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Executives

Richard D. Kinder – Chairman and Chief Executive Officer

Steven J. Kean – President and Chief Operating Officer

Kimberly Allen Dang – Vice President and Chief Financial Officer

John W. Schlosser – President, Terminals

Jim Wuerth – President, CO2

Analysts

Darren Horowitz – Raymond James

Brian Joshua Zarahn – Barclays Capital,Inc.

Theodore Durbin – Goldman Sachs

Craig Shere – Tuohy Brothers

John Edwards – Credit Suisse

Kevin F. Kaiser – Hedgeye Risk Management, LLC

Becca Followill – U.S. Capital Advisors, LLC

Kinder Morgan Energy Partners L.P (KMP) Q3 2013 Earnings Conference Call October 16, 2013 4:30 PM ET

Operator

Welcome to the Quarterly Earnings Conference Call. All lines will be in a listen-only mode until the question-and-answer session. (Operator Instructions) Today’s conference is being recorded. If you have any objections, you may disconnect at this time.

Now, I will turn the call over to Mr. Rich Kinder, Chairman and CEO of Kinder Morgan. Sir, you may begin.

Richard D. Kinder

Okay. Thank you, Kelly, and welcome everybody to the third quarter earnings call of Kinder Morgan. As usual, we will be making statements within the Securities Act of 1933 and the Securities Exchange Act of 1934.

I’ll give an overview of the quarter and 2013. Steve Kean, our Chief Operating Officer will go into more details of segment performance and talk about our project backlog; and then Kim Dang, our Chief Financial Officer will review the details of the financial results for the quarter and year-to-date, and then we’ll take your questions.

The Kinder Morgan Companies had a good third quarter and I think we’re on track for a very good year. At KMI, we raised the dividend to $0.41, that’s an increase of 14% from the third quarter of 2012. In terms of cash available for dividends in the quarter was up 17% from the comparable quarter a year ago. We’re on track for 14% growth and declared dividends for the full-year 2013, and we expect to declare at least a $1.60 versus a $1.40 for the full-year of 2012, and versus the 2013 original budget at KMI of $1.57.

KMI continues to benefit from strong growth and performance at KMP and from solid cash flow generations at EPB. At KMP, we raised the distribution to a $1.35, that’s up 7% from the third quarter of 2012. DCF before certain items was up 22% for the quarter.

For the full-year 2013, we expect to declare dividends of $5.33, that’s up 7% from the full-year 2012 and a $0.06 above the $5.27 target in our budget for 2013. At EPB, we raised the distribution of $0.65, that’s an increase of 12% from the third quarter of 2012. For the full-year of 2013, we still expect to distribute $2.55 per unit, and that’s up 13% from full-year 2012 and consistent with EPB’s budget for the full-year 2013.

I believe the long-term opportunities for the Kinder Morgan Companies look very positive and our project backlog, which Steve will talk about it in more detail grew again this quarter to about $14.4 billion versus $14 billion last quarter and $12.6 billion at the time of our Investor Conference in January of 2013. These projects and the backlog are spread across all five of our business segments. And in addition to that backlog, there are numerous other projects that we’re working on that have great potential and are likely to occur, but they’re not sufficiently definite to put in our backlog at this time.

We remain very bullish on the future of natural gas as the fuel of choice in the U.S. for decades to come. We see increased demand coming from increased use for electric generation downstream industrial use particularly along the Gulf Coast, LNG liquefaction for export and exports to Mexico.

All-in-all, we expect demand for natural gas in the U.S. including the exports of LNG into Mexico to increase from a level of about 70 Bcf a day to date to something approaching 90 Bcf per day over the next 10 years. And we think with our 70,000 plus miles of natural gas pipelines, we expect to benefit enormously from this growth.

We also expect to benefit substantially from additional production of and demand for NGLs, condensate and crude driven by the shale plays, particularly the Eagle Ford, where we have committed almost $900 million to our crude and condensate facilities and also production from the Marcellus and Utica.

We also expect continued strong demand for CO2 in the Permian Basin, which we are attacking by expanding the source and transportation part of our CO2 segment, and we see continued demand for additional liquid storage facilities in our Terminals Group. And finally, we continue to progress on our major expansion of the Trans Mountain system in Canada. Let me conclude my part by talking briefly about our ability to reduce O&M expenses on the El Paso Pipelines we acquired back in May of 2012.

In an earlier call, we itemized in some detail the changes in sustaining CapEx between 2011, which was prior to our acquisition in 2013, and we show we were actually spending more on pipeline integrity on these pipes when you total both sustaining CapEx and expenses related to that area.

Since that call, we’ve gotten a couple of questions regarding reduction in O&M between 2011 and 2013. And we thought the simplest way to explain this is to compare the GAAP O&M expenses for 2011 for the major El Paso Pipelines as Tennessee Gas Pipeline, El Paso Natural Gas, Colorado Interstate and Southern Natural Gas to compare the 2011 GAAP O&M expenses in those – for those four pipelines with the budgeted expenses on those same categories for the same pipelines in 2013.

This is as close to apples-to-apples as I think you can get and obviously all these figures are public record and you can verify them. In 2011, these expenditures were $865 million and the budget number for 2013 is $674 million or difference of a $191 million. The budget for 2013 is obviously the budget, the year is not yet finished, but just to as a sanity check, we went back and looked at the trailing 12 months as of 6/30/13 and that is $670 million.

So we are very much on track with where the budget is. So you subtract $674 million from $865 million and you get a difference of $191 million. Of that $191 million difference, we reconciled about $182 million of it for you or 95% of that reduction, and let me give you a brief overview of those changes.

Payroll benefits and associated employee expenses resulted in a decrease of $161 million. Now that’s not surprising, because as a result of the merger, we eliminated 803 positions in the combined entity. Out of that $161 million reduction, a $121 million of it was as a result of personnel reductions in G&A and at the Gas Group level, only approximately $40 million what resulted from field reductions.

The next item is actually an increase and that’s the pipeline integrity expenses, we spent $63 million more in 2013 than was spent under prior management in 2011 that is completely consistent with the increase we talked about in the earlier call relating to sustaining CapEx.

We had lower non-pipeline integrity maintenance expenses of $33 million, our cost of gas across these pipeline systems was $28 million less in 2013 than it was in 2011. Vehicle and aviation expenses were reduced by $12 million and we had maintenance savings in the O&M categories, related to the best in offshore assets, primarily at the Tennessee Gas Pipeline of $11 million.

