Intrepid Potash, Inc. (IPI) Q4 2019 Earnings Report, Transcript and Summary

Welcome to the Intrepid Potash Inc. Fourth Quarter and Year-End 2019 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to John Richardson, Investor Relations. Please go ahead.

Thanks, Arial. Good morning everyone. This is John Richardson, Intrepid's Director of Investor Relations. Thanks for joining us to discuss Intrepid's fourth quarter results for the period ended December 31, 2019. With me today is Intrepid's Co-Founder, Executive Chairman, President and CEO; Bob Jornayvaz; and Intrepid's Vice President of Finance; Matt Preston. Also available to answer questions during the Q&A secession following our prepared remarks will be our Chief Operating Officer; Brian Stone, and our Vice President of Sales and Marketing; Mark McDonald. Please be advised that our remarks today, including answers to your questions include forward-looking statements as defined by this U.S. Securities Laws. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. These statements are based on the information available to us today, and we assume no obligation to update them. Those risks and uncertainties are described in our periodic reports filed with the Securities and Exchange Commission, which are incorporated by reference. During today's call, we will refer to certain non-GAAP financial operational measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in last night's press release. Our SEC filings and press releases are available on our website at intrepidpotash.com. Following the prepared remarks, we'll open the call to your questions. Now, I'll turn the call over to Bob.

