Greetings and welcome to the Huntsman Corporation Third Quarter 2021 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. It is now my pleasure to introduce your host Ivan Marcuse, Vice President of Investor Relations. Thank you. You may begin.

Thank you, Jesse and good morning everyone. Welcome to Huntsman's third quarter 2021 earnings conference call. Joining us on the call today are Peter Huntsman, Chairman, CEO, and President; Phil Lister, Executive Vice President and CFO; and Tony Hankins, President of Polyurethanes. This morning before market opened, we released our earnings for the third quarter of 2021 via press release and posted to our website huntsman.com. We also posted a set of slides on our website which we will use on the call this morning while presenting our results. During this call, we may make statements about our projections or expectations for the future. All such statements are forward-looking statements and while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the quarter. We will also refer to non-GAAP financial measures such as diluted adjusted EBITDA, adjusted net income, and free cash flow. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release, which has been posted to our website, huntsman.com. I will now turn the call over to Peter Huntsman, our Chairman, CEO, and President.

Thank you very much, Ivan. Good morning everyone. Thank you for taking the time to join us. Let's turn to slide number three. Adjusted EBITDA for our Polyurethanes division in the third quarter was $246 million versus $156 million of the year ago. Our Polyurethanes business EBITDA growth was primarily a result of 2% year-on-year total volume increase and improved margins. Total volumes have increased 5% -- would have increased 5% had it not been for Hurricane Ida disrupting our Geismar, Louisiana operations in the third quarter. Our differentiated volumes increased by 4% in the quarter, led by our insulation, including spray foam and elastomers and adhesive businesses. Our core construction markets, including insulation, adhesives and coatings continue to be the strongest markets for polyurethanes. The North American insulation businesses includes spray foam and our composite wood products business. These remain strong as we see solid residential and commercial construction spending. Our Huntsman Building Solutions business continues to benefit from strong demand and market share gains. HBS revenues were well above the prior year and on track to exceed $575 million for 2021, combined with margins approaching 20%. The backlog of our order book for spray foam remains strong. The price increases that we implemented during the quarter are helping to offset higher raw material prices and logistical costs and challenges. Further, our efforts to expand internationally continue to gain momentum and is contributing ahead of our expectations. We remain very positive about this platform, and we'll look to add to it with bolt-on acquisitions and organic investments when feasible. Our elastomers, which includes our global footwear business, is another core growth platform for Polyurethanes and it continues to see strong recovery trends globally. This platform is implementing price increases globally to offset the headwinds in raw materials and supply…

Thank you, Peter. Turning to slide seven. We are pleased to see a continuation of a strong recovery in earnings. Adjusted EBITDA for the quarter was $371 million. Adjusted EBITDA increased by $183 million year-over-year and by $37 million or 11% quarter-over-quarter. We were particularly pleased with the continuation of the strong adjusted EBITDA margins in our Performance Products division. We're investing organic growth capital into this division with a determination of maintaining adjusted EBITDA margins above 20%. Overall, our volumes grew by 8% with recovery across the majority of our businesses since 2020. Gross profit margin improved substantially over the prior year period despite severe increases in raw materials year-on-year, increases which continue into the fourth quarter as energy costs, driven by natural gas, rise around the world. Since 2017, we have divested approximately 40% of our prior portfolio, with one of our primary objectives to deliver more stable earnings than we have in the past. Our adjusted EBITDA margin was 16% for the third quarter and we have now delivered three consecutive quarters of margins of 16% to 17%. We remain focused on improving our adjusted EBITDA margin beyond these levels. Let's turn to slide eight. A reminder that we have an ongoing acquisition synergy and cost optimization program which we began in 2020. We expect to have delivered approximately $90 million by the end of 2021, of which half is SG&A. We initially targeted $120 million of total improvements by 2023 and now expect to deliver approximately $135 million, of which $60 million is SG&A and the remainder is improvement to gross profit. We remain focused on controlling SG&A. Since 2019, we have offset increased SG&A from bolt-on acquisitions with our cost savings initiatives. Those acquisitions, combined with overall improved business performance, have increased our top line…

