CSX Corp (CSX) — Q3 2017 Earnings Call Transcript

Thank you, Shirley, and good morning everyone. On behalf of the management team here at CSX Corporation, I'd like to welcome you to our quarterly earnings call, and also thank you for your interest in our company. Our presentation, our quarterly finance reports, and our press release, which conveyed our results and reaffirmed our 2017 guidance, are all available on our website at csx.com in the investor section. In addition, a webcast replay of this presentation will be available later today, and the 10-Q will be posted tomorrow on that same website. This morning, CSX is being represented by our Chief Executive Officer, Hunter Harrison; our Chief Operating Officer, Cindy Sanborn; our Chief Sales and Marketing Officer, Fredrik Eliasson; and our Chief Financial Officer, Frank Lonegro. On Slide 2 is our forward-looking disclosure. Any statements about the future made during the course of this presentation or during the question-and-answer session should be taken in the full context of this disclosure. Turning to Slide 3, is our non-GAAP disclosure. While CSX files all of our financials in accordance with U.S. GAAP, we're providing certain non-GAAP measures to give you a more wholesome understanding of the business. These measures should be taken in the full context of this disclosure and with the understanding that they are not a substitute for GAAP. Finally, with our investor conference less than two weeks away, and with close to 30 analysts covering CSX, I would encourage everyone today to limit their questions to one. With that, it is my great pleasure and privilege to introduce our President and Chief Executive Officer, Hunter Harrison.

Thank you, David, and good morning to everyone, and thanks for joining us. As David said, we've got a lot to discuss today, and my remarks are going to be a little different than they normally might be. I'm going to allow Frank to run through the numbers; there's no use in us both doing it. And to try to give you some explanation or at least our read on the quarter, which some could characterize as mixed results. There were a lot of dynamics going on and taking place in the third quarter, which was a carryover to some degree from the second quarter, and was a challenging start. So, let me start here. I think that we went through obviously some slippage service-wise in the third quarter, which we're not proud of, which we had a listening session last week with the Surface Transportation Board, with their team members. I think some of you were present. There was some mixed reporting there, but I can tell you this, I've been in this business a long time, and this company is back to where it was -- it's back to where it was, and it's better, and it's climbing, and I see those issues, generally speaking, behind us, which I'm very proud of that. It reflects to some degree the resiliency of this organization, to go through what this organization has been through, and to be able to come out of an eight-nine-week setback. I didn't really – I considered initially as we went into this transaction; I didn't want to spend a lot of time reflecting on that. But I do think it will add some context that this was not a failure of the model or a failure in railroading. Some of the historians aren't very good historians; this is not a new operating plan. This is an operating plan that's been in existence for over 20 years. It's had a pretty good track record. In fact, I would say that it has an excellent track record. As we reflect, it was more of an execution issue. We didn't execute at many levels, and we learned that. As a result, we had to make some changes, which I would describe as painful. That's never pleasant to do, but we had to do that. We had two derailments that were a real concern to me. One was a pretty horrific derailment on the side of a mountain that you read a lot about; we have changed some procedures as a result, and I would say also to the local people there that we were dealing with who were extremely cooperative in our efforts trying to get that derailment under control. Then we had a derailment in South Carolina that I'm convinced from a personal standpoint is clearly a case of sabotage where we had a bulldozer flipped on the track covered by debris. We came around, and that's not unusual in that territory to have that. Thankfully, nobody was hurt. We've got rewards out. The derailments, the personnel changes that had to be made, I think to some degree reflected that we had considerable resistance to change. We were going to have to deal with that and we've had to in a more difficult way than I thought it might be. But having said that, I think the most significant issue that came out is we learned a lot about some of our people. We've made some personnel changes and developed some real, what I would describe as, rock stars, both in-house, from other railroads, and from the free market as well. I am very pleased that I think the organization is ready to go forward at what I might describe as breakneck speed. The operating plan we've talked about; we brought in our first dispatchers from the field, taking us from nine offices to one here in Jacksonville. It's a big step. These changes are dynamic, and the markets change, but I think we have pretty well settled in with the hump yard; we started off with 12, and we're now down to four core yards located in Selkirk, New York; Waycross, Georgia; Indianapolis Avon yard; and Willard is the last one that will probably be closed soon. So, the hump yard work is mostly behind us. Dispatcher work is behind us. Personnel moves are in place. The learning curve is increasing. I am as excited as I've ever been, or more so, about the future of the organization going forward. I will have more remarks at the end. At this point, let me catch my breath and let Frank help convert some of these things into our earnings results.

