Global Partners LP (GLP) 2011 Q4 法說會逐字稿

Good day, everyone, and welcome to the Global Partners Fourth Quarter 2011 Financial Results Conference Call. Today's call is being recorded. There will be an opportunity for questions at the end of the call.

With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slifka; Chief Operating Officer and Chief Financial Officer, Mr. Tom Hollister; Executive Vice President, Chief Accounting Officer and Co-Director of Mergers and Acquisitions, Mr. Charles Rudinsky; and Executive Vice President and General Counsel, Mr. Edward Faneuil.

At this time, I would like to turn the call over to Mr. Faneuil for opening remarks. Please go ahead, sir.

Good morning, everyone. Thank you for joining us. Let me remind everyone that during today's call we will make forward-looking statements within the meaning of federal securities laws. These statements may include, but are not limited to projections, beliefs, goals, and estimates concerning the future financial and operational performance of Global Partners. The actual performance for Global Partners may differ materially from those expressed or implied by any such forward-looking statements.

In addition, such performance is subject to risk factors including, but not limited to those described in Global Partners' filings with the Securities and Exchange Commission. Global Partners undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statement that may be made during today's conference call.

With Regulation FD in effect, it is our policy that any material comments concerning future results of operations will be communicated through press releases, publicly announced conference calls, or other means that will constitute public disclosure for purposes of Regulation FD.

Now, please allow me to turn the call over to our President and Chief Executive Officer, Mr. Eric Slifka.

Thank you, Edward, and good morning, everyone. Global Partners delivered EBITDA of $86 million in 2011, just above our 2011 guidance of $75 million to $85 million. It was approximately $13 million better than 2010 and the highest annual EBITDA recorded by the partnership.

Volume for the year was up 43% from 2010 to 5.2 billion gallons or approximately 340,000 barrels a day. There are several factors behind the increase in volume, including full-year contribution from our acquisition in 2010 of the Mobil assets and the Warex terminals, and increases in wholesale gasoline, bulk supply and exchange activity and blendstocks.

Our total net product margin was up 28% to $234 million in 2011 from $182 million a year ago. A primary factor behind the increase in margin in 2011 was the addition of our Mobil assets and related supply rights. These assets performed very well for us, exceeding our return expectations for the year.

Other positive factors included the full year impact of the Warex terminals, increase in gasoline blendstock activity, record net product margin results from our bid, bunkering and natural gas businesses and a significant contribution from our new crude oil activity. Offsetting these positives were futures market backwardation pressure on our wholesale gasoline business and significant margin declines in our wholesale distillates business, due primarily to a less favorable or flat distillates curve year-over-year.

Degree days were also 9% warmer than normal in 2011 and 23% warmer than normal in the fourth quarter. In a minute Tom will discuss our net product margin results in more detail.

We continue to reposition the Company to take advantage of attractive opportunities in the marketplace. Over the past two years the strategic steps taken have strengthened and broadened our asset base with downstream, vertically integrated distribution and marketing activities arising from the Mobil station and supply rights; significantly expanded our Albany terminal, creating a hub for the sourcing, storage, transportation and marketing of distillates, gasoline, blendstocks and more recently crude oil; and, established Global as a premier gasoline and blendstock supplier through the acquisition of the Warex terminals and our expansion activities in Albany.

Our diversification is evident in the growth of our wholesale gasoline business, our commercial activity and our recently added all other segment, which includes rent from dealer-operated sites and convenience store sales at our Company-operated locations. Our net product margin for these three business activities nearly tripled from $56 million in 2009 to $166 million in 2011, and represented 71% of our total net product margin, more than twice the 35% contribution in 2009.

On March 1st we completed the acquisition of Alliance Energy to diversify and strengthen our earnings stream. Alliance is a premier multi-brand, independent gasoline station and convenience store operator and distributor in the Northeast. The Company's portfolio includes approximately 540 gasoline stations located throughout New England, New York, New Jersey and Pennsylvania.

Alliance is a skilled and profitable operator that through strategic acquisitions and organic growth has achieved significant success during the past 15 years. The company is an ideal fit with Global Partners and has most recently been managing our Mobil assets.

The transaction adds to our year-round income stream and complements our position as a leading wholesaler of transportation fuels in the Northeast. We now have a total portfolio of approximately 800 owned, leased or supplied gas stations, expanding our geographic footprint to include Connecticut, Maine, New Jersey, New York and Pennsylvania. In addition, while our existing stations are flying the Mobil flag Alliance is a top tier distributor of multiple brands including ExxonMobil, Shell, Sunoco, CITGO and Gulf.