If you put all those up that I just mentioned that’s an explanation for a reduction of $182 million. And if you want more detail on that, David Michels, our Vice President of HR and his people Vice President of Investor Relations can give you more detail on all these items.

But I think in my judgment what all this shows once again is that while the Kinder Morgan, we try to operate our pipelines in the most efficient manner possible when we acquire assets, we reduce fat, not muscle or bone and I think our EHS record supports that conclusion.

So with that, I’ll turn it over to Steve for review of the segments and talking about our project backlog. Steve?

Steven J. Kean

All right, I may go through the segments focusing on performance in third quarter to third quarter last year versus this, our expectations versus plan for the full year and then some of the business drivers and the backlog. Starting with gas, the Gas segment at KMP is up 59% on an earnings before DD&A basis to $608 million versus $383 million in the same quarter last year, the increase is the result of the dropdown transactions, TGP and EPNG and also the acquisition of the other 50% of El Paso Midstream from the third-party owner and the closing of the Copano transaction in May of this year. So these acquisitions more than offset the year-over-year negative of the divested Rockies assets that we had to sell presume to be FTC order to close the El Paso transaction.

With respect to the performance versus plan, this segment is expected to exceed its plan for the year, but entirely as a result of the Copano acquisition. From a volume standpoint, higher Eagle Ford volumes drove improved year-over-year performance of the Texas Intrastates. But we had lower overall transport volumes across the segment versus the third quarter of last year as a result of lower gas demand for electric generation versus the record year that we experienced in 2012.

If you look focus in on EPB, that lower demand in electric generation on the SNG system and the impact of rate case settlements on SNG and WIC caused EPB’s asset earnings before DD&A to be down slightly in the quarter versus third quarter last year, $286 million versus $299 million last year.

But looking ahead, we added to our project backlog in this segment, primarily in EPB and overall we continue to identify and capture opportunities for expansion driven by export opportunities in LNG, Mexico, and even Canada, and on the need to transport gas out of the shale plays primarily Eagle Ford and Marcellus.

And turning to Mexico in particular, we believe the U.S. gas exports are the best way to meet growing Mexican demand and we believe that our assets are perhaps the best position to serve that demand.

Turning to CO2 segment earnings before DD&A, in this segment, we’re $349 million for the quarter, up 5% from last year, and on track to slightly exceed its budgeted growth of 5% for the full year.

The growth here was driven by higher oil and NGL volumes and higher prices. The growth in oil volumes was due to Katz and to the recently acquired Goldsmith Unit, and that more than offset slight year-over-year declines at SACROC and Yates.

Katz oil production in particular was about 2,700 barrels per day average for the quarter versus 1,800 barrels a day a year earlier, so up 50%. And Katz has been running around 30% to 50% in the current month, so moving in right direction. We continue to see strong demand for CO2 and are actively pursuing several large development projects to bring more CO2 to our fields and also to the market.

Products segment earnings before DD&A for the quarter was $202 million, up 9% versus last year, and expected to be slightly below its budgeted growth of 12% on a full-year basis. The shortfall to full-year plan is primarily due to the impact of the California Court of Appeal’s rate decision on SFPP that we talked about last quarter and due to lower volumes on KMCC versus the volumes we had in the plan.

Now, with respect to KMCC, we have contract minimums on that asset, and we receive revenues even when shippers aren’t using their full entitlement, but we don’t recognize those revenues until make up rights are fully taken into account. So there is a little bit of an uplift associated with that business going from 2013 into 2014.

Those two negatives are offsetting above plan performance that we experienced at Cochin transmix and the Products segment terminals facilities. And again, this segment is up nicely from last year. It has a number of very good projects under construction and in the backlog. Also note this segment is a strong increase in refined products volumes year-over-year with volumes up to 6.6% on a quarter-to-quarter basis when you include plantation and 4.1% without plantation, that’s the biggest upward move we’ve seen for quite awhile.

We saw increases in gasoline, biofuels, and NGL volumes versus the third quarter last year. Now, some of that was probably some short haul volumes that may not recur, but it was an uptick certainly in what appears to be the base business.

Terminals segment earnings before DD&A for the third quarter was $199 million, up 7% from last year, but we expect this segment to be slightly below its budgeted 12% growth on a full-year basis. Year-over-year growth was driven by increased throughput and the higher renewal rates at Pasadena and Galena Park liquids facilities here in Ship Channel, as well as additional petcoke volumes and revenues versus the same quarter last year.

Our bulk volumes were essentially flat year-over-year looking at third quarter, we had decrease in coal volumes, but we had increases in petcoke and steel volumes versus third quarter last year. We also started bringing online our BOSTCO terminal project in the Ship Channel that project is already being expanded and well under the current contracts be expanded to a total of 7.1 million barrels of capacity with associated barge and dock space and ship dock space.

And this is one of several projects that we’ve had, where we’ve gotten expansions under contract before we’ve even gotten the first project done. That’s true, BOSTCO is true of our Edmonton facility and also true of our Splitter facility in the Houston Ship Channel. Now phase one of our IMT coal terminal expansion was completed during the quarter, and we continue to identify and capture a lot of new opportunities for expansion of this business too.

Kinder Morgan Canada segment earnings before DD&A were $44 million versus $56 million in the same quarter last year and that decline was due almost exclusively to the sale of our Express-Platte pipeline system and a weaker Canadian dollar year-over-year.

But the main story for this segment is as it has been our progress on the $5.4 billion expansion of our Trans Mountain pipeline, which we’re expanding from 300,000 barrels a day to 890,000 barrels a day. That expansion is under long-term contracts, which have been approved by the NEB, still to come there is the filing of our facilities application with the NEB, which we expect to finish in December or file in December of this year and still expect in-service by the end of 2017.

Now, turning to other elements of our project backlog starting with our January Investor Conference and several times since then, we’ve updated that backlog and it’s been growing with every update. And this includes our high probability projects, projects that are under construction, but aren’t yet producing revenue under contract that don’t have permits, perhaps are very close to having contracts, but anyway projects that we have a high degree of confidence we’re going to get done. So that this quarter the backlog increased from $14 billion to $14.4 billion.

Also, during the quarter we had almost $300 million of capital projects come online, and when they come online, we roll them off the backlog. So what we’re seeing is additions to that backlog that increase the overall backlog while offsetting the projects that came into service. Of the larger projects that came into service, Parkway and our refined products pipeline project came online. That’s a facility in the Louisiana, Mississippi, and our petcoke handling facility for BP at its Whiting Refinery, Whiting Indiana refinery.

