NGL Energy Partners LP (NGL) Q1 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the First Quarter 2019 NGL Energy Partners LP Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host for today’s conference Trey Karlovich, Chief Executive Officer. Sir, you may begin.

I have not been promoted, I’m still the Chief Financial. Thank you for joining us this morning and welcome. This conference call includes forward-looking statements and information. Words such as anticipate, project, expect, plan, goal, forecast, intend, could, believe, may, and similar expressions and statements are intended to identify forward-looking statements. While NGL Energy Partners believes that its expectations are based on reasonable assumptions, there can be no assurance that such expectations will prove to be correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations included in the forward-looking statements. These factors include prices and market demand for natural gas, natural gas liquids, refined products and crude oil, level of production of crude oil, natural gas liquids and natural gas; the effect of weather conditions and demand for oil, natural gas and natural gas liquids; and the ability to successfully identify and consummate growth opportunities and strategic acquisitions at costs that are accretive to financial results and to successfully integrate and operate assets and businesses that are built or acquired. Other factors that could impact these forward-looking statements are described in risk factors in the partnerships annual report on Form 10-K, quarterly reports on Form 10-Q and other public filings and press releases. NGL Energy Partners undertakes no obligation to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. This conference call also includes certain non-GAAP measures, namely EBITDA, adjusted EBITDA and distributable cash flow, which management believes are useful in evaluating our financial results. Please see the partnership’s earnings releases, investor presentations and annual and quarterly reports on Form 10-K and Form 10-Q on our website at www.nglenergypartners.com under the Investor Relations tab for more information on our use of non-GAAP measures as well as reconciliations of differences between any non-GAAP measures discussed on this conference call to the most directly comparable GAAP financial measures. I will now turn the call over to our CEO, Mr. Mike Krimbill. Mike?

Good morning. During the previous earnings call, we discussed NGL’s transition in strategic direction. First, moving away from pipelines of business to a less complex and less seasonal MLP, we accomplished that in July as we sold our remaining Retail Propane business for $900 million. Second, we work to focus on our two growth businesses: Water Solutions and Crude Oil Logistics. In this fiscal quarter, they accounted for approximately 80% of our EBITDA; EBITDA, which more than doubled over the same quarter a year ago. We are beginning to replace the Retail Propane EBITDA we sold with five acquisitions in the Water Solutions space during the quarter at a cost of approximately $126 million. All of these assets are located in the Delaware Basin and are currently being integrated into our water pipeline system. There are several more opportunities in the Water Solutions space that we are currently reviewing. There are evolving strategic initiatives within the space that we will discuss on subsequent earnings calls, if successful. With respect to our Crude Oil Logistics business, we are seeing improvement in the DJ Basin as additional gas processing capacity becomes available and our marketing and transportation margins are improving across the basins in which we operate as well. So in conclusion, we believe this will be the first of many quarters in which we exceed the prior year’s performance. And frankly, this is remarkable considering the recent sale of nearly $90 million of EBITDA. So with that, back to Trey.

