Targa Resources' CEO Discusses Q1 2014 Results - Earnings Call Transcript

| About: Targa Resources (TRGP)

Targa Resources Corporation (NYSE:TRGP)

Q1 2014 Earnings Conference Call

May 1, 2014 10:30 a.m. ET


Joe Bob Perkins - Chief Executive Officer

Matthew Meloy - Chief Financial Officer and Treasurer

Jennifer Kneale - Director, Finance


Jerren Holder – Goldman Sachs

Ethan Bellamy – Robert W. Baird

T.J. Schultz – RBC Capital Markets

Chris Sighinolfi – Jefferies


Good day, ladies and gentlemen and welcome to the Targa Resources’ First Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a 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 the conference over to Jen Kneale. You may begin.

Jennifer Kneale

Thank you, Operator. I'd like to welcome everyone to our first quarter 2014 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.targaresources.com. We will also be posting an updated Investor Presentation to the website later today.

Speaking on the call today will be Joe Bob Perkins, Chief Executive Officer, and Matt Meloy, Chief Financial Officer. Other management team members are available for the Q&A. Joe Bob and Matt are going to be comparing the first quarter 2014 results to prior period results, as well as providing additional color on our results, business performance, and other matters of interest, including our revised 2014 financial outlook that was released on March 31, 2014.

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, 2013, and quarterly reports on Form 10-Q.

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

Joe Bob Perkins

Thanks, Jen. Welcome and thanks to everyone for participating. For today’s call, I’ll start off with a high level review of our record setting first quarter 2014 performance highlights, including discussing some of the factors that resulted in our reported quarterly results being higher than our preliminary results announced on March 31. We will then turn it over to Matt to review the Partnership’s consolidated financial results, its segment results and other financial matters for the partnership. Matt will also review key financial matters related to Targa Resources Corp. Following Matt’s comments, I’ll provide some concluding remarks and we’ll include some additional color around our 2014 financial outlook and our outlook for growth capital projects and expenditures, then we’ll take your questions.

Our reported first quarter adjusted EBITDA was a record $232 million as compared to $132 million for the first quarter of last year, up $100 million rounded to the nearest million. This 75% increase was driven by record quarterly operating margin in the Logistics & Marketing division and record quarterly operating margin in the Field G&P segment. the Logistics & Marketing operating margin was 79% higher than the first quarter of 2013. Likewise, Field G&P operating margin was 75% higher in the first quarter 2014 versus the first quarter 2013. Our reported first quarter adjusted EBITDA was also higher than our preliminary release by more than our normal conservatism. Therefore a few comments on the increase. We typically have a number of pluses and minuses when numbers are reported for a quarter versus our preliminary estimates. However, for Q1 the adjustments were almost all positive as we benefited from business driven upward adjustments across most of our business units.

The following business units all had meaningful increases, averaging more than a $1 million per business unit, North Texas, SAOU, Badlands and Sand Hills, each within the Field G&P segment. LOU, Southwest Louisiana and VESCO, each within the coastal G&P segment, LAA and CBF, each in the logistics asset segment and NGL marketing, post-sale marketing and commercial transportation, each within the marketing and distribution segment. So the upward adjustment to final realized quarterly numbers is due to positive business drivers or multiple business units and maybe a bit of conservatism.

Let’s move to more performance highlights and discuss year-over-year results for the first quarter, starting with the Field Gathering and Processing segment, which produced operating margin of $94 million, which as previously mentioned was a record quarter representing that impressive increase at 75% versus the first quarter of 2013. We’re very pleased with our first quarter results, particularly given the impact of the severe cold weather that occurred throughout the quarter. Our margin increase was driven by the combination of a number of factors, including significantly higher year-over-year contribution from Badlands, higher commodity prices and an increased throughput volume across all our systems except for Versado. For some Saunders area, connections had just now returned to pre power levels. With the activity for the south part of Versado at highs versus recent years, we continue to expect that Versado volumes, like all other Field G&P volumes, to be higher or significantly higher in 2014 than in 2013.

The logistics assets segment produced quarterly operating margins of $97 million, up 72% compared to last year, primarily driven by higher LPG export activity and higher fractionation activity, including some reservation payments received in both areas. Despite the temporary impact of severe cold weather on domestic propane of logistics and on periods of higher [marketability] of propane prices during the quarter, overall long term and short term demand for exports was strong.

