Darling Ingredients Inc (DAR) Q1 2021 Earnings Call Transcript

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Darling Ingredients Inc (DAR 3.47%)
Q1 2021 Earnings Call
May 12, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Darling Ingredients Conference Call to discuss the company's first quarter 2021 results. [Operator Instructions] Today's call is being recorded.

I would now like to turn the call over to Mr. Jim Stark. Please go ahead.

Jim Stark -- Vice President, Investor Relations

Thanks, Tom. Welcome to the Darling Ingredients Q1 Earnings Call. Participants on the call this morning are Mr. Randall C. Stuewe, Chairman and Chief Executive Officer; Mr. Brad Phillips, our Chief Financial Officer; and Ms. Sandra Dudley, Senior Vice President of Renewables and Strategy. Mr. John Bullock is attending a college graduation today and family comes first. There is a slide presentation available, and you can find that presentation on the Investor page under the Events and Presentations link on our corporate website.

During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in yesterday's press release and the comments made during this conference call and in the Risk Factors section of our Form 10-K, 10-Q and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.

Now, I would like to turn the call over to Randy.

Randall C. Stuewe -- Chief Executive Officer

Thanks, Jim. Good morning, everyone. Glad you could join us on the call this morning. A year ago, like many other management teams, we all had the deer in the headlights there happening as a result of the pandemic. Today, we see a very clear future for Darling Ingredients as our dedicated global team of 10,000 plus employees continue to execute our business strategy in a safe and efficient manner.

Our earnings for the first quarter of 2021 we're certainly energized by a rising commodity price environment, which undoubtedly had a positive impact and enabled Darling to report a record $284.8 million of combined EBITDA for the quarter. The Feed segment's EBITDA was $124.4 million, which was $34 million better than the fourth quarter of 2020 and $54 million higher than the first quarter of 2020. Protein and fat prices averaged in the range of 40% to 60% higher than the year ago period and have continued to move higher into the current period. Our Food segment turned in a solid performance to start 2021 with an EBITDA of $46.4 million, which was approximately 18% higher than a year ago. We continue to see solid growth in our collagen peptide sales and look forward to our biomedical products having an impact in the future on this segment's earnings.

In the Fuel segment, we continue to see solid results from our European bioenergy business, which reported another solid quarter, producing $20.5 million of EBITDA in Q1. Diamond Green Diesel generated another outstanding quarter with a $2.77 EBITDA per gallon on 78 million gallons sold. Darling's half was $108.2 million of EBITDA plus our bioenergy results produced a strong $128.7 million of combined EBITDA in Q1 for our Fuel segment.

As we noted in the earnings release yesterday, both DGD expansion projects remain on time, on budget and on target. We continue to experience a favorable commodity pricing environment as the U.S. economy recovers with more and more states lifting COVID restrictions. As travel increases, we are seeing energy prices go higher as ultra low-sulfur diesel is trading above $2 a gallon in the NYMEX spot for the first time in a couple of years. Higher levels of economic activity here and abroad we believe will support continued strength in the demand-driven commodity cycle that I'll discuss a little later on the call.

Now I'd like to hand it over to Brad to take us through the financials, then I'm going to come back and discuss the outlook and our increased guidance for 2021. Brad?

Thanks, Randy. Net income for the first quarter of 2021 totaled $151.8 million or $0.90 per diluted share compared to net income of $85.5 million or $0.51 per diluted share for the 2020 first quarter. Net sales increased 22.7% to $1.05 billion for the first quarter of 2021 as compared to $852.8 million the first quarter of 2020.

Operating income increased 62% to $199.5 million for the first quarter of 2021 compared to $122.8 million for the first quarter of 2020. The 62% increase in operating income was primarily due to the first quarter 2021 gross margin improving approximately $68 million over the prior year and increasing from 24.1% to 26.2%. This is primarily the result of higher protein and fat prices in our Feed segment during the first quarter as Randy mentioned earlier.

Depreciation and amortization declined $6.1 million in the first quarter of 2021 when compared to the first quarter of 2020. This reduction was due primarily to certain assets in our Food segment which became fully depreciated and amortized by the end of 2020. SG&A increased slightly by $1.2 million in the quarter as compared to the prior year and there were $778,000 of additional restructuring and impairment charges related to the biodiesel facilities shutdown in the prior quarter. Lastly, regarding the improved operating income, our 50% share of Diamond Green diesels net income was $102.2 million as compared to $97.8 million for the first quarter of 2020. Interest expense declined $2.7 million for the first quarter of 2021 as compared to the 2020 first quarter.

Now turning to income taxes. The company recorded income tax expense of $28.7 million for the three months ended April 3, 2021. The effective tax rate for the first quarter is 15.8%, which differs from the federal statutory rate of 21% due primarily to the biofuel tax incentives, the relative mix of earnings among jurisdictions with different tax rates and excess tax benefits from stock-based compensation. The company also paid $15.6 million of income taxes in the first quarter. For 2021, we are projecting an effective tax rate of 20% and cash taxes of approximately $30 million for the remainder of the year.

Looking at the Q1 balance sheet, our total debt declined $63.5 million to $1.44 billion and the bank covenant leverage ratio ended the first quarter at 1.6 times adjusted EBITDA. Capital expenditures were $60.8 million for Q1 2021 and is in line with Darling's planned capex spend of approximately $312 million on capital expenditures for fiscal 2021.

As you saw at the end of March, Diamond Green Diesel successfully entered into a new $400 million senior unsecured revolving credit facility. The new revolving credit facility matures March 30, 2024 and is non-recourse to the joint venture partners. The use of funds of this revolver or for general joint venture purposes and as we have indicated in the past, any potential distributions in 2021 wouldn't be considered until the expansion in Norco, Louisiana's in-production in the fourth quarter later this year.