Now a few facts about the composition of the backlog across the business units and across the years. The Gas Group is up from last time from $2.7 billion to $2.9 billion. Most of that increase is associated with additional pipeline capacity in LNG, liquefaction investment on the SNG and Elba Island asset, so these are primarily in our EPB project area, EPB, MLP.

We do not have in the backlog our joint venture projects with MarkWest, the process gas in the Marcellus and Utica and Ship Y-grade to the Gulf Coast. We believe we have a very attractive solution for producers presented in both of those projects, but we won’t add them to the backlog until we see commitments come through and we’re still working on those commitments. The products group backlog is up slightly, but still rounding to 1 billion same as last time, and new projects in the Eagle Ford and on Cochin are more than replacing and now in service Parkway project.

Terminals is also up slightly, but still rounding to $2.1 billion same as last time. The new projects there, primarily liquids facilities, including some accrued by rail projects and expansions of those projects are offsetting projects going into service during the quarter, which included the BP petcoke facility, as well as fertilizer terminals expansion and IMT.

CO2 is up to little over 2.9 billion from what had been just under 2.8 billion previously. And there is some shifting there from EOR Enhanced Oil Recovery projects into more CO2 source and transportation projects. And in this segment, our backlog is a little bit more based on development plans, our development plans as opposed to commitments to specific customers.

And as a consequence as those development plans change, these numbers move a little bit more than our other business segments do, but up in CO2 since our last update. And again the biggest project is KM Canada, the $5.4 billion expansion. And a reminder on this project too that we’re in developments and we’ll be in development for quite a while. And our development costs are recovered through demand charges that we would receive on firm capacity that we sold across our dock. And so this is a project where we’re getting our development costs recovered.

We also recalled the recent Investor Presentations we showed you in the backlog as we were showing it to you was kind of back-end loaded. As a consequence of the TMX project coming on towards the end of the backlog and also the liquefaction projects and then it was bit front-end loaded with projects that were in the near-term and the middle years were a little more hollowed out, 14 or 15 were a little bit lower. We also told you that we expected as we went on that we would fill those years, most of our projects were contracting for 12 to 24 months out and that’s happened.

So in the revised backlog, we’ve increased 2014 and 2015 by almost $600 million and almost $300 million respectively. So the bottom line is that, we’re continuing to find new opportunities that are more than offsetting projects that are going into service. We have a large number of projects coming into service in the fourth quarter, which is a good thing, and we’ve got a lot of good prospects. And so we’ll update this once we get through the fourth quarter. And so that’s it for the backlog.

And with that, I’ll turn it over to Kim.

Kimberly Allen Dang

And I’ll go through the numbers starting with KMP in each of that four pages of the numbers. I’m going to go and focus on the second page of numbers, which is our distributable cash flow and its how we look at performance. Let me point out that that distributable cash flow is reconciled to our GAAP numbers and we provide detail for you on all the certain items and adjustments. But in the quarter as Rich mentioned, DCF was a $1.27 per unit, that’s down slightly from the third quarter of last year. But on a year-to-date basis $30.94, up $0.22 or 6% on a year-to-date basis, and for the full-year, we expect DCF per unit to be up about 6.7%.

The $1.27 based on a $1.35 declared distribution results in about $34 million of negative coverage in the quarter. And as we’ve told you and we’ve told you all year, we expect coverage to be negative in the second and third quarter positive in the first and fourth and positive for the full-year. On a year-to-date basis, the $3.94 compares to the distribution of $3.97, and so we’re about $14 million short, but again for the full-year expect to cover. The $1.27 translates into DCF of $554 million, that’s up $99 or $99 million or 22% versus the third quarter in 2012.

And so let me just reconcile that $99 million for you what’s driving that growth. If you look at the top of the page, our segments are up $262 million. And of that $262 million, $225 million is coming from the Gas Group, so about 86% of the segment growth in earnings before DD&A is coming from natural gas. And as Steve said, that’s driven by the dropdowns from KMI and from the Copano acquisition offset by the FTC sale.

The other segments are also nicely with the exception of Kinder Morgan Canada that is down slightly because of the Express sale. G&A is an increase of $22 million quarter-to-quarter and that’s largely about $18 million of that $22 million is associated with the El Paso and Copano acquisitions offset by the benefit of the FTC sales.

Interest is up $49 million in the quarter, almost all associated with incremental debt balance as a result of the acquisitions and expansion capital. Sustaining CapEx is up $14 million in the quarter versus last year. We expect expansion capital would be up in 2013 versus 2012 and then you have a small amount of other items that are up $6 million or a increase of $6 million in expense.

So that gets you to $171 million, an increase in distributable cash flow. If you look at the GP interest and the increase in non-controlling interest of $72 million and that takes you to $99 million of growth in distributable cash flow in the quarter.

For year-to-date, as I’ve said $326 million in growth and distributable cash flow, and look at what’s driving that? If you look up with the segments, and the segments are up $887 million year-to-date, $771 million is coming from the gas group based on the same factors that drove the quarter. And then you have $51 million coming from CO2, $54 million from Products, $23 million from Terminals, a nice growth in those segments and that’s offset by $12 million decline in the Kinder Morgan Canada segment as a result of the Express sale.

G&A, we have increased G&A of $70 million year-to-date about a little for $60 million of that is associated with the acquisitions net of divestitures. Interest is up $173 million year-to-date versus 2012 and that’s result both of increase in debt balance and a higher average rate. The higher average rate is driven by the rate of the interest rate on the dropdown debt, which KMP assumed in conjunction with the dropdowns, which was at a slightly higher rate than the existing average rate at KMP.

Sustaining CapEx is up $36 million in the quarter and then we have other items that are about $46 million that you see in the adjustments to DCF, the biggest impacts there is the sale of REX and part of the impact of the sale of REX comes back when we add back the JV DD&A, which is in our adjustments between net income to get to DCF.

So that’s a $46 million impact that gets you to $562 million of increase in cash coming from these assets. In the GP interest and non-controlling interest, there is an increase of about $236 million. So take the $236 million from the $562 million and that gets you to $326 million increase in distributable cash flow for the quarter.

Now looking at the segments versus our budget, as Steve mentioned natural gas is above its budget on a year-to-date basis and we expected to exceed this budget for the full year by approximately 11%. If you look at it without Copano, the Natural Gas segment would be slightly below its budget.