Comparing the first quarter of 2014 versus the first quarter of 2013, we’ve obviously benefited from full quarter contributions from phase 1 of our international export expansion and from our 100,000 barrel per day train 4, both of which came online in the second half of 2013. These two projects are also somewhat related in that capability of train 4 to make low ethane propane helps support the export effort.

Operating margins for our marketing and distribution segment were 90% higher in the first quarter of 2014 than the same time period last year, primarily as a result of the increase of LPG export activity and also due to higher NGL marketing margins and higher wholesale propane margins from increased logistics driven opportunities and a favorable market environment in the first quarter.

Distributable cash flow for the quarter of $189 million resulted in distribution coverage of approximately 1.6 times, based on our first quarter declared distribution of $76.25 or $3.05 on an annual basis. Consistent with what we had said previously regarding the impact of a single quarter’s performance on our distribution and dividend policies, we want to reiterate that we use multiyear views for our dividends and distributions when we declare them or when we announce guidance relative to our expectations.

The last two quarters of performance have exceeded our expectation and we expect to use that out performance to increase our coverage while continuing to steadily grow our distributions and dividends with that same multiyear view. The partnership’s first quarter distribution represents a 9% increase compared to the first quarter of 2013. At the TRC level, the first quarter dividend of $64.75 or $2.59 annualized represents a 31% increase compared to the first quarter of 2013. So for 2014 we continue to expect partnership distribution growth of 7% to 9% and are clearly on track to be on the high side of that expectation. At the TRC level, we continue to expect dividend growth of more than 25%.

That wraps up my initial comments, and I’ll hand it over to Matt.

Matthew Meloy

Thanks Joe Bob. I’d like to add my welcome and thank you for joining our call today. As mentioned, adjusted EBITDA for the quarter was $232 million compared to $132 million for the same period last year. The increase was primarily the result of higher LPG export activity and fractionation activity in our logistics and marketing division, a higher contribution from Badlands and higher commodity prices and volume throughput in our Field G&P segment. Overall operation margin increased58% for the first quarter compared to the first quarter last year. I will review the drivers of this performance in the segment reviews.

Net maintenance capital expenditures were $12 million in the first quarter of 2014 compared to $19 million in the first quarter 2013. We continue to expect $90 million of net maintenance capital expenditures for the full year of 2014.

Turning to the segment level, I’ll summarize the first quarter’s performance on a year-over-year basis and we’ll start with our Gathering and Processing segments. Field Gathering and Processing operating margin increased by 75% compared to last year, driven by increased commodity prices, higher natural gas inlet volumes and higher crude oil gathering volumes. First quarter of 2014 natural gas inlet volumes for the Field Gathering and Processing segment were 853 million cubic feet per day, a 17% increase compared to the same period in 2013. The overall increase in natural gas inlet volumes was due to increases in the following business units; 108% at Badlands, 27% in North Texas, 19% at SAOU and 9% at Sand Hills. Inlet volumes at Versado were 4% lower during the same period last year due to some producer delays in returning some affected Saunders area wells to pre-fire levels. We continue to expect growth across all our Field G&P systems in 2014.

Crude oil gathered increased to 75,000 barrels per day in the first quarter, 137% increase versus the same period last year and highlights our continued progress in North Dakota. We also continue to expect 2014 average Badlands crude gathered volumes to approximately double 2013 average volumes. For the segment, natural gas prices increased by 49%, NGL prices increased by 19% and Condensate prices increased by 4% compared to the first quarter of 2013.

Turning now to the Coastal Gathering and Processing segment, operating margin increase 11% in the first quarter compared to last year. The increase was primarily driven by higher NGL sales prices and the receipt of some short term volumes with higher average GPM at LOU, which we do not expect to replicate going forward. Gross NGL production decreased slightly as a result of the impact of severe weather and some third party operational issues. For the segment, natural gas prices increased by 45%, NGL prices increased by 12% and Condensate prices decreased by 11% compared to the first quarter of 2013.

Next I’ll provide an overview of the two downstream segments. Starting with the Logistics Assets segment, as Joe Bob mentioned in the opening, first quarter operating margin increased 72% compared to the first quarter of 2013, driven by higher LPG export and fractionation activity including the receipt of reservation fees in both areas. For the quarter, we loaded an average of 3.5 million barrels per month of LPG exports and also benefited from reservation fees for two VOGCs that were scheduled but not loaded. We continued to improve our capabilities to load vessels that go into park and are now also benefiting from a new additional 12 inch pipeline from Mont Belvieu to Galena Park being in service. The addition of the pipeline is part of the broader second phase of our international export expansion which we are completing in stages through the third quarter of 2014. The pipeline is completed, the dock and refrigeration are expected to be in-service ahead of schedule and a balance of the project should be completed as expected.

