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Targa Resources Partners LP (NYSE:NGLS)

Q1 2009 Earnings Call

May 07, 2009 11:00 AM ET

Executives

Anthony Riley - Senior Manager Finance/Investor Relations

Rene R. Joyce - Chief Executive Officer

Jeffrey J. McParland - Executive Vice President and Chief Financial Officer

Analysts

Mark Reichman - SMH Capital

Ryan Kelly - Prudential

John Tysseland - Citigroup

Operator

Good morning ladies and gentlemen, thank you for standing by. Welcome to the Targa Resources Partners LP Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened up for questions. (Operator Instructions). This conference is being recorded today Thursday, May 7 of 2009. I would now like to turn the conference over to Mr. Anthony Riley, please go ahead sir.

Anthony Riley

Thank you, operator. Good morning everyone. I am Anthony Riley, and I would like to welcome you to Targa Resources Partners LP's first quarter 2009 investor call. Before we get started, I would like to mention that the partnership has published an earnings release which is available on our website at www.targaresources.com.

Speaking on the call today will be Rene Joyce, Chief Executive Officer and Jeff McParland, Executive Vice President and Chief Financial Officer. Rene and Jeff are going to be comparing the first quarter results of 2009 to the first quarter results of 2008.

Before we begin, I would like to remind you that this call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Exchange Act of 1934 as amended. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The future results of Targa Resources Partners LP may differ materially from those expressed from the forward-looking statements contained within this call.

Many of the factors that will determine these results and values are beyond our ability to control or predict. These statements are necessarily based upon various assumptions involving judgments with respect to the future; including among other things, weather, political, regulatory, economic, and market conditions; timing and success of business development efforts and other uncertainties. You are cautioned not to put undue reliance on any forward-looking statements.

Now, I will turn it over to Rene Joyce, our Chief Executive Officer

Rene R. Joyce

Thanks Anthony. Good morning and thanks to everyone for participating in Targa Resources Partners first quarter '09 conference call. Joining Jeff and me are several members of our management team who will be available to assist in the Q&A session.

By way of agenda, I will start off with some performance highlights for the first quarter. I'll then turn it over to Jeff to review our financial results. Following Jeff's comments, I will offer some highlights from the first quarter, update our business priorities moving forward and finally, we will take your questions.

With regard to the performance highlights for the quarter, our first quarter results generated distributable cash flow of $33.6 million which corresponds to distribution coverage of approximately 1.3.

Gathering throughput for the combined systems was a little over 429 million cubic feet per day, a decrease of approximately 7% compared to the same period in '08. For the same period, plant natural gas inlet was 7% lower at slightly over 408 million cubic feet per day. These decreases result primarily from the impact of processing economics on our purchases of lower margin discretionary volumes at our Louisiana System from third party pipeline systems which were somewhat offset by increases at our North Texas and San Angelo Operating Unit Systems.

North Texas and San Angelo inlet volumes increased primarily due to incremental producer volumes. Process NGL

Gross NGL production was 41,600 barrels per day for the three months ended March 31, '09, a decrease of 6% over '08. Natural gas sales volumes decreased 15% to 335 million billion Btu per day in the quarter ended Mach 31, '09 compare to slightly over 418 billion Btu per day in '08. The decrease in natural gas sales is primarily the result of decrease in demand by our industrial customers in the late trials (ph) area and a decrease in purchases from affiliates for resale.

NGL sales was 37,200 million barrels per day for the first quarter '09, a decrease of 2% over the period in '08. The decrease in NGL sales is primarily due to lower plant inlet volumes.

Condensate sales were down 8% to 3,400 barrels per day for the first quarter of '09 compared to the 3,700 barrels in the first quarter of '08. On the pricing front, for the three months ended March 31st '09, our average realized prices, including impacts of hedges, for natural gas, NGL and condensate, were $4.56 per MMBtu, $0.55 per gallon, and $41.13 per barrel respectively. This compares to $8.02 per MMBtu, $1.21 per gallon and $85.59 per barrel for natural gas NGL and condensate respectively during the period first quarter '08.

Now I'll turn to Jeff to give you details on our financial performance.

Jeffrey J. McParland

Thanks Rene. I'd like to add my welcome, and thank you for joining our call today.

The first item I would like to mention is some additional operating data that we've included this quarter. As you may have noted in our earnings release we've broken out volume data for each of the three systems in the Partnership. We currently plan to include this level of detail on a quarterly basis going forward and trust that you'll find this additional transparency useful in understanding our operating performance.

