Q1 2024 Plains All American Pipeline LP Earnings Call

Participants

Al P. Swanson; Executive VP & CFO of Plains All American GP LLC; Plains All American Pipeline, L.P.

Blake Michael Fernandez; VP of IR; Plains All American Pipeline, L.P.

Jeremy L. Goebel; Executive VP & Chief Commercial Officer of Plains All American GP LLC; Plains All American Pipeline, L.P.

Wilfred C.W. Chiang; Chairman & CEO of PAA GP Holdings LLC; Plains GP Holdings, L.P.

Jeremy Bryan Tonet; Senior Analyst; JPMorgan Chase & Co, Research Division

John Ross Mackay; Research Analyst; Goldman Sachs Group, Inc., Research Division

Keith T. Stanley; Research Analyst; Wolfe Research, LLC

Michael Jacob Blum; MD and Senior Analyst; Wells Fargo Securities, LLC, Research Division

Naomi Marfatia

Neal David Dingmann; MD; Truist Securities, Inc., Research Division

Spiro Michael Dounis; Research Analyst; Citigroup Inc. Exchange Research

Sunil K. Sibal; MD & Senior Energy Infrastructure Analyst; Seaport Global Securities LLC

Theresa Chen; Research Analyst; Barclays Bank PLC, Research Division

Zackery Lee Van Everen; Director of Infrastructure Research; Tudor, Pickering, Holt & Co. Securities, LLC, Research Division

Presentation

Operator

Thank you for standing by, and welcome to PAA and PAGP's First Quarter 2024 Earnings Conference Call. (Operator Instructions).
I would now like to hand the call over to Blake Fernandez, VP, Investor Relations. Please go ahead.

Blake Michael Fernandez

Thank you, Latif. Good morning, and welcome to Plains All American First Quarter 2024 Earnings Call.
Today's slide presentation is posted on the Investor Relations website under the News and Events section at plains.com. An audio replay will also be available following today's call.
Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on Slide 2. An overview of today's call is provided on Slide 3. A condensed consolidating balance sheet for PAGP and other reference materials are in the appendix.
Today's call will be hosted by Chairman and CEO, Willie Chiang, Executive Vice President and CFO, Al Swanson, as well as other management members.
With that, I will now turn the call over to Willie.

Wilfred C.W. Chiang

Thank you, Blake. Good morning, everyone, and thank you for joining us. Our strategy remains consistent and is anchored around capital discipline, generating free cash flow, return of capital to our investors and financial flexibility. And consistent with those themes earlier this morning, we reported first quarter results that are in line with our expectation, which reflects progress towards our full year 2024 targets and provides us with confidence in our ability to deliver on the plan that we laid out in February.
For the first quarter of 24 and as illustrated on Slides 3 and 4, we reported adjusted EBITDA attributable to PAA of $718 million, and we reaffirmed our 2024 adjusted EBITDA outlook. Al will share additional details on our quarterly performance and the 2024 outlook in his portion of the call.
As noted in our press release this morning and as illustrated on Slide 5, we have increased contract volumes and extended the term on certain contracts such that our weighted average contract duration of our Permian long-haul portfolio, it's approximately 5 years, which takes us through 2028. This includes new contracts or extensions on Cactus I, Cactus II, Basin and Sunrise.
This also includes transactions related to 200,000 barrels a day of Cactus 1 capacity that has been finalized on terms that are consistent with the rates in the range of $1.25 to $1.50 per barrel that will become effective in September of 2025.
Today's announcement is a win-win for both Plains and our partners, and it strikes a good balance between term commitments and maintaining flexibility to capture higher margins from uncontracted long-haul capacity over time. While we are not providing formal guidance for 2026, we would expect continued underlying growth in the business and contributions from efficient growth investments to offset the lower contracted rates, which results in a broadly flat adjusted EBITDA in 2026 as compared to 2024 guidance for the crude segment.
In summary, we believe these actions should provide greater clarity and confidence in the outlook for our crude oil segment and our ability to continue to generate significant free cash flow over multiple years.
Consistent with our efficient growth strategy, and as summarized on Slide 6, Plains acquired an additional 10% in the Saddlehorn Pipeline Company, LLC, and the Mid-Con terminal asset for an aggregate cash consideration of approximately $110 million. These bolt-on acquisitions are expected to generate unlevered returns in line with our return threshold of approximately 300 to 500 basis points above our weighted average cost of capital. In addition to enhancing our position in both the Rockies and the Mid-Con.
With that, I'll turn the call over to Al.

