Keyera Corp

TSX:KEY

Earnings Call Transcript 2024-Q1

[Operator]

Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Keyera's 2024 First Quarter Conference Call. [Operator Instructions]And I would like to turn the call over to Calvin Locke, Manager of Investor Relations. You may begin.

[Calvin Locke, executive]

Thank you, and good morning. Joining me today will be Dean Setoguchi, President and CEO; Eileen Marikar, Senior Vice President and CFO; Jamie Urquhart, Senior Vice President and Chief Commercial Officer; and Jarrod Beztilny, Senior Vice President, Operations and Engineering. We will begin with some prepared remarks from Dean and Eileen, after which we will open the call to questions.I would like to remind listeners that some of the comments and answers we will be giving today relate to future events. These forward-looking statements are given as of today's date and reflect events or outcomes that management currently expects. In addition, we will refer to some non-GAAP financial measures. For additional information on non-GAAP measures and forward-looking statements, please refer to Keyera's public filings available on SEDAR and on our website.With that, I'll turn the call over to Dean.

[C. Setoguchi, executive]

Thanks, Calvin, and good morning, everyone. We've carried the positive momentum from last year into 2024, leveraging the strategic advantages of our integrated value chain to drive solid performance across all 3 business segments. We continue to see the growth in high-quality fee-for-service cash flows and remain on track to reach the upper end of our 6% to 7% EBITDA growth target out to 2025.Our Liquids Infrastructure segment delivered a fifth consecutive quarterly record for realized margin, reaching $137 million. Driving this performance was the continued ramp-up of long-term contracted volumes on KAPS and growing demand for our fractionation, storage and condensate businesses. Our Gathering and Processing segment delivered its second highest quarter ever with $104 million in realized margin. This includes the first full quarter of contributions from the Pipestone gas plant expansion. This segment has undergone a significant transformation. In 2017, over 70% of our G&P realized margin came from our South region gas plants. Today, more than 70% comes from our 3 North region gas plants. Over this time period, our G&P realized margin has grown by more than 40%. Producer economics in the North are driven by higher condensate content, making them less sensitive to natural gas pricing. Our North region also has longer contract durations with strong counterparties and a high degree of take-or-pay. The growth we're delivering in our fee-for-service business segments is driving high-quality cash flows, which supports sustainable dividend growth.Our Marketing segment continues to perform well, generating $114 million in realized margin in the quarter. On a full year basis, we now expect Marketing to deliver between $430 million and $470 million of realized margin. This includes the impact of a 6-week outage at AEF, which is now complete. This significant increase is mostly due to the expected strength of our iso-octane business. Our Marketing segment continues to provide Keyera with a distinct competitive advantage. Strong cash flows from this segment have enabled us to consistently deliver above-average after-tax corporate returns. These cash flows are then reinvested into long-life infrastructure projects, in turn driving growth and high-quality fee-for-service cash flows.We expect to generate significant free cash flow in 2024 as we continue to benefit from investments made in prior years. Our capital allocation priorities have not changed and remain grounded in a long history of disciplined financial management.Our balance sheet is strong, allowing us to further create value through increasing returns to shareholders and investing in capital-efficient growth opportunities. These opportunities will leverage and enhance our existing core asset position in Western Canada. They include a frac debottleneck, a new factory expansion and a KAPS Zone 4 extension. To move ahead, these projects will need to generate a strong return supported by long-term contracts.I'll now turn it over to Eileen who will provide an overview of our financial performance for the quarter and touch on our revised guidance for 2024.

[Eileen Marikar, executive]

