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Earnings Call Analysis
Q3-2023 Analysis
Gibson Energy Inc
Gibson Energy's third quarter of 2023 was marked by the transformative acquisition of the Gateway terminal, which provided an additional core platform with strategic advantages. Notably, Gibson achieved a record in August by loading 12 very large crude oil carriers (VLCCs) at the terminal, setting them apart on the Texas Gulf Coast. This accomplishment underscores the high demand for their services. Additionally, with new leadership for commercial operations at Gateway and positive engagement with existing customers, there's a strong foundation for future growth and optimism for securing new and extended contracts at favorable rates.
Financially, Gibson delivered an impressive quarter with a consolidated adjusted EBITDA of $150 million, with the Gateway acquisition contributing positively. The quarter's performance surpassed expectations, with strong results from both infrastructure and marketing sectors. The distributable cash flow for the quarter was $93 million, leading to a payout ratio of 61%, considerably below the target range of 70% to 80%. The leverage ratio, pro forma for the full year contribution from the Gateway acquisition, was a healthy 3.1x, aligning with the company's financial targets.
On the environmental front, Gibson's new sustainability report highlights their ongoing efforts toward a lower carbon future, including a 15-year renewable power purchase agreement, which reflects their commitment to achieving their emissions reduction targets and the goal of Net Zero by 2050. Such initiatives not only address environmental concerns but also offer the potential for cost savings, showcasing Gibson's dedication to responsibly managing both its financial and environmental footprints.
Gibson Energy's financial position remains robust, with a favorable payout ratio and a debt to adjusted EBITDA ratio that underscores the company's strong balance sheet. With these measures under control, they continue to prioritize their infrastructure adjusted leverage and payout ratios, which remain well within their target parameters, reinforcing the company's overall financial health and its ability to sustain and grow its operations responsibly.
Good morning, everyone, and welcome to the Gibson Energy Third Quarter 2023 Conference Call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Beth Pollock, Vice President, Capital Markets and Risk. Ms. Pollock, please go ahead.
Thank you, operator. Good morning, and thank you for joining us for this conference call discussing our third quarter 2023 operational and financial results. Speaking on the call this morning from Gibson Energy are Steve Spaulding, President and Chief Executive Officer; and Sean Brown, Senior Vice President and Chief Financial Officer. We have the rest of the senior management team in the room as well to help with questions and answers as required.
Listeners are reminded that today's call refers to non-GAAP measures, forward-looking information and pro forma financial information. Pro forma information is derived in part from historical financial information from the South Texas Gateway Terminal LLC financials and is subject to certain assumptions and adjustments and may not be indicative of actual results. Descriptions and qualifications of such measures and information are set out in our investor presentation available on our website and our continuous disclosure documents available on SEDAR+. Now I would like to turn the call over to Steve.
All right. Thank you, Beth. Good morning, everyone, and thank you for joining us today. The third quarter of 2023 was a transformative quarter for our company, marked by the successful closing of the Gateway terminal on August 1. As you may recall, prior to this acquisition, we had consistently communicated that any M&A opportunity would need to be on strategy and deliver high-quality cash flows through take-or-pay contracts with high credit quality customers. This transaction met all of these objectives and provides us an additional core platform that is competitively advantaged.
I'm also pleased to report that over the 2 months since closing the Gateway acquisition, the asset has exceeded our expectations with respect to both the financial and operational performance. During the month of August, the terminal loaded 12 very large crude oil carriers or VLCCs. That's a record for the facility and something that sets us apart from other terminals in Corpus Christi, since we are 1 of only 2 facilities in the Texas Gulf Coast with the ability to load VLCCs.
This high watermark also speaks to the continued demand for the terminal services in our facility located in the advantaged outer harbor of Ingleside. At the same time, our focus is on expanding the contracted loading window and committed volumes per loading window at the facility. During the quarter, I'm excited to share that we hired a new Head of Commercial for Gateway, Andrew Kaplun. He joins us from Buckeye, where he was commercially responsible for the Gateway Terminal. He brings a solid relationship with our existing gateway customers and a deep understanding of Gateway's competitive advantages and the overall value proposition, which will ensure we retain these customers and attract new ones to continue to grow the terminal.