Al P. Swanson

Thanks, Willie. We reported first quarter adjusted EBITDA net to PAA of $718 million. Slides 10 and 11 in today's appendix contain walks that provide details on our first quarter performance. Our outlook for the balance of the year remains essentially unchanged, and we are reaffirming our adjusted EBITDA guidance range of $2.625 billion to $2.725 billion for 2024.
We continue to believe the Permian will grow 200,000 to 300,000 barrels a day with a back half weighted ramp, providing momentum for the remainder of 2024. The NGL segment remains highly hedged with frac spreads at approximately $0.65 per gallon for 2024. And A detailed overview of our 2024 guidance and key assumptions, which remain generally consistent with our February guidance are on Slide 12 within today's appendix.
For 2024, we expect to generate $1.55 billion of adjusted free cash flow, excluding changes in assets and liabilities and including $110 million of bolt-on acquisitions with approximately $1.15 billion to be allocated to common and preferred distributions. We will also continue to self-fund our targeted $375 million and $230 million of growth in maintenance capital, respectively, net to PAA, which is consistent with our February guidance and includes capital for POP JV well connections and intra-basin improvements as well as capital related to our previously announced Fort Sask debottleneck project.
With that, I'll turn the call back to Willie.

Wilfred C.W. Chiang

Thank you, Al. Over the last several years, we have made considerable progress across several initiatives, including running a safe, responsible and reliable business, remaining capital discipline, generating meaningful free cash flow and increasing the return of capital to our unitholders while maintaining financial flexibility.
Our business model and asset footprint span key supply basins in North America and provides infrastructure solutions to supply global energy demand needs. The combination of our asset base and our strategic initiatives really creates a unique value proposition for our current and potential unitholders, including a double-digit adjusted free cash flow yield and a distribution yield of approximately 7% to 7.5% with a multiyear targeted annual increase of $0.15 a unit.
We're pleased to be able to provide the update on our Permian long-haul contracting efforts, which reflects our commitment and focus on being the partner of choice and creating win-win solutions for our customers and partners. Recontracting of our long-haul capacity has been a focal point for investors, and we view the developments that we shared with you today as a significant milestone, offering better visibility and clarity around the contractual support for the performance of our Permian long-haul portfolio in the coming years.
The bottom line is we're well positioned to continue to generate significant free cash flow well into the future. I'll now turn the call over to Blake to lead us into Q&A.

Question and Answer Session

Blake Michael Fernandez

Thanks, Willie. As we enter the Q&A session, please limit yourself to one question and one follow-up. For those with additional questions, please feel free to return to the queue. This will allow us to address questions from as many participants as practical and our available time this morning. The IR team will also be available to address any additional questions. Latif, we're ready to open the call for questions, please.

Operator

Thank you... (Operator Instructions) Our first question comes from the line of Michael Blum of Wells Fargo.

Michael Jacob Blum

So I guess first question I wanted to ask was just, I guess, on the guidance. You had a strong Q1. You had the bolt-on acquisition. So maybe just talk through why not increase the 24% guidance and same line of thinking there. Are you -- would you say you're on track to beat the $0.15 per year of distribution growth given that it seems like you got the bolt-on -- the business is running well?

Wilfred C.W. Chiang

Yes, Michael, thanks for the question. This is Willie. It is early in the year. We're confident about being in the range and really just don't want to get too far ahead without seeing a few more things, but we do remain confident of our performance this year. And I would characterize it as cautiously optimistic that we'll be able to perform well into the range.

Michael Jacob Blum

Okay. Understood. And then I wonder if you can comment on the rates for the contract extensions for Cactus II and the Sunrise Basin. Were those largely consistent with prior rates and just extended the duration? Or did you also see changes in the rates there?

Jeremy L. Goebel

Michael, this is Jeremy Goebel. What I'd say on the rates of the Mid-Continent, the reason we were looking to contract those on a long-term rate as it got towards tariff. So effectively, folks are paying tariffs to get there, and that's the right balance for us for a long-term rate. On Cactus II, the extensions were associated with contract extensions associated with their options to extend. So they basically elected their options to extend the existing contracts

Operator

Our next question comes from the line of Tristan Richardson of Scotiabank. Is your line muted? Shall I move on? Yes. Thank you. Okay. One moment. Our next question comes from the line of Spiro Dounis of Citi.