On CO2, we expect it to be approximately $30 million above its budget. Now, if you look at the price of WTI relative to the prices of – the prices in our budget for WTI and you look at our metric and our sensitivity that oil prices are above $6 million and DCF for every dollar change and price, you would expect that segment to be up about $45 million, and then you would expect it also to be up a little bit incrementally for the Goldsmith acquisition.

And so Horseshoes and Handgrenades, you would expect that segment to be up about $50 million versus the $30 million I mentioned. And so what’s offsetting the price impact on crude is that we have – we are realizing our lower NGL price than we had in our budget, we have slightly lower oil volumes and then we have some higher expenses in some of our oilfields.

Products, we expect to be slightly below our budget, and terminals, we expect to be below its budget above 4% largely as a result of lower coal volumes, lower steel volumes than what we budgeted, lower ethanol volumes versus what we’ve budgeted and a contract that we lost with CFX.

KMC, we expect to be about 7% below its budget, as a result of the Express sale. But overall, the Express sale is accretive to KMP’s Bcf, but the positive benefit show up in the interest line and due to reduced debt issuance and reduced issuance unit shows up in our shares outstanding.

G&A for the full-year, we expect to be up about $16 million and that is largely associated with Copano. Interest was going to be up about $13 million and that’s largely also as a result of the Copano acquisition, but the increase in interest expense associated with the Copano acquisition is being somewhat offset by higher capitalized interest as a result of increased expansion in capital spending versus our budget.

Sustaining CapEx, we expect to be slightly over our budget on a year-to-date basis, we have a large positive and sustaining CapEx, but that timing for the full-year, we expect to be about $5 million negative versus our budget and all of that and more is Copano and then it’s being slightly offset by some positives and capitalized overhead. And so that’s KMP’s distributable cash flow.

Turning to KMP’s balance sheet; if you look we ended the quarter at 3.9 times debt-to-EBITDA, which is consistent with where we ended the second quarter. We expect in the year approximately about 3.8 times and our budget was to end the year about 3.7 times, but realize that we don’t have a full-year benefit of the Copano acquisition in the EBITDA numbers.

Year-to-date, our debt balance is up $3.7 billion and in the quarter, it is up about $500 million, looking at the factors driving that. The $500 million change in debt for the quarter, we spent about a little over $800 million in expansion CapEx. We contributed about $70 million in contributions to equity investment. So we had uses of capital of approximately $875 million.

That was offset by, we issued equity that accounted for about $481 million, and then we had a little bit over a $100 million of other uses of capital, which is largely accrued interest, which was a $144 million use of capital during the quarter and then that’s being offset by contributions that we get from JV partners and for consolidated investments, and we received about $30 million in proceeds from the sale of the TGP offshore assets.

On a year-to-date basis, we have capital used for expansions and acquisitions and contributions to equity investments about $9.6 billion, that’s $6.9 billion in acquisitions, which are primarily the drops in Copano acquisition and the Goldsmith acquisition. There is a $558 million of debt that comes on to our balance sheet as a result of acquiring the second half of EPNG. We spend about $1.9 billion in expansion CapEx and a little over $200 million in contributions to equity investments.

We have raised equity of about $5.6 billion offsetting that $9.6 billion of capital uses, and so we’ve got about $300 million in other items, which are we received $400 million in Express proceeds. We received a little under $100 million in swap and warrants. We received a little over $100 million in contributions from JV partners. We have the sale of the TGP offshore. And then we had a little over $300 million in working capital uses primarily associated within accrued interest. There were some taxes that we had to pay in conjunction with the Express proceeds. We have Copano acquisition expenses and also some inventory timing, and so that’s KMP.

Turning to EPB, again here I will focus on the second page, which is our calculation in distributable cash flow, but we have reconciled this to our GAAP income numbers for you and provided you a lot of detail on any other reconciling items.

On EPB, the distribution for the quarter is $0.65, that is 12% growth a quarter-over-quarter and that translates into a $1.90 on a year-to-date basis, which is up 16%. Based on the distributable cash flow per unit of $0.58, our coverage were about $14 million negative in the quarter and consistent with what I said about KMP and what I said about EPB last quarter, we expect that it will have negative coverage in the second and the third quarter positive quarter, positive coverage in the first and the fourth and that we will have positive coverage in the full-year. Year-to-date coverage is positive about $13 million.

The $0.58 of distributable cash flow per unit translated to distributable cash flow in total of $127 million, that’s down about $22 million versus the third quarter of last year. And so let me just take you through that. The assets were down about and you can see this at the top of the page earnings before DD&A down about $13 million. The biggest piece of that is Southern Natural Gas, which was impacted by the rate case and also lower volumes as a result of higher gas prices and cooler weather.

The WIC rate case and then those are being somewhat offset by the Elba an increase in the Elba Express Pipeline as a result of the expansion that came on in April 1 of this year. G&A is a benefit quarter-to-quarter of $4 million, interest – a small change is an increase of $1 million and then sustaining CapEx is a benefit, we spent less sustaining CapEx in the third quarter of this year than we did in the third quarter of 2012 of about $4 million. So that gets you to about a $6 million decrease in cash flow generated by the assets net of interest costs.

The GP is an increase into the GP incentive of about $16 million, and that’s a result of the higher distribution and more units outstanding. And so when you combine that with the $6 million coming from the assets, that’s about $22 million decrease quarter-to-quarter.

For the nine months, the $425 million of DCF before certain items is relatively flat versus the nine months in 2012. The assets are up $39 million, $31 million of that you can see on the line earnings before DD&A of $888 million versus $857 million in 2012, and then about $8 million of it shows up in reduced minority interest or non-controlling interest expense further down the page, and we talked about the reason for that in prior quarters.

G&A is lower in the nine months of 2013 versus 2012 by $23 million, and that’s the cost savings that we are realizing as a result of the merger. Interest is increase of $12 million and that’s primarily based on rate where we termed out some debt that was on EPB’s revolver in the fourth quarter of last year associated with the May drop downs.

Then the sustaining CapEx isn’t a benefit of about $5 million year-to-date versus the three quarters in 2012, and then other items are about $2 million. Well, that takes you about $57 million increase coming from the assets net of interest costs and then the GP interest is up about $59 million on the higher distributions and more units, so that you’re about flat on a year-to-date basis.

Now, for the full-year versus our budget, if you look at it, the – it is we will hit the $2.55 in distribution. We will come in slightly below on coverage and that’s just a result of moving the Gulf LNG drop out of this year. There are some other moving parts. We had the WIC rate case, which was – we did not anticipate in our budget, and some lower contract renewals on WIC, but that’s been offset by our lower G&A and some better performance out of the other assets so that the entire variance for the year is largely due to the Gulf LNG drop moving out.

