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Buckeye Partners (NYSE:BPL)
Q2 2018 Earnings Conference Call
Aug. 3, 2018 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the BPL 2018 second-quarter financial results conference call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Kevin Goodwin, vice president and treasurer. Sir, you may begin.

Kevin Goodwin -- Vice President and Treasurer

Thank you, Bruce. Good morning, all. Welcome to Buckeye Partners' financial results conference call for the second quarter of 2018. On this morning's conference call, Clark Smith, our chairman, president, and chief executive officer, will discuss highlights since our last conference call.

Khalid Muslih, executive vice president and president of global marine terminals, will discuss his segment's results and provide an update on the significant capital projects in this segment. And Keith St. Clair, executive vice president and chief financial officer, will review our financial results for the quarter. Also on the call this morning are Bob Malecky, executive vice president and president of domestic pipelines and terminals; Bill Hollis, senior vice president and president of Buckeye services; Todd Russo, senior vice president and general counsel; Joe Sauger, senior vice president of operations for global marine terminals and engineering services; and Gary Bohnsack, vice president, controller, and chief accounting officer.

After our prepared remarks, we will take your questions. We'd like to remind everyone that we may make comments on the call that could be construed as forward-looking statements as defined by the SEC. Future results are subject to numerous contingencies, many of which are outside of our control. Any forward-looking statements we make are qualified by the risk factors and other information set forth in our Form 10-K for the year ended December 31, 2017, and in our most recent Form 10-Q, each as filed with the SEC and available on the Buckeye Partners' website at www.buckeye.com.

We undertake no obligation to revise our forward-looking statements to reflect events or circumstances occurring after today. In addition, during the call, we will be discussing Buckeye Partners' adjusted EBITDA and certain other non-GAAP measures pertaining to completed fiscal periods. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release issued this morning, as well as in the supplemental reconciliation, both of which are available on the Investor Center section of the Buckeye Partners' website. During the call, we will also discuss forward-looking estimates of our coverage ratio.

The numerator of our estimated coverage ratio is estimated distributable cash flow, which is a non-GAAP financial measure. We cannot provide a reconciliation of estimated distributable cash flow to estimated GAAP net income, which is the GAAP financial measure most directly comparable to distributable cash flow, without unreasonable efforts due to the inherent difficulty and impracticality of quantifying certain amounts that would be required to calculate GAAP net income, such as unrealized gains and losses on derivatives mark-to-market and potential changes in estimates for certain contingent liabilities. These amounts that would require unreasonable efforts to quantify could be significant, such that the amount of projected net income would vary substantially from the amounts of projected distributable cash flow. With that, I will turn the call over to our chairman, president, and CEO, Clark Smith.

Clark Smith -- Chairman, President, and Chief Executive Officer

All right. Thank you, Kevin. Good morning, everyone, and thank you for joining us today. I apologize for my voice, I'm fighting a little bit of a head cold.

So at times, I may have to take a drink of water. As you're aware, earlier this morning, we announced that Buckeye is undertaking a comprehensive strategic review of its asset portfolio with a financial strategy. I intend to provide more details around that review, but first, as usual, I'd like to start off by discussing a few safety highlights for the quarter. During the quarter, a number of our teams across Buckeye participated in emergency response drills and training that was hosted at our Buckeye Bahamas Terminal.

The intent of this training is to ensure our employees are adequately prepared to respond in the event of an emergency, including coordination with local first responders. These drills served to reinforce our employees' continued focus on safety to ensure the safety and security of our assets, our people and the communities in which we operate. We're also pleased to announce that we crossed a significant milestone during the quarter by working over 1 million contractor hours without any OSHA recordable incidents. This demonstrates that our employees and contractors remain focused on executing our growth in operations while not losing sight of the importance of following our strict safety guidelines.

Turning to our announcement this morning, we previously stated our goal of maintaining our level of distribution and preserving our investment grade credit rating. We recognize that the public equity markets for midstream MLPs remains dislocated, and our cost of capital has increased as the equity markets have not rewarded Buckeye for the level of distributions being paid nor for the significant level of cash flows we are generating. At the same time, our commercial business development and operations teams have continued to perform well, and Buckeye has identified opportunities to deploy meaningful levels of capital at attractive multiples. Since last quarter, we announced the purchase of our partner's 20% equity interest in Buckeye Texas Partners at an attractive valuation.

We launched the expansion of our Chicago complex supported by a long-term throughput arrangement with BP, and we've formed a joint venture with Phillips 66 and Andeavor to develop a large-scale marine terminal in Corpus Christi that we believe has additional growth capital opportunities to expand beyond the first phase. Beyond these large initiatives, we have a healthy backlog of additional projects and further expansions that are under assessment. Overall, we now expect to deploy over $600 million of capital in 2018. We expect these investment opportunities to drive long-term value for our unitholders.

However, our ability to execute on these opportunities could be limited by the lack of available sources of capital at a reasonable cost. In addition, although we expect to see improvement in our segregated storage business in the next 12 to 18 months, in particular, with the anticipated benefits of the IMO 2020 marine fuel regulatory changes, both our distribution coverage and leverage have been negatively impacted by continued challenging market conditions for segregated storage, combined with the anticipated increased levels of capital expenditure. In light of these factors, our board of directors and management have initiated a comprehensive review of our asset portfolio and financial strategy as we look to guide the company through this current business cycle. We have retained financial advisors to assist in this strategic review.

This process includes a review of a number of alternatives to maximize long-term value for Buckeye, including individually or in combination of a potential sale of certain assets, with full or partial monetization of equity interest in certain joint ventures and other potential transactions. In addition, we are assessing our capital structure and the potential benefits of transitioning to a self-funding model for the equity portion of our growth capital requirements, limiting our dependency on public equity markets. Our strategy is to evaluate any and all business and strategic options that could drive long-term unitholder value and no option will be off the table in our review. We plan to complete this review in the third quarter and communicate the results during our third-quarter conference call in early November.

And I would like to emphasize that our board and management team are committed to determining the best path forward for Buckeye and its unitholders. I can assure you that we believe that our diversified portfolio of pipeline and terminal assets and the talented Buckeye employee bases will deliver growing value for our unitholders well into the future as we work through these business cycles. Turning now to our distribution for the second quarter, we announced that our board of directors approved maintaining our quarterly distribution of $1.2625 per unit or $5.05 on an annual basis. We also elected to pay the distribution in time to our Class C unitholders.

Given the challenges facing our business, our goal to maintain our investment grade rating, our distribution policy will be part of the strategic review that I just spoke about. With respect to our ongoing capital projects, we continue to advance on a number of large- and small-scale opportunities that we expect will provide meaningful contributions to the company's performance in 2019 and 2020. We have commenced construction of the South Texas Gateway Terminal, a joint venture with Phillips 66 Partners and Andeavor in Ingleside, Texas. Khalid will provide more detail on both this opportunity and global marine terminals in a moment.