Thanks, Dean. Adjusted EBITDA for the quarter was $314 million compared to $292 million for the same period last year. This result includes another record contribution from our Liquids Infrastructure segment and continued strong performance from our Gathering and Processing and Marketing segments. Distributable cash flow was $205 million or $0.90 per share compared to $227 million or $0.99 per share for the same period in 2023. Net earnings were $71 million compared to $138 million for the same period last year. The decrease was due to an unrealized non-cash loss on risk management contracts, higher financing costs and depreciation expense.Keyera continues to maintain a strong financial position, exiting the quarter with net debt to adjusted EBITDA at 2.2x, below our targeted range of 2.5x to 3x. This positions us well to self-fund organic growth opportunities that will further strengthen our business and continue to drive shareholder value.Moving on to our guidance for 2024, as Dean mentioned, we now expect our Marketing segment to contribute between $430 million and $470 million of realized margin in 2024. This is up from our previous base annual guidance of $310 million to $350 million. This increase reflects the continued strength of our iso-octane business. Due to the increase in expected Marketing contributions, cash taxes are now expected to range between $85 million and $95 million. This is up from $45 million to $55 million previously.Growth capital for 2024 remains unchanged at $80 million to $100 million. A reminder that this includes $20 million to $40 million of capital that is contingent on sanctioning of KAPS Zone 4 and advancing opportunities at KFS. Maintenance capital remains unchanged at $90 million to $110 million.I'll now turn it back to Dean.

[C. Setoguchi, executive]

Thanks, Eileen. The long-term outlook for volume growth in the basin remains strong. This growth will be supported by key developments, including TMX expansion, LNG Canada, a growing petrochemical industry and increasing NGL exports. With strategically placed assets, Keyera remains strong -- well positioned to help enable this growth.On behalf of Keyera's Board of Directors and management team, I want to thank our employees, customers, shareholders, indigenous rights holders and other stakeholders for their continued support.With that, I'll turn it back to the operator for Q&A.

[Operator]

[Operator Instructions] And your first question will be from Robert Hope at Scotiabank.

[Jessica Hoyle, analyst]

This is Jess Hoyle on behalf of Rob Hope. To start, just conceptually, how do you think about what to do with outperformance on Marketing cash flows? Can they be attributed to share buybacks? Or are you thinking about it in terms of pre-funding some future unsecured growth?

[C. Setoguchi, executive]

Your voice sounds much better than Rob's. I'm just kidding. Listen, that's a great question. And what we've always said is that our Marketing performance and margins that we generate there is the competitive strength of our company. And really, it's like a free equity offering. So we have this excess cash flow that we're able to reinvest either back in our business to create more value, more efficient service for our customers, but also a long-term cash flow stream that's usually backed by take or pays and fee-for-service cash flows, which helps drive future dividend growth. But we also have the option to buy back shares if we choose to do so. So having that optionality with strong Marketing margins is a great advantage for us.Eileen, is there anything you want to add?

[Eileen Marikar, executive]

No, other than I think we're well aware, we can add shareholder value by reinvesting in the business and through buybacks. They do remain an option, as Dean mentioned, and we certainly understand the compelling value proposition. They can be activated very easily at any time. And at this point, as Dean mentioned, we believe we have opportunities that can deliver even better value for shareholders.

[Jessica Hoyle, analyst]

Great. And then, just looking at some of your future growth opportunities, can you give us an update in terms of where you stand on, let's say, Zone 4 or frac expansion in terms of contracting discussions and timing, things like that?

[C. Setoguchi, executive]

Yes. Well, listen, that's also a great question. I'll turn that over to Jamie in just a minute, but what I'd say is that we see tremendous growth in our basin out to the end of the decade. I think it's tremendously exciting that, again, TMX is in service. And also, we'll see Coastal GasLink and LNG Canada come into service in the next 12 months or so. So that's going to unlock a lot of growth in the basin. And with that growth, we have a lot of critical basin infrastructure that helps to enable the growth. So, that creates a lot of opportunities for us in terms of investment opportunities. And I'd say that KAPS Zone 4 and frac expansions are part of those opportunities.So maybe I'll just turn it over to Jamie and let him add to that as well.

[K. Urquhart, executive]