Thank you, Hunter, and good morning everyone. I will briefly walk you through the quarter and touch on a few fourth quarter and full-year items. In the early part of the quarter, as Hunter mentioned, we rolled out significant changes to the network operating plan as a result of our rapid transition to Precision Scheduled Railroading. While our service took a step back in July and August, we are pleased to report that our velocity and dwell performance in September were favorable to Q1 levels, and we expect continued improvement going forward. The changes we made to the operating plan helped drive significant train length improvements on a sequential basis. Balancing the train plan and consolidating train types drives efficiency savings through better asset and resource utilization. Cars and locomotives in service are down significantly year over year, and we are able to run our railroad and our company with fewer resources. Compared to year-end 2016 resource levels, our total workforce is lower by over 4,000 FTEs, including over 1,000 contractors and consultants. Turning to slide eight, from a financial perspective, we were encouraged by the results for the third quarter. While we took a direct hit from Irma, experienced several significant derailments, and transitioned to a new operating plan, we made good progress toward our 2017 and longer-term goals. Jumping into the details of the income statement, revenue was up 1% year-over-year, driven primarily by core pricing gains of 3.5% all in and 2.2% excluding coal, as well as 1% volume growth and higher fuel recoveries, partially offset by unfavorable adjustments. Total expenses were $2 million favorable, with efficiency savings more than offsetting the impacts of inflation and higher fuel prices. Our quarterly financial report goes through the details of each operating expense line item, but I would like to quickly call your attention to a couple of key points. Our labor and fringe expense was down 6% on 10% fewer resources. Our MSNO was slightly unfavorable due to the combined impact of several train accidents, relocation costs, and asset impairments, which offset the favorable efficiency gains from better asset and resource utilization. While fuel expense was up, the increase was driven entirely by a 19% increase in the price of diesel. Top line stability plus our relentless focus on controlling costs drove a 4% improvement in operating income, a 4 point improvement in operating ratio, and a 6% EPS growth, reflecting both higher earnings and the completion of our $1.5 billion share repurchase program. On slide nine, year-to-date free cash flow generation is strong at over $1.5 billion, reflecting solid top line gains, significant efficiency savings, and the reduced capital intensity of our business. Please note that our third quarter cash flow benefited from the deferral of tax payments allowed by the IRS for companies impacted by the recent hurricanes. We expect to make the third and fourth quarter tax payments by year-end. Free cash flow growth has enabled increased shareholder return, including the $0.2 dividend increase earlier this year, plus the completion of our expanded buyback program. CSX's improved financial performance is reflected in our improving ROIC, which exceeds 10% on a trailing 12-month basis and a stable debt-to-EBITDA ratio, even with higher debt levels. Turning to slide 10, our fourth quarter volume outlook on a comparable basis is neutral, with nearly two-thirds of our business expected to be growing or stable year-over-year. The global benchmarks support continued strength in export coal, with fourth quarter tonnage expected to be similar to what we saw in Q3. Intermodal is expected to continue to grow, reflecting strong consumer sentiment and a tighter truck market. However, several markets continue to be impacted by specific headwinds, most notably the anticipated decline in North American light vehicle production, the reduction in unit train shipments of crude oil, and the ongoing challenges of domestic utility coal. Looking forward, as our service product continues to improve and we transition to a faster, more reliable solution for our customers, we will see growth prospects across a wider spectrum of our markets. Wrapping up on slide 11, we are on track to deliver on an operating ratio around the high end of the mid-60s, with record productivity savings, EPS growth of 20% to 25%, and free cash flow of around $1.5 billion. We've completed our buyback program in five short months and we look forward to seeing you at our investor conference in two weeks, and would now be delighted to take your questions.

Great. Good morning.

Good morning, Ken.

Hunter, maybe you can talk a little bit about your thoughts on kind of share loss and your ability to regain that given some of the service issues. Do you see that you've kind of lost some share, and would that be permanent and tougher to win back in that case? Or as you get the service improved, do you think that starts to shift back?

