep in mind, Paul – by the way, this is Brent Heagy responding to your question – is that there is one volatile item in that G&A number and that's our long-term incentive plan expense, and that obviously varies based on our share price. So you really have to kind of remove the impact of that and so I can't really sort of say that if you look at the Q4 number that that would be the go forward run rate.

I would say, once you exclude the impact of LTIP, that we're probably seeing a little bit of an increase in our run rate in G&A, but that's largely because we have had to add staff, particularly in our operations area, to really address the work that they now have that the expansion on the Cold Lake and Polaris systems completed construction and now we're in an operational mode. So that's going to cause a bit of an increase certainly in our operations cost.

On the G&A side, we do have a few other items. As Chris has mentioned, we are doing some business process type of work, we are moving into new office space, but I wouldn't say that this is really materially upticking our G&A run rate overall. And as Chris has mentioned, we do have initiatives that are ongoing to take a hard look at our overall cost structure and make sure that we're being very, very prudent around that.

Paul Lechem

Thanks, Brent. Separately on the Bulk Liquid Storage side, there's I think a C$30 million expansion going on in the U.K. and Germany, Chris, I think you mentioned. Can you give us a sense, what is that expansion, how many tanks, how many barrels, when it's going to come into service, is there opportunity for more to come beyond that?

Christian P. Bayle

If you're referring to the tanks in Germany, I think that's slightly under C$10 million expansion and I think it involved about six chemical tanks that can be completed this year and placed in service. And broadly across our storage business, we are seeing certainly high utilization rates. The number for the fourth quarter was 97% in our storage business. That's essentially full.

So we don't undertake generally new storage expansions unless they are underpinned by a current customer or a new customer, but I can assure you our business development teams in Europe are working hard to find ways to secure new expansion opportunities for our business. They are generally relatively small scale for a business of our size, but even a C$30 million to C$40 million future capital program is meaningful for that sector and I'm quite comfortable that that would be something we'll be executing this year.

Paul Lechem

Okay. So you had C$10 million of the expansion in Germany. The rest is in the U.K. What's that going to bring on?

Christian P. Bayle

It's a handful of smaller projects related to several of our facilities in the U.K. as well as some of the facilities in Sweden as well are undertaking some expansion programs. But essentially they are just either adding new relatively small tankage or reconfiguring existing tankage for new products.

Paul Lechem

Okay, thanks. Last question, now that Devon has come out and said that they are looking to sell their half of Access as well, what is your take on what's going on now with the sale of the Access Pipeline, does that change the value that they are looking for given they are looking to sell the whole thing? Can you tell us anything that you're seeing in the market in your level of ongoing interest in that?

Christian P. Bayle

Sorry, Paul, clearly I couldn't make any specific comments related to that transaction or any other. But again just to echo some of the comments I made when Linda enquired about M&A, generally any sort of M&A that's right in the sweet spot, whether it's conventional oil sands pipeline, things like that, of course we would be interested in looking at it and analyzing and depending on the fundamentals it could be an attractive asset for us, but I can't really comment specifically on anything.

Paul Lechem

Okay, fair enough. Thanks.

Operator

The next question is from Ben Pham from BMO Capital Markets. Please go ahead.

Ben Pham

Had a question around your conventional system and did you comment on your volume decline in the quarter, and there was a commentary about some curtailment going on and is that what was mostly driving it, to what extent did that drive it, and the curtailment, is that gone now heading into this year?

Christian P. Bayle

I think what you're referring to when it comes to some curtailments is we did see in Q3 some negative volume impact on our Mid-Saskatchewan pipeline system related to some downstream pipeline issues. This was on one of the export pipelines. There were certain plant maintenance and integrity activities going on that export pipeline that of course impact the volumes on gathering systems such as ours. So those were largely over within Q3, which is one of the reasons why Q4 volumes increased relatively dramatically over Q3. So we don't anticipate any ongoing curtailment issues on any of the pipeline systems of any materiality.

And getting back to your question about declines, we did see some quarter over quarter declines on Bow River and Central Alberta systems, two of our three conventional systems. I'd quite frankly quantify them as modest declines and they were more than offset by the increases we saw in the Mid-Saskatchewan pipeline system. So overall, our volumes are up slightly year-over-year on an annual aggregate basis and we are quite pleased with that performance in this market environment.

Ben Pham

Okay. And maybe staying within conventional, could you comment on your foes and how competitive do you think they are relative to some of the other alternatives out there like trucking which is facing some decline on the fees, could you comment a little bit more on that?

