Targa Resources' CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.13.14 | About: Targa Resources (TRGP)

Targa Resources Corporation (NYSE:TRGP)

Q4 2013 Earnings Conference Call

February 13, 2014 10:00 AM ET

Executives

Jen Kneale - Director, Finance

Joe Bob Perkins - CEO

Matt Meloy - SVP, CFO and Treasurer

Analyst

Darren Horowitz - Raymond James

Brad Olsen - Tudor, Pickering, Holt

T.J. Schultz - RBC Capital Markets

Ethan Bellamy - Robert W. Baird

Norman Kramer - Kramer Investments

Michael Blum - Wells Fargo Securities

Jon Yoder - Goldman Sachs

John Edwards - Credit Suisse

Operator

Good day, ladies and gentlemen and welcome to the Targa Resources’ Fourth Quarter 2013 Earnings Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session, and instructions will follow at that time. (Operator instructions) As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference Jen Kneale, Director of Finance. Please go ahead.

Jen Kneale

Thank you, operator. I'd like to welcome everyone to our fourth quarter and full year 2013 investor call for both Targa Resources Corp. and Targa Resources Partners LP. Before we get started, I would like to mention that Targa Resources Corp., TRC, or the Company and Targa Resources Partners LP, Targa Resources Partners or the Partnership, have published their joint earnings release which is available on our website www.taragaresources.com. We will also be posting an updated Investor Presentation to the website after the call.

Speaking on the call today would be Joe Bob Perkins, Chief Executive Officer, and Matt Meloy, Chief Financial Officer. Joe Bob and Matt are going to be comparing the fourth quarter and full year 2013 results to prior period results, as well as providing additional color on our results, business performance, and other matters of interest.

I would like to remind you that any statements made during this call that might include the Company's or the Partnership's expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor provision of the Securities Acts of 1933 and 1934.

Please note that actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings, including the Partnership's Annual Report on Form 10-K for the year ended December 31, 2012, and quarterly reports on Form 10-Q.

With that, I will turn it over to Joe Bob Perkins.

Joe Bob Perkins

Thanks, Jen. Welcome and thank you to everyone for participating. Besides Matt, Jen and myself, our several other members of the management team will be available to assist in the Q&A session. For today’s call I’ll start off with high level review of performance and highlights. We’ll then turn it over to Matt to review the Partnership’s consolidated financial results and segment results and other financial matters. Matt will also review key financial matters related to Targa Resources Corp. And following Matt’s comments I’ll provide some concluding remarks and then we’ll take your questions.

We’re pleased to announce that 2013 was a record year for Targa on multiple fronts; record adjusted EBITDA of $629 million; record Logistics & Marketing division operating margin of $424 million, driven by key organic growth projects that came online during the year; record Field Gathering & Processing volumes; record distributable cash flow of $440 million; and of course increased distributions for TRP and increased dividends for TRC.

We placed over $1 billion of projects in service in 2013, largely supported by fee-based contracts. This impactful level of strategic CapEx was combined with a unique strategic acquisition of the Badlands properties, which we closed at the end of 2012.

Yes, 2013 was the transformative year we predicted. The underlying fundamentals of our business are very strong and 2013 EBITDA was on the strong side of our guidance. We’re pleased that we ended 2013 with a very strong fourth quarter driven by; first, higher than expected contributions from key organic growth projects that came online in the second half of the year, particularly fractionation and export projects at Mont Belvieu and Galena Park.

Demand for propane and butane exports was very robust in Q4. In the first phase of our export expansion project came online in September for Q4 operations. Our new facilities performed very well, exceeding our expectations; second, full year contribution and increasing quarter-over-quarter contribution from our Badlands operations in North Dakota; third, increasing Field Gathering & Processing volume growth year-over-year as producers kept the pedal to the floor, continuing to develop acreage across our basins of operations; and fourth, higher NGL and natural gas prices in Q4 that helped offset the operations impacts of very cold weather in the quarter and helped offset some of the lower prices realized during the first part of the year.

And with those positive drivers, our record year was accomplished despite the impacts of the fire at our Saunders plant that reduced Versado volumes and an incident to the third-party NGL pipeline from our VESCO facility that impacted VESCO performance earlier in the year. The additional export and fractionation capabilities drove another year of record operating margin for our Logistics & Marketing division, up 39% compared to 2012. This was driven by, daily LPG export volumes that more than doubled as a result of the September completion of phase one of our expansion, coupled with increased export volumes through improved operational efficiency at Galena Park and Mont Belvieu in the first three quarters of the year.

