Genesis Energy, L.P. (NYSE:GEL) Q3 2022 Earnings Conference Call October 27, 2022 10:00 AM ET
Company Participants
Dwayne Morley – Vice President of Business Development & Investor Relations
Grant Sims – Chairman & Chief Executive Officer
Conference Call Participants
Michael Blum – Wells Fargo
TJ Schultz – RBC Capital Markets
Karl Blunden – Goldman Sachs
Operator
Greetings and welcome to Genesis Energy Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Mr. Dwane Morley, Vice President of Investor Relations. Thank you. You may begin.
Dwayne Morley
Good morning. Welcome to the 2022 third quarter conference call for Genesis Energy. Genesis Energy has 4 business segments. The Offshore Pipeline Transportation segment is engaged in providing the critical infrastructure to move oil produced from the long-lived world-class reservoirs from the deepwater Gulf of Mexico to onshore refining centers. The Sodium Minerals and Sulfur Services segment includes trona and trona-based exploring, mining, processing, producing, marketing and selling activities as well as the processing of sour gas streams to remove sulfur at refining operations. The Onshore Facilities and Transportation segment is engaged in the transportation, handling, blending, storage and supply of energy products, including crude oil and refined products. The Marine Transportation segment is engaged in the maritime transportation of primarily refined petroleum products. Genesis’ operations are primarily located in Wyoming, the Gulf Coast states and the Gulf of Mexico.
During this conference call, management may be making forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The law provides safe harbor protection to encourage companies to provide forward-looking information. Genesis intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities and Exchange Commission. We also encourage you to visit our website at genesisenergy.com, where a copy of the press release we issued today is located. The press release also presents a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures.
At this time, I would like to introduce Grant Sims, Chief Executive Officer of Genesis Energy, L.P. Mr. Sims will be joined by Bob Deere, Chief Financial Officer; and Ryan Sims, Senior Vice President, Finance and Corporate Development.
Grant Sims
Thanks, Dwayne. Good morning to everyone and thanks for listening in. The third quarter was once again a great quarter for Genesis as our market-leading businesses exceeded the upper end of our internal expectations. The fundamentals and macro conditions for our business segments remain strong. and continue to provide the foundation for strong financial results and continuing improvement to our balance sheet over the coming periods. Our quarterly results were driven by a combination of strong operating performance across all of our business segments, steadily increasing volumes in our offshore segment and strong soda ash prices in all of our markets, especially in our export markets. Excuse me! Based on our financial performance over the first 3 quarters and our expectations for the remainder of the year, we are today once again raising our full year guidance for adjusted EBITDA to a range of $700 million to $710 million for 2022 which includes approximately $41 million of nonrecurring benefits we received in the second and third quarters.
Said another way, our revised 2022 guidance range at its midpoint which suggests a normalized adjusted EBITDA of approximately $665 million which is over 15% higher than the midpoint of our original 2022 guidance range of $565 million to $585 million. Importantly, we expect to exit 2022 with a leverage ratio as calculated by our senior secured lenders at or below 4.25x which as I’ve said before, is the only relevant leverage covenant anywhere in our capital structure. As we look ahead to 2023, despite any potential recession-related risks that might be on the horizon for the broader economy, we remain confident that market dynamics in each of our respective businesses remain such that we do not believe we will see a meaningful impact to our expected earnings capability in 2023. This belief is supported by visible and growing volumes out of the Gulf of Mexico, specifically from a full year of King’s Quay in the portfolio of 6 or so infield workover and subsea tiebacks we referenced last quarter, along with new volumes from Argos in the coming months. None of this visible volume growth will be impacted by an economic slowdown or fluctuation in oil prices given the capital intensity and fixed cost economics of the deepwater Gulf of Mexico.