I think it's just about immediate. Well, shippers out there are trying to get the best bargain they can get. Safety and competitive service at a competitive price drive the business. This is not the old days of some kind of relationship sales. This is about who has the best product, who's got the lowest price. We think we're going to be there. We believe this reflects in our market share, and I'm not a big advocate of the market share data and accuracies that it reflects, but not to dwell on that. I'm convinced of this: all you’ve got to do is get our service where we know it can be, where it is improved to, and then have a competitive price out there, and you'll have your fair share of the business.

Great. Thank you.

Hi, good morning everyone, and thanks for letting me ask a question. So Hunter, I mean, we've heard all the anecdotal evidence from the shippers about what went wrong and how service deteriorated on your network. But maybe can you just give us a little bit deeper lessons learned through this process, and why you feel that the organization is now in place to deliver better results going forward?

Yes, I can provide this information after the Surface Transportation Board hearing. We had to temporarily suspend shipments for three customers due to delays. We were accused of violations because we had 60 railcars sitting idle for over five weeks. There are two perspectives to consider: the changes made and the pushback from some individuals. Transitioning from a proxy operation to a proactive change has not been ideal, leading to some resistance. I don’t want to blame anyone; we have dedicated railroaders and union members, and in my previous discussions, I aimed to avoid casting blame. The first group to leave the company included a significant number of management personnel. I’m not assigning blame—collectively, we didn’t achieve our objectives, which necessitated some personnel changes. We encountered some challenging situations that we managed to address, and while they were difficult, we handled them. We faced an incident at one of our main gateways where individuals falsified car movement records to evade scrutiny over shipment delays. This behavior is unacceptable. We may have rushed into our hump yard closures; perhaps I pushed too hard. However, I believe we’ve learned valuable lessons in the past several weeks. Cindy and her team have done an excellent job of recovering and getting us back on track, and I’m confident it will improve. That’s certainly encouraging. If you could move past the anecdotal evidence and consider the hearings from last week, they weren’t solely focused on CSX service; they touched on broader political matters like reciprocal switching and open access. We’re ready to engage in those discussions, but let’s be clear. We had ten or eleven customers testify, but we received more favorable feedback from others who weren’t present. I’m skeptical of some current surveys and doubt their reliability based on the honesty of feedback received in discussions. Ultimately, we are prepared to overcome any challenges ahead.

Thank you.

Shirley?

Hi, good morning. Thanks for taking my question. So just touching on intermodal markets and the strategy, we are seeing some reports on Northwest Ohio's role in the intermodal network, maybe some service offerings begin adjusted. As you move past the initial stage of design with the hump yards and the flat switching, is it the hub and spoke design for your intermodal something you're also considering to rework? And what implications are there for Ohio and also the Carolina Connector that was planned for North Carolina? Thank you.

Yes, thanks. Let me just answer that in two words. Number one, we've got an investor conference coming up in two weeks now that we will talk thoroughly about that and other issues. But at the same time, I could answer that - several other questions. Everything we're doing is under review. Now I can't tell you what the outcome is going to be. We don’t go in there and look at an issue and have an answer. We go in to look and develop an answer. So we'll see what it brings.

Okay, thank you.

Hi, thanks. Good morning. I know you highlighted sort of what the derailments cost you specifically in the quarter. But I was wondering if you could help us understand a little bit sort of how the service ran through the model and sort of what the expenses related specifically to that, and maybe a little bit of weather? Just wanted to contextualize how much of the operating ratio improvement you could have gotten in addition to what you did if you had a cleaner quarter.

Hi, Chris; Frank. Yes, we obviously experienced some transitional issues in the first part of the quarter as we transitioned into an operating plan over the July 4th holiday. Any time you've got a network-related set of changes, quantifying the dollar impact from that, you do see on the revenue side the impacts of that transition really muted the top line growth when compared to our peers. We probably left some demand on the ground. We probably saw some temporal shifts in business either to truck or to other rails. As you heard from Hunter in his opening, we do expect that to come back pretty quickly. On the expense side, any time your network is a little sluggish, you're going to see higher overtime, re-crews, fuel car hire, that nature, but not something we’re able to put a pinpoint estimate on. It certainly did impact us from an operating income and operating ratio perspective in the quarter.

Okay.

Yes, good morning. Hunter, I know you've commented on the network and how it's running. I wondered if you could give a bit more perspective in terms of whether the car load schedule is pretty much stable at this point? How would you think about the trajectory? I don't want to be overly focused on metrics, like velocity and dwell and so forth, but sometimes they help to see how the network is running. So, is it stable at this point? Would you expect to see further momentum build, that the metrics improve and costs fall out further? Just kind of where you're at concerning the network and the trajectory today?