Christian P. Bayle

We are very comfortable with where our totals are at today. They are essentially flat year-over-year. Certainly in this price environment we work very hard to remain competitive with our customers' alternatives. But I think as our performance has shown, as long as Inter Pipeline is providing good, high quality, reliable service, our customers are sticking with the pipe.

Ben Pham

Okay thanks. That's very helpful.

Operator

The next question is from Steven Paget from First Energy Capital. Please go ahead.

Steven Paget

I'm wondering about your strategy for your cash flows beyond paying dividends, maintenance and growth capital. Would you begin to look at returning that capital through share buybacks and debt repayment?

Christian P. Bayle

If we just look at what we're doing today, if you take our – maybe 2015 is a good proxy – essentially the cash flow that we generate as a business once you take off dividends is almost spot on our growth and sustaining capital program for 2016. So I think we are deploying our free cash flow in our business very prudently and there really isn't any material additional money that's available for any of the uses other than say a modest debt repayment.

And I think looking forward, I'm quite confident that Inter Pipeline's future continues to be bright and we will have uses for our free cash flow proceeds that will be probably better suited to reinvesting in the business than to embarking on any sort of share buyback program, as we see it today.

Steven Paget

Thank you, Chris. There's a lot of uncontracted capacity in Oil Sands Transportation. How competitive have new contracts become?

Christian P. Bayle

You're right, that's really a key feature of our story as a company as we have deliberately and consciously overbuilt many of our oil sands pipeline systems to put us in a position to have a lot of available capacity in the market. But quite frankly, Steven, today, because not a lot of activity out there in terms of sourcing new transportation agreements with new shippers, and that's true for us and I think it's true for pretty much every oil sands transportation company today, so there's no real data points out there on how competitive the market is. Now that will change once we return to a stronger oil price environment, but again I am very confident that Inter Pipeline is very well positioned in the geographies that we serve to compete with anybody.

Steven Paget

Thank you. Chris, if I can just follow up, if we get a turnaround and you're seeking new oil sands shipping contracts, does IPL have a cost advantage, connectivity advantage or both versus other shippers?

Christian P. Bayle

I certainly think we do, but again it depends on the region we are talking about. If for projects, for future hypothetical projects that are close to our existing mainlines, whether it's the Polaris silhouette system or the Cold Lake blend or the Corridor blend system, if it's very close to those pipeline systems, clearly I believe we would have both a cost and execution advantage and a schedule advantage and a pricing advantage because all we have to do is build relatively inexpensive laterals and pumping stations to connect to our mainlines and the mainline capacity is in place.

But clearly, the further away you get from our existing mainlines, the more challenging that will become. So we have three very large systems that are sitting in the sweet spot of a lot of development areas. Again, that's why I'm quite comfortable that we will be able to win our fair share of new projects once a stronger pricing environment returns.

Steven Paget

Thank you, Chris. Those were my questions.

Operator

The following question is from Robert Kwan from RBC Capital Markets. Please go ahead.

Robert Kwan

Maybe I'll just stay and start with oil sands here, is there any update on the Narrows Lake extension?

Christian P. Bayle

No, we really don't have any comments to make on Narrows Lake other than what we've released with our capital news release. We confirmed of course that the Narrows Lake project is delayed. We're not in a position to comment on timing. But in terms of future EBITDA profile, we are comfortable confirming to the market that our long-term views on the EBITDA generating potential for Narrows Lake connection remains unchanged.

Robert Kwan

Okay. I guess is there anything in the agreement that you can talk about with respect to their sunset dates or how we might or might not see compensation if that project is delayed indefinitely?

Christian P. Bayle

Sorry, Robert, there is absolutely nothing beyond that that I am prepared to talk about.

Robert Kwan

Okay, fair enough. Just turning to M&A, high-level question, has your approach incrementally to acquisitions, at least in Western Canada, changed given what's a more uncertain volume outlook? And I guess more specifically, would you be comfortable acquiring an asset for long-term value if maybe the current cash flows don't necessarily support the valuation or would you take dilution over a material number of years if you thought that you could get very good value longer-term with that asset?

Christian P. Bayle

We look at acquisitions from a lot of ways. There's no one prescribed formula that we have at Inter Pipeline in terms of how we necessarily value an acquisition. But we don't take flyers. We like to understand what the near-term potential will be. We have to be very comfortable with what the, call it, short-term potential is for an acquisition. But we are in a business that also is required to take a very long term view on the assets that we buy. A lot of the businesses that we own and the contracts we enter into of course are run for decades. So we are extremely comfortable looking at the long-term view, but the short term also matters.