Looking at EPB’s balance sheet, they ended the quarter at 3.6 times debt-to-EBITDA, that’s down from the end of last year and flat to the second quarter. We expect to end the year at about 3.8 times debt-to-EBITDA, and that’s just some timing on equity issuance and interest payments between now and the end of the fourth quarter.

Reconciling their debt, the change in debt at EPB for the quarter was a reduction of $14 million for the year-to-date. There was a reduction of $122 million. In the quarter we spent $25 million on expansion CapEx, coverage as I mentioned earlier was a negative $14 million, and then we had a positive working capital and other items of a little over $50 million, which primarily relates to accrued interest and accrued taxes.

Year-to-date expansion capital was $68 million. We’ve raised equity of $87 million, coverage was a positive $13 million and then we have working capital and other items of about $90 million, again which is largely associated with accrued interest and accrued taxes.

Turning to KMI the declared dividend for the quarter $0.41 compares to cash available per share of $0.41, so basically flat on coverage, cash available to pay dividend $424 million, that’s up $62 million or 17% versus the third quarter in 2012. So let me just take you through what’s driving that growth. The increases coming from the MLPs and the distributions coming from the MLPs is $102 million increase.

We have lower interest expense of approximately $62 million. Now some of that’s timing because we used the accrual method in 2012, because we only had a partial year on the El Paso acquisition and so cash, cash distorted the numbers on a partial year. So you have a little bit of difference in timing just accrual versus cash, but most of it is driven by the debt pay down as a result of the drop downs. You’ve got about $95 million reduction in the quarter as a result of reduced cash generated from the assets that we’ve dropped, we have about a $15 million increase in cash taxes and then we have about $8 million in lower G&A to get you to the $62 million.

Year-to-date cash available to pay dividends of $1.231 billion is, that’s an increase of $259 million or 27%. Let me just walk you through that increase, the interest in MLP, EPB and KMP, it’s an increase of $422 million. We actually have higher interest year-to-date of $39 million. What you see there is a full-year of, year-to-date we have in all periods, we have the El Paso debt versus we only had it in the partial period last year, but that’s being somewhat offset by the decreased interest associated with that pay down on the drops.

We’ve got $33 million reduction and cash generated from our other assets as a result of the drops, we’ve got a $76 million increase in cash taxes as a result of the higher income and then we’ve got a $15 million in higher G&A largely as a result of having a full-year El Paso. And so that gets you to the $259 million increase in cash available to pay dividends.

Now for the full year, as Rich said, we expect to distribute at least $1.60, that $1.60 is above our original budget of $1.57 per share because we’ve raised the distribution on the dividend by $0.03 as a result primarily of the Copano acquisition, but the reason we say at least $1.60 is because we expect that we will generate our cash available. Both the $1.57 and the $1.60 were based on distributing everything that we had. We expect at this point that we will have some excess cash available largely as a result of delaying the Gulf LNG drop and that asset staying at KMI for four additional months and better performance on other retained assets.

Looking at KMI’s balance sheet, KMI ended the quarter with $9.78 billion of debt that is down about $1.6 billion from the end of the year, now what you see on this page is $10.23 billion of debt at the end of last year, but that’s a recaps number where we actually ended the year with $11.4 billion, and then in the quarter debt is actually up about $300 million. So quick reconciliation for you on the quarter, we repurchased warrants at about $330 million. We spent some money on some environmental legacy, environmental issues and the legacy marketing book at El Paso about $28 million.

And then we actually generated cash in excess of what we reflect in the metrics largely as a result of more taxes that we’re paying versus what’s in the metric because in actuality, we are using all of the NOL that we can possibly use and so we’re paying lower cash taxes versus in the metric, we only reflect about a $300 million use of the NOLs. So we have lower cash taxes in reality than what we reflect in the metric.

Year-to-date, $1.6 billion decrease in debt, $2.2 billion in proceeds that we got from the drops in the sale of B2B, and also debt that was assumed by KMP in the dropdown transactions. We’ve repurchased $463 million of warrants. We made a $50 million contribution to the pension. We’ve made about $60 million of investments in the two MLPs to maintain KMI’s 2% interest. We’ve contributed about $50 million to equity investments and then we’ve got about $50 million in other items, the largest of which is the difference between the book and cash taxes.

At KMI, on a fully consolidated basis, we expect that will end the year maybe a shade higher than what I said last quarter. Last quarter I said about 5 times maybe end about 5.1 times and that’s a result of the warrant repurchase occurring faster than we originally anticipated.

So with that Rich, turn it back to you.

Richard D. Kinder

Okay, thank you Kim. Thank you, Steve. And we will take questions from the callers. Kelly, you want to come back on.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Darren Horowitz from Raymond James.

Richard D. Kinder

Hi, Darren, how are you doing?

Darren Horowitz – Raymond James

I’m fine. Thanks Rich. I appreciate you taking my question. I realize the Marcellus and Utica liquids project isn’t in the budget and it was announced as a letter of intent contingent upon sufficient shipper commitments and various approvals. But since the JV announcement, the competitive landscape has changed little bit. You’ve got an additional proposal for a big LPG dock in Lake Charles another large player moving forward with the second big marine terminal expansion. So I’m curious how that change is the playing field as you view the project and more importantly the odds of it getting done?

Richard D. Kinder

Well, again as we said all long Darren, we will only do this if we have commitments. So far we’re seeing a lot of customer interest, Steve what you want to add to that?

Steven J. Kean

Yeah, I think one of the things that it’s still to be completed particularly focus, you really have to look at this project in two parts, the first part is the processing part there appears to be a lot of demand for additional processing capacity and we expect there will be even more as the producers get a handle on the composition of the Utica volumes as it starts to coming out of the ground, and so that’s kind of one aspect of the project.

The other is the Y-grade line and that’s what you’re mainly focused on. And there, I mean I think that having more outlets potentially for this product as it moves to south, the way we propose to this, we could build either into Southwest Louisiana or into Mont Belvieu.

And what we’re talking to shippers about, our producers about right now is what they would prefer and what we’ve also put on the table, when I say we, I mean us and MarkWest is the interest that we have and potentially building some fractionation capacity for them.

So the fact that there might be some additional destinations, it certainly complicates the picture, but it’s still something that we’re willing to invest in and willing to hear what our producers think in terms of where they want to go. But that’s the thing we’ve got up, still get straightened out and be able to present to our producers, but we’re really kind of looking in part for them to tell us where it is that they want to go.