Yes. So from a Zone 4 perspective, just to remind everybody, the BC Montney is home to a large-scale, world-class resource that has decades of run room in that resource. So the conversations that we're having all along the KAPS fairway, but also a long Zone 4 and ultimately into BC, where we'd be looking for a North Rivers project to ultimately, potentially deliver some volumes into KAPS. Those conversations are gaining momentum, and we're extremely optimistic with respect to our ability to be able to get sufficient volumes to sanction that project sometime in 2024. Now having said that, we'll always reinforce this, that we have to have sufficient backstopping from our customers in order to proceed with those projects. It's not a philosophy of ours to build it, and they will come. So once again, very constructive, meaningful conversations happening along Zone 4 and into Northeast BC.From a frac perspective, I would -- characteristic is extremely constructive conversations. I think everybody is aware that frac capacity is very tight right now. And as we've mentioned in the past, we've got a couple of ways to be able to enable growth in our Keyera Fort Saskatchewan facility, so the first being the debottleneck of Frac II. This allows us to leverage our existing equipment in a very capital efficient way. So, as we're positioning ourselves for that project, we look probably to be able to order long lead items towards the back end of this year with a targeted service date of 2026 for that project. Then on Frac III, this would be a new build on our existing KFS lands. We're advancing feed as we previously communicated. And given recent discussions with customers, we are gaining more and more confidence that we'll be moving ahead with that project as well. So it's important that it's not an either/or. If we have the right level of support, we'll be proceeding with both those projects. But to reinforce, we need the appropriate customer underpinning in order to do so.

[Operator]

Next question will be from Robert Kwan at RBC.

[Robert Kwan, analyst]

If I can just start with your approach to new investments, just off the back of some of those comments on specific projects. So you talked about long-term contracts. You talked about wanting strong returns. And I think on prior calls, you said you want to be at the upper end or even above the high end of that 10% to 15% pre-tax range. So if you can just confirm that, but also just how are you thinking about managing the capital cost side? Because that's obviously the other component of returns. How do you manage that going forward? What would you do differently than what you did on KAPS?

[C. Setoguchi, executive]

Well, Robert, lots of good questions there. First of all, with our integrated system now with KAPS, we see opportunities to invest in growth projects all across our value chain. And again, that's to accommodate a lot of the growth that we see happening in the basin, supported by sort of the global macro views, but also discussions with our customers. So I think it's exciting times for our company as we look forward. And so, any new infrastructure project, we want to make sure that we have sufficient backing from a contractual perspective to support a strong return. And on a stand-alone basis, we do view that as the higher end of that 10% to 15% return on capital range, and knowing that we're going to have an opportunity to bundle our services together to generate a much higher return at an enterprise level. So that's the value of our integrated platform. It's providing a very efficient value-added service to our customers. And at the same time, when we create more value doing -- providing those services, it creates value for our shareholders as well.In terms of managing the capital cost side of it, certainly, contractually, we always like to try to build in provisions to try to mitigate our exposure on that front. But that will depend on the type of asset and what we're looking at. But I know that Jarrod and his group, they're also doing a lot of work and making sure that we have a high level of confidence in anything that we go to execute.And with that, maybe I'll just turn it over to Jarrod to add to that comment.

[Jarrod Beztilny, executive]

Yes. I think what I'd add, KAPS in particular was a great learning experience for us. And when we think about capital management, it's that whole life cycle of a project, from development through execution and all the way to commissioning and start-up. And it's really regardless of the project. It's about identification and characterization of risk and really doing the appropriate work at the front end to understand what those risks are and be able to mitigate that throughout that execution cycle.

[Robert Kwan, analyst]

Great. If I can also just ask some of the upside, you focused a little bit of the earlier comments on gas and gas liquids, but just with Trans Mountain's expansion coming in, your condensate system and expectation that volumes are going to grow through the end of the decade to fill all of the pipes, what's the latent capacity in your existing system? And then, are there any bottlenecks where you would foresee needing to allocate capital as oil production grows?

[C. Setoguchi, executive]

Yes, sure. I'll turn that over to Jamie in just a minute, but Robert, we're extremely excited about both export pipelines to the West Coast, and obviously, TMX is a big part of that. And we have a lot of services that we provide to the oilsands, and we do have really the market hub for diluent in Edmonton with our pipeline system and all the receipt points to receive condensate and also deliver to the oilsands. We have a working interest in the Norlite pipeline, which has more capacity that we can continue to work with Enbridge to fill that. We have storage services that we provide on a long-term basis, and that's been a great business. We have 50% ownership in the baseline tank terminal. So, that is very well connected to all the tankage and the connections that go into TMX. So there's a lot of services that we provide to oilsands that we think are going to benefit from more growth in oil -- largely from the oilsands. But also keep in mind that, that growth in oilsands bitumen production is going to drive more condensate demand, which also supports our G&P business and all the developments that we see along the fairway, where we have 3 gas plants in our northern G&P system. So they're all linked together, and we think that's going to be a huge tailwind for our business going forward.But Jamie, anything else you want to add?