With respect to phase two of our Michigan-Ohio project, as we expected at the administrative law judge's recommended decision this past spring, the Pennsylvania Public Utility Commission denied our request to reverse the portion of the Laurel pipeline servicing Central Pennsylvania. As previously announced, we believe we have addressed the PUC's concern for offering bidirectional service between Central and Western Pennsylvania. This approach allows current shippers continued access to Western Pennsylvania, while providing Pennsylvania consumers with increased access to lower cost Midwest-supplied fuels. In July, we also successfully resolved concerns certain shippers expressed on the timing of our hydro test at the [Inaudible] pipeline and announced that the testing would occur in mid-September.

This is a significant step in commencing bidirectional service in late 2018, subject to receipt of certain regulatory approvals. We also continued to advance our expansion projects of our Chicago complex, Buckeye's Midwest hub. The project to expand our refined product storage capacity and our blending and [Inaudible] capabilities remains on budget and on time with an expected completion in mid-2019. BP Products North America is supporting the project with a long-term contract.

This investment further solidifies the position of our Chicago complex as the premier storage and trading facility in the Chicago area. While these larger projects receive most of the attention, we are also progressing on several smaller scale projects. These types of projects frequently involve enhancements to our existing asset, allowing for a more robust set of product or service offerings. For example, we are expanding our butane blending capability by enhancing these services at certain terminals in the Southeast and introducing blending capabilities at our Buckeye Bahamas hub facility.

We're also advancing several other growth capital opportunities, such as expanding our asphalt handling capabilities at our North Charleston Terminal in South Carolina and exploring an opportunity to transfer propane in the upstate New York and Pennsylvania. These projects represent a small subset of the identified backlog of potential enhancements and opportunities across our portfolio of assets. Our commercial and business development teams continue to review and evaluate additional growth opportunities that we believe with delivering creates long-term value for our unitholders. Now I'll turn the call over to Khalid to discuss our global marine terminals segment in greater detail.

Khalid Muslih -- President of Global Marine Terminals

Thank you, Clark, and good morning, everyone. My remarks today will focus on the performance of our global marine terminals segment during the quarter, while also providing additional color around the advancement of our growth capital projects. The global marine terminals segment posted adjusted EBITDA for the second quarter of $120.7 million, compared to $131.8 million during the same period of last year. The decrease in adjusted EBITDA was primarily driven by a $23.3 million decrease in revenue from lower demand for storage services as a result of weaker market conditions, partially offset by greater contributions from our equity investment in VTTI, the acquisition of our former partner's interest in Buckeye Texas and successful cost controls.

In addition, our average available capacity utilization was 85% for the second quarter of 2018, compared to 91% for the same period last year, reflecting the weaker market conditions. While near-term market conditions remain challenging for our segregated storage business, our global platform is positioned to capitalize on emerging long-term market trends to deliver the necessary services to meet customer demand. At the moment, prior investments made across our system have positioned us to satisfy current demand through evolving market conditions. At least an example of these investments and how they can attract customer demand was the commissioning of our new Raritan Bay to Perth Amboy transfer line.

This new transfer line has enabled recontracting with open capacity at Raritan Bay and is providing our customers with improved waterfront access at Perth Amboy, as well as access to the Buckeye Pipeline Network. Another example is our enhanced blending, segregation and marine capabilities in the Bahamas, which has facilitated incremental demand for gasoline and distillate service. These investments drive incremental utilization of our assets and provide attractive differentiated capabilities to our customers, regardless of market structure. Additionally, we are positioning our terminals to meet increasing demand for our services as a result of the upcoming IMO changes.

This change limiting the sulfur content in marine transportation fuels should increase demand for our storage asset capabilities in 2019 and beyond. Overall, our asset infrastructure and focus on customer service positions us to drive significant cash flow improvement with little additional capital spend. Turning to South Texas, we saw a record contribution generated from our Buckeye Texas assets during the quarter as a result of continuing improvements in operational performance, implementation of projects and our acquisition of our former partner's 20% non-controlling interest in the assets. The successful implementation of several throughput enhancement projects resulted in higher splitter processing rates, along with record facility throughput and dock export volumes during the quarter.

These improvements enabled the first shipment of crude oil by a Suezmax tanker from Buckeye Texas in April. We're in the process of connecting our Buckeye Texas assets to the new Cactus 2 pipeline, as well as completing several facility debottlenecking projects underwritten by our customer to enhance our receipt and handling capabilities of increasing Permian Basin crude oil volumes. In connection with the anticipated demand as a result of IMO, we are undertaking a technical and an economic feasibility review with respect to expanding the processing capabilities for our existing condensate splitters and improving production yields for higher demand products. Successful implementation of this project could add an incremental 25,000 to 30,000 barrels per day to our processing capabilities on a relatively shorter time frame and at a lower cost than adding a third train.

In addition to expanding our last mile handling of growing volumes of crude oil, we also see increasing demand for similar capabilities for LPG and petroleum products and are well-positioned to meet growing market needs. To that effect, we recently completed a new pipeline connection project, again, underwritten by our customer, providing access to incremental supply of propane and butane volumes for export. We are moving forward with another underwritten dock enhancement project to handle increasing throughput volumes of LPG. Further, we are evaluating the potential for expanding our LPG handling and export capabilities, driven by strong customer interest.

We hope to report more details on our progress on future calls. Now switching over to our South Texas Gateway Terminal project that is currently under way in Ingleside, Texas, the initial permitting and construction of the facility are proceeding as planned, and we are on schedule to commence initial operations by the end of 2019. We are continuing our efforts to secure additional volume commitments and are in advanced contract stages with a number of customers requesting access into the facility. This strong interest from other potential customers and the announcement by our partners that the Gray Oak pipeline will have initial capacity of 800,000 barrels per day have led us to accelerate the expansion of our initial operating capacity of the South Texas Gateway Terminal.

This highlights the continued interest and strong demand by Permian producers for the Corpus Christi market and export access. Our combined asset footprint and connectivity capabilities in Corpus Christi position Buckeye to play a preeminent role in facilitating the rapidly increasing flow of U.S. crude oil and petroleum products. In addition, we continued to advance our efforts to enhance our overall capabilities through new connection and other infrastructure projects to facilitate our customers' ability to access the growing number of long-haul pipelines, culminating in the Corpus Christi area.

We look forward to sharing additional details on these efforts on future conference calls. Moving on to our joint venture, VTTI, the second quarter of 2018 proved to be another strong quarter, as we reported our proportion of share of adjusted EBITDA of $34.6 million, versus $28.8 million last year. VTTI declared a cash distribution for the second quarter of $23.8 million, an increase of $6.4 million compared to last year. Despite challenging global market conditions for storage, VTTI reported a strong average available capacity-utilization rate of approximately 96% during the quarter.