Since we acquired the facility in August, we have met with all 6 of the existing customers at the facility, which as a reminder, all of our existing customers -- all of the existing customers at the terminal are customers of ours in Canada, 4 of which are among our top 10 customers. While negotiations do take time, the constructive market dynamics in the region have increased our optimism around our ability to enter new contracts and/or extend existing contracts at or above current rates.
Turning to our financial results, which include 2 months of contribution from Gateway. We achieved consolidated adjusted EBITDA of $150 million for the quarter. This outperformance above our previous outlook for the quarter was driven by a strong infrastructure quarter as well as a solid quarter from marketing. Our distributable cash flow of $93 million in the quarter resulted in a payout ratio of 61%, well below our 70% to 80% target range. Our leverage ratio pro forma for the full year contribution from Gateway acquisition was 3.1x, which is at the low end of our 3x to 3.5x target.
From an ESG perspective, we had some notable milestones during the quarter as we announced a 15-year renewable power purchase agreement with Capstone Infrastructure and Sawridge First Nation. In conjunction, we also released our new sustainability update report. The power purchase agreement demonstrates Gibson's commitment to low-carbon transition and achieving our emissions reduction target, including Net Zero by 2050. Power prices under this agreement are below current rates and competitive in context to historic rates in recent years.
In summary, we are proud of Gibson's third quarter financial and operational results. We successfully closed the Gateway acquisition during the quarter with financial results exceeding our expectations. Infrastructure continued to deliver consistent performance with the non-marine infrastructure business ahead of Gibson's previous expectations for the quarter and a strong contribution from Gateway from the first 2 months of ownership. Marketing delivered in line with last quarter's guidance, benefiting from the storage opportunities and strong refined products volumes. We made meaningful strides towards our emissions targets, including Net Zero by 2050 by entering into a renewable power purchase agreement during the quarter.
I'll now pass the call over to Sean, who will walk us through our financial results in more detail. Sean?
Thanks, Steve. Further to Steve's comments, the third quarter was a very exciting quarter for Gibson. To start off, we closed the Gateway acquisition for USD 1.1 billion, which expands our liquids infrastructure footprint, enhances the strength and stability of our cash flows, and will serve as a platform for future growth.
Speaking to our financial results, total adjusted EBITDA of $150 million was largely flat to the third quarter of 2022, with year-over-year growth in infrastructure being offset by a more normalized marketing contribution in the current quarter. Specific to infrastructure. Infrastructure adjusted EBITDA of $140 million was $29 million higher than the third quarter of 2022, due to strong performance from the non-marine infrastructure business, which was well ahead of our previous guidance, and 2 months of contribution from Gateway.
Delving further into the non-marine infrastructure business performance during the quarter. Results were above our historic run rate for this business as the impact of previously anticipated items, which we had thought could total between $6 million and $10 million, did not materialize or were more than offset by base business outperformance.
Turning to the Gateway business. While we have only owned the asset for 2 months, during these initial months, the EBITDA contribution exceeded initial expectations. As Steve noted, we are very pleased with the first 2 months of performance and believe they clearly demonstrate that we can achieve the 9x forward-looking transaction multiple quoted at announcement of the acquisition.
Looking at our Marketing segment, we continued to build off the strong first half of the year with solid performance during the third quarter, with crude marketing realizing some storage-based opportunities and the refined products division continuing its strength from earlier in the year, driven by strong drilling fluid demand, which was partially offset by tighter heavy differentials.
Consistent with the guidance we provided on the second quarter conference call, we generated adjusted EBITDA of $24 million in the third quarter, but would note that the timing of certain opportunities were pushed into and will be realized during the fourth quarter.
In terms of our outlook for Marketing, though likely not as strong as we saw at the beginning of the year, the environment remains constructive, specifically in our crude marketing business, where we continue to see storage and location-based opportunities. As such, with the benefit of the previously mentioned opportunities we expect will now be realized in the fourth quarter, our current expectation is that our marketing segment will have another strong quarter and generate adjusted EBITDA of around $25 million.