Now with that, I'll turn it back over to you, Randy. Thanks, Brad. I'd like to touch on our updated guidance we provided in our press release yesterday and it can also be found on Slide 5 of our investor presentation. We feel comfortable with the increased range of $1.075 billion to $1.15 billion of combined EBITDA as the increase is coming from two segments, our Feed segment and our Fuel segment. The Feed segment is certainly benefiting from the rising commodity price environment for both proteins and animal fats and waste oils, and the question you're thinking is how long does this higher price environment. Darling, just like every other commodity producer is watching this like a hawk. Our view is that we got into the current situation because of the demand-driven event which started with China. And unlike a supply shortage driving commodity prices higher, higher prices from a demand driven event can take multiple growing seasons to rebuild feed inventories. Yes, commodity prices have steepened versus on the futures curve, but that futures price is still 30% to 50% higher than the historical price when you get to that future period. For now, we think the Feed segment will perform well for the rest of 2021. We remain disciplined in our evaluation of the volatility this segment can experience and continuing to reduce our expenses and improve efficiencies to enhance the margin environment we are experiencing today. The other increase in our guidance is the Fuel segment. DGD turned in a record EBITDA per gallon in Q1. And with that, the Q2 margin is averaging in the current environment, we are putting a potential range of $2.25 to $2.40 EBITDA per gallon for DGD for 2021. As our joint venture partner announced several weeks ago, we believe the start-up at Norco expansion will be in the middle of Q4, that DGD will ultimately sell 365 million gallons of renewable diesel in 2021. Those higher gallons and the range of EBITDA per gallon provided puts Darling's half of the EBITDA from DGD between $410 million and $435 million for 2021. The DGD Port Arthur project continues to make excellent progress and we did include a picture of that site on Slide 10 of the investor presentation. We are targeting this facility to be operational in the back half of 2023, but the team continues to evaluate if we can improve the timeline and start up Port Arthur earlier. For Darling, we continue to investigate multiple avenues to expand our feedstock footprint and we believe that we are on a solid pathway to achieve this objective in the very near future. We are encouraged to see more and more states in the U.S. and other countries passing and preparing legislation for low carbon fuel standards. In our view of the renewable diesel supply and demand equation, we continue to believe that renewable diesel demand will outpace supply for the next three to four years, then we believe that sustainable aviation fuel market demand should begin to develop and have demand pull for DGD somewhere in that timeframe. We think our DGD Joint Venture is a highly innovative platform and employees one of the most advanced processes for turning waste animal fats and oils into the greenest hydrocarbon in the world. And it goes without saying, DGD is one of the best investments we can allocate capital to for high returns for our stakeholders. But we have other areas of innovation as well. Since the beginning of 2020, Darling has had 100% ownership of EnviroFlight. EnviroFlight is a leader in sustainable insect Ingredients designed for animal and plant nutrition, aiming to drive transformative change in the global food supply. We have made several recent announcements on expanding our operations of EnviroFlight earlier this year and we believe this project will position us as the leading developer of proprietary technologies with the first commercial scale black soldier fly larvae manufacturer in the U.S. We are also pleased with the development of work going on in Europe with our Biomedical technology team. Our X-Pure GelMA is our latest addition to our Biomedical range of ultrapure gelatin and collagens to the medical industry, and we anticipate that the product offerings will grow as we move forward and the new products bringing added value to our industry. Our X-Pure products are unique on the market as they come with ultra-low levels of impurities and fully validated traceability of raw materials. Our innovative spirit grows as we continue to look for ways to improve our product offerings across the spectrum of the markets we serve. We view our efforts to add innovative products as well as the ongoing investments we have made to build new and expanded rendering capacity over the past several years as key to improving long-term shareholder value. Sometimes the cycles may not lineup for us, but when they do, Darling can generate solid returns and strong free cash flow. I'd like to note that we are proud to be selected by Bloomberg and TV Media Group as one of the 50 sustainable climate leaders in the world. Darling is the original recycler. And to us, that makes Darling Ingredients the greenest company on the planet. Thank you for all of the 10,000 employees for making Darling the company it is today. With that, lets go ahead and open it up to Q&A. Tom?

Questions and Answers:

Operator

Thank you. [Operator Instructions] And the first question comes from Ben Bienvenu with Stephens Incorporated. Please go ahead.

Ben Bienvenu -- Stephens Inc. -- Analyst

Hey, good morning, everybody.

Randall C. Stuewe -- Chief Executive Officer

Good morning, Ben.

Brad Phillips -- Executive Vice President, Chief Financial Officer

Good morning.

Ben Bienvenu -- Stephens Inc. -- Analyst

I want to ask maybe starting on your guidance, and in particular, the margin per gallon guidance for DGD. Just help us think about what's embedded into your outlook there and where you think elements of variability are, obviously, very strong margins in the first quarter, we've seen some components of the margin pressure things a little bit in 2Q, but still as you said, while demand look favorable and some -- I just wanted to kind of better understand what's going into your output?

Randall C. Stuewe -- Chief Executive Officer

Ben, this is Randy, and I'll tag team with Sandy here a little bit on this one. The margin environment in Q2 is very similar if not better than Q1 right now, and what's driving it really the biodiesel industry, which obviously, we don't participate in is having to pay substantially more for feedstock than we are, as you know a majority of biodiesel is made from soybean oil and then you can see that's in that, at least on the board of trade is at $0.65 on the non-deliverable options here in July, and those that are running refined bleached or refined bleached deodorizer paying somewhere between $0.75 and $0.85 a pound delivered their locations today. You take that, and you have to in order to produce those gallons, you have to drive marginal profitability, and the green premium that we referred to which is a combination of the RINs and the blenders tax credit forum are having to do the work. The blenders tax credit is fixed, so therefore, it comes down to the RIN, and we've seen some pretty strong escalation in the RIN. That has been provided with lower feedstock cost at DGD because of waste fats and oils and pretreatment technology, plus the RIN, plus the LCFS has come back a little bit here in the last 30 days. We've set up a Q2 now that I think will impress. The balance of the year, I think it'd be easier to take guidance up there right now than where we're at. But we're going to watch from here and see where we're at. And I think that's fair enough. Sandy, anything you want to add to that?

Sandra Dudley -- Senior Vice President of Renewables and Strategy

Yeah, I think we're very pleased with the margin environment that we're in. I think that historically you've seen that our margin has been very good regardless of the environment that it's in. But there are some things that we're going to continue to watch, especially as we get further up into the year. So there is the Supreme Court ruling on small refinery exemptions. There is the RVO. There is how feedstock prices are going to progress. But that said, again, you've seen very solid performance out of DGD for an extended period of time regardless of the environment.

Ben Bienvenu -- Stephens Inc. -- Analyst

Okay, perfect. And then when we think about the feed ingredients business, kind of two-part question here. It seems like the outlook there is, I guess just a reflection of what we see in the futures strips. Is there a point at which you foresee any sort of demand destruction or price resistance? I know the demand backdrop for the feed environment is quite good. All the protein processors continue to consume at high margins, ethanol is coming back online at supporting corn, so it does seem like there is a great demand backdrop for the grain environment. But I want to get a sense of how you think about that unfolding through the year relative to your guidance and then kind of understanding what's in your guidance if it is reflective of the current futures?