Spiro Michael Dounis

Thanks... So maybe I just want to go back to the 2026 comment. Willie, I totally appreciate you're not giving guidance today. But I just kind of want to understand maybe what underwrites some of the view sort of flat over time, just thinking about things like how you're thinking about basin growth over the next few years? And then just other things around M&A. Obviously, you've been active on the bolt-on front, I assume no M&A from here. And then also, you mentioned some lines of spot upside on some of these open volumes. I imagine that's all upside to that to you as well.

Wilfred C.W. Chiang

Yes, Spiro, it's -- as you well understand, there's a lot of variables that go into this, and it would not be a good guidance if we could try to look to 26 to see all those things. As you know, the tightness in supply and demand on the capacity, operating costs, production, there's a lot of things that go into -- and while I'm not going to break out everything there, what we were trying to do is as we think about our business in 26 without significant changes of where we are today, not large investments that we put in, not gross -- not spikes in production. We've kind of talked about 200,000 to 300,000 barrels a day of growth in the Permian kind of over the next number of years. It's really trying to put a normalized view on 2026 based on how we're operating today. And the point of this was really to try to quantify the impact, not exactly, but there are some folks that believe that the renegotiation would have resulted in a significant reduction to the point where we could catch up. And what we're trying to say is really we're going to be generally flat in 2026, which is really the first full year after the contract renegotiation. And it's always our jobs to work hard on improving that. So as we get closer, we'll be able to give better forecast on it. But again, it's really to quantify what we think the range is. We expect to be broadly flat with 2024 and '26 and there could be upsides just as there could be downside and more resolution will come as we see more.

Spiro Michael Dounis

Okay. Yes. Understood. Appreciate that, Willie. Second question, maybe just going to NGL. Just curious how you guys are thinking about the hedging strategy out for 2025. And then more broadly or longer term, curious if there's any opportunities over time to reduce that commodity exposure through contracts.

Jeremy L. Goebel

So on the first part of the question is, we're actively monitoring our hedging profile, and we try to be opportunistic. Liquidity decreases significantly after you get outside 6 to 9 months. So -- and it's while very largely backward dated. So for us, we're being opportunistic. It doesn't make sense to hedge at this point on a forward basis. We have some because it was higher, but it's minimal. And so in our opinion, it's opportunistic as the liquidity gets higher and market views get higher and as the front end of the crude markets roll up and as gas prices moderate, you get to points where we'll hedge again. But at this point, we're not going to give any guidance on it, but that just gives you an assessment of right now. The forward curve isn't suggesting we should do it, and liquidity is not there to do anything exciting.

Wilfred C.W. Chiang

And Spiro, as you know, we've got some additional capacity that's coming on in Fort Saskatchewan, and that is consistent with your question on how do we get and shift more towards a fee-based consistent cash flow stream. So that's always our objective. It's just you got to be smart about how you go about it and pick the right times to contract.

Spiro Michael Dounis

Perfect. I'll leave it there for today.

Operator

Our next question comes from the line of Keith Stanley of Wolfe Research.

Keith T. Stanley

When you look at the portfolio now after today's announcement, are there assets that at all that you would call out aside from maybe BridgeTex where contract rates are still meaningfully above market? Or are we at the point now where your contract rates are all pretty much more or less in line with where the market would be.

Jeremy L. Goebel

Keith, this is Jeremy. I would say that your assessment is correct that BridgeTex is the one that's outstanding. We don't operate the pipeline. It would be a better question for one. But one thing I would say is BridgeTex demand is increasing. And so one thing to pay attention to is Wink-to-Webster or just extended to Beaumont, which has led to more demand for BridgeTex. You've got the downtime on Wink-to-Webster in June. So longer term, we see that as a healthy pipeline with opportunity, and we control the capacity between Midland and Colorado City, we see benefits as those volumes increase as well.

Al P. Swanson

This is Al. The only thing I would add to what Jeremy said is we assumed and made our assumption in this broadly flat 2026, the BridgeTex impacts as well.

Keith T. Stanley

Okay. That's helpful. And then just a small clarification, I think it was Spiro's question, just the 2026 crude segment EBITDA being flattish, I just want to make sure that, that doesn't include any bolt-on acquisition assumptions or use of free cash in that way, right? It's more just organic growth through the company.

Wilfred C.W. Chiang

Nothing major.

Operator

Our next question comes from the line of Sunil Sibal of Seaport Global.

Sunil K. Sibal

Can you get me all right?