In addition, higher throughput rates and improved cost control further supported operating results. This global network of world-class terminalling assets in key market areas, combined with our partnership with Vitol, continues to provide a platform for growth and an emerging suite of organic growth projects at attractive investment multiples. I'll now turn the call over to Keith.

Keith St. Clair -- Chief Financial Officer

Thank you, Khalid, and good morning, everyone. I'll now provide additional details about our second-quarter financial results. This morning, we reported net income attributable to Buckeye unitholders of $91.9 million for the second quarter of 2018, compared to $112.7 million last year. This decrease is primarily attributable to lower operating results, driven by weaker overall segregated storage market conditions and lower results in our merchant services segment.

We also incurred higher interest and debt expense related to our senior notes issuance in late 2017 and our junior subordinated notes issued in January of this year. Net income attributable to Buckeye unitholders was $0.59 per diluted unit for the second quarter of '18, compared to $0.80 last year. The dilutive weighted average number of units outstanding during the quarter was 154 million, compared to 142 million last year. The increase in weighted average number of units outstanding is primarily due to the block trade of LP unit issuance in September of 2017 and the Class C PIK units issued during the first quarter of this year.

On a consolidated basis, we reported adjusted EBITDA, which is our primary measure of financial performance, of $254.9 million for the second quarter, representing a decrease of $14.3 million compared to last year's adjusted EBITDA of $269.2 million. Now I'd like to discuss in further detail the change in adjusted EBITDA for each of our reporting segments. Our domestic pipelines and terminals segment adjusted EBITDA was $135.3 million for the second quarter of 2018, which was flat with the prior-year quarter. Increased pipeline transportation volumes in the Midwest, as well as higher terminal settlement revenues, which benefited from higher commodity prices, were positive contributors for the quarter.

These benefits were offset by a reduction in terminal throughput revenue due to the expiration of a crude-by-rail contract in the Chicago complex in the first quarter of 2018. In addition, we were impacted by lower segregated storage revenues as certain tankage was not released by customers due to current market backwardated structure. We've made investments across our domestic system to increase the connectivity and capabilities of our segregated storage assets that have allowed us to maintain a strong base level of storage revenue even in backwardated markets. For example, all of the available storage capacity at our Chicago complex, which is roughly 6 million barrels, continues to be fully utilized.

Our average pipeline transportation volumes increased 2.9% to nearly 1.5 million barrels per day compared to 1.456 million barrels per day in 2017. Pipeline volumes increased, primarily due to strong demand for gasoline and distillates in the markets we serve, particularly in our Midwest systems, including increased volumes moving east into the Cleveland and Pittsburgh markets. Our terminal throughput volumes grew significantly during the quarter, with volumes totaling 1.345 million barrels per day across our portfolio, representing an increase of nearly 6% over the second quarter last year. Terminalling volumes increased, primarily due to market share growth across our system, including in the Southeast and in Pittsburgh.

For example, we've recently signed a volume incentive agreement with a large customer that has driven increased terminalling volumes in a number of our markets. We have also seen the benefits of investments we have made in our terminalling assets to increase our service offerings. During the second quarter, we saw the ramp-up of volumes from a major customer as our expansion in Jacksonville, Florida, came online, which added incremental storage tankage, rail and truck offloading systems, along with ethanol and butane handling capabilities. Now turning to our global marine segment, as Khalid mentioned, this segment produced adjusted EBITDA of $120.7 million during the second quarter of 2018, compared to $131.8 million last year.

Overall, improved performance of Buckeye Texas Partners and VTTI compared to the prior year were more than offset by lower capacity utilization and rates in our segregated storage business. For the second quarter of 2018, VTTI's adjusted EBITDA contribution was $34.6 million, versus $28.8 million last year. VTTI declared a cash distribution to Buckeye of $23.8 million for the quarter, versus $17.4 million last year. As Khalid noted, VTTI was able to maintain capacity utilization of approximately 96% during the quarter.

Additionally, anticipated capital spend for VTTI on an AH basis for 2018 is estimated to be approximately $180 million to $190 million. Looking at the balance sheet, VTTI had net long-term debt of approximately $900 million at the end of the quarter. We realized the highest quarterly contribution to date from our Buckeye Texas Partners facility, which benefited from strong operating performance and the buyout of a minority 20% interest from our partner, Trafigura, which closed in April. Turning now to our segregated storage business, the average available capacity utilization of our marine storage assets was 85% for the second quarter of '18, compared to 91% last year.

This decline in utilization is primarily related to uncontracted crude oil capacity. We also saw a decline in rates in both the Caribbean and the Harbor. As the decline approaches -- as the deadline, rather, approaches for implementation of the IMO fuel standards, the teams are focusing their efforts to ensure we are positioned to capture incremental storage volumes resulting from [Inaudible] market dislocations. We also believe our assets are well-positioned to benefit from the continued growth in light oil production as U.S.

exports compete for global market share. Our merchant services segment reported a net loss in adjusted EBITDA of $1.2 million for the second quarter, compared to EBITDA contribution of $2 million last year. This decrease was primarily driven by unfavorable spread, particularly in the distillate market, partially offset by higher sales volume year over year. Now turning to our balance sheet, at the end of the second quarter, we had $1.7 million in cash and cash-equivalents and $4.9 billion in long-term debt.

We have $460 million outstanding on our credit facility, of which approximately $289 million is reflected as long term and the balance of $171 million is reflected as short term, as this supports our merchant services segment working capital requirements. We had just over $1 billion of -- we have just over $1 billion of incremental liquidity available on our revolving credit facility and our total debt to trailing 12-month adjusted EBITDA based on our credit facility calculation was 4.3 times. Looking forward, our next significant maturity is $400 million in November of this year. Distributable cash flow for the second quarter of 2018 totaled $162 million, compared to $170.4 million last year.

The decrease in DCF was driven by reduced EBITDA contributions from our business segments and higher interest and debt expenses related to our recent debt issuances, partially offset by decreases in maintenance capital expenditures, primarily due to the timing of project spending in the year-ago quarter. Our distribution this quarter of $1.2625 is unchanged from the previous four quarters. Our distribution coverage ratio, based on distributions declared on the units outstanding at the end of the quarter, was 0.87 times. As stated in the previous quarter, we expect our distribution coverage for the year to remain at 0.9 to 0.95 times.

Now looking at Buckeye's capital spending, maintenance capital for the second quarter of 2018 was $27.2 million, compared to $35.6 million for the second quarter of 2017, excluding hurricane-related projects. We expect maintenance capex for the full year to be within the range of $105 million to $125 million. Return capital spending was $104.6 million during the second quarter, and we expect return capital spending to be in the $345 million to $395 million range for the full year. In addition, we expect to contribute between $55 million and $75 million for the full year to fund our portion of capital expenditures at our South Texas Gateway joint ventures.