Furthermore, we believe the structural tightness in the soda ash market will continue to support soda ash prices in 2023, even if all or parts of the world start to see any slowdown in economic activity. These elevated soda ash prices combined with approximately 700,000 tons of incremental soda ash production we expect to have online from our Granger facility will also provide for increased financial contribution in 2023. Assuming steady performance from our other business segments, we do not see any reasonably likely scenario where we do not generate adjusted EBITDA next year in the mid-700s. Accordingly, we would otherwise expect to deliver more than 10% sequential growth from 2022 to 2023 from our base businesses. We would also expect to exit 2023 with a leverage ratio and again, as calculated by our senior secured lenders below 4 times. We believe this performance, combined with a clear line of sight to generate increasing amounts of free cash flow in the years ahead from additional offshore volume growth and a full year of soda ash volumes from Granger who will provide us with increased flexibility to address any near-term maturities on our capital structure under virtually any operating financial and economic environment. Now I’ll touch briefly on our individual business segments.
As we mentioned in our earnings release, our Offshore Pipeline Transportation segment again exceeded our expectations. During the quarter, we saw volumes from Murphy’s King’s Quay development continue to ramp ahead of our internal expectations. And according to Murphy’s latest public disclosure, King’s Quay is currently producing volumes in excess of 90,000 barrels of oil equivalent per day from only 5 of the 7 original wells. They are expected to bring online both the sixth and seventh wells in the near future and are continuing to work on increasing the capacity of King’s Quay beyond the original design capacity of 85,000 barrels of oil and 100 million cubic feet of gas per day over the remainder of the year. We remain encouraged with Murphy’s operating performance and believe we will see strong volumes from King’s Quay through the remainder of this year and into 2023 as well as for years and years to come. Furthermore, we benefited from a full quarter’s performance from the 2-well subsea Spruce development which continues to exceed our in the operator’s predrill expectations. We also saw 2 of the previously discussed new infilled subsea wells that were planned for the back half of 2022 come online during the quarter. We expect the remaining 4 of these wells to be placed online between now and the end of the year.
Each of these wells required 0 capital to connect and represent close to 10,000 barrels of oil per day on average of additional production that will flow first through a 100% Genesis owned lateral prior to transportation to shore through either of our 64% owned and operated Pasir CHOPS pipeline systems. Based on public disclosures from the working interest owners and Argos, the operator of the field is continuing to work through commissioning items which will delay startup until 2023. Nonetheless, the 14 wells predrilled and completed at the Mad Dog 2 field. Once it does start, we expect the volumes to ramp to its nameplate capacity of 140,000 barrels of oil per day over the subsequent 9 to 12 months after first production. This seems reasonable to us as King’s Quay from 0 to exceeding design capacity in less than 6 months from only 5 wells. The anticipated volumes from the Argos floating production facility should provide a steady bridge to the incremental 160,000 barrels of oil per day we expect in late 2024 and early 2025 from our recently contracted developments, Shenandoah and Salamanca. We also remain in active discussions with the operators of multiple infilled subsea and/or secondary recovery development opportunities, representing upwards of 200,000 barrels of oil per day in the aggregate that can turn to production over the next 2 to 4 years, all of which have been identified but not yet fully sanctioned by the operators and producers involved.
Based on the current activity levels and the number of projects with first production on the horizon, combined with the new increasing list of drilling prospects near our existing infrastructure, it is clear to us that no broader economic slowdown or short-term fluctuations in commodity prices will have a significant impact on the pace of development in the Gulf of Mexico for the foreseeable future. This is especially true in light of the deepwater Gulf’s importance to secure domestic oil production, its proximity to Gulf Coast refinery complexes and this fact, it has the lowest carbon footprint of any barrel of oil refined and consumed in the United States. Recognizing this, the Department of Interior has, in fact, just recently completed the public comment period for a brand-new 5-year leasing program from 2023 to 2028 which includes the Central Gulf of Mexico planning area, exactly where our industry-leading infrastructure is located. Furthermore, on October 20, the Department of Interior and the Bureau of Ocean Energy Management announced next steps for oil and gas leasing in the outer continental shelf to comply with provisions in the inflation Reduction Act of 2022. These steps include holding lease cell 259 by March 31, 2023 and lease sale 261 by September 30, 2023. While there remain decades and decades of inventory on existing and valid leases, these additional lease sales will provide operators new 10-year primary terms to further explore, develop and exploit the tremendous reserves in the Gulf of Mexico which will help support the growth and stability of our basin-leading infrastructure in the Central Gulf for many decades to come.