Before concluding the discussions of the results for this quarter, I will briefly walk you through the items leading to distributable cash flow. During the third quarter, we reported distributable cash flow of $93 million, which was a $10 million increase from the second quarter of this year and a $22 million decrease from the comparable quarter last year. Sequentially, much of the increase in distributable cash flow relative to the second quarter of 2023 can be attributed to incremental cash flow from the infrastructure business, and more specifically, the Gateway terminal, which was only partially offset by a lower contribution from marketing and higher interest expense.
On a year-over-year basis, with adjusted EBITDA being largely flat, the main driver for the decrease can be attributed to increased interest expense resulting primarily from the new debt issued to finance the Gateway acquisition, but with other smaller drivers, including higher maintenance capital, which was only partially offset by lower cash income tax.
In terms of our financial position, our payout ratio now sits at 61%, which is well below the bottom end of our 70% to 80% target range. On a pro forma basis, our debt to adjusted EBITDA decreased to 3.1x, which is also at the low end of our 3x to 3.5x target. We also continue to remain focused on our infrastructure adjusted leverage and payout ratios. On this basis, on a pro forma basis, our leverage is 3.7x, and our payout ratio is approximately 79% compared to targets of below 4x and 100%, respectively, under our financial governing principles.
Before providing my closing remarks, as touched on briefly in the prior quarter, I did want to briefly update our approach and actions to date as it relates to mitigating currency fluctuations with the acquisition of the Gateway Terminal. Since closing of the transaction on August 1, we have entered into hedges to mitigate some of the near- to medium-term currency risk. Currently, between 2/3 and 80% of our first year of Gateway free cash flow has been hedged. And beyond that, we hedged approximately 1/3 of second year free cash flow to provide flexibility in the future.
In summary, the third quarter was a very strong quarter for Gibson. Infrastructure results were ahead of our expectation due to strong non-marine infrastructure performance and 2 months of contribution from Gateway. Marketing was in line with prior guidance, though some opportunities will now be recognized during the fourth quarter. And we remain well within our key governing financial principles and continue to maintain our industry-leading financial position.
Thank you for your time today. I will turn the call over to the operator to open up the line for questions. Operator?
[Operator Instructions] And your first question will be from Jeremy Tonet at JPMorgan.
This is Eli Johnson on for Jeremy Tonet. I just wanted to start off on Gateway re-contracting. Previously you've discussed adding term and higher MVCs, re-contracting at higher rates. What kind of specifics can you provide on those negotiations? And how much incremental uplift could this add to asset run rate levels? And then how do those negotiations kind of tie into competitive dynamics with Ingleside?
Thank you for that question. This is Steve Spaulding. I would say, we have 6 existing customers there. Currently, we're in negotiations with 3 to actually extend those existing agreements and add existing -- add additional capacity and storage with that. And with those, we are proposing higher MVCs. And then on top of that, we have 4 other customers that are now off-takers of the terminal that have asked and we have given proposals to actually enter into new contracts at the terminal.
All right. Yes. I appreciate the color. And maybe just kind of turning to equity shareholder returns as well. Do you guys have any updated timing or thoughts on share repurchases? And how do those kind of tie into your overall capital allocation prioritization?
Yes. Thanks. You've got Sean here. So no update on timing. As everybody is aware, we come out with our budget in December of this year. And we do it every year. And concurrent with that budget, we'll come out with any expectation we have on share repurchases. But from a broader perspective, I mean, capital allocation doesn't change. We will take a look at what our excess cash flow is, basically do the cash flow waterfall, and that's going to be after growth capital. So that's a key determinant in what the level of buyback may or may not be for 2024.
And any excess cash flow after payment of dividends, et cetera, will go to share buybacks. I mean, as you would have seen on the call, we do think still there's an opportunity to get leverage down somewhat. But on a pro forma basis, at 3.1x, and that's reflective of a full year contribution from Gateway or the forward earnings potential of the facility, we're very comfortable with what the leverage is. So more of the story is we'll come out with more formal guidance around both our capital budget and any potential share buybacks for 2024 concurrent with our December release.
