Greetings, welcome to the MRC Global's fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Monica Broughton, Investor Relations. Thank you, Monica. You may begin. Thank you, good morning. Welcome to the MRC Global fourth quarter 2022 earnings conference call and webcast. We appreciate you joining us. On the call today, we have Rob Saltiel, President and CEO, and Kelly Youngblood, Executive Vice President and CFO. There will be a replay of today's call available by webcast on our website, mrcglobal.com, as well as by phone until February 28, 2023. The dial-in information is in yesterday's release. We expect to file our annual report on Form 10-K later today and will also be available on our website. Please note that the information reported on this call only speaks as of today, February 14, 2023, therefore, you are advised that information may no longer be accurate as of the time of replay. In our call today, we will discuss various non-GAAP measures. You are encouraged to read our earnings release and securities filings to learn more about our use of these non-GAAP measures and to see a reconciliation of these measures to the related GAAP items, all of which can be found on our website. Unless we specifically state otherwise, references in this call to EBITDA refer to adjusted EBITDA. The comments made by the management of MRC Global during this call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of the management of MRC Global. Actual results could differ materially from those expressed today. You are encouraged to read the company's SEC filings for a more in-depth review of the risk factors concerning these forward-looking statements. Now, I'd like to turn the call over to our CEO, Mr. Rob Saltiel. Thank you, Monica. Good morning, and welcome to everyone joining today's call. I will begin with a discussion of notable achievements for 2022, review our fourth quarter results at a high level, and address some of the key business drivers underpinning our 2023 outlook. I will then turn over the call to Kelly to provide a detailed review of the quarter and 2023 guidance before I deliver a brief recap. 2022 was an excellent year for MRC Global with several significant financial achievements. Our top line performance was impressive, ending the year at $3.4 billion with 26% year-over-year revenue growth. Each of our four business sectors saw sales jump by double digits and two of our sectors, gas utilities and DIET, each exceeded $1 billion in revenue. We realized full year EBITDA of $261 million, 79% higher than 2021 on EBITDA margins of 7.8% at 230 basis point increase. The last time MRC Global exceeded this EBITDA margin percentage was in 2012 when revenue was over $2 billion higher. We generated $43 million of operating cash flow in the second half of the year, even as second half revenue exceeded first half revenue by 11.5%, we continued to grow our inventory balance. Our upstream production business benefited greatly from improving fundamentals and our increased focus on Permian Basin opportunities. This was our highest growth business in 2022 with 30% revenue improvement over 2021. Our increased focus on the chemical space yielded impressive results with a 20% revenue increase in 2022 versus 2021 and a 65% rise in sales over the same period from our targeted customer accounts, proof that our strategy is working. Our energy transition business generated over $100 million in revenue in 2022, led by robust development of renewable fuels projects in the U.S. Energy transition opportunities are plentiful and growing, and MRC Global is well-positioned to capitalize with our customer relationships, technical expertise, and project experience. Finally, our focus on capital efficiency and bottom-line results translated into significantly higher returns on capital in 2022. Return on invested capital or ROIC is a widely used measure of capital stewardship and an important driver of shareholder value. After adjusting for the impact of LIFO, our ROIC was 11% in 2022 above our cost of capital and a significant improvement over the prior year. Turning now to the fourth quarter, we finished the year strong with fourth quarter revenue of $869 million in line with our guidance. Seasonal slowdowns in our gas utilities and diet sectors contributed to the sequential decline. Solid double-digit improvements in our upstream production and midstream pipeline sectors were a bright spot as these sectors were up 11% and 15% respectively. Profitability in the fourth quarter was also excellent as we achieved an adjusted EBITDA margin of 7.6%, a 70 basis point improvement over the fourth quarter of 2021. This performance was aided by increases in customer pricing to counter inflation, consistent focus on cost discipline, and excellent work by our supply chain and operations teams in meeting customer demands. Turning now to 2023, we expect this to be another successful year for MRC Global with double-digit sales growth and EBITDA margins exceeding 8%. The top line increase should be enabled by revenue gains across all four business sectors and across all three geographic segments. From a sector perspective, we expect outsized revenue growth in our upstream production and midstream pipeline sectors in 2023 to support increasing production of oil and gas, both in North America