Randall C. Stuewe -- Chief Executive Officer

Yeah, Ben, this is Randy again. I mean, clearly the optionality that is built in the Feed segment we've talked about for the last three or four years. As we said, well, if the pricing comes back, finished product pricing to the 10-year average, everyone will be pleased with the investments we've made. We've now driven past the 10-year average on these in the Feed segment, the core rendering business and the derivatives from the slaughtered animal byproduct. They're benefiting from the corn pricing, the soybean meal pricing around the world. And it's really pretty fascinating to me. You could probably take our guidance up from the Feed segment performance here even because prices have continued to improve here in the near term or probably being conservative. We benefit in these times when corn and soybean meal rise up because more an alternative ingredient in many of the rations around the world. And so we become an alternative out there and probably never received full nutritional value whether we're at a discount or a premium. So I think we're pretty well set. I think that our fats and oils will -- we're trading today -- delivered Diamond Green Diesel, delivered feed customer in the mid '50s, while the bean oil boards at 65. And so that's a historical discount that we've seen.

So at the end of the day, anybody that has fears for us having enough feedstock, there is plenty of feedstock here for us. And then the proteins have now moved up to where soybean meals in the mid fours. It's slightly inverted. It's not a giant inverse from to new crops. So we'll continue to see that spread. The interesting thing on this is, and we've had a lot of internal discussion and narratives about it. Every time -- I guess, I'm approaching 39 years, almost 40 years in the business now, and what we've ever seen price spikes in the past or cycles, if you will. They've been driven because of some crop shortage, usually a weather event somewhere in the world or in multi-hemisphere as it was, whatever 2011, 2010, '11. This is a demand driven event where the combination of meat production to feed animals and fuel production to produce green energy has now made the lines get very narrow to the point where even what looked like massive stocks of corn and soybeans six to nine months ago now as the stocks or percentage of used ratio, you're down in very low levels. And so if you get any disruption in crop production, those lines will cross and you could have $9 corn very quickly here. At that point, you're going to ration something.

What's interesting to me is as you look at the price of chicken, the price of pork and the price of beef year-over-year, the marketers and the producers have gotten ahead of the curve there and have retail prices at a point here where that's still profitable even with the higher feeding economics. It doesn't mean that there's not going to be some compression in the margins of the livestock producer here with the higher input costs, but there is enough to keep it -- there is enough profitability in the chain itself and to keep it producing versus contracting as maybe we've seen in the past year. So overall, it looks pretty darn good around the world for us. Raw material volumes aren't up as sharply as they were a year ago, but they're still up again, population growth around the world this year, and I just don't see much much changing that here in the near term.

Ben Bienvenu -- Stephens Inc. -- Analyst

Okay, very helpful. Thanks and good luck.

Randall C. Stuewe -- Chief Executive Officer

Thanks.

Operator

The next question comes from Manav Gupta with Credit Suisse. Please go ahead.

Manav Gupta -- Credit Suisse -- Analyst

Hey guys, congrats on the beat and excellent raise. My question here is we have seen a number of small players out there who have never actually done this come out and sign sustainable aviation fuel contracts, a fuel they are no way even close to producing and have never actually produced. And then we look at you guys, the best in the business, who has not announced anything major in sustainable aviation fuel as of yet. So my question is why are the two best guys in business holding back and while some of the other players out there are announcing these contracts, which we are not even sure are executable?

Sandra Dudley -- Senior Vice President of Renewables and Strategy

Hi, Manav. This is Sandy. And so, I think in terms of next steps in SAF [Phonetic] first our immediate future is really completing the St. Charles expansion and the Port Arthur Greenfield. We know that these facilities will provide significant carbon reduction opportunities for our customers and both projects will be completed before we know it. And of course, we've talked about what's next. We've less space at the Port Arthur facility in anticipation that there would be something next, and that's no coincidence.

As the market develops both in terms of transportation in aviation, we'll have more for you. And be assured when we do move, we'll move swiftly and that's in line with our first mover reputation. We're well aware that SAF is of extreme interest to a lot of folks. We believe that there is a real push by the current administration and there's significant support in general for reduced aviation emissions. SAF will happen, it's just a matter of time. But what we need is, we need the mandates and we need incentives to turn this nascent industry into a real one. We're really in the stages of preliminary engineering on that at DGD as we speak, and we're running all the financial models that you normally would. And as the economics pencil out, of course, we want to be a part of it.

Manav Gupta -- Credit Suisse -- Analyst

Okay, great. My follow-up question here is and I think you mentioned this a little bit in the prepared comments. We saw a little bit of pull back in the carbon prices in California. I think it's seasonal, but I would like to know your view? And also do you think as Washington, Canada and other places open up, do you think there is a sustainable support for carbon prices, whether it's California or Washington or even in Canada, or do you think the supply that is building is a little too high so the carbon price can trend down?

Sandra Dudley -- Senior Vice President of Renewables and Strategy

Yeah. So the first thing with regard to California. I think what you're seeing there is it's just really a matter that they got hit really hard by COVID. They're starting to open up and things will get better I think as we move further into the summer and we see the transportation -- the summer transportation pick up. You will also see that LCFS pricing pick up.

In terms of demand worldwide, I think you had asked about that and what we're seeing out there. Obviously, there are a number of programs that exist today. There is you're California, Oregon BC. Now, we can expect to see Washington join the list of jurisdictions with the CFS. We also recently saw New Mexico make a run at the CFS, and it came so close, but just ran at that time. And so we think that there is significant momentum going into 2022 as well. And we know that New York continues to work to get a CFS in place with hopes that one will be included in the Climate Action Council's draft recommendations later this year.

