Toby McKenna — Building North America's #1 Independent Gas Storage Company

00:00 What Rockpoint is — 280 Bcf, six facilities, ~30% share in two markets

• Largest independent storage company in North America: three facilities in Northern California, three in Alberta, ~30% market share in each. Market cap ~$1.4bn with Brookfield's ~60% class B taking equity value to nearly $4bn.
• Classic job: supply peaking in winter, price discounting in summer. New job: "we're here to help suppress volatility and offer services to customers to help them manage their own version of volatility."

02:10 The demand mix inverted — storage as an operational tool, not heating load

• Mid-'90s: every pipeline pointed at Chicago, New York, Toronto, Montreal, the Pacific Northwest — all heating load. Today the new demand (LNG, AI/data centres, electrification, oil sands) uses gas for operational purposes and "don't use storage the same way that the old storage was used."
• Oil sands is "the ultimate ace in the hole" in Alberta — gas burned to melt bitumen, growing with TMX-driven expansions.

02:54 The new put option — responsiveness moved from withdrawal to injection

• "In the old days, that responsiveness was needed on withdrawal. Now, we need that same responsiveness on injection." An LNG plant's disruptions hit on injection: a ship misses, and large volumes flood back into the market.
• "That's the put option that hadn't existed for the past three decades. That's really changed the value proposition."

04:17 The October 2025 IPO — ~$700m, 10× oversubscribed, 80% hit rate

• Advisers (RBC, JP Morgan) warned energy issuance had been poorly received; interest showed up within two days of the roadshow. "We had no idea what to expect."
• What resonated: Ukraine exposing Europe's energy position, then the realisation that "natural gas in North America is being used to balance worldwide supply and demand" — and storage is "really one of the only ways to get that exposure."

09:03 Trained as a bear — NGX, Engage Energy, and a career of getting stopped out

• Started at West Coast Energy's Natural Gas Exchange (NGX), pushing OTC phone trading onto a screen; then ten years trading at Engage Energy, later co-founding Louis Dreyfus Energy Canada (→ LDH → Castleton).
• "Most of them will say Toby's a bear… I ended up making most of my money in my career on the bearish side." Traders carry PTSD both ways: repeat the wins, never repeat the losses.
• Why he left: VAR limits force a short lens. "It's really hard to participate in a trend if you're going to get stopped out three times before you arrive… the market can stay irrational longer than you can stay liquid."

16:12 Tidewater Midstream — buying the distressed link in the chain

• Thesis on leaving trading: convert cheap/distressed gas into higher-value components (C2+, propane, butane). LNG was the obvious route but too capital-heavy for a start-up.
• With Joel MacLeod: roll up distressed gas processing, pipelines, rail, storage (Brazeau/Wild Rose) into a vertical chain so that "you could win off of one of those distressed parts of the value chain." ~30 transactions, "two PhDs worth of energy."

20:47 Frank McKenna's lesson — cause and effect over five and ten years

• No political ambitions ("I can say that definitively") — the family saw the cost.
• The transferable skill: "he had a way of seeing through the short term… willing to put to the side a short-term part of a deal that most people would get consumed by and look at the big picture." McKenna's own operating frame: "see through tomorrow, focus on five and 10 years out."

26:27 Taking over in 2020 — auditing accumulated conservatism

• He didn't want the job; a recruiter and a pragmatic wife pushed it. "One of the better decisions I've ever made."
• The operating insight he arrived with: in an asset that has been acquired repeatedly and never challenged, "if everyone's been conservative at every move of the entire chain… you get 10 conservative decisions that can lead to a 20 or 30% inefficiency." His first job was hunting every one of them.

28:52 Asset lineage — AEC/EnCana → Niska → Brookfield

• AECO, Suffield, Countess and Wild Goose all trace to Alberta Energy Company / EnCana. Suffield is, he believes, the biggest facility in North America.
• Carlyle/Riverstone bought the EnCana storage unit in 2006, renamed it Niska (a Cree word for Canada Goose) and took it public in 2010 — where shale broke it. Brookfield bought Warwick in ~2012, bolted on assets, then acquired Niska; eight assets by the mid-2010s, now six after the 2023 non-core sales.

31:26 Why shale killed storage — and why that lever is gone

• "Shale was the number one competitor to natural gas storage" — cheap, switchable supply that capped every spread. Chesapeake at $2–3 turned on; at $1 shut in.
• Today producers target liquids-rich and oil-associated gas, so the dry-gas price signal barely moves them, and expensive horizontal wells "can't turn on and off at will" without damaging the well. "The competition from production has simply gone away."
• The market used to debate how much working gas gets North America through a cold winter; what it never priced was the shale on/off lever. "Today, that second lever… is way less elastic."