All right. Thanks, Mike. As Mike mentioned, we closed the Retail Propane sale to Superior Plus on July 10. So this will be our final quarter to include retail in our financial results. We will recognize a gain of over $400 million in the upcoming quarter related to this sale. We’ve used the proceeds to immediately reduce borrowings on our credit facility. The net debt reduction from this transaction was approximately $875 million after working capital and certain transaction costs, which should be reflected in our 9/30/2018 balance sheet once it is released. Our first quarter results were highlighted by the following: adjusted EBITDA totaled $80 million for the quarter with every segment in line with our guidance and expectations. Water Solutions grew 75% compared to the same period of last year and 20% over the prior quarter. It is now our largest segment, producing over 40% of our total adjusted EBITDA for the quarter. Grand Mesa continues to perform at or above expectations with an average of 112,000 barrels per day for the quarter. The Liquids business is benefited from few released railcars and lower costs, allowing for better margins on both propane and butane and the Refined Products segment performed significantly better in the first quarter last year, increasing adjusted EBITDA by approximately $12 million. As I mentioned, we are right in line with our guidance and expectations for the year. Based on our guidance ranges, we are forecasting the first quarter between $70 million to $82 million. We currently expect adjusted EBITDA to increase between $20 million or $25 million each quarter for the remainder of this fiscal year, driven by the growth in our water business and volumes on Grand Mesa and the normal seasonality in Liquids and Refined Products. Our targeted adjusted EBITDA for this fiscal year remains unchanged at $450 million, and we are confirming our guidance ranges for each segment. We declared a $0.39 per unit, $1.56 per unit annualized distribution for the quarter and our trailing 12-month distribution coverage is now up to approximately one times, as 0.95x to be exact. We plan to rebuild coverage to our targeted 1.3 times coverage or better, at which time we would evaluate the potential distribution increase or other use of the excess cash flow, including funding growth, reducing debt or repurchasing equity. Leverage and interest coverage are improving, and we expect significant improvement in all credit metrics for the upcoming quarter with the debt reduction from the propane sale. Touching on some specifics for each business segment. The crude segment generated approximately $30 million of adjusted EBITDA this quarter with Grand Mesa contributing $45 million gross and approximately $38 million on a net basis. The remainder of the Crude Logistics segment operated at an approximately $8 million loss for the quarter, which continues to include the loss for shipping commitments on third-party pipelines. However, we entered into agreement at the end of the quarter, whereby we have backstopped our commitments on one pipeline, which we expect we’ll save approximately $26 million for the remainder of this fiscal year. This agreement was contemplated when we gave our guidance range for the year. However, the benefits will not start to be recognized until the second quarter. This benefit will be recognized for the remainder of the contract, which runs through March 2020. Financial volumes on Grand Mesa averaged about 112,000 barrels per day for the quarter and physical volumes averaged about 110,000 barrels per day during the quarter. We continue to extract volumes averaged $115,000 barrels per day for the year as we expect to increase production out of the DJ Basin over the next several quarters, and MVCs began to increase as well. While we expect to benefit from higher differentials out of many of the basins, like the Permian and increased utilization of our transportation assets, we are not adjusting our guidance range for crude segment at this time. However, we are currently expect – expecting to be at the higher end of the guidance range for the year. As a reminder, our FY 2019 adjusted EBITDA guidance for this segment is between $145 million to $155 million, which does not assume any significant capital invested in this segment. Water Solutions’ adjusted EBITDA was $39 million for the quarter, which included a realized loss on skim oil hedges of approximately $4.6 million. Water volumes averaged 920,000 barrels per day this quarter with quarter-over-quarter increases in every basin we operate. Skim oil production was approximately 3,600 barrels per day during the quarter with an average crude cut of 0.39%. The crude cut is specifically lower in the spring and summer months, and we continue to expect the crude cut for the year of approximately 0.42%. Now, continuing to layer and hedges, and have hedged approximately 87% of our expected skim oil production at a weighted average price of approximately $56 per barrel through March 2019, which includes our legacy hedges as well. We’ve hedged approximately 2,200 barrels per day for fiscal 2020 at an average price of $57 per barrel. We also now have hedges covering approximately 1,000 barrels running through April through December of 2020 at approximately $61 per barrel. We’ll continue to layer in positions in the outer years to protect our downside exposure on the skim oil. We believe we would capture significant upside to a crude price rally through the expected increase in volumes. We’re exposed to the basin differentials for the sale of our skim oil. However, we would expect to benefit from those differentials in the Crude Logistics segment, another benefit of our diversified business portfolio. We estimate that the Permian differential had about $1 million impact on just our water results for the first quarter. We invested approximately $175 million in our water business during the first quarter, which included approximately $126 million in acquisitions and about $50 million in organic capital. We closed another $46 million in acquisitions in early July. We now have 26 disposal facilities and 42 wells in the Delaware Basin, along with numerous permits and continue to execute on our plan to have many of those facilities pipeline connected over the next year. We continue to expect to generate adjusted EBITDA between $200 million and $225 million in FY 2019 with over 1.25 million barrels per day on the system by the end of this fiscal year. Adjusted EBITDA for our Liquids segment totaled $10 million this quarter. As I mentioned, margins have improved with fewer railcars and lower average railcar lease costs. We’ve also lowered our costs through the reduction in lease storage and increased our railcar utilization percentage during the quarter. Volumes were strong compared to last year, and we continue to grow our presence, servicing producer needs for liquids takeaway and marketing. We’re taking a hard look at optimizing our proprietary terminals and contracting for winter propane. We will continue to provide propane to Superior through this fiscal year and possibly beyond depending on the economic terms. The Liquids team is systematically targeting new customers and growing volumes with existing customers to support its strategic plan. Our fiscal year guidance range for the Liquids business remains $55 million to $70 million. Refined Products reported adjusted EBITDA of $4 million this quarter, which while that sounds like a very small number is a vast improvement over the same period last year. Gasoline volumes and margins were in line or exceeded expectations during the quarter and remain positive at this time. Hedging our gasoline inventory into a backwardated market continues to be a headwind for this segment. However, rack margins are strong and we do expect to benefit as we move through the blending season starting in September. Our blending business is now fully operational with strong logistical positions in the New York Harbor, which allows for full participation in transatlantic flows as well as domestic pipelines, and in Collins, Mississippi, which is the last injection point for Colonial. We have seen strong rack margins for diesel in certain areas, most notably the Permian Basin, where demand continues to remain strong from oilfield activity. Our FY 2019 guidance range for the refined business remains $55 million to $80 million. Our corporate costs were $8.7 million this quarter, which included approximately $1.7 million in legal costs associated with EPA case, which we recently settled. We continue to expect corporate and other to be $25 million to $30 million of expense, which includes a net benefit from the Retail Propane of approximately $5 million from this first quarter. Maintenance CapEx was $12.4 million this quarter and was slightly higher than expected in our water segment, which totaled $7.1 million due to one-time cost associated with the lightning strike and tubing and pump replacements to improve efficiency of certain wells. Approximately, $3.4 million of maintenance CapEx incurred this quarter was related to the Retail Propane business, which we’ve sold. We are currently expecting remaining CapEx for this fiscal year to be between $5 million to $7 million per quarter and those costs will primarily be in the water segment. In summary, this was a very significant quarter for the partnership, as we announced the sale of the Retail Propane business and the transition into a more streamlined and focused entity. We’ll continue to have a diversified portfolio as we believe that is beneficial to manage the changes in commodity price. However, we have executed on numerous transactions to improve our balance sheet, strengthen our cash flow stream and focus on our strongest opportunities. Thank you for your interest in the partnership. And we’ll now open the line for questions.