These amounts also exclude the approximately $210 million that we invested in the acquisition of the 20% interest in Buckeye Texas Partners. These amounts all combine to an estimated full-year 2018 capital investment of between $610 million and $680 million. We continue to project that VTTI will not require material equity funding in 2018. In closing, our diversified portfolio of assets continues to produce significant cash flow as indicated by Buckeye generating adjusted EBITDA of nearly $1.1 billion and distributable cash flow of over $700 million over the last 12 months, despite challenging market conditions for segregated storage.

That concludes my remarks, and we'll now open the call for questions.

Questions and Answers:

Operator

[Operator instructions] And our first question comes from the line of Jeremy Tonet from JPMorgan. Your line is now open.

Jeremy Tonet -- J.P.Morgan -- Analyst

Good morning.

Clark Smith -- Chairman, President, and Chief Executive Officer

Thanks, Jeremy.

Keith St. Clair -- Chief Financial Officer

Hey, Jeremy.

Jeremy Tonet -- J.P.Morgan -- Analyst

Thanks for the color on the strategic review here, just wanted to start there. Can we assume that a key tenet of whatever the plan is would be to maintain investment-grade ratings? Could you expand on your thoughts for that?

Clark Smith -- Chairman, President, and Chief Executive Officer

Yes, we're absolutely committed to investment grade ratings, Jeremy. So that's a right statement. It's part of a number of different options we're going to be considering, but that's the highest priority.

Jeremy Tonet -- J.P.Morgan -- Analyst

That's helpful. And just trying to dig into the thought process a little bit. If the outcome of the strategic review directs you to sell assets and de-lever to preserve the ratings, over how long would you guys be willing to run with lower level of coverage? Or on the other hand, if you're thinking about moving straight to the self-funding strategy, what level of distribution in your mind would be the right level there?

Clark Smith -- Chairman, President, and Chief Executive Officer

Jeremy, we're not going to try and speculate on the outcome of the strategic review other than saying that our focus is going to be on creating long-term value for our unitholders. So time is obviously a part of that, but we'll have an opportunity to report back to you on the next earnings call.

Jeremy Tonet -- J.P.Morgan -- Analyst

That makes sense, thanks. And just merchant services, I was wondering if you could touch on that a bit more as far as the results in the quarter and kind of how you see the outlook for the balance of the year?

Bill Hollis -- President of Buckeye Services

Yes, this is Bill Hollis. I'm happy to, Jeremy. I think the second quarter, it is typically one of the lower quarters of the year. I think when I spoke on the last call, we talked about something in the range of $20 million to $25 million as our normal expectation for EBITDA for the business on an average year.

I think we talked about plus or minus $10 million as a range that would be reasonable to think about in that, and we'll certainly be toward the lower end of that range this year, but I think we're still within the parameters that we talked about on the last call.

Jeremy Tonet -- J.P.Morgan -- Analyst

That's helpful, thanks. And did I miss -- did you guys talk about what the 2019 CAPEX spend would be on the organic side?

Keith St. Clair -- Chief Financial Officer

No, Jeremy, we have not indicated where 2019 CAPEX would be, no.

Jeremy Tonet -- J.P.Morgan -- Analyst

Great. Thanks for taking my questions. I'll hop back in the queue.

Keith St. Clair -- Chief Financial Officer

OK. Thanks, Jeremy.

Operator

And our next question comes from the line of Shneur Gershuni from UBS. Your line is now open.

Shneur Gershuni -- UBS -- Analyst

Good morning.

Keith St. Clair -- Chief Financial Officer

Good morning.

Shneur Gershuni -- UBS -- Analyst

First off, I was wondering if I can just clarify what are the answers you gave to Jeremy. So push comes to shove, the distribution -- sorry, rather, the IG rating ranks above the distribution as in terms of goals?

Clark Smith -- Chairman, President, and Chief Executive Officer

Well, it's all part of the look at all of the options, but what I was trying to convey to Jeremy was, we're committed to being investment-grade, that is the highest priority. Maybe do a self-funding is one of the options that we're considering, Shneur. Obviously, when you look at the capital needs we just described, there's a number of factors that will come into play, and we're not prepared to tell you the absolute outcome at this point in time, but we'll be ready in about 90 days.

Shneur Gershuni -- UBS -- Analyst

OK. Fair enough. And in thinking about sort of the options that you're looking at, how would you order the priorities? I mean, are you looking at each one as one individual action as a magic elixir? Are you looking kind of as a combination? So for example, would it just be distribution count? Would it just be asset sales? Could it be a combination of them? Or are you even thinking more outside the box in terms of potential M&A activity or LBO activity? I was just wondering if you can sort of talk about how many boxes we're looking at here.

Clark Smith -- Chairman, President, and Chief Executive Officer

Yes, we're looking at all these options. As we mentioned in the remarks, all the options are on the table. A combination is certainly feasible, but we've got a lot more work to do before we can determine what that combination could be. And again, we're not going to speculate today on the call about how will all these combinations fit together, but we're looking at all of them.

Shneur Gershuni -- UBS -- Analyst

Great. And one final ops question. The rail contract that went away last quarter. Is there any plans or opportunities to replace that or replace the lost revenue at some point?

Bob Malecky -- President of Domestic Pipelines and Terminals

Yes, this is Bob Malecky. There is obviously a change in the interest in rail transportation at this juncture, and we are pursuing some opportunities with it. It's all in the formative stage, and we hope to report on that soon.

Shneur Gershuni -- UBS -- Analyst

Great. Thank you very much, guys. Have a great weekend.

Bob Malecky -- President of Domestic Pipelines and Terminals

Thank you.

Shneur Gershuni -- UBS -- Analyst

Thank you.

Operator

And our next question comes from the line of Harry Mateer from Barclays. Your line is now open.

Harry Mateer -- Barclays -- Analyst

Hi. First, just, you have an upcoming maturity, $400 million in mid-November. So given you don't plan to announce the results of the review until the 3Q call, what's your current thinking on how you're going to address that? Do you try and refinance it in the bond market ahead of it or just use the revolver to pay it off on a temporary basis?

Keith St. Clair -- Chief Financial Officer

Yes, Harry, that's a decision that will come to as the maturity approaches. We certainly have the flexibility and the availability to basically address that maturity with capacity within our revolver. Our expectation now, though frankly, would be to be in the bond market some time in Q4.

Harry Mateer -- Barclays -- Analyst

OK. And then just a follow-up on last question. I may have misheard, but the question was phrased in a way that I was asking whether like a privatization LBO option was something that would be part of the consideration. And it sounded like you answered in the affirmative that that's part of the suite of options you would look at.

Is that correct?

Clark Smith -- Chairman, President, and Chief Executive Officer

We're looking at all options. That's all I'll say at this point in time.

Harry Mateer -- Barclays -- Analyst

OK. Thank you.