We also saw continued strong producer activity across all areas of our Field Gathering & Processing segment. Volumes were up in North Texas, Sand Hills and SAOU and they would have been up at Versado except for that temporary negative impact of the Saunders fire. We also benefited from contributions from the Badlands assets in 2013.

With increases each quarter, we raised the Partnership’s full year 2013 distribution 11% over 2012, consistent with our original 2013 full year distribution guidance of 10% to 12% that we gave you in the fall of 2012. At the TRC level, our full year 2013 dividend was 35% higher over 2012, above our original 30% plus dividend growth guidance given for the year. We continue to expect to deliver full year 2014 distribution growth of 8% to 10% at the Partnership and expect to exceed 25% TRC dividend growth for 2014. Later in the call I’ll discuss our expectations for 2014.

Our 2013 distribution coverage tracked just as we said it would, finishing slightly over 1.0 times for the year and our 1.4 times coverage for the fourth quarter reflects the strong performance of our businesses with several expansion projects online. I would also like to discuss our thoughts on some of the domestic propane market issues you may have been reading about, particularly the impact in the Midwest. While Targa doesn’t have assets in the Midwest and do not even have a Midwest region, we have responded to the market with our transportation assets and terminals outside the region helping to serve the market needs.

For example, we’re actively moving product or helping others move product to areas in need and our facilities and equipment are running essentially full out to help with the temporary logistics constraints. But even with available propane and storage we have reached physical limitations of our transportation assets, mainly trucks, railcars, barges and rack capacity and just how much propane we can move.

The factors impacting the tightness in local propane markets have been widely published and discussed. For example inventory levels going into the winter for the Midwest were the lowest in 10 years, made worst by a late and extensive crop drying season. By contrast Gulf Coast inventories were slightly above the 10 year average as we entered winter and then the coldest winter in over 20 years hit the Midwest in successive ways. Plus, the region experienced some key supply disruptions from two Midwest refinery shutdowns, major pipeline outage, lowering the typical region supply which normally supports market. In that context, we support the emergency transportation measures such as extending working hours for truckers taken by states to accommodate the regional issues and we’re continuing to do what we can to help meet the market demand.

I’d like to conclude our introductory remarks with a great big pat on the back to our entire team for Targa’s performance in 2013, and Targa’s very strong positioning for the future. I think the following data-points are pretty impressive; 2012 adjusted EBITDA of $515 million; 2013 adjusted EBITDA of $629 million; and 2014 EBITDA guidance of $750 million or higher, and that is combined with additional growth projects in process that will contribute in the future. We really could end the call on that note, but I’ll turn it over to Matt in return perhaps repeating myself in a few minutes. Matt?

Matt Meloy

Thanks Joe Bob. I’d like to add my welcome and thank you for joining our call today. Joe Bob discussed some full year 2013 records and highlights, so let’s now turn our attention to Q4 results. Adjusted EBTIDA for the quarter was a record 215 million, compared to 131 million for the same period last year. The increase was primarily driven by a 73% increase in operating margin from our Logistics & Marketing division resulting from a full quarter of contributions from our export expansion and CBF Train 4.

Our Gathering & Processing division margin increased by 40% driven by contribution from Badlands and higher inlet volumes across all our field G&P systems, except Versado which was negatively impacted for two months due to the fire at the Saunders plant, Saunders is now running again and Versado would have also had higher volumes if it were not for the temporary interruption.

Overall operating margin increased 49% for the fourth quarter, compared to last year and I will review the drivers of this performance in our segment review. As we have mentioned before please note, that we benefit from the receipt of certain minimum contract payments at year that we do not otherwise see in the first three quarters of the year. In Q4 approximately 15 million of our operating margin was from the receipt of take-or-pay, reservation fee deficiency or other such contract payments. Net maintenance capital expenditures were 18 million in the fourth quarter of 2013 compared to 18 million in 2012.

Turning to the segment level, I’ll summarize the fourth quarter’s performance on a year-over-year basis starting with our Gathering & Processing business. Our Field Gathering & Processing operating margin increased by approximately 56% compared to last year driven by contribution from Badlands, increasing volumes and higher commodity prices. These effects were partially offset by the impact of an early and cold winter, third-party operational issues and the fire at the Saunders plant in Versado.

Fourth quarter 2013 natural gas plant inlet for the Field Gathering & Processing segment was 785 million cubic feet per day, a 9% increase compared to the same period in 2012. All of the Field G&P business units other than Versado had higher natural gas inlet for the quarter. Natural gas inlet volumes increased by approximately 16% of those North Texas and SAOU and 4% at Sand Hills. For the segment, we also benefited from higher commodity prices in the quarter. Condensate prices were 12% higher, natural gas prices were 7% higher and NGL prices were 7% higher compared to the fourth quarter of 2012.