Thank you. [Operator Instructions]. Your first question comes from TJ Schultz with RBC Capital Markets. Your line is open.

Hey, guys. Good morning. Just first on the water acquisitions. What annualized EBITDA are you expecting from the $126 million in acquisitions? And what impact did those deals have on 1Q?

Hey, TJ. So, those deals are all completed towards the latter part of the first quarter. Obviously, we had our last earnings call on the 30th of May. We completed those acquisitions post that earnings call. So there was very minimal impact for the first quarter. Annualized EBITDA is expected to be about five times, which is about $30 million. So that’s how we’re thinking about it from an annualized perspective. Obviously, no impact during the first quarter. So we are expecting three quarters of that impact for the rest of this fiscal year.

Okay. And then the $15 million in organic growth CapEx in 1Q, can you just expand on some of those organic initiatives that you’ve planned in the water business? And what kind of remaining growth CapEx you’ve planned in water through the rest of the year?

So, yes – so the growth CapEx in water included completion of wells, adding permits, adding land for additional properties as well as this beginning of the construction of pipelines to connect our disposal facilities in the Delaware Basin. Most of that CapEx is in the Permian and, specifically, in the Delaware. The CapEx for this fiscal year is more weighted to the front half of the year. As we complete the already permitted locations as well as the pipelines, we would expect that CapEx to diminish throughout the year at this point in time. But again, with some of these acquisitions, we could have some opportunities for growth beyond that.

I’ll just add to that, TJ, that in New Mexico, going to the Devonian, the – we drilled three wells and the drilling costs, I believe, were $6 million for one. We are very fortunate $8 million for one and third was between $8 million and $10 million. And then we’re putting pipe and some truck unloading facilities. So you’re looking at an average of probably $10 million plus on each of those. Those are not some – I think, two of them are in service towards the end of the quarter, one is just beginning this quarter. So we’re – it sounds like a lot of money, but that in New Mexico, that’s three to four wells.

Okay, that makes sense. I guess, just lastly, switching gears, do you have any view on this Colorado initiative, 97 making the ballet, just any color you have on the potential for that to pass and what could the impacts potentially be to your crude and water cash flows, if it does pass?

Well, we’re working with the industry and trying to educate folks and, again, we do have view, I don’t believe they have the signatures yet to put it on the ballet. If they do, it’s the same story of such setback where the anti-fracking crowd is trying to reduce the fracking in Colorado. We don’t think it’ll be successful. But if it was successful, I mean, I’ve heard crazy numbers like over half of the drilling activity would be curtailed in Colorado, which obviously would be devastating for the economy. But we don’t see it happening. In fact we can say, we don’t – our producers are drilling. We’re seeing an increase – dramatic increase in water in the DJ in the end of July or early August because of the additional gas processing coming on. So perhaps we’re not seeing anybody pullback.

