Targa Resources Partners LP Q4 2009 Earnings Call Transcript

Mar. 1.10 | About: Targa Resources (NGLS)

Targa Resources Partners LP (NYSE:NGLS)

Q4 2009 Earnings Call Transcript

March 1, 2010 11:00 am ET

Executives

Anthony Riley – Senior Manager, Finance/IR

Rene Joyce – CEO

Jeff McParland – EVP and CFO

Mike Heim – EVP and COO

Analysts

Gabe Moreen – Merrill Lynch

Emily Wang – Raymond James

John Tysseland – Citigroup

Operator

Good morning, ladies and gentlemen, welcome to the Targa Resources Partners fourth quarter 2009 conference call on March 1, 2010. Throughout today’s recorded presentation, all parties will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator instructions) I would now hand the conference over to Anthony Riley. Please go ahead, sir.

Anthony Riley

Thank you operator. Good morning everyone, I am Anthony Riley and I would like to welcome you to Targa Resources Partners LP’s year-end 2009 investor call.

Before we get started, I would like to mention that the partnership has published an earnings release, which is available on our Web site at targaresources.com. Speaking on the call today will be Rene Joyce, Chief Executive Officer; and Jeff McParland, Executive Vice President and Chief Financial Officer. Rene and Jeff are going to be comparing the fourth quarter and year-end results of '09 to the fourth quarter and year-end results of ’08, as well as providing additional color on our results, current performance, and other matters of interest.

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

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

One quick reminder before starting into the results, since the Downstream Business and the partnership are entities under common control, the accounting treatments provides that the partnerships reported results of operation now include the historical results of the Downstream Business for all periods presenting.

With that, I will turn it over to Rene Joyce, our Chief Executive Officer.

Rene Joyce

Thanks Anthony. Good morning and thanks to everyone for participating in Targa Resources Partners fourth quarter and year-end ’09 conference call. Besides Jeff and myself, there are several members of management who will be available to assist in the Q&A session.

By way of agenda, I will start off by reviewing some performance highlights for the fourth quarter and full year of ’09. I will then turn it over to Jeff to review our consolidated financial results. Following Jeff’s comments, I will provide some updates on some ongoing activities at the partnership and finally, we will take your questions.

At the start, I am very pleased with our ’09 performance given the challenges presented by the difficult economic and capital markets environments last year. We executed on our business strategies by closely managing controllable costs and capital expenditures causing the drop down of the Downstream Business, increasing our Gathering and Processing inlet volumes, and finalizing the necessary commercial agreements to support a major expansion of the Cedar Bayou Fractionator.

The Downstream Business generated record results in ’09 posting operating margin of almost $160 million. Despite a 53% decline in realized prices for natural gas, and a 42% decline in realized prices for NGLs from ’08 to ’09, the operating margin of our Gathering and Processing segment decreased only 22%. This reflects the benefit of our focused cost control efforts, our disciplined hedging program, and the underlying support of our stable inlet volumes. We capped off the year with very strong fourth quarter performance generating distributable cash flow of $61.1 million, which corresponds to distribution coverage of 1.6 for the quarter.

Turning to the segment level, I will first review the full year and fourth quarter ’09 operating highlights for our Gathering and Processing segment. For the full year, the combined inlet for North Louisiana and San Angelo systems was 446 million cubic feet per day, an increase of approximately 6% compared to the same period in ’08. Inlet volumes for each of the three systems increased for the full year compared to ’08. Louisiana system was up year over year primarily due to increases in discretionary processing volumes, which were partially offset by lower wellhead volumes. The year-over-year increase at North Texas was a result of increased producer volumes from new well connects partially offset by natural declines of existing wells and the impact on producer and pipeline operations of cold winter weather in ’09.

San Angelo volumes benefitted from well connect activity that while below ’08 levels was well above historical averages. Fourth quarter ’09 plant natural gas inlet for the combined North Texas, Louisiana, San Angelo systems was 456 million cubic feet per day, an increase of approximately 16% compared to the same period in ’08. This quarterly volume increase resulted primarily from increases at our Louisiana and San Angelo systems, partially offset by lower volumes at our North Texas system.