Fourth quarter results for the Field segment also benefited from volumes in our Badlands system where natural gas inlet and crude oil volumes were up significantly in Q4 and where operation’s effectiveness is improving. We previously indicated that we expected our Badlands crude oil gather volumes to be at least 20% higher in Q4 over Q3 and actual volumes ended up being 24% higher, illustrative of the progress that we continue to make in extending our system footprint even with the onset of winter.

In the Coastal Gathering & Processing segment, operating margin increased 6% in the fourth quarter compared to last year. Although we saw a reduction in total natural gas inlet volumes in the Coastal segment NGL production increased by 5% and operating margin increased by 6% as a result of the volumes moving to more efficient and better located plants in the target system.

Turning now to our Logistics Assets segment, fourth quarter operating margin increased 110% compared to the fourth quarter 2012 due primarily to higher export and fractionation volumes partially offset by increased operating expenses associated with additional assets in service and higher system maintenance cost.

Export activity at our Galena Park marine terminal on the Houston Ship Channel increased again this quarter with the first phase of our international export expansion project complete and running. We benefited from robust international demand for both propane and butane during the quarter and loaded an average of 124,000 barrels a day or 3.8 million barrels per month. In the Marketing and Distribution segment, operating margin for the segment increased 25% over the fourth quarter of 2012 due primarily to increased LPG export activity.

With that, let’s now move briefly to capital structure and liquidity.

At December 31st, we had 395 million of outstanding borrowings, under the Partnership’s 1.2 billion senior secured revolving credit facility, due 2017. With outstanding letters of credit at 87 million revolver availability was about 718 million at year-end. Total liquidity including approximately 57 million of cash on-hand was approximately 775 million.

At December 31st, we had borrowings of 280 million under our accounts receivable securitization facility. Early in December, we entered into an amendment to increase our facility to 300 million and extend the termination date to December 2014.

On a debt compliance basis, which provides us adjusted EBITDA credit for material growth projects that are in process but not yet complete and makes other adjustments, our total leverage ratio at the end of 2013 was 3.6 times, near the middle of our stated range of 3 to 4 times on a compliance basis.

In the fourth quarter, we received gross proceeds of approximately 142 million from equity issuances under our, At-The-Market equity program which allows us to periodically sell equity at prevailing market prices. In 2013 we were very pleased to raise approximately 525 million of gross proceeds under this program. Subject to market conditions, we believe that we could potentially use the ATM program to meet your equity needs in 2014, while always reserving the ability to utilize other equity operating forms if appropriate.

So far this year in the ATM, we have raised gross proceeds of 57 million and we expect to be back in the market in the near future.

Next, I’d like to make a few comments about our hedging and capital spending programs for the year. The contributions from fee-based capital projects placed in service in 2013; our fee-based operating margin was over 50% in every quarter increasing to approximately 62% in Q4, and 57% for full year 2013. We expect operating margin to be approximately 60% to 65% fee-based during 2014.

For the non-fee-based operating margin relative to the Partnerships’ current equity volumes from Field G&P, we estimate that we have hedged approximately 70% of 2014 natural gas and approximately 20% of 2014 combined NGL and condensate. We’re less hedged than in previous years, but our diversity and fee-based improvements reduce the need to hedge commodity prices to previous percentages across all commodities.

As you probably know the recent run-up in propane and ethane prices is primarily in the spot market, and in the prior month with significant backwardation in the forward market, perhaps driven by forward market liquidity most energy commodity pricing is faced with significant backwardation, and we do not feel the need to hedge additional NGL volumes at this time, but we will continue to evaluate the appropriate timing for additional NGL hedges overtime, as well as natural gas and oil hedges.

Moving to capital spending, we now estimate approximately 650 million of growth capital expenditures in 2014 with approximately $1 billion of growth CapEx placed in service. We continue to expect maintenance CapEx net or interest to be approximately 90 million.

Next, I’ll make few brief remarks about the results of Targa Resources Corp. On January 14th, TRC declared a fourth quarter cash dividend of $0.6075 cents per common share or $2.43 per common share on an annualized basis, representing an approximately 35% increase for the full year 2013 versus the full year 2012. TRC’s standalone distributable cash flow for the fourth quarter of 2013 was 27 million and it declared 26 million in dividends for the quarter. At year-end TRC has 84 million in borrowings outstanding under its 150 million senior secured credit facilities and 9 million in cash resulting in total liquidity of 75 million.