and internationally. IOCs and larger independents are expected to comprise an increased share of the CapEx this year in the North America oil field, and we are certainly experiencing that with our business. Recent budget surveys by industry analysts project an average of approximately 15%-20% increase in U.S. upstream capital spend and a mid-teens percentage increase globally. We expect the Permian Basin to be very busy for MRC Global in 2023 due to our strong market positions with leading producers there, coupled with a well-timed opening of our Midland service center last fall. Internationally, investment in the North Sea is expected to fuel upstream production growth there as well. Our gas utility sector, our largest revenue contributor, should also experience healthy sales growth this year, even after this business expanded by more than 20% in each of the past two years. Recently published research on gas utility capital spending indicates a 17% increase in the 2022 through 2024 time frame versus the previous three-year period, with the bulk of this spend being allocated to safety and integrity projects. This same research report anticipates an upper single-digit capital spending increase in 2023 over 2022, consistent with what our gas utility customers are communicating to us. As we have said on previous earnings calls, our gas utility sector should be a growth engine for years to come as we expand our market share to new utility customers and improve our share of wallet with existing customers. Finally, our diet sector is expected to experience upper single-digit revenue growth in 2023, even after a nearly 30% uptick in 2022. Within diet, the outlook for the chemical sub-sector remains positive, especially in the North America market, which benefits from low feedstock costs. We continue to gain market share with new customers, and we have grown our North American chemicals backlog by 79% at the end of 2022 as compared to year-end 2021. Also in diet, we remain involved in multiple LNG projects, both in the U.S. and internationally. We expect multiple additional LNG projects to gain approval in the U.S. this decade as the U.S. remains the world's leading LNG producer and increases its supplies to European markets. Finally, our thriving energy transition business delivered more than $100 million of revenue in 2022 and will continue to be a long-term growth driver. In 2023, we expect our energy transition activity to be weighted more heavily toward international projects after 2022's predominance of U.S.-based opportunities. In addition to robust revenue and earnings growth, we expect to generate substantial operating cash flow this year as we improve working capital efficiency and convert more EBITDA into cash. Currently, we are targeting at least $120 million in operating cash flow, an increase from our previous guidance. This will be enabled in part through accelerated progress on managing our working capital more efficiently. For example, we have initiatives underway with our supply chain and operations teams to improve the absolute levels, the locations, and the productivity of our inventory, and we are also targeting improved efficiency of our financial working capital. Achieving an attractive return on invested capital is vital to our value creation narrative, we will continue to improve this metric in 2023. With that, I'll now turn the call over to Kelly. Thanks, Rob. Good morning, everyone. My comments today will be focused on sequential comparisons. Unless stated otherwise, we are comparing the fourth quarter of 2022 to the third quarter of 2022. Total sales for the fourth quarter were $869 million, a 4% sequential decrease, outperforming our historical seasonal trends and in line with our previous guidance. From a sector perspective, I will begin with our gas utility and diet sectors, which make up approximately two-thirds of our revenue and represent our less cyclical business lines. Gas utility sales were $319 million in the fourth quarter, a $40 million or 11% decrease due to a seasonal reduction in customer spending, which is normal for this business. For the year, the gas utility sector grew 25% on strong activity levels as our customers remain focused on safety-related modernization and emission reduction programs, along with continued infrastructure improvement projects. The diet sector fourth-quarter revenue was $248 million, a $28 million or 10% decrease due to the timing of several energy transition biofuel projects and turnarounds winding down in the fourth quarter. This sector delivered 29% year-over-year growth, exceeding the $1 billion mark, making it our second-largest sector behind gas utilities and our second highest growing sector in 2022. The upstream production sector revenue for the fourth quarter was $195 million, an increase of $19 million or 11%, countering seasonal trends as we typically see a decline in this sector's fourth-quarter revenue. Canada led the increase with higher activity. International upstream sales benefited from increased activity in the North Sea and the lack of foreign currency headwinds compared to the third quarter. In the US, we saw improving customer activity levels, which has continued into January for a good start to the year. We are expecting the larger public E&P operators to drive a higher