Thank you, Phil. Given that our Investor Day is a little over a week away, I shall limit my comments this morning until the time when my team and I intend to share a more fulsome vision of the business. However, this past quarter marks a significant achievement in that our strongest quarter on record still has room for improvement so we further cut costs, complete our MDI splitter, see the Aerospace recovery continue, anticipate new capacities of specialty products and push through price increases. Over 40% of our EBITDA came from non-Polyurethanes' earnings, marking a significant balance. We also purchased just over $100 million this past quarter of our stock. Our Board, upon reviewing our projected earnings and cash generation, has decided to resume a share buyback program that will include a quarterly buyback that, at a minimum, should approximate our quarterly dividend. As we look into the fourth quarter, we should expect some seasonality, raw materials headwinds and logistics challenges. This should be largely offset by aggressive price increases, operating excellence and a continued focus on cost reductions. We expect our fourth quarter EBITDA to be between $320 million and $355 million. On another front, we began reporting, in 2017, on the significant lawsuit we filed at that time against Rockwood and Albemarle after discovering that Rockwood had committed fraud and breached contractual obligations at Otas under an agreement to purchase Rockwood's TiO2 colored pigments business in 2013. After we closed on the transaction in the following year, Albemarle merged with Rockwood when it purchased the stock of the remaining Rockwood businesses. We sued Rockwood and Albemarle as Rockwood's successor after discovering that when we were negotiating the deal, Rockwood misled us about the viability of the key color pigments manufacturing technology it was selling. We arbitrated the…

Thank you. Ladies and gentlemen, we will now be conducting our question-and-answer session. [Operator Instructions] Our first question is coming from the line of Frank Mitsch with Fermium Research. Please proceed with your question.

Good morning all and congrats on the quarter, and Peter, certainly congrats on the Albemarle lawsuit. I remember reading the complaint 4.5 years ago, and I was thinking, wow, Albemarle is in deep doo-doo. And then when Kirkland and Ellis took on the case on a contingency fee basis, I'm like, well, it's just a matter of time. So really happy that it finally played out. You mentioned that they are going to make an appeal, which on an arbitration process, seems a little bit confusing. But regardless, that will take several months. You said that in the release, I think it said there's a 9% interest fee. Does that continue on these results? And actually, there were other individuals that were named in the lawsuit. What transpired there? And I guess given this windfall, how should investors think about the cash that you're going to get in?

Well, I think that -- Frank, thanks for the question. I hope I can remember the details of it. And yes, I commend you. I think you were one of the few and certainly one of the earliest that wrote about the lawsuit back in 2016. Yes, the appeal, I do not know what Albemarle will do. That's their decision to appeal. I'm assuming that if they do, it will certainly just add a few more months. But my understanding, again, I'm not a lawyer, do not profess to be a lawyer or even have a cursory knowledge of law, but my understanding is that the bar for appealing and arbitration is higher than that of a typical courtroom -- a typical court proceeding. So again, that's up to them to determine how they would like to handle this. The motions and the filings, the renderings of the judges will be made public on Monday, if we file thereabouts as we file our case. And we will -- I assume that most all of that will be public at that time. And the 9% interest, yes, that is ongoing and that will be calculated after the judgment has been rendered, which it has. That will be calculated on a 9% on an ongoing basis just as it has in the past. And that's -- I believe that's a New York state's rate that is set. That doesn't change. That's not something that you argue or appeal. So yes, as far as the individuals are concerned, I'll just leave that to whatever the panel had to say about that. So yes, as far as the usage of the funds, we would -- we expect to be more aggressive than we have been in the past about deploying capital into ways in which we can increase the value of our stock and that will be through acquisitions. And when I talk about acquisitions, that also includes the acquiring of our own stock. I hope that it was recognized in my comments. We will be -- it is our intention at this time, barring a major acquisition or something that would perhaps slow that down, we would intend on an ongoing basis to, at a minimum, be purchasing back our stock at a rate of about $40 million a quarter. In some quarters, if we see fit as we did this past quarter, we'll do significantly more than that, but probably should be the expectations that on an annualized basis, that we want to be able to match our dividend that we pay out to shareholders and the amount that we buy in stock to pretty much match each other.

