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Calumet Specialty Products Partners, L.P. (NASDAQ:CLMT)

Q1 2014 Earnings Conference Call

May 07, 2014 01:00 PM ET

Executives

Noel Ryan - Head of IR

Jennifer Straumins - President and COO

Pat Murray - CFO

Analysts

Theresa Chen - Barclays Capital

Steve Sherowski - Goldman Sachs

Edward Westlake - Credit Suisse

TJ Schultz - RBC Capital Markets

Cory Garcia - Raymond James

Operator

Ladies and gentlemen, welcome and thank you all for joining the First Quarter 2014 Calumet Specialty Products Partners Earnings Call. My name is Ryan. I will be the operator in today’s event. And at this time all participants are in listen-only mode. Later we will be opening the lines to facilitate questions-and-answers. (Operator Instructions) And as a reminder we are recording the call for replay.

And now it’s my pleasure to turn the call over to your host, Mr. Noel Ryan, Head of Investor Relations.

Noel Ryan

Thank you, Ryan and good afternoon and welcome to the Calumet Specialty Products Partners first quarter 2014 results conference call. Appreciate you joining us today. Leading today’s call is Jennifer Straumins, our President and COO who will provide an update on our business during the first quarter and the opportunities for growth as we look ahead to the remainder of the year. Next Pat Murray, our CFO will provide detail on our financial performance during the first quarter. At the conclusion of our prepared remarks, we will open the call for questions.

Before we proceed, allow me to remind everyone that during the course of this call, we may provide various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Such statements are based on the beliefs of our management as well as assumptions made by them and in each case based on the information currently available to them. Although our management believes that the expectations reflected in such forward-looking statements are reasonable, neither the Partnership, its general partner nor our management can provide any assurances that the expectations will prove to be correct.

Please refer to the Partnership’s press release that was issued this morning, as well as our latest filings with the SEC for a list of factors that may affect our actual results and could cause them to differ from our forward-looking statements made on this call. As a reminder, you may download a PDF of the presentation slides that will accompany the remarks made on today’s conference call as indicated in the press release that we issued earlier today. You may now access these slides in the Investor Relations section of our website at www.calumetspeciality.com.

And with that, I’d like to hand the call over to Jennifer.

Jennifer Straumins

Thank you Noel and good afternoon to all of you joining us on today’s call. Please turn your attention to page four of the slide deck for a high level overview of our first quarter results. Calumet has started the year on a strong note. We reported a record first quarter adjusted EBITDA of $82.7 million compared to $53.2 million during the fourth quarter of 2013 and $80 million in the first quarter 2013. Excluding the impact of $89.6 million in non-recurring debt extinguishment cost, net income for the first quarter of 2014 was $39.8 million, or $0.50 per diluted unit.

Our Calumet -- our specialty product segment had a strong first quarter with total gross profit for the segment of 60% year over year as increased sales of Calumet's packages and synthetic products, a category inclusive of the Royal Purple, Bel-Ray, Quantum and TruFuel premium brands, contributed to an improved higher margin product mix. In this category Royal Purple and TruFuel were the real standouts during the first quarter.

In our Fuel Products segment, nearly 40% year over year decline in benchmark refined product margins was partially offset by strong seasonal production of gasoline and diesel at our major fuel refineries. In addition to sequential improvement of our San Antonio refinery which operated at record rates during the first quarter following the completion of a crude oil unit expansion in December of 2013.

Distributable cash flow nearly doubled during the first quarter 2014 to 49.4 million versus the prior year period. The year over year increase in DCF was driven primarily by an increase in adjusted EBITDA, a decline in turnaround cost and a decline in replacement and environmental capital expenditures when compared to the first quarter 2013.

Please turn to page five at this point, in 2013 our distribution coverage remained below one times in large part due to planned maintenance conducted at our fuel refineries during the second, third and fourth quarters of last year. With this maintenance behind us, distribution coverage has shown a marked improvement, as our first quarter distribution coverage ratio approached one time supported by a combination of higher adjusted EBITDA and lower required capital spending.

