Kinder Morgan Energy Partners LP Q2 2009 Earnings Call Transcript

Jul.16.09 | About: Kinder Morgan (KMP)

Kinder Morgan Energy Partners LP (NYSE:KMP)

Q2 2009 Earnings Call

July 15, 2009 4:30 pm ET


Rich D. Kinder – Chief Executive Officer

C. Park Shaper - President

Steven J. Kean – Chief Operating Officer

R. Tim Bradley – President, CO2


Gabe Moreen - BAS-ML

Stephen Maresca - Morgan Stanley

Darren Horowitz - Raymond James

Michael Blum - Wells Fargo Securities

Noah Lerner – Hartz Capital

Brian za Haren - Barclays Capital

John Edwards - Morgan Keegan

Alex Meyers – [company inaudible]

Eve Segal- Credit Suisse


Welcome and I would like to thank you all for standing-by for the quarterly earnings conference call. (Operator Instructions) I would now like to turn the call over to Rich Kinder.

Rich D. Kinder

Welcome to the second quarter analyst call. As usual, we will be making statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Also as usual, I will give an overview of the quarter's performance and strategic outlook. Park will follow with the financial details and then we will take any and all questions that you might have.

I think if you look at the second quarter, we made real progress in overcoming some really significant headwinds that we and the rest of our industry face as a result of this prolonged recession. As you know, we judge ourselves primarily against our own plan that we publish on the Web site each January and I am delighted to report that in the second quarter we actually exceeded our plan.

We expect to distribute our target of $4.20 per unit for the full year 2009 and based on our current forecast, we are very close to generating sufficient distributable cash flow to fully cover that distribution with this year's cash flow, considerably closer than we were at the end of the first quarter. So we seem to be improving as the year goes forward, although there are certainly a lot of moving parts.

Also along those lines, we now expect all five of our business segments to exceed their 2008 results in terms of earnings before DD&A and distributable cash flow for the full year 2009 compared to the full year 2008.

Now why are our results improving? I think it's the result of a number of factors, primarily including: good performance in our Products Pipeline segment, particularly in our Cochin and NGL system coming down from Canada; improved crude oil production with our SACROC unit and our CO2 segment; and good results from our cost reduction efforts, pretty much across the company.

Now, as I said, Park's going to cover the financial numbers, but let me outline some of the most important developments in each business segment.

Starting with Products Pipeline, there refined products volumes are still lower than 2008 and still below our plan, however, we did see some improvement in the second quarter. Overall, refined products volumes were down 1.9% in the second quarter versus 2008. This is an improvement of a negative 3.9% in the first quarter of 2009. If you strip out Plantation, and that's probably the fairest way of doing it to really judge the throughput, we were down 2.2% in the second quarter versus being down 6.4% in the first quarter.

And that 2.2% negative, by the way, compares to the EIA preliminary numbers that we're seeing of a negative 4.4% for the nation as a whole in the second quarter.

Now, all those numbers I just gave you are refined products as a group. If you delve a little deeper, gasoline volumes were actually positive in the second quarter versus the second quarter of 2008 by about 3.4% and year-to-date they are now actually positive by 0.5%, so one half of 1%.

Now I don't know how much to read into all that and certainly these volumes are still volatile so again, I would let everybody be their own judge of this, but we are seeing quarter-to-quarter improvement, particularly on the gasoline side.

Jet fuel also showed an improvement compared to the first quarter. Diesel did not. So it's sort of a mixed bag but in general becoming a little more positive sequentially.

With regard to the NGLs in our Products Pipeline segment, they were positive to 2008 for both the second quarter and year-to-date and in the overall Products Pipeline segment we have overcome these volume shortfalls with good performance on our Cochin system and better tariffs in California and with savings across the board, particularly on the power cost side.

And as we said in our release, we now expect this segment to not only exceed 2008 but also to slightly exceed its plan for 2009.

In our Natural Gas Pipelines segment, there the challenges we have faced have been weaker performance in the second quarter at our Texas intrastates. That's mostly timing, where we've had some storage revenues we have purposely postponed until later in the year to maximize economic benefits and some operational costs that also are a bit front-end loaded compared to last year.

And for the whole year we expect that segment to be only slightly below plan, but they have faced some headwinds in that sector, in the Texas intrastate market itself that we expect will continue. We've also had lower revenues from new pipelines because of delays of the in-service states, which leads to lower revenue.

Now we have offset a lot of these negatives with lower operating costs and we have had very good performance in our Kinder Morgan Interstate Gas Transmission system coming out of the Rockies.

In our CO2 segment, our better production at SACROC and reduced costs across the board is overcoming our lower crude prices and included in that lower crude price, of course, is we're finding lower NGL to crude ratios for 2009 than we expected to see.

But overall, again, CO2 is making a real effort there. We expect them to be better than 2008 for the entire year and we expect them to be relative close to their plan for 2009.

In our Terminals segment we continue to experience significant lower steel volumes in our bulk business, although there are indications of some modest upturn for July. It's too early to tell whether that's a trend yet. We have been able to claw back a significant percentage of the shortfall through reduced costs, particularly in fuel and utility costs, and in contract labor.

And I would point out that outside of the problems on the bulk side, particularly the steel, our liquids terminals are doing very well and are at, or above, plan for the quarter and year-to-date.

In our Canadian operations, our fifth business segment, while we've had lower volumes to the Washington state refineries, overall the throughput on Trans Mountain has been above both 2008 and the plan, for both the second quarter and year-to-date.

And the volumes across the dock at Vancouver going on to ships that are going either down the coast of California or in some cases to Asia, have been well above our plan and well above 2008 and, in fact, during one of the months this year we've already set an all-time record for shipments across the dock, indicating, I think, demand from our customers to ship more out of the port on the West Coast, in this case Vancouver.

Now, I would also like to give you an update on our major natural gas construction projects that are underway and then on a few new projects that look promising.

Let me start with the major projects update. Since we last talked to you, we have made significant progress on each of our major projects. On Rockies Express, REX-East went into service on June 29, with service to the Lebanon, Ohio, hub. And on that system we can now deliver up to 1.8 billion cubic feet (Bcf) a day of natural gas from the Rocky Mountains to Audrain County, Missouri, and 1.6 Bcf per day to the Lebanon hub in western Ohio.

The next and final step is service to Clarington, Ohio, and we were targeting a May 15 start up for all five spreads. We actually beat that by a week or two and all those spreads, so far, are running on, or in advance of, what we targeted them to be at this point in time.