That concludes my review. So I’ll now turn the call back over to Joe Bob.

Joe Bob Perkins

Thanks Matt. We know that year-end call always seems a little long and we thank you for your attention. To wrap-up the final portion of our prepared remarks, I’d like to briefly review some thoughts on 2014. At this time last year, we said that 2013 would be a transformative year for Targa, given the $950 million that we spent on growth CapEx helping drive a record on a number of fronts and further increasing our scale and diversity, combined with integrating Badlands, I’d say 2013 was truly transformative.

After declaring transformative success for 2013, I wonder if we can say that 2014 will be transformative also. I think we asserted that during our November Investor & Analyst Meeting and we all still believe that is true today. We will continue to deploy significant capital in 2014 in organic growth opportunities across our business. Continued producer activity is driving opportunities across our Gathering & Processing and Downstream businesses and we’re not expecting slowdown in 2014.

Although it has only been a couple of months since we forecasted $590 million in major project CapEx for our Investor Day. We have updated that list and have approved a couple of projects that were on the development radar screen. The 2014 estimated total for the major project list is now 650 million after we made additions in cost and timing estimate updates. Our Board recently approved the construction of a new pipeline in the Permian Basin in associate, compression, dehy and treating facilities.

That new pipeline will connect our SAOU and Sand Hill systems. It’s about 35 miles of pipe, about $30 million of investment, including the facilities and it is a strategic investment providing us with some key synergies. And will allow us to move volumes across the two systems, and serve producers between the systems. In the near-term it provides a very quick augmentation of processing capacity that was filling up at Sand Hills, creates an almost immediate ability to serve the high activity and growing producer volumes in the Sand Hills area by sending volumes to High Plains.

It also helps more quickly fill the more efficient 200 million a day High Plains Plant, which is currently under construction and expected to be in service in mid-2014. It provides flexibility in additional insurance for targeting our customers. And the pipeline allows us time to contemplate the optimum location or an additional plant capacity across the two interconnected systems which have multiple plants and multiple NGL and residue takeaways. Some of us have wanted to do this for a long time.

Our Board also approved an additional plant in the North Dakota, doubling the current processing capacity in support of robust producer activity in the Bakken/Three Fork plays. We’re still working on the details and timing for that new plant. But I am happy to say it was approved. I mentioned in the expected mid-2014 completion of our High Plains Plant, and I want to update you on some of the other projects that you know are currently underway.

After significant delay due to greenhouse gas permitting issues, our 200 million a day Longhorn plant in North Texas is expected to be in service in the second quarter. Producers continue to be active in the Barnett combo where we have been using a third-party to process has that is in excess of our current capacity. So we’re glad that Longhorn will soon be in service.

When Longhorn is operational it will be more efficient and more flexible on ethane rejection than our other plants. This plant and its residue and NGL outlets will also increase North Texas system flexibility, while creating reserve processing capacity to meet continued growth and production overtime.

Moving to Galena Park and Mont Belvieu, the second phase of our international export expansion is underway. As we have mentioned previously, the expansion will be completed in stages during 2014 and will be fully operational by the third quarter of 2014. We’ve already completed the new 12 inch pipeline and it is in service at this time. In North Dakota, we’re able to make a lot of progress at Badlands in 2013, although it started slower than anticipated we made significant progress during the year and are continuing to expand our system and capabilities to support producer customers.

In 2014 we will continue to build out the system with an estimated additional $190 million of CapEx spending. For 2013, we exceeded the volume expectations that we provided you for Q3 and provided you for Q4 and we expect to double our average 2014 volumes over 2013. Our primary frustration as we’ve said before with Badlands is the pace of progress on the right-of-way of the Fort Berthold Indian Reservation. We will continue to work with the tribe, the BIA and others to improve the situation. We don’t have the same kind of right-of-way issues on the portion of our system that is not located on the Reservation.

I should also mention the current status of Train 5, we received that permit in late December and the timing of construction will be dependent on market demand. In December, we announced that we had entered into an LOI with Kinder Morgan to form a joint venture for new fractionation facilities to help support the needs of potential customers on the Kinder MarkWest Utica Marcellus Texas Pipeline that’s a mouthful, and we’ll abbreviate it UMTP.

We’re currently working with Kinder Morgan and jointly discussing our services with producers and the result of UMTP’s open season will help determine that timing. Similarly, the design for and timing of Train 6 will be determined by growing market demand whether from the Utica Marcellus or elsewhere the Permian, the Eagle Ford, we expect this demand to continue as long as E&P companies are active and continuing to seek access to the market hub.