Obviously, the Canadian CFS final regulation will be out at the end of this year and implemented in December of 2022. And now we're seeing provinces like Quebec which are enacting their own provincial mandates. And then of course, there's RED II, which is slowly becoming RED III, We're early stages of that. But we expect those targets will become more aggressive. So as we look to the outlook in terms of demand, we see great things. And as we look really at our sales, which is kind of an indication of that. We're very pleased. Obviously, we have two facilities that are going to be coming online in the not too distant future. And I think that there was probably a point where we looked at ourselves around the room and we said, wow, are we biting up a pretty big piece of the Apple in filling up these facilities. But the fact is that as we look at going forward, we're probably not going to have the gallons for everyone that wants them. And so, I know that it's not demand -- demand related, but at the same time, we're also seeing things on the supply side. So we're seeing projects getting pushed back. And I think you had alluded to something like that. And we're hearing less and less about other projects that were once widely mentioned. And so I think what we're seeing setting up is there may be less supply than some would estimate in order to build increasing demand that we're seeing. So all in all, I think -- we think that there is a lot of demand out there and we're really excited about that.

Manav Gupta -- Credit Suisse -- Analyst

Thank you for taking my questions.

Randall C. Stuewe -- Chief Executive Officer

Thanks, Manav.

Operator

The next question comes from Tom Palmer with J.P. Morgan. Please go ahead.

Thomas Palmer -- J.P. Morgan -- Analyst

Good morning, and thanks for the question, guys. So you've seen a big step up in Feed segment EBITDA over the past couple of quarters. I know this has been covered various times over the years. I just had a couple of questions to clarify your pricing model. You've given us some helpful detail in the past on how a penny of higher fat prices translates to $8 million to $10 million EBITDA in the Feed segment. Has there been thought about providing similar figures for the other products in the segment, like protein, used cooking oil? And then I just wanted to clarify the timing of your revenue recognition in that segment. If we see spot prices at a certain level today, should we be thinking about that as the price you're recognizing immediately or do you pre-sell and thus higher prices today flow through on a slight lag?

Randall C. Stuewe -- Chief Executive Officer

Thanks. Good questions, Tom. I mean, obviously, the Feed segment has a whole bunch of businesses built in that. Some have price exposure and optionality, others don't. When we said before a penny a pound is $10 million annual EBITDA and that's all fats and oils globally. You've seen Europe be at a higher price on fats, although they've moved up above $1,000 or EUR1,000 a tonne now. So we're starting to get some more momentum back out and Europe reacted to this. But, overall that model is intact as we look around. Our proteins have been lagging a little bit of what's going on in the world. There is limited uses at times for some of the animal-based proteins out there.

And then the final question that you were asking is the lead lag. The biggest impact to that is the -- I want to say is the pipeline, the in-transit to Diamond Green Diesel. We came into the first quarter with a very, very short book on, meaning, we didn't have much sold out in front here. We had beliefs where the market was going at that time and convictions. And so we have now moved on and we keep in a strong inverse, trying to be sold up. So what that translate to in common language means that there is probably a 45-day to 60-day lag in recognition of these higher prices flowing into our P&L now. So that's where second quarter as the fat prices moved up late in the first quarter, they came back down, they've gone back up, will start to flow through again in second quarter. And the question will ultimately be how far -- how long does this inverse roll forward. I think we're very comfortable. It's going to roll through all of third quarter, and then the question is how? How much does it really back off if any in Q4. And really, we're already as I said earlier, we're such a substantial discount to palm oil and bean oil today on the fats that I don't see much downside there. And the proteins were fairly priced and you're seeing actual protein prices now come back up, while the oil shares back and off a little bit. So end of the day, I think you'll see, as we were saying it in our improved guidance, obviously, that comes through a belief that the Feed segment which carries the new capacity, which carries the optionality will continue to improve for the next several quarters.

Thomas Palmer -- J.P. Morgan -- Analyst

Thanks for all that color. And I just had a follow-up on the fat side. You talked last quarter once Port Arthur is up and running about the possibility of sourcing from other parts of the world. In your view is the animal rendering industry in areas like South America built out to the extent to ensure the supply you would like? Or is that a strategic opportunity for Darling to explore establishing rendering operations?

Randall C. Stuewe -- Chief Executive Officer

Well, I think the first thing, I'll I have Sandy help me a little bit on this here. As I would say, none of our strategy or investment is built on global origination. We believe that there is adequate feedstock today in North America to support our investments. We've said secondarily that we believe that feedstock will be displaced from generation one technology in the biodiesel industry as we bring the capacity online. That's number one.

Number two, we sit on 0.5 million tons of fat in Europe today that can move in here if the euro, the freight rate are in right position. And yes, South America, Australia, New Zealand, Latin America, China to a lesser degree have developed industries that can arbitrage fat in here as necessary.

Sandra Dudley -- Senior Vice President of Renewables and Strategy

Yeah, this is Sandy. I think we feel very comfortable about our ability to secure feedstock both for St. Charles expansion and for our Port Arthur facility. Feedstocks always been a significant part of any investment thesis that we've done for any of the facilities. And keep in mind that the build out of our facilities is really centered around feedstocks, which I think makes us unique compared to many other projects. Our locations are where there are a lot of agricultural products that naturally funnel into it and that's no coincidence. We like the U.S. in terms of the supply of feedstocks, and needless to say Darling produces a significant amount of low carbon feedstocks in the U.S. And finally, we do see growth in feedstocks down the road in general and then specifically within Darling as we continue to enhance our collections and expand our control of various low carbon feedstocks. So I guess in the end, the feedstock supply chain has always been a differentiator between DGD and other projects.

Thomas Palmer -- J.P. Morgan -- Analyst

Thank you.

Operator

The next question comes from Sam Margolin with Wolfe Research. Please go ahead.

Sam Margolin -- Wolfe Research -- Analyst

Hey, good morning, everybody. Thanks for calling.

Randall C. Stuewe -- Chief Executive Officer

Good morning, Sam.

Brad Phillips -- Executive Vice President, Chief Financial Officer

Good morning.

Sam Margolin -- Wolfe Research -- Analyst

Just a follow-up on DGD margins and strength. So look, a lot of people focus on that unit cost spreads between the byproducts and sort of fresh vegetable oils. Is there anything else going on, on the operational or technical level that's worth calling out, maybe a yield outcome that was -- that's generally better than modeled or something beyond just what people see on the screen on a price per pound basis?

Sandra Dudley -- Senior Vice President of Renewables and Strategy

Yeah, I think we're always trying to improve our DGD facilities. Really what I think he most important thing is with regard to our pre-treatment facilities that gives us a huge advantage at DGD. It allows us to source the lowest cost feedstocks and you're seeing that show up in our margins today.