In the marketing and distribution segment, operating margin for the segment increased 90% over the first quarter of 2013, due primarily the higher LPG export activity and higher NGL marketing and wholesale margins related to a more favorable market environment.

With that, let’s now move briefly to capital structure and liquidity. As of March 31, we had $355 million of outstanding borrowings under the partnerships’ $1.2 billion senior secured revolving credit facility due 2017. With outstanding letters of credit of $97 million, revolver availability was about $748 million a quarter after. Total liquidity, including approximately $81 million of cash on hand was about $829 million. At quarter end, we had borrowings of $234 million under our $300 million accounts receivable securitization facility.

In the first quarter we received net proceeds of approximately $150 million from equity issuances under our At-The-Market equity program which allows us to periodically sell equity at prevailing market prices. We continue to be very pleased with the success of our ATM program and expect to continue to use the ATM program to raise equity in 2014.

Total funded debt on March 31 was approximately $2.8 billion or about 55% of total capitalization and our first quarter combined debt to EBITDA ratio was 3.0 times.

Next, I’d like to make a few comments about our fee-based margin, hedging and capital spending programs for the year. For the first quarter of 2014, our operating margin was approximately 60% fee-based and we continue to expect operating margin to be about 60% to 65% fee-based during the year.

During the first quarter we added some additional hedges for natural gas to our non-fee-based operating margin relative to the partnership’s current estimate of our equity volumes from Field Gathering and Processing. We estimate that we currently have hedged approximately 70% of the remaining 2014 natural gas and approximately 20% of remaining 2014 combined NGL and condensate volumes.

When we updated our 2014 financial outlook on March 31, we indicated that we had not made any changes to our price tag for2014. We also provided an updated sensitivity that a $0.05 change and a weighted average price of the partnership’s typical NGL gallon would correspondingly change 2014 adjusted EBITDA by approximately 1%. Last fall, our regional guidance sensitivity was a $0.05 change in NGL price would change 2014 adjusted EBITDA by approximately 2%. The reduction in this sensitivity is driven by higher fee-based margin expected during the rest of the year and previously contemplated as well as a realization of one quarter’s financial results.

Moving on to capital spending, as announced on March 31, we now estimate approximately $700 million of growth capital expenditures in 2014. The most visible changes to our capital expenditure estimates were the addition of Badlands spending for our new 40 million a day plant that may be in service by the end of the year, inclusion of some spending in 2014 in our petroleum logistics business related to the construction of the condensate splitter and our channel view terminal, and of course the revised estimate also includes some small projects and a reevaluation of the expected timing of existing expenditures.

Next, I’ll make few brief remarks about the results of Targa Resources Corp. Targa Resources Corp standalone distributable cash flow for the first quarter of 2014 was $27 million and TRC declared approximately $27 million in dividends for the quarter. On April 15, TRC declared a first quarter cash dividend of $0.6475 per common share or $2.59 per common share on an annualized basis, representing an approximately 31% increase over the annualized rate paid with respect to the first quarter of 2013. As of March 31, TRC had $72 million in borrowings outstanding under its $150 million senior security credit facility and $14 million in cash, resulting in total liquidity of approximately $92 million. We continue to expect a 27% effective cash tax rate for TRC for the full year in 2014.

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

Joe Bob Perkins

Thank you, Matt. As mentioned at the beginning of my remarks, I will now provide some additional color around our revised 2014 financial outlook and an update on the status of our growth capital projects. When we first provided you with our 2014 financial outlook back in early November, we had only been operating Phase 1 of our newly completed international export expansion for less than two months, part of which was a very rapid startup and testing phase. With this limited view of our operational capabilities at Galena Park, as well as limited view of export market demand for our not yet proven facility, we provided guidance at the time that only included the contracted cargos to date. We’ve now been loading low ethane propane, servicing VLGCs and continuing to serve our HD5 and butane business for more than six months. We have clearly benefited from the high levels of export activity and higher than expected facility utilization and see continued customer interest in short term and long term contracts for our services. Since that time we have also experienced favorable activity in volumes across all our businesses.