Wilfred C.W. Chiang

Yes, we can, Sunil.

Sunil K. Sibal

So on the Permian recontracting, so thanks for that update. And I was kind of curious since this was a major milestone and now that you have this behind you, how does that, if any, impacts your kind of longer-term capital allocation strategy?

Wilfred C.W. Chiang

Yes. The capital allocation strategy doesn't change, right? Our leverage is where we want it to be. We set a new range. Our maximize free cash flow, expect our CapEx to be in that $300,000 to $400,000 -- $300 million to $400 million range per year. We do look for opportunities that are high synergy, high-return synergy opportunities for bolt-ons, and we'll continue to look for those opportunities because we think they're accretive and we can execute them on that. And then the focus is, again, return of capital to unitholders. And I think, yes, Tristan did ask the question, if we perform better, we would certainly consider an increase above our target as we have done in the last couple of years.

Sunil K. Sibal

Understood. And then on Permian, it seems like weather-related events kind of led to a sequential decline in your volumes. I was kind of curious where things stand today. Have you seen enough recovery from those? Obviously, you're reiterating your full year expectations, but I was just kind of clear more near term, what are you seeing in the basin?

Jeremy L. Goebel

Sunil, this is Jeremy. There was an impact in January, February for about 2 weeks associated with the freeze. Volumes have recovered. There's been some issues with gas outages throughout the basin that have caused some impact. But by and large, it's in line with expectations. There was a big growth impact -- big growth in the fourth quarter of last year, which we expected flattish in the first part of this year and growth in the second half of the year. And so we're not changing our outlook at all based on the normal impact of averages.

Sunil K. Sibal

Okay. And just one clarification. So based on what we are seeing in gas prices and gas constraints, you are not expecting anything -- any change to the second half levered growth? I understand there is a gas pipeline coming online. So that essentially, in your mind, helps resolve the constraint and kind of gets us the second half uptick in production. Is that fair?

Jeremy L. Goebel

That is very fair. That's one way to look at it. The other is when gas prices are low, it doesn't impact all shippers, right? Some of them have for transport and the vast majority do it's just those last molecules of gas trying to get out of the basin. The other part of it is when gas prices are like that and most capital allocation to oilier areas, lower GOR areas, which generally is beneficial for us. So it's not all that.

Operator

Our next question comes from the line of Zack Van Everen of TPH & Company.

Zackery Lee Van Everen

Starting with the Saddlehorn transaction, can you guys provide any insight into the contract profile underpinning the pipe? Are those fairly long dated? Or there will be some rolling in the next few years?

Jeremy L. Goebel

I think that's a question for the operator to hold on, but we'd say we're very comfortable with the acquisition price and long-term outlook for the coming years.

Zackery Lee Van Everen

Okay. Perfect. And then one kind of outside of your business realm, but we're seeing more and more producers in midstream talk about 2026 being a very potentially constrained year on the gas side. Have any of your producers expressed any concerns or talk through the outer years with gas constraints maybe coming back in 2020?

Jeremy L. Goebel

I think in general, all the conference calls you've seen this so far is that there's a general need for another pipeline as mentioned. And historically, new pipelines get sanctioned and we expect that to happen. And anything would be transient. It would be quarters, it wouldn't be years. And in our view, remember, we're just talking about the last pipe. We're not talking about the whole base of production. So if you delay 100,000 barrels a day of growth 6 months, that's 100,000 barrels a day out of -- at that time, close to 6.5 million barrels a day. It's a very minor impact to the total basin.

Operator

Our next question comes from the line of Naomi Marfatia of UBS.

Naomi Marfatia

Appreciate all the color and answers to the question as far on the recontracting through 2025. But can you talk about perhaps how the 5-year contract structure in 2028 leaves a massive amount of flexibility in the future prospects of the business, particularly around exports. Can you talk about the opportunity set that you're looking at?

Jeremy L. Goebel

This is Jeremy. I'm not sure I completely understand the question. But what I would say is it's staggered. We gave you the average end of the duration. The durations move over different years and we like to stagger contracts -- and our intent is to continue to stay with long-term exporters and refiners in our contracting. So we're managing that profile. We'll actively manage it. We see opportunities that the long-haul highs be needed. The Permian oil in place is a big number, and we'll have production for a long time. So this doesn't concern us one bit. This was how we were able to get to the right balance of time, tenure and rate, and we'll continue to manage that profile over time.