Robert Kwan

Okay. And I guess maybe last on this line of questioning, how you are approaching – especially with a lot of producers these days, credit ratings are under pressure, a number of them are non-investment-grade – how much does that factor into your thinking when you're looking at counterparties or if it's a weaker counterparty but you really think the underlying resource is okay, can you just maybe talk about the thought process balancing those two things?

Christian P. Bayle

Those are all excellent considerations. We do of course look at the strength of the counterparty, particularly when you're talking about very long-term deals, but we also do look at the underlying asset and try to form a view on the long-term development potential of the asset as well as the corporate counterparty. They all go in the mix.

Robert Kwan

Okay. Maybe just last one specific question to the quarter, you had highlighted that there was a C$21 million one-time adjustment to the capital fee booked in the quarter for Polaris and Cold Lake and then there was some other change in accounting policy that benefited the quarter. Can you just talk a little bit more about that? And the annual number was C$11 million, which implies that there was, for lack of a better term, a charge or reversal earlier in the year. I'm just wondering if you can let me know what quarter that fell into.

Brent Heagy

It's Brent Heagy here, Robert. Yes, so just to sort of reiterate, so in our disclosure you will notice that to normalize the 2015 annual results, you would need to deduct C$11 million of revenue, and then to normalize the Q4 2015 results you would need to deduct C$21 million of the revenue. Now what makes that up? It's actually those adjustments are actually a mix of items that fall into I would say different periods, so not just sort of one simple answer.

As you've noted, one part of it was related to one-time capital fee payments on the Polaris and the Cold Lake pipeline systems, but there was also one-time interconnection fee, and then also to a change in our revenue recognition policy, and more specifically around that is we were carrying some smaller amount of deferred revenue and under this policy change we are now able to recognize that.

So it's actually quite a mix of numbers, but what we wanted to make sure is that everybody sort of understood at least what the quantum of those one-time numbers were and what it would mean in terms of a normalization of our annual and our Q4 results.

Robert Kwan

Okay. So maybe put differently, if we look at the fourth quarter, so the normalization will be about C$21 million?

Brent Heagy

Yes.

Robert Kwan

But I guess, Brent, based on what you also said, I presume some of the positive adjustment was the deferred revenue, effectively just the catch-up on what you were booking to what you will be booking.

Brent Heagy

Yes.

Robert Kwan

So is there not also an ongoing positive impact from booking higher deferred revenue?

Brent Heagy

Most of that deferred revenue is pretty well – there's not much deferred revenue that's going to be left on the balance sheet. So that's why it's more of a one-time recognition.

Robert Kwan

Got you. You've already crossed over then kind of the balancing point, is that…?

Brent Heagy

Yes.

Robert Kwan

Okay, perfect. Thank you very much.

Operator

[Operator Instructions] The next question is from Linda Ezergailis from TD Securities. Please go ahead.

Linda Ezergailis

Just some kind of cleanup questions on how we might trend things. I'm wondering how we might think of your current taxes in 2016 and beyond, how they might be trending?

Brent Heagy

Sure. I can answer that, Linda. It's Brent Heagy again. So what I can tell you is, and again very roughly because obviously there is a lot of things that go into this calculation, but I would say roughly for 2016 that we would expect cash taxes of approximately C$65 million from our Canadian operations and around roughly C$2 million from our European operations.

Linda Ezergailis

Okay, thank you. And will that tick upwards in 2017 and beyond?

Brent Heagy

Again, kind of getting into 2017 is a little bit of a stretch. It's really, really going to depend obviously on the performance of each of our underlying business units. So for me to start stretching into 2017 becomes a little bit difficult. So I'd just be sort of comfortable leaving at that, what we see for 2016.

Linda Ezergailis

Okay, thank you. And maybe if one of you could provide some commentary on your outlook for frac-spreads and what you're seeing in the forward pricing?

Christian P. Bayle

Sure, Linda. Right now, frac-spreads, again which is on a U.S. dollars per U.S. gallon basis, we're seeing frac-spreads right now at around US$0.32, and if you look at the current forward curve for the balance of the year for 2016, it's around US$0.30, again U.S. cents per U.S. gallon. For 2017, it would be around US$0.28. And actually if you go all the way up to 2018, you're looking at about US$0.27. So those are the metrics that we're seeing today.

Linda Ezergailis

That's great. Thank you.

Operator

Thank you. There are no further questions registered at this time. I would now like to turn the meeting back over to Mr. Roberge.

Jeremy A. Roberge

Okay, everyone, thank you for participating on our call today and we certainly look forward to discussing our first quarter 2016 results with you at our next scheduled conference call, which will be held on May 10, 2016. Thank you.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.

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