For the first quarter of 2009, the Partnership reported a net loss of 2.1 million compared to net income of 24.9 million in 2008. The decrease in net income is primarily attributable to an $18.5 million non-cash hedge loss compared to $0.5 million non-cash hedge loss in '08. The decrease was also impacted by the lower commodity prices and higher operating, depreciation, G&A and interest expenses, partially offset by lower deferred income tax expense and other income.

Income from operations for the first quarter of 2009 decreased to 7.4 million from 33.9 million, primarily as a result of lower prices and the non-cash hedge loss. Adjusted EBITDA for the quarter decreased to 45.5 million compared to 52.6 million due primarily to the lower commodity pricing environment.

Net interest expense for the quarter was approximately 9.9 million and maintenance capital expenditures were 2.6 million. Revenues for the first quarter of '09 were 239 million, 53% lower than revenues of 512.1 million for 2008. The primary drivers of the revenue decline were decreases in average realized prices and in sales volume.

Moving to capital structure and liquidity, we had 337 million in capacity available under our senior secured revolving credit facility after giving effect to outstanding borrowings of 488 million, 15 million in letters of credit and an approximately $10 million reduction in borrowing capacity, a result of the default last October by a Lehman Brothers' affiliate under our revolver.

As of March 31, 2009, we had 62 million of cash on hand which along with availability under our revolver brings our total liquidity to approximately $400 million. Total funded debt at March 31, 2009 was approximately 697 million or about 48% of total capitalization.

We are revising our capital expenditure estimate down slightly for 2009 to a level what ends up more in line with the approximately 55 million in 2008. This updated estimate reflects cost control programs and cost savings. As we move through the year, we may see additional impacts from these programs. We estimate that maintenance capital expenditures will account for approximately 40% of 2009 total capital expenditures.

That wraps up the financial overview. So I'll turn the call back to Rene.

Rene R. Joyce

Thanks Jeff. First, I want to say we're very pleased with the performance of Targa Resources Partners in this environment and our relative position in the gathering and processing industry.

Based on information available to date, we still believe our '09 North Texas and San Angelo wellhead volumes will meet or exceed those of '08, while total LOU inlet volumes will depend on the prevailing frac spread environment. That frac spread today between the Henry Hub and Mont Belvieu is well over $2 for ethane and for the total NGL barrel well over $3.50 per MMBtu. We note, however, that our wellhead volumes during '09 could be negatively impacted by the continued decline in drilling activity and possible production curtailment due to low gas prices. We are monitoring these activities very closely in our areas of operations.

Regarding our LOU volumes, wellhead volumes there have been lower than expected. However, we have recently added an incremental source of discretionary pipeline volumes which have increased plant inlet volumes to 174 million cubic feet per day. And we expect by Friday that this volume should be at or near 190 million cubic feet per day.

For the first quarter of '09, plant natural gas inlet volumes for the Partnership's three systems were up sequentially over the fourth quarter of last year. North Texas and San Angelo volumes were each up over 4% quarter-over-quarter, and LOU was up 3%. Volumes at each of these systems today exceed the average volumes for these systems in the first quarter of '09.

For our volumes received as payment on a percent of proceeds contracts, which we refer to as equity volumes, we are well hedged in '09 and '10. Including the new gas hedges at Waha and into (ph) during the first quarter, we believe we are about 75 to 80% hedged for our equity volumes of natural gas and NGLs in '09 and about 60% hedged for our equity volumes of natural gas and NGLs in '10.

We continue to evaluate accretive acquisitions and organic growth opportunities that can add value and reflect sound economics. However, given disruptions in the capital markets, combined with ongoing economic weakness and higher hurdle rates, we review each opportunity with increased scrutiny. We will continue to evaluate the distribution policy on a quarterly basis using a long-term time horizon and an appropriate forecast of both volumes and commodity prices, as the then current market conditions indicate.

To conclude, I feel the combination of operating capital and liquidity highlights and some of the (ph) Partnership's solid financial footing, including substantial liquidity of approximately $400 million at quarter end, solid distribution coverage for the first quarter of approximately $1.3, meaningful headroom with respect to our financial covenants and with our earlier debt maturity in the first quarter of 2012, no near term refinancing requirements.

That concludes the formal part of the call. We will now open it up for your questions.

Question-and-Answer Session

Operator

Thank you sir. We will now begin the question and answer session. (Operator Instructions) Our first question comes from Margaret Woolever of Raymond James. Please go ahead.