Turning now to our Sodium Minerals and Sulfur Services segment. The macro story for soda ash remains intact as worldwide demand ex China is continuing to outpace supply despite any concerns of a slowdown of the broader economy. According to third-party reports, estimated demand growth for soda ash in the ex-China market alone is expected to be in excess of approximately 1 million tons per year through the end of the decade. The outlook moving forward is driven by a combination of industrial production growth and increasing demand associated with the green transition, specifically from solar panel and lithium battery manufacturers at the same time as there is limited new supply available to the market outside of significantly higher cost synthetic soda ash production. As a result of the structural tightness and the cost structure of synthetic producers, our noncontracted export soda ash prices have steadily increased throughout 2022 and this again held true as our fourth quarter soda ash prices are expected to be higher than our third quarter prices. Given this starting point and the nature of our contracts, we currently expect in all of our recent pricing conversations thus far would confirm that our weighted average soda ash price will be higher in 2023 than it was in 2022. This will be true even if we were to see a decline in market clearing spot prices over the course of 2023 which is not impossible but depends on a number of negative dynamics all playing out together.
Soda ashes without question a fundamental building block of the global economy with no practical substitutes and absent some major black swan event will continue to be a vital component for future economic growth, both domestically and around the world for the foreseeable future. The fundamental oversupply in the undersupply in the soda ash market has occurred despite the automobile industry producing far fewer units than historical average due to semiconductor chip shortages and various other supply chain issues. Moving forward, we would expect general auto production levels to return to historic levels as well as significant growth for soda ash expected from solar panel manufacturing and lithium battery manufacturing to support growing demand for EVs and batteries for renewable sources of electricity. We believe these tailwinds are likely to offset any potential reduction in demand for soda ash from construction-related activities or other smaller end markets which might be impacted by any recession or economic slowdown. You can read a lot out there about lithium that many are now calling the new white gold because of its place as a critical component in the manufacturing of batteries for electric vehicles as well as storage batteries for renewable energy from solar and wind. Well, soda ash really is another white gold as you need 2 parts soda ash for one part lithium to make 1 unit of lithium carbonate equivalent which is a key component in battery manufacturing, not lithium by itself but soda ash mixed with lithium using more than twice the amount of soda ash per the amount of lithium used.
Based on the growing demand from green initiatives which appears to be relatively invariant to general economic activity, it is evident the world will need more soda ash to support the transition to a low-carbon world and the general economic growth that without question occur in the decades to come. We are very excited to be the first domestic natural soda ash producer to bring online a meaningful expansion this decade to help supply this constantly growing market. The incremental volumes we will produce from our Granger facility will not only allow us to supply our customers from multiple independent production sites, thus increasing our reliability as a supplier. But these new volumes will also allow Genesis Alkali to be the logical supplier of incremental soda ash demand from our customers, both domestically and abroad to support their future growth initiatives in the coming years. Along these lines, we remain on schedule to have first production from our original Granger facility as early as January 2023 and with the expanded Granger facility expected to be online sometime midyear. We continue to expect a net increase in production of around 700,000 tons in 2023 which importantly will be contracted at current market prices with the full 1.2 million to 1.3 million tons from old and new Granger available for sale in calendar year 2024.