We have all of our right-of-way and all of our permits and clearances, and frankly, this is the first time we've started a REX segment with all those clearance, and I think we have some open field running on the last leg because we're building during the prime part of the construction season from June to October.

On the other side of the equation, the train is a little more challenging on the last part of the build. More rock and hills and that is why we divided into five spreads for the last 195 miles. We are projecting November 1 for in-service to Clarington and once we are mechanically complete and have FMSA approval to operate all the REX at the .8 design, we will be able to deliver 1.8 Bcf a day to eastern Ohio.

On our Midcontinent Express system we went into service to Delhi, Louisiana, on April 24 and we're well on our way to completing the final leg of this project to the Transco station 85 in western Alabama, with an in-service date of August 1.

Our Kinder Morgan Louisiana project is now complete. It went into service on June 21.

So in summary, we are now down to the last two construction legs on our major projects, with all construction to complete by the end of the year. And after August 1 we'll really just have this one leg, the REX-East section, going on to Clarington.

With regard to costs, compared to what we told you a quarter ago, really not much change: REX now has gone from $6.6 billion to $6.7 billion. All these are 8/8's numbers, obviously; Kinder Morgan Louisiana at $1.0 billion; last time we said $980.0 million so it's pretty much flat; and no change from the numbers we gave you the last time on Midcontinent Express and Fayetteville Express.

Now let me address one final matter relative to pipeline construction. There's been a fair amount of news recently regarding pipe quality on new pipeline projects and this was highlighted in a recent FMSA bulletin regarding yielded pipe. Let me kind of tell you what that means and doesn't mean for our projects.

First, some background. On our three major projects, REX, MEP, and Kinder Morgan Louisiana, we have some pipe that we have sought, or will seek, approval from FMSA to operate at a .8 design, i.e. that's at a higher pressure.

On REX we've already received FMSA authorization to operate the western portion of the project at that .8. We're running the high-resolution tool on REX-East to Lebanon, and should have those results shortly, and then we'll run the tool to Clarington shortly after that leg goes into service.

On Kinder Morgan Louisiana, which is already in service, we ran the tool in June. The results were clean, we turned the data in to FMSA and we expect authorization to go to the .8 design shortly.

On Midcontinent Express we're running the tool this month to Delhi. That's the part that's already in service, and we'll run the tool on the last leg over to T85 shortly after we put it into service.

We are confident we will have few, if any, issues with these tool results. As I mentioned, we've already been through the whole process on REX-West and have received FMSA authorization on that pipe and we got a clean run on Kinder Morgan Louisiana.

Further, I think all that gives us confidence that the additional inspection and testing that we did has allowed us to avoid the problems with yielded pipe.

Finally, let me just say with projects of this size and complexity, there almost always are start-up issues when you ramp up compression. There are sometimes repairs that need to be made and you may find dents that were done during the construction process. We have had those, expect to have them, but based on our experience and the precautions we've taken in the construction process, we don't expect to experience anything beyond minor short-term outages or reduction in flow.

So I wanted to clarify that with you because I think there's been some confusion in the trade press with regard to that particular issue.

So that's sort of an update on the pipeline projects, and overall, as I said, it's not over until the fat lady sings but we feel a lot better about our progress this quarter then we did at our conference call three months ago.

And I would also like to mention a couple of new projects that our board just approved today. The most significant of these is a new $180.0 million-plus project in our CO2 segment to further expand our Products Pipeline network in the Permian Basin and to develop a significant new CO2 flood in the Katz Field, which we already own. We expect to produce an incremental 25.0 million barrels of oil at Katz and we expect this whole project to serve as a platform for increased EOR [Enhanced Oil Recovery] efforts in the region by Kinder Morgan and by third parties.

And certainly 25.0 million barrels of oil spread over 15 to 20 years is nothing to sneeze at. If you look at it, that's an average of something north of 4,000 barrels a day. We expect, of course, as usual, it's a little bit front-end loaded and we will probably peak in the vicinity of 7,000 barrels a day out in the 2015 time frame.

We expect the pipeline to be in service by early 2011, at which point we will commence the floods in the Katz unit.

A second project that's been approved by our board is in our Terminals group and there we have entered into an agreement with a major oil company to build slightly over 1.0 million barrels of new petroleum product and ethanol storage at our New York terminal, at our Carteret terminal in New York Harbor, at a cost of slightly over $60.0 million. And I think that also bodes well, and again, it's a long-term contract with a major oil company supporting that particular project.

So that's an update on some of the new developments. Finally, let me just mention that we continue to be successful, as you know, in accessing both the debt and equity markets. On the equity side we have now sold about $750.0 million of equity year-to-date and that includes $96.0 million from a partial quarter, partial second quarter, of our at-the-market program, which we think is very positive. And the $750.0 million total sold compares to our budget target for the full year of $1.0 billion. So we made some real progress there.

And with that, I'll turn it over to Park who will take you through the financial details.

C. Park Shaper

I will go through the numbers, talking about second quarter performance, how we're doing year-to-date, and a little bit about how we expect the full year to come out. So hopefully everyone has the press release. There are a number of stages at the back of that.

The first numbers page is the face of the income statement. All I want to point out here is towards the bottom you will see the declared distribution per unit and the board, today, did declare a distribution of $1.05, payable in August. That is up 6% from where we were second quarter a year ago. And the first half distribution of $2.10 is up almost 8% relative to where we were in the first half of 2008.

Now with that, if you'll turn to the next page, we can talk about the cash that we're generating to support that distribution and you'll see again towards the bottom the DCF per unit, distributable cash flow, per unit, we think is the most important number to focus on. It's about $0.99 for the quarter; that's down from $1.14 a year ago. About $1.95 for the first half, and that's down from about $2.26 from a year ago.

Now, a lot of this was expected. I mean, one, commodity prices were a lot lower in the first half of 2009 versus where they were in 2008 and that was built in to our budget. And so actually, if you look at, as Rich mentioned, our second quarter results, we actually ended up above our plan, and nicely above. Even though, as we talked about back in January and in the first quarter, commodity prices were not as high as our plan. And so we have continued to do a good job at finding cost savings and other opportunities to claw back the gap that lower commodity prices have presented us.