Clark Smith -- Chairman, President, and Chief Executive Officer

Thanks.

Operator

And our next question comes from the line of Ross Payne from Wells Fargo. Your line is now open.

Ross Payne -- Wells Fargo Securities -- Analyst

Good morning, guys. I know we're trying to get as much color on this as we can. Is it fair to say, though, that selling assets may be the first priority, cutting distribution is No. 2 and potential sale No.

3?

Clark Smith -- Chairman, President, and Chief Executive Officer

No, I don't think I'd put it in necessarily that order. I think all of those options carry weight and as somebody asked just a little while ago, in combination, they all have different variables attached to. I think the highest priority is to stay investment grade, and after that, everything really is going to get, I would call, an equal look.

Ross Payne -- Wells Fargo Securities -- Analyst

All on the investment grade, can you speak to what's so important about that from an operational or financial standpoint to your company?

Keith St. Clair -- Chief Financial Officer

Yes, Ross, there continues to be a situation where frankly access to capital becomes more important than the actual cost of capital. As you think about us and you think about our suite of investment opportunities, etc., and our ability to finance our growth, it's very important to us that we're able to access reasonably priced and available capital in the public debt market, and the investment-grade credit rating continues to be very important in that regard.

Ross Payne -- Wells Fargo Securities -- Analyst

OK. And then, finally, on a potential sale. I mean, obviously, PE has been out there. EnLink was purchased by private equity.

Is that a potential avenue that might be explored? And if so, how would you view staying investment grade under that particular kind of scenario?

Keith St. Clair -- Chief Financial Officer

Yes, Ross, I think that's a question that, again, I think what we have to do is just go through our process that's completing, our strategic review, and I'm not going to suggest that anything has a higher probability, one pad versus the other, other than our continued commitment on a stand-alone basis to maintain IG rating.

Ross Payne -- Wells Fargo Securities -- Analyst

OK, great. Thanks a lot, guys.

Keith St. Clair -- Chief Financial Officer

Thanks, Ross.

Operator

And our next question comes from the line of Theresa Chen from Barclays. Your line is now open.

Theresa Chen -- Barclays -- Analyst

Hi. Following up on the line of questions related to IG. Given the Moody's outlook change a couple of weeks ago, can you give us a sense of what kind of timeline the agency has given you to make in a progress to get to the metrics they want to see in order to avoid a downgrade?

Keith St. Clair -- Chief Financial Officer

Yes, Theresa, this is Keith. I mean, first of all, all of the agencies understand that there is no silver bullet, not a quick fix, right? And they understand that we're in process of evaluating different options and completing the strategic review. And our anticipated completion of this review is consistent with the timeline that they've laid out from the perspective of being able to outline a specific plan. Once that plan has been communicated, it's our belief that we would then be given not a quarter, but frankly, several quarters to get the metrics back in line with what their expectations are.

Theresa Chen -- Barclays -- Analyst

Got it. And as you go through your strategic review, when we think about the outer years, what kind of organic capex spending are you taking into account? Is that roughly $300 million-per-year number still a good run rate? Or would you consider paring back some of the spending to rationalize your financing needs given the market challenges?

Keith St. Clair -- Chief Financial Officer

Well, I think a lot of that depends ultimately on where we end up with the completion of this -- with this review. We find ourselves in a situation where there are a lot of very attractive growth opportunities for it that we think will create long-term value for all our stakeholders. So it's important that we be able to maintain that level of spend to support what we think are going to be very attractive returns for unitholders, but as to the specific level of capex, we're not at a point where we're ready to speculate on what those levels will be in outer years.

Theresa Chen -- Barclays -- Analyst

Understood. And lastly, in relation to the base business. With your legacy segregated storage assets, how far are we from approaching a bottom in terms of earnings? What percentage of the contracts that were put in place during contango have you recontracted at this point?

Khalid Muslih -- President of Global Marine Terminals

Yes, Theresa, this is Khalid. Obviously, we've had -- some of these contracts have rolled off, and we have, as a result, been able to recontract some of those positions, albeit at lower rates. Some of those positions, the business models just didn't make sense, and in return, we've seen obviously a decline in our utilization levels. Not trying to get into the specifics of what exactly has rolled off, but I'd say that there's probably less than 10% that's left.

So if that kind of helps you get a feel for it, that's probably is as far as I can go. But I do think that when we look at where we have currently been, I guess, over the last couple of quarters, I would venture to say that our utilization levels are going to be roughly around those levels, give or take 3 percentage points.

Theresa Chen -- Barclays -- Analyst

Got it. And – sorry?

Khalid Muslih -- President of Global Marine Terminals

That's it. Like I stated before.

Theresa Chen -- Barclays -- Analyst

Got it. And actually for VTTI as well, can you just remind us what is the recontracting percentage up for 2019?

Khalid Muslih -- President of Global Marine Terminals

Yes, I think on VTTI, it's a little bit of a different situation. I think as we've mentioned before, the facilities obviously cater to third-party customers, but I would say, a disproportionate share of the capacity is tilted toward Vitol. That capacity is very much exercised for their strategic purposes. So I think just kind of looking at VTTI from the standpoint of contract roll-offs, little bit different than perhaps just the way that we look at our segregated storage business that is more targeted toward a series of third-party servers.

Theresa Chen -- Barclays -- Analyst

OK. So just to clarify that comment, are you saying that Vitol could potentially pay above-market rates for VTTI access because they have further leverage in the integrated value chain?

Khalid Muslih -- President of Global Marine Terminals

No, I didn't say that. I just said that basically they need that capacity in order for them to be able to execute on their various financial and physical trading activities.

Theresa Chen -- Barclays -- Analyst

Got it. Thank you very much.

Khalid Muslih -- President of Global Marine Terminals

Thanks, Theresa.

Operator

And the next question comes from the line of Michael Blum from Wells Fargo. Your line is now open.

Michael Blum -- Wells Fargo Securities -- Analyst

Thanks. Good morning. First question was on the domestic pipelines and terminals segment. You made a comment during the prepared remarks that you're seeing some of your customers not renew their contracts because of backwardation.

Can you just give a little more detail in terms of, are there certain areas within certain locations where you're seeing that weakness and what the dynamics look like there?

Bob Malecky -- President of Domestic Pipelines and Terminals

Sure, Mike, this is Bob Malecky. We saw an uplift in some of the storage. I think as Keith directly commented, our primary storage location in Chicago complex continues to exhibit strong utilization, not for structured moves, but for operational need in that marketplace. When contango market came into place in '16 and '17, we were actually able to deploy some storage in some of the remote terminal locations, along the coastline and inland in some of our facilities in which we deployed distillate storage.

Those that rolled off as structures walked away, and we're back to kind of more of a baseline operational need in domestic pipelines and terminals.