Once expanded, Granger will join our Westvaco facility as one of the lowest-cost soda ash production facilities in the world. Our legacy refinery services business continues to be a steady contributor for Genesis. The primary end markets we serve, specifically copper mining and the corrugated paper market provide us a stable baseline of business despite any concerns of a broader slowdown in economic activity. I think we can all agree that copper will remain a fundamental building block of the global economy and specifically the green energy revolution for the foreseeable future, especially based on the various forecasts of electric vehicles, solar panels and the build-out of the electric transmission and charging infrastructure. In addition, our sulfur-based products are used in various applications to support emissions reductions activities in various industrial applications. Despite any risk of a potential economic slowdown, we believe the combination of an elastic copper demand, steady demand from pulp and paper markets, along with the additional demand from ancillary applications will provide us with a steady to increasing results moving forward.
I would like to take a moment to talk about how we believe the market continues to misunderstand and arguably undervalues our Sodium Minerals and Sulfur Services segment. For whatever reason, the market seems to value this segment like a generic bulk chemical business with minimal market scale and whose products likely compete with substitute products that are used in low to no growth end markets with low margins. Businesses like that should probably be valued by the market at call it an 8x EBITDA multiple. I can tell you, we firmly believe our Sodium Minerals and Sulfur Services segment should instead be valued much more like a specialty chemicals business, where the market tends to value such at EBITDA multiples north of at least 10x, if not in the range of 12 to 13 times. Our soda ash business produces a product that has no practical substitutes and is absolutely essential to everyday life, global economic activity and the energy transition. Many of the products we take for granted, such as the windows in your house, at your place of business or in your cars, iPhones, glass containers, solar panels, lithium batteries for electric vehicles, detergents, pharmaceutical products, among countless others, all require soda ash to produce and deliver an end product to a consumer. We do not compete with a substitute product but rather we compete with synthetically produced soda ash which is more than twice as expensive to produce and has a far nastier environmental footprint relative to natural production.
The end markets we serve are not only vast and diverse but they continue to expand and grow. Furthermore, after our Granger expansion, we will produce and supply close to 13% of the global demand for soda ash outside of China. All of these factors should likely combine to contribute to steady and growing financial performance. It is interesting to note that since the beginning of 2018, the first full year we own the soda ash business, we have been able to generate average EBITDA margins as a percent of revenue of greater than 25%, fully loaded with all fixed and variable expenses. The calculated average EBITDA margin as a percent of revenues increases to approximately 30% if you exclude the impacts of the black swan pandemic had on this business in 2020 and 2021. These are realized EBITDA margins of specialty chemicals, not generic bulk chemicals. Similarly, our refinery services business provides essential emission reduction services to our host refineries at the same time, producing a specialty chemical that has limited and/or significantly more expensive substitutes in virtually all of its applications. Additionally, it is an essential input into both the copper mining and pulp and paper industries. We continue to be one of, if not the leading supplier both in North and South America and we support end markets that will continue to be around and grow for many years ahead.
I think we can all agree that demand for copper is not going away, especially given its necessity in our everyday life and its increasingly important role in the energy transition to a lower carbon world. Also, the last time I checked, everyone continues to have countless Amazon, FedEx or UPS boxes on their front porch every day. As a result of our competitive positioning and the steady to growing demand from our various end markets, we have been able to generate EBITDA margins as a percent of revenue of greater than 30% since the beginning of 2018. This is quite remarkable and once again, more akin to a specialty chemical business, especially given this business has generated these types of EBITDA margins since we first acquired the business back in 2007 or some 15-plus years ago. The world and more specifically, the green transition to a low-carbon world will not be able to move forward nor at the pace that everyone desires without soda ash and our sulfur-based products period. Our Marine Transportation segment performed in line with our expectations as market conditions continue to support activity levels at or near 100% for all classes of our vessels, combined with increasing opportunities to steadily increase our day rates.