So, as we have discussed the fourth quarter was the strongest quarter ever for Targa, and it is obvious that Q4 2013 exceeded our expectations, primarily as the result of some factors that might not affect 2014. You certainly would not want to extrapolate take-or-pay reservation deficiency payments received in the fourth quarter into each of the subsequent quarters. Also as we’ve discussed before, our 2014 guidance does not include activity at our export terminal beyond what we had contracted or had expected to contract at long-term market rates.

In Q4 we benefited from high international demand for propane and butane, both long-term and short-term or so called spot. Early in Q1 we continue to benefit from high international demand for exports, both spot and our long-term contracts.

More recently we have seen some of that short-term spot demand diminish as prices in U.S. rose relative to other global markets. It’s difficult to forecast what will happen to spot demand exports for the rest of 2014 and such spot export demand and spot rates are not included in our guidance as we’ve said before.

On other business fronts, despite weather impacts, particularly in Q4 we’re pleasantly surprised by volume performance across the board. The volume improvements overtime are already included in our guidance. Those who were at our Analyst Day know that we used a $0.90 per gallon weighted average NGL price in our 2014 guidance. Obviously we’ve seen prices significantly higher thus far in Q1, but again it’s difficult to predict what will happen with prices for the rest of the year.

For example, our weighted average NGL prices for January range from $0.93 a gallon up to a $1.14 a gallon, and that same average barrel is currently at a $1.1 a gallon. So given some of the factors I just discussed, you probably can tell that we feel comfortable indicating at this point that we expect 2014 EBITDA to be 750 million or better.

I warned you earlier in the call I would have to repeat myself at the end. I really think that the following EBITDA data-points are pretty impressive and should be kept in mind. 2012 adjusted EBITDA of $515 million, followed by 2013 adjusted EBITDA of $629 million, followed by a 2014 EBITDA guidance of $750 million or better and additional growth projects in process that will contribute to the future.

As I mentioned earlier in the call, we continue to expect to deliver full year 2014 distribution growth of 8% to 10% at the Partnership and expect to exceed 25% TRC dividend growth for 2014.

So with that, we’ll open it up to questions. I’ll turn it back over to you operator.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question comes from Darren Horowitz from Raymond James. Please go ahead.

Darren Horowitz - Raymond James

Good morning guys. Joe Bob thanks for all the color around spot shipments regarding propane and butane. I just have one quick question there and this is with regard to the Galena Park terminal. I know that you guys can do somewhere between 5.5 million and 6 million barrels a month. Can you just remind us what the spot volume was and more importantly looking forward I know that you were thinking about engineering to do a Dock 5 so does the thought process changed there with regard to the contracted mix or if you move forward with the Dock 5 expansion would it be similar to the first two expansions where it was just about all take-or-pay long-term contracts?

Joe Bob Perkins

That was a little longer than one quick question, but thank you Darren. I did provide some color on what was going on with exports. You are correct. Our published nameplate capacity is 5.5 million to 6 million barrels after the second phase of our expansion. The additional Dock work that you mentioned is underway and there is nothing different about our expectations of the need for that additional Dock work. I think I answered the question. Didn’t I?

Darren Horowitz - Raymond James

Yes. No I appreciate that and Matt, just a quick question back to your guidance and the basis for the 2014 guidance. Can you just give us a little bit more color around the hedge percentages for NGL and condensate production that’s built in? And also if you could just outline the processing contract mix between what you guys have allocated for fee TOL or POP I’m just trying to get a sense for the variability for those West Texas assets?

Matt Meloy

Yes. Sure. We had, I think we said about 20% of our NGLs and condensate is hedged into ’14 and that’s included in our guidance. The contract mix we have really hasn’t changed a whole lot overtime for the Field out in the Permian or Texas primarily percentage of proceeds that’s commodity sensitive and that’s the volume that we do hedge. We did provide a sensitivity in our guidance that had a $0.05 NGL move but equate to about a 2% EBITDA and I think we’re still comfortable with that sensitivity.

Darren Horowitz - Raymond James

Okay. And then Joe Bob last question, just curious about the development or the evolution of all those Badlands assets. Obviously when you look at the ramping gas inlet volumes and crude oil gathering volumes and what you’ve laid out for 2014 guidance, it would argue that you would probably have to spend more than $180 million in CapEx to keep up with the production. So I’m just curious how much incremental gathering capacity do you think that you’ll need going into 2015 and more importantly it would seem like adding incremental 20 million cubic feet a day processing plants is probably not going to be enough. So if you could just give us your thoughts on how ’15 in terms of CapEx and development could shape up that would be helpful? Thank you.