Thank you. Our next question is coming from the line of Bob Koort with Goldman Sachs. Please proceed with your question.

Thank you. Good morning Peter. I wanted to ask you about your comments on the Polyurethanes division and the journey you've been on to high-grade it, which will, I guess, culminate shortly with the splitter project. Do you anticipate, is the vision there that your margins will actually increase? Or relative to the sort of mid- to upper teens channel you've been in, as you displace some of the commodity sales, which obviously can have very, very good margins at times, is it more of an outcome that you'll have a more stable margin structure in Polyurethanes?

Yes, we certainly would assume that on an ongoing basis, we're at about an 18% margin today, on a total Polyurethanes basis. Between further cost consolidation, operating consolidation and upgrading of the materials, we believe that, that should have an average EBITDA going forward of about 20%. We're hoping to get at least 200 basis points, and a lot of that needs to be on things that we control. You'll remember or noticed just recently here that we've shut down one or two of our system houses. We've been able to consolidate some of those operations. We're not abandoning any of those customers or any of those product lines as much as we're consolidating into system houses, which in the past have focused on two or three product applications and today are focusing on five and six product applications. As we further expand our spray foam business in Europe, I don't think that this will require any further investment in new locations. We'll do this out of existing system houses, and we'll continue to grow the business downstream without a great deal of capital investment. We'll see an opportunity, I think, to further consolidate costs and to further move this business. Obviously, one of the areas I would just note of, I wouldn't say frustrations but I hope of recognition from our investors, is that when you do these sort of transformations, you make the investment upfront in splitting. You make the investment upfront in your capacities, in your R&D, in your route to markets, in your specialty products. And then you go out and you sell those, you market those and those can take -- and many applications can take anywhere from six to 18 months to be able to get approval for fire-retardant materials or automotive or aerospace applications, adhesives, coatings and so forth. So it's not just simply a question that we're going to be taking polymeric and shifting it over to differentiated, and we'll see that take place over the course of the next quarter or two. This is something that's usually a 12 to 18-month sort of a transition as you build up capacities and capabilities and then you transfer products to qualifications and then eventually are able to move the volume there. But I think we're well down that road and we obviously see the benefits of that certainly throughout 2022. And we'll certainly be giving more information of that this next week in our Investor Day.

Thank you. Our next question is coming from the line of Mike Sison with Wells Fargo. Please proceed with your question.

Hey good morning. Nice quarter guys. Peter, I think you mentioned in the opening remarks that the goal is to get to 20% EBITDA margins and I suspect we'll get a lot of that next week. But just curious where you think the opportunity is to continue to improve margin over the next couple of years and maybe some timing on that potential.

Well, I think that as we -- I'm not sure that I said 20%. So that's -- I wouldn't mind getting there as quickly as possible. I think at this point, we've said the high teens, which I certainly would define as being at 18%, 19% as a company. One of the slides and one of the presentations I'll be making at Investor Day will be the projects that we have in order to get us there. And so again, it's a bit of a preview of that. I think a lot of that is an opportunity around a number of different facets. Most of those things, I see them, is in our control. As we look at things like the continued recovery of the aerospace business, that will probably be coming back here over the course of the next 18 to 24 months, $50 million or so of just profitability to get us back to where we were on a pre-pandemic basis. Again, that's subject to the growth of the aerospace industry and the recovery of wide-body planes. That's not necessarily something that are doing but those are contracts we were locked in. We already have 85-plus percent of markets in many of those applications. We want to keep that. So we look at the capital projects that we have in our Performance Products around electrolytes, car batteries, ultrapure amines and so forth. We look at the splitting project that we'll be getting into more information this next week coming on the second quarter. And we look at continued bolt-ons. And then also, as we look at the wide range of cost optimization, that's just not cutting SG&A but it's cutting our direct and indirect costs. It's focusing on our supply chain, on our purchasing and so forth. And right now, we publicly have talked about $140 million target, and that target will certainly be materially increasing as we have an opportunity to discuss that more fulsomely. So as we look at each one of those adding anywhere from 40 to 50 basis points of additional margin, I think that when you add that to what's been our traditional run rate margin of that 16% or so, I'm very confident that over the course of the next 12, 18 months, that we'll be able to accomplish that. And you'll see that, that will add up to some 300, 350 basis points of improvement.