Michael Blum -- Wells Fargo Securities -- Analyst

OK. And then a similar question I want to ask about the dynamics going on in the New York Harbor. One of your competitors talked about some change there in the market. I was wondering if you could just give some of your comment -- color on how you see that market trending? And is anything changing from your perspective?

Khalid Muslih -- President of Global Marine Terminals

Yes, Khalid here. In reality, we have a fairly substantial position in the Harbor. I will say -- I mean, I think just with regards to that comment about third-party competitor, if I recall, their position was largely more around -- they had some, I guess, larger capacity around the fuel oil. Our business is largely focused on clean products, gasoline, blending, and distillate.

And I think what I'll say about the Harbor, clearly, there's also been pressure around lakes in that area, but we actually do see significant amount of demand for our services. I feel like what has been able to further differentiate our capabilities are just some of the prior investments that we've made with regards to our transfer capabilities and our blending capabilities. We're actually -- we were able to attract a new export customer at Perth Amboy, and we are finishing up on some butane blending capabilities there. And like I mentioned, we had some capacity that rolled off at Raritan Bay that was largely kind of more geared toward structure and distillate, and I think, as I mentioned to you on prior calls, that facility is more logistically challenged than perhaps some of our other facilities in the Harbor, but with this new transfer line that we've been able to put in service, not only have we been able to bring back customers and, I guess, a pullback in the capacity that we lost, I guess, over the last couple of quarters, but we've also been able to generate more activity across the system.

And so I think that tells you that that integrated network, I feel like, is going to differentiate us around the New York Harbor. I think, also, concurrently with that, we do have an asphalt position that has been put back into service and it's been exercised quite well. And like Bob mentioned, we're also working on another crude oil export project out of Perth Amboy, which we're hoping to be able to report on in -- on a future call.

Michael Blum -- Wells Fargo Securities -- Analyst

Great. Thank you very much. Thanks, everybody.

Bob Malecky -- President of Domestic Pipelines and Terminals

Thanks, Michael.

Khalid Muslih -- President of Global Marine Terminals

Thanks, Michael.

Operator

And our next question comes from the line of Matthew Phillips from Guggenheim. Your line is now open.

Matthew Phillips -- Guggenheim Partners -- Analyst

Good morning, guys. I want to pick up a thread on GMT here a little bit. Clearly, the offshore market, storage market is pretty challenged right now, but IMO is driving some interesting moves and fuel oil and gas oil flipped the contango next year, mid- to late '19. I mean, is this -- do you see that the Caribbean assets, in particular, kind of bottoming out this quarter, next quarter and you guys are going to get ahead of that trade in '19? I mean, is this a trend that you're kind of seeing from counterparties?

Khalid Muslih -- President of Global Marine Terminals

Yes, this is Khalid, again. I mean, I'll kind of go back and give you some of my thoughts. I mean, I think, we're very well-positioned with regards to IMO. I mean, I think if you think about what it will do, I mean, obviously, it's going to push, I think, sour free trades into contango and it will widen the light heavy spread.

And that's obviously going to be more conducive for the crude oil blending. Obviously, I mean, the new sulfur regs are going to take away the last sulfur sink for the high-sulfur fuel oil and all of a sudden, you're going to take anywhere from 2 million to 4 million barrels a day of this material and, all of a sudden, create a situation where it doesn't have a home anymore. And so I think we're very well-positioned to be able to capture that demand. I would anticipate that we would see as folks start preparing for IMO, obviously, a ramp up and obviously refining processing and we'll see a buildup of inventories before the rule goes into play.

Obviously, us having the capability to handle that, I think, situates us well, but I also feel like just given the fact where we sit just on that, the nexus with the transshipment point between the -- in the North Atlantic will really give us the opportunity to be able to deploy [Inaudible]. And yes, we are already prepositioning our assets for that capability. And like I mentioned, we can provide these services with very little to no capital because we've already made the investments, and we can swing over from current service to whatever the new market demand may be.

Matthew Phillips -- Guggenheim Partners -- Analyst

Do you think you need crude to be in contango for the asset base as a whole to work? Or is fuel oil and refined products enough?

Khalid Muslih -- President of Global Marine Terminals

No, not at all. I think we've got the capability to flex our storage between fuel oil and crude oil. Obviously, back in 2015, when the market went to contango or surplus for crude, we obviously flexed and converted a lot of capacities and fuel through what we call flex service, which is the ability to go between the two. We are continuing to shrink the amount of crude oil capacity as we go forward.

And so, clearly, as the market ramps up for these various materials, we had straight line fuel oil, high-surface fuel oil, vacuum gas oil. We're very well-positioned to be able to swing our asset base to be able to capture that demand.

Clark Smith -- Chairman, President, and Chief Executive Officer

Yes, and to kind of put it in perspective, Matthew, of the 26 million barrels roughly that we have in Bahamas, there's only 3 million that's specifically dedicated to crude service.

Khalid Muslih -- President of Global Marine Terminals

Yes, that's right. So we clearly have the ability to flex our capacity quite readily.

Matthew Phillips -- Guggenheim Partners -- Analyst

Got it. That makes sense. I thought the processing expansion, the splitter expansion comments were interesting. Would that fall under the tolling agreement with Trafigura? Or would that be a different structure in terms of how you'll do that?

Khalid Muslih -- President of Global Marine Terminals

Yes, I mean, look, I mean, like I mentioned, we are currently under way with that. We've already commissioned the technical study. We've gotten cost estimates. We're continuing to optimize on the yields associated with where do we feel like we can generate the highest value products.

But yes, to the extent that we move forward with that project, our expectation would be to include that in our tolling arrangement with our customers.

Matthew Phillips -- Guggenheim Partners -- Analyst

Got it. And then last one for me. On VTTI, I think you all gave the '18 capex figure, but I think I missed it. I was wondering also if you had the '19 proportionate capex figure for VTTI?

Keith St. Clair -- Chief Financial Officer

No, and let me be clear there. I'm glad you asked that question, Matthew, because the $180 million to $190 million is not proportionate. That's on an eight-eight basis for '18. So our piece would be half of that.

Matthew Phillips -- Guggenheim Partners -- Analyst

So $180 million for 100%, you guys would be at half?

Keith St. Clair -- Chief Financial Officer

Yes. And again, as I've mentioned in my prepared remarks, I mean, we don't anticipate any material equity contribution there to help fund that. I mean, they have -- they will largely be able to fund that with their existing capacity on the revolver.

Matthew Phillips -- Guggenheim Partners -- Analyst

When you said $180 million, sorry, was that the remainder of this year? Or that's for full year?

Keith St. Clair -- Chief Financial Officer

That's for the total year, total, $180 million to $190 million.

Matthew Phillips -- Guggenheim Partners -- Analyst

Got it. OK. Thank you.

Operator

And our next question comes from the line of Tristan Richardson from SunTrust. Your line is now open.