percentage of the activity increases in 2023, which bodes well for us as our revenue in the upstream market is driven predominantly from this customer base. Midstream pipeline sales were $107 million in the fourth quarter, up $14 million or 15% as several customers took delivery of valve and actuation assemblies and line pipe in the fourth quarter related to higher activity levels in the Permian Basin. The outlook for our midstream pipeline business is expected to be strong as increases in production volumes from oil and natural gas drive the need for more gathering, processing, and take away infrastructure. From a geographic segment perspective, US revenue was $720 million in the fourth quarter, a $48 million or 6% decrease as the gas utilities and diet sectors experienced seasonal declines, partially offset by increases in the upstream production and midstream pipeline sectors. Canada revenue was $46 million in the fourth quarter, a $9 million or 24% increase. International revenue was $103 million in the fourth quarter, a $4 million or 4% increase driven by the upstream production sector on increased activity in the North Sea. Turning to margins. Adjusted gross profit for the fourth quarter was $184 million, 21.2% of revenue, a 70 basis point decline from the third quarter, in line with our expectations. The full year 2022 adjusted gross profit was 21.3%, a 120 basis point improvement over 2021, driven primarily by improved pricing, product mix, and our preferred supplier position. We are targeting to maintain average gross margins for this year of at least 21%, which is a notable improvement over historical averages. Adjusted SG&A for the fourth quarter was $122 million or 14% of sales. The 70 basis point increase this quarter over last was a function of lower quarterly revenue and slightly elevated costs from headcount increases to support our growth projections. The full year adjusted SG&A as a percentage of revenue was 14%, an improvement of 130 basis points compared to a year ago. In 2023, we expect the full year average percentage of sales to trend lower in the mid 13% range, despite the full restoration of benefits and wage inflation. This percentage is expected to be higher in the first quarter, but improve each quarter thereafter, in line with the cadence of our anticipated revenue growth that I will discuss later. EBITDA for the quarter was $66 million or 7.6% of sales, a 70 basis point improvement over the same quarter a year ago. For the year, EBITDA was $261 million or 7.8%, a 230 basis point improvement. As Rob mentioned, this is our highest margin since 2012 when our revenue base was $2 billion higher, which is evidence of the actions we have taken over the last few years to run the company more efficiently, driving more incremental revenue to the bottom line. Tax expense in the fourth quarter was $12 million with an effective tax rate of 36% as compared to $10 million of expense in the third quarter. The difference in the effective rate and the statutory rate is due to state income taxes, nondeductible expenses, and differing foreign income tax rates. For the quarter, we had net income attributable to common stockholders of $15 million or $0.18 per diluted share. Our adjusted net income attributable to common stockholders on an average cost basis, normalizing for LIFO expense, was $27 million or $0.32 per diluted share. Over the last two quarters, we have generated $43 million in cash from operations with $10 million generated in the fourth quarter. For the full year, we used $20 million of operating cash, primarily due to the timing of year-end working capital requirements, specifically inventory receipts and the timing of certain cash inflows and outflows. As a matter of fact, if we would have closed the year one week later, we would have netted positive cash generation for the year. Historically, in a year with 26% revenue growth, we would have had significant negative cash flow, so we consider this a significant inflection point for our company and our cash generation capabilities going forward. For 2023, we are targeting cash flow from operations of $120 million or better. As we previously mentioned, generating cash consistently going forward in both years of growth and decline is a key initiative for the company, and we are committed to delivering this. Working capital as a percent of sales was 16.2% in the fourth quarter. For 2023, we expect this metric to remain at similar levels, which is about 300-400 basis points of improvement over historical averages. Our total debt outstanding at the end of the quarter was $340 million, consistent with the third quarter. Our leverage ratio based on net debt of $308 million was 1.2 x, which is a new MRC Global record and considerable improvement over the prior year when our leverage ratio was 1.7 x. We expect to make further progress on our leverage ratio in 2023, reducing it below 1 x as our EBITDA continues to grow and we lower our net debt position. In addition, we anticipate refinancing our term loan this year. We are monitoring the debt markets closely to determine the appropriate time to take action. We believe our positive business outlook and improved leverage will translate into better terms and conditions as we approach the refinancing date. We ended the year with availability