Joe Bob Perkins

Okay. First to kind of correct so everybody understands, we’ve got about 38 million a day of processing capacity right now in the Badlands, but that’s a bit of a miss number because you beat NGLs not Mcfs and this is very high liquid content gas. But in any event that 38 million a day rating for our current capacity with some work in the additional plant will go up to about 80 million a day, so we’re doubling the plant capacity hopefully here in the recently short-term. And $180 million of CapEx really is our best estimate for 2014 to try to meet the producer demand and most of that is focused on just handling our dedicated acreage as we build out the footprint and the plant for that footprint.

Darren Horowitz - Raymond James

Thank you.

Operator

Thank you. And our next question comes from Brad Olsen from Tudor, Pickering. Please go ahead.

Joe Bob Perkins

Good morning Brad.

Brad Olsen - Tudor, Pickering, Holt

Hello everyone. Hey guys quick couple of questions. Obviously quarter was very strong versus the 750 and up guidance range you’ve provided and you also provided some helpful adjustments like the 15 million of contract true-ups. Would it be fair qualitatively to say that when thinking about kind of $750 million annual run rate and the difference between that and the 250 million less the 15 million of true-ups that the remaining margin uplift that you realized in Q4 was largely due to Dock activity above and beyond what was contracted?

Joe Bob Perkins

Brad I did enumerate, I will kind of repeat that we had high international demand for spot, I’ve said that first so it was the largest factor and we’ve benefited from that. That secondly, we had volume increases that exceeded expectations despite a very cold winter. And I said thirdly, that prices were up considerably from the $0.09 a gallon. And without giving you the exact numbers that’s pretty much in rank order.

Brad Olsen - Tudor, Pickering, Holt

Okay. And so the actual fee-based volumes on the Dock were the biggest factor in, I guess I can just imply from all that that those were significantly above what the actual contracted volumes on the Dock were expected to be?

Joe Bob Perkins

All we had in our guidance was what the contracted volumes were expected to be.

Brad Olsen - Tudor, Pickering, Holt

Okay, great. And another question on kind of a condition of the export market as you see it. Obviously most expansions including yours on the Dock side have been focused on refrigerated international grade propane. Is there anything that you’re seeing as a result of inventories getting drawn down here domestically on the propane side that shifted market interest towards more expansions focused on the butane market?

Joe Bob Perkins

Well, I won’t try to speak to other person’s expansions, but our original capability at both propane and butanes semi wrap. And if you went back overtime that was probably up to even a third butane. As we expanded our export project it gave us the capability to handle more butane as well and most of our term contracts give customers the right for butanes. You add refrigeration you can refrigerate butane at pumping capability and pipes and dock capability the butane can go with and sometimes it goes on the same ships.

Brad Olsen - Tudor, Pickering, Holt

Okay, great. So the latest international expansion, I guess it’s appropriate to think of that as being butane capable as well as refrigerated propane capable?

Joe Bob Perkins

Yes. And we’ve got separate systems and yes you have to think of it that way, that’s the right way to think about it Brad.

Brad Olsen - Tudor, Pickering, Holt

Okay, great. And one more question, I know I probably asked this one on every quarterly call. But are you seeing anything in the condensate market, where you operate that would either encourage you or discourage you incrementally as you think about potentially setting up some kind of splitter or export facility on the Gulf Coast for heavier NGLs and least condensates?

Joe Bob Perkins

We’re still involved in discussions I think that that demand remains high and we’ve got some facilities that are pretty well positioned for the right project.

Brad Olsen - Tudor, Pickering, Holt

Alright, great. Thanks a lot guys.

Matt Meloy

Yes. Thanks Brad.

Operator

Thank you. And our next question comes from T.J. Schultz from RBC Capital Markets. Please go ahead.

Joe Bob Perkins

Good morning T.J.

T.J. Schultz - RBC Capital Markets

Good morning. Good color, just if some of the spot exports continue or just in general as you look at ’14 to see some of these results trend above your expectations on EBITDA, how do you look at balancing kind of growth versus coverage longer-term? Would your preference be to build additional coverage this year, or is there an upside to that kind of targeted distribution growth range, if some of these trends continue?

Joe Bob Perkins

I understand the question. But you kind of started with an if, it was high just because of some unexpected spot cargoes, then I'm going to build coverage with it. And that was how you started the if. I feel very comfortable with our distribution and dividend guidance, and our dividend guidance had a level or exceed that level.