I am pleased to welcome Alliance President, Andrew Slifka, who has joined Global Partners as President of the partnership's Alliance Gasoline division. Andrew also will join the Board of our general partner. Andrew and the Alliance management team have a successful track record in growing the gas and convenience store business.

With respect to organic projects, as we previously reported, we have begun moving mid-continent crude oil from the Bakken region of North Dakota by rail to our Albany location for resale. Almost every day now there are news reports highlighting the huge size of the oil and gas fields in the United States and Canada, as well as the increasing levels of drilling and production. According to a recent article in the Wall Street Journal $145 billion was spent drilling and completing US wells in 2011. This is nearly double the $73 billion spent in 2009 and is more than ten times the $13 billion spent in all of the US in 2000. We believe this is a game changer for our country and its energy market.

Today rail transportation offers an increasingly viable logistical solution for those products. We were the first company to move unit trains of crude oil from the Bakken region to the East Coast. In just the first two months of 2012, we received 15 unit trainloads of crude oil at our Albany facility compared with 13 trainloads in the fourth quarter of 2011.

We are encouraged by the prospects for this business longer term. The infrastructure required to transport and store the country's growing sources of both crude oil and natural gas does not exist today. Billions of dollars of investment in infrastructure will be needed to bring these products to market. Our objective is to play a role in this energy infrastructure renaissance through the development of logistics and assets that capitalize on market inefficiencies.

Consistent with our prior comments, we held the distribution flat for the fourth quarter. An ongoing goal for the partnership is to maintain and increase the distribution and maximize returns to our unitholders over time. The Board will continue to evaluate the distribution on a quarter-by-quarter basis in light of our earnings power, which continues to be strengthened by acquisitions and organic projects.

In Q1 we expect weak results due to the warm weather we are experiencing, and increasing gasoline prices which are affecting demand and gas station margins. However, we have several exciting projects under development for 2012. For example, we're in the process of doubling the rail capacity at our Albany terminal, which will allow multiple products to be offloaded simultaneously. We expect the expansion to be completed in the second half of this year.

In North Dakota we are in the process of completing construction of a 100,000 barrel storage tank. The tank is on schedule to be ready by the third quarter, enhancing our infrastructure in the Bakken region. Looking ahead the combination of our acquisitions and internally generated growth projects diversify Global's income streams.

Now, let me turn the call over to Tom for his financial review. Tom?

Thank you, Eric, and good morning, everyone. Let me briefly say that with respect to the fourth quarter we experienced increases in net income EBITDA and distributable cash flow. Net income was up year-over-year by $4 million or 69% to $10 million, primarily due to the Mobil assets, wholesale gasoline and crude oil. The same factors helped lift fourth quarter EBITDA by $5 million to $27 million, and our distributable cash flow by $4 million to $17 million.

For the full year, as Eric mentioned, our net product margin was $234 million. This was up 28% from $182 million in 2010. Let me touch on the segments comprising the net product margin.

The net product margin in our largest segment, the wholesale segment, was $164 million for the year, up only 6% from last year's $155 million, despite a 42% increase in volume from 3.4 billion gallons a year ago to 4.8 billion gallons in 2011. Our wholesale margin results did not keep pace with the volume increases, primarily due to the backwardation in the gasoline market and the less favorable market conditions in the distillate market.

Let me be more specific about our wholesale net product margin which is comprised of three product areas. I will touch on each of them. Our wholesale gasoline net product margin increased $32 million or 49% from $65 million last year to $97 million this year, despite the backwardation in the gasoline markets. This reflects the contribution of the Mobil assets together with the full year impact from the acquisition of the Warex terminals in 2010, as well as our increasing activity in gasoline blendstocks, primarily ethanol.

The wholesale distillates net product margin declined $31 million or 38% from $81 million a year ago to $50 million in 2011, despite an 8% increase in volume. The primary factor, as Eric mentioned, was a less favorable distillates curve year-over-year. Warmer than normal weather was also a factor particularly in the fourth quarter.

Our wholesale residual oil and crude oil net product margin increased $8 million from $9 million to $17 million. Our new crude oil activity accounted for the increase due to particularly favorable market conditions and to a lesser extent the physical product margin. The mid-continent crude oil market is increasing in efficiency and we expect it to become more efficient over time.

Our second segment, the commercial segment, enjoyed strong results boasting a net product margin of $39 million, more than twice last year's $18 million. The improvement reflects full year gasoline sales from our company-operated sites as well as record results from our bid, bunkering and natural gas businesses.