Wilfred C.W. Chiang

And Naomi, this is Willie. As we talk with our customers and our partners on this, this all fits their profile production. And if you think about it, you've got a limited amount of infrastructure that's going to these markets now. And we would like to think that the relationships are strong and that the customers will be sticky because the offering that we have fits what they want to do. And so it's not a matter of people wanting to shift to completely different markets. I would think that as we are good partners, and we'll continue to have those -- and it's really a renegotiation of term and tenure and tariff at that time.

Naomi Marfatia

That is helpful. Maybe as a follow-up, how should we think about Permian production cadence for the remaining of the year? Should we expect further gathering bolt-on transactions to drive production given the increased activity?

Wilfred C.W. Chiang

I think we've shared that our expectations for the Permian really are 200,000 to 300,000 barrels a day of growth from the end of the year to the end of the year, 23 to 24, and it's really back half Q3 and Q4 that we'll see the increase. Great.

Naomi Marfatia

Thanks for all the color. Have a great rest of your day.

Operator

Our next question comes from the line of Neal Dingmann of Truist Securities.

Neal David Dingmann

My first question on your Canadian assets, specifically, you've had some nice market-based results in past quarters on the Canadian crude spreads and NGL markets. I'm just wondering how are those continuing to trend? Are they still up and to the right as they've been?

Jeremy L. Goebel

So our view is the same as our outlook for the year. We tried to bring those down on the market-based opportunities as TMX starts up. So it's our views impact it's included in our guidance. And what I would say is we view that as positive long term for our Canadian assets as more production growth, and you're probably in a constrained environment again in 2 to 3 years. So we think more volume will be good for those assets on both the NGL and the crude side. And while there may be fewer market-based opportunities, it could lead to higher tariff-based opportunities. That's great to hear. And then just a quick one, just what you just mentioned
That movement to the West Coast is going to reorganize how things move in the U.S. to make up for that. So those barrels not coming into the U.S. So that could create other opportunities for some of our other pipes in the Mid-Continent.

Neal David Dingmann

Great add. And then I was just asking on -- you just mentioned on Permian growth. Is the majority of that still going to come from the Delaware, I think last quarter, you talked about maybe 170 Delaware rigs versus 120 Midland. So is that still kind of anticipate that being the case for the remainder of the year?

Jeremy L. Goebel

Yes. The activity balance hasn't really changed very much, but we do see some growth in the Midland Basin, but we think it will be disproportionately in the Delaware Basin.

Operator

Our next question comes from the line of Jeremy Tonet of JP Morgan Securities. Go ahead, Jeremy.

Jeremy Bryan Tonet

Just want to come back to the recontracting, if I could. I wanted to better understand, I guess, when you say terms consistent with rates, what that means exactly? Does that mean like there's a higher amount contracted at a lower rate? Or is there something else? Just wondering why it's consistent with rates and not just those are the rates?

Wilfred C.W. Chiang

Well, it's a mix of what we've got. And it's -- we don't really want to get into the specifics of every pipe and what the tariff is. I think the key one on that, Jeremy, is when you look at the recently built pipes, it's $1.25 to $1.50. And essentially, what we're telling you is that we've been able to recontract successfully with our partners at rates that are competitive with that. And going forward, I think it's a reset in that we don't have -- we have less than our far out of market as we go forward. And as the basin tightens, we would expect that there could be some pressure upwards on that.

Jeremy Bryan Tonet

Got it. That's very helpful. And then just wanted to come back to the guidance, if I could. Appreciate that early in the year and you don't want to move it just yet. But with the acquisitions, presumably bringing upside to results for the year, are there other, I guess, headwinds that have materialized so far that would be an offset? Or just trying to better understand the gives and takes? Or just as the year progresses, you would account for that upside later?

Al P. Swanson

Jeremy, this is Al. The acquisition of the $110 million is the impact that we'll be seeing this year would be very modest and well with inside the range we have. Our base business is performing in line with expectations, as Willie mentioned on his prepared remarks. So if you run the math on $110 million and recognize that it's only a partial year, it was not enough for us to allow for in our business. But our business is performing in line with what we expected.

Wilfred C.W. Chiang

Jeremy, this is Willie. Just a clarification. The specific $1.25 to $1.50, that was really around Cactus I. However, we've got other pipelines that are in the mix, and we have a weighted average concept that we look at. But it really -- the $1.25 to $1.50 is really just the Cactus 1 recontracting.