Okay, fair enough. I appreciate it guys.

Thank you. Your next question comes from Shneur Gershuni with UBS. Your line is open.

Hey.

Yes. Starting off with water – hey, Mike.

Hey.

Maybe, just starting off with the water segment, When you originally presented your guidance last quarter, if I remember correctly, you had said that there was a contemplation of some acquisitions that needed to be accomplished to sort of hit that number. The acquisitions that were closed during this quarter – is that – are those the acquisitions that were contemplated and anything further would result in a positive revision in guidance? Or are there a few more that still need to be done to get your numbers, I’m just trying to understand how the acquisitions play into your overall guidance as you presented it last quarter?

You’re correct. Those are the ones we’re referring to. So anything in additional would be, you’re right, an upward revision in guidance.

Okay, fair enough. And then just the Refined Products segment, I mean, you said that the margin had expectations. We were expecting a little bit higher. Just kind of want to understand what’s – where we are at this stage in that segment? I understand the bigger macro issues there, but are you seeing shorter hauls and so forth. I’m just trying to understand what’s happening in the business right now? How is it evolving here from how it used to be?

Yes, Shneur. So, for us, specifically, obviously, colonial is the lion share of our Refined Products business and what we do along colonial with our line space as well as our position in TransMontaigne’s storage facilities. What we’ve seen, obviously, different is the contracting along that pipeline is different, line space is no longer factored into the contracts or has any significant impact to the contracts. We are still seeing high volumes, but we are seeing more exports out of the Gulf, and so the basis differential is not as significant as it once was. Rack margins have continued to be relatively stable through this quarter. Again, the biggest challenge for that business is hedging the inventory and what is now a backwardated market versus the past several years would have been primarily a contango market. We’ve modified our strategy, obviously bringing on the blending operations as the primary component of that to try to supplement the cash flows that we’ve lost from the change in basis and the change in line space. That business is now operational. We’re expecting to see benefit from that through the blending season, which really starts in September. So hopefully, some impact – positive impact in this upcoming quarter and then the real impact in the third and fourth quarters.

Okay. So, from a seasonality perspective, when I’m thinking about this blending business, you get a little bit kind of mid-September when the winter-summer plan switches and then 3Q – sorry, I guess, fiscal – or sorry, annual 4Q and annual 1Q, we would see a pickup and then we would see a reverse basically in the first quarter of next year in terms of kind of the flows or the seasonality of that business. Is that the right way to think about it?

Yes, that’s correct.

Okay, perfect. And then just on working capital, I understand that you definitely need working capital for the Crude Logistics and Refined Products business. But with the sale of Retail Propane, do you foresee less working capital needs going forward? I assume you’re no longer buying in the summer for the winter or actually you are effectively doing some of that for Superior stage right now.

We will still do that for our third-party customers, including Superior through our Wholesale Propane business, which is embedded in the Liquids segment. The Retail Propane business used anywhere from $25 million to $75 million of working capital, depending on the time of the year. So that obviously will go away. We don’t expect changes in the rest of the business from where we are currently. And so a slight reduction in working capital, but not significant.

Okay. And a follow-up question, you’d mentioned utilization is up with your railcars. I guess, kind of a two-part type of question here. Is utilization up solely because you’ve turned back lease on some of the cars where the leases are up? Or are you seeing a combination of those more utilization and a smaller fleet?

It’s a combination of both. So smaller fleet, obviously, is helping the utilization, but we’re also moving more volumes. Some of that has been driven by some of the challenges in the Northeast in the Liquids market with the Mariner projects, but we’ve seen higher volumes, which has also helped on the utilization side.

The Bakken’s also helped with the Overland Pass, I think, being full. So we’re seeing more volume out of the Bakken and then more out of the Marcellus.

Do you see an environment, where you give up more cars going forward, like as they come off lease or is there a scenario where you’ve got the cars you have, but as they – as the leases are up, you can actually take the cost down further, but still maintain the same size. I was just wondering how that can potentially unfold.

We’re continuing to roll out of some leased cars through this year. A big portion of those came off at the end of last fiscal year. There are some more that will come off this year as well. Obviously, we want to maximize the cars we have, but additionally, there are some leases that while they’re rolling off, we may re-lease those cars just at a much lower rate. So we’re continuing to try to optimize.

The railcar fleet could remain the same, but cost will continue to go down as we get rid of the $1,000 a month cars and re-lease it whenever the market is $500 or $600 a car.