In March we completed a 900 million senior unsecured notes offering. This offering which represents the largest notes offering in our history achieved a 6.5% coupon, the lowest we’ve ever obtained in an unsecured financing. This offering helped us achieve several objectives. First, it allowed us to redeem 500 million of senior unsecured notes carrying a much higher coupon of (9 and 3/8%) [ph] which will result in annual interest savings of approximately $9 million.

Second it helped fund the acquisition of Anchor Drilling Fluids, an accretive acquisition that we expect to bring more than $30 million of incremental specialty products EBITDA to our business each year.

And last but not least, we took the remaining proceeds of cash to the balance sheet which will help provide a supplementary funding to our ongoing slate of organic growth projects.

At quarter end we had 714 million in cash and availability under our revolving credit facility. In late March we completed the acquisition of Anchor Drilling Fluids for a little over seven times estimated 2013 EBITDA. Through this expensive line of drilling and completion fluids, Anchor delivered solutions that reduced drilling and completion time, upped the control reservoir formation pressures and maximized oil and gas production contributing to improved well economics for end users. This transaction positions Calumet as one of the leading independent supplier of drilling fluids to the domestic E&P industry, a sector that continues to enjoy rapid growth due to advances in joint technology and increased exploration activity and identifies an emerging unconventional resource plays.

The addition of Anchor to Calumet’s asset portfolio also serves to increase to Partnership specialty product sales and the business that we expect to generate consistent cash flow with limited ongoing capital investments. We currently saw lubricant and solvent products into the oilfield services businesses so this acquisition helps to further grow our presence in this market. Also during the quarter we acquired United Petroleum, a wholesale supplier and distributor of premium motor oils, coolants and greases. United owns the Quantum brand which is one of the fastest growing lubricant brands in the industry. United currently sells more than 160 Quantum branded products to more than 50 distributors with sales in 35 states. Through the Quantum brand, United sells products into the passenger car heavy duty truck, farming an industrial end use markets through its distribution partners.

The team at United has brought together a highly effective sales and marketing organization that we intend to leverage, as we seek to further increase our addressable markets while growing our customer base. The Quantum brand will join the Royal Purple and Bel-Ray lubricant brands to provide a global customer base with a unique fully integrated product offering.

After completing the 3,000 (barrel a day) [ph] crude unit expansion project at our San Antonio refinery in December, our San Antonio refinery operated at record rates during the first quarter 2014. Once the TexStar pipeline comes on stream this year, San Antonio will enjoy lower feedstock transportation cost, as it will begin to receive Eagle Ford crude oil supply by pipeline, a cheaper alternative than having trucks bring crude into the Elmendorf terminal which is now how the refinery is currently being supplied.

On the package and synthetic side of the business, Royal Purple and Calumet Packaging, the maker of TruFuel both had great quarters. The highlight of the quarter for this area of our business was the launch of Royal Purple in the Walmart store network. Thus far sales into Walmart are tracking ahead of expectations.

And finally with regards to our Dakota Prairie refinery construction North Dakota, our Missouri esters plant expansion and our Montana refinery expansion, all these projects remain on schedule. Dakota Prairie is scheduled for completion by year-end of this year. Our Missouri plant expansion will be completed by mid-2015 and Montana expansion is still targeted for completion by the first quarter of 2016.

Turning now to Slide 6, 7 and 8. Our record first quarter performance is largely thanks to the underlying strength of our specialty products segment. As you can see on the charts on Slide 7, the primary reason the distributable cash flow more than doubled year-over-year with a replacement environmental internal cost declined by more than 20 million in the first quarter 2014, versus the first quarter 2013.

On Slide 8, we see the distribution coverage benefited from the slower capital spending together with the modest year-over-year increase in adjusted EBITDA.

Turing to Slide 9, from a benchmarking perspective, we are currently seeing a yield that is more than 300 basis points higher than the Alerian MLP Index, which captures 75% of available MLP market capitalization. We also continued to trade at a premium yield versus a variable distribution MLP refining universe. As we’ve said in the past, we remain committed to pay a robust cash distribution much as we have for the last 33 consecutive quarters.