As a result of our activity at Galena Park and other factors, we raised our financial outlook on March 31to provide an updated expected guidance range of $820 million to $880 million for 2014 adjusted EBITDA. The biggest drivers in the upward guidance revision are; the successful completion of the first quarter where results clearly exceeded our initial expectations. The inclusion of already contracted short term and long term export volumes at the contracted rates and some expected volumes beyond those that were already contracted, and increased volume expectations for the year across our Field Gathering and Processing segments as I previously mentioned. Because there is still a range of outcomes around key factors, we are providing a range that account for upsides and downsides, in particular for the range of potential export performance as well as for potential upsides and downsides relative to our volume expectations in our other businesses.

We also want to remind you, that similarly to the last two years, we expect the second quarter EBITDA to be lower than the first quarter EBITDA. It may be the lowest quarter in the year for 2014 as a result of the impact of seasonality on several of our businesses and the startup of additional projects that will occur throughout the year.

Moving to the status of our major growth projects, I’m very pleased to announce that our 200 million cubic feet a day Longhorn plant in North Texas is expected to be fully operational this month. Longhorn will be online earlier than was expected when we finally broke ground and will also be under budget. At SAOU, we expect our 200 million cubic feet a day High Plains Plant to be completed by the end of the second quarter. We are also in the process of constructing the 35 miles of pipeline that will interconnect our Sand Hill system and our SAOU system and expect that pipeline to be completed along a similar timeframe to the High Plains Plant. And with activity around all of our Permian Basin remaining at high levels, we are looking at other opportunities to expand in the area.

Moving to North Dakota, we are pleased with our continued volume growth, despite a very cold winter. Our assets and our Targa employees performed very well in the first quarter. And we were able to gather 2.4 times more crude and 2.1 times more natural gas than during the same time last year. The volume growth that we are experiencing is evidence of our progress and significantly expanding our system and capabilities. Producers around our system continue to be incredibly active and there’s still a lot of opportunity for improvement. We are adding as announced another 40 million cubic feet a day natural gas processing plant at Badlands that may be in service by the end of 2014. Natural gas flaring remains a major issue in the Williston Basin and we are doing our best to serve our producer customers by increasing our capabilities.

In late December 2013, we announced that we had signed a joint venture with Kinder Morgan to provide fractionation services downstream up there in MarkWest Utica Marcellus Texas Pipeline, abbreviated UMTP. UMTP is continuing to gain traction with producers, but as mentioned in Kinder’s Q1 2014 earnings call, UMTP does not yet have commitments. Given the continued success of producers in the Permian, Eagle Ford, Mid-Continent as well as the partnerships growing equity volumes, there are other potential commercial needs for train 5 beyond UMTP, and commercial discussions are ongoing related to train 5 capacity. Obviously the timing of Train 5 is subject to the conclusion of sufficient commercial arrangements, but we do have the permit in hand and we do have the land for the construction and we expect to proceed sometime in the near future.

Similarly, the timing for Train 6 is subject to commercial demand and I believe that Train 6 is simply a question of when and not if. As mentioned earlier in the call, we’re completing the second phase of our international export expansion in stages and our operational capabilities will continue to improve as each stage is completed with phase 2 expected to be fully operational in the third quarter of 2014. We continue to benefit from significant demand for long term and short term contracts at Galena Park.

For the remainder of 2014, we have an average of 4.2 million barrels of exports per month contracted. That 4.2 million barrels of exports includes both short term and long term contracts. Looking forward to 2015, we have a similar amount already contracted under just our longer term arrangements. Some of those longer term arrangements extend as long as 2020. Obviously as we complete our expansion projects, our export capabilities for next year are even greater than this year, providing potential volume upside.

On March 31, we announced the partnership approved construction of an approximately $115 million, 35,000 barrel per day condensate splitter at our existing Channelview facility. We’ve begun the permitting process for the splitter and its associated infrastructure and expect that construction will take approximately 18 months after receipt of all our permits.

So given everything we’ve discussed today, it’s safe to say that we’re very pleased with Targa performance to date and feel very positive about the future. We continue to execute across our business units and demand is robust for our upstream and downstream services. Our assets benefit as producer activity remains high and we now see no slowdown at all around our Field Gathering and Processing areas of operations.

Our 2014 outlook of a range of $820 million to $880 million is about 30% to 40% over the adjusted EBITDA record we set in 2013. We think our performance in the first quarter, got us off to a really good start.

With that we’ll open it up to questions. I’ll turn it back to you operator.

Question-and-Answer Session


(Operator Instructions) And the first question comes from Jerren Holder of Goldman Sachs. Your line is open.