Randall C. Stuewe -- Chief Executive Officer

Yeah, and I think look. Sam, this is Randy. I think that's well said. I think the secret sauce is the flexibility of our origination that comes into the free treatment. Clearly, there is never-ending operational efficiency targets that are happening. Valero's, they are just awesome people in the world of optimizing the unit down there between yield. Collectively, we work on CI scores, and then ultimately customer mix, and then we've talked in the past about arctic grade and the product mix that we're making. So you put all those together and it's quietly a very definable and unique in a sense to us advantage that you're starting to see out there.

Sam Margolin -- Wolfe Research -- Analyst

Okay, thanks for that. And then just switching gears to the base business and maybe I'd ask you to expand a little bit on your thoughts on demand and how this is the unique cycle? I mean, just how would you characterize what you're seeing in demand? Is this a special year for growth on just a rate of change basis? Or is what we're seeing sort of also like the cumulative effect of two decades of China and the WTO and people in the world moving out of poverty and therefore is and that sort of adds to the structural duration of what you're seeing? Thanks.

Randall C. Stuewe -- Chief Executive Officer

No, it's a great question and hopefully my crystal ball as to never fog in. For us, as we looked around the world, our thesis has always been very simple, population growth, wealth creation. And two things happen once there's wealth created. You use a lot of energy and you like to eat better. And all those confluences are coming together now around the world. The pandemic probably interrupted that for better part of the year, but we're seeing appetite for a protein around the world like never before. I mean, when you look at China, and I have been absolutely paradoxical on my belief that China has to de-risk their food supply. They don't have water. They don't have land. They're at full production on what they can produce. And then you take the animal disease risk that they've experienced. And it's really put into the forelight and foresight here of what they have to do on the world market.

So six months ago we thought they were replenishing in the hog herd. And I think they were. I mean, we would tell you how do we know that, what we had pig blood coming into our five blood processing plants in China, and then we had pig skin coming into our Central China Gelatin factory for the first time in almost two years. So that's a pretty good indicator. That has slowed down again tremendously, almost 50% of what it was in November, if not less. So China lost of a portion of their hog herd again and the question will ultimately be how do they, is this a cycle that they really industrialize, institutionalize, commercialize the bigger farms. I think the answer is yes. And China has a magical way of making things happen happen faster than most people in the world understand. But we've never seen this type of demand in the world, all around. Every one of our plants in the world is full today to produce meat, and I don't see anything slowing down that part of the picture in the near term here -- in the near term. I can't even put years on that.

I just think once that appetite is there, it doesn't go away. So that's what we said and tried to characterize this as demand driven versus a crop shortage in North America or South America or the wheat crop that interrupted in the Balkans or the Ukraine. And so this is very different. All said, I talk both sides here. I mean, China has a magical way of being one of the best traders in the world and they can change on a dime with policy and put a halt on some of this, but I just don't see them doing that this time. They've got such a severe shortage of meat. And the way you look at that as you look at cold storage of products here in the U.S., and they're really a historical low. So quietly the meat is moving out of the country. It's speeding the demand and I don't see anything slowing down.

Sam Margolin -- Wolfe Research -- Analyst

All right. Thanks, everybody.

Randall C. Stuewe -- Chief Executive Officer

All Right.

Operator

The next question comes from Ryan Todd with Simmons Energy. Please go ahead.

Ryan Todd -- Simmons Energy -- Analyst

Great, thanks. Maybe just a follow-up on one of your comments during the prepared remarks on distributions and capital management. I know you had talked in the past about external financing for the DGD expansion. Do you have a revolver that you got the DGD, I think in March. But I think you commented that you wouldn't be likely to see distributions until until Q4 when the expansion starts up, is that how we should think about it? Will you look to take the revolver over the course of this year or will you look to the hold out until the expansion starts before we would see kind of distributions to the parent accelerate?

Randall C. Stuewe -- Chief Executive Officer

Yeah, Ryan, this is Randy, And then Brad and I and Sandy we'll all -- we'll try team this a little bigger. From a macro perspective, we are now, what is this, May, so June, July, August, September, we're four months away from starting up the second machine. At that time, then you're going to be at 700, 700 plus run rate, maybe $2.50 a gallon. So dividends become really possible as we start that new machine up here and start to pull back. I don't think pulling from the revolver does much for any of our capital structures today as we're not in any risk of that or have anything to really push on.

The timing of DGD III as Sandy referenced and as we referenced in our comments, clearly we're looking at ways to bring that online as quickly as possible, slated for second half '23. But as we complete number 2, clearly we will turn our focus to that. We're blessed right now with the kind of the troubles, if you will, in the petroleum industry or the reduced capital programs there. It's made great labor and really the mechanical and pipe fitting shops available rather than sharing with somebody else for a percent of their capacity, we've got access to them. So ultimately the timing in the size of the dividends -- if you say even $2 in a quarter to $2.50 for next year, 700 million gallons. That's, that's a 1 billion 750 [Phonetic], that's 875 million plus. We don't see much change in the core business next year given the demand driven cycle. You're paying with this year. You're six months from a pretty significant cash coming over the transom.

Ryan Todd -- Simmons Energy -- Analyst

Thanks. I really appreciate that. Maybe since you're talking the expansions, a follow-up there. I guess first on DGD II. Any color on how you think about, like how much time that it takes to ramp up volume metrically? How much you'll see kind of in the fourth quarter of this year and into the early part of next year? And then as you were talking about the capacity on the pipe fitting and on some of the construction side, we've obviously only seen a lot of significant inflation in the market right now on raw materials, including steel pricing. Is there any risk to DGD IIIs capital budget or did you price these contracts before a lot of the sub kicked in?

Sandra Dudley -- Senior Vice President of Renewables and Strategy

So this is Sandy. What we told you is we've given you guidance in terms of total volumes for this year. Those include volumes from DGD II coming online as well. We expect to be fully up in '22. And obviously, we're saying that it's prior to that. So I think you can draw your conclusions there. In terms of construction costs, obviously, we're nearing the end of St. Charles expansion and everything appears online and on budget there. And with regard to Port Arthur, we've driven pilings, we report foundations, we've ordered all of our major equipment. And we did that early on. I know Randy and John Bullock often talk about our first mover advantage. And I think when it comes to this, this is clearly an example of that. We move quickly and we hit the market right in the right window in terms of when we made our purchases.