T.J. Schultz - RBC Capital Markets

Okay, great. Everything else I had has been asked. Thanks.

Joe Bob Perkins

Okay, thanks.

Operator

Thank you. And our next question comes from Ethan Bellamy from Baird. Please go ahead.

Ethan Bellamy - Robert W. Baird

Good morning guys. What could, or better in EBITDA guidance look like assuming everything runs smoothly and conversely if we had a $75 crude price this year, what would be the biggest kind of threat to guidance, would it be volumes or the CapEx budget, I just want to understand better the kind of a upside and the downside scenarios?

Joe Bob Perkins

That's two separate questions, on the first question the or better, depending on the causes, I don’t know another way to explain my or better, I think I underlines it in my notes, if I didn’t emphasize it I meant to. And I don’t think it’s going to be worse. Then you said what happens with $75 crude price. Is that a differential caused to WTI? Is that a world recession? And what are the expectations of producers for what the price is going to be in the future will determine their activity. As long as producers remain active I don’t see downside to our activity, or the guidance.

Ethan Bellamy - Robert W. Baird

The Panama Canal expansion looks like it might be hitting some trouble with the contractors there. Do you think that that caps the LPG export opportunity or would the volumes just go elsewhere?

Joe Bob Perkins

We don’t think it caps it. And I am not sure I’m not the Panama Canal expert. We know some people believe that the Panama Canal will sort of arb the difference in transportation and that it won’t matter, it will be a little bit, transportation will be a little bit shorter but they'll pay the difference at the Panama Canal. So none of our contracts are dependent on the Panama Canal getting finished, some of our contractors go beyond that dimensions, I'm sure it's impacting how the users of those contracts think about their shipping. But I don’t see it as a major difference. I see it as a potential upside to exports longer term once people figure out how to use it.

Ethan Bellamy - Robert W. Baird

Okay. With respect to the propane deficit and price spike recently, do you see that as transitory or are there any lasting changes or impacts or opportunities for you from recent pricing?

Joe Bob Perkins

My view is that the recent pricing and logistics issues are a transitory issue. The longer term issues and trends haven’t changed. This was a very, very cold winter and propane wasn’t in the right places.

Ethan Bellamy - Robert W. Baird

Excellent. Thank you very much.

Operator

Thank you. (Operator Instructions) And our next question comes from Norman Kramer from Kramer Investments. Please go ahead.

Norman Kramer - Kramer Investments

Good morning Joe Bob, that was a really good quarter. My question revolves around ethane. Have you been getting enquiries regarding exports of ethanes and do you have any thoughts about this area of plans to think about going into this part of the business?

Joe Bob Perkins

We have had discussions about ethane exports. We understand the technology. We can do that. The challenges of an export project; start first with challenges on the other side of the water combined with a willingness both that customer to term up supply at Mont Belvieu-based pricing. If we received such a contract we would undertake such a project, and it will take a couple or three years to get it done after the announcement.

Norman Kramer - Kramer Investments

Okay, thank you for that. And a second question, I know from your presentations that you have I think three facilities on the ship channel. Are there any expansion plans on the other two that are in some sort of your thought process at this point?

Joe Bob Perkins

Well, taking them in order of activity, the Galena Park expansions have been going on for some time and we’ve got a little more land and a little more space and the ability to do more things in the future at Galena Park.

Moving next to Channelview, great deal of activity, we acquired acreage after, we first acquired the project we have added tankage and we got other projects in the works. And I sort of addressed that relative to the condensate splitter question a little while ago. Patriot, we purchased, has less activity on it. But it's nicely located most likely to help with condensate splitter or other petroleum logistics opportunity, but could have some utilization associated with our LPG exports down the road, it’s nicely situated.

Norman Kramer - Kramer Investments

Okay. That does it for me. Thanks very much.

Joe Bob Perkins

Thank you, Norman.

Operator

Thank you. And our next question comes from Michael Blum from Wells Fargo. Please go ahead.

Michael Blum - Wells Fargo Securities

Hi, good morning everybody.

Joe Bob Perkins

Good morning, Michael.

Michael Blum - Wells Fargo Securities

Just a couple of quick questions really, one, you’ve just seen a lot of assets trade-ins in West Texas and the Permian. And I am just curious, if that’s changed anything from a competitor’s standpoint from your perspective or are your systems really just kind of captive to where you are sitting?