With that being said, our negative coverage for the quarter is about $17.0 million and is about $40.0 million year-to-date. Now, as Rich mentioned, as we look forward for the full year, we believe that we are very close to covering the $4.20 budgeted distribution that we have for the year. So our forecast comes very close to covering that and is much closer than where we were in April, when we last talked about this, and certainly closer than where we were in January.

So again, we've made tremendous strides in filling in this hole and moving towards covering our distribution and we're hoping that continued hard work in the second half of the year will get us above that distribution and closer back to the excess coverage that we had in our budget.

A couple of lines up from that, you will see DCF before certain items. This is a total dollar amount. Down about $19.0 million, $274.0 million versus the $294.0 million a year ago. Now, and for the first half down about $40.0 million. But I want to point out again that that number of $274.0 million for quarter is about $30.0 million ahead of our budget. So for the quarter, in terms of total DCF, we are actually ahead of our budget. So again, we feel like things went very well in the quarter.

Above that, sustained capital expenditures, about $41.0 million compared to $47.0 million a year ago. About $71.0 million for the first half compared to about $77.0 million a year ago. For the full year we still expect that we will be at about $183.0 million of sustaining capex and that's essentially where we said that we thought we would be in the first quarter.

So, now it's actually down, slightly down from the $202.0 million and that's our full year budget, but again, our current expectations are consistent with where we thought we would be in the first quarter.

You know, the express contribution, it will be for the year, a little bit ahead of budget but fairly consistent with where we thought it would be.

The book case tax differences, you can see, cash taxes were less than book taxes by about $5.0 million in the quarter. Now that was better than last year and better than the budget and cash taxes have been less than book taxes by about $13.5 million year-to-date.

Above that you have DD&A. DD&A is up considerably, largely driven by CO2 and you can see that up in the DD&A section, which is kind of the second section from the top. CO2 DD&A in the quarter is up $30.0 million. Total DD&A is up $37.5 million. From this line down here we actually add in the [inaudible] share of the Rockies Express DD&A and any PDD&A, although it's not significant yet. And there you have a total change year-over-year of $41.0 million. But again, three quarters of it is coming from increased DD&A at CO2.

And then you have the limited partners net income, the general partners share, and the total net income. And really all I would point out there, distributable cash flow is a more meaningful measure and we think where you should focus. But we're actually ahead of budget on those fronts as well.

With that, let me jump up to the top of this page and talk about the segments. And Rich already hit on a lot of this, but you can see Products Pipeline up over $21.0 million from 2008 for the quarter, up over $26.0 million for the first half, above budget by over $12.0 million for the quarter. And so very nice performance in the Products Pipeline segment, even in the face of volumes that are lower than what we expected when we did the budget.

Cochin bounced back very nicely in the second quarter. You may recall that Cochin was a weak spot in the first quarter but in the second quarter it has essentially come back to its budget. We also had nice performance out of Pacific West Coast terminals and the Central Florida pipeline. Both versus budget and versus 2008.

If you look at Products Pipeline for the year, we expected to come in just a little bit ahead of its budget and nicely ahead of where it was a year ago.

Natural Gas Pipelines, down about $18.0 million for the second quarter, down about $4.0 million for the first half. Now, some of this was anticipated. We expected and actually budgeted for the second quarter 2009 to be below second quarter 2008. Now we've actually come in even below that budget and the reason is in part, timing. You know, Rich mentioned the Texas intrastate and that timing there is related to when storage revenues are recognized and also some operational expenditures.

Although our sales margins on the Texas intrastate are being impacted by the current natural gas dynamics as well. That being said, over the course of the year, we expect the Texas intrastates will fall a little bit below their budget but significantly less than where they are, where they performed in the second quarter. In other words, we're going to make up a fair amount of that relative to 2008 and the budget in the second half of the year.

Then the other weakness in the Natural Gas Pipelines comes from primarily the delays in getting the project in service and a little bit from the revenues that we're recognizing during interim service. What that means for the Natural Gas Pipelines segment overall is we do expect it to be below budget, although we expect it to be below budget by less than 3%.

On the CO2 side, it is below last year by about $14.0 million, the segment is. And for the first half it's below last year by about $46.0 million. That's largely driven by lower commodity prices and in truth, we've done a very good job of making up for lower commodity prices through increased volumes at SACROC and cost reductions.

What that means is as we look through the entire year, while we actually expect a pretty significant reduction in CO2 cash flow, due to the lower commodity prices, both versus 2008 and versus our budget for 2009, we actually think that we are now within 3% to 4% of meeting our budget for 2009.

So given current commodity prices, so current crude prices and NGL prices, we do think we'll come in under our budget. Now that could change as commodity prices change, but we have made up a huge amount of that gap, again, through additional volume and cost savings.

On the Terminals side, as Rich mentioned, we continue to be impacted by volumes, especially on the steel side. We are up about $2.0 million from where we were in 2008 for the quarter. We're up about $11.0 million year-to-date. Now, we are down a bit from our budget and we do expect that Terminals will come in below its budget for the year, although that should be a little less than 5% relative to its budget.

On the Kinder Morgan Canada side, we're up nicely from a year ago, largely due to nice volumes on the system and the expansion that we completed on Trans Mountain a year ago. We are impacted, as we discussed in the first quarter, by a book tax accrual that due to an accounting change, we now have to reflect at Trans Mountain, or Kinder Morgan Canada. We didn't have that incorporated into our budget. This was something that changed in the first quarter, and so it's a variance both for last year and to budget.

But if you ignore that book tax accrual, and it does not impact our cash taxes, if you ignore that book tax accrual and the impact of foreign currency fluctuations, we expect that Kinder Morgan Canada will be on budget or slightly above budget for the year.

Now where that gets us in terms of segment earnings before DD&A, you know, about flat for the quarter compared to last year, and then for the six months, also about flat. For the quarter we're actually ahead of our budget. Now, we were below budget in terms of segment earnings before DD&A in the first quarter, but for the second quarter we are actually ahead of our budget in terms of segment earnings before DD&A.

But as we look out for the year, you know, we do think that we will fall a little bit below budget in terms of segment earnings before DD&A. I kind of walked you through this. Products a little bit above, Natural Gas Pipelines, CO2, and Terminals fall a little bit below. Then Kinder Morgan Canada we expect to be a little bit above.

That being said, we still expect significant growth and our segment earnings before DD&A, relative to last year, and so, again, still getting very nice growth out of the segments, even if it's not quite up to budget.