Thank you, John. Good morning, everyone and thank you for joining us. I first want to take this opportunity to thank Lanny Martin from the entire Intrepid family, for his 15 years of partnership and service on our Board. We wish him well in his retirement and hope to visit him, on the sunny golf courses of Arizona. We truly thank you. We executed well again last quarter, with a year-over-year increase in water sales from our oilfield solution segment, and improving cash costs for Intrepid South and Pecos water. The fourth quarter results demonstrate a more stable cash flow profile than would have been possible prior to development of our oilfield solutions segment. Our ability to quickly pivot and create additional value, from a relatively small capital investment is a key differentiator and I'm proud of the agility, our team has demonstrated. The oilfield solution business continues to grow as we had anticipated with fourth quarter water revenue, increasing 58% from the same period last year. Total revenue for the segment increased 86% from the fourth quarter of 2018, thanks to contributions from other products and services offered within the segment. For our E&P customers, completion activity consumes more than 60% of capital invested in an oil and gas well. In an effort to remain within their guided 2019 capital budgets, we saw a fourth quarter completion activity and the associated water consumption, slow across all shale basins in the United States. If you follow the large pressure pumping service providers in the U.S. and listen to their fourth quarter calls, you would have heard them talk about this reduction in completion activity at the end of the year. However, since the end of the year, we have seen net completion activity begin to bounce back in the Northern Delaware Basin, as capital budgets have been reset. We expect to have the majority of our infrastructure upgrade projects on Intrepid South finished by mid-year, which will enable us to more efficiently serve our customers and should lead to improving gross margins, throughout the year for oilfield solutions. We've already seen up to 20% decrease in the cost of moving water, for our lowest margin jobs on the South Ranch and have recently commissioned another 10 pound brine station on the property, which we expect to be well received given the popularity of our 10 pound brine station, at Intrepid's HB facility. Looking ahead to 2020, we have a full order book for water at our South Ranch and are optimizing that book by actively moving lower margin sales to our CapRock water rights, where we have excess water and have the ability to service, through our partnership with Select Energy. We continue to expect full year water sales between $32 million and $45 million and we're pleased with the anticipated contributions, from our recently acquired Dinwiddie Ranch assets, now referred to as Intrepid South. The growth in oilfield solutions in the fourth quarter, partially offset a slowdown in domestic potash sales and lower netbacks for Trio, compared to the prior year. For our Potash segment, we experienced softer sales and lower gross margin in the quarter, which is driven by poor weather for fall applications and customers choosing to delay potash purchases, in anticipation of a winter fill program. Potash sales volumes decreased by 12% year-over-year in 2019, while volumes in the fourth quarter of 2019 decreased by 39% versus the fourth quarter of 2018. The fourth quarter comparison is difficult and that an October 2018 fill program, lifted demand in that quarter and there was no corresponding fill program announced in the fourth quarter of 2019. Potash netbacks in the fourth quarter improve both year-over-year and sequentially, because of our focus on marketing segment diversity, allowing us to increase our mix of sales in the higher priced feed in industrial markets, to replace lower demand in the Ag market. Full year 2019 netbacks improved 11% compared to the full year 2018. Despite production curtailments of approximately 4 million tons by our competitors in the second half of 2019, significant inventories of potash remained in early 2020. In response to these inventories, our competitors announced a winter fill program in January of 2020, reducing potash prices by $25 per ton. Intrepid took advantage of this opportunity as well, and offered potash to our agricultural customers with good results at similar values. Immediately, after the subscription window closed, prices have moved back up $20, so we've managed our order book very well, allowing us to transact current orders at that increased value. Trio sales volume increased 20% in the quarter versus the prior year, primarily due to rising export volumes. However, these volumes represented lower gross margins for the segment. For the full year, Trio sales volumes were relatively unchanged when compared to 2018, while sales in the quarter were supported by strong exports to Southeast Asia, which offset lower volumes domestically. We expect Trio sales volumes to follow normal, seasonal patterns in the first-half of 2020, and we've seen strong domestic subscription for our Trio products in the first quarter of 2020, which will carry into the second quarter. Trio netbacks in the fourth quarter of 2019, turned it down compared to the third quarter, because of a higher proportion of export sales volumes. In addition, for both Potash and Trio, our commitment to diversifying our sales portfolio has produced continue improvement in byproduct sales, which were up $2.5 million, 42% or compared with the fourth quarter of last year. Before wrapping up, I'd like to remind everyone on the call today of the meaningful, strategic moves, we executed in 2019. The expansion of our oilfield solution segment throughout 2019 is paying off by reducing the volatility of our cash flows. Intrepid is well positioned geographically, to provide necessary midstream services to producers in one of the most prolific and cost effective oil and gas basins, in the United States. Although, Potash and Trio continue to be core assets, this diversity in a revenue stream enhances the value of Intrepid. Although 2019, had its challenges with political turmoil and unfavorable weather patterns, our strong balance sheet and diverse revenue streams, allowed us to manage through a soft patch in both fertilizer and oilfield services, in great shape. We've begun the New Year on solid footing Potash and Trio sales, exhibiting resilience early in the year, and we're cautiously optimistic about the rest of 2020. Given the recent strength in commodities like sugar, rice, cocoa, and palm oil, we're hopeful that corn and soybeans won't be far behind. Following three consecutive suboptimal application seasons, farmers are indicating a strong desire to replenish soil nutrients during the spring of 2020. This combined with expectations of substantial acreage dedications for both corn and soybean planting in North America, should produce tailwinds for potash sales into the agricultural markets. Finally, our outfield solution segment will continue to develop, as we complete the infrastructure upgrades and expansions to our freshwater infrastructure, discussed on last quarter's call. We're also excited about the startup of our produced water disposal partnership with NGL Energy Partners, which is expected to commence operations around the midyear of 2020. Significant progress has been made with respect to the build-out of these facilities, and there's strong demand for water disposal services in the Northern Delaware Basin, for the foreseeable future. NGL has been a stellar partner and has done a great job in securing long-term commitments for our new facilities. We're enthusiastic about the growth of this partnership, and the growth that it will provide. I'll now turn the call over to Matt, who will discuss our financial results.