Joe Bob Perkins

The major assets changing hands in the Permian have not really affected competitive landscape in my opinion, the big change is just so much activity in this giant trend going from vertical to horizontal. And there is a lot of room to go on that too, if you look at the percentage of horizontal in the Permian Basin. We like our position and we try to play primarily in, around and between those positions. SAOU nicely positioned on the East side of the Permian Basin, Sand Hills and what you might call sort of Southwest of the Permian Basin and we’re linking those two together, which really gives you sort of coverage and ability from the West side of Sand Hills all the way to the East side of SAOU.

Then I’d like to mention Versado just because it’s so fun to see that throughput volume growing after waiting for the shale revolution to get to it and we’re expanding with pipe to underutilize processing capacity there.

Michael Blum - Wells Fargo Securities

Thanks, and that’s very helpful. In the past you’ve talked about a shallow backlog of projects and I think the $1.5 billion type range. Obviously you’ve got the 650 for 2014. Has that number changed at all, is that still kind of in the range that you’re looking at?

Joe Bob Perkins

Those are our official numbers right now, I think they’ve put out a new Q1 Investor Presentation on the web for this caller or immediately afterwards and that’s what those numbers will still reflect.

Michael Blum - Wells Fargo Securities

Okay. And then my last question actually on that presentation, I was just curious if there was anything in that slide deck that can be different from our incremental to what’s been discussed on this call today.

Joe Bob Perkins

No, there should not be. I repeat.

Michael Blum - Wells Fargo Securities

Okay, good. Thank you.

Operator

Thank you. And our next question comes from Jon Yoder from Goldman Sachs. Please go ahead.

Jon Yoder - Goldman Sachs

Good morning. Obviously a great quarter but just wanted to get a sense of the, I guess the financial impact of the throughput that was constrained by operational issues and the cold weather in Q4 if you guys could provide that number?

Joe Bob Perkins

There were ups and downs associated with that description. First on the Gathering & Processing side, plants performed very well considering the weather, but there was some impact during the cold waves. That impact was more than offset by sort of the unexpected strong performance not in the cold waves and pricing. Then the wholesale propane and our natural gas liquids logistics businesses, just worked very, very hard to try to help meet demand and there were some cost involved with that and there were some profits involved with that. I sort of gave a description of impact in Q4 that might not repeat in 2014 and it didn’t quite hit that list.

Jon Yoder - Goldman Sachs

And as far as what you’re seeing in the first quarter has some of those trends kind of rolled through so far, what do you say?

Joe Bob Perkins

We had a repeat of some of that in the first part of January.

Jon Yoder - Goldman Sachs

And looking at the Bakken on the natural gas infrastructure side, are you guys -- how was the outlook there? I know obviously you have your hands full with your crude oil expansion program there, but in terms of adding on a processing plant or incremental infrastructure, what’s the outlook there?

Joe Bob Perkins

Yes I guess in addition to saying that we were adding processing capacity, because that was large enough on the radar scope that we thought we should mention it, Board approved it outside our authority. We are -- we continue to be active along with needing more processing capacity you have to sort of -- we continue to add pipe and more importantly we’re adding compression that meet those customers’ needs and is that the color you were looking for?

Jon Yoder - Goldman Sachs

Sure, yes I guess beyond the additional -- yeah that’s fine. Thanks.

Operator

Thank you. And our next question comes from John Edwards from Credit Suisse. Please go ahead.

John Edwards - Credit Suisse

Yes, good morning. Great quarter. Just following up the last question, so net was weather a positive or a negative on the fourth quarter? And so far in the first quarter has the net been positive or negative?

Joe Bob Perkins

I mean there is mix -- it would depend on whether you’re in a Field or you’re in the NGL marketing division. I mean if you look across the Field segment we report by area the volume and you’ll see slight incremental downs in North Texas, SAOU. The volumes were down 15 million a day across our Field and now has impacts of the Saunders fire as well as some weather impacts to the other areas. In the wholesale business it’s seasonal and we expect more margin to be earned in Q4 and Q1, but we don't necessarily get into the specifics of those, but if you can go back and look at historical quarters in trends?

Matt Meloy

I would say if you include the impact of price into weather, that you would have to say that weather was net positive to us, every way I’ve cut the numbers, but that’s because of the price part in there and because we performed very well despite really rugged temperatures, I’m proud of the operations.

John Edwards - Credit Suisse

Great. Thank you very much.

Operator

Thank you. And I’m not showing any further questions at this time. I would now like to turn the call back to Mr. Joe Bob Perkins for any further remarks.

Joe Bob Perkins

Thank you operator and thank you everyone who attended, and for your patience on this call. We love talking about the business, hope we’ve covered the things you wanted to cover. If you have any other questions feel free to contact Jen, Matt or any of us. Good day.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!