Now, the other thing I want to point out is in a macro environment, with respect to demand for a number of these products and commodity prices, that's pretty ugly. Now our segments are still performing fairly well. We have a budget that has very nice growth in it relative to 2008 and most of our segments are going to be very close to that budget. And even the ones that miss are only going to miss by maybe a few percentage points.

And I think that really shows a couple of things. One, it shows what we've been talking about for years, the stability of the assets that we own. The stability of the assets in our portfolio and their ability to generate cash in even poor macro economic conditions.

I think the other thing that it demonstrates is the resourcefulness of the people that we have managing these assets. Our people in our business units, operations people, commercial people, recognized that these were tough times and have done a phenomenal job at offsetting the deficits that we faces. They've done a tremendous job of finding cost savings opportunities, tremendous job of finding additional opportunities to take advantage of our assets.

So again, in conditions that are very poor, our assets are still performing relatively well.

With that, I will drop down to G&A. It's about ten, twelve lines down. You'll see about $74.0 million for the quarter, actually down from about $76.0 million for the quarter a year ago. Year-to-date we're up about $11.0 million. But what you're seeing here is some of the impact of some of the cost-saving initiatives that we implemented in the first quarter.

Again, in an effort to improve our results relative to our budget targets, we enacted a number of cost-saving mechanisms. Those are bearing fruit. We do expect that overall our G&A expense will come in under our budget for the year.

Interest is right below that. You will see it is up about $1.6 million from where it was a year ago. It is up almost $9.0 million, a little less than $9.0 million, for the first half. But for the quarter it is significantly under budget and we expect for the year that it will come in significantly under budget. And that's essentially favorable floating interest rates. So our floating rates are a little bit lower than what we had in the budget and we're realizing the benefit of that.

Below that you have the certain items. For the quarter they really are not overly meaningful and for the most part not new. Many of them are the same things that have shown up previously. The first one that's a positive is, again, relates to the Kinder Morgan Canada book taxes and prior periods, we actually putting down here in certain items.

I mentioned the fact that some of these book taxes show up up in the segment that's the current effect of this accounting change. The prior period effect shows up down here in certain items. It is a positive for this quarter.

So again, take certain down, you get down to the net income numbers that we have discussed previously. And with that, I'll go to the third page—really it's the fourth page.

The volumes are on the next page. A lot of that is covered in the press release and Rich went through that and so I'll skip to the last page of the earnings release, which is the balance sheet.

And running through that quickly, other current assets is down, largely a function of accounts receivable.

PP&E change is a function of expansion capital offset by depreciation. I'll give you a little bit more detail on expansion capital in a minute.

Investments is up tremendously. $776.0 million. That's a function of our investments in Rockies Express, which was north of $400.0 million, Midcontinent Express, which was north of $300.0 million, and FEP [Fayetteville Express Pipeline]. And so again, contributions to the joint ventures that occurred since the beginning of the year are reflected there.

Deferred charges and other assets are down. That's a result of the change in value of our hedges. The total assets, about $18.5 billion.

On the liability side, I'm going to discuss notes payable when I talk about debt. Other current liabilities is down primarily as a function of accounts payable. Long-term debt I'll talk about in a minute. Value of interest rate swaps is down. That's a function of the forward curve for interest rates. And other liabilities is up and that's a function of the change in value of our hedges.

Now on the partners' capital side, again you have a change in accumulated other comprehensive loss. That's a function in the change in value of the hedges. Other partners' capital is up, largely as a function of the equity that we issued in the first half of the year.

And so that takes you, again, down to total liabilities and partners' capital of about $18.5 billion.

Our net debt at the end of the quarter was about $9.3 billion. That's up almost $800.0 million from where we were at the beginning of the year. It's also up about $620.0 million from where we were at the end of the first quarter. And I will walk you through a reconciliation there in just a second.

But quick, a look at debt to EBITDA. We are at 3.7x compared to 3.4x at the beginning of the year and 3.5x at the end of the first quarter, but consistent with where we expected to be at this point in the year.

And so the change in debt for the quarter is about $620.0 million, year-to-date a little less than $800.0 million. Expansion capital for the quarter is over $300.0 million and year-to-date has been about $625.0 million. And on top of that, we've had significant contributions to our joint venture pipeline project. For the quarter, almost $630.0 million and for the year a little over $800.0 million. So again, significant investment activities going on in the first half of the year, consistent with our expectations.

We have had one small acquisition in the quarter and the year. The cash that went out on that was about $18.0 million, so those were uses of cash, sources of cash, from equity issuance we generated, we raised about $382.0 million for the quarter, about $670.0 million year-to-date.

Two things I want to note about those numbers. One, those are net and so they are net of underwriting discounts, etc. And the second is the exercise of the shoe from our June offering actually occurred in July and so it's not reflected in these numbers, but we have already received the cash from that. It was included in the $750.0 million that's mentioned in the press release.

Again, that has already happened, it just didn't happen in June. It happened after the end of the quarter.

From a new deal that we have a customer, we generated about $12.0 million in the quarter, about $110.0 million year-to-date. We also generated about $144.0 million through a swap unwind back in the first quarter. That was in January.

There are a few other ins and outs and then we have a use of cash for working capital purposes of about $37.0 million in the quarter and almost $200.0 million year-to-date. Now, that is accounts receivable and accounts payable, with a use of cash of about $60.0 million in the quarter, almost $100.0 million year-to-date. Our other current assets in inventory was a use of cash of almost $80.0 million for the quarter and year-to-date.

Other accrued liabilities, such as accrued taxes and accrued interest, was actually a source of cash during the quarter of about $127.0 million.

And then we had some cash that was paid out for array cases and for various other items that total up, again, to the working capital uses of cash for the quarter of about $37.0 million, year-to-date about $200.0 million.

Now, as we go forward throughout the year, we actually expect a fair amount of that working capital to reverse itself and so hopefully in the second half of the year we see a source of cash from working capital, again, those things coming back to us.

A little bit more detail on the expansion capex. You may recall I said total expansion capex was a little over $300.0 million for the quarter, about $625.0 million year-to-date. On the product side it was about $40.0 million for the quarter, about $67.0 million year-to-date. A lot of that is being spent at Southeast Terminals and then our expansion at our Carson facility out in California.

On the natural gas side is about $128.0 million for the quarter, about $232.0 million for the first half. And the vast majority of that, almost all of it, is the Louisiana pipeline. And then we have some smaller storage expansions going on.