Thank you, Bob. Good morning, everyone, and thanks for joining. Full year sales improved by 6% compared to the prior year, driven by our oilfield solutions segment. Fourth quarter sales declined by 10%, due to lower potash and domestic Trio sales volumes as customers delayed purchases in anticipation of a winter fill program. The majority of domestic Trio sales in the quarter was carryover from the third quarter, while total Trio segments sales was influenced by export volumes that pushed the average net realized price for Trio lower. Increased sales from the oilfield solution segment helped to offset lower nutrient sales during the quarter. Gross margin in oilfield solutions improved 28% in the fourth quarter and 12% for the full year, when compared to prior year periods. Our combined nutrient segments experienced a decline in gross margin of 49% in the fourth quarter compared to the prior year, due to reduced domestic sales volumes, but an improvement of 15% for the full year 2019, compared to 2018. Net income for the fourth quarter was $2.1 million or $0.02 per diluted share, and $13.6 million or $0.10 per diluted share for the full year. Moving to our Potash segment, our fourth quarter gross margin was impacted by lower sales volume in anticipation of the fill program, that was announced in January 2020. Full year sales were further impacted by poor weather in North America, that reduced application rates and limited our byproduct production and sale of magnesium chloride. Potash production decreased 4% and 5% in the fourth quarter and full year 2019 respectively, compared to the same periods in 2018, due to increased salt production at the Moab facility, and timing of harvest from our solar plants. Our Trio segment fourth quarter gross margin decreased $0.7 million compared to 2018, due to reduced domestic demand. However, the decline was partially offset by increased byproduct water sales. For the full year Trio gross margins benefited from higher domestic pricing earlier in the year, as well as an increase in byproduct water sales throughout 2019. Similar to potash, our full year domestic Trio sales were impacted by wet weather that reduced spring 2019 nutrient application. However, this was offset by increased byproduct sales and export sales in the fourth quarter. For our oilfield solution segment, the addition of Intrepid South water rights and other products and services contributed to the 85% growth in sales for the quarter, and 60% growth for the full year. When compared to prior periods, margins were impacted by third party water transfer on Intrepid South and some startup expenses, that should have less of an impact over time. 2019 results also had more water sales classified as byproduct water, which are recorded in either the Trio or Potash segment, instead of oilfield solutions. Turning to liquidity. We ended the year with $20.6 million in cash, and $54.2 million available to borrow, under the $75 million cash flow revolver. We continue to manage our balance sheet conservatively through this down cycle in fertilizer and feel that our net-debt-to-EBITDA, a less than one times at yearend 2019 gives us considerable flexibility, as we work through a lower than normal cash flow first quarter, due to the slow sales from Q4. We remain in a comfortable position to pay down the $20 million of senior notes that come due in April. Cash provided by operations for the full year was $49 million and cash spent on investing activities was $81 million, primarily due to the Intrepid South acquisition in May. Capital investment excluding acquisitions for 2019 was $25 million, which includes opportunity capital investment related to our newly acquired assets. We expect to spend between $25 million and $35 million in capital in 2020, with $10 million to $15 million for sustaining capital items, and the remainder for opportunity capital across our three business segments. That concludes our prepared remarks, operator, and we're ready to take questions.

Thank you. We will now begin the question-and-answer session. [Operator instructions] Our first question comes from Vincent Andrews of Morgan Stanley.

Hi, this is Jeremy Roseburg on for Vincent. Thanks for taking my questions. I want to start out on the winter fell program. Just wondering, just to follow-up on that if you could just comment on and at this point, where your potash inventory levels are, and just kind of how comfortable you are in terms of inventory?

You mean in terms of being able to meet the demand for the spring, or do we have too much inventory?

The latter, whether you have too much?

Matt, I'll let you.

I think we're in a very comfortable spot as far as our inventories. We're certainly seeing great subscription here under the winter fell program, and we're holding some back to maybe see some higher prices here in the second quarter. And we've already started to see some spot sales at the $20 up. I'll let mark add on anything else to that?

No, I think, to reiterate the comments, we had good subscription in January, February, on the sales, I think as Matt commented, and Bob in his prepared remarks mentioned that we're well prepared. Our book is in good shape to take care of some of the spot business and we're transacting at currently with some new business opportunities.