Jerren Holder – Goldman Sachs

Good morning. Just wanted to start off with I guess the commentary around distribution growth and understand that you guys are taking a multiyear outlook in making those decisions. But looking back over the past two years, the rate of growth has been in the double digit range. So I guess going forward with the strong coverage and expectations for the year at least, should we be thinking about the multiyear growth outlook to be in the double digit range as well?

Joe Bob Perkins

I kind of go back to that question often and I understand asking us to provide multiyear guidance. We continue to try to give it to you one year at a time and our guidance for 2014 should be viewed with our historical performance and we’re comfortable with that 7% to 9% at the MLP and the 25% plus at Targa Resources Corp.

Jerren Holder – Goldman Sachs

Thank you. Thanks for the color on the growth projects. Just wanted to touch upon some of the stuff on your backlog, seeing one of the condensate splitter announcements take place, what is the outlook from the demand perspective for incremental condensate splitters and what regions are you seeing that activity in?

Joe Bob Perkins

What we’ve said publicly about those discussions with potential customers is that we were having discussions about splitters, plural. We’ve announced one and I think I could still say we are having discussions about splitters plural. The interest in activity is high for parties such as Targa who are well positioned to execute on that.

Matt Meloy

We also have just to bring to your attention, the investor presentation we’ll be posting shortly after this call and you’ll see in our backlog where we outlined $1.5 billion of additional growth projects, not yet approved. They’re on the official CapEx forecast. You’ll see a condensate splitter – I was going to say additional condensate splitter. So we have another one still on that backlog.


And the next question is from Ethan Bellamy of Baird. Your line is open.

Ethan Bellamy – Robert W. Baird

One of the more interesting things to occur recently is the success of Continental Hawkinson up in the Bakken and Harold Hamm says he thinks the Bakken is going to do 2 million barrels a day. Street consensus would be a lot lower than that. You guys have had Badlands for a year now. Just curious about where you think wells per section is going to shake out and is there a chance that Harold is right about 2 million barrels a day? And if so would that mean another billion dollars you guys can spend up there potentially?

Joe Bob Perkins

That was a lot of questions. I’ll share my perspective. From the time we first started looking at the Williston basin, my perspective has continued to go up. To some extent we suffer by looking backwards at type curves and well performance and what producers are doing. Harold is in a good position to be looking forward. And each time we think we understand how many wells there are going to be per section, we end up raising our internal estimate. There are better parties to be the official spokesman for what that’s going to look like. And it really does vary by subsection of the Bakken/Three Forks, but not unlike the Permian Basin. Producers continue to find more and more of it to be productive and continue to improve the technology such that each completion is better than the last one in a particular area. That’s very, very good for our Badlands position and for our potential to expand that Badlands position.

Ethan Bellamy – Robert W. Baird

Okay. Fair enough. Another big picture question, a little closer to home. TRGP has been one of greatest value creations stories in the history of the MLP sector. The last stage for GPs tends to be bringing them in to the MLP. Is that something you guys have look at any time recently? And is that something we should consider as part of our investment framework?

Joe Bob Perkins

We look at everything, but it’s not on our near term radar scope. There’s not a reason to do that right now. We’ve got lots of projects to pursue at MLP. We are not constrained by the burden of IDRs or costs to capital which is the argument you usually see. And whereas I wouldn’t say never, I’d certainly would say don’t expect it anytime soon.

Ethan Bellamy - Robert W. Baird

Helpful. Thank you so much.

Joe Bob Perkins

I haven’t gotten a question in this area so I want to correct a Perkins misspeak. It may not be the only one I made, but as I was describing our relationship with Kinder Morgan, I probably got a little off script. It’s a good thing that people listen to me instead of what was printed on a page for me. But I said joint venture it just came out. That’s not what it is. It’s a letter of intent in a relationship that we are working very closely to try to make things happen. So we should strike the joint venture from the transcript part, but I’ll continue to remain positive about their project and us working with their project.


(Operator instructions) And the next question is from T.J. Schultz of RBC. Your line is open.

Joe Bob Perkins

I know you were just getting ready to ask me that question about ...

T.J. Schultz – RBC Capital Markets

Exactly. I’ll stay far away from that. But the $1.5 billion projects under development I guess with that list with the slides but maybe you could quickly add what else has may been added or taken off that committed list or what’s now still under development? Is it just the additional splitter possibly?