[K. Urquhart, executive]

Yes. I guess the only thing I'd add, Dean -- and it's a great question, Robert -- is that, as Dean alluded to is that we -- our condensate system has all the major supply and demand pipelines flowing into and out of it, and it's a very dynamic system. So depending on where that supply is coming from and where that demand is being pulled off of our system, [ we will ] be really imperative to deciding if we do need to debottleneck our system. Now, having said that, we've done a ton of work where we don't envision that there's going to be significant capital required to manage the growth that's been publicly stated most recently around growth within the oilsands, and ultimately, the condensate demand that goes along with it.

[Robert Kwan, analyst]

Is there any way to quantify, just say, for every incremental 100,000 barrels a day of oilsands production, what that might mean to you in terms of millions of dollars of margin?

[C. Setoguchi, executive]

Yes, I think that would be tough for us to quantify, I guess, at this point. [indiscernible] to say, though, it is a tailwind for us. Yes. Thank you.

[Operator]

Next question will be from Robert Catellier at CIBC.

[Robert Catellier, analyst]

I'm just wondering, with the 2 frac units at KFS fully utilized, what's the biggest factor for frac expansion? What are the biggest push-backs from the customers in reaching those contracts you need before FID?

[C. Setoguchi, executive]

And yes, good question on the fracs. As Jamie said, frac capacity in Alberta and especially in the hub in Fort Saskatchewan is super, super tight right now. And again, when you just look at the volume outlook of growth in our basin, there's just going to be more demand for all the liquids that get extracted from the natural gas that's going to be produced. So producers are seeing that this is a bottleneck. And so, this is why we're having meaningful discussions in terms of contracting up for more capacity to help back the investments in the debottleneck and also in the Frac III that Jamie talked about.But Jamie, anything else you want to add?

[K. Urquhart, executive]

Yes. I would just add, Rob, that it's not push-back from our customers. It's really around mostly just marrying timing, right? Like, the acquisition that we did from Plains for the 21% that we did back in late '22 was really instrumental to being able to really offer our customers some frac capacity in the near term that then bridge them to a longer-term deal. But also, as we think about people's growth in the basin, how do we marry the timing that they're going to need that frac capacity with when we're going to be able to provide that? But it's really not push-back with respect to a need for the service. It's just really marrying the timing.

[C. Setoguchi, executive]

Yes. Maybe just adding one more thing, Rob, is the great thing, too, with KAPS is that we're bundling a lot of our services together. So it's not just frac that we're talking to our customers about. It's KAPS. In a lot of cases, it's also the G&P and Marketing services as well. So again, it's a great opportunity for us as we see the basin grow.

[Robert Catellier, analyst]

Okay. That's helpful. You had some very robust Marketing guidance this morning, and the MD&A mentions more stringent fuel standards supporting demand. Is that new from last year that -- the fuel stringency standards?

[C. Setoguchi, executive]

Yes. You know what, the one great thing about us is that we have a really great product with our iso-octane. But, Jamie, may I just turn it over to you to answer that.

[K. Urquhart, executive]

Yes. Robert, this has been sort of evolving over time, and we're starting to see more and more states down in the U.S. sort of evolve and ultimately adopt these type of standards. So what I can share is that every year, our market share in these, what we call, advantaged markets continues to grow. And it's because people are introduced to our product. And as Dean says, once you get introduced to our product, we've never not had a return or a repeat customer.

[C. Setoguchi, executive]

We always joke around and say we should deliver one rail car of it to every refinery that can take it by rail, and they'll be a return customer for life because the product is that good.

[Robert Catellier, analyst]

Okay. Maybe a couple of quick ones for Eileen. What do you think the best option is for your significant free cash flow generation right now, given that you have the strong balance sheet, relative lack of near-term maturities, but also potentially some growth projects ahead of you?