Again, the Louisiana system volumes were up year over year primarily due to increases in discretionary volumes, which were partially offset by lower wellhead volumes. The decrease at North Texas was primarily the result of weather impacts and settlement of a contract dispute with a counterparty that provides for their ability to substitute the amount of physical volumes available to us for plant processing with a payment of their economic equivalent. These negative impacts were offset partially by incremental increases and producer volumes from new well connections.

On a sequential basis, fourth quarter plant natural gas inlet for the combined three systems declined 2% compared to the third quarter of ’09 driven by decreases of 4% and 3% at North Texas and San Angelo. The North Texas decline is mainly due to the loss of items related to the settlement I mentioned earlier, as well as the impact of cold winter conditions on production, gathering, and processing operations. San Angelo declined sequentially mainly due to the impact of cold winter conditions. Fourth quarter operating margin in the Gathering and Processing segment was flat at $47 million compared to last year reflecting the net impact of increased volumes NGL prices offset by the lower average realized natural gas prices.

Next, I would like to review the operating highlights for the Downstream Business. As I mentioned, the Downstream posted a record-operating margin for the fourth quarter and full year of ’09. Both the Logistics Assets and the Wholesale Marketing segments posted quarterly and annual operating margin results that were the highest in Targa’s history. In the Logistics Assets segment, fractionation volumes increased 17% from 191,000 barrels per day in the fourth quarter of last year to 223,000 barrels per day for the fourth quarter this year, driven by volume increases at both our Cedar Bayou and Lake Charles fractionators. For the year, fractionation volumes increased 2% to 217,000 barrels per day; volumes at both fractionators were up year over year. Utilization of Y [ph] grade only capacity at Cedar Bayou Fractionator increased from 98% in ’08 to 100% in ’09, statistical results that are consistent with what the industry has been saying about pipe fractionation capacity at Mont Belvieu.

Treating volumes associated with our NGLS [ph] at Mont Belvieu, our sulfur natural gasoline unit, were up 25% to 32,000 barrels per day for the fourth quarter compared to ’08 and up 6% for the full year versus last year. Both fractionation and treating volumes increased mainly due to the industry impacts of hurricane Ike in September of ’08 while NGLS also benefitted from increased unit availability in ’09. Operating margin from the Logistics Assets increased $13 million or 86% to $28.7 million for the quarter, up from $15.4 million last year and increased $37 million or 74% to $87 million for the year, up from $49.9 million last year. The $13 million increase for the quarter was driven primarily by higher operating margin from Cedar Bayou Fractionator along with increases from our NGLS unit and terminalling and storage assets. The quarter was also positively impacted by year-end take-or-pay payments.

The reasons behind the $37 million increase for the year are very similar to the reasons behind the quarterly increase. The annual margin gain was driven primarily by higher operating margin from CBF volumes and rates along with increases from our NGLS units and terminalling and storage assets. The increases were somewhat offset by lower operating margin from our transportation assets. A large majority of the increase as Cedar Bayou Fractionator is directly related to higher fixed portions or fractionation fees within our contractual portfolio.

Within the NGL marketing segment, fourth quarter NGL sales volumes increased 11% compared to ’08, mainly due to higher petrochemical plant operating rates, which increased to around 87% in the fourth quarter of ’09 compared to around 70% in the same quarter of ’08. Increased spot sales volumes also contributed to the gain. The increased volume was somewhat offset by contractual volume change with a large petrochemical customer although the profitability associated with this contract is largely unchanged.

For the year, NGL sales increased slightly to 245,700 barrels per day compared to 244,600 barrels per day for ’08. Sales to petrochemical customers increased almost in locked step with the increases in petrochemical plant operational rates, partially offset by lower spot sales. Fourth quarter operating margin within the NGL Marketing segment increased by over $10 million compared to last year to almost $14 million. Full year operating margin within the NGL Marketing segment increased $27 million or almost 150% from last year to $45.8 million despite the 44% decrease in average realized NGL prices. The margin increase is driven primarily by two factors, the (inaudible) NGL products in the latter part of ’08 resulted in losses associated with NGL inventory during a period of very low NGL demand, which materially offset the free fee-related portion of this segment. Although the average NGL prices were 44% lower than ‘08, our focused efforts during ’09 to reduce exposure to inventory allowed the fee-related portion of this business unit to be a significant driver of profitability.