Next question will be from Linda Ezergailis at TD Cowen.
Maybe you can just give us a sense of how the integration is going. It sounds like commercially, it's going to be pretty seamless with Gateway. But from like a physical operations perspective, have you started discussions or put any thought to which folks you might hire from Buckeye or which might be willing to come over? And do you expect your cost base or anything else to change? Or your processes in terms of how you manage the facility once you take over from Buckeye, and the timing of that?
Linda, that's a great question. And when we -- we've been working on, right? So day 1, when we -- we put a large contingent down to actually develop a transition team. But more importantly, all 27 people located at the facility, including the scheduler and the commercial person that's responsible for the asset, all come on board. So we're very excited about bringing all those people on board, and we expect to bring those people on board very soon. And we put together a transition team really across all of our functions to make sure this is a seamless operation and we're very confident that we'll be able to take that over 100% in the near term.
Okay. And just a follow-up question. My understanding is that your cash tax situation at Gateway is quite efficient. But can you maybe -- or Sean maybe provide kind of a longer-term outlook as to your cash tax situation in terms of conceptually how it might be kind of a run rate or how it might be changing over time?
Yes, absolutely. Thanks for that, Linda. Yes, as you noted, with the full step-up in basis and then existing tax pools we had in the U.S., we don't expect to be taxable in the U.S. for the foreseeable future. So as you noted, very tax efficient. Specific to the quarter, you would have noticed that cash taxes were lower than perhaps was expected, and that's really from the deduction we got from the acquisition and integration costs, but also from some of the other benefits.
We had cash taxes of circa $40-odd million last year. This year, we expect it to be in the range of sort of $30 million to $35 million, which is reflective of sort of a cash tax position prior to sort of Texas and then where we sit now. And then on a go-forward basis, we expect it to be in the sort of $20 million to $25 million range annually. And that is reflective of really the benefit that we get of having a business that's not really taxable or isn't taxable south of the border. And then as well, the fact that the capital we raised to finance that acquisition, at least the debt capital was financed in the Canadian capital markets, so is deductible against our Canadian income.
Next question will be from Rob Hope at Scotiabank.
Two cleanup questions. Just taking a look at South Texas. The commentary seems to imply that volumes were tracking ahead of expectations for the 2 months that you owned it. Can you maybe talk about kind of what were the key drivers of that? And as we move forward, is there a reason why -- or what are the outcomes I could see you maintain these levels versus step down to what your plans were?
Yes. Thank you for the question, Rob. There are 2 drivers. The first 1 is, we talked about the 12 VLCCs that we load. And remember when -- so our MVCs are set up on Aframaxes. And that's a 750,000 barrel vessel. And we load 1.2 million to 1.25 million on VLCCs. So that incremental amount is charged a throughput fee. So that drives our incremental revenues up. And then the other is we do have some spot windows available and our existing customers are utilizing those spot windows.
And then maybe for Sean. If we go back to the Q2 call, you mentioned the $6 million to $10 million of headwinds that were potentially going to show up in Q3. It does look like those did not show up. But as we take a look at Q4, was part of this just a deferral of maintenance? I would imagine the rail step-down is in there, but maybe can you talk about how the headwinds didn't show up in the quarter and how that plays out into Q4?
Yes, absolutely. Great question, Rob. So as you noted, the headwinds did not show up. And quite frankly, actually, we have performed above what our historical run rate would have been for that business. It's really from 2 factors; 1 being, as you noted, some OpEx efficiencies. So that's nothing that is going to move to another quarter. It's just we operated a bit more efficiently than at least we had initially budgeted. There was some deferral that would move into the fourth quarter and perhaps early into next year.
We don't think that that's overly material. So would not really bake that into sort of any forecasted amounts. And we did see increased revenues through most of our facilities. So that would be not only at our both Hardisty and Edmonton terminals, and this is relative to what we had expected going into the quarter, but also in our sort of other pipelines division, which should include both our Canadian pipelines and small terminals. It's a bit of mix all of it.