On the CO2 side we spent about $71.0 million in the quarter, about $188.0 million year-to-date. As is typical, most of that is spend at SACROC, a little bit at Yates.

On the Terminals side, we spent about $67.0 million in the quarter, about $137.0 million year-to-date. Our expansion at Vancouver Wharves is the biggest piece of that. And then you have assorted smaller projects, and a large number of smaller projects.

And then, as I mentioned, we made significant contributions to our joint ventures throughout the first half of this year and that will continue in the second half of this year.

And those are the financials and I will hand it back to Rich.

Rich D. Kinder

Okay, we will take any questions y'all might have.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Gabe Moreen - BAS-ML.

Gabe Moreen - BAS-ML

Question on the Katz development here. The $180.0 million, does that cover the cost of the pipeline or does that also cover some of the capital costs of starting up the field itself as well?

Rich D. Kinder

That covers both. That's the 91 miles of 10-inch pipeline and the cost of developing the flood at Katz, all in.

Gabe Moreen - BAS-ML

And do you envision any of the capacity on that line going to third parties? It seems like you alluded to third parties maybe using some of that capacity.

Also in terms of how you think about hedging that commodity risk as you ramp up production.

Rich D. Kinder

From the capacity standpoint, we most assuredly do think there will be other users. We have baked into this project, in the $180.0 million plus for the project, the full cost of the line coming from SACROC over to Katz.

We certainly, the line, we certainly expect to have other customers in that line, third-party customers, and we think that will give us upside to the present case. But that's not in the numbers that we're talking about now.

And we think in fact that, not to overstate it, but actually Tim's here. That pipeline is expandable with very little cost, up to 200.0 million a day. So we can move 200.0 million across there.

There are several adjacent fields to Katz where we have been in discussions with third parties already about servicing them. But obviously we can't do that until we had a base load for the pipeline. Katz now is the base load for that pipeline.

And then we think beyond the Katz deal, which we already own, there may be opportunities to acquire other fields in that general area where we might use some of the additional capacity on that pipeline.

So it's a pretty significant project and one I think that fits very well into our long-term goals for our CO2 segment.

With the hedge, from the hedge question standpoint, we expect to hedge that under our program just as we do SACROC and Yates on a going forward basis.

Gabe Moreen - BAS-ML

On the $100.0 million you have budgeted for Terminals acquisitions, you got a little done in the second quarter, do you still feel pretty good about hitting that $100.0 million for the year?

Rich D. Kinder

We do. And in fact, I had hoped to be able to make a couple of more announcements today. We certainly expect them in the very near future, we just haven't quite crossed the t's and dotted the i's. And again, I don't to over exaggerate here, they're not blow-you-socks-away acquisitions but certainly we expect to meet that $100.0 million. Yes.

Gabe Moreen - BAS-ML

Other than the fact that you continue not to spend any money on brand consultants, is there anything to read into the name change at your GP?

Rich D. Kinder

Good question. No, there's really not. We think it will eliminate some confusion because nobody knows who Knight is and most people who Kinder Morgan is. And this was something that at the time of the privatization, the rating agencies preferred that we do, to separate the two. We did that. Since then, at Kinder Morgan Inc. we've paid down the great majority of the debt, of course, and so we no longer need that same degree of separation so everybody was agreeable to us going back to the original name of Kinder Morgan Inc.


Your next question comes from Stephen Maresca - Morgan Stanley.

Stephen Maresca - Morgan Stanley

On growth capex costs you mentioned a little tick up on REX and I know it includes some expansions, but as it relates to the Fayetteville expansion, how confident are you in the budget for that and is it possible, if costs come down, that it comes in under budget.

Steven J. Kean

We feel pretty good about the costs and a big part of that is that the project is being built in a little bit of a different economic environment when it comes to procuring services, construction services in particular. Contractors don't have as much to do as they did a few years ago so we think we're going to be able to not only get some pretty good prices on the construction but hopefully also get a better allocation of the risks of the construction processes being the projects of the contractors.

None of that is all done yet and that's why we're not changing the forecast. I think we would be hopeful that we will do better than the numbers, but I think we have some pretty good comfort around the numbers that we are projecting right now.

Rich D. Kinder

And plus that's being laid right down a pipeline alley where there's been a prior pipeline constructed in the recent past so it's, in a lot of respects, just a lot more straightforward, easier project than some of the others we've had.

Stephen Maresca - Morgan Stanley

What, if any, is there plans or thoughts on extending REX further beyond Clarington?

Steven J. Kean

It's something that we continue to look at. We have conversations with the LPCs over on the East Coast. We've recently been talking to Marcellus Producers. There's nothing really imminent there at all. It's just something that we want to keep a potential growth option available for us and so we keep the discussion going. But there is certainly nothing imminent there.

We do feel like eventually the gas needs are continuing moving on and we're not that far from some of the Marcellus production that is under development right now. So it's just something we want to continue to keep our eyes on and see what opportunities might be presented. But there's nothing really on the drawing—or nothing really imminent right now.

Stephen Maresca - Morgan Stanley

We have seen some distress assets come for sell and we are certainly seeing now a couple of NLP mergers in the space. In the past you have been an acquisitive company and now you have switched toward a lot of organic growth. What are you seeing in terms of the acquisition market, are you looking out there and just sort of your thoughts on that.

Rich D. Kinder

We are always looking at all opportunities, including acquisitions, and we have had talks from time to time about acquisitions. And we'll just have to see how it pans out.

Again, we want to be, if whatever we acquire, we want to be very selective, we want to be very careful. These are certainly challenging times in the sense of knowing what the forward cash flow and asset really is. It's a lot more difficult to predict today.

So we certainly wouldn't rule it out. We've looked at some things, but we're going to be very careful and we will only do it if it's positive from an accretion standpoint for our present unit holdings.


Your next question comes from Darren Horowitz - Raymond James.

Darren Horowitz - Raymond James

On the Texas intrastate business, if you could just elaborate a little bit more outside of the timing of recognizing those storage revenues, like you alluded to. Can you give us a little more insight into the potential for the sustained impact of lower natural gas prices on volumes in the back half of this year and more specifically, what you're hearing from producers.

Rich D. Kinder

I think certainly lower prices are having impact on the margins or the spreads we can get on gas we haul from South Texas or East Texas to the Houston ship channel and over to Beaumont. So I think that's certainly a negative.

We have been able to offset some of that by just being good buyers and sellers of gas and preserving the margin. You know, we do a lot of back-to-back [inaudible] contracts. But certainly it's had an impact on us.