The net product margin in our all other segment which includes rental income from dealer sites, as well as convenience store income from our approximately 40 company-operated locations, increased from $9 million in 2010 to $32 million in 2011. Keep in mind again that we only had one quarter of results for this segment in 2010 compared to a full year of operation in 2011.

Total costs and operating expenses for the year increased from $117 million a year ago to $159 million in 2011. The increase reflects a full year of operations of our Warex terminals which we purchased in the second quarter of 2010, as well as the purchase of our Mobil assets late in the third quarter of 2010.

From an expense standpoint we reduced our headcount by 10% during the third quarter, ending the year with 264 people, down 29 from 293 people at June 30. Compared with the first half run rate in 2011 we are on track to reduce core expenses in 2012 in a previously announced range of $10 million to $12 million.

There are some onetime expenses during 2011 I would like to note. We expensed $2 million of onetime severance costs related to the reductions in staff, and we incurred $1.1 million of onetime costs associated with the Alliance acquisition.

Interest expenses increased approximately $9 million from $22 million to $31 million, which reflects higher oil and refined product prices, as well as the term financing associated with our acquisitions. Our distributable cash flow at $46.7 million is up slightly from last year's $46 million. The key factors affecting this result, as we have discussed, were the backwardation in wholesale gasoline and less favorable distillate market conditions.

The balance sheet remains very liquid with nearly 70% of our assets concentrated in receivables and inventory. These assets turn over quickly. Our days receivable and days inventory represent about two weeks of sales and cost of sales respectively.

As Eric mentioned, last week we purchased all of the membership interests of Alliance Energy. In consideration Global Partners issued 5,850,000 common units and assumed long-term debt subject to post closing adjustments of approximately $180 million. In order to assume Alliance's long-term debt we increased the acquisition tranche of our bank credit facility to $500 million. I am pleased to report that our bank group significantly oversubscribed this increase.

There is limited working capital impact on financing requirements as a result of the Alliance acquisition. Similar to our Mobil transaction we believe that the purchase of these assets achieves tax efficient returns. Although there is some remaining work to do, the key integration elements are all in place and we are running smoothly as one combined company.

We expect to incur approximately $5 million of onetime closing costs in the first quarter of 2012. We believe that this acquisition further diversifies our asset base, enhances our cash flow and extends our leadership position, enabling us to deliver long-term value for our unitholders and employees.

The transaction is expected to be accretive in its first full year of operation, consistent with our previous comments and based on the anticipated performance of the Alliance business, as well as current and anticipated general economic industry and market conditions. The partnership has modeled an expected cash return prior to financing costs in the low to mid teens in the first full year of operation.

Near term, we expect our first quarter performance will be weak due to warm weather which is affecting heating oil sales and increasing gasoline prices, which is affecting demand and gas station margins. Beyond this we look forward to the addition of Alliance to the partnership's future results, as well as the contributions of our many organic projects underway that Eric highlighted.

With that we would be happy to take your questions. Operator?

Thank you. We will now be conducting a question-and-answer session.

(Operator Instructions)

Our first question comes from the line Gabriel Moreen of Bank of America Merrill Lynch.

Good morning, everyone.

Good morning, Gabe.

A couple questions I guess on the Bakken opportunities, just getting some more details around that in terms of the terminal you're building. Is that strictly for your own use, or is that also being I guess leased out to third parties? And then some more color maybe if you see what you're looking at on additionally on the terminaling side.

And then in terms of where that crude is being transported to, and realizing I guess the huge discounts right now associated with Bakken crude. Is that crude then -- where is that crude going from Albany? And I'm just wondering if the PADD 1 refinery shifts, does that change anything with that business in terms of where that crude ultimately heads to?

Sure. So the crude that we're aggregating and putting on trains and bringing to Albany are going to East Coast refineries. Obviously, if those refineries are to shut there will be limited demand for that, but the fact of the matter is we feel comfortable that there are substantial volumes that will be able to move as long as there are a refinery opened on the East Coast.

But as you would suspect, Gabe, it is the typical group. You've got ConocoPhillips. You've got Sun as sort of the primary customers and targets for that product. And like I say, I think there's plenty of volume available in the market for us to supply there.

In terms of the tank out there, I think our view is we'd like to use it for our own use. If somebody were to come along and offer me lots and lots of money and not compete directly for the business that I want to do out there, essentially we would consider leasing it, but we built it primarily for our own use.