We have ample liquidity to help support payment of this distribution and we are well on our way to fully covering the quarterly distribution given improved business fundamentals. Given this backdrop, we believe our company has significant upside potential particularly as we begin to layer on approximately 200 million of incremental EBITDA contributions from the organic growth projects online between 2014 and early 2016.

Turning to Slide 10, specialty products gross profit per barrel was very strong during the first quarter increasing on both a quarter-over-quarter and year-over-year basis. Specialty products gross profit increased by $50 million representing 79% of our total first quarter gross profit, again, an improved product mix drove the bulk of this growth. Within the fueled products segment, both gasoline and diesel gas spreads declined significantly on a year-over-year basis. RINs expense declined year-over-year which was a modest benefit to the fuel products gross profit.

Turing to Slide 11; while our growing portfolio of global lubricant brands remain a fraction of our overall business, the opportunity for increased market share in these higher margin premium products market are significant. As I mentioned earlier, Royal Purple and TruFuel both had strong quarters, the teams joining us from United Petroleum and [indiscernible] are still being integrated into the business, but we expect them to deposit contributors this year as well particularly given their ability to help us cross sell our entire portfolio of products on a more global scale. We are capitalizing on the ability to target customer relationships at a holistic level identifying real time opportunities to sell a wider range of products to our key accounts.

Turning to Slide 12; here we provided an overview of some of our recent capital market related activities. As I mentioned to you earlier, we completed our largest notes offering in history in March which really helps to further bolster our cash position exiting the first quarter. Also in March we announced the 300 million aftermarket equity issuance program. This program is not only more cost effective way of raising equity than a traditional overnight equity offering, it also allows us an orderly transmission of small volumes of units into the market as conditions warrant.

Importantly, this program is used by many MLPs and should be viewed as one of many potential funding options available to us. During the first quarter of 2014 we do not sell any units under the program and given our current liquidity position, have no immediate need to sell units under these programs although we reserve the right to use this program at our discretion.

As of March 31, 2014 we had more than 530 million of availability under our revolver and 180 million in cash, the combination of which we believe provides a significant liquidity paid of the distributions and fund the organic growth projects and working capital requirements.

Now turning to Slides 13 and 14; we can discuss our acquisition of Anchor Drilling Fluids and what it means for Calumet. From a strategic perspective, this acquisition positions us as one of the leading independent producers and marketers of drilling fluid solutions in the United States. During the past decade North America has witnessed a surge in oil and gas production supported by the application of advanced drilling techniques and unconventional resource plays.

Anchor’s market leading position as an established independent producer of drilling fluids coupled with its deep base of established customers and expansive distribution network position us as a key beneficiary to trend toward increased exploration of production spending. We believe the execution of a vertical integration strategy, one that puts us closer to our crude oil suppliers and customers represents a long term competitive advantage for the Partnership. As a key supplier of drilling fluids, the oil and gas producers in the field, the Anchor acquisition helps to further expand our relationship at the well head.

One of the potentially overlooked aspects of this transaction helps us expand our growing portfolio of logistics assets. Prior to this transaction, Calumet earned 12.5 million barrels of crude and product storage capacity right across more than 1,300 chains, release approximately 2,700 railcars and we owned crude rolling terminals in Montana and North Dakota and we also own a fleet of trucks. Anchor augments this expanding list of logistics assets to include multiple domestic facilities many of which serve as distribution and storage centers.

Looking ahead, I am pleased with the momentum evident in our business. Our fuel plants are operating on plan, demand for our product is stable to growing in many of our core markets, our organic growth projects remain on schedule and we remain well capitalized to support the future growth of the business. Overall, we are well positioned for a profitable growth during 2014.

With that I’ll hand the call over to Pat Murray, our CFO.

Pat Murray

Thanks Jennifer. Let’s all turn our attention to slide 16 for a discussion of adjusted EBITDA. We believe the non-GAAP measure of adjusted EBITDA is an important financial performance measure for the Partnership. Adjusted EBITDA as defined under our financing instruments increased to 82.7 million for the first quarter of 2014, up from 80 million in the same quarter of last year. As illustrated in the chart on slide 16, the bulk of the year over year increase in adjusted EBITDA was due to increased specialty products, average selling prices per barrel, favorable product mix and increased package and synthetic specialty product sales.