Tristan Richardson -- SunTrust Robinson Humphrey -- Analyst

Hey, good morning, gentlemen. Just a quick follow-up to the last question. The VTTI 2018 capex came in a little bit from last quarter. Could you talk about just sort of project timing there? Or what drove that variance?

Keith St. Clair -- Chief Financial Officer

I don't recall. I mean, we had -- they -- earlier in the year or late last year, we had talked about, I think, capital spend of probably $200 million to $250 million. There are no projects that are incurring any specific delays. I think the real answer is they probably just fine-tuned that number a little more closely as they continued to progress throughout the year.

So kind of $180 million to $190 million is what we're looking at today.

Tristan Richardson -- SunTrust Robinson Humphrey -- Analyst

OK, helpful. And then you guys talked about sort of exploring expansion of LPG export capacity. Could you talk about where export capacity is today and as you explore expansions, where you could see that capacity, if and when you deploy capital to do so?

Khalid Muslih -- President of Global Marine Terminals

Right. And this is Khalid. I mean, I'll speak to it, I suppose, around the Gulf Coast area. And then, I know Bob has also some opportunities moving side pane on our existing pipeline systems to upstate New York.

But with regards to South Texas, I know that there's been a significant amount of focus and chatter around crude oil volumes coming to the Corpus Christi market. However, alongside the growing production of crude oil, there's also a growing demand for LPG handling and export services. We currently have a refrigerated LPG storage position in excess of 1.1 million barrels. We have the capability to export LPG via multiple modes, refrigerated ships, semi-refrigerated and pressurized.

We had continued to work with our partner to increase connectivity to the asset. I mentioned we connected to a regional frac and entered into a new commitment on a, I guess, a new pipeline connection that we put forward. So we're seeing quite a bit of volume throughput increase at our existing assets. And as a result, we're looking at ways that we can continue to optimize and provide the ability to more efficiently export that product.

However, similar to like I mentioned on the crude oil side, there are multiple parties that are also looking at bringing in additional volumes of LPG into the Corpus market. We, again, are not focused on the long haul, we're focusing our attention on the last mile. And we believe that there is the opportunity to either bring some of those volumes into Buckeye Texas or look to explore new development opportunity within those surrounding areas. So that's essentially what we are currently focused on and evaluating along with some pretty strong customer interest.

Tristan Richardson -- SunTrust Robinson Humphrey -- Analyst

And then -- and just last one for me. Keith, you mentioned the partnership doesn't necessarily want to be bound by some annual capex level and want the flexibility to deploy capital commensurate with where you see opportunity. As you migrate to that equity self-funding model, curious if the goal is to be equity self-funding year in and year out each and every year? Or is it sort of -- it will be dependent on the opportunities out there?

Keith St. Clair -- Chief Financial Officer

Well, again, Tristan, I think that's something that really goes to the heart of the strategic review that we're completing. So what I would ask is let us complete the work here, and then we'll be able to, I think, better address questions related to self-funding or not once we've completed that review.

Tristan Richardson -- SunTrust Robinson Humphrey -- Analyst

Understood. Thank you guys very much.

Keith St. Clair -- Chief Financial Officer

Thanks.

Operator

And our next question comes from the line of Tom Abrams from Morgan Stanley. Your line is now open.

Tom Abrams -- Morgan Stanley -- Analyst

Thanks a lot. Couple of follow-ups. One is on review. Is it possible to go back to shareholders with that preferred ask, particularly if now the questions framed with you can either have a self-funding, distribution reduction or preferred shares?

Clark Smith -- Chairman, President, and Chief Executive Officer

Well, I think the answer to that regardless of the other options is yes. That's something we're going to take a look at. Obviously, we got to shape it a little differently and make it, I think, more precise. But that's an option certainly we would like to have.

So the answer is -- is it under consideration? Yes, Tom, it is.

Tom Abrams -- Morgan Stanley -- Analyst

OK. And then just on VTTI. It hasn't happened yet, but all the mashed nations, the tariffs, Iran, Libya, all different countries with ups and downs in production. Is that something that we should translate as a risk to VTTI? Or is it just the fact that Vitol is there to kind of insulate us from it contractually?

Khalid Muslih -- President of Global Marine Terminals

I mean, maybe I'll try to take a stab at that question because I mean, I think, there are so many hypotheticals around that. I think, look, I mean, with tariffs, right, I mean, at the end of the day, I think the long-term impact of that could certainly lead to slow economic activity. And in turn, obviously, with that, you could have an impact on slowing down global oil demand. But I mean, I think that's a pretty complex or complicated question to answer that.

I think it'll take more time than what we have here today. But I do -- I will say though, I think we'll really look at, again, where their assets are positioned, they're in key market areas, key hubs. And again, they are not only strategic to Vitol, but they also offer quite a bit of service to some of the third-party customers that are in there as well.

Keith St. Clair -- Chief Financial Officer

And the other thing I will say, Tom, is when you think about the product profile for VTTI, it's predominately either fuel oil or clean product. And they really don't store much in the way of crude.

Tom Abrams -- Morgan Stanley -- Analyst

OK, good. And the last thing was a follow-up on the New York Harbor question. I just -- maybe I missed it, but is there anything -- can you scale the impact in the second quarter of the issues there in terms of utilization and pricing? And then, how much worse, again, scaling at magnitude for the third quarter? Could that be a negative headwind?

Khalid Muslih -- President of Global Marine Terminals

Yes. I think, I guess, if I think about the decline, right, maybe not answering your question exactly, but I'm going to try to give you some color around this. But I mean, I think if we look at the 6% decline in utilization, I would say, a little over 1% of that was attributable to New York Harbor and then the balance to the Caribbean. We have some capacity that is available.

But like I mentioned, a significant amount of capacity was recontracted here recently as a result of putting into services new transfer line from Raritan Bay to Perth Amboy.

Tom Abrams -- Morgan Stanley -- Analyst

OK. And lastly, one of your competitors, who had some tankage on Staten Island, I think, like 3 million barrels just basically idle. And they've actually talked about selling it or shutting it down. And I just wondered if that would improve the region's, kind of, supply demand, if you will, and potentially throw some business your way? Or is it just tightening for the future, not for the current?

Khalid Muslih -- President of Global Marine Terminals

Yes, I don't know, if it's going to have that material of an impact, but yes, clearly, I think, taking out tankage in that market is probably not a bad thing. But again, I mean, I think, when I look at what the customers are looking for, I think they're looking for more than just plain vanilla storage, they're looking for blending capability, they're looking for transfer capability, they're looking for a whole host of different things. Just because the market has just become more efficient, more transparent, it's -- you really do need to have the ability to really differentiate yourself. And we think we've got that in our asset base up in New York.

Tom Abrams -- Morgan Stanley -- Analyst

All right. Great. Thanks a lot. Take notes during your review.

It's going to be a good case study at some point in the future.