So that – so you sort of have a twin operating leverage benefit, the benefit of just utilizing the assets more and at the same time they potentially can be cost utilized?

Correct.

Perfect. Really appreciate the color guys. Thank you very much.

Thanks, Shneur.

Yes.

Thank you. Your next question comes from Dennis Coleman with Bank of America. Your line is open.

Good morning, Dennis.

Hello. Can you hear me?

Yes.

Okay, great. A couple from me on the water business, if you would, just to make sure I’m understanding. So the guidance $200 million to $225 million, I guess, a little bit of the question is, what gets you to that $225 million end of the guidance and does that include some additional M&A? Or is there any contemplation of that? I guess, this might have sort of been answered, but trying to make sure I understand it.

Right. So, the upper end of the guidance does not include any additional acquisitions. It would include higher – obviously, higher volume. Commodity price is not as significant of an impact to the business. As I’ve mentioned on the call, we have a vast majority of the skim oil hedged at this point in time. So higher commodity price does not have a significant impact. The differential has had a little bit of an impact in the Permian during the first quarter. So that getting cleaned up a little bit would be helpful to get to the high end of that guidance, but it’s really going to be based on volume growth.

Okay. And then – so the M&A opportunities that you’ve mentioned, I mean, what kind of scale could those be? Are they similar sized to what we’ve seen or?

Well, we probably shouldn’t say, but they are – I would say, they’re similar or larger.

Okay, okay. That’s great. Couple, I just cleaned up on – I think, I heard this right, you said that the crude cut has been on the lighter end in the first quarter and I’m not sure whether you’re suggesting that there is a seasonal aspect of that?

There is a little bit of a seasonal aspect. The average and you saw this last year also is about – we’re expecting 0.42%. I think, we’re a little bit better than that last year. When it’s colder, you get a little bit more oil out of the water. So generally, late falls, winters, when you see a little bit higher skim oil cut. So our fiscal first quarter and second quarter will probably be under that average and then the back half of the year should be slightly over that average.

Got it. Got it. And, Trey, if I can just ask you, could you walk us through those maintenance CapEx numbers? Again, it seemed like there were a couple of moving parts there with the Retail Propane coming out in the first quarter.

Sure. So $12.4 million is what we incurred during the first quarter. $3.4 million of that was Retail. So run rate was nine for the quarter, that included some onetime costs in water. Water was seven of that nine. We’re expecting each quarter going forward to be between five and seven. So call it, 15 to 20 for the rest of the year.

Perfect. Perfect. Thanks for clarifying. That’s it for me.

Okay. Thank you.

Thank you. Your next question comes from Adam [indiscernible]. Your line is open.

Thanks for taking my call. Appreciate it. Can you talk a little bit more in detail about what you’re actually buying in your acquisitions? Are you buying wells, parts of pipeline, additional trucks? Just maybe a little more color on what you’re exactly doing there.

No trucks. We don’t think that, that’s really a repeatable-type business. So no trucks. The acquisitions at this point have been majority of wells, not sure how much in pipe.

A small amount in actual pipe during this quarter. We will be spending the growth capital on pipe, and we did acquire a significant amount of write away in this quarter.

Got it. And that’s used for building at the pipeline, I assume. Is that correct?

Yes. That’s correct. Our strategy is, and you can kind of see this on our maps when is to connect our facilities from the – in the Delaware Basin from the New Mexico, Texas border, all the way down to Pecos so – and to tie all of those facilities together via pipeline.

Got it. And I guess, a previous question was how you built up to the $200 million to $225 million of EBITDA. Is the right way to look at that? And again, I’m reasonably new to the story, so excuse me if I’m asking stupid questions. But if you did, $39 million this quarter, call that a $160 run rate, plus you did $126 million of acquisitions, you paid five times that, that’s another $25 million. You did another $46 million of acquisitions in July, add a similar five multiple, there’s another $10 million, so you have the $10 million, the $25 million and the $39 million during the quarter that pretty much gets you to $200 million. Is that the right way to look at it? Or am I missing something?

That’s the way that we’re looking at it also, Dennis.

Okay. It’s Adam, but you called me Dennis.

Adam sorry, sorry, sorry, Adam. Dennis was right before you. Yes, that is how we’re looking at it.

Okay. Again, you have things like you mentioned you’re building out three more wells, so obviously, there is a return on that capital plus whatever else you do and any additional volumes to get you to $25 million. Is that correct?