under our ABL facility of $606 million and $32 million of cash for a total liquidity position of $638 million. This is more than a $100 million increase in liquidity compared to 2021. To finish off our 2023 outlook. As Rob mentioned earlier, for the total company, we are targeting a double-digit percentage revenue increase and surpassing the 8% hurdle for EBITDA margins. We are starting off 2023 strong, and the December backlog was 43% higher than the prior year, and the January 2023 backlog is 3% higher than December, giving us confidence in our outlook for the year. From a sector revenue perspective, this translates to a high teens percentage improvement in upstream production and a low teens percentage improvement for midstream pipeline. Both gas utilities and diet are expected to be an upper single-digit% improvement. A geographic view, we expect each segment to increase in the low double-digit percentage. Our normalized effective tax rate for the year is projected to be 26%-28%, but could fluctuate from quarter to quarter due to discrete items. As activity levels continue to improve, inventory levels will again increase, but more modestly than in 2022, supporting our full year 2023 target to generate $120 million or more in cash flow from operations. Excess cash will continue to be prioritized in the near term towards further strengthening the balance sheet and growth of the business. Regarding our capital expenditures, we expect those to be in line with historical averages in the $10 million-$15 million range. Finally, as we look at the cadence of revenue throughout the year, we expect the first quarter to decline slightly in the low single digits, with growth in the second and third quarters before our normal seasonal decline in the fourth quarter. With that, I would like to turn it back over to Rob for closing comments. Thanks, Kelly. There's no question that 2022 was an excellent year for MRC Global. Our outstanding financial results reflect a significantly more efficient company with increased profitability, strong cost discipline, and an improving solid balance sheet. In addition, our continuous focus on customer service, supported by reliable operations and capable supply chain management, enabled impressive growth across our entire business. With this successful backdrop, we are optimistic about further raising the bar for MRC Global in 2023. These are some of the performance highlights that we will be emphasizing. We expect double-digit revenue growth and EBITDA margins in excess of 8% in 2023. All four of our business sectors are expected to achieve solid growth rates even after the strong performance in 2022. Cash generation from operations through the business cycle remains a priority, and we are targeting in excess of $120 million in operating cash flow in 2023, even with double-digit revenue growth. Our diversification strategy is paying off with approximately 2/3 of our revenue generated outside the traditional oil field. Our gas utilities and diet sectors thrive largely independent of commodity prices, and they each offer attractive growth prospects over the longer term. Finally, we understand that improving our return on invested capital is critical to attracting and retaining investors. We are pursuing specific initiatives to improve our capital productivity that will manifest in 2023 and beyond. With that, we will now take your questions. Operator? Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Nathan Jones with Stifel. Please proceed with your question. Good morning, everyone. Morning, Nathan. Good morning, Nathan. I wanted to start off talking a bit about free cash flow here. You know, obviously a little bit lower than you'd anticipated in 2022 with some fourth quarter timing there. The business still did consume $234 million of primary working capital in 2022. Maybe you can talk a little bit more about, you know, what we should expect from cash generation from the business with all of the transformation that it's undergone over the last few years across a business cycle. You know, even in 2023, I would think we're looking at below kind of an average level of cash generation, given that you're still supporting a fairly significant amount of growth in 2023. You look at, you know, $120 million of CFO, more than $100 million of free cash flow. Even if I take out the dividends on the preferred stock, you're still looking at, you know, a free cash flow to equity that's in 2023, 7.5%-8%, kind of free cash flow yield on the stock. Just maybe talk a little bit more about what we can expect from free cash flow across the cycle here, given, you know, the pretty healthy yield we're looking at the moment. Yeah, Nathan, this is Kelly. I'll start off with this one. Yeah, no, listen, I, and I wanna hit real quick on 2022. You mentioned, you know, that we fell maybe a little bit short of our goal. We did talk about that in the prepared remarks, that if we would've closed the books one week later, we would've had, you know, positive cash generation for the full year. You know, just the timing of inventory receipts and inflows and outflows of cash there at the very end, just, you know, barely, or just made us barely, you know, miss that target. That was very unfortunate. Still very, very positive. As we mentioned, kind of an inflection