The other impact has been that some of our contracts are tied to a percentage and then as prices lowers that percentage shrinks, also.

Let me say, I'm kind of a contrarian in the long run. I think that lower gas prices are actually going to be very much a positive for Kinder Morgan and the other mid-stream energy players because I think what we're demonstrating is that we have a tremendous supply of natural gas, hundred years plus probably with all the shelf space in the lower 48.

And that makes gas a lot more marketable from the standpoint of using it for future electric generation. And if you really look at the situation, the only real way, in my opinion, to make a real credible impact on CO2 emissions, in terms of reducing it, is to have massive new electric generating capacity where natural gas replaces coal.

And that's not to say that coal is going to be phased out, but I just think that natural gas, given its abundance and given the relatively cheap prices now, I think that's going to be very positive in the long run for the overall usage of natural gas and if you do that, that's going to vastly increase the need for infrastructure, which is, of course, our sweet spot.

But it has had a negative impact. I think it's going to continue to have somewhat of a negative impact on the Texas intrastates for the rest of the year.

Darren Horowitz - Raymond James

In talking with producers have you gotten a feel for any sort of pricing sensitivity that might give you the ability to be a bit more constructive on your intrastate volumes in the back half of the year? I mean, is it five or five-fifty or possibly even lower than that where you could see a volume uptick sequentially?

Steven J. Kean

Do you mean in terms of when people start drilling again?

Darren Horowitz - Raymond James

Yes. Just trying to get a feel for possibly you guys coming in a bit closer to where you were budgeted for this year.

Steven J. Kean

Well, I guess the first thing I would say is, you know, when Park was talking about expectations through the end of the year, he was talking about taking into account some of the things that Rich was just talking about on the supply side.

I think what we're looking to in terms of how we might see the gap narrow or do even better, I would kind of play less on the idea that there's going to be some kind of dramatic supply recoveries in the field in South Texas.

We might do a little better on processing and treating, we might do a little better on our cost side, the storage values continue to be pretty strong. Those are a few places I would love to narrow the gap rather than a supply turn around.

C. Park Shaper

And the other thing we should point out and maybe I didn't make this clear, the Texas intrastates are likely to come in below their budget but it is by a tiny amount. They are very close to hitting their budget. There is not a very big gap to fill there.

Darren Horowitz - Raymond James

On the Terminals side, so we can get a better feel, can you quantify the uptick that you mentioned as deal volumes in July and then incrementally, how much do you think you can claw back from cost reductions?

Rich D. Kinder

First of all, we've been able already to claw back a lot from cost reduction. If you look at the total impact from a revenue basis of this downturn in steel alone, it has been a lot greater than the total downturn in the whole EBITDA and earnings for DD&A of the Terminals unit.

So we've clawed a lot back and I guess the one thing about having short hauls and handling bulk materials is that you do have some fairly substantial expenses that go away. You have less fuel because you're not using your bigger earth mover or your D9s as much as you were and you have a lot of contract labor that you can lay off on a short-term basis. So we've been able to do that.

So we've been able to claw back a significant portion of it. As far as the uptick in numbers, it looks pretty impressive when you compare the second quarter with what we expect to see in July but the July numbers are still well below where we were a year ago at this time. So I think what we're seeing on the part of our customers is I think they have, most of them on the steel side have pretty much gone through their inventory now and so it's a kill-to-eat type of thing. They're not going to build inventory again but whatever new contracts they can sign is what they will produce in the out months of the year.

And so we're seeing a nice impact, favorable, in July but whether that lasts, we'll just have to see. And it's still well below last year.


Your next question comes from Michael Blum - Wells Fargo Securities.

Michael Blum - Wells Fargo Securities

More of a conceptual question, on the Katz announcement with the CO2, can you talk conceptually about your decision to expand your activities of the CO2, particularly in the production side.

And related to that, what is your comfort level for how big as a percentage of your total cash flows would you be comfortable having that CO2 component become?

Rich D. Kinder

First of all, we would not do this unless it were a very positive project. Read that as well north of 20% on the unlevered IRR with what we think is very conservative oil pricing, well below where the forward curve today is, at the time of maximum production from Katz.

So that's, it's like we said a million times, we're going to look for good projects any place within the area of our sweet spot where we do business.

And of course, when you look at what percentage are we comfortable with, remember that over a period of time, of course, these things don't last forever, and we're going to have a decline in production at SACROC in the out years, as we've said all along. Now Yates, there is very little decline there. It's a very different field, much longer lived.

But this will certainly fit in and replace, we think, declines that we will see from our other production.

And then the other thing I want to emphasize, this is not just a play about producing crude oil. We really think this pipeline has the ability to be expanded and extended to cover what looks like some pretty good plays up there in that whole area.

And so in essence, what we're doing is we're just moving our whole CO2 supply infrastructure, which really begins all the way out in Southwest Colorado, we're moving that 90 miles to the east into a pretty prolific part of the Permian that thus far has not had any CO2 supplied to it and it's much easier to do it the way we're doing it, which is to be able to base load it with our own very high return project, but then where we think there would really be some upside is moving additional CO2 to third parties in that general area.

Michael Blum - Wells Fargo Securities

On the Cochin pipeline the NGL volumes were up pretty dramatically quarter-over-quarter. Can you talk a bit about what is driving that increase?

Rich D. Kinder

That's a good question. What we have is customers who are, for their own marketing reasons, moving a lot of NGLs further east. More NGLs than we expected from Canada down to the U.S., and moving it further east than we had expected. And I don't know what their reasons are, if they're building inventory further east or what their game plan is, but we have had very nice volumes the last few months.

Michael Blum - Wells Fargo Securities

Has that continued into the third quarter? Do you have any indications from your customers if they are still planning to do that going forward into the year?

Rich D. Kinder

It's a month-to-month process, so July looks pretty good but we don't know beyond that. And we will just have to wait and see what they do.


Your next question comes from Noah Lerner – Hartz Capital.

Noah Lerner – Hartz Capital

On the Kinder Morgan Louisiana pipeline, I take it that that's basically bringing in a lot of the gas that will be coming off of Cheniere LNG facility there for Chevron and the other party, Total.

My understanding is shipments will be somewhat sporadic coming in. It's not going to be every day. I was just was wondering if there is any way to leverage the pipeline to pick up additional revenue when those two entities and organizations are not filling the pipeline with their shipments?