[Eileen Marikar, executive]

Thanks, Robert. Yes, excellent question. We are certainly in a great position when it comes to the balance sheet, an enviable position, I'd say, so certainly, no need to allocate cash on the debt side. Dividend growth, that's another thing that's obviously very important to us. We're proud of that long history, and we want to ensure that we grow it sustainably. And so, that's always tied and underpinned by the growth in our fee-for-service cash flows. And as I said earlier, it's really then adding shareholder value, either through growth and/or through buybacks. I think, as I said earlier, buybacks are an option. They can be easily activated when we feel that it's appropriate. It's just that right now, we see some really strong opportunities that can deliver even better shareholder value.

[Robert Catellier, analyst]

Okay. And then, last one for me. Understanding that the increase in the Marketing guidance attracts some fair amount of cash taxes, do you see any -- I won't call them easy, but any near-term opportunities to improve the conversion of EBITDA to FFO?

[Eileen Marikar, executive]

Yes. On the tax side, last year, we brought on KAPS and we acquired the additional working interest in KFS that added significant tax pools, right? But we delivered record earnings last year, and we are set to deliver another strong Marketing year this year. So we have significantly accelerated the use of tax pool. So I think this is a good problem to have as we're making a lot of money. It's just important to think managing taxes go forward, it's just another reason why reinvesting in the business in strategic high-return projects is important.

[Operator]

Next question will be from Ben Pham at BMO.

[Benjamin Pham, analyst]

Maybe on your Marketing guidance, you have the 2024 numbers out, and I guess if you adjust for the outage, it's a high $400 million business this year. Can you talk about then -- I'm just looking at some of your -- reviewing your assumptions, again, for your base Marketing guidance. And it looks like some of those trends there in your base, you're benefiting modestly from that. Can you talk about a scenario next year, not specifically guidance, what outcomes or factors could actually get Marketing down to that low $300 million range?

[C. Setoguchi, executive]

Ben, thanks for your question. Yes. Maybe I'll turn that over to Jamie, and he can speak more to our Marketing business.

[K. Urquhart, executive]

Yes, Ben. So I think if I understand your question properly, it's what outcomes -- negative outcomes could have us be down to our base long-term guidance? And just a reminder of what assumptions are driven around that base long-term guidance, and that's obviously having our facilities run at or near capacity, being able to source butane at or around historic averages and some assumptions around WTI in particular. So, those are things that obviously -- if commodity prices change materially, that's obviously going to have an impact on our business. Now, I'll remind you that we hedge -- we have a very disciplined hedge program within our organization. And when we did see the significant commodity price shocks back during COVID, we still had very, very strong results. And so I just -- I think as we look at our base guidance, it's something that we put out based on a very high level of confidence that we're going to meet long term in the next while. Certainly, we've got a lot of positive things that are developing in our business. But beyond that, I think that's about as much color as I can provide.

[C. Setoguchi, executive]

Yes, Ben, maybe I'll just add 2 points to reinforce. One is the outlook for our iso-octane business remains very strong. And [ those are ] to all the points that Jamie spoke to earlier, it's a very high-quality product. And the 3 main qualities of it that make it valuable: it's high octane, 100 octane; it's low sulfur; and it's low RVP. A lot of the competing products for iso-octane may have 1 or 2 of those qualities, but not all 3 of them. That's what creates a lot of demand for what we have. So the outlook for that remains strong. I'd say second of all is that our Marketing business is really a logistics business. And because of all the connections and connectivity that we have, our logistics expertise and our marketing expertise, we're able to connect products to the highest-value markets and make a margin doing that. So the more barrels -- as our system grows and the more barrels that we touch, it helps us enable that strong marketing result as well.

[Benjamin Pham, analyst]

And maybe just to continue on it a little bit and unpack some of the base guidance, you have butane costs to long-term average, but it looks like you've -- you're only slightly benefiting from that this year from your disclosures. And then, WTI at $65 to $75, WTI is a little bit above that. So is it other -- I guess what I'm trying to get at is there must be really something else that's really driving just such a huge uplift in Marketing. Is it the premiums in iso-octane that -- is it different from the base? Is it condensate, propane exports? It's just such a pretty [ meaningful ] difference from the base.