Sure. Tom, we have not completed the installation of the trip plans. If you remember back a little, from our early experiences with installing these trip plans, that effort is not complete. Now we're much further along than I thought we'd be, but I would think that we're probably 85% there. By mid-year '18, it will be fully in place with the plans. That means that the plans will be upgraded as required, where it is necessary and the market demands it. Our train speed and dwell time is currently about 10 to 12 hours, which is impressive overall. Our productivity cars per hour has improved further, indicating our ability. The true velocity has picked up significantly. The scouting report we did shows even more than we can produce results that have been discussed over the next four years. Now the timing within that four-year window might adjust a little up or down, but the opportunities ahead are very bright.

Okay, great. Thank you for the response.

Thank you. Your next question comes from Allison Landry with Credit Suisse. Your line is open; you may ask your question.

Thanks. Good morning. Hunter, I wanted to ask if you thought the customer and employee response to the changes that you're implementing, and the resulting dislocation, has that led you to rethink any elements of precision railroading as it applies to the CSX network? Is there anything that you need to do differently, or that we should think about for CSX relative to what we observed at CP or CN?

No, I don't think so. The only caveat I would put there is this: this model, in my view, will work here as well as anywhere, and even more so. I think we've learned the importance of the execution and the selection of people is even greater. I think we are kind of fine-tuning that a little bit. We have a lot of internal talent that has been covered up with mud, and I think we've taken a hose and washed some people down, and we've found some rock stars here. That's encouraging.

Okay. Thank you.

Thanks. Good morning. Hunter, I guess there is really no one that implements precision railroading as quickly and effectively as you. There is a feeling that your ability to do this has been largely due to the hands-on nature of your involvement in driving changes at the grassroots level. Could you just talk about that concerning the turnaround at CSX in terms of your ability or inability to spend time with the rank and file and drive changes as you had in previous turnarounds? Any insights there would be helpful. Thank you.

I'm not 45 years old anymore, though I wish I were for many reasons. I’ve gained some years, and while I'm not able to connect with everyone individually as much as I would like, I'm focused on sharing knowledge. I have authored numerous books, papers, and case studies, and I receive a lot of inquiries from those trying to grasp these concepts. Our team is beginning to understand it better. We discussed how to convey that this isn't just an abstract idea; there's a solid foundation here that works and that people will embrace. My goal is to communicate this through my team more effectively than I have in the past.

Got it. Okay, that's very helpful. Thank you very much for answering my questions.

Thanks. Good morning everyone. Hunter, in your slides, you pointed out that the 4Q outlook shows about 50% of your end markets to have a favorable outlook versus I think it was 66% last quarter. So, broadly speaking, as you look at your long term or efficiency targets for CSX, how much do end markets feature a role in achieving that? Given that end markets are slowing, what’s the offset to that? Thanks.

Hi, Ravi, it's Frank. Obviously, we'll share a lot more with you in a couple of weeks when we get to the Investor conference. Top line growth is certainly part of the future, but I would tell you that the expense lines are really important to the future. If you look at what Hunter has done at CN and CP, that's an important part of the future, ensuring we drive productivity savings to lower the operating ratio. We are also focused on growing the top line as well.

Yes, let me just give you an outlook; I will give you a preview to segue here into the market for the Analyst Day. Gone through wisdom, the results that we've achieved through these turnarounds. Well, first of all, we weren't sensitive to the market, which is wrong. We improved revenue in places, but we were successful net, net in all three locations. Our operating ratio was 24 year-end with four points versus their number. So, in the end markets that affected the bottom line approach, we have always gone into a right-wrong perspective. Our operating ratio has had a nice improvement despite every hurdle, but we'll keep achieving strong results.

Great, thank you.

Hi, good morning everyone. Just in the context of everything you talked about with regard to the cadence of the operating plan, when do you think you would be able to extract value in terms of pricing from the service that you build into the network? Obviously, as we’re looking into ’18, truckload capacity is tightening-up, creating a more favorable pricing environment as a result. When do you expect to realize extracting value in terms of pricing at CSX from these changes? Is that a 2019/2020 backend-loaded type of process?