Okay, got it. And then just in terms of potash pricing, I know you mentioned a comment that netbacks were better in the quarter just because of the kind of the mix was better in feed and industrial. And I'm wondering for 2020, maybe just kind of talk about that mix and just the mix between the Ag tons and the industrial and feed tons? And just how we should be thinking about potash pricing for you in 2020?

Well, once again, in 2019, we had a net realized price advantage of approximately 35% of our Canadian competitors. And so, as we continue to diversify our potash into more specialized markets, we hope to continue to capture those premium prices. As to the Ag markets, that's really a function of what our Canadian competitors and Russian competitors decide to do. There's no question, we're going to see a strong demand season in the spring, and there's great opportunities for substantial potash applications. It's a function of what we see from our much larger competitors, in terms of where they choose to take their price given the demand, and the pricing that we're seeing in a variety of commodities that tend to be the leading indicators. So, when we look at the price of sugar, we look at rice, we look at cocoa, we look at a lot of other commodities that people don't pay as much of attention to here in North America, we're seeing strong recoveries, and a lot of those commodities which are generally leading indicators. And so we hope to see corn and soybeans rebound as well. We're clearly going to see big applications go down this spring. And it really is a function of how our larger competitors choose to treat this opportunity in the marketplace.

Okay, got it. And then just one last one. Just thinking of sticking on potash, just thinking about volumes, obviously, 2019 was impacted by the weather. But if we're thinking about 2020 volumes, can we -- do you think we could get back to that 2018 level of about 364,000 tons or just any thoughts there on volumes? Thank you.

There's no question that if we have normal application season, so if we just have normal weather, we have every opportunity to sell out of our potash. So, it really is a function. If we have two normal application seasons, then we just don't see any issues with selling out. But, if you look at the '19 application season, the weather just couldn't have been any worse.

Yes. I'll just add on a little bit today. We always have a difficult time forecasting full year sales. This, when you can see the fourth quarter swing by roughly 30,000 to 40,000 tons, depending on what happens. So, I completely agree with Bob's comments, we'll just have to wait and see, but if average evaporation and normal application season, there's no reason we can't be at similar spots.

All right, I got it. Thanks guys.

Our next question comes from Mark Connelly of Stephens Inc.

Thanks. We had talked a quarter or two ago about the rain issues that affected Wendover. And you had said that the availability would be pretty good by Q4. Again, but you also said that overall pond inventories were going to be below normal. So, it sounds like you're all set for the spring. How does this play out across the second-half of the year? And is just Wendover pulled down your overall availability or are your other facilities able to offset that?

I think, as far as overall pond inventories, we've certainly already seen the impact of a bad weather season on the potash side. On the mag-chloride side, as we talked about in Q3, we did hold back some magnesium chloride to sell into our best markets, which is our DIC market. But, as I said before, the impact has already happened. I think with the normal evap season we should be right back to normal the second-half of 2020, on both potash and magnesium chloride.

Okay, that's helpful. Was there any significant impact that we should be thinking about in terms of cost of production?

I think, you're already seeing that come through in our results today. Lower pond inventories is certainly going to increase the per ton cost out of Wendover. But you saw that in Q3 somewhat, and certainly in Q4 already.

Right. Okay, perfect. Just one last question. In that CapEx guidance, are there any notable K and Trio investments?

Sure. I mean, we always have some small opportunity project kind of bite size, recovery improvement projects, process flow improvement projects at our Potash and Trio facilities. But nothing that jumps out being…

Nothing in the millions of dollars.

Yes, nothing in the $5 million or $10 million range. It's kind of bite size opportunity capital there on the Potash and Trio segments.

Perfect. Thank you very much.

Our next question comes from John Roberts of UBS.

Thank you. You mentioned that customer capital budgets in the Delaware basin had been reset at the start of the year. Do you do any CapEx surveys of your customers or anything that gives you some insights into their capital spending for 2020 versus 2019?