Within the Wholesale Marketing segment, fourth quarter NGL sales volumes increased 1% compared to ’08 mainly due an earlier offset of winter weather in our market. Increased sales at storage and terminal locations were partially offset by the exploration of a spy agreement as well as production issues at certain West Coast refineries. For the full year, NGL sales volumes decreased 6% compared to ’08 mainly due to the exploration of a refinery purchase agreement.

Fourth quarter operating margin within the Wholesale Marketing segment increased significantly by $12.8 million to $12.9 million from $100,000 last year driven primarily by higher margins at our terminals and strong winter driven sales from storage. Full year operating margin within the wholesale marketing segment increased $10.5 million or 80% to $23.7 million from $13.2 million last year, driven primarily by higher margins at our terminals and winter-driven sales from storage.

A significant portion of the partnership’s improved fourth quarter ’09 distribution coverage was related to the seasonality of the Marketing segment of the Downstream Business and year-end take-or-pay payments within the Logistics Assets segment. Although not unusual for fourth quarter performance, these factors are not expected for the first quarter in 2010. In addition, Downstream plant turnarounds are scheduled for the first quarter.

That wraps up my review, so I will now turn it over to Jeff to give you more details on consolidated financial performance.

Jeff McParland

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

One reminder as Anthony mentioned under the common control accounting treatment the partnership’s reported results of operations now include the historical results of the Downstream Business for all periods presented.

For the fourth quarter of 2009, the partnership reported net income of $38.4 million or $0.56 per diluted limited partner unit compared to net income of $19.8 million or $0.48 per unit for the fourth quarter of 2008. These quarterly results reflect non-cash hedge charges of $3.8 million in 2009, and a $11.7 million in 2008.

Adjusted EBITDA for the quarter was $84.6 million compared to $82.6 million in last year’s fourth quarter. Our operating expenses decreased by $13.3 million or 24% to $43 million for 2009 compared to $56.3 million for 2008 driven primarily by lower fuel and utilities expense as a result of lower gas prices.

General and administrative expense increased by $12.2 million to $23.4 million for 2009 compared to a $11.2 million for 2008. The increase included compensation related expenses, professional services, allocated corporate level expenses, and insurance.

Net interest income for the quarter excluding interest on affiliated indebtedness was approximately $17 million or about $6 million higher than 2008, primarily due to the issuance of our 11.25% notes. Other income decreased by $18 million primarily due to a $13 million gain on debt repurchases in 2008. Maintenance capital expenditures were $7.9 million for the fourth quarter of 2009.

For the full year 2009, the partnership reported net income of $52 million or $0.86 per diluted limited partner unit. Net income for the year reflects a number of non-cash charges including a $37.6 million non-cash hedge loss, $43.4 million in interest expense on affiliate indebtedness that is not an obligation of the partnership and that was eliminated in connection with the Downstream transaction, and a $1.5 million loss related to the repurchases of 11.25% notes.

Adjusted EBITDA for the year was $286.3 million including the $1.5 million loss on debt repurchases. This compared to adjusted EBITDA of $269.4 million last year including the $13 million gain on repurchases of 8.25% notes.

Our operating expenses decreased by $69 million or 27% to $185 million for 2009 compared to $254 million for 2008 driven primarily by lower fuel and utilities expenses as a result of lower gas prices. General and administrative expenses increased by $10 million to $79 million for 2009 compared to $69 million for 2008. The increases included compensation related expenses, professional services, allocated corporate level expenses, and insurance.

Net interest income for the year excluding interest on affiliated indebtedness was approximately $52 million or about $14 million higher than 2008, primarily due to the issuance of the 11.25% notes. The $12 million decrease in other income is primarily due to the $13 million gain on debt repurchases in 2008.

Maintenance capital expenditures were $20 million for 2009 compared to $40 million in 2008. The decrease is driven by several factors. First, (inaudible) connect expenditures were lower in our Gathering and Processing segment due to reduced producer activity in the first part of 2009 and to the addition of producer volumes behind central delivery points, which typically does not require expenditures on our part once the central delivery point has been constructed. Secondly, there were several one-time expenditures in our Logistics Asset segment in 2008, related to start-up of our NGLS unit, re-commissioning of our boiler at Cedar Bayou, and an operator change for an NGL pipeline system. Finally, we benefitted from generally lower overall supply and material cost, partially as a result of the economic environment, and also as a result of our focused efforts on cost control and cost savings beginning with the onset of the economic downturn in the second half of 2008. I should also note that there has been no change to our normal activity levels related to safety, environmental, and routine or periodic maintenance.