Fuel product margin despite increased hedging gains declined on a year-over-year basis. Higher natural gas cost and increased crude oil sales to third parties contributed to higher operating and transportation cost respectively.

We encourage investors to review this section of our earnings press release found on our website entitled non-GAAP financial measures and the attached tables for discussion and definitions of EBITDA, adjusted EBITDA, and distributable cash flow and financial measures and reconciliations of these non-GAAP measures to the comparable GAAP measures.

Now turning to slide 17, fuels refining economics declined significantly on a year-over-year basis during the first quarter. The benchmark Gulf Coast 211 crack spread averaged $19 per barrel during the first quarter of 2014 compared to $30 a barrel in the same period of last year. The year-over-year decline in the 211 crack spread was driven primarily by a sharp drop in the gasoline cracks and to a lesser degree, the diesel crack. Crude oil price differentials remain volatile throughout the quarter, a factor which further impacts gross profit in the fuel segment. The narrowing in Canadian crude oil differentials such as WCS and Bow River was a drag at the margin during the first quarter of 2014. However these differentials have both stabilized at still elevated levels early into the second quarter of 2014.

And now turning to slide 18, for the three months ended March 31, 2014, our total cost to purchase RINs was 7.9 million versus 11.8 million in the first quarter of 2013. Despite higher RINs prices and higher volumes of fuels produced on a year-over-year basis, we were able to blend away a larger percentage of our obligation during the first quarter of this year. Partnership currently expects its gross estimated annual RINs obligation which includes both RINs that are required to be secured through either blending or through the purchase of RINs in the open market to be in the range of 90 million to 95 million RINs for the full year. The Partnership records its outstanding RINs obligation as a balance sheet liability and this liability is mark to market on a quarterly basis to reflect the market price of RINs on the last day of each quarter.

Turning to slides 19 and 20, exiting the year we remain very well capitalized while overall leverage though elevated remains at manageable levels. We expect leverage to decline as we cycle out weaker turnaround impacted quarters from 2013 with improved quarterly performances in 2014. Including both cash and availability under our revolver as of March 31, 2014, we have 714 million in available liquidity, up from 593 million at December 31, 2013.

Turning to slide 21, looking ahead to the remainder of 2014, we have hedged approximately half of our anticipated fuels production. In a year of heavy capital spending on growth projects, we believe this is a prudent way to help de-risk our 2014 results. For 2014 we have locked in 3.7 million barrels of gasoline at an average price margin of $14.53 per barrel, 4 million barrels of diesel at an average margin of $27.57, and just under 1 million barrels of jet fuel at an average margin of $24.82. To continue our efforts to minimize crack spread volatility, we intend to continue to hedge up to 75% of our anticipated fuels production as far as four years out.

Finally turning to slide 22, we are maintaining our full year 2014 capital spending forecast. We project that total replacement, environmental, turnaround and growth related capital spending will be in the range of 340 million to 385 million in 2014 compared with 243 million in 2013.

The bulk of the year-over-year increase in CapEx is attributable to work related to the North Dakota Refinery construction and the Montana Refinery expansion projects. Outside of our growth CapEx which remains discretionary, we anticipate a 35% to 45% decline in replacement, environmental and turnaround cost in 2014 versus 2013.

With a heavy turnaround year well behind us, annualized turnaround cost is expected to be in the $20 million to $30 million range until our next major turnaround cycle in 2018.

And with that, I’ll turn the call over to the operator, so we may begin the Q&A session. Operator?

Question-and-Answer Session

Operator

(Operator Instructions). And our first question comes from Theresa Chen with Barclays.

Theresa Chen - Barclays Capital

With the specialty margins, the $0.42 and $0.22 level even beyond on the long-term guidance of 30 to 40. Do you think that’s sustainable for the rest of the year given the better asset mix from the acquisitions? Or were there temporary factors that boosted the number in Q1?