Okay, got it. And then I guess on the distillate side of things and appreciating the warm weather and how much of an impact that's had on a lot of people, not just yourselves, are you guys also feeling okay about I guess your retail customers in terms of being -- the winter they've had in terms of being able to pay their bills to you guys?

Gabe, it's interesting. All of our resellers and deliverers of heating oil say their accounts are current and they're in pretty good shape at this point. One advantage for the consumer is that the prices are down. It's easier to pay. We are a little suspicious though that some of these companies on lower volume will have some stresses, which we may see in the course of the summer when they have less cash flow.

Yes. I think -- Gabe, I think one of the things is because it has been so warm and the demand is off I think, and obviously it's off, you can assume it's off exactly what the degree days are in terms of demand at a minimum. So, I think consumers have had to purchase less heating oil and because of that they have lower costs. If per gallon costs are high, they'll right -- but because of the warm weather they haven't had as big a bill.

Got it. That makes sense. And then directionally in terms of how you're thinking about, or if you're thinking about giving guidance this year it seems like there's a lot more moving parts this year given the weather, gasoline prices, et cetera. Are you going to hold off on guidance, or just sort of see how things kind of shake out from an EBITDA guidance basis?

Well, Gabe, I think maybe the way to answer that is just to recall that consistent with the comments in our Q2 conference call of '11, and a flat futures market and with our pre-Alliance business, a reasonable expectation for EBITDA should be in the $90 million to $110 million range, particularly after giving effect of the expense reductions that we've, those actions we've taken.

Separate and distinct from that, the Alliance transaction is as you know expected to be accretive, and we've modeled a cash return prior to financing in the low to mid-teens for the purchase price of those assets.

Got it. Okay. Thanks, Tom. Helpful.

Thank you. Our next question is from Ron Londe of Wells Fargo.

Thank you. Just to reiterate that was $90 million to $110 million of EBITDA or EBIT?

That's EBITDA.

Okay. Yes, I was just curious what the environment was during the fourth quarter maybe into the first quarter and getting -- finding some distressed cargoes from Europe.

Well, we have some cargoes that do come from Europe on a consistent basis, Ron, and that's a pretty reasonable transaction for us, but other than that that was primarily the only volumes that we took in -- right -- that would have been at all advantaged.

Would you say it was a better quarter from that standpoint, or --?

No, normal.

Kind of a normal environment.

Yes.

Okay. From the standpoint of debt you always talk about debt that's related to hard assets. Can you give us kind of an updated feel for that given the acquisitions and everything?

Sure, Ron. At yearend under our acquisition and general purpose facility we had availability of about $350 million and we had borrowed $205 million. And then we increased that tranche to $500 million and borrowed $180 million to finance the Alliance acquisition in the course of the quarter.

So, what does that get us? Does that get us --?

That's about the $400 million range --

$400 million --

-- between those two numbers, right?

-- related to hard assets.

Yes.

Okay. And can you give us -- there has been a lot of noise on the television about stations converting or installing natural gas facilities. Can you give us your perspective on that related to the cost, and benefit and demand?

Yes. It's interesting and I've had multiple meetings with many different parties, Ron. And I think for me if I were going to do that I would want to back into some sort of anchor tenants first. And then I would consider doing that because you know it's expensive to convert these facilities over.

And, yes, in fact costs are lower in those products, but at the end of the day you're also laying out a couple million bucks per site to make a conversion. So, for me, if I were going to do it I would want to make sure that I had an anchor tenant or a couple large commercial accounts that essentially were helping me to pay off, or guarantee a payout on that investment.

Okay. And you were talking a little bit about demand falling off because of high gas prices. Can you give us a feel for the percent of drop in demand in general that you've been seeing and how that's affecting the convenience store part of the business?

Gas demand is off 4% -- right -- according to for the PADD 1 -- according to the EIA data for the quarter. Because we're taking over -- because we took over those Mobil assets those -- I don't want to say -- I think we run them better than the prior owner, and because of that I think we're getting more out of those convenience stores. So, we haven't seen a problem. Now maybe if we were running them as best as possible all along the way you might have seen a dent in that business, but for us it's actually the opposite.

And the North Dakota terminal and the Albany terminal projects, what is the dollar amount of those two, the cost on a cost basis?

I want to say the tank out in North Dakota is somewhere around seven -- what do you think, guys, $7 million in total? And then the facility in Albany the first build-out that we shared with CP was $6 million, and the additional build-out will be somewhere around another $6 million or $7 million. And then we also spent a little bit of money creating the ability to take in multiple products there as well. That might be another $1.5 million or $2 million, something like that.