Unidentified Analyst

Hi. I was wondering that when you're looking at improving costs, could you give a little bit more insight on how you plan -- rationalizing costs and maybe quantify the benefit range or targeting for operating expenses?

Jeffrey McParland

Well, we had talked about this some on our year end call. Basically when we see commodity prices collapse, a lot of our services operate in the same areas as the producers who supply our system. They go after their costs with a vengeance and rather than being a follower, we engage at the same time. What does that mean? That means going back to vendors and reopening contracts and resetting rates or it means being aggressive of opportunity of supplies, we ran -- 10-inch pipe last year. We purchased at same price but something like 25 to 30% less and actually have gotten 12-inch pipe at the same cost this year. So we're seeing substantial reductions in the cost of supply.

That simply requires discipline through our consumer process to go after those improvements. We've an ongoing program of operational, our management looking to our area managers that we started back in August of last year. Once we finish around with them, we'll start that over again and go through each of their budgets, their plans, their activities to make sure we're optimizing our approach to running the business.

Unidentified Analyst

Okay. Great. Thank you, that helps. And on the maintenance CapEx you said it will be about 40% of 55 million, so I think that this will be back operated?

Jeffrey McParland

Oh, yeah, we saw 2.6 in the first quarter. So that will spread more evenly over the rest of the year. We've had a pretty good track record of being conservative in on CapEx estimates. Our operating folks tend to keep their budgets intact even though they might not be actually running at that kind of expenditure level. So, we expect there is probably more biased downwards than upwards, barring a significant organic growth project on that CapEx forecast. But pro rata remaining years is a reasonable assumption.

Unidentified Analyst

Okay. Thank you very much.

Operator

Our next question comes from Helen Rayu with Barclays Capital. Please go ahead.

Unidentified Analyst

Good morning. Is that the CapEx on the bulk side, I guess you're implying 33 million for the year? I am just wondering where the -- it seems to be down from 45 previously, where are the adjustments coming from?

Jeffrey McParland

Our total CapEx last year ran about 55 million. And we had a budget going into this year the estimated 60 million. Most of the organic side of that is unidentified projects, it's plans that the operating managers put in place as we develop our plans and then we go and approve each project on a case by case basis. And you heard us say a number of times, our opportunities tend to run in terms of expenditure levels, a million dollar, several million dollars, maybe as high as four, five and many of them are in less than a million dollar range. So it's just blocking and tackling around our systems.

So we get better visibility on those as we move through the year. Overall we have seen our cost reduction programs and improvement of prices in supplies and vendors show up in our results of operations. So we assume that we are down at a total expenditure level, somewhat like last year's.

Unidentified Analyst

Okay, great. And just a question on your average realized commodity price for the quarter. I guess, just to understand how these numbers are calculated, I guess if you look at your NGL per gallon your average realized price, including the hedge effect, you said $0.55 per gallon. That would be the price without the hedge impact because your hedge -- I guess average 2009 hedge price is $1.32 and you're quite heavily hedged. I am just trying to understand what makes the averaged realized price quite lower than what I would expect including the hedging effect?

Jeffrey McParland

Probably the main difference between what you are calculating and what we show under our accounting standards is the fact that our sales include both our equity volumes and the third party volumes of our producers. And the accounting requires that we include the hedge impact across all of those sales. So the difference you are looking at is probably the difference between trying to put the hedges just on our equity volume or your estimate of that since that's not a item that's reported versus the total volumes that we sell which includes third party volumes.

Unidentified Analyst

I see. Okay, great. Thank you very much.

Operator

(Operator Instructions) Our next question comes from Mark Reichman with SMH Capital please go ahead.

Mark Reichman - SMH Capital

Good morning

Unidentified Analyst

Good morning Mark.

Mark Reichman - SMH Capital

I think in the past you said that, target had no hedges, it would need roughly $65 oil and $7 gas to pay its distribution. And recognizing that you have a lot of liquidity moving forward, I was just curious on what your view of the market is right now, what you're seeing and kind of how you're thinking about your hedge program. And also you know other actions that might be needed in terms of making maybe some small acquisitions from the parent or other greenfield opportunities.

Rene Joyce

All those options are available to us.

Mark Reichman - SMH Capital

Yeah.

Rene Joyce

It's the simple answer to that Mark. Yeah, we do have 400 million of liquidity at the MLP is performing well. Do we have to undertake any of those actions right now? I would say the potential of a drop down, a small drop-down from the parent is always there. We're always looking for organic acquisitions around our existing assets. So, that's progressing as is it always has.