Thank you. Our next question is coming from Hassan Ahmed with Alembic Global. Please proceed with your question.

Good morning Peter. Peter, just obviously, Q3 with Hurricane Ida, supply chain constraints and the like was a bit of a tricky quarter. But just looking at the volume growth, particularly within Polyurethanes, I mean, sequentially up 10%, clearly very impressive. So if you could just -- I would love to hear your views on how we should think about volume growth, particularly as one starts thinking about 2022. I mean, we all know that this is an industry that typically grows volumes at, call it, 5%, 6%. But I mean, are we going to see some sort of a major restocking exercise? I mean, how are you thinking about volume growth year-on-year in 2022.

Yes, I think that, Hassan, it's an excellent question, one that we grapple with. And when I look at Polyurethanes, in the third quarter, we're essentially sold out. We're producing as much as we can and we're selling as much as we can. We saw an increase in that volume in the third quarter over second quarter largely because of the Rotterdam turnaround that we have that had that facility down for a little bit longer than we had expected. But I think again, as I just personally am not a believer that we ought to be investing capital to expand revenue and expand tonnage for the sake of expanding tonnage. I'd much rather see us deploy that capital and take the least profitable lens of our businesses and figure out how we can upgrade and how we can make a higher-margin product across the board. And so I think that whilst the industry is going to be growing, the MDI industry will be growing at 5% or 6% globally, I don't have a problem with us being essentially sold out. We're obviously going to have some incremental debottleneck projects that will come along of low single-digit sort of growth rates, reliability projects and so forth. But we're going to be far more focused on how we increase the margin on the volume that we have. We have plenty of MDI, I think, in the world. We need to have better Huntsman. I'm not talking about the industry. Huntsman needs to have better MDI, better margins, lower costs and be able to take what is already a great business and make it even better.

Thank you. Our next question is coming from the line of David Begleiter with Deutsche Bank. Please proceed with your question.

Thank you. Peter, Performance Products has had a very good 2021 and a good back half of the year. How do you think about the sustainability of these numbers or more normalized earnings power of this business heading into next year?

Yes, I think look, these products and the applications that we've gone into, and I hope that we've been clear in what we -- the transformation that we've seen in that industry. When you're operating facilities such as those that we sold to Indorama, we had capacity in Fort Neches that we sold to them of, I think it's somewhere around 1.5 billion pounds. And you have -- and that's not including the PO/MTBE facility. That's just including the EO, EGs, ethylene capacities and so forth, propylene capacities. You have -- more importantly than focusing on the value per pound, though you're always looking at that, you've got to keep those plants running, you got to keep them running at capacity. So your end markets, obviously, are going to be more commoditized and be larger volume customers. And as we look at where we are today, we've sought after and we've been able to win a lot of niche businesses and such as our polyurethanes catalysts. That's just not our polyurethane catalysts but also that of others. As we look at the wind industry and the coatings industry and the fuel and lubricant additives business, the desulfurization of natural gas production and so forth going into the maleic anhydrite going into UPR and the integration into those areas. We've been able to take this business and focus it less on the commodity side, more on the specialty side. And I think it's really paying us very handsomely. We think that as raw materials are probably going to be plateauing, peaking and plateauing here in the next two quarters or so, our opportunity in this business is going to be able to hang on to the gains that we've made. We've got to continue to stay focused on our commercial excellence programs and pricing. And as those raw material prices come down over the course of the next year or perhaps over the next 12 to 18 months, we've got an opportunity not just to maintain these margins, but in some cases, hopefully strengthen the margins. Now hopefully, the raw materials aren't going to crash because there's a recession. But if they moderate back to a more normalized basis of a crude oil that's around $40 or $50 instead of $70, $80 a barrel, I think that this business, not only will it maintain this sort of level of performance but we might have an opportunity, over the course of the next year or 2, to continue to strengthen it. So we're very bullish on our Performance Products. We like where it's going. We like the investments that we're making in this area, and it's going to continue to be one of our key businesses.