Joe Bob Perkins

Yeah. Really the only change is the additional splitter. Most of the things we talked are Badlands additional expansion, Permian additional expansion, train 5, train 6. So those things are still in continued development.

T.J. Schultz - RBC Capital Markets

Okay and then how do we think about timing there for some of those projects to move into the committed bucket and when would you expect some of the timing for those projects to be put in place? And if you could talk a little bit about the expected returns that you’re looking at on that CapEx?

Joe Bob Perkins

We’ve had, I guess it’s almost a tradition of showing you the ones that have been approved on one page and then showing the ones that are publicly known we’re working about on another page and then we have a tradition of not showing you the ones that aren’t publicly known we’re working on. So if you think of those three pages, we’ve got a pretty good track record of projects rolling from one page to the other, including the ones that have been approved getting done on time and on budget. We’ve given some examples of what we think the timing are. It’ll take that long for the first condensate splitter project to be approved. I’d like to think that we would get another one approved sometime in the future. I use the term the near future for Train 5 because I believe that and people have been looking at for a while and know that we have the permit in hand and know we have the land, know that we have internal needs for it.

I really think that’s all we’ve said publicly about what moves from the second page to the first page and I’m not getting ready to say anything about what’s moving from the third page to the second page. Our Permian activity, just recently I think additional activity on the Permian was sometimes defined as pipes and plants. We announced the 35 mile plant and it’s already in progress and under construction. We continue to look at other opportunities there. We’ve remained very active. Additional Permian work could be in the future. It may not fall the super near future, but certainly in the future. Is that helpful?

T.J. Schultz – RBC Capital Markets

Good, thanks. That’s all I got. Appreciate it.

Joe Bob Perkins

You asked for returns also, I’m sorry. We’ve characterized the returns on both of those sheets as pretty attractive. Most of them leverage our existing assets and that’s good. The range of the first page, which is the approved ones that we’ve said officially is

Matthew Meloy

Five to seven times Bob is our principle.

Joe Bob Perkins

And some of those on that list have been better than that range, as you know. I don’t expect that the second page, the not yet approved projects under development look very much different at all. In the third page, it looks like the second page.


And the next question is from Chris with Jefferies. Your line is open.

Chris Sighinolfi – Jefferies

Thanks for all the added colors this morning and in particular, the insight into Galena and the operations sort of the educational learning progress as you’ve had that facility online. I’m wondering if I could just explore a little bit more in terms of the delta from 4Q to 1Q. And then sort of from a spot cargo activity perspective, any additional color you could provide into that. Apologize if you’ve said it and I’ve missed it. And then in addition to, as you refine the operations of that asset, maybe the thoughts around contracting more volumes on a firm basis and if you give an update as to sort of how much is open versus contracted at this point in time.

Joe Bob Perkins

Let’s understand all of the questions, Chris. Let me try to summarize with what we carefully chose to do from a competitive standpoint. For the remainder of 2014, we have an average of 4.2 million barrels of exports contracted. And you know we’re increasing our capacity along that time too, but I’m not drawing the capacity increase curve. We have said that once phase 2 is done that we’ll officially be 5.5 million barrels to 6 million barrels per month of capacity. Now, we also then carefully said that for 2014, relative to that 4.2 million barrels a month remaining average, we’ve already contracted for a similar amount in 2015. So it’s clear that we’ve got an increasing amount of term for early 2014 to now 2014, 2014 to 2015, we’ve got more term. I don’t want to provide more color for competitive reasons on that exact mix for the remainder of the year. I sort of did provide what the mix looks like right now and 2015 because looking out into 2015 we probably haven’t booked spots that far in advance. And beyond that color, I’m just not comfortable with it right now.

Chris Sighinolfi – Jefferies

Okay. No, I appreciate the competitive dynamic and your added color. I guess we were just thinking about as a number – we talked about this at your Analyst Day, but obviously you and Enterprise have done quite well in the export dynamic to date. Seems to me like a lot of midstream players would now like to get involved and we have a slate of projects on the drawing board. And so, just in that sense, trying to get a feeling for the appetite internally given the asset performance to contract over time more and more of that capacity. So that was just where I was coming from. I do appreciate your comments on this and everything else this morning. Thanks.


(Operator instructions).

Joe Bob Perkins

Thank you all very much. If you have any follow up questions, feel free to give Jen or Matt or myself, any of us a call. Good day.


Ladies and gentlemen, this conclude today’s program. You may now disconnect. Good day.

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