point for the company, that with a 26% level of growth last year, we were able to get that close with cash generation. In the second half of the year, we generated $43 million of cash, which we're very proud of that. You know, you were exactly right, Nathan. You know, we added a lot of inventory in 2022, you know, significant build there that was most of that working capital consumption that you're talking about. You know, we came out of the pandemic, you know, at very minimal inventory levels. Really had to do some investment in both 2021 and 2022 to replenish those inventory levels, really to kind of get out of the hole that we had, you know, kind of put ourself into as we were trying to cut, you know, cost and reduce working capital during the pandemic. Also with the 26% level of growth we had, just a much stronger business having to build inventory into that market as well. We'll continue to build inventory here in 2023 as well. Not near to the same level, you know, not that $200 million-plus level that we had in 2022, but, you know, something much lower than that. I think actually probably, you know, gosh, we're thinking maybe $40 million-$80 million of inventory versus the $200 million of inventory build. That'll obviously depend on how things kind of shape up as the year goes on, that's kind of our thinking coming into the year. The cash flow yield that you mentioned, you know, you know, in unlevered is kind of, you know, we're thinking kind of that 9%-10% range, you're right on a levered basis. You know, we'll be slightly less than that. Still, you know, that's a very positive metric that, you know, we think that we can maintain, not just in 2023, but even the years to come, going forward. You know, we said it in our prepared remarks as well, just to reiterate it, no matter what the cycle is, if we're in a growth market or a down market, we are fully committed to making sure that we generate cash in any environment that we have ahead of us. If I could just add to that, Kelly. Thanks for that summary. Obviously, generating cash is a priority for this management team. As we said in our press release, you can see we finished the year at the lowest leverage in MRC Global's history of 1.2 x. We are in a year where our term loan is likely to be refinanced as it comes due in September 2024. Having strong cash flow generation and low leverage on the balance sheet just gives us more flexibility and more attractive terms as we go to refinance our term loan. Longer term, obviously, if we continue to generate cash as we intend to do so, it'll give us more strategic flexibility, to think about other opportunities, and give us a broader set of options as we think about capital allocation more broadly. As Kelly said, we're in a really good position here. It's an inflection point really that we hit last year, and going forward, cash generation is a big part of the MRC Global story. Is it fair to assume that you probably don't do anything else with cash other than pay down debt until you've refinanced that term loan? I think that's a pretty safe bet. You know, we, I think we've all seen the uncertainty and some volatility in the debt markets. Obviously, getting the term loan refinance will be a priority for the company. Again, being in a strong position in terms of cash generation and having the business be good will certainly help us there. Thinking broader about capital allocation, that's probably post the refinancing of the term loan. You do have a much better balance sheet now than you've had over the last few years, having paid down a lot of debt over the last few years. Can you maybe talk about those priorities a little bit post the refinance of the debt here? I mean, I guess what I'm angling at here is, with this kind of free cash flow yield, maybe a consideration to a share repurchase, or what the other priorities could be. Well, look, we don't wanna get too far ahead of ourselves here. I think, as we said, we've just passed the inflection point. I think what we need to do is we need to prove that we can, follow through on the cash generation to the numbers that we outlined today, which we are confident we will do, but that's certainly the first port of call. Beyond that, I would just say all options are on the table, Nathan. Okay. Thanks very much for taking my question. You're welcome. Thanks. Thank you. Our next question is from Cole Couzens with Stephens Inc. Please proceed with your question. Hey, guys. Thanks for taking my questions. You're welcome. Can you guys provide any insight into why revenue will be down sequentially in 1Q and any drivers for the recovery in the 2Q and beyond? Yeah, I'll take that one. This is really typical seasonal decline for our business, that we've seen, almost every year, which is that, you know, coming out of the, a fourth quarter, where budgets are exhausted, people come into the new year, customers do, typically taking a while to ramp up their spending and their project activity. Keep in mind that, a lot of our business, is involved with field projects, which, in some cases depend on the weather. You know, our biggest, sector is gas utilities here in the U.S., and a lot of the projects that, take place, will be in the Northeast or Midwest, places where the weather is not as conducive to project activity as it will