Mark Reichman - SMH Capital

All right, continued activities you're pursuing some of the --

Rene Joyce

Yeah, we -- for the last two years, we've been actively going into some of the shale plays, trying to get in. And we've got a number of initiatives somewhere as far along is having term sheets being exchanged and discussions well along on some potential projects in the Marcellus and the Haynesville and Eagle Creek. So, we would like to get in that. Fee-based business doesn't require processing with substantial growth over the next few years. So we've been pushing very hard to try and get into those areas.

Mark Reichman - SMH Capital

Okay. That's helpful. Like in the release where you said you have basically have ample liquidity. You're comfortable with your position to kind of bridge the time required to determine what a long-term operating environment looks like for your business. I was just curious, I mean based on what you're seeing in the markets right now, I mean are you feeling better, worse, about the same in terms of how long you think that bridge or that timeframe will be? And do you feel still pretty comfortable with your ability to at least your hedge position for 2010?

Rene Joyce

I feel better today than I would have felt coming out of last year. I mean look ethane is $0.40 today, propane $0.65. And that's about 75% of our barrel. So in our petrochemical operating rates for this month are 83-84%. These are all much better than I would have thought two or three months ago. There is still pressure on gas. So I think the frac spread is going to be there which will benefit our Louisiana operations. A lot more benefits at TRI than at TRP.

So I think things are more favorable today. How long they continue depends on a lot of factors. That's why we say it's still a quarter-by-quarter analysis for us on -- with regard to actions we may take some of the options which we have already mentioned in our distribution policy.

Mark Reichman - SMH Capital

Okay, great. Thanks, that's helpful.

Operator

Our next question comes from Glen Brecken with Brecken Capital. Please go ahead.

Unidentified Analyst

Hi guys. Can you give an estimate on 2010 what you hedged on just natural gas alone?

Jeffrey McParland

I think the 60% that we quote is approximately the right number for both natural gas and NGL.

Unidentified Analyst

Okay. I was thinking the natural gas would have been a little bit higher, but you must be expecting some volume increases next year I guess is my question?

Rene Joyce

The natural gas is probably a bit higher than the NGL but it's -- they are relatively close but I don't have the exact number with me.

Unidentified Analyst

Okay. And can you just give some trends what you're seeing sequentially either -- obviously we can track the natural gas more in the NGL side sequentially this quarter versus last quarter?

Jeffrey McParland

In terms of price or in terms of volume?

Unidentified Analyst

Both if you can. And I have a follow up on overall natural gas volumes as well.

Jeffrey McParland

Let's just see if we have the sequential data right in front of us here.

Unidentified Analyst

But when you're thinking at -- I guess are we past -- I mean given the overall rate count reductions that have been announced, are we past in your view the bulk of risk of volume declines assuming prices of the overall -- I am sorry -- underlying commodities stabilize or rise?

Rene Joyce

No, well I think we are passed because you're not seeing the volume fall-off for quite a while yet. And there's a lot of systems like ours. Take for example, North Texas where the volumes have been growing, that's because of the backlog of projects that we had up there and well hook-ups. And that's why we're pretty comfortable in saying those volumes will be higher. But at San Angelo, the drilling activity has fallen off. Even though our volumes are higher than first quarter average, we anticipate to see some impact in the second half of this year.

Now, that may be mitigated by any third party volumes we put on. And we're working with the producers. As they're seeking cuts from their suppliers to maybe get their cost structure to a point where they can bring rigs on. We're offering deals on our processing arrangements short-term relief to also assist in getting rigs back up. So as of right now we anticipate some volume impacts at San Angelo but we may be able to offset that.

In LOU, wellhead volumes are falling, and we don't anticipate that will change for the remainder of the year. But we do think with this discretionary third party gas that we're putting on that we should keep volumes up between 150 and 200 million cubic feet a day. So we feel relatively good today about the volumes. But there will be impacts.

Unidentified Analyst

Hey Rene, is there Anthony --

Unidentified Analyst

When you were asking about NGLs were you referring to the trends we're seeing within the petrochem complex?

Unidentified Analyst

Yeah, I mean what are the -- we've seen some improvement in commodities, right? And all of the companies have reported that NGL is up slightly so far in the month of May over April -- April over the month of March. Can you just give some color whether that's true or not?