We've also done this before, and we have a great model that's been fully engineered and working. It's always easier when you have the blueprint than when you're having to make changes on the fly. And we've seen other projects report, 20% to 25% increases in costs due to things like that, like you mentioned, we're not. And so I think everything looks very positive. We are not projecting any increases at this point in time. So we're very proud of both of our projects and the progress. And I know that Jim had mentioned earlier that we have some pictures in the deck for you on this.

Ryan Todd -- Simmons Energy -- Analyst

Thank you.

Operator

The next question comes from Craig Irwin with ROTH Capital Partners. Please go ahead.

Craig Irwin -- ROTH Capital Partners -- Analyst

Hi, good morning. Congratulations on a really strong results.

Randall C. Stuewe -- Chief Executive Officer

Thanks, Craig.

Craig Irwin -- ROTH Capital Partners -- Analyst

Randy, I wanted to ask if you can connect the $1.1 billion in EBITDA, give or take in the guidance. If you connect that back to free cash flow this year, I know there is uncertainty around exactly how much cash you're going to get from Diamond Green. But what do you expect the core operations to throw off? And is it fair for us to expect cash flow to strengthen in the second half?

Brad Phillips -- Executive Vice President, Chief Financial Officer

Hey, Craig. This is Brad. On free cash flow this year, we've got the $300 plus million, which more or less the last several years had on capex, although our interest expense is coming down, we'll still see that probably in the 60, 65 range, $45 million of cash taxes. We'll see kind of how working capital ends up for the year right now with the higher prices. There is obviously little bit of pressure on changes in working capital. But we're in pretty good shape there in Q1, which is typically our toughest working capital quarter. But really when you put that all together with the guidance and where we expect the base business to be and you disregard dividends for the moment in that discussion which we just discussed, would be the tail end of the year and meaningful ones, certainly next year from Diamond Green. We do expect to have noticeable reductions in our debt level this year. We're 1.67 on our leverage ratio and I think really for the year even without dividends, we expect that to remain at or below two times.

Craig Irwin -- ROTH Capital Partners -- Analyst

Great, thank you. So this is a very similar environment today to when you did the acquisitions of both Griffin and Vion. I've heard you explained in the past how environments like this tend to increase the appetite of families that control some of these very large rendering competitors of yours, obviously much smaller than you, but large for the market. The question is, are you guys elephant hunting again? Is North America attractive for you? Or would you be looking more for elephants, may be grazing in South America or Asia?

Randall C. Stuewe -- Chief Executive Officer

Hunt for Zebra's, we own all the elephants. Craig, it's a great question. For the first time we completed a Board meeting here this week and for the first time the opportunities around the world are starting to surface again post some pandemic recovery depending on which continent you're on. So yeah, I mean, I think number one, the balance sheet is in order. Number two, the free cash generation between now and '23, '24 is pretty well predictable. And yes, we would like to grow, but we will do it smartly and it will be driven around building the moats around the kind of the four platforms I talked about, being that our renewable energy platform which is sustainable aviation fuel and our green energy businesses in Europe, around EnviroFlight, around our collagen peptide business, and then we love any bolt-on core rendering business that the give us; number one, a presence in a geography. Number two, gives us the arbitrage of feedstock. So we're actively looking around the world, and for the first time we're starting to see some stuff move that may come to market here this year or later this year.

Craig Irwin -- ROTH Capital Partners -- Analyst

Excellent. Well, you guys are definitely executing the long-term vision, so congratulations. I'll hop back in queue.

Operator

The next question comes from Ben Kallo with Robert W. Baird. Please go ahead.

Ben Kallo -- Robert W. Baird & Co. -- Analyst

Hey, good morning guys. Good job on the call. Randy, I can look up transit. I didn't know that word. So three questions, two big picture, maybe one by mutual. Big picture, the inflation environment you talked about lasting for the foreseeable future I think is what I heard. But you've been in a lot of this environment over those 39 years. And so I just like -- how do we get around that in your predictability? The second thing -- I get a question quite a bit. We saw the ADM facility coming on with the soy crush the announcement yesterday, you guys knew about long before. But the question is like does the returns go to ethanol business as everyone comes into this business and what separates that. And then the third, the mutual question is, how do we think about your SG&A? I see it ticks up a little bit here, and obviously, there is some leverage in the business. But how do you think about you controlling costs even though you're high in the hog period, lets say?. Thank you.

Randall C. Stuewe -- Chief Executive Officer

Lots of it lots of embedded questions there. And clearly the business has some tailwinds right now that it's faced headwinds for the last five years. I'll break these down for you. Clearly, the crushing industry both here and in the U.S. and in Canada for North America and canola are responding to the increase in demand or the anticipated demand for feedstock to feed renewable diesel investment in the near future. And I think that's all well and good. The crushing industry will take three years probably to build out. And you've seen the scale of some of these announcements, whether it's North Dakota crushing plant for ADM or it's Sydney Ohio expansion for Cargill or canola for Richardson's in Canada, and Viterra and Cargill, and etc., etc. And at the end of the day, those are for 1 million ton crush plant, that's a $350 million, $400 million investment today.

The other thing that you've got to look at is that any of the renewable diesel stuff that's been announced out there, it requires refine bleached deodorized vegetable oil, and that capacity also needs to be expanded today. I think Ben, it's pretty simple. And then I'll turn it over to Sandy. Marathon has proven the great experiment true. They used up all of the refining bleach and deodorizing capacity in the United States by starting up a plant. And so today, I'm hearing that RBD is trading somewhere between 15 and 20 over, that's 1,500 and 2,000 over. And so clearly that capacity is going to have to be expanded to as we go forward. And Sandy, you want to talk about renewable diesel capacity in your views?

Sandra Dudley -- Senior Vice President of Renewables and Strategy

So renewable diesel capacity, I think we touched on this maybe in an earlier call. Obviously, there are projects that are moving along and moving along well, probably like ours. But then there are projects that we're seeing kind of fall behind in terms of timelines, that are ones that we used to talk about that we don't hear much about anymore today. And so, well, we probably saw this. What some people think is this aggressive amount of gallons coming out on the market. I don't think that we see it as aggressively as some other people do.

Randall C. Stuewe -- Chief Executive Officer

And then SG&A, Brad, do you want to take that?

Brad Phillips -- Executive Vice President, Chief Financial Officer

Yeah. [Speech Overlap]

Ben Kallo -- Robert W. Baird & Co. -- Analyst

My question too was just on the ethanol front is that we had the boom bust cycle and maybe you answered this, but just spell it out to me because I'm slow is why is it different than that?