be in the spring and the summer, beyond. Those are really the key drivers that lead to that slight seasonal decline. Again, as you think about the year cadence, first quarter will be down versus fourth quarter, but then the second and third quarters are typically up. Peaking in the third quarter, and then again we see somewhat of a seasonal decline in the fourth quarter around the holidays and the degradation of the weather in that quarter. This is really nothing unusual. It's the same cadence that we had in 2022. Again, we're projecting a double-digit improvement in our revenue across all four quarters, and, you know, that this first quarter guidance is really consistent with the seasonal efforts, the seasonal activities more than anything else. Kelly, you wanna add to that? Yeah, just one other data point to add to that. You know, if you look at Q4, typically, we're down 5%-10% sequentially from Q3 - Q4. We were only down 4% this quarter, so a much stronger fourth quarter than we normally have. That also contributes to the decline that you're seeing in Q1, because normally Q4 would be at a lower level. Yep, that's helpful. Next question. We really appreciate the new insight on ROIC and the focus to drive that higher over time. What was your thinking around rolling that out now, and what are some of the levers for improvement in 2023 and beyond? Well, you know, I've been here at MRC Global for a couple years now, you know, we've really gone through a couple of iterations of things to focus on with our investor base, really starting with our focus on the bottom line, which is our EBITDA margins. What you've seen is that over the last couple years, we've really improved that bottom-line profitability to where we're now guiding to exceed 8% this year, which would be a near record for the company over its, you know, multi-year history. I think that you've also heard us talk a lot on the call about cash generation, which is obviously something that's really important to our investors and to this management team. We just addressed a question on that. I think the thing that I think the best companies do in this industry, in industrial distribution, is they do focus on those capital returns. You know, we have to be good stewards of capital. Our capital is primarily in the form of inventory and financial working capital. You know, we don't have a lot of large assets, big, expensive assets that we base our business on. It's really that inventory and that financial working capital that we have to get good returns on. We, we really feel that making that measure more public and more visible, both internally and externally, will help guide our actions and our focus, and we think it is a driver of shareholder value. Again, the larger industrial distributors have been talking about it for years. I think MRC Global needs to spend more time focusing on that, and we will, we will certainly do that. Now, as I mentioned, the two big components there are inventory and the financial working capital. On the inventory front, as I mentioned in the prepared comments, we're looking at a number of ways to improve the productivity of that inventory. Having the right inventory at the right place in the right quantity is how you are successful in the distribution business. In some cases, we haven't had as productive an inventory as we could. We like to have the inventory turn more frequently. We like to make more gross margin on that inventory. We like to not handle that inventory more times than we need to. We have initiatives underway to address all of those sorts of things in 2023 and beyond to improve the productivity of the inventory. On the working capital side, you know, we've got to make sure that we are very diligent in terms of managing both our payables and our receivables and make sure that those are in a proper balance because there's a significant amount of cash tied up in working capital, especially as we're growing our business. We wanna make sure that that's more efficient. Again, we can get those numbers down, that net working capital number down, even as we grow our business. That's a better return for our investors on the capital that we've been entrusted with. Those are some of the things to be thinking about for 23 and beyond, but this is a measure that we want to continue to talk about with our investors and again, internally here at the company. Great. Thanks, guys. I'll turn it back. You're welcome. Thank you. Our next question is from Doug Becker with Capital One. Please proceed with your question. Thanks. I wanted to touch base on chemicals. The early returns from the focus there seems to be very favorable. I just want to get a sense for what type of growth to expect in that sub-sector this year, are the margins on a relative basis gonna be higher or lower than the diet overall average? Yeah, I would say, consistent with, how we're thinking about the diet sector generally, the revenue growth in the chemical sector should be in that, you know, high single digit range. A lot of what we do in the chemical sector, is valves, and some of that is, special alloys and, corrosion-resistant materials. Those things tend to, garner a higher, gross margin on average than typically what we make as a company. In general, I think it's a, it's a very positive story on