Our next question comes from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your question.

Yes good morning. Peter, I was intrigued by the comments you made in your prepared remarks about greater focus on value versus volume in the Performance Products segment. If we sort of zoom out the lens and look at the margin profile there, it's improved quite dramatically. And so given the changes that you just talked about with divesting the Indorama assets and managing the business differently, do you think that there's opportunity for EBITDA margins that would remain above 20% sustainably, in other words, similar to the Advanced Materials segment margin profile? Or do you think there's too much cyclicality to endorse that? Just to follow up on David's question, how would you suggest we think about the medium-term margin profile and the trajectory in Performance Products?

Yes, I would think that, that business ought to remain a 20%-plus sort of a business as there's going to be some cyclicality there is in any business. But I think as you look across the board, we have an opportunity here, the week after next, to be able to convince you of this and the new products, new applications that we're getting into. And yes, I'm hugely bullish on our Performance Products and there's a reason why we kept the assets that we did. And we think there's a great future in this business. We think that the earnings that we see today, by and large, are sustainable.

Thank you. Our next question is coming from the line of Matthew DeYoe with Bank of America. Please proceed with your question.

Thanks. So, if we rewind back to 1Q, the discussion around Polyurethanes business was that there was some degree of overearning. Since then, prices continued to move higher. Obviously, there's been a lot of outages, but one of your larger competitors tried to dispel kind of any notion that MDI and Polyurethanes from a commodity basis is really overearning at the moment. So like what's your opinion on this? Has it changed at all? What do you think the most likely direction for MDI profitability is over the next 12 months?

I think -- I don't think that right now, the MDI markets are overearning. I think that industry demand, I think, is pretty balanced right now. And as you look right now, industry feels like it's around the mid-80s utilization in Europe, probably 110%, 120% utilization in Americas, taking in some imports, and Asia is probably a little bit less than Europe. But I think that we've -- I think that we're doing about where we ought to be doing in MDI right now.

Thank you. Our next question is coming from the line of Mike Harrison with Seaport Research Partners. Please proceed with your question.

Hi good morning. Was wondering, Peter, if you can comment on where polyurethane inventory levels are right now in terms of volumes compared to normal for this time of year as we think about coming recovery in the supply chain in construction and the seasonal build there. Will you have some additional inventory that you would typically build into that spring season? And then maybe also talk about what that means for plant utilization. Does that mean that you're going to be running your plants harder than you typically would in Q4 and Q1 and we could potentially see some better utilization, better margins from those facilities in the next couple of quarters? Thanks.

Very good question. And I'm -- again, I'm reticent to talk about where our competitors might be nearly because I haven't the foggiest idea where they are and especially -- well, I won't comment any more on competitors. Tony, do you want to comment on where you see inventories right now, potential build?

Yes, thanks, Peter. Mike, I think level is now as low as they've ever been in MDI, certainly [Indecipherable] We see demand continuing to be very strong, particularly in North America. The disruptive supply chains, the regional balances there have really evened out. And I think our customers are running low inventories as well. They're struggling to get key components needed to make these formulations. And I think we're going to see very strong utilization rates on the plants. We're flat out. We can't run those harder than we're running at the moment anyway. So I don't see any balance between Q4 and Q1 in that respect. We're running as hard as we can, particularly to manufacture the downstream products. And in fact, we've got still in Huntsman Building Solutions, we still got an eight-week backlog in orders so we can sell every molecule we can make. So I think that bodes well for industry utilization rates and I see that continuing well into 2022. So yes, inventory is low and we need everything we can make.

Tony thanks.

Thank you. Our next question is coming from the line of John Roberts with UBS. Please proceed with your question.