[C. Setoguchi, executive]

Yes, you're absolutely right. The octane premiums are very strong. So that's not something that is published like RBOB and not tradable, so it's more negotiated. But if you go to the gas pumps and you see the difference between 89 to a 91 octane spec, you can just look at the -- how much extra you have to pay for each point of octane, which is pretty high right now. So that's a good indicator of where our premiums are, and they are very high, certainly at the top end of what we've seen over the last 5 to 7 years. So that's been a big boost. But again, as the volumes in the basin grows, we're a supply-based basin, and those barrels have to clear somewhere. So because of our system and our logistics capabilities, we're able to capitalize on that service of finding markets for those NGLs. So that's also been a big driver as well.

[Benjamin Pham, analyst]

Okay. Got it. And maybe can you update us on your hydrogen opportunity with the federal government recently confirming commitment or strategy there and support, and maybe talk about progress of late, how do you plan to fund maybe a potentially larger project? And do you think it's going to be more of a demand-driven market or more of an export market?

[C. Setoguchi, executive]

Well, what we see a pretty big opportunity for -- the potential for at least is ammonia. And there are several industrial players in the industrial heartland that are sort of advancing some projects. I would say that still relatively early days on that. But there seems to be demand in Asia, especially in Japan, because they do want to lower their emissions footprint with some of their coal production. So some of the things that we're looking at is a rail -- a [ unit-train ] rail terminal, and we're working on that with CN Rail. We do have a very large tract of undeveloped land, 1,300 acres of land, that's industrial-zoned and very, very well connected from a pipeline perspective, very close to [ time to ] do carbon sequestration, so a carbon delivery line. So we're trying to work with industrial players in the area, plus also work with potential companies to develop on our own lands opportunities like ammonia or other products. But I'd still say it's still very early stages, and a lot of it is going to be driven by government policy.

[Operator]

Next question will be from Cole Pereira at Stifel.

[Cole Pereira, analyst]

As we think about the 2024 CapEx plan, you gave some good color on capital priorities. I realize some of your growth CapEx is contingent on FID-ing these projects, but could that get flexed higher depending on when and if you FID those projects? Or is it pretty locked in for this year, regardless of timing?

[C. Setoguchi, executive]

Yes, Eileen, you want to speak to that?

[Eileen Marikar, executive]

Yes. I would say that assuming we can get those other projects that we talked about, Zone 4 or frac to bottleneck, et cetera, that is built into that $80 million to $100 million. And I feel pretty good that it wouldn't go higher than that for 2024.

[C. Setoguchi, executive]

A lot of the capital associated with those projects would be in future years like 2025 and 2026. So if we continue to advance, that's already factored into the numbers, as Eileen said.

[Cole Pereira, analyst]

Okay. Great. That's good color. And then, thinking about some of the volume headwinds in the South region, should we essentially just think about those recovering in line with natural gas prices?

[C. Setoguchi, executive]

Yes, that's a very good point. And I think people sometimes get fixated too much on the spot price of natural gas at this second. When you look at the broader fundamentals and what's happening with coastal gasoline coming into service, more intra-Alberta demand, coal to gas switching and more capacity into the U.S., we think that this is a temporary situation. The demand for LNG continues to grow globally. So we certainly believe once we get past the next couple of quarters that we're going to see better days for natural gas. But maybe just specifically on what we see in activity, I can turn that over to Jamie.

[K. Urquhart, executive]

Yes. So, Cole, yes, it's a great question and good observation is that we have seen some shut-ins in the South in particular. Dean has identified -- the North is driven around condensate. So we've seen nothing but growth, and people putting money into the drill bit. But there's some really exciting stuff going on in our South assets as well. And I'm sure everybody has seen a couple of recent announcements, which are very exciting around the Duvernay in the South behind our Rimbey gas plant. And just -- it's maybe not as -- from a granularity perspective, but those Duvernay plays are very high in ethane and natural gas liquids. And to remind everybody, our Rimbey gas plant has a de-ethanizer and a pipeline connection to [indiscernible] and we have a deep cut at that facility. So as we see the evolution of that play, we look at Rimbey, and it's just naturally suited to be the landing spot for that -- the associated gas with that play. But that play is driven off of liquids. It's a light oil or a heavy condensate play that, similar to the North, will be driven off of WTI pricing. And we look to -- as we're talking to those producers, we'll be looking to put some term and some take-or-pay provisions on those contracts, obviously, as we look at Rimbey being -- and the frac at Rimbey being really a highly demand-driven sort of offering.And then around Strachan, we're seeing a lot of development in the Deep Basin as well. And those plays are very high liquids-rich as well. And remind you that we have a deep cut at the Strachan gas plant as well. So I look at the South having a very meaningful role to play in NGL growth within our organization, and ultimately, the connectivity that we have up to either the Rimbey frac, which is a 28,000 barrel a day frac, which is full, or then seeing some gas getting -- or NGLs getting ultimately forced up through our Rimbey pipeline and up to KFS.