Next question will be from Robert Catellier at CIBC.
First of all, congratulations on getting off to a good start with Gateway. I'd like to go back to the capital allocation and share repurchase question here. As we sit today, do you see more opportunity for value creation through reducing leverage or through share repurchases?
I mean from a pure economic perspective, I mean, just given where our yield is relative to our interest rate and the tax deductibility, it certainly points to share repurchases. I think there's other factors other than pure economic factors. I mean we are very focused on staying certainly within our leverage range, and would very much like to be at the lower end of that leverage range. I mean, at 3.1x on a pro forma basis, we're basically there. So as I said, I think we will look to reduce some leverage, but I don't think there's really a need to reduce material leverage. So that will be the balance that we have, Rob. I'm not sure if that answers your question, but...
Yes. Yes, it does. I mean, the point was, you're already pretty low on your leverage range. So I just wondered how much value you saw in reducing that further. But you answered that question. And then I'll move on to the currency. Glad to see the detail you put out there, but as you go forward, how do you plan to manage the currency risk? And I'm thinking about maybe hedging targets in terms of the amount and how far out you might go with the hedge book?
Yes. Our philosophy right now is we are going to look to hedge probably roughly 2/3 to 80% of the next 12-month cash flows. And really, what we're trying to do there is protect ourselves from the downside risk. We're not looking to profit off of that. So we will utilize different strategies to potentially do that. And then we'll look to hedge probably around 1/3 of the months 12 to 24, and that will be on a rolling basis. So again, what we're focused on here is really protecting ourselves from the downside and ensuring that the cash flows we receive from this facility are in line with what we had expected when we first purchased it.
Okay. That's helpful. And then just on -- as you look at the Gateway on an operating basis, I know it's early days, but what opportunities do you see to leverage some of Gibson's existing infrastructure or marketing expertise to enhance the competitiveness of Gateway understanding. It's already pretty competitive as it is. So I'm thinking about things like are there any asset additions such as pipelines that might help you augment that competitiveness even further?
Yes, Rob, this is Steve. Thank you for that question. I think right now, our main focus is making sure this thing runs right on top, right, and re-contracting or bringing in new customers to lengthening our contract mix, adding additional tankage, additional pipelines, and probably growing that business 10% to 15% on a long-term run rate of what we are today. So I think 1 of the questions earlier was what rates we think we can get. And currently, we believe we can get at or above the existing rates at the terminal. So...
All right. So more of an organic growth focus currently?
That's right, Rob.
Yes. And last question for me. I wondered if you had any initial thoughts on what the recent E&P consolidation in the U.S. means for your operations?
Yes. I mean, Chevron, Hess -- I mean, that's not a -- Hess is not a big producer in the Permian Basin. Then you look at Exxon and Pioneer. Most of the Pioneer volumes were pointed towards the Beaumont and the Houston Ship Channel. So those aren't big shippers into the Corpus area. None of those are big shippers into the Corpus area currently, Rob.
Next question will be from Ben Pham at BMO.
A couple of questions going back to Gateway. And I know you mentioned negotiations take time. Could you comment on timing of when you think you get new contracts? And then you also mentioned indications of rates being at or above current. I mean, what's driving really, moving on, those contract indications, because that seems pretty good versus perhaps initial expectations?
Yes. Thank you, Ben. So as far as what's driving that, I think it's just -- as you can see, as we talked earlier in the prepared remarks, we keep adding VLCCs every month to this terminal. And that competitive advantage at the Ingleside and the ability for Ingleside to load VLCCs overshadows the rates of most people even in the inner harbor. So we'll continue to draw barrels away from the inner harbor. There's numerous inner harbor customers that have bad docks in the inner harbor and space on our side. And they forgo and pay the take-or-pay in the inner harbor and move all their barrels over to us. And the reason being is that we're just that competitive advantage. I mean there's definitely docks in the inner harbor of Corpus Christi that they would have to pay to actually versus go to us. That's how large our competitive advantage is.