Darren Horowitz – Raymond James

Okay. And then Steve, my last question shifting gears a little bit over to the BOSTCO terminal, I appreciate the color there. But beyond the remaining 30 tank that should arrive on line over the next six months and hitting that aggregate capacity threshold that you outlined. How do you guys think about, went adjacent to that or the ability to leverage that footprint, possibly to add more splitting capacity for the export on the complementary product like gas, oil, or [indiscernible] to the Latin America. I mean how does – ultimately how does this refined product push to the Gulf Coast whether or not it’s there or Galena Park or Corpus. How does that work into your downstream plan to add more capability?

Richard D. Kinder

Well, I mean it’s a good thing for our asset set on the Houston Ship Channel. So we have the largest independent terminal link facility at Pasadena and Galena Park over the years. We’ve been adding across channel lines to improve the connectivity. KMCC has that as a destination. We’re looking for ways to interconnect that big operation, which is also expanding with the BOSTCO facility. And so overall, the push to move more products into storage and then how it’s either by pipeline or on ship or barge is a positive thing. And John Schlosser, is here, do you want to add anything?

John W. Schlosser

Yeah. I mean, we seen the grounds swell of carpets trying to get to the water there. You have the opportunity for two additional docks at BOSTCO. We’re building a new dock at the Greenford facility at our partner Watco’s facility, and we announced the AES facility, which will have an additional dock as well, with that will come additional tanks and additional ability to move product to the water.

Darren Horowitz – Raymond James

Thank you.

Operator

Our next question comes from Brian Zarahn for Barclays. Your line is open.

Richard D. Kinder

Hi, Brian.

Brian Joshua Zarahn – Barclays Capital,Inc.

Hi, Rich. I guess following up on Darren’s first question on the Marcellus Utica Y-grade line. We are the potential shippers leading towards in terms of destination of Belvieu or Louisiana?

Richard D. Kinder

I think there is interest in both. I don’t know there is preponderance. I guess we’ve heard more talk about the Ship Channel than anything else. So when you say…

Steven J. Kean

Probability on the margin.

Richard D. Kinder

Yeah, just because Mont Belvieu is still view, and I think correctly is the most liquid point in the whole infrastructure play. So I’d say, we’ve had a little more interest there.

Brian Joshua Zarahn – Barclays Capital,Inc.

In terms of if that’s the market, would you lean towards third-parties or would you look at adding your own fracs and so you rental [ph] your own word to be in Belvieu or outside Belvieu?

Richard D. Kinder

Well, I think we’re working with the number of parties now on both ends of the transaction, in other words with some of our potential shippers and also present owners of frac capacity and together with MarkWest and we’re just looking what all our alternatives are, I think we have made the decision on that yet.

Brian Joshua Zarahn – Barclays Capital,Inc.

Okay, any type of a ballpark range of potential cause without the fracs for the project?

Richard D. Kinder

Well, what we’ve said, and we’re in a very competitive situation here as you know Brian, so we have not really broken the components out, we’ve just pointed to north of $2 billion as the kind of all in investment here.

Brian Joshua Zarahn – Barclays Capital,Inc.

Okay. And then any update on the hedges for 2014 and 2015 production this year to the business?

Richard D. Kinder

Kim, do you have those?

Kimberly Allen Dang

Sure, I can tell you what they are. If you look at the – you want 2014, we are 66% hedged at about $94 a barrel, 2015, we’re about 43% hedged. And depending on the way you look at our collars between $90 or $92, if you have the market price then its $92, if you have it in at the put price or the floor, its $90.

Brian Joshua Zarahn – Barclays Capital,Inc.

Thanks, Kim.

Operator

Our next question comes from Ted Durbin from Goldman Sachs. Your line is open.

Richard D. Kinder

Hey, how are you doing?

Theodore Durbin – Goldman Sachs

Hey, I’m well, thank you. Question on the CapEx budget overall and you talked about how you have this sort of hollow part in the 2014 and 2015 that you’re now filling in. And I’m just wondering if you can give a sense of where the budget looking like for 2014 at least, is about versus – or down versus this year and then how that might then translate into your goals for distribution growth, say, 5% to 6%?

Richard D. Kinder

Well, if you look at 2014, Steve is right, we’re filling in those holes, and right now in this project backlog, we have about $3.4 billion little north of that for 2014. We’re just starting the budget process, and I’m sure there will be additional projects added to that when we go through the budget with all of our business segments over the next three weeks starting next week. But that’s what we currently have in this backlog, and again I would look at that as a pretty conservative number compared to where I think we will end up.

Steven J. Kean

Yeah, that’s right. And that – please go ahead…

Theodore Durbin – Goldman Sachs

No, does that include dropdowns as well, I’m assuming?

Richard D. Kinder

No, that does not include…

Steven J. Kean

Yeah, that is just capital projects.

Theodore Durbin – Goldman Sachs

Got it. And then if I can just shift over to the Gulf LNG and you mentioned that a little bit in the prepared remarks kind of waiting on or at the drop down to EPB, I guess I’m just wondering if you can give us a little bit more detail on where you are in terms of contract and something you said you’re going to wait maybe four months. Is that a reasonable timeframe to think about when you might have a sense where the contracts are, or is that just we’re sort of pushing that out and then may get pushed a little bit further, just talk about Gulf LNG for us.

Richard D. Kinder

I think we will have detailed information on the drops of the remaining assets by the end of this year. We’ll be able to disclose that once we get through the budget process, I think we’ll be able to tell you what we expect to be able to do.

Theodore Durbin – Goldman Sachs

Got it. And then just coming back to the Marcellus and actually on the natural gas side, you obviously got a lot of growth there. I mean a lot of producers are concerned about where basis differentials for and some of the discounts, I think you saw this summer. I’m just – I’m wondering if there are some bigger things that you’re thinking about around takeaway there because of the big growth in the basin around your assets?

Richard D. Kinder

Yes, there are number of things we’re thinking about and for competitive reasons, I really won’t mind to go at all of them. But obviously we believe that in the long-term there needs to be significant additional capacity built into New England, and we obviously on Tennessee have the pipe to do that or the base to do that. That depends again on shipper commitments. We’ll just see where that comes out.

But we think there is additional volumes to go to – into Canada. And as I’ve said before, I believe there is eventually, virtually all of Eastern Canada will be served out of the Marcellus and Utica. Again, our pipeline network links itself very well to that and I think we’ll have some announcements pretty shortly on that.