Now, let us move briefly to capital structure and liquidity. At December 31, we had approximately $410 million in capacity available under our senior secured revolving credit facility after giving effect to outstanding borrowings of $479 million, $69 million in letters of credit, and the reduction in borrowing capacity as a result of the Lehman default. We also had $60 million of cash on hand at year-end bringing total liquidity to approximately $470 million. Total funded debt at December 31 was approximately $908 million or about 52% of total capitalization. Our consolidated leverage ratio at year-end 2009 was approximately 3.2 times.

On January 19, 2010 we completed a public offering of 6.3 million common units at a price of $23.14 per common unit. The net proceeds of approximately $140 million from the offering are earmarked for general partnership purposes and were used to reduce borrowings under our revolver. Pro forma for the offer in proceeds year-end liquidity was approximately $610 million.

I will wrap up by touching on CapEx and hedging and then turn the call back to Rene. Our estimated 2010 capital expenditures are approximately $130 million with maintenance capital expenditures accounting for approximately 25% of that amount. With respect to hedging and our natural gas Gathering and Processing segment, we estimate that as we stand today, we have hedged the price exposure for approximately 80% of our equity volumes of natural gas and of combined NGLs and condensate for 2010 and approximately 70% for 2011.

That wraps up the financial overview, back to Rene.

Rene Joyce

Thanks Jeff. The partnership generated strong fourth quarter and full year results supported by stable Gathering and Processing volumes, continued recovery in the market and prices for NGLs and a record year for the Downstream Business. Based on information available to date, we believe 2010 North Texas volumes will approximate those of ’09, and San Angelo system wellhead volume should exceed those of ’09, and total 2010 Louisiana system inlet volume should approximate those of ’09 based on current frac spread projections for 2010.

Also you saw a press release on February 16, where we announced the signing of a ten-year NGL fractionation agreement with ONEOK Partners. The agreement act supports the expansion of Cedar Bayou Fractionator about 60,000 barrels per day or 28%. We have started the bid in auto process for long lead-time equipment [ph] is scheduled to commence commercial operations during the second quarter of 2011.

In addition to the announced expansion, we have decided to invest low-cost capacity improvement at the Cedar Bayou Fractionator, increasing Y grade fractionation capacity by an additional 18,000 barrels per day. Relative to the 60,000 barrels per day expansion, this incremental opportunity can be achieved at a lower investment cost per barrel capacity. Targa is currently in the process of contracting most of the space at rates similar to the rates in the ONEOK agreement. This project will occur on the same timetable as the 60,000 barrel expansion. This incremental investment also provides Cedar Bayou Fractionator’s option to process Y grade liquids or to produce purity ethane.

With that I will conclude by saying that we continue to make progress on new fee-based investment opportunities, potential opportunities for fee-based gathering assets in one of the shale plays as well as additional expansion opportunities within our Downstream Business.

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

Question-and-Answer Session

Operator

Thank you sir. (Operator instructions) The first question today comes from Gabe Moreen from Merrill Lynch. Please go ahead with your question.

Gabe Moreen – Merrill Lynch

Hi, good morning everyone.

Rene Joyce

Good morning.

Gabe Moreen – Merrill Lynch

Couple of operational questions, on the distribution marketing segment, I think Rene you mentioned some of the spot sales. Was that, I guess, at a level that was a big contributor and/or a greater than expected unusual effect?

Jeff McParland

Spot sales to some extent offset that one contract volume reduction that Rene mentioned. I do not think any of it is unexpected and if I am thinking about it – no, I am not thinking about it going forward but it is not unexpected, and it is part of our ongoing business.

Gabe Moreen – Merrill Lynch

Okay, and then on the Wholesale Marketing side, given how tight propane inventories have gotten, I was wondering I guess whether you saw opportunities either there in the fourth quarter or you have seen additional opportunities in the first quarter, even though inventory is pretty bad weather all along in the country and I think some operational glitches around the supply chain in certain places.