The market for Jones Act tonnage remains structurally short across all classes of our vessels due to continued net retirement of marine tonnage across the industry, combined with steady refinery utilization levels and the robust demand to move refined products from the Gulf Coast to the East Coast and the West Coast. This structural tightness, especially for our inland fleet, has recently been exacerbated by record low water levels on the Mississippi River which has caused increased traffic, navigational delays and longer than normal wait times to move through locks. These conditions have reduced the practical availability of marine equipment available to make moves up or down the Mississippi River. It is important to note that we have not experienced any negative financial effects as a result of such conditions on the Mississippi River. We operate on a day rate plus fuel basis without going ‘off the clock’ due to navigational issues, whereas traditional dry cargo or line haul carriers generally operate on a per ton mile rate structure. When you don’t move a ton at least a mile, you lose revenue. That’s not at all how we operate. As we mentioned in our release, the American Phoenix recently completed her scheduled dry docking and has started her most recent charter with an investment-grade counterparty through the end of this year at a rate meaningfully higher than our previous charter.
We also recently entered into a longer-term agreement with another investment-grade counterparty starting in January 2023 at a rate equal to or better than her current charter. This new arrangement will last a minimum of 6 months and more likely than not for all of 2023 at rates approaching what she commanded when we first purchased the vessel in 2014. All of the dynamics across our marine portfolio provide broad support for increasing levels of financial performance from our Marine Transportation segment moving forward and we do not foresee a scenario where any short-term reduction in demand due to a policy-driven slowdown with significantly alter its trajectory. As we have said in the past, we remain very excited about the future of Genesis. The decisions we have made over the last few years, the recovery in our market-leading business off the double black swan lows of 2020 and as well as the expected growth we have in front of us, all combined to provide us with the foundation of generating increasing amounts of discretionary cash flow and an improving credit profile in the coming quarters and for years ahead. Our current expectations for 2023 will not only allow us to exit the year with a bank leverage ratio below 4x but will also allow us to manage our capital structure to the extent the regular way capital markets remain practically closed for any extended period of time.
Along these lines, we have demonstrated time and time again we have tremendous support from our banks. And while we have no definitive plans to do so, we have historically been fairly creative in terms of executing on structured finance or asset sale opportunities to the extent we feel they are necessary and in the best interest of all of our stakeholders. As a result, we remain absolutely confident we have the flexibility and in fact, multiple attractive avenues to deal with any near-term maturities as well as extend and possibly even expand our senior secured credit commitments.
The management team and Board of Directors remain steadfast in our commitment to building long-term value for everyone in the capital structure and we believe the decisions we are making reflect this commitment and our confidence in Genesis moving forward. I would once again like to recognize our entire workforce for their efforts and their unwavering commitment to safe and responsible operations. I’m proud to be associated with each and every one of you.
With that, I’ll turn it back to the moderator for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from Michael Blum with Wells Fargo. Please proceed with your question.
Michael Blum
Thanks. Good morning, everyone. I wanted to ask about the soda ash business. Specifically, I just wanted to hear if you have any – just what the supply chain and shipping conditions are right now? And are there any bottlenecks you’re seeing to get your product to market? And then can you provide like a breakdown of end markets you’re selling into right now?
Grant Sims
I mean I think in terms of delivery mechanisms, basically, the vast majority of our product out of Wyoming goes out via rail. And then as distributed domestically via trucks and other means at that point. But the rail goes to ports where we load onto vessels for exports. So at this point, we’ve not seen any disruptions in that ability to get there. It’s important to note on our domestic sales which is about half of our sales we’re just the agent for transportation. We don’t take any — we sell FOB, if you will, Wyoming to our domestic customers and we help a range but all of that. But on our international sales, our export sales, we do sell on a delivered basis. But given our size, that we have — we think we have more favorable as the largest exporter coming out of the U.S., we have more favorable rates on both the railroads to get to the terminals and our maritime costs are lower than other people that are because of the volume discount that we get through NSA by moving more product than any other domestic exporter. Regarding the current breakdown of cells, I don’t have that right at my fingertip but Michael, we can get that to you at some point.
Michael Blum
Okay, great. Appreciate that. And then you had some comments in, I guess, the press release and your prepared remarks about upcoming maturities and your ability to deal with those. And I guess from what I understand the lease you don’t really have any maturities until 2024 and it’s not even that big maturity in ’24. So I guess I just want to make sure I’m not missing something there. Is there something that we should be aware of? And as you think about those options for the maturities that are coming up, what maybe you could expand upon that?