As far as optimism on -- I'm actually surprised. I thought it would be a little bit more difficult to actually re-contract, and so as far as re-contracting discussions, they're further along than I would expect. And we have more interest from new parties, which is stronger than I expected at the beginning. Part of that was bringing on that commercial person from Buckeye. If I ask him, he's going to be very aggressive and say he's going to have it done quite early. But commercial takes time. And so we'd hope to actually have 1 or 2 of those sometime in the second quarter. If it occurs earlier, we'll be very pleased. But right now, the discussions are going very well.
So just want to make sure I asked. So it sounds like you're balancing spot rates versus MVCs, and you're seeing a nice uptick in volumes, and that could come more to your favor if you continue to see that going forward?
Yes. So yes, some of the existing customers are taking up the spot spaces. Those existing customers want to firm that up because on spot basis, you get no priority in your loading, you don't get to schedule it 10 -- 6 months out, and it's at higher risk, right? The spot rates are. And also, will we go firm? We do require 8-day storage with a firm contract. So that's going to drive the storage build out there at the terminal.
Okay. And on new contracts, is there something you're giving up on new contracts versus your commentary on existing?
No, it's at the same rates. And the same -- they're basically side-by-side looking very similar, Ben.
Okay. Got you. And maybe my last question on the marketing guidance side. Are you -- what percentage of that is coming from the Q3 timing difference?
Yes. I mean it's a couple of million bucks. I mean, something like $3 million to $5 million, something in that range. So it's just something where we did carry a bit through and we thought that might get realized in the current quarter and it got pushed to the fourth quarter.
Next question will be from Robert Kwan at RBC Capital Markets.
Just on the infrastructure EBITDA of $140 million. Are you able to break down how much of that came from Gateway versus the Western Canadian terminals, and then kind of the pipeline segment that you thought you were going to get the headwinds?
Yes. We don't -- Robert, as you know, we don't typically provide that granularity down to that level. But I mean what I can tell you is it would have been an outperformance of, call it, just under 5% of what I would call our sort of legacy business with -- and that would be both terminals and sort of other pipelines and small terminals, with the rest being from Gateway.
Got it. And then just as you think about your comment on re-contracting rates possibly being a little bit higher. I know Steve, you said, look, side-by-side the contracts look very similar. I just want to make sure though is there any capital that you need to put in? You also kind of link that to increased storage. So is it the same rate, but you got to put some capital in? Or is it really just the same rate, very minimal capital and any storage expansions would draw an additional fee?
That's a great question, Robert. So in a service, what we do is we have an MVC, right? And that MVC in the past had been in Aframax and so the new proposals are 50% Aframax and 50% partial loaded VLCC, which increases our MVC in these proposals from 25,000 barrels a day to 33,000 barrels a day. We'll see how successful we are, but that's what's in our proposals. I assume some of the customers will push back on that. And then as far as rates, embedded in those proposals is storage, right? So with a firm capacity window, you also are required to take out a minimum amount of fungible storage, and that is 8-day storage. And with that, we're currently kind of full. All of our storage is fully leased out in our existing contracts, which will push forward the more development of storage at the facility. We have cost estimates on that. Those cost estimates, they're probably -- it's about half the cost of the build out of tanks probably at Edmonton or some of the new tanks at Hardisty, but part of that is just currency, FX, U.S. versus Canada.
So Steve, do you need to build out the tankage to maintain the current rates? Or is it current rates unloading and then you're going to get an additional fee for the storage?
No.
Okay. Last question. Just as you look at the current marketing environment, Sean, you talked about it being constructive. Can you just frame the current environment, though, with respect to that $80 million to $120 million range? Are we kind of at that midpoint, recognizing that I know you had $25 million for the quarter, but just seasonality?
I mean we've got Kyle in the room here. So I guess he can talk about the market in general and what we're seeing. I mean, we had roughly $25 million this quarter. Our guide for next quarter would be for the $25 million. So that would point generically to that midpoint. We had a much more successful first half of the year. So it's always tough to pin that far into the future. But I don't know, Kyle, do you want to talk a bit about sort of environment in general?