Jeff McParland

I think this is the coldest weather across the country that we have seen in a long time. Our demand was certainly up. We were fortunate that we delivered much of our product by rail as we do and we did very well with those deliveries meeting our customers’ demand. We actually sold our products quicker in the fourth quarter rather than waiting to the end of the winter and those were very profitable sales.

Unidentified Participant

I would also say that we are managing both our inventories and the supply chain, you were referencing, issues on a daily basis to try and meet our customers’ needs while maintaining our margins.

Rene Joyce

Gabe, the only disappointment I would say would be the refinery run rates that we have experienced particularly with the West Coast refinery. But otherwise, volume and margins are up.

Gabe Moreen – Merrill Lynch

Great, good to hear. And then just a big picture question, given the state of the world in your business, just remind me, I guess, if you could, maybe where you feel comfortable in terms of distribution coverage ratios nowadays?

Rene Joyce

I thought I’d get that question.

Gabe Moreen – Merrill Lynch

Might as well get it out of the way.

Rene Joyce

Yes, our distribution coverage was 1.6, and we alluded to factors that will bring that down in the first quarter. Distribution coverage was still a high percentage POP and otherwise we’d get a good bit of our operating margin from, the value of natural gas liquids and natural gas, even though the fee component has gone up significantly with the drop down of the Downstream Business. So, do we need 1.6 coverage? No, but we look at our business two or three years out, and we’ll continue to do so with regard to what we feel is appropriate coverage today, and also that what factors in for any distribution increase analysis that we go through. So, yes, we are feeling more say optimistic about our businesses today than several months ago, but it is still a two, three-year analysis with regard to what we feel is the appropriate distribution coverage, and the opportunity to increase distribution.

Gabe Moreen – Merrill Lynch

Okay, thanks.

Operator

Thank you. Our next question comes from Emily Wang from Raymond James. Please go ahead.

Emily Wang – Raymond James

Hello?

Rene Joyce

Hello, yes.

Emily Wang – Raymond James

Okay. Hi guys, congratulations on a good quarter. I was just wondering if you guys could talk a little bit about your hedging profile, specifically going into the outer years, say 2011 and beyond, and what kind of – how much do you guys expect to be hedged, and if you guys are looking to add additional hedges?

Jeff McParland

Okay. This is Jeff. As we mentioned in the call, we are at – for ’11 we are at about 70% hedged. It declines in outer years very much along the traditional profile that we have had through the life of the company, including the partnership. And we do actively monitor price conditions in the markets and look to layer additional hedges on as we go forward in time. So we typically describe our hedge program as one that has been heavily hedged in the near term a year or two, and declining percentages in the outer years and layering additional hedges on as we go through in time. I think at the end of last year, we also with respect to NGLs talked about hedging less or hedging also on a quarterly basis, rather than just on an annual basis, as we have been dealing with some pretty steep discounts a couple of years out in the NGL price periods, but we have been successful in putting additional hedges on across all the commodities, and we will look to maintain that profile going forward.

Rene Joyce

Yes, with respect to hedging natural gas liquids, primarily ethane or propane, two things there, one the discount going further out is pretty steep, and we are feeling more optimistic about the future pricing of both of those commodities. So, that is what it takes kind of entering into hedges on a short term, one or two quarters out basis going forward.

Emily Wang – Raymond James

Okay. And so going back to hedging on a quarterly basis, from the third quarter 10-Q to now; have you guys added any additional hedges?

Jeff McParland

You will see additional hedges across the third quarter through year-end –

Emily Wang – Raymond James

Okay.

Jeff McParland

That will be scheduled in our K in the usual manner, and we also have additional hedges on since year-end leading to the percentage as I mentioned on the call of approximately 80% hedged this year and 70 next year.

Emily Wang – Raymond James

And those will not be in the K or they will?

Jeff McParland

They will not.

Emily Wang – Raymond James

Okay.

Jeff McParland

We typically include the hedges only through the reporting period.

Emily Wang – Raymond James

Okay, thank you so much.

Jeff McParland

Thank you.

Operator

The next question comes from John Tysseland from Citigroup. Please go ahead.