[C. Setoguchi, executive]

And maybe just to add to Jamie's comments, at Rimbey, in particular, we have a lot of unutilized capacity. So that's a 400 million a day facility, turbo expander facility. And right now, it's only running at about half of capacity. So we think this is a tremendous opportunity for us.

[Operator]

[Operator Instructions] Next is Linda Ezergailis at TD Cowen.

[Linda Ezergailis, analyst]

Recognizing that cash tax planning is complicated at the best of times, I'm wondering if you could help us understand kind of the rate at which you might be able to draw down your $3.3 billion of tax pools and also how potentially additional acquisitions might contribute to bolstering your cash tax outlook?

[C. Setoguchi, executive]

Yes. Great question, Linda, and I'll turn that over to Eileen in just a minute, but as she said earlier, this is a product of having very strong results. When we generate a lot of money, fortunately, we have to pay more taxes over time. But I do want to just say maybe a comment on M&A is that we do see that there is potential opportunities out there, but we'll be very disciplined, and it will be driven by -- it's got to be on strategy. It has to be within our financial framework in terms of managing our balance sheet, and it's got to be value-accretive to our shareholders. So, I know you know this already, but we'd never do anything just for taxes, but that could be an added benefit, I guess, if we're able to find something that fits within that criteria. But, Eileen, I'll turn it over to you.

[Eileen Marikar, executive]

Sure. Excellent question, Linda. I wish there were a magic [ bullet ] for the taxes. But as Dean said, whenever we -- we do have pools, but it depends on the type of pool, so things like pipelines. They have much lower CCA deduction rates, especially like a condensate pipeline. Things like G&P facilities or frac; those have very, very good tax pools. They're more at the 25% rate. So those are the types of things that can certainly help to manage the taxes going forward. And to Dean's point, I just want to reiterate, again, whatever we do, project or acquisition, needs to be strategic and then fit within our financial framework.

[Linda Ezergailis, analyst]

Okay. Maybe this is a follow-up question for Dean. Now that you own a significant strategic pipe at KAPS, can you comment on your interest in further integrating value chain by potentially looking at buying pipes in the future optimistically, whether it be an interest in Trans Mountain or something else? And also, kind of what might prompt consideration of a significant -- another greenfield build of whatever product type?

[C. Setoguchi, executive]

Thanks for the questions, Linda. What I think that -- first of all, what our goal is, we want to provide the best value-added service for our customer. So, you know what, when we see opportunities, we're always trying to make our system better, so we can offer that -- the most competitive service. And that's going to create opportunities now that we have integrated systems. So I could see us potentially building more gas plants in the future, and it could be greenfield or it could be expansions of our existing sites that we have. Certainly, on the frac side of it or more -- when we add more storage, we'll have to likely build that. I'm not sure that there'd be a lot of opportunities to buy anything there. But -- so, that will be more of a brownfield type expansion. We also like trying to expand our system on the downstream side to access end markets. So, if there is a requirement to maybe build a pipeline to the oilsands for solvent or things like that, we would be certainly interested in it. Big projects like TMX, that doesn't really have a lot of synergies with our existing business. So, that wouldn't have a lot of appeal to us. So to sum it all up, it has to be really on strategy. It has to really make our system better and our ability to have a better value proposition for our customers. And so, we're not specifically targeting pipes, but certainly, there could be some opportunities where some pipes would make some sense with our system.

[Operator]

And at this time, we have no other questions registered. Please proceed.

[Calvin Locke, executive]

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

[Operator]

Thank you, sir. 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.