Now what do you mean by multiple products?

So we can take in not just crude oil. We could take in crude, ethanol, other blendstocks as the opportunities present themselves.

Do you have the ability to take in propane?

Not at that facility. But hey, Ron, I like your thought.

Okay.

Okay. So, I'm with you on that.

Okay. That's all I have. Thanks.

Thanks.

Thank you. Our next question is from Paul Jacob of Raymond James.

Good morning, guys. On the cost reductions, the $10 million to $12 million run rate, can I just assume that that's going to be fully effective in the first quarter of this year? Is there going to be some ramp up to that reduction as the year progresses?

It's effectively fully in place in the first quarter. And remember, that's off the core run rate in the first half of '11.

Okay. And then in terms of the DOE strategic reserve contract is there -- are you looking at a possibility to extend that beyond 2012 and, if so, when might we hear about that?

The Department of Energy I believe has three additional one-year lease options on their end. And we'll see what they do. Typically they have renewed them.

Okay. Great, that's all I have.

Thank you. Our next question is from Brian Zarahn of Barclays Capital.

Good morning.

Good morning, Brian.

Can you elaborate a bit on your first quarter expectations? Do you expect coverage to exceed one times in the quarter?

I think, Brian, we probably won't go further than what we said this morning simply because we're still in the midst of the quarter, but because of the warm weather heating oil sales are off. And the increasing gas prices, as Eric mentioned, that affects demand as well as margins on a gasoline station site. So, it will be a weaker quarter.

Okay. And then you talked a little bit about your CapEx. I wasn't sure if the storage in North Dakota and Albany project if that was in total or for '12, but do you have a preliminary view of 2012 CapEx?

We have not, Brian, and probably won't mention a full number for the year. What I can say is our maintenance CapEx, if you look piece through our past statements it's probably in the $12 million to $14 million range, including Alliance for 12 months. This past year it was much less happily because we found the Mobil assets being, number one, in excellent condition. And in addition some of the routine maintenance programs we took in place will take a few years to unfold.

And then on -- given the change in product flows and we're seeing a lot of activity for marine terminals on the East Coast, can you give your perspective on do you see any growth opportunities there or opportunities for higher rates down the road?

I think if the assets are the right assets and can handle the right products and are unique and less commodity, I think those will have higher returns associated with them in total -- right -- so and if you are talking about -- I don't know if that question is also saying, asking if the M&A market is busy. I can tell you it is busy. There's a lot going on, and there's a lot of projects and a lot of assets that are looking to possibly change hands.

Okay. Thanks, guys.

Thanks, Brian.

Thank you. Our next question comes from James Jampel of HITE.

Hi, guys.

Hey, how you doing, James?

Just a little bit more on the fourth quarter versus the first quarter. You mentioned the high gasoline prices pressuring margins in the first quarter and of course the warm weather that we're having here. Could you comment on other things that will be puts and takes between the fourth quarter and the first quarter, including the backwardation or anything else you want to mention?

I think you can sort of look at the product curves on the NYMEX, and you can see sort of where gasoline sits. And you're going from a wintertime spec to a summertime spec. It's the same as it is every year. You have obviously fluctuations in how big that carry is going from one product to the next, but that's there. I would say on the heating oil you are seeing some contango in that heating oil market as well. So, those are somewhat positive trends.

And anything else that would distinguish the fourth from the first?

I don't think so, James. I think the two big ones apart from the curves that Eric mentioned are the weather and the increase in gasoline prices.

I see. Now, Tom, you did mention something about the mid-continent market becoming -- should be becoming more efficient in your remarks. And could you elaborate on that?

Yes, James. It's Eric. In terms of the mid-continent, all Tom's referring to is as these assets and the infrastructure gets built out over time, you are going to see the market become more efficient. You are going to see the spreads on all this stuff sort of narrow down a little bit. Right now because there's just so much production coming on stream, and there's no pipelines and there's even few rail facilities, the ability to move product fungibly, quickly, easily from one location to another location is limited. And because of that there are really large inefficiencies that exist in that marketplace.

I see. Well, help me through here because it would seem to me that the movement of oil by rail over such long distances in North Dakota to Albany, and given the refinery situation on the East Coast that that this would be like really a short-term thing and it wouldn't be something that is going to be a longer part of the Global portfolio of business. Or, am I missing something?

Well, yes we hope not. I do think that we're as a supply point as efficient as the other existing alternatives that are in the marketplace. So, the hope that we have is that we'll be able to grow the business, and that it's not a business that's going to be a short-term business.