That’s correct. And then the CapEx incurred in the back half of the year most likely lead to growth in the following fiscal year.

Exactly. Okay. Great. I appreciate you’ve taken my call. Thanks very much.

Thank you.

Thank you. Your next question comes from Matt Niblack with HITE. Your line is open.

Hi, thank you for taking the question. So I think for people that get comfortable coming back to the NGL units, one of the key things is being able to hit the guidance numbers and there is a miss versus consensus here this quarter, but I think it’s kind of difficult to model quarter-to-quarter. So that’s probably not a big deal. But when you think internally about the guidance, how conservative have you tried to make it or have you tried to make it conservative such that we’re much more likely than not to hit it on the full year? How do you think about that internally? Can you put that number out there?

You are correct. We’ve tried to be very conservative and make sure we beat our numbers. Unfortunately, we didn’t give, I would say, the quarterly guidance. So the analysts had to come up with their own numbers. If they’d all come up with $50 million everyone would say, tremendous success instead we – they came up with numbers and several have said, miss. Well, we’re extremely happy with our number. Our number is very close to our internal budget, which is higher than the $450 million. So we’re – we don’t consider it miss at all. We think it’s a great quarter, and it’s just – Trey gave the guidance already each quarter after this, I think you said $20 million to $25 million higher.

And just to add to that, so what we’ve done differently from the past? Obviously, last quarter, we gave ranges for each business segment, which is the first time we’ve given ranges by business segment and a target for the company. If you took the low end of the range, obviously, that was below that target. The high end of the range was much higher than that target. As I mentioned in my prepared remarks, earlier if you took those ranges for the first quarter, we would have been $70 million to $82 million. We came in at $80 million. So we’re at – we are already at the higher end of our ranges, which as you project out, would be on the higher end of the ranges across the board. However, we did not change our overall guidance. We believe those ranges are still accurate and our best forecast. As we’ve mentioned before, if we’re in a higher crude price cycle or higher commodity price cycle with the backwardated market, crude, water should perform very well, Refined Products and Liquids to some extent may struggle and vice versa. So if we’re in a contango market, while crude and water may struggle, Refined Products and Liquids should be at the higher end of those ranges. So overall, we’ve changed the way that we’re delivering those expectations. As Mike mentioned, we did not give quarterly guidance. The consensus was fairly wide. There were several analysts close to $80 million, and there were a couple in the – at $90 million or even, I believe, there was one well above $90 million. So we need to work with the analyst community to make sure that we’re getting the quarterly expectations in line, which, again, we’ve mentioned in the prepared remarks that we’re expecting a fairly radical increase, although it will be different based on the seasonality for Refined and Liquids. But a radical increase of between $20 million to $25 million each quarter, which will get you – which would bridge around the $82 million to our current target of $450 million.

That’s very helpful. Mike, I think you mentioned that your internal budget is actually higher than the guidance. Can you give us some color on about how much higher?

Well, probably not, I think Trey has covered it with the ranges.

Yes. I would say that our internal budget, which is, again, used for multiple reasons is at the higher end of the ranges that we gave for each segment.

Okay. Fair enough. Really appreciate it. Thank you.

Thank you. Your next question comes from Jordan Stevens of Caspian. Your line is open.

Hi guys. Just had a quick question on the balance sheet. I know on the last quarterly call, you had discussed essentially targeting taking out some of the bond issue, as you know, I think the only thing you maybe had foreclosed is the longest dated issue and I noticed in your release you kind of quoted that you’d immediately applied the proceeds or for now outside the proceeds of the sale through the revolver. Any sort of thoughts on kind of how you’re thinking about the balance sheet and any timing of potential actions there?

So we have some new dated maturities with 2019 notes. We also have a step-down in the call feature of the 21s that occurs in October. And then our highest cost debt are the 2023 notes. Those would be the primary targets for debt reduction. However, we also want to maintain liquidity on the credit facility and make sure that we have the balance between fixed rate debt as well as some floating rate debt. Obviously, we’re in an increasing interest rate environment. So that’s working against us a little bit today, but with the large amount of working capital borrowings at a floating rate, we obviously are managing that perspective as well. So nothing definitive to announce today, but we are – we would be looking at some of the notes whether that’s through open market repurchases or like we’ve done historically or a tender or a call.

Great. Thanks guys.

Thank you. And I’m showing no further questions at this time. I’d like to turn the call back over to Mike Krimbill, CEO for closing remarks.

Well, thank you for your attention and questions. And we will talk to you at the end of the second quarter.