chemicals. We're really happy with the market penetration that we made, in 2022. We've got more opportunities in 2023, we see, significant projects coming down the line, that should be, attractive for us. Kind of at a bigger picture, when you think about the chemicals industry in the U.S. and what's happening in Europe and elsewhere, you know, we really think the chemicals industry is positioned well in the U.S. market with the feedstock costs generally being lower here. For all those reasons, you know, we're very bullish on the chemicals business in this year and beyond. Is there anything in particular that would keep it from growing a little bit more than diet? Just thinking that you're really in a position to take some share here, as you expand your focus. Well, that's certainly gonna be the goal of the team that's, advancing our strategy there. You know, we'll just have to see how that plays out. You know, obviously, it's a competitive space that we compete in, but we have some real experts on some of the chemical processes and the, and the products that we're supplying into that space. So we feel very good about our position, and, we'll continue to kind of report back through our earnings calls how we're doing there. I think it's a fair comment to say that, you know, we could see outsized growth in the chemical space. I think at this point we're saying that it's gonna be in line with diet overall. Keep in mind, the diet sector also includes energy transition, which is gonna be a really fast growth pace, business for us. Overall, we think, the chemical space certainly can grow, at the rate of diet, and as you point out, perhaps better if we're more successful in share penetration. That's a fair point on the energy transition. Just thinking about margins this year, pipe pricing has been a tailwind. Just wanted to get a sense for if it was a tailwind, headwind in the fourth quarter and what's your expectation this year? Yeah. I mean, we've talked a lot about the fact that, you know, there was a real strong inflation on pipe that was probably not gonna be sustainable, and we're already seeing some flattening and deflation in line pipe. As we look from 2022 to 2023, the gross margins that we expect on line pipe should come down from the levels that we had in 2022. However, we believe that the line pipe margins, gross margins are likely to stay higher than our historical average, which is very positive for us. We've replaced a lot of the high-priced inventory that we would have bought earlier in the year last year, we don't feel that we're saddled with a lot of ballast in terms of having high, high-priced inventory that we're trying to sell into a flat or lower priced market. Overall, we feel, you know, good about our position with line pipe in terms of the inventory we have and the outlook for 2023. It's gonna be a lot slower growth this year, though. I mean, last year, line pipe sales grew over 50% year-over-year. This year it's gonna be, you know, single digit growth in terms of sales. In terms of the margins, you know, the margins will be better than what we've seen historically, but not at the levels that we saw in 2022. One last one just on maybe the optimal leverage, level of debt or leverage. You know, really clearly reposition the company. The debt's been coming down. What do you think the right level is, of debt or leverage, in kind of the new, newly repositioned company? Well, this is something we ask ourselves every day. I think the thing we're most confident about is lower is better right now. You know, this company has for many years carried too much debt relative to the volatility of the earnings and the cash flow that it generated. Obviously, we think that in some cases that may have had us traded at a discount to where we should trade because of the lack of strategic flexibility and some exposure to some cycles. Look, we're certainly getting into a much more comfortable range of debt and leverage than we've ever been before. Again, as I mentioned in a previous question, we are in a year where we will be refinancing our term loan in all likelihood before the end of this year. This is a really good time to lower our leverage level and to demonstrate our cash flow generation capability. I think going forward, the answer to your question really is a function of what we do as a company, what businesses we're in, the volatility of those businesses in terms of cash generation and earnings and those sorts of things. You know, I think that's something that could certainly evolve for MRC Global as we go forward. But right now, we like where we are. We're gonna like even better where we're gonna be a year from now with the cash generation. Then longer term, similar to the earlier question on capital allocation, we'll take a look at what's the right leverage level for the company given the businesses that we're in. Makes sense. Rob, thank you very much. You're welcome. Thank you. Our next question is from Ken Newman with KeyBanc Capital Markets. Please proceed with your question. Hi, everyone. This is Katie Fleischer on for Ken today. Hey, Katie. Hi, Katie. I was wondering if you could talk a little bit about what you've been hearing from your customers so far. I know you said that the preliminary January backlog is indicating up versus December. Just