Thank you. On Huntsman Building Solutions, when you talk about margins approaching 20% -- EBITDA margins approaching 20%, is that with market-based MDI and propylene oxide? Just remind me, do you have an advantaged propylene oxide cost in that business? And I assume you're using market-based MDI?

John, it's Phil. We use integrated margins. Strategically, our focus is on upgrading the quality of our margins overall. And we make decisions as an overall supply chain team looking at where we direct those molecules. And we look at integrated margins, including how we move our polymeric downstream into our HBS business for the supply chain.

John, just to add to that, and we do have an advantage here on polyols because as we grow that business, particularly with close sales using polyester polyol, rather than polyether which comes from PL, the polyester comes from a recycled bottle-grade terrell. And there, we do have a cost advantage and we see that end of the market growing very rapidly.

Thank you. Our next question is coming from the line of Alex Yefremov with KeyBanc. Please proceed with your question.

Thank you. good morning everyone. Peter, about a month ago, the company announced energy surcharges for MDI in Europe. Have you been able to fully implement any of those? What's been the market reaction?

Well, this will shock you that our customers are less than excited about this. But it's something that we're pushing through as we speak and as we're in a number of very sensitive negotiations with others, I really don't want to speculate. One of the reasons why we gave a rather wide range in the fourth quarter on our EBITDA is because there is some uncertainty as to the outcome of all of these. I think we'll get some of them. And right now, I don't want to speculate on all of them but we're pushing very hard. The -- as we're telling our customers, the incredibly shortsighted and bad energy policy in Europe is not of our making, and the volatility of these prices and costs are not of our making. And they really need to -- I've spoken with scores and hundreds of our customers around the world, they've got to push these things through and people have to see the consequences of decisions. And Huntsman is not going to be the shock absorber between energy policy -- bad energy policy and the consumer. So yes, I feel very passionate about this and it's something that we're going to push. Even if we lose some volume, that we're going to continue to push. And as far as our competition, I can't speculate what they're doing, if they're doing it through price increases or surcharges or whatever. But again, so much -- I think one of the great criticisms in this industry is at times, I think we can be lazy and even lethargic when it comes to these sort of issues and just figure they're going to go away in a quarter or two and we'll just absorb it. And I don't think that's fair to shareholders that have that take place.

Thank you. Our next question is coming from the line of Angel Castillo with Morgan Stanley. Please proceed with your question.

Hi good morning and thanks for taking the question. Just curious on the Asian market competitive environment. Just if you could give us a little bit more color as to what you're seeing both from a demand perspective, given all of the uncertainty and changes that have been taking place, but also from the perspective of the competitor that added capacity or expanded its capacity earlier this year, how have you seen the market absorb that? And are we kind of at a good balanced level in that region and how we're seeing it progress?

I'll let Tony comment on the polyurethane side of that. I would just remind all of you that as we look at the Asian market, very similar to Europe and very similar to North America, we're probably about 95% self-supplied within that region. And yes, we do have some logistics backlogs, and we -- I would say that we're probably in the low tens of millions of dollars, particularly in some of our specialty products in Advanced Materials and in Performance Products. And Tony mentioned some of our blowing agents and so forth in our spray foam business, where we are getting hit with some of the backlogs and so forth at the ports. But by and large, as we look at our Asian market, we produce a product between China and Singapore and Thailand and other locations and we supply within that region. And so as we look at it from a macro basis, it looks quite solid and a slow and steady recovery. Tony, you want to comment on MDI in Asia?

Yes, Peter, I think you're absolutely right. I mean, particularly in China now, we're seeing a balanced situation with the dual control policy clearly having effect in certain provinces. So the way to look at that is, geographically, Jiangsu, Fujian and Guandong have slowed down because of the imposition by the government of the dual control energy policies. And that's affected demand in those regions, particularly in things like appliances and footwear, which tend to be concentrated in those provinces. But that's been offset by outages in quarter four. There's -- one of our major competitors has got a significant turnaround. So the way that I look at this is I think the market is going to slow down between 5% and 10% in Q4 because of dual control. So, that will be balanced by the capacity coming out for turnaround. So I see a balanced situation going to quarter four, and I think that prices remain pretty steady around RMB2,000 a ton. So to answer the question, balanced conditions in China right now.