Rich D. Kinder

You're quite right on that. We expect they will be sporadic. And of course, as we said before, the value to the shippers is the optionality it gives them. When they land LNG, at Cheniere they now have the ability to access. I think we cross 13 different pipelines across what we call pipeline alley in Louisiana. So it's optionality.

It will be sporadic I'm sure and Steve, do you want to comment on other uses of the pipeline?

Steven J. Kean

While their usage may be sporadic, their demand charges are not. So they will pay whether they use it or not, for the shipments. Now, there is a lot of interconnectivity on the pipe and so there should be some options and we are working on our shippers because they have capacity rights to line, obviously.

But working with our shippers to find the right ways to capture that in what we would call low-pressure operations. That would be operations of pipe when there isn't LNG offload coming through.

So we're still working that. Think there should be some value there and would expect there to be some value there. And so we're working on that.

The longer term would be is there an opportunity, and we don't know that there is, but certainly would want to evaluate whether that pipe which currently does not have any compression on it, whether it would make sense to exalt them or otherwise make a pipe able to do more than it currently can. That would obviously require capital and that's something that we will continue to look at as well.

But the connectivity gives some hope that there's some value there and we're working with our shippers on how best to capture that.

Noah Lerner – Hartz Capital

Could you add a little bit of color about exactly what will transpire, what you expect to transpire, in the back-end of the year that's going to make up for the cash flow short fall compared to budget from the first half of the year? What is it that you are going to be over—exceed the budget on that's going to create that additional cash to get you to that 1.0 coverage ratio?

C. Park Shaper

I said that we are about $40.0 million behind through the first half of the year and so it's not that big a hurdle to make up when you're talking about an entity that generates almost $3.0 billion of segment earnings before DD&A.

So that being said, what's going to happen is first and foremost, that we have a number of major natural gas pipelines that are coming into service. The number that have already come into service, that weren't in service for the entire first half of the year, will be in service for the entire second half of the year. And then NEP and the last piece of REX that will come on line during the second half and will provide contributions that weren't provided in the first half of the year.

We have other expansion projects going on as well, don't have as large of an impact of that. We have the timing issues that we discussed on the Texas intrastate. And so there are a variety of factors.

In truth, if you look at it, our expectation is that we probably fell short of covering the $1.05 again in the third quarter but in the fourth quarter we expect to have significant excess coverage.

Noah Lerner – Hartz Capital

Were these pipelines coming on line in the second half not budgeted, or is it that they are going to come on line sooner in the second half than budgeted, which will create the additional cash flow?

C. Park Shaper

No, if you go back to what we talked about in January when we went through the budget, we actually expected—I can't remember exactly where we were in the first quarter but I think we were a little bit below coverage in the first quarter. We expected not to have coverage in the second and the third quarters and we expected to have significant coverage in the fourth quarter that would make up for that.

So really, the way it's playing out is not that different than the way we budgeted it.


Your next question comes from Brian za Haren - Barclays Capital.

Brian za Haren - Barclays Capital

On the Products Pipeline's business revenues were flat but earnings were up around 15% so obviously cost savings were a big driver, and you expect to meet your budget in that business. Will it be mostly by cost savings or cost savings and the tariff bump?

Rich D. Kinder

I think it's a combination of both. We have that significant cost savings and it's not just what you would expect cost savings and cutting O&M overhead. We have also had significant savings in our utility costs as our throughput is a little less than what we had projected. And also, as one of the benefits of lower natural gas costs, of course, some of the utilities supplied to our products lines actually come from natural gas generation. And therefore we have had a lowering of those utility rates on a kilowatt hour basis.

So it's a combination of all those things. And we have had, of course, the inflationary escalator on July 1 that went into effect, which was in excess of 7%, on our intrastate lines. And then we've been able to have some tariff increases, particularly in the state of California that have also added to the bottom line.

So it's a combination of a lot things and I think this management team is pretty good at taking costs out and I also think it's pretty good at sensing opportunities and taking advantage of them and certainly at our West Coast terminals, as Park pointed out, that's a positive. Our Southeast terminals are doing well. These are all unregulated assets that we're just able to take the material that's in, the steel that's in the ground and maximize revenues from it.

So it's a combination of a variety of things and I think it's going to be a great accomplishment for them to meet and slightly exceed their budget for their year in the face of the downturn in the throughput.

C. Park Shaper

Just two things that I will add to that. One is that the revenue number that you're looking at that's in the press release, it's just refined products and it's just pipeline. And so that is not the entire segment.

Now when we publish the Q you will see the entire segment revenues and I think you will see that they are up a little bit from what's represented there.

And then the second thing is while no question, it's true that we will get a benefit in the second half from the perk increase in tariff, as relative to budget that's essentially no impact because that was incorporated into the budget.

Brian za Haren - Barclays Capital

Looking a little more at the segment, the gas and volumes are pretty decent, well above the IE numbers and ethanol was a little bit of a help, but is this a sustainable level for the rest of the year, for gasoline?

Rich D. Kinder

I think that the level, as I said at the start, it's volatile. Who knows for sure. I think the level where we are now, if you take into account all the products, I think it's pretty representative of what we'll see the rest of the year.

Now, there's no guarantees on that. Some people would say we'll see more uptick but I think right now what we're seeing is—I don’t know if these numbers are anything to crow about in terms of throughput, but a little better than the first quarter. We'll just see how the rest of the year develops.

You shouldn't hone in on one product. You know, gasoline, as I said, is positive, even year-to-date by just a smidgen. But jet fuel is still down, although it seems to be coming back. Second quarter is better than the first quarter. And the diesel is definitely down and it did not turn around in the second quarter, so I don't think that we had an aberration to the positive in the second quarter and we'll just see how things work out.

Brian za Haren - Barclays Capital

On Trans Mountain you saw some heavy traffic in Vancouver. Do you see Vancouver as a continued growth area for some of your growth projects?

Rich D. Kinder

I really do. What we're finding is I think a good bit of interest in our customers, who are the producers, in finding other outlets for their crude oil other than moving it through the pipelines to the East and to pad two in the Midwest. And there's a lot of reasons for that, a lot of moving parts, as there in all parts of our business. But they seem to be particularly desirous of going over the dock. Most of that is going to the United States, specifically most of it to California, some is going to Asia. But it gives them a real option.