Randall C. Stuewe -- Chief Executive Officer

So Jim, why is RD different than ethanol since your ex-ethanol, I saved you from that business.

Jim Stark -- Vice President, Investor Relations

Okay. Thanks, Randy. Hey, Ben, it's different because of the boom that you had with ethanol build out was to meet a certain level of the mandate driven by the renewable fuel standard. Its different from renewable diesel because the low carbon fuel credit or low carbon fuel standards around the world are about reducing carbon. So you've got more opportunity and demand for lower CI scoring products like what DGD makes versus ethanol and its reduction. So the element of the backdrop is too, it comes from the fuel side, so renewable diesel is 100% fungible with petroleum diesel today. You don't have limitations on what you can blend in and the amounts. It doesn't have to be handled separately, it can get moved in the pipeline when it's back up and running. So you've got a variety of differences from that standpoint and also to cost. If you remember back in the day when they could get 20% GHG reduction, they were spending $1.65, $1.75 a gallon to build. We're looking at plants that at least the way DGD is built around $3 or higher. So it's the capital limitations and just the overall market is a different from the standpoint of an RFS versus LCFS around the world.

Brad Phillips -- Executive Vice President, Chief Financial Officer

Ben, this is Brad. Just to circle back on the SG&A. Yeah, we were up a little take there about $1.2 million versus a year ago. We did have a multi-employ or $1.3 million additional accrual that we made on a withdrawal liability on the pension side. But when you strip that away, we're flat. Really there you had some increases of several million due to FX, when you've got the euro, USD1.2 versus 1.1 insurance as we've talked about before the last couple of quarters is up year-over-year. And then we're actually this year and as Randy and we've talked about the guidance up and the performance, we are accruing more on the compensation incentive side instead of playing catch-up maybe on a good year later in the year, we've upped that, so that'll be smoother during the year.

And then on the flip side, we've obviously had a travel offsetting that with travel down and the stock awards expenses down versus last year, just the difference in the plan and the cadence of that. So I expect SG&A to run right in this range, adds to something extraordinary, which many things run through SG&A being around this level or a little lower than the following quarters.

Ben Kallo -- Robert W. Baird & Co. -- Analyst

Thank you, guys. I know that was a lot of questions.

Operator

The next question comes from Matthew Blair with Tudor, Pickering, Holt. Please go ahead.

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Hey, good morning. Thanks for taking my question and congrats on the guidance raise. My question is with the volatile pricing that we saw in the quarter, were there any significant shifts in your RD feedstocks point? And I guess on a similar note, are you seeing any improvements in UCO [Phonetic] or DCO availability.

Sandra Dudley -- Senior Vice President of Renewables and Strategy

This is Sandy. And in terms of our feedstock plays and I think you asking, have we changed our mix based upon what we were seeing going on in the market. And really it's no. I mean, I think everybody knows the three products that we typically use, and that's UCO, DCO and animal fats. At any one time, one of those could be higher or lower price than others. And we're going to take advantage of that because we have the machine that can do that. And so I don't, that really wasn't a major thing for us. We just took advantage of what we could in the market.

In terms of UCO -- I'm sorry DCO, were you asking if we were seeing more supplies come online. And I think that we never really experienced an issue with either one of those supplies. In general, I think that you're seeing more and more restaurants coming back online. And so, within the market in general, there is probably more pounds out there, but I don't think that we've seen any substantial.

Randall C. Stuewe -- Chief Executive Officer

Yeah, hi Matt, this is Randy. I always smile a little bit given the number of conversations that I have on UCO in this country. It's not a material amount of the entire feedstock as we've always said. There is 2 billion pounds of it. Darling has 40% to 50% market share in the United States. We're still down about 8% to 10% versus let's call 2019, and that's predominantly in the East Coast, West Coast, Northeast and California to be exact, where they're is still not open. So it's really not a material discussion for even the RD business. You would never build an RD plant and so your lead feedstocks is going to be UCO, because there really isn't any and 50% of it already go into our location. I can't use the word control like Sandy does, but I'm not allowed to. But that's where we see it. But at the end of the day I think you're going to see more and more restaurants opening up. With foodservice comes bigger and better demand for protein, which should make additional rendering and animal fats available as we go forward here.

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Sounds good. Thanks for all the details. And then my follow-up is, for the 30 million gallons of renewable naphtha that's coming with the Norco expansion. What market does that go in to? Does that go into the chems market, does that go into gasoline? And can you talk about how the economics on renewable naphtha stack up versus RD?

Sandra Dudley -- Senior Vice President of Renewables and Strategy

Yeah. So I think renewable naphtha as the new product for us, which we're just going to be able to produce once the expansions online. But like renewable diesel, we view naphtha as a worldwide market and we're seeing potential opportunities out there around the globe and it may be in different forms, whether that's in terms of green gasoline or possibly used as a feedstock and other process. I think that there are a number of options. But we're just not quite there yet. We sell them, actually produced and stripped it, so.

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Got it. Thank you.

Operator

The next question comes from Ken Zaslow with Bank of Montreal. Please go ahead.

Kenneth Zaslow -- Bank of Montreal -- Analyst

Hey, good morning, everyone.

Randall C. Stuewe -- Chief Executive Officer

Good morning, Ken.

Kenneth Zaslow -- Bank of Montreal -- Analyst

Can you dimensionalize how each new policy would create demand relative to the California, because there seems to be some real runway here in terms of the policies that are coming down the pike, and it would be helpful. If we could get some idea of, because that's going to be the lead to continue the momentum, I think. So there's two parts there. Am I right that has continued the momentum? And can you dimensionalize how much incremental demand there would be with each new policy that's coming down the pike?

Sandra Dudley -- Senior Vice President of Renewables and Strategy

So yeah, I think you're right. We had mentioned earlier that there is an awful lot of momentum. We're seeing a lot of new programs out there and potential new programs out there. Obviously, we now have Washington State, which is in play and we're so excited about that, and that's about 0.8 billion gallon market per year. New York is also on that horizon that we're looking at, and that's probably a 1.4 billion gallon per year. New Mexico, which we think has a decent amount of momentum going into next year is about 0.5 billion, 0.6 billion gallon market per year. And then obviously, Canada is going to be coming online and they're about 8.5 billion gallon market per year. And then I think I had also mentioned Quebec early on as well, and that's probably close to a 1.2 billion market itself. And so, there are significant volumes out there. There is a lot of demand being created. And these are just what we're seeing today. And so I think the future looks really bright.