And then, of course, there is a takeaway for the Y-grade to get the NGLs out and we think that there is a lot of opportunities for us there. So we’re very happy with the kind of footprint we have in the Marcellus and Utica and we think we’re going to be able to use that to our advantage and to help our customers over the next several years.

Theodore Durbin – Goldman Sachs

Is the demand for takeaway, are you sensing that the producers are willing to sign a capacity more or is this more going to be a demand pull from the utilities or power generators?

Steven J. Kean

I think on the New England expansion is going to be primarily demand goal.

Theodore Durbin – Goldman Sachs

That’s it for me. I’ll leave it there. Thanks.

Steven J. Kean

Thank you.

Operator

Our next question comes from Craig Shere from Tuohy Brothers. Your line is open.

Richard D. Kinder

Hi, Craig.

Craig Shere – Tuohy Brothers

Looks like SACROC was off second quarter in a row, Yates was down sequentially, and the Katz ramp is still little under budget. Do you all still feel comfortable production will grow over the next couple of years and is permitting for new field injections becoming an issue?

Steven J. Kean

I’ll have Jim Wuerth, the answer is yes, we do and Jim, I’ll let you answer that.

Jim Wuerth

Yes. I think, SACROC is always a little up and down. So I’ve mentioned that is of right now through October running close to 32,000 barrels a day. So a lot of it just depends on how quick we’re able to get patents ready, get the injection permits and monitor the floods. So it’s going to be up and down, but I expect SACROC to continue to be relatively flat for several years to come.

Yates is a big field that is on a slow decline and we’ll work it as well as we can, but there will be a slight decline there each year. And Katz is running as Steve mentioned about 32.50 right now for the month, so it’s getting real close to the budget numbers, and I think what we’re going to see at Goldsmith is we got great opportunities there. Continues to be a lot of opportunities I think out there for CO2 flooding. The demand is still real high for CO2 and that bodes well for us.

Craig Shere – Tuohy Brothers

And is contract or not contracting – permitting becoming an issue as far as being able to move forward on some of these opportunities?

Jim Wuerth

Right now we’re having a little problem with the Railroad Commission just lack of staff there, but nothing we aren’t capable to look around I think.

Craig Shere – Tuohy Brothers

Okay. And one amount of subject of your simple question for you. If all of your CO2 needs were acquired from third parties, do you believe that you would in fact, capitalize more CO2 purchases and book higher DCF than you’re reporting now?

Jim Wuerth

We wouldn’t record higher capitalized CO2, that’s correct.

Craig Shere – Tuohy Brothers

Okay, so…

Jim Wuerth

If we were selling the CO2 to third parties, yes, on our S&P side, we would have had higher DCF.

Craig Shere – Tuohy Brothers

I gotcha. So the intra-company’s sales results in more conservative accounting?

Jim Wuerth

I believe that’s good way to say it.

Craig Shere – Tuohy Brothers

Okay. And last question, given some of the recent headwinds kind of affecting KMI’s share price from some market perceptions. How do you think about the alternatives of repurchasing warrants versus existing shares? And how much capacity do we have to keep renewing this equity repurchases every quarter?

Richard D. Kinder

Well, we look at that based on growth projections and based on what we believe the return is on purchasing warrants versus shares. And as you see today, the board authorized an additional $250 million to be used for either shares or warrants at our discretion and we just continue to look at what makes the most sense to buyback shares or buyback warrants.

Craig Shere – Tuohy Brothers

I gotcha. And speaking with some clients Rich, that the comment was made that your own repurchases were not a large percentage of your annual distributions that you get, and I just wonder if you would like to opine on the value of the equity right now?

Richard D. Kinder

That’s of course you guys expertise not mine, but I believe obviously the equity is undervalued at KMI. You have a stock that is yielding 4.5% now and has growth of 14% this year in declared dividends. We said we believe long-term, it’s 9% to 10%. And at KMP, you have a security that’s yielding 6.5% with growth of 7% this year. We said long-term we believe 5% to 6% there. So to me that’s a very good investment, but that’s again not mine to opine, I’m obviously prejudiced. I think the stock in units are tremendously underpriced in my view, but again that’s for the market to determine.

Craig Shere – Tuohy Brothers

Understood; thank you very much.

Operator

Our next question comes from John Edwards from Credit Suisse. Your line is open.

Richard D. Kinder

Hi, John, how are you?

John Edwards – Credit Suisse

Doing well, Rich. Just if I could follow-up on your Y-grade pipeline from the Marcellus, with the production there, it seems to be continue to ramp faster than most expect at least in the past people have said there is just room for one of these pipeline projects to come to the Gulf. They think if things continue in that direction, there might be room for two projects?

Richard D. Kinder

Let’s look…

John Edwards – Credit Suisse

Yours and the competitor?

Richard D. Kinder

Yes, I would say John that’s possible, but we can’t look at it that way and we won’t look at it that way. We’re going to get out there and compete and see if we can get the first project. The thing you have to keep in mind is, it’s not just the first pipe that goes in the ground. There is expansion capabilities and things like that. And so there is definitely an advantage to being the first one that gets built of these two.

And so we’re just looking at it as, it’s one of the other is going to win the day. And the other thing to take into account, I know you are very familiar with this, but production targets or expectations and actual production on the one hand versus willingness and ability to commit contractually for a long-term from the other are two different things. And so what it comes out to is whether people will put ink on paper to sign up for the capacity.

John Edwards – Credit Suisse

Okay, fair enough. That’s all I have. Thank you.

Richard D. Kinder

Yes. Thank you, John.

Operator

(Operator Instructions) Our next question comes from Kevin Kaiser from Hedgeye Risk Management. Your line is open.

Kevin F. Kaiser – Hedgeye Risk Management, LLC

Hey, good afternoon. Question on CapEx for gathering and processing, what is CapEx budget for gathering and processing on a quarterly basis, including Copano?

Richard D. Kinder

I don’t know if we have that number broken down.

Steven J. Kean

We don’t break it out separately. It’s just part of our Natural Gas CapEx.

Richard D. Kinder

CapEx on Copano and Altamont and some in Texas, some in other – in Texas as well, we will have a breakout of that.

Kevin F. Kaiser – Hedgeye Risk Management, LLC

Okay, so no breakout for GMP by sustaining CapEx versus expansion CapEx either?

Richard D. Kinder

No, I think that’s just aggregated in our total gas group…

Steven J. Kean

Yes. Total Natural Gas segment aggregates all of the, whether sustaining CapEx or expansion CapEx is all aggregated.