Grant Sims
No, you’re exactly right. I mean we don’t have any unsecured maturities until mid-2024 in our senior secured facility expires 90 days inside that. Some people have brought that up as a potential overhang given obviously the current dysfunctionality as I characterize it in regular way capital markets, really the unsecured market at this point. As you point out, it’s only a $340 million issuance. It’s very small. We don’t see it as an issue at all. We have multiple ways to deal with it and handle it. And so yes, I was just really trying to address some of the comments that we get that that’s a concern to some people in the capital structure. We just don’t view it, especially given the momentum of our business and the increasing amounts of discretionary cash flow that we have very high visibility towards.
Michael Blum
Okay, great. Thanks for clarifying.
Operator
Our next question comes from TJ Schultz with RBC Capital Markets. Please proceed with your question.
TJ Schultz
Great, thanks. Morning, Grant. Maybe just a broader question on tightness in the soda ash market beyond your Granger expansion. Are you expecting any other material supply additions in the U.S. market in the next 2 to 3 years? I’m just trying to think how the natural soda ash market would get less tight from where it is today beyond any demand movements. And if you could just touch on some of the dynamics that would all have to occur together to realize lower pricing next year?
Grant Sims
Yes. I mean there’s no other near-term expansions of natural production in the U.S. which, in our view, can occur prior to the 25, ’26 time frame. There’s probably some debottlenecking that could occur and brownfield expansions that could occur at the Sisecam site but it doesn’t appear that it’s in their 5-year capital plan. The Solvay has announced an opportunity to debottleneck and these are all in plus or minus 300,000 to 500,000 tons a year type deals but we don’t — again, we would think that, that would take 2 or 3 years. And given that Solvay is currently publicly separating, if you will, it’s a bulk chemical business. It’s soda ash business from its other businesses. We don’t perceive that that’s going to — given that it’s in one form or another, either for sale or going to be spun out that that’s that expansion is going to occur. And again, not of it can occur in our mind before ’25 or ’26. As we look at some of the at least kick around or announced potential new greenfield developments to expand in the Trona Basin in Southwest Wyoming. I think those are at best case 2028 to 2030 time frame based upon our view of what it would cost to do a greenfield development that has been kicked around.
And I think some of this is in the public domain in terms of some of the public discussions that has occurred, that the cost would be in excess of $1,000 a ton of incremental capacity. And given that there’s no — in the soda ash business, there’s not really the concept of take-or-pay or multiyear contracts, we would expect that you would need a clear runway to, call it, plus or minus $120 a ton net EBITDA margin to support that expansion and by golly, if there’s $120 net EBITDA margins across the board, we’ll make $600 million a year off of our 4.8 million tons of existing installed production capacity.
TJ Schultz
Okay, great. Maybe just following up on the end markets for soda ash from Michael’s question without getting into the exact percentages. Is the view essentially that autos have effectively already suffered. So you’ll see growth there. And then as solar and meti grow as a percentage of mix, that can fully offset or substantially offset any potential weakness that you may see or we may see on construction?
Grant Sims
Yes. I mean that’s basically — that’s our feeling that the U.S. automobile manufacturers have been in the 13 million to 14 million unit rate for a couple of years, especially exacerbated by the chip shortage in our discussions with the automobile glass manufacturers in the automobile industry itself, they believe that, that ship shortage is going to be substantially addressed, call it by the first/second quarter of 2023. When it can get back to potentially given pent-up demand and other things to get back to 17 million to 18 million units on an annual basis. So that drives quite a bit of incremental demand. And then the demand from the green initiatives of solar panels and lithium carbonate for batteries and other things is conservatively about 0.5 million tons year of incremental demand. And so I think a pullback in construction activities, at least our view at this point, the pullback in construction activities is in large part going to be addressed by the growth that’s coming from the green initiatives.