Yes. We meet with them every week. So, in terms of contacting our customers, we're circling with them literally every week going through frac schedules. And the reason is because, in order to deliver the water to the individual fracs, we've got to be totally in line with what their frac schedules look like. And so, the answer to the question is an outstanding, yes. And that we're talking to them virtually every single week. I want to introduce Brian Stone, our new Chief Operating Officer. Brian, I don't know if you want to add to that.

No, I'd just echo what Bob said. We have regular meetings with producers. These are high quality producers. We're very involved in their frac schedules. And it's important because we have to be able to deliver frac rate freshwater to them.

Last year, you were able to provide some guidance on 2019 water sales expectations. Do you have any similar guidance for 2020?

We said that $32 million to $45 million in water sales for 2020, on our last call, and we just reiterated that for this call.

Thank you.

Our next question comes from Joel Jackson of BMO Capital Markets.

Hi, this is Robin on for Joel. Thanks for taking my questions. My first is on Trio. I'm just wondering if Trio prices don't improve from Q4 levels, what are the mix impacts from lower expected international sales and for 2020?

Well, we’ve pretty much backed away from most international sales. We had a very solid sale that we've been working on for a relationship in Africa that's going very well. We've pretty much backed out of the Central and South American markets, so that, we don't have to compete with Chinese keys right? And so, we've backed out of those lower netback markets and have really focused our activities on the domestic markets, and a very limited international markets that give us the best netback opportunity. So, I don't know if that gives you enough color. We're happy to answer it a little more if you'd like.

Well, I guess, if looking at Q4 Trio pricing and a breakeven gross margin level, I mean, the prices were to stay the same, assuming that mix benefit. I guess, is it fair to assume that Trio gross margin could shift back to positive territory in 2020?

Very easily, I mean, there's a $10 price increase announced as of April 1. So, we have every expectation of seeing the price continue -- the fill program that came out, took it down, a touch or not -- held it steady and then it's got a price bump happening in April. And so, we have every expectation of that if not a little bit more so.

Okay, great. Shifting to oilfield solutions, how are some of the other system enhancements progressing like pump automation? And after the new pipeline is completed in Intrepid South, I believe you said by midyear, how do you see oilfields solution segment margins progressing across the year from these benefits?

Well, the margin should increase substantially as you put in that infrastructure to service, customers throughout the Ranch as well as customers off the Ranch. So we've now made the connections and we’ll be coming out with maps pretty quickly, now that Select has completed their JERA pipeline and their JERA 3 pit, which is just on the very north side of our NGL AMI. And the pipeline capacity that's now been built out throughout the entire NGL AMI area, and allows us to now reach outside that AMI, and just off the ranch, as well as the first disposal well, that's not been drilled and completed with NGL within that partnership, and the pipelines that have built to handle the produced water, the long-term commitments that NGL has successfully negotiated to begin to supply that. So we see the disposal facilities, the pipelines, the wells that are already drilled, kick-in from a revenue standpoint, hopefully in June of this year.

Thank you.

Our next question comes from DeForest Hinman of Walthausen & Co.

Hi, thanks for taking my questions. Just bouncing around a little bit on the balance sheet. You gave some commentary on lower than expected or lower than normal first quarter '20 operating cash flow. You have a debt payment in April. Can you just help understand the mechanics of that? Do we have an ability to use credit facility to fund that build payment if necessary?

We absolutely do, but we have the cash in the bank to pay it. So, we just don't see any issues regarding liquidity. We're obviously always working on other transactions that Intrepid South provides us. I think you're going to see over the course of time, more and diverse revenues that come out of the combination of the Intrepid South and the NGL partnership that exists down there, and its connection to the Select Energy pipeline. So we're just not concerned, the lower first quarter cash flows are going to be a result of the fourth quarter decrease in potash sales, but we feel we've got other levers to pull to hopefully make up for it. That's the beauty of the diversification program we've been working on.