wanted to hear, like, are you still confident on the level of demand visibility going into 2023 as you speak with your customers? Yeah, it's a good question, obviously we're about halfway through the month of February, so we're a month and a half into the year. I would say that our discussions with customers and what we're seeing in terms of spending habits are very supportive of the outlook that we anticipated kind of late last year and now are reaffirming today. Customer spending levels seem to be unaffected by any talk of weakening of the economy, or any sort of fluctuation in oil and gas prices. We feel very good about our market position. To give you an example, you look at our upstream business. Our upstream business is heavily levered toward large IOCs and large public producers as opposed to private and smaller independents. Everything that is written about the space is talking about how they're going to assume a bigger percentage of the activity in the oil field. That gives us confidence in our two sectors that are expected to grow the most this year on a percentage basis, which is our upstream and midstream business. I talked about what customers are telling us and what industry analysts are predicting for gas utility CapEx spend, and that's very supportive. A lot of that, again, is independent of economic conditions or commodity prices. A lot of these are safety and integrity projects or modernization projects. They're gonna go through largely inelastic, from what is happening in a broader economy, especially if there's a slight move one way or the other. The diet space, as we've talked about, you know, we're seeing a strong activity on projects, some turnarounds, but some larger projects as well in chemicals and refining. We continue to be bullish on the energy transition space coming into the year with a significant backlog and a good line of sight for projects in 2023 and beyond. Long way of answering your question, Katie, we feel good about where we are today and everything that we've seen in the market and what we've talked about with customers is supportive of our outlook. Okay, great. That's helpful. Thank you. Just for my follow-up. You talked about price already, but in terms of driving your margins, for this year, can you just talk about some of the puts and takes going into that 21% number? Is it really coming from product mix or SG&A leverage, or something else? On the gross margin number, you know, a couple things really come to mind. The first is that, you know, we saw a lot of inflation across our business in 2022. As we talked about on a number of previous earnings calls, you know, we have pricing in our contracts that allows us to reset those pricing, those prices, you know, to match inflation. There's always a little bit of a lag in that. Last year, as we were seeing inflation, we traditionally were coming together with our customers and talking about the impacts and then having to adjust pricing typically upwards to account for that inflation. A lot of that price adjustment took place over the course of the year, and really, 2023 will be the first time that we've really seen a full impact on that of that pricing on our margins. Obviously, that's a, that's a positive for us. Another positive for us as we think about this year is we really do feel like we'll see a nice pickup in our valve business and our international activity. Higher growth rates than the average for the company and our valves and actuation business and our international business. They tend to be higher gross margin businesses, so those tend to be accretive to that adjusted gross profit percentage that we're guiding at around the 21% range. Obviously on the potential downside is just, you know, the catch-up of the average cost to the replacement cost. As we continue to buy more and more expensive inventory and sell inventory through the year, our average cost has crept up, and obviously, that's gonna work against a growing gross margin. When we looked at all of those puts and takes together, we came to the view that they're largely in balance. Last year, you know, we finished the year at 21.3%. As we look at this year, we think we're in that 21% range or better as well. Those are really some of the puts and takes, but the net on it is that we think we're roughly flat on adjusted gross profit% for 2023 over 2022. Okay. Okay, thanks. Then just one really quick modeling question. What are you guys assuming for LIFO reserve for this year? It will certainly be less than last year. You know, 2022, I think we finished with $66 million of LIFO expense. Still believe we will have LIFO expense because, you know, there's gonna be some continued inflationary pressures. You know, I would, I would plug into your model now maybe $40 million-$50 million range. It's hard to predict, you know. It, it depends on a lot of different variables, but somewhere in that ballpark. Okay. All right. Thank you. Okay. You're welcome. Thank you. There are no further questions at this time. I'd like to turn the floor back over to Monica Broughton for any closing comments. Thank you for joining us today and for your interest in MRC Global. We look forward to having you on our first quarter conference call in May. Have a great day. Thanks. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.