I think it's a matter of what the competition does, yes. If the competition improves their pricing and service, it will affect us, and we can't ignore it. But if you look at what is likely to happen, I think we will start to see improvements in pricing in 2018 to a degree that we might describe, and in 2019, we will start to see better pricing with good service and profits as we continue that into 2020 and beyond. If you provide good service, you'll have a better opportunity to grow, and I think we can achieve that.

That's helpful. Thank you.

Thanks very much and good morning. In looking at your volumes in the third quarter, I'm curious which segments you think were most impacted by some of the challenges that you encountered during the quarter and in particular, how much do you think the intermodal network was impacted, particularly as you onboarded a new international intermodal customer during the quarter?

Yes, this is Fredrik. I think we saw an impact on all our markets in the third quarter from the challenges, and of course also the hurricane impact of Irma. It was pretty widespread, but it’s hard to pinpoint clearly. We benefited from onboarding two new customers in the intermodal space and also continued to see opportunities to convert things off the highway system as the market has tightened. So we feel good about where it is. As Hunter alluded, service is now returning and it's much stronger; we're seeing customers come back to us very rapidly.

Hi, Cherilyn; Frank. I will just add a little bit on the hurricane to make sure everyone understands: it was probably about $0.02 in the quarter, a lot of that was top line and obviously we had some planned shutdowns in the Southeast. In some cases, it could have been a couple of weeks. So as you think about the transition impact and service side, you also need to remember we had the hurricane occurring in the middle of that.

That's helpful and that's my one. Thank you.

Hi, thanks. Good morning guys. So why don't you ask about coal yield spell, I think 7% sequentially, how much of that is sort of the mix of net and thermal and export and how much of that maybe is from just lower net export pricing? If I can just ask as Hunter, we had a noisy third quarter. Can you maybe calibrate headcount and operating ratio expectations for the fourth quarter?

Scott, you are breaking the rules; one question.

So, let me tell you the first part in terms of the coal; clearly, the second quarter was a very strong quarter according to the indexes, and that certainly helped the net deals, and yes, there is a bit of a mix change as well because the thermal market and the export market has gotten stronger. So, I think you are losing both sides which are big drivers of that.

On the operating ratio, Scott; Hunter could chime in on the headcount, but year-to-date we’re at 66.7, and Q4 will be better than Q3 and you know what our guidance is, so you can get pretty close on Q4.

Yes, in fact the headcount number is, I think projecting year-end will be 4500.

Yes, on a year-to-date basis, compared to where we finished in 2016, the total headcount was around 4500 as you heard. At the end of Q3, the number was about 4200, which includes management, union personnel, contractors, and consultants.

I guess the only other thing I will add is we will talk at the Analyst Meeting, there has been a lot of noise and a lot of things happening, but I'm not sure the fourth quarter is going to reflect that, but if you are waiting for fourth quarter results, you might fall off your chair for results.

Next question?

Thank you very much. Just a quick question about auto; I think a lot of us were surprised to see an 18 auto SAR in the most recent months. We’ve heard stories that maybe 0.5 million cars plus might have been lost due to the strong impacts of Houston and a little more in Florida. Could we be underestimating auto, and if there is a rebound or secularly? We talked about how autos. The outlook is not right but I was really surprised by the most recent monthly SAR and I'm just talking to some folks in Texas saying a lot of autos need to be replaced.

Yes, I think that's a good question. We certainly have seen a fair amount of inventory drawdown, and because it’s back to kind of a more normalized level layer year-over-year, which hasn’t benefited previously in the year; so that's a good sign. I think production numbers for next year indicate about 200,000 more vehicles than we expect to see this year. So there could be an opportunity there. I certainly know that our automotive network is running well and is within a merchandise network; we are seeing strong numbers now.

Okay. That's my one. See you guys in a few weeks. Thanks.

Well, one number here today that should get your attention is that general motor is selling a steady old car, 24% of the cars. The rest of the other type vehicles, so if you talk about cars there is great slippage, which the implication starts to be for that car. If it's a new model and etc., but that’s gets specifically not the case.

Hi, good morning guys. Thanks for taking the time. Fredrik, maybe a question for you on the long-term intermodal dynamic; if you look at the business, the RPU today is kind of where it was in the 2005 timeframe, and volumes have grown quite a bit. As we look out over the next five or ten years, should we be expecting more of a volume growth story in intermodal or a little bit of pricing as well? What should drive the change in that market dynamic?