Unidentified Analyst

Yes, the petrochemical operating rate was 55% in December when the hurricane impacts and the economic impacts, that's currently at 83-84% and the utilization of light ends, ethane and propane is very high because the ethylene cash cost has a huge advantage in using the lighter end rather than gas, oil and naphtha. So we're seeing 830,000 barrels of ethane roughly being used right now, 330,000 of propane. But at petrochemical complex those are very high rates on those two products versus past periods.

Will that continue? That I think for a while, we'll have to see how that plays out. But yes, utilization of ethane and propane is very high. And we've seen that in the price improvements from the low $0.30 to near $0.40 today over -- $0.40 to day, propane at $0.65.

Unidentified Analyst

Okay, all right. I have a follow up but I will let someone get, get back in the queue if there is -- I'll follow with that one. Thank you.

Operator

Our next question comes from Ryan Kelly with Prudential. Please go ahead.

Ryan Kelly - Prudential

Hi, good morning guys. I jumped on the call late, so I apologize if you've already addressed this question. Wanted to dive a little deeper on this shale play, expansion concept that you talked about in response to another question. Is that something that is imminent? And is that something that -- what area would you be looking at, what would be the general structure or framework that you would consider entering that shale plays or expanding into those areas?

Rene Joyce

I would say imminent, and we have confidentiality agreements we have to deal with here. But I would say we're focused in on the Marcellus and Haynesville, obvious because of their price advantage and the activity that we are still kind of seeing up there, Eagle Creek will be a distant third. Like I said we have got proposals out there and we've had discussions for longer time with some potential parties.

So I would say it's imminent but we are working very hard at it. And we would love to get a deal in the Marcellus and Haynesville. In some cases that involves participation in existing systems, with the need to spend significant amount of dollars over two three year period to build up the infrastructure. But we've been focused on this for quite a while. And like I said hopeful that we'll have something to announce in the near future.

Jeffrey McParland

And as far as structure is concerned we are looking at both owning assets and doing joint ventures.

Ryan Kelly - Prudential

Okay. Now, will this occur at NGLS and would it be at TRI level?

Jeffrey McParland

Yes.

Rene Joyce

Yes, it's both. It could accrue -- it all depends on the size and really the type of project that we are looking at. And what's the build out required and how does that build out look like over time. But like I said it could occur at either or both TRI and TRP.

Ryan Kelly - Prudential

And then would there be a leveraging announcement out of the gate?

Jeffrey McParland

Depends on the transaction.

Rene Joyce

That's premature at this point.

Ryan Kelly - Prudential

Okay.

Rene Joyce

As we go through that. I mean basically as we said in the past, we know we've got substantial financial footing here to operate in this environment. But we also are going to be very passionate and disciplined about using that until we get some clarity on what capital formation will look like going forward. And we're certainly not there yet as things haven't yet completely settled out in our view. So that's not going to -- we hope preclude us from -- proceeding forward but the ultimate structure of transaction will depend on its cash low characteristics, its overall scale and where it provides the most incremental value to the pieces of this system.

Unidentified Analyst

Okay. Do we extrapolate from the recent amendments into the credit agreement, is the TRI level as sort of a precursor to this transaction?

Rene Joyce

I'd say that's unrelated. That credit agreement, as the parent did not allow the opportunity to buy back debt at less than par under the senior secured facilities. And those lenders were agreeable to give us that change. As you know throughout the system we've been buying debt back at less than par which we think is pretty good capital management.

Jeffrey McParland

And we currently have a considerable amount of cash on the balance sheet at the TRI level.

Unidentified Analyst

Okay, thanks guys.

Operator

Our next question comes from John Tysseland with Citi.

John Tysseland - Citigroup

Hi guys. Jut a quick follow-up on that line of questioning, I mean I guess NGLS is in a unique position and that is actually has capital readily available to it to make some investment in the G&P space. I guess looking at your proposals that you're putting out there for potential build-out of Haynesville and Marcellus, are you seeing kind of I guess fewer cover bids out there and of those bids and competition are industry returns being going up in line with kind of where capital markets are today?

Jeffrey McParland

I will tell you the answer to that is yes.

Rene Joyce

We got to recognize that our cost of capital is one thing today. It's going to be another thing tomorrow. And so we have got to factor that in and looking at the absolute return that these projects needs to generate for us to want to step in and commit the kind of capital we have to -- like I mentioned in one case, it could be as much as $500 million over the next few years. So yes it has going up. I am not certain about the competing bids, they always are. And in these situations I don't know if the number has stayed the same or gone down.