Kevin F. Kaiser – Hedgeye Risk Management, LLC

Okay. And then on the company-wide, so the budget for this year for sustaining CapEx will be 3.39, that’s before Copano. If KMP only spent that on an annual basis, so no organic expansion CapEx, how would the segments perform over the long-term? Would the company be able to keep cash flow flat?

Steven J. Kean

I’m sorry, I don’t.

Kimberly Allen Dang

Yes. Well, I think that we have growth – I mean are you asking if there’s growth absent spending CapEx in KMP.

Kevin F. Kaiser – Hedgeye Risk Management, LLC

The question is really, if the budget was only limited to the sustaining CapEx, with the additional asset base be able to – would it be maintained, would the cash flows be maintained over the long-term frequently…?

Steven J. Kean

Oh, I see your question, yes, and we’ve said this several times and these are ballpark numbers of course, but generally speaking, of that 5% or 6% this year had to be 7% growth in distributions. We think probably 1.5% to 2% is organic growth, in other words if we didn’t spend any capital, you would get that.

At KMP that comes from a number of things. One is, of course the inflation escalator that we have on our FERC regulated products pipelines. Second is on automatic escalators that we have on some of our terminal assets. So you probably have, we estimate 1.5% to 2% growth, if you didn’t spend any capital and then the rest of that growth comes from primarily from new projects that come online.

Kevin F. Kaiser – Hedgeye Risk Management, LLC

Okay.

Richard D. Kinder

And they subject to our market conditions, market conditions determine the growth on just the existing asset base on a standalone basis.

Kevin F. Kaiser – Hedgeye Risk Management, LLC

Right and how would 1% to 2% organic growth be possible with just $339 million, if you spend about $400 million in E&P loan and that’s not in the sustaining CapEx budget?

Steven J. Kean

Well, just said, I’m not following your question. I guess you ask how much organic growth you had without expansion CapEx and that’s the kind of number that we use about 1.5% to 2% Kim.

Kimberly Allen Dang

Kevin, is your question, if CO2 production would stay flat, if we weren’t spending expansion capital?

Kevin F. Kaiser – Hedgeye Risk Management, LLC

No, the question is on the business, the entire KMP business, how would cash flows trend over the long-term, if we only spend $339 million a year in capital expenditures?

Kimberly Allen Dang

I think Rich just answered it.

Richard D. Kinder

Yes.

Kevin F. Kaiser – Hedgeye Risk Management, LLC

Okay. And then the last question I have is, do you consider distributable cash flow to be synonymous with free cash flow?

Kimberly Allen Dang

Well that, I mean Kevin, I mean look, what we’re looking at is how much cash flow that the MLP generates before expansion capital, because our partnership agreement requires us to finance expansion capital to distribute everything that we generate and to finance our expansion capital. And so what we are comparing distributable cash flow is to the cash flow that we have available for distribution to our unitholders before we factor in expansion CapEx.

Kevin F. Kaiser – Hedgeye Risk Management, LLC

Okay. So you would its not – you would not say that free cash flow and distributable cash flow are the same thing?

Kimberly Allen Dang

If you are defining free cash flow as cash flow after expansion CapEx, then I would say the distributable cash flow and free cash flow are not the same thing, but it depends on how you are defining free cash flow.

Kevin F. Kaiser – Hedgeye Risk Management, LLC

I would define free cash flow as cash flow from operations minus the capital expenditures needed on an annual basis to maintain those cash flows from operations?

Kimberly Allen Dang

Well, that is not, unfortunately that is nice that you would interpret it that way, but that’s not the way that our partnership agreement defines it and therefore, that’s not the way we are allowed to segregate it.

Kevin F. Kaiser – Hedgeye Risk Management, LLC

Okay. All right, thanks. Thanks for the color and thanks for taking my questions.

Richard D. Kinder

Thank you, Kevin.

Operator

Our next question comes from Becca Followill from U.S. Capital Advisors.

Richard D. Kinder

Hi Becca, how are you?

Becca Followill – U.S. Capital Advisors, LLC

Can you talk a little bit about the interim outlook for EPB post 2013, but before the Elba export facility comes online given the roughly $80 million in rate reductions with these two rate settlements at WIC and SNG and then the stepdown in rates at SLNG at year-end?

Richard D. Kinder

There is no question. We’ve been very clear about this that of course the rate case on SNG and the rate case on WIC will be a negative impact. We settled both of those and they had some negative impact as Kim said in 2013, but that will increase of course we have a full year-end 2014.

We of course have longer-term obviously, the Elba Island LNG project is a huge positive. And we have some other smaller growth opportunities coming online in EPB. And then we anticipate we will have dropdowns into EPB that will help in terms of distributable cash flow.

Becca Followill – U.S. Capital Advisors, LLC

So there will be drops in the interim that will help to bridge that gap?

Richard D. Kinder

That’s true, Becca.

Becca Followill – U.S. Capital Advisors LLC

Okay, thank you. And then what is the timing for filing for Altamont at Tennessee of the portion of line that you’re looking to convert?

Richard D. Kinder

And we have a timeframe

Steven J. Kean

Yes, I mean I think we would be looking at that into early next year.

Richard D. Kinder

Early next year would be the probable answer.

Becca Followill – U.S. Capital Advisors LLC

Thank you. And then the last question on the CO2 business. Just by my quick back of the envelope on the numbers, it looks like operating expense was up pretty materially during the quarter. Was there something unusual there? Is that just a function of maybe adding Goldsmith or is there something else going on that’s maybe short-term in nature?

Richard D. Kinder

Jim?

Jim Wuerth

I would guess it’s probably Goldsmith. We haven’t seen anything unusual that has popped up on us at all.

Becca Followill – U.S. Capital Advisors LLC

Did they have materially higher per unit O&M cost?

Richard D. Kinder

It depends on what you are comparing it to. If you’re comparing it to Yates, the answer would be yes. If you are comparing it to SACROC, probably comparable.

Becca Followill – U.S. Capital Advisors LLC

Okay. Just on the overall average basis…

Richard D. Kinder

Yes.

Becca Followill – U.S. Capital Advisors LLC

It just looks like it’s up meaningfully. Okay, that’s all I have. Thank you, guys.

Richard D. Kinder

Thank you, Becca.

Operator

There are no further questions at this time.

Richard D. Kinder

Okay. Well, thank you all very much. We appreciate your time and attention. Have a good evening. Thank you.

Operator

Thank you for participating in today’s conference call, you may disconnect at this time.

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