They can move it down the line. We have some storage, both at the start of the Trans Mountain line and adjacent to the dock there in Vancouver. We can get sizeable ships in to move it out and it's a pipeline that's already in place that doesn't require vast amounts of new commitment on the part of shippers.

So I believe that we're going to continue to see additional Canadian crude go out across the water and I think at least for the next several years it will go out primarily through Vancouver.


Your next question comes from John Edwards - Morgan Keegan.

John Edwards - Morgan Keegan

On your Kinder Morgan Louisiana line, you've got the capacity sold. Is there going to be any opportunity to do some kind of interruptible shipments along the line should it not be utilized by Total and Chevron.

Steven J. Kean

Yes, again, we are looking at the opportunity to put the pipeline in what's called low-pressure operation, which would be operations without a ship offloading. And we think that there may be some incremental revenue opportunities, given the connectivity of the pipeline and so we are working with our shippers who, again, have substantial rights to that capacity on the line, to figure out a way to do that and how best to move from low- to high-pressure operations.

But there should be some revenue opportunities there we are looking for the best way to get out.

John Edwards - Morgan Keegan

On the Katz development, how do you expect the cash flow there to split between what you get from the CO2 pipeline and oil?

Rich D. Kinder

Initially, when we're just moving the CO2 to our own Katz field, the great majority of the cash flow will be coming from the production of crude oil in the field. It's basically 25.0 million barrels over 15 to 20 years.

Eventually, I think if we can and we have high hopes that we will be able to sign up third parties for capacity, then I think you will see the pipeline become a much bigger contributor to the cash flow of the overall project. And that's what really makes it intriguing.

John Edwards - Morgan Keegan

On the capex to the joint ventures this quarter, could you repeat that?

C. Park Shaper

The numbers I gave you were for the full year. And so this is the change again, in that investments line on the balance sheet from December to June. On Rockies Express it was north of $400.0 million, on Mid Continent Express it was north of $300.0 million. And then FEP was actually $30.0 million.

John Edwards - Morgan Keegan

On SACROC, on the volumes, you mentioned those were above budget. Could you talk about, do you expect those to continue to be sustained above budget for the rest of the year?

R. Tim Bradley

For the second quarter we averaged around 31,000 barrels a day at SACROC and so far month-to-date in July, due to heat impacts on our compression equipment, we're a little below that.

So setting that issue aside, we are forecasting oil product to remain above target for the rest of the year. Our current forecast is averaging around 30,500 barrels a day average for the year. Again, July might come in a little bit below that as we battle heat issues, but we do expect to remain above budget for the remainder of the year.

John Edwards - Morgan Keegan

From time to time you talk about with the general partner, you're very deep in the splits. It does raise your cost to capital. Are there any thoughts in the long term to doing something there or not?

Rich D. Kinder

I don't think so. As we've said so many time, both Park and I have said this, that we are certainly not having problems making investments or finding acquisition opportunities that produce returns well above our cost of capital and as long as we can do that, we would have no intention to change the splits.


Your next question comes from Alex Meyers – Hughes Hubbard & Reed.

Alex Meyers – [company inaudible]

I just wanted to look forward a little bit to 2010 and see what you thought about SACROC and Yates production for that period of time.

Rich D. Kinder

We haven't even started on our budget yet. Again, Yates is a very predictable field in the sense that it's a gravity drain. It has a very slow decline rate. We are continuing to drill some horizontal wells there. We are doing a little step-out drilling in a couple of places.

And SACROC has more of a decline curve. That said, we are still in some very sweet spots of this area called the Platform that we will be drilling up in 2009 and on into 2010. But beyond that we're really not to the stage yet where we can find out what the vibes are going to be.

Bu it expect both of them to remain strong in 2010.

Alex Meyers – [company inaudible]

And in terms of services cost, can you talk about how they would trend going forward and a lot of the savings you are starting to recognize this year, how sticky is that and where does that savings kind of go away?

Rich D. Kinder

In oil field services saving and that kind of thing?

Alex Meyers – [company inaudible]


Rich D. Kinder

That's probably a mixed bag. Some of it will stick beyond this, some of it won't. Tim, do you want to comment more specifically, because a big bundle of savings are your shop.

R. Tim Bradley

The single largest component of cost savings that we've been able to secure so far this year is in our well work expense, particularly rig activities. And they seem to track oil prices fairly closely. And if gas prices continue to remain at their current levels that creates more negative pressure in that arena.

We've been able to secure some other cost savings on a smaller order of magnitude in the various miscellaneous services associated with maintaining and operating our equipment and our assets.

Another significant savings is power is significantly lower than what we had budgeted. That's largely driven by lower gas prices but to a certain extent we've been able to operate more efficiently and consume a little bit less power.

So that's the breakdown of the major components and beyond that it's pretty small pieces.


Your next question comes from Eve Segal- Credit Suisse.

Eve Segal - Credit Suisse

From time to time you look at the potential backlog of projects. Could you describe how large that potential could be? And what the outlook could be there.

And I sort of lost track of rate cases. Any update or prospects of final settlements?

Rich D. Kinder

Let me start with the second question first. On the rate cases, as you may have noticed, we have settled bits and pieces of it with various shippers. We continue to negotiate with shippers to settle other parts of it. As I have said so many times, it takes two to tango there and we will just have to see how all that comes out.

I think on a going-forward basis we are very comfortable with the rates we have now reflecting the real world so it's not like we're building up future issues but it's a question of settling differences of opinion on the past, primarily.

But no news other than that.

On the backlog of projects, of course, I think the right way to think of this is that we're pretty opportunistic and we look at a lot of different projects, both grass roots projects and acquisitions, as long as they fit within our areas of expertise. And I think we're going to find a number of those.

The specific backlog of projects right now is not nearly as great. When we finish all these pipeline projects by the end of this year the only major pipeline project left will be the Fayetteville Express, which is a $1.2 billion project.

We still have some sizeable Terminals work to go. We have the new Katz project. We have some other smaller projects. The Traverse Air Force Base Project on the Products side.

You add all that up and it's a few hundred million dollars of additional projects that are in the backlog. And then we'll just see what else comes down the pike. We're looking at some other things that are pretty interesting right now but obviously we are not going to announce or say anything about them until we actually have the horses in the corral.


There are no further questions in the queue.

Rich D. Kinder

We appreciate the patience of everybody. Thank you very much and have a good evening. If you have any questions call Kim Dang or David Kinder, they'll answer them for you.


This concludes today’s conference call.

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