Kenneth Zaslow -- Bank of Montreal -- Analyst

Right, and then in terms of cash deployment, you did obviously mention about the acquisitions. The amount of cash that you're going to have is going to be very hard to spend. Would you think about reallocating that to either onetime dividends, share repurchases, anything like that? Again, I think it's going to be just hard to spend all the cash you going to bring in. Any thoughts on that?

Randall C. Stuewe -- Chief Executive Officer

Yeah, I was -- as I said, clearly in the boardroom the last couple of days that was put on the screen as the -- as we always call it the cigar box, starts to build cash here pretty strong, strong in ''22 and then gets massive in '23. At the end of the day, Brad has around $250 million of term B to pay down, then we're sitting with a summer time callable or fall callable, thee and five eights euro bond that's out there, and then we've got a five and a quarter U.S. bond in '22. Long-term, I suspect we'd like to keep that -- some of that debt out there, if not the most of it and extend it out when the time is right before inflation moves these rates back up.

And then at the end of the day, the opportunities are we're looking around the world. Hopefully, we'll find some that makes sense that are fair priced that we follow our model on. And then, Ken, you said it outright. The Board's eventually going to have to evaluate a one-time dividend, a regular dividend or buybacks of some magnitude going forward. As we've called it in the boardroom, it's a high-class problem. Don't want to say we're kicking the can down the road. But at the end of the day, we still got a little bit of time on our hands before we have to make that call.

Kenneth Zaslow -- Bank of Montreal -- Analyst

Great. I appreciate it.

Operator

And our final question today comes from Adam Samuelson with Goldman Sachs. Please go ahead.

Adam Samuelson -- Goldman Sachs -- Analyst

Yes, thanks, good morning, everyone. And thanks for squeezing me in.

Randall C. Stuewe -- Chief Executive Officer

Good morning.

Brad Phillips -- Executive Vice President, Chief Financial Officer

Good morning.

Adam Samuelson -- Goldman Sachs -- Analyst

So a lot of ground has been covered. Maybe I didn't hear much about the food business both on the quarter and the forward outlook, which was unchanged. I know you've been very confident, Randy, on the growth, on collagen peptides and some of the new capacity there. Just help us think about some of the dynamics in play in that business this year? And how we should think that exiting the year into '22.

Randall C. Stuewe -- Chief Executive Officer

Yeah, I know. Great question, Adan, and a fun one to kind of going to conclude with the Feed segment clearly, because all of the optionality and that looks like the shining star. But the reality is the growth in the annuity side and then the strong cash flows have been always in that Food segment that have been very predictable, and two years ago we laid out a plan to add three or four new spray dryers out there and an enzyme conversion unit to capture the growing collagen peptide world, which essentially for those that are listening is a water soluble or use versus in a more sapphire type of application in regular gelatin.

And really not only that DGD ever that we hit a home run there, we are hitting a home run in the collagen peptide world right now from a demand perspective. That capacity is all coming online right now. When I say coming online, it's running the sales ledgers are building. Nestle's investment or Nestle Health and Nutrition that invested into vital proteins has clearly given kind of a great turbo charge to the vital proteins brand and allowed us to grow with that the number one brand in the world as we call it the blue jar that's out there now, and that's [Indecipherable] Darling product that's in there. And so we see that continuing to grow very nicely. It's been led by Jennifer Aniston and she has quite a following out there. She was introduced recently in some Dutch commercials and the sales are now 5 to 10 times higher than what they anticipated. So we're excited about it in that area.

All said in the segment, Brad and I watch that segment in the 125, 140 range for years and years and then we said 160 last year and then we said we would probably be in the 180s this year and then we would be in 200s. I think we're still on that trajectory as we change the product mix here and get the capacity sold out. And then we're working in that, the biomedical device and area right now, and that's probably two or three years out. But that, in our world as we talk in the Board room about the next big thing is in that, those applications for collagen peptides as we look around the world going forward. So the [Indecipherable] model is we took it back in 2014, was 100% gelatin driven model on, and we've rationalize that and refocused it to now where it's a both a gelatin and a collagen peptide business and soon it will have a third leg to it in the biomedical health and nutrition area, so hope that helps.

Adam Samuelson -- Goldman Sachs -- Analyst

It does. If I could just squeeze one quick one in. I don't think I heard this earlier. What is the capex expectation both at the parent, but also what's Diamond Green capex this year?

Brad Phillips -- Executive Vice President, Chief Financial Officer

On the base business, we're looking at about $310 million, $312 million, and we did $60 million here in Q1.

Randall C. Stuewe -- Chief Executive Officer

And Sandy do you want to comment about DGD a little bit?

Sandra Dudley -- Senior Vice President of Renewables and Strategy

Yeah. So this year and next year really are two big capex years, so we're finishing out DGD II this year and starting -- working on DGD III as well. So you're talking probably close to $800 million in both years.

Adam Samuelson -- Goldman Sachs -- Analyst

Right, great, that's really helpful. Thanks so much.

Operator

This concludes the question-and-answer session. I would now like to turn the conference over to Randall Stuewe for any closing remarks.

Randall C. Stuewe -- Chief Executive Officer

Thanks, Tom. I appreciate everybody's time today, and hope you all stay safe. In our IR deck there's a list of upcoming events that we'll be speaking at and look forward to talking to everybody in August and stay safe. Thanks for all the questions today.

Operator

[Operator Closing Remarks]

Duration: 70 minutes

Call participants:

Jim Stark -- Vice President, Investor Relations

Randall C. Stuewe -- Chief Executive Officer

Brad Phillips -- Executive Vice President, Chief Financial Officer

Sandra Dudley -- Senior Vice President of Renewables and Strategy

Ben Bienvenu -- Stephens Inc. -- Analyst

Manav Gupta -- Credit Suisse -- Analyst

Thomas Palmer -- J.P. Morgan -- Analyst

Sam Margolin -- Wolfe Research -- Analyst

Ryan Todd -- Simmons Energy -- Analyst

Craig Irwin -- ROTH Capital Partners -- Analyst

Ben Kallo -- Robert W. Baird & Co. -- Analyst

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Kenneth Zaslow -- Bank of Montreal -- Analyst

Adam Samuelson -- Goldman Sachs -- Analyst

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