Okay. And you spent some time talking about the water sales opportunity, similar to what we had spoken about on the third quarter call. Can you give us some more color understanding of the margins expectations within the water sales, and then even touch on the margin expectations within oilfield services. You know, when those revenues initially came online, they're very high incremental margins and we've had good contribution on a dollar basis, but we haven't had levels anywhere near where they were in the past.

Well, what you've seen is the progression of higher volume sales from different locations. So when we started our first water sales from our CapRock water that had existing infrastructure in place and no basis in that, that was 95% margin. As we moved over to the Pecos river, and we built substantial holding ponds and infrastructure to service the water on the Pecos water rights, our margins went down, but we still had good margins on the Pecos. And then as we bought the Intrepid South Ranch that really needed, almost a total revamp in the infrastructure, those first six to nine months of margins brought the entire margin structure down. But, as we've said repeatedly, as we continue to build those up, we've already seen a decrease in our cost and an increase in our margin. So the reason that you saw it was we started with CapRock sales, that had existing infrastructure and no basis that delivered you extremely high margins, you then saw the addition of additional water sales from Pecos, and then finally saw the addition of water sales from Intrepid south, that all have different margin regimes and cost structures. So, as the infrastructure for each of those facilities continues to get built out, you'll see operating cost go down and margins increase.

And do you have anything you want to share in terms of what the full year gross margin expectation is?

Not right now. I think we'll continue to update as we said in our prepared remarks. Those costs went down 20% and continue to go down. I don't know how to better explain -- I know you're looking for an exact number as to our entire water sales, because they're coming from three different places, with three different bases, in terms of our cost structure, giving a combined margin answer, I know makes it hard to model us as a company. But, I'm trying to give you the color as to why each of those geographic areas deliver a different margin.

Okay. Maybe a different way. Can you help us understand that some expectations around operating cash flow generation or free cash flow generation? You did give us your CapEx outlook.

Yes. We certainly see a strong 2020, I mean, certainly the increase in water sales to $32 million to $45 million and in revenue, a lot of that will fall straight to our operating cash flow. And then we'll kind of do a wait and see on potash like we said on our prepared remarks, we're cautiously optimistic about 2020. It feels like we're coming out of a bottom of the fertilizer cycle here and seeing some good early indications, as far as capturing some increased price on potash and then hopefully in the Trio side. And those things certainly point to a strong 2020 and cash flow generation.

Okay. And then in terms of …

Go ahead.

No, please finish.

I was just going to say on maintenance CapEx we're in the $10 million to $12 million range. On opportunity capital, we've got the ability to ramp it up or slow it down, depending upon how we're seeing the oilfield market move forward. The great thing about the produced water piece is we don't build the infrastructure without the water commitment. And so, NGL as I said in my prepared remarks has done a great job for the first pieces getting tenure commitments for those assets, that we're building out. So the good news is the commitment comes first and then we spend the capital. So it's working extremely well and we're just very proud of that partnership and that large AMI with NGL.

Okay. And last set of questions. Can you give us any color in terms of the legal item with the Pecos water, arbitration or whatever we're going to call it. And then any update on the Mosaic litigation?

I'd say on the Pecos water, we've got a court date set for August in the adjudication court. I think that there's been a lot of noise from some of the opposing attorneys trying to continually run around and change venues, but we've got a very defined date in August court date. And we feel very, very confident in our legal position as to our water rights. I don't see any threat to losing our water rights. As to the Mosaic issue, I really don't have any comment other than -- we just don't believe it has any merit. So I'll leave it at that.

Okay, thank you.

Our next question comes from Jason Ursaner of Bumbershoot Holding Holdings.

Good morning. I guess a little bit following-up on some of DeForests' questions there. The Select Energy indicated that their New Mexico pipeline came out late in Q4. Could you talk at all about what you guys saw in the quarter versus what might be a slow run rate and based on some of their commentary around 50% average utilization of the year? What expectations do you guys have for next year that's built into the full year guidance on water sales?