Khalid Muslih -- President of Global Marine Terminals

Yea, no doubt.

Keith St. Clair -- Chief Financial Officer

Thank you, Tom.

Tom Abrams -- Morgan Stanley -- Analyst

Thanks.

Operator

And our next question comes from the line of Dennis Coleman from Bank of America. Your line is now open.

Derek Walker -- Bank of America Merrill Lynch -- Analyst

This is Derek Walker on for Dennis. You guys -- just a quick one on VTTI and kind of the self-funding option that's on the table. You mentioned there was no equity contribution this year. And just given the kind of your outlook for CAPEX in '19, do you see a need for equity contribution? And will that be funded in the self-funding option that's being considered?

Clark Smith -- Chairman, President, and Chief Executive Officer

Well, first of all, the self-funding option is being considered as something that will be part of the overall review. So we're not saying that is absolutely the direction that we're moving. So just to be clear about that, Derek, I just want to make sure you understand. But yes, we would expect, on an ongoing basis, there would be some capital requirement from VTTI, from its partners.

So yes, we would expect to be required to fund some portion of the growth capital next year. And again, this year, we haven't ruled it out. I'm just saying, it's going to be an immaterial contribution that would be required this year.

Derek Walker -- Bank of America Merrill Lynch -- Analyst

Got it. And then what's -- with the Gray Oak Pipeline scope, the open season recently completed, is -- the STG terminal project of 3.4 million barrels, is that enough to satisfy that scope? Or do you see a need to expand the terminal with that open season completed?

Khalid Muslih -- President of Global Marine Terminals

Yes, Derek, it's Khalid, again. And that's what I was referring to in my prepared remarks. We are accelerating our expansion plans just given not only the successful open season for the Gray Oak pipeline but also a couple of good, just the strong customer interest and our ability to be able to bring on additional customer commitments. So we are moving forward with those plans.

Derek Walker -- Bank of America Merrill Lynch -- Analyst

And I think before, it's capable of going to 10 million barrels a day with the terminal expansion. So do you see any idea of sort of kind of directionally the sort of scope of those accelerated plans?

Khalid Muslih -- President of Global Marine Terminals

Yes, I mean, look, I mean, we're not going to accelerate up to the 10 million barrels in this first phase, but we're certainly going to be moving up in a respectable amount, and we do feel like this facility does have the ability to be able to move anywhere between 800,000 to 1 million barrels a day.

Derek Walker -- Bank of America Merrill Lynch -- Analyst

Got it. Thank you, guys. That's it for me.

Clark Smith -- Chairman, President, and Chief Executive Officer

Thanks, Derek.

Operator

And our next question comes from the line of Selman Akyol from Stifel. Your line is now open.

Selman Akyol -- Stifel Financial Corp. -- Analyst

Thank you. Just two quick ones for me. Just on Gateway, have you guys even started ordering sort of longer lead stuff at all?

Keith St. Clair -- Chief Financial Officer

Yes, [Inaudible] we've started out on the engineering. We're well under way with that, and we're scoping out all of our long-lead equipment for expediting to ensure we meet or beat schedule.

Selman Akyol -- Stifel Financial Corp. -- Analyst

Got you. And then, can you just say what current utilization is of BORCO right now?

Khalid Muslih -- President of Global Marine Terminals

Sel, we don't obviously break out our individual facility utilization. However, I'll just point out that as we think about kind of the suite of terminals that we have, it is operating obviously at a relatively lower rate, but it's still highly utilized.

Selman Akyol -- Stifel Financial Corp. -- Analyst

OK. That does it for me. Thank you.

Keith St. Clair -- Chief Financial Officer

Thanks, Selman.

Operator

And our next question comes from the line of Sunil Sibal from Seaport Global. Your line is now open.

Sunil Sibal -- Seaport Global -- Analyst

Yes, hi. Good morning, guys, and thanks for all the clarity on the call. Just one clarification for me. Considering that maintaining IG is the top priority as part of the strategic review, I was curious, in terms of leverage metrics, is there kind of a max leverage metric that the agencies have kind of indicated to you for -- to be comfortable in that IG metrics?

Keith St. Clair -- Chief Financial Officer

Yes, I mean, kind of it, but where the agencies would like to see it, basically kind of the bright line, if you will, is five times or greater on a sustained basis. I mean, that's fairly consistent across all three of the agencies, where they would prefer to see an IG company is trending toward the 4.5 times or below.

Sunil Sibal -- Seaport Global -- Analyst

OK. Got it. And then in terms of IMO 2020, I think you guys touched upon a few different ways it impacts that. I was just kind of curious net-net based on your BORCO exposure and international exposure, do you see IMO 2020 as a net positive for you guys for overall portfolio?

Keith St. Clair -- Chief Financial Officer

Yes, absolutely. We think that not only will we see benefit from the standpoint of the demand for segregated storage, you're going to be blending capability, segregation capability, we think also there will be some follow-on benefit from our processing capabilities in South Texas. And we think also it will be very constructive for VTTI.

Sunil Sibal -- Seaport Global -- Analyst

OK. Got it. Thanks. That's all I had.

Operator

Thank you. And at this time, I'm showing no further questions. I'd like to turn the call back over to Clark Smith for closing remarks.

Clark Smith -- Chairman, President, and Chief Executive Officer

All right. Thank you, Bruce. In closing, our board of directors and management team, along with our financial advisors, are working diligently toward the completion of our strategic review to determine the best path forward to deliver long-term value for our unitholders. Importantly, our exceptional employees and contractors remain focused every day on delivery site with strong performance across our asset portfolios.

We look forward to updating you on our progress on all of our initiatives in Buckeye's next earnings call. Have a nice weekend.

Operator

[Operator signoff]

Duration: 69 minutes

Call Participants:

Kevin Goodwin -- Vice President and Treasurer

Clark Smith -- Chairman, President, and Chief Executive Officer

Khalid Muslih -- President of Global Marine Terminals

Keith St. Clair -- Chief Financial Officer

Jeremy Tonet -- J.P.Morgan -- Analyst

Bill Hollis -- President of Buckeye Services

Shneur Gershuni -- UBS -- Analyst

Bob Malecky -- President of Domestic Pipelines and Terminals

Harry Mateer -- Barclays -- Analyst

Ross Payne -- Wells Fargo Securities -- Analyst

Theresa Chen -- Barclays -- Analyst

Michael Blum -- Wells Fargo Securities -- Analyst

Matthew Phillips -- Guggenheim Partners -- Analyst

Tristan Richardson -- SunTrust Robinson Humphrey -- Analyst

Tom Abrams -- Morgan Stanley -- Analyst

Derek Walker -- Bank of America Merrill Lynch -- Analyst

Selman Akyol -- Stifel Financial Corp. -- Analyst

Sunil Sibal -- Seaport Global -- Analyst

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