We will certainly cover that as part of our investor conference. We feel we are very well-positioned strategically in our ability to reach the port on both the East Coast and in the Gulf. We think we have an excellent service product, a good facility at key export players. We feel good about it for the remaining time this year. The forward curve seems to be right; it is a good opportunity for the U.S. producer to participate next year as well. We’ll provide more color at the investor conference.

All right, thanks for the time.

Hi, good morning, and thanks for taking my question. Just wanted to dig into the utility coal volumes which took quite a haircut year-over-year. Where do those stockpiles stand? And when do you think that will stabilize? Will we see perhaps more stability in utility coal volumes?

As we look at the fourth quarter, we expect domestic coal to be roughly flat. The performance in the third quarter is likely our best indication of what to expect. Currently, stockpiles in the North are higher than desired, while in the South they are somewhat lower, creating an opportunity to replenish supplies there. This involves longer transportation, which can yield higher revenue. Additionally, at the start of the year, we lost a short-haul utility coal contract of around 6 million tons, which had been consistent for the entire previous year and will affect us in the fourth quarter. Overall, the market remains profitable. While the summer season was challenging, natural gas prices around three are proving to be more favorable than during the spring.

Thank you very much.

Yes, from your longer-term shareholder succession planning is important here since the situation is very different from CP, where you had an heir apparent only months into it. So Hunter, could you comment on the timeline for the Board deciding who is going to lead CSX after you retire, and any signposts that we as investors should watch for along the way?

Well, that is something that the Board is very sensitive to, and we are actively working on; it's not something to worry about, there’s no worry, and I'm hopeful we could give you more insight. Again, it's me but I am not sure. What I can say is we share your concerns. We are focused on the issues of ensuring continuity in leadership.

Hey, thank you. Frank, real quick, when you talked about what the hurricane cost you in the quarter, you did a good job of parsing it off. Can you talk a little bit about potential rebuilding that you might benefit from in Q4 and possibly even beyond?

Sure. As Florida rebuilds, as Texas rebuilds, there can certainly be end markets that will benefit from additional volumes and types of products that we ultimately haul. Yes, I think there are opportunities out there; it really depends on how quickly these folks can rebuild in those areas. But anything that helps the end markets will ultimately help CSX.

I agree. We are also seeing an impact on the trucking market itself. It allows us to participate in some of those movements that we wouldn't otherwise, as well as convert business back to railroads. Additionally, we've talked earlier about vehicles being replenished. There are some opportunities for us to capture.

And are you seeing that occur right now, Fredrik?

I am definitely seeing the truck market tightening. We are seeing that. I think it's a little early to see in terms of building products. However, we have seen some of the vehicle opportunities based on the need to replenish or see what inventory levels are and how quickly that comes down. So that's been very helpful.

Okay, that's my one. Thanks for your time, as always.

Thanks very much. Good morning everyone. My question is for Frank and free cash flow for Frank and the buyback that’s coming from it. You noted in your guidance you got $1.5 billion guidance, but you're kind of there already, and you've made quite a move on your buyback this quarter. So are we just being conservative on this? Are you expecting kind of flat free cash flow through the back half? How should we look at your share buyback momentum as a result of that free cash flow going forward?

Sure. Honestly, we'll provide more information as we approach the investor conference on shareholder returns and capital allocation in the coming weeks. In terms of the free cash flow, we had a nice benefit in the third quarter from deferring tax payments, which we will make good on in December. The fourth quarter is usually a lighter free cash flow quarter. However, we are already at $1.56 billion, and if I were betting, I'd take the over.

Okay. Thank you very much.

Thanks and good morning. I wanted to ask about export coal since it's recently held up a bit better than expected. Do you have any early thoughts about the export coal market in 2018? Looking longer-term, how do you think about the structural positioning of your network, and what role export coal will play?

We will certainly cover that as part of our investor conference. We feel we are very well positioned strategically concerning our ability to reach the port, both on the East Coast and in the Gulf. We think we have an excellent service product, good facilities, and we believe that key export players feel positive. It looks good for the remainder of this year, and the forward curve seems favorable for U.S. producers next year as well. However, we'll give you more color at the investor conference.

Okay, great. Thank you.

Thank you very much. I hope we were able to provide some clarity without getting ahead of ourselves with our upcoming Analyst Day, which our team is diligently preparing for. We appreciate the questions you posed, and we will take them into consideration and respond accordingly. I look forward to seeing you again. Thank you.