So inventories are extremely low. And not all of the economies are going to see things. We’re seeing robust demand growth continuing and developing economies, both in South America as well as Asia outside of China. So we feel quite confident in our discussions with customers as we start here the renegotiation period for 2023. I think that those dynamics are really holding up. So I got — just as we’ve been sitting here, I’ll kind of answer Michael’s question which is part of your question also. But in general, about 54% of the total market is in glass of all kinds. So it’s automobile glass, container glass, flat glass for construction activities. Generally, during recession, we see container glass absolutely go up. People tend to drink more for whatever reason apparently. Soaping detergent is about 16%. About 17% goes into chemicals and the rest is kind of in the metals, mining and pulp and paper business. So that’s a general breakdown of where the sales are.
TJ Schultz
Okay, thank you.
Operator
[Operator Instructions] Our next question comes from Karl Blunden with Goldman Sachs. Please proceed with your question.
Karl Blunden
Hi, thanks very much for your time. I was interested in your comments on the copper mining and market. And I was curious if you could provide a bit more color there. Are you — when you think about the forward outlook, there is that driven primarily by the production volumes of your customers. Is there any profitability tie in there for their profitability to your outlook or any market share opportunities?
Grant Sims
No. We generally — I mean we’re at an absolute critical component the sodium hydrosulfide which is the byproduct or the product that we make in the removal of the sulfur that is in trained in crude oil that enters a refinery is used in copper mining to basically as a reagent to separate the copper from the molybdenum, was a very hard word to say. And so then you get the copper miner guess the revenue impact being able to sell the molybdenum as well as remove it from its typical and train molecular structure with copper. So we’re critical but a very small part of the input. We structure everything on the basis of basically a fixed margin delivery from our perspective. So whether or not copper prices are $3.40 or $2.80 or $4.50, we get the same margin per ton of sodium hydrosulphide that we sell into that market.
So it’s our belief and you can read a lot of commentary from Freeport-McMoran and BHP and others that are large publicly traded copper producers that basically the cash cost of their cash cost of producing copper across their portfolio of mines worldwide is in the $1.40, pound range. And so with today’s copper prices of $3.40, there’s absolutely no — they’re producing everything that they possibly can. And so unless and until you see a long-term forward copper pricing curve of $2 or less. So we don’t expect anything to any effect on our ability to market the tons. So, that’s kind of the dynamic we see.
Karl Blunden
Yes, that’s really helpful. It ties up with the commentary you’ve seen from the miners, too. With regard to the capital structure and we do appreciate the be proactively discussing that you have options to deal with the 24 and 25 maturities. When you think about the preferred options, should we still think about unsecured debt as the preferred way to go. Those bonds have rallied recently, close to 9% yields now. But is that the preferred option and to keep the capital structure simple over time? Or are you increasingly looking at things that could be lower cost, whether they’re structured or equity linked, et cetera?
Grant Sims
Yes. I think that we’re looking at — well, right now, even if with the Montreal to unsecured at 9%, that doesn’t seem to be overly attractive at this point. But I think that we would like to — we are looking at cheaper alternatives which could possibly be an expanded senior secured commitments in one form or another that gives us a cheaper cost of capital to go forward and simplify the capital structure and well as potentially harvest some of what we perceive to be mispriced bonds in our unsecured complex. So I think that given the radically improving financial performance of the business, the calculated the leverage and with the clear growth that we have in front of us in ’23 and beyond, I think that we’re in a very enviable position to be able to be creative in either regular way or other ways to simplify the capital structure and ultimately, with reducing the cost of capital, if you will, that exist on the balance sheet at this point.
Karl Blunden
That’s really helpful. Thank you.
Operator
We have reached the end of the question-and-answer session. I’d now like to turn the call back over to Grant Sims for closing comments.
Grant Sims
Okay. Well, again, we appreciate everybody listening in and we look forward to continuing to deliver good news on our fourth quarter call and as we go through 2023. So thanks, everyone and we’ll talk soon.
Operator
This concludes today’s conference. You may disconnect your lines at this time. And we thank you for your participation.
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