I see. Enbridge is talking about reversing pipelines and trying to move that way.

Yes. Well, I've heard a lot about that and I'm not exactly sure how it's going to get there. What I do know is I have the single line haul rail. I can load a tank car in North Dakota and in four days have it in Albany. Now that's fast. And I'm not saying that's a typical time, but it's not much off of that. And so, I would argue I have as an efficient way to move crude and other products as anyone.

Now the question goes back is -- how much demand are you going to have for it? But we feel that because of our efficiencies in this asset that we can compete certainly with other rail facilities. And then depending upon how we maximize out the facilities we may be even able to compete if there were any developments of pipes.

I see, okay. And lastly, did you look at all at the facility that Buckeye bought?

Which one are you talking about?

No. The one in the New York area.

The one in where?

The one in the New York area.

Yes. We saw that facility. I think -- look, they obviously have ideas and plans for that facility. I don't know what they are.

But in terms of -- is that something that you guys looked at seriously, or no?

We look at all, we look at every deal that's out there, so --.

I see. I guess the way I would characterize it -- correct me if I'm wrong -- is they might have had certain synergies with that piece of property that you guys might not.

Perhaps I would guess, but I don't know.

Okay. Thanks. And also thanks, again, for reporting that headcount series. That definitely sets you guys apart, and I think it's very important.

Thank you.

Thank you. Our next question comes from Andrew Gundlach of First Eagle.

Good morning. One housekeeping question. What do you expect your interest to be this year?

Well, Andrew, we haven't given guidance on it. The borrowing levels are more or less set now and it will depend on prices, unless there's some transaction in the course of the year.

So $30 million or $40 million range basically?

Andrew, I'm not -- we don't maybe -- maybe you don't know, typically don't give specific guidance on that.

Okay. The other thing with respect to your comments on Conoco and Sun obviously they're -- those refineries are up in the air. And what happens if they -- I don't know which Conoco refinery you're talking about if it's train or the other one, but --

I was just talking about the one that was running.

Just the one that was running, okay. And so, if Philadelphia gets shut?

That's -- it's okay. We think logistically we're, we have a better solution than anybody else, so -- .

But is there a demand for that, for the product in other East Coast refineries that might still run?

We believe that there will be. If there's any other refineries running we believe that, A, we're efficient and that, B, if we can handle the demand we'll be the guys to supply it.

Okay. And then just two questions on the bigger picture. Can you -- you started to refer to this earlier with Albany and propane, but can you talk about the blending opportunities that you see if you figure that Marcellus produces I don't know somewhere between 30,000 and 50,000 barrels of C3 plus five years from now say?

Yes.

Is that -- and just explain how that -- what opportunities are there for you, number one. And number two on the marketing side of the business the Atlantic Basin trade is changing big time and it's tough to get your arms around it. And can you just talk about that as a threat and an opportunity?

Yes. Well, I think the Atlantic -- let's start with the Atlantic Basin. I think depending on which refineries they open, and which ones close and which one comes back up and run again you're going to see gasoline come into the market. It comes -- a lot comes from Europe now. So, I think you're going to continue to see that.

And if some -- if the market were to get very tight I think you could even some of it come domestically. Right? So I think the market will find its footing, and its price and its value to make the gasoline come here. And, for us, I think, look, we're a taker and so we'll be on that marketplace, and I don't think it's much of a change from how it works today.

Okay. And then what about the blending opportunities?

Yes. I think you're spot on. You've got all this domestic production coming up and it's all over the country, and it is going to shift supply and demand patterns and who's advantaged and who's disadvantaged. And you're going to have to see how that plays out. It's going to be shifting though for sure. Right?

But can you capture the spread for your own profit margin as you do more blending?

What I believe will happen is those who have the logistical assets that can take advantage of those inefficiencies will be the ones to benefit from those spreads.

I would agree with that. Thank you.

Thank you. Our next question comes from Ron Londe of Wells Fargo.

Thanks, just a quick housekeeping question. What do you expect the number of units to be outstanding at the end of the first quarter?

Hang on a second, Ron. We've got --

I know it's 21.5 plus 5.8.

Yes. That's pretty much the number.

Is that going to be the number?

Yes. It will be [$27.430 million].

Okay, okay, thanks.

Thank you. There are no further questions at this time. I would like to turn the floor back over to Mr. Slifka for closing comments.

That concludes today's call. We look forward to updating you on our progress. Thanks, everyone, for joining us.

This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.