We expect that it will, because frankly, there is far more opportunities for the three large players to go around than there is, frankly available equipment. So, so far so good. I think we’ll stay the course. And if and when there’s any M&A opportunities, you’ll be the first to see in a press release.
Robert Mosca: Thanks. Appreciate that, Eric. And maybe if you could unpack, in your prepared remarks, you said that those commercial discussions for new units still kind of at an impasse for customers not willing to commit on the rate or term. Maybe could you provide some more color into whether there’s been some softening around that dynamic, or is it still pretty similar to what you saw last quarter?
Eric Scheller: Hi, this is Scheller. I think it’s like the ice cube starting to melt. We’re now in the middle of the first quarter. We are taking some inbounds and discussions as people are looking at their production curves, trying to figure out what available capacity we could shuffle around to optimize networks and to optimize flows into the pipe. So we always have these conversations on a continuous basis with our customers to figure out what that forward looks like, especially given that we’re talking about a year out to get new units.
Robert Mosca: Got it. Appreciate the time, everyone.
Eric Scheller: Thank you.
Operator: Your next question comes from the line of James Spicer with TD Securities. Your line is open.
James Spicer: Hi, good morning. You spoke about the need to refinance the high-yield bonds at some point and wanting to address the capital structure. Another component there is the revolver. You ended the quarter with $872 million of revolver borrowings, that’s about $260 million year-over-year. Maybe you can just speak a little bit about your comfort around that level of revolver utilization and how that factors into your overall plans for the balance sheet?
Eric Long: Yes, James, obviously the revolver is our lowest cost of capital that we have in our capital stack. We’ve had a long relationship with our bank syndicate, literally we’re talking 12 years, 14 years associated with, I think that our first financing was 2006, back with that Group. So we’re in excess of 15 years to 16 years now. We’ve got a $1.6 billion commitment with, as you pointed out, [850,875] drawns. So we’ve got plenty of capacity. When you look at the availability, we got plenty of availability to finance future growth to the extent we opt to do so. The bank group is very, very stable. We’ve actually had a recent entrant who was able to consolidate a couple of smaller players, or some of the European institutions in energy who are migrating out of the domestic energy business.
So we solidified that with a much larger, longer-term strategic type of financing institution who has an appetite to be in compression and in energy in general. So we’re very comfortable with that ABL facility. I think our vision has always been, let’s use that as a growth platform. And at some point when it gets large and it grows to a certain point, rather than moving that from all floating rate debt, we’ll turn some of that up and move that into a high yield facility. So at this stage, we did put a $700 million notional float to fixed commitment in place. Our effective interest rate is sub 4%, 3.9725% or so on that facility. So it’s an attractive cost of capital for us, and we just need to continually look to optimize and balance fixed versus floating.
We do have capacity and do we have access to capital, unlike, frankly, most of the peers in the compression industry are pretty tapped out. So we’ve got line to play with should we so desire. And I think this is what your management team is paid to do, is every single day and every single quarter, every single year to look at that capital structure, figure out how we optimize that, how does that fit in with our growth plans, and we’ll balance accordingly.
James Spicer: Okay, that’s great color. I appreciate it. And one more if I could. I was just curious about the drivers behind that preferred unit conversion and what your expectations are around additional conversions in 2024?
Eric Long: That is something we really don’t have a lot of insight or color into. I think that was probably done opportunistically, points you to the public docs, you can figure out that they’ve got a conversion price of $20.01. And when the units are running in that $25, $26 range, clearly there are some economic incentives for them to do so. They did have warrants associated with the preferred. We put that together. Those have all been cash settled and cleared out. There were some converted to common, and those have all been disseminated out into the public hands. They did convert $40 million. Depends where the unit price is. If the unit price is, we look at underwriter discount or the current strike price minus underwriter discount, less than 2001, if it’s economic, they may continue to do so.
If there’s some softness in the security price, probably not. So they’re happy with the investment. It’s a 9.75 current pay, so there’s no big incentive for them to exit the facility. And we got plenty of time and tenor associated with it. So I don’t see them in a rush to exit. I see them, like any investor, being methodical and trying to optimize their financial returns over time. And with EIG, I would expect nothing less than that in the future.
James Spicer: Okay, makes sense. Thank you.
Eric Long: Thanks very much.
Operator: There are no further questions at this time. This concludes today’s call. You may now disconnect.