35:47 Demand at the borders, supply that can't reach it

• ~20 Bcf/d of Gulf exports, 5 Bcf into the Canadian market, half a Bcf to Mexico — massive new demand riding on existing infrastructure while pipelines are 10-, 20- and 30-year projects. "This is a problem that we should have solved 10 years ago."
• The new modelling input he never used to carry: how long will producers produce below variable cost on a dry-gas basis? AECO around $1 through all of Q3 last year; California below variable for much of this summer. Result: more spread volatility and "a higher insurance value on the put."
• Producers are becoming storage customers themselves — vertical integration forced by egress, downstream and LNG offtake risk, taking that role from the merchant community.

39:22 The Gulf of Mexico template — storage rates tripled in 10–12 years

• First Gulf LNG cargo 2014; no movement in storage values by 2015. Today Gulf storage values are "300% of what they were" — a tripling over 10–12 years.
• The mechanism isn't just international price exposure: an LNG customer is inelastic in both seasons (protecting a $10–20 export value chain) and takes roughly three times the space to reserve injection capability that a conventional utility user needs. Conventional share shrinks while volatility grows — "that's the double-edged sword."
• He thinks AECO "is on the precipice of an expansion that could be significant" — explicitly flagged as not guidance.

42:12 The physical primer — depleted reservoir vs salt cavern

• Almost all North American storage is depleted reservoir or salt. Salt is shallower and smaller but must be man-made (washed out), so it's expensive; its advantage is high-deliverability injection and withdrawal — the "punchiness" new users want.
• Depleted reservoirs are the low-cost way to solve the bulk of the problem: millions of years old, already produced so the geology is proven. Most of Rockpoint's are "delta pressured" — quality good enough to hold more gas than was originally produced; new facilities built in the last decade only reach original pressure.
• 2023 core/non-core review: sold the 49.9% Tres Palacios non-op stake (with Crestwood) to Enbridge and the small Salt Plains asset to Spire.

44:35 The four-part barrier to entry — and "all of that white space is spoken for"

• Geology (Alberta has maybe a dozen comparable reservoirs), location and a market that needs it, then pipeline cost — overruns "at a high pace" over the past 5–8 years plus the regulatory build process.
• The one nobody models: interconnect. You need a pipeline that will interruptibly take gas from you and give it back — but end users have spoken for the delivery white space and producers for the receipt white space. Without that, a multi-hundred-million investment can't guarantee performance, and no proponent will backstop it.
• What development there is: small bespoke salt projects in the southern US with proponents backstopping both sides. "None of that storage expansion is changing the dynamic… that's why we've become so scarce and why we're so valuable."

47:38 Brownfield inside the fence, not greenfield

• "We're all chasing this 1 to 5% growth opportunity within our own fence" — compression, adjacent reservoirs, new wells, debottlenecking, deliverability technology. A 5 Bcf Warwick expansion can be backstopped with one or two contracts; a 30–40 Bcf, 10–15 year commitment with a new party cannot be de-risked on transport.
• Retention argument: 38 years, "we do not cut our customers. Never have." A diversified fleet (different sizes, deliverabilities, costs) plus both electrified and gas compression gives levers to make customers whole through an NGTL curtailment.

49:57 The three revenue buckets — take-or-pay, STS, optimization

• Take-or-pay (~50%, targeting 60% by 2029): customer pays regardless, de-risks the operator, and lets a sophisticated customer hedge the position into future years.
• Short-term storage (STS): typically with banks. Gas at $1 today, December at $2 — the bank leaves its own physically-collateralised molecule in the ground and Rockpoint captures 90–95 cents of the $1 spread. "Effectively a financing."
• Optimization (15%): space reserved daily for operational flexibility. ~99% of the time nothing goes wrong, so that space becomes an option to inject at $1.00 and schedule a withdrawal at $1.15, buy it back, and daisy-chain onward.
• Why he isn't more contracted: he doesn't want to be yet. Customers want 5/10/15-year deals; he wants the insurance value to expand first. California annual pricing at $2–3+ is starting to justify contracting more aggressively; Alberta is "early days."

56:36 Why the optimization wedge is not a midstream marketing wedge

• A midstreamer's wedge is an obligation: inlet substances never match outlet substances, creating involuntary longs and shorts (too much propane, not enough butane, long rail cars). "The market tends not to like that marketing wedge."
• Rockpoint's is a choice. "We never have an obligation to do anything with that business… every single day we're long the put and every single day we're long the call." No open positions, no commodity exposure, no carry from one period to the next — which is why he refuses to call it trading.
• Quality evidence: over the past three years the optimization book has realised an equivalency with the contracted terms — with no black-swan events in that window.

58:33 An infrastructure proxy trading at a discount

• He concedes the discount and names its cause: shareholders want to pay the infrastructure multiple for an infrastructure contract profile, and at ~50% take-or-pay he doesn't have one yet. "The macro is so strong that investors like the balance… but that ultimately is part of the reason why we're not trading at that premium today."
• ~80% EBITDA margin on very low fixed costs — power, gas and property tax, plus G&A. Hour-by-hour optimisation ("if the power price is $1,000 at hour 22, we just don't inject at hour 22"), enabled by large OBAs with the pipelines that free him from acting inside any given 24-hour window.