John Tysseland - Citigroup

How do you view or how do you balance the kind of -- what your position in those two areas, in terms of your existing infrastructure that's there -- relative to maybe a competitor that has infrastructure there. And weighing that relative to how aggressive you get in terms of your bids business. In other words, somebody with existing infrastructure might be able to do something at a little bit cheaper than you might be able to on a greenfield basis but they might not have capital. So how do you balance that?

Rene Joyce

Frankly just aspect when you're talking about stepping into gathering, processing arrangement with a producer. One, we are leveraging off of our relationships with producers we have in other areas. I mean we are gathering and processing whenever things up and running 2.2 billion cubic feet a day. So we have got some long term very good relationships with a lot of producers that have acreage positions in these shale plays. So we are leveraging off of that as being a solid operator, an efficient operator.

How quickly you can put the infrastructure and how well you maintain that infrastructure, the efficiency of the operations all factors that weigh into the decision by a producer to go with a particular gatherer and processor. So I think we stack up pretty well there. And like I said price is one. We are not -- we don't have existing assets in these areas. But I think when you look at the other factors we stack up pretty well, and we will utilize that to try and get ourselves into some of these plays.

John Tysseland - Citigroup

Thanks.

Unidentified Analyst

We have operations downstream, more of the downstream than just gathering and processing which we bring other things to the table.

Rene Joyce

Yeah some of these plays aren't all dry gas, some may have some liquids. And when you look at our sizable liquids business and the fact that we're dealing in liquids across the country, sometimes we're in a better position to offer solutions around the NGLs that some of the other gatherer or processors can not. So, there is a lot other things besides price; that was the good point Roy just mentioned.

John Tysseland - Citigroup

That's very helpful. Thank you.

Operator

Our next question comes from Glen Brecken with Brecken Capital. Please go ahead.

Unidentified Analyst

Tackling the shale plays in other ways, it sounds like you are closer than you were last quarter. Just a comment on that, and secondly, how do you balance the new opportunities versus drop down opportunities? Because, I mean one thing looking at the parent, I mean you have a significant amount of high grade fee based related contracts and they are very valuable to the unitholders in that they can improve valuation dramatically versus comparable companies that have that mix of business in it.

Jeffrey McParland

Let me just talk about the second piece and then I'll let Rene on the first. We've got a lot of moving parts here but the fundamental tenets that we have to run the system with our fair value across both the MLP and the parent. So as we think through potential options on the going forward strategy related to drop downs, we have to make it work from both sides of the fence.

Obviously what we are trying to do, as Rene has said is blend out the cash flow mix of the MLP. So it does grow by way of fee opportunities, fee cash flows as well as the organic growth around the existing systems. Rene, you want talk a little --

Rene Joyce

No, it's about the -- as we've got shareholders at TRI, we've got unitholders at the MLP. So it is a balancing act in valuations and dropping down. So still our goal is eventually get all these assets into MLP. But if we make a drop down this is going to eat up our liquidity at the MLP before we know what it cost us to replace that liquidity. And while we're still working on these shale plays, I think it's probably our view that it would be better for the MLP to jump into the shale plays rather than dealing with the drop downs. So our assets performing well at TRI and would add a lot of value to the MLP. But they're always going to be there available for that drop down.

Unidentified Analyst

Okay. That's what I thought. And regarding the first question?

Rene Joyce

We're closer now than we were first quarter --

Rene Joyce

As every month goes by we've had more and more discussions and we exchange term sheet. And we kind of sit across the table with some parties, and we exchange views. I think we're asking for too much. We think we need that. They think we're asking for too much we think we need that. So every month goes by we have additional deals we're looking at and we're progressing along with the ones that we've been working off for quite a while. But again you know it's give and take and -- nothing's imminent but we're hopeful.

Unidentified Analyst

Okay, thank you guys. Good job by the way in light of the fact that even though the market is not valued, the units in my mind correctly you're steering the company in a very prudent way in this difficult environment.

Jeffrey McParland

Thank you.

Rene Joyce

Thanks for the kind words. Now we need somebody to go out and buy some of these units.

Operator

(Operator Instructions)

Rene Joyce

Thank you, operator. And to the extent anyone has follow-up questions please feel free to contact Anthony or any of us. Thank you again for your time this morning. And I look forward to our next conference call.

Operator

Ladies and gentlemen, this concludes the Targa Resources Partners LP conference call. If you would like to listen to a replay of today's conference, please dial 303-590-3030 or 1800-406-25 and enter an access code of 4058507. AT&T would like to thank you for your participation. You may now disconnect.

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