Well, the good news is we're working extremely well with Select. If you were to look at a land map in terms of where the JERA pipeline stops, and their pit 3 stops, and where NGL AMI stops, so where their pipeline stops going south and where AMI stops going north, there's an area in between that we have the ability to service and hopefully, add incremental capacity into the JERA pipeline from our CapRock water. And so we're working with a majority or with several operators that are sort of in that in between area, so that we can help Select ramp up the utilization of that pipeline. There's good strong water demand. As we said, we've got a sold out book down at Intrepid South. And so, to whatever degree, we can supply water using the Select pipeline coming north and add to their incremental utilization. We're now seeing those synergies begin to develop. So, I think we're all cautiously optimistic that given our ability to service, water, basically at the state line going up to JERA, and their ability to service coming down from the northern part of the Delaware to that boundary, if you will. We're working well with Select to try to get maximum utilization of all the assets.

Okay. I guess just maybe asking it differently. I looked at 50% utilization on 150,000 barrel capacity and kind of take some of the average rates you guys have put out there from the water story line deck. Are you predicting growth outside of that in the full-year guidance? Is that -- versus the 25.7 you did in 2019, I mean, that contract alone is kind of applying similar value to the large contracts you have which would kind of be the full growth that’s in your guidance?

I don't want to step on Select's guidance that they've given, those are their numbers. I would just state very emphatically, that we're working hard to provide them with incremental opportunities. However, they're choosing to report their numbers is how they believe them to be. And I just can't stress that we're working hard to provide them with incremental opportunities that exist out there in the marketplace.

And then just the past two years, EBITDA has been around $50 million each of the past 10 years, free cash flow [Indiscernible] I guess, in that $75 million to $80 million range which would be cash converting 75% to 80%. It hasn't been a crazy environment, especially when we talk about some of the tailwinds that you're seeing in MOP, some of the secular growth you're talking about in oilfield services. So, obviously, I understand there are elements that are out of your control. But when you look over the next three years or five years, I mean and even with some of the opportunity capital, that you're talking about, you're still looking at excess free cash flow of $100 million $200 million whatever number that is above and beyond any sustaining capital needs. So if you're kind of sitting here right now with the enterprise value of around $300 million. Could you talk at all just the long-term capital allocation plans? It just seems like you're saying...

Well, as we stated repeatedly, we don't see any significant acquisitions on the horizon. We've got the opportunity for great bite size organic growth down at Intrepid. When you combine the entirety of the water assets, the water infrastructure there's a lot of very small bite size organic growth that adds significant margin opportunities. So you're just not going to see us run off and buy something, but you're going to see the Dinwiddie acquisition, which we bought it at a five times cash flow is going to easily do better than that. The opportunities that continue to come up quarterly just from our relationships that we've built down there and what's happening, you're just going to see the Intrepid South, provide more and more cash flow opportunities to Intrepid given that footprint. And its location, it's just got an incredible location.

So for the time being, I mean, when you just anticipate cash flow adding to cash on the balance sheet, how are you thinking about, I guess either paying down debt or buybacks or anything like that?

Well, right now, until we come out of this period of volatility and not only corn, soybeans, crude prices, stock market, et cetera, we'd rather focus on our balance sheet to make sure we have a strong balance sheet to get through some of these, I would call them black swan occurrences, until we can continue to build up our cash flow in a much more diversified fashion, so that we have a firmer foundation. I'll just stress that we believe 2020 is going to be better than 2019. And look at all the headwinds that we faced coming out of 2019 in terms of major volatility and all the commodity markets that we serve, so the diversification is clearly paid off and giving us a firm foundation of cash flow. Had we not done it and relied solely on potash and Trio, I think we'd be in much worse shape.

Okay. Awesome. Thanks.

This concludes the question-and-answer session. I would like to turn the conference back over to Bob Jornayvaz, for any closing remarks.

I just want to thank everyone for their time and interest in Intrepid. We really appreciate it, and we look forward to speaking with everybody in the near future. Thank you again.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.