1:00:49 Capital allocation — ~5% dividend, brownfield first

• 50% payout, dividend around 5%. Remainder into brownfield capex; buybacks (C$10m last quarter) or debt reduction when that isn't the most accretive use. Leverage 3× (target up to 3.5×), and he doesn't think paying it down is a great use of capital here.
• ~$150m over three years to unlock 5–7% expansion at a 4–6× build multiple. Liquidity is deliberately ample — an almost $400m credit facility, because the business consumes cash if prices spike to $10 or $20.

1:02:19 The Warwick battery — monetising an idle interconnect

• 11 MW of batteries at a facility running at about a third load factor: large, heavily-underutilised power infrastructure plus 24-hour staffing and inside-the-fence security already paid for.
• The economics rhyme with the storage book — "it's managing volatility. It's being called upon at peak. It injects at lows." A template he may replicate at other facilities.

1:05:58 Why low gas prices are good for a storage operator

• "The ability to keep gas in the ground always is better than pulling gas out of the ground unless you're getting paid a massive premium… you can transact on that same molecule over and over and over again with no risk."
• Withdrawing creates an obligation to refill — and he refuses to forward-hedge that, because he can only re-inject when interruptible space is physically available. Not hedging is the risk control.
• Full storage this winter pushes low prices into the winter and into next summer, which sets up intrinsic value to expand on the way out. Customers meanwhile buy below-variable-cost molecules "at a higher frequency" than any model used to assume.

1:08:10 Where he could be wrong

• Honest framing ("I hope I don't have blinders"), but: "it's really hard to suppress volatility… there's so few levers to stop it."
• The real risks he names: a US or Canadian policy decision to stop exporting LNG; a structural change in how power is produced; and battery technology improving faster than expected — the stated reason he's building one.
• The offsetting moat: energy sovereignty. "We just don't see nations looking at energy in the negative light that they once did."

1:10:25 The Brookfield overhang — Oct 15 lockup vs the CPUC clock

• The Oct 15 date is the IPO lockup coming off. But Brookfield needs a CPUC change-of-control approval to go below 50%; the application went in Q1 with roughly a year's guidance, implying a Q1–Q2 2027 decision.
• "It's widely believed that they're waiting for the CPUC option to make their decision as opposed to that one." A secondary is the logical mechanism. "They love our business and aren't terribly excited about selling" — but "I can't speak for my shareholder."

1:14:48 Data centres — 99.9% redundancy needs a peaker, and a peaker needs storage

• On Meta's $13bn Alberta announcement he is deliberately unexcited: "there's more discussion about the demand than there has actually been FID projects."
• But the structure matters: 99.9% redundancy means gas peakers backstop the load even where renewables supply it, and "the battery backup or the storage backup to back up the real battery which is the power peaker." ~10 GW in the Alberta queue; 12.5 GW arrived in California in one quarter.
• He forecasts conservatively — LNG 20→30 Bcf, Alberta power doubling in a decade — and still gets a tailwind that doesn't depend on any single proponent.

1:17:38 "Too much egress is as good for us as not enough egress"

• Asked what happens if the egress bottleneck is solved: producers see white space and fill it, so you get oversupply in a basin "looking for any demand" — volatility either way.
• He doesn't expect it absent sustained high oil: "at $100 oil we have way too much gas looking for a home," which would just add to the insurance bid on the injection side.

1:19:23 Recontracting, and the first 10 Bcf Alberta long-term deal

• Pushes back on the "recontracting below existing rates" question: a large California renewal cycle landed this year and was refilled "at phenomenal prices." Six years in, he's still shaping the maturity waterfall.
• Announced last quarter: a 10 Bcf long-term contract with an unnamed Alberta customer — deliberately signalled as evidence of the 50%→60% take-or-pay conversion.
• What he's waiting on in the WCSB: LNG Canada stabilising through commissioning (once it can no longer flare, that gas returns to the system) and its first Pacific winter. His view — Alberta storage will have to supply most of British Columbia's storage solutions.

1:22:15 "I've been a bear my entire career… I'm a secular bull"

• The headline turn from a self-described 30-year bear: insatiable world demand, a political environment finally focused on energy, and undeveloped international chains mean "this shortage will result in overall, broadly speaking, higher prices for the next decade." Quarter-to-quarter distressed gas, yes; a prolonged low-price regime, no.
• Energy security and sovereignty: Europe's haves and have-nots (France's nuclear position as the counterexample), and a Canada whose neighbour is "for the first time ever pointing sticks at us" while Canada holds "an abundance of safe energy."
• The AI arms race framed geopolitically: if North America can't land the data centres and Asia does, that shifts economic dominance.

1:26:07 Closing — scarcity, incumbency, and a vulnerable market

• "Natural gas storage is an industry that's very hard to replicate" — barriers to entry and scarcity value are only two of the drivers.
• The clinching example: Chicago printed $70 last winter (and $1,000 in Oklahoma/Texas, $60 in California) — a market with abundant pipelines and every economic signal to attract molecules, and it couldn't. "The North American market is highly vulnerable and that vulnerability will continue to lead to higher insurance premiums for natural gas storage."