Operator

Our next question... Comes from the line of John Mackay of Goldman Sachs.

John Ross Mackay

I just figured now that you're having some of these conversations with your shippers around kind of back half of the decade volumes and rates. Would just be curious if there's anything you can share on how the market is developing for kind of Houston versus Corpus dynamics, whether or not some of the big export projects proposed out there are kind of playing into those conversations yet? I appreciate it.

Jeremy L. Goebel

I would say they had absolutely no impact on the discussions that we had. I think the view of the offshore export facility get built. You have to think about there's already a couple of million barrels a day inked in Houston and close to 3 headiness, right? So those balances may not change very much and you have production growth in between. We're talking about a project 3 to 4 years from now, where you could have 0.5 million to 800,000 barrels a day more production. I think you're going to move in and less efficient docs offshore, maybe take some production growth, but you'll still be full to Corpus. So I don't -- it didn't impact the discussions at all, and it's more of an and as opposed to or.

John Ross Mackay

All right. That's fair. Maybe just one last one. Maybe just another comment on the weather challenges or otherwise in first quarter, understand kind of general Permian trajectories intact. Just when we're looking at kind of Permian gathering versus long haul. Was there more of an impact on one versus the other? And maybe just how we think about a 2Q trajectory versus a second half pickup.

Jeremy L. Goebel

This is Jeremy. The way I'd look at this is the gathering was more impacted by weather. The markets impacted the long haul. It's just a matter of where the bid as it better for our shippers to buy at Midland, by at the end of the pipe or it's the dock. And so sometimes they'll just change their behaviors and how they ship, and it could be a measure of what are inventories in Cushing and water demand and turnarounds in Cushing. So I'd say long-haul impacted by market. The gathering was more impacted by the weather.

Operator

Our next question... Come from the line of Theresa Chen of Barclays. Teresa?

Theresa Chen

First, I'd like to ask about the upcoming maintenance on Wink-to-Webster. And how that might translate to incremental throughput on basin pipeline and maybe your pushing assets given the spot capacity there. Is that an opportunity for incremental earnings, either from a throughput metric perspective or marketing optimization?

Jeremy L. Goebel

So Theresa, this is Jeremy. I look at it is the 10 days of scheduled downtime, there's ways to get it out, right? A lot of that will -- the export pipes to the Gulf Coast will be full. There's some capacity there. The barrels do need to get to Colorado City, which we can assist with the barrels will likely flow on to BridgeTex as a result of lines are being down. So you see more BridgeTex flows, more Colorado City flows. And when it gets to Colorado City, we're likely to see more basin flows. So I think all 3 of those could happen plus you'll see significant flows through all the Corpus pipes.

Theresa Chen

Understood. And on the WCS front, as TMX is infilling, we're seeing the differentials come in at this point. Can you give some color on how that's impacting your marketing activities? And maybe just broadly looking past this, if you have a rule of thumb on the magnitude of impact that differentials on WCS specifically impacts the crude segment just from a quarter-to-quarter basis, that would be helpful. Thanks.

Jeremy L. Goebel

I don't think we'll give specific guidance, but what I would say is it will be included in our outlook. I'd say there's plenty of ways for us to optimize around our assets between rates over and WCS. WCS is one component of the marketing activities in Canada. But there also will be storage opportunities and other things as it starts up, no pipe. Pipe is complicated that will have the difficulty starting up, and it will create opportunities, also flow changes of that magnitude away from the U.S. So it may end up more tariff-based opportunities, less market-based opportunities, but we would expect the market-based opportunities to come back as Canadian production growth.

Wilfred C.W. Chiang

Theresa, this is Willie. I think the key point on this is we've always said with the shift in flow, 400,000 to 600,000 barrels a day potentially short term, there could be some blips. Long term, we think it's very healthy because it sends good price signals to the Canadians to develop more resources and it's, quite frankly, a great opportunity for the Canadian resource base to increase.

Al P. Swanson

And this is Al. The only thing I would add is that it's actually coming online and this stuff is happening pretty well in line with what we assumed in our original February guidance.

Theresa Chen

Thank you.

Operator

I would now like to turn the conference back to Willie Chang for closing remarks. Sir?

Wilfred C.W. Chiang

Thank you. As always, we enjoy visiting with you. Thanks for dialing in and your ongoing attention and support of what we're doing. We look forward to seeing you out on the road. Talk to you soon.

Operator

And this concludes today's conference call. Thank you for participating. You may now disconnect.