Thank you. Our next question is coming from the line of Laurence Alexander with Jefferies. Please proceed with your question.

Thank you for fitting me in. This is Dan Rizzo on for Laurence. You mentioned before changing portfolio and doing some bottom slicing. I was just wondering where you still are looking at kind of divesting or just bottom slicing with you in your own portfolio?

Well, I'm not sure now is the appropriate time for us to identify particular assets that we would be looking to sell off. But we are very serious about improving the margin of this business. In the last few years, we've sold 40% of our company. We've repurchased, in other assets, equivalent to about 15%, 20% of our business. And we're transforming the entire portfolio. And as you do that, that means you're shifting your costs around, you're cutting your costs and repositioning them. You're looking at opportunities where to put higher-value margins in materials where you can capitalize on customer relations and so forth. And so I think that as we look at the business within and the transformation that is going on, I see that as continuing going forward. And we're going to continue to look at our assets and the value that those assets have to us and the shareholders that we represent and that they have perhaps to other people. And likewise, we'll continue to look outside of our company for assets that are valued. I think that as we start looking perhaps at an M&A market is a bit overheated, I think we're starting to see a little bit of a diminishment in the value of some of the assets that we've been looking at. But by and large, I think asset prices are probably a bit inflated right now.

Thank you. Our next question is coming from the line of Matthew Blair with Tudor, Pickering, and Holt. Please proceed with your question.

Hey good morning and congrats on the results. I guess this might be a question for Phil. But looking at the working capital headwinds this year, I think about $650 million year-to-date, and I know it's going to be hard to predict when that might reverse. But I just wanted to clarify, do you expect to fully recover those working capital headwinds in the future? Or is there a reason why you might not recapture all that $650 million?

Yes. So Matt, if you think back, I mean, at this time last year, we were sitting in an oil environment of approximately in the $30s. Today, we're in the $80s overall. And as you indicate, that's moved up our working capital balances substantially. I mean, the answer is as you move forward into 2022 you'll just see substantially less working capital inflation overall for us. And that's why we remain confident, obviously, delivering our 40% free cash flow conversion in 2022 overall. I think we said in our remarks as well, if you look at our working capital and the control of our working capital as a percentage of sales, it's lower today than it was at the same time point in 2018 and 2019. So, we expect to continue to recover those working capital amounts. And as those receivables roll through and we collect on them, we'll be improving our cash flow as we head into 2022.

Operator, I know a number of people are looking to move on to other calls here at the top of the hour. Why don't we take one more question and we'll let people get back to work?

Thank you. Our final question comes from the line of Arun Viswanathan with RBC Capital Markets. Please proceed with your question.

Thanks for taking my question. Given the strong free cash flow conversion here that you're expecting in 2022, we were kind of encouraged to see the resumption of the buyback plan this quarter of $100 million-plus. Would you expect that to continue, again given the cash flow that you expect next year and accelerate maybe?

Well, I think that we'll see a minimum on a quarterly basis of $40 million, thereabouts. I mean, I'd say $40 million because that on an annualized basis equals to our cash payment -- dividend payment. And we kind of -- again, at a minimum, we want to see those two balanced. And as we see opportunities, as we see confidence in our earnings and our continued cash flow generation and so forth, we'll get more aggressive in buybacks. And as we continue to see that the stock is valued where it is versus buying assets in the open market, we may well get more aggressive. But I don't want to be trying to predict where we're going to be six to nine months from now as far as share buybacks. But I think it is safe to assume that we've set a minimum floor of $40 million-ish thereabouts. And at today's prices and the prices we saw this last quarter, we remain a good buy.

Thank you. Ladies and gentlemen, we have reached the end of our question-and-answer session, and this does conclude today's teleconference and webcast. We thank you for your participation, and you may disconnect your lines at this time.