John Tysseland – Citigroup

Hi guys, good morning.

Rene Joyce

Good morning, John.

John Tysseland – Citigroup

Couple of things. One, when you look at your, I guess some of your expansion opportunities, what is your comfort level in terms of being able to control cost there, how are you contracting that out, is it – are E&C companies willing to give you kind of turnkey type rates in just kind of how you are managing that process?

Rene Joyce

The largest project that we’re talking about is the fractionation expansion at Cedar Bayou. What we did here to reduce the uncertainties and risk as we spent $3 million worth in engineering upfront so that we had a much better and a much more complete set of drawings and bid packages. The other thing is, in that capital expansion is approximately $12 million worth of major equipment. We’re already out on the street with bid packages, and we are evaluating responses from those contractors and suppliers. We have already got part of our electrical equipment back in. That has come in at a lower price and earlier delivery. So we are hoping that that $12 million, we can beat that $12 million estimate that was in the engineering estimate, and we can get the project done a little bit quicker than second quarter of 2011. As far as the construction cost is concerned, those will be put out in five or six packages. Some contractors may bid on multiple packages, so we expect those to primarily be on a fixed price basis. There may be some smaller parts that would be down on time and material, but we think this is a very controllable expansion, we do not want any surprises, we want this to be done on time and under budget.

John Tysseland – Citigroup

So is your preference to go more on a fixed price or you are willing to give incentives for early completion or anything like that, you said something that is scalable?

Rene Joyce

We certainly will have incentives for early completion or penalties for late completion, in those fixed price contracts.

John Tysseland – Citigroup

Great, thank you. And then, also kind of switching to the wholesale business, can you remind us what you generally expect in terms of seasonality percentage if you take the annual kind of cash flows out of that business? How seasonal you should be fourth quarter and first quarter relative to the second quarter and third?

Rene Joyce

We do that by volumes, by quarter is probably the best way, I don’t think on an operating margin we have it broken out that way. But from a volume standpoint, Mike’s got it right in front of him.

Mike Heim

Yes, John, hi. I had look at the volumes that we have for 2009, a breakout of how we have made money by quarter in the wholesale segment. So, fourth quarter 2009 was kind of extraordinarily good year, so you might not want to await it like that, on a go-forward basis, but I just look at history and do it that way – but we have ’09 and ’08 out there by quarter.

John Tysseland – Citigroup

Fair enough. And then last question, when you look at the, for example, 80% hedge for 2010, is that equal across all components of both natural gas in your NGL exposure or for example is it – are you hedged last on ethane and propane relative to the rest of the equity stream?

Rene Joyce

At this time, as Jeff described, he gave it to you in two groups. One was natural gas and the other was natural gas liquids combined with condensate. As far as the product by product hedging for 2010, it is generally similar from ethane all the way through the heavies.

John Tysseland – Citigroup

Great, thanks guys.

Operator

(Operator Instructions) We have a follow-up question from Gabe Moreen from Merrill Lynch. Please go ahead.

Gabe Moreen – Merrill Lynch

Just a quick one for Jeff. The 23 million G&A run rate for the quarter, is that good to go forward or did I think you mentioned maybe one or two, little bit one-timers in there?

Jeff McParland

It does have some incremental expenses. One of the big differences was insurance, which had been running up every year over the last couple of years. We are not anticipating anything like that amount, if any increase in our property insurance or liability program rates this year. So that would not be a recurring increase. Now the compensation related expenses included both the, if you will, one-time impact of a very strong year as well as in our long-term incentive program, which has a performance component in it as well as an underlying – it is a shadow of program, if you will, on the underlying unit price. It is a significant change across the year from the December to December stock prices as well as the relative ranking of NGLS against the peer group that the performance factor is measured on. So, I think probably a better way to think of it is just look more at the historical G&A levels in there, the Q4 feels strong for a run rate kind of number.

Gabe Moreen – Merrill Lynch

Okay, great, thanks Jeff.

Operator

(Operator Instructions) There appears to be no further questions, please continue with any other points you wish to raise.

Rene Joyce

Thank you operator, and to the extent anyone has follow-up questions, please feel free to contact Jeff or any of us. Thank you again for your time this morning, and I look forward to speaking with you again.

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