Yes, sure. I mean, like Sean said, and although probably not as strong as the first half of the year, we're very much constructive on it right now. Currently, we're seeing wider WCS differentials, which does somewhat benefit Moose Jaw. With that said, throughout the winter months, we do start storing asphalt. So those earnings push into future quarters and can delay some of those feedstock advantage benefits.
On our crude marketing side, we're only a month into the quarter, so it's still early, but we're seeing increased throughputs at the assets, which would be normal course for this time of year. Heavy apportionment on Enbridge Mainline came in at 24%, which was a material increase from October. And we expect that to continue in the near term. So what does that do? It creates some opportunity for storage and transportation movements. That kind of environment can present opportunities for us. But like I said, it's pretty early, but those would be a couple of the themes that our marketing team is paying close attention to.
[Operator Instructions] And your next question will be from Patrick Kenny at National Bank Financial.
Just to come back to Gateway here and I guess looking at the record number of VLCCs that you loaded in August. Steve, I think you mentioned the 1.2 million, 1.3 million barrel loading capacity right now. I'm just wondering whether or not this deepening of the channel to 54 feet might represent some near-term upside to your VLCC loading capacity? Or if you would need to, I guess, dredge your dock a little deeper as the channel expands, and if that's something you're looking at as part of your contract discussions to underpin that CapEx?
Yes. Thank you for that question, Pat. Yes, the channel has been deepened to 54 feet plus from 47 feet plus, and it's also been widened. As to date, the Coast Guards have not allowed anyone that has a deeper port to load any more barrels really on the ships, right? But we do expect some time in the future. We don't know when. I don't know that if it's in the near future, probably but over the next year or so, that they'll start to be able to load deeper. We went to all of our customers and said, "Hey, what advantage is this to you? Because we would love to deepen our docks and provide that ability for you to load your VLCCs from 1.25 million up to maybe 1.4, 1.45 million".
It's kind of marginal for them. So I don't know if the project will move forward, right? But we definitely have asked our customers and provided them a means in which to pay for the deepening of our dock. But it's pretty marginal. It's going to be like that 1.25 million, up to 1.45 million, 1.5 million. So it's not -- they still have the lighter offshore. So it's not a major advantage when it comes to the VLCCs. Probably the larger 1 for us is the widening of the channel. And right now, the Aframaxes and the Suezes, they can come in at night, but they can't leave loaded. So they have a daylight-only restriction on leaving. So we believe that, that will be lifted in the future. We don't know exactly when, but that will be lifted in the future. And that will allow us more load times, which we believe we can add additional windows down the road.
Got you. Okay. And I guess, as a related question. So the 3.1x pro forma leverage ratio, just to clarify, so that would include or assume kind of a 9x run rate contribution from Gateway. I'm just curious what still needs to be achieved from here on in operationally or financially from Gateway to reach that 3.1x pro forma leverage ratio?
So Pat, just to clarify, that's actually a trailing number. So that would take actual results from Gateway, which have progressively increased over time. So I mean, that is a real number right now. That's not us taking a forecasted number. I think -- notwithstanding it's a pro forma number, I think our accountants would get some heartburn with putting a forecasted number. The footnote would be very expensive to qualify that. So it's actually trailing numbers. So there's nothing from a Gateway perspective because it's happened. And we're actually -- if you run rate it, what we've seen since we've owned the facility, that number would have been even lower.
Right. So directionally, we're probably sub 3x, assuming you achieve the 10% to 15% upside?
Yes, I mean assuming last 12 months' performance from the what we'll call legacy business, and if you run rate the 2 months since we've owned the facility, that's absolutely correct.
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Thank you very much, and thank you all for joining for our 2023 third quarter conference call. Again, I would like to note that we have made available certain supplementary information on our website, gibsonenergy.com. If you have any further questions, please contact investor.relations@gibsonenergy.com. Thank you.
Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.