Jennifer Straumins

No I think that’s going to be very sustainable going forward given that the acquisitions that we’ve done in the higher margin businesses that we’ve put into segment.

Theresa Chen - Barclays Capital

Perfect, thank you. And then thinking about third party acquisitions in the specialty segment. Clearly these tuck-in acquisitions are an integral part of your growth story. And I was just wondering if you could give us a sense of what’s the size of the acquisition opportunity out there under your current assessment or beyond?

Jennifer Straumins

We are currently actively looking at probably half a dozen acquisitions, and given the nature of our customer base with over 6,000 specialty products customers we have limitless acquisition targets available to us.

Theresa Chen - Barclays Capital

That’s helpful. And then lastly as you return closer and closer to full distribution coverage, how do you think about balancing distribution growth versus getting back to one-time coverage. Would you be only be comfortable growing the distribution once you get back to one-times, or would you be comfortable doing beforehand?

Jennifer Straumins

Well obviously that’s a decision that’s made by our Board every quarter based on information available to them at that point in time and market fundamentals. In my opinion I would like to see us hold the distribution steady and so we start to realize some of the cash flow from the organic growth projects.

Operator

And next we have Richard Roberts with [indiscernible].

Unidentified Analyst

Good afternoon folks and congrats on the quarter here. Couple from me, Jennifer maybe first. You mentioned some of those FX assets that came along with the Anchor acquisition and as we look at some of your independent refining peer, the trend here recently has certainly been to create an MLP for their logistics assets. I am just curious since you certainly have other assets in your portfolio that would meet that criteria. I am wondering if something like that would make sense for you just given that you already traded a multiple that’s much higher than the C Corp refiners.

Jennifer Straumins

That’s a great question and that’s something that we talk about quite often. The logistics assets that we acquired as part of the Anchor acquisition would include distribution facilities and a line of trucking assets. Some of the things that I thought about overtime would either be a logistics MLP. And or looking at our fuels refineries and putting, dropping them into a variable distribution MLP and holding our specialty assets inside a traditional MLP. And that’s something that we continue to work with our bankers and our advisors on as we move forward.

Unidentified Analyst

Okay, great. And maybe if I could risk this one. If you could give us any sense maybe of the size of logistics assets portfolio that you have either in terms of EBITDA potential or way you categorize it?

Jennifer Straumins

Yes, I would say at this point in time we probably got at least 50 million to 75 million of EBITDA coming from logistics assets. You could take a page out of [indiscernible] notebook and take our tank farms and move those into a logistics type of MLP and have transfer pricing going back and forth with the refineries and the logistics MLP. So people, other logistics MLPs out there have gotten very creative and we continue to watch and learn from what others are doing and we’ll implement the strategy that’s right for us.

Unidentified Analyst

Okay, great thanks. Maybe one more to switch gears a little bit, on Dakota Prairie, and correct me if I am wrong. But as I understand that the plan for some of bottoms production out of the North Dakota refinery is to send those barrels over to Montana, I guess potentially it’s hydrocracker feed. I am wondering if that is the case what do you with the bottoms in between the work at Montana being finished I guess that your lag between the two projects being done.

And then secondly do the economics of those barrels show up in the projections for either North Dakota or Montana that you have out there currently?

Jennifer Straumins

They show up in the projections for both Montana and North Dakota because there the transfer prices going back and forth between the JV and Calumet. And this is a very fungible product that can be sold on the Gulf Coast at any point in time to any other refineries on the Gulf as really cracker feed. So that’s where it will go during the year between North Dakota coming online and Montana coming online. We’ve just got better logistics in ’14 internally after that point in time.

Operator

Next question comes from Steve Sherowski with Goldman Sachs.

Steve Sherowski - Goldman Sachs

Hi, good afternoon. First question, I just wanted to make sure I heard this correctly. Did you say that you are currently generating $50 million to $70 million in EBITDA from your logistics assets?

Jennifer Straumins

I think you could certainly find a way that could get to that number based on either rail rates and trucking fees and pipeline fees and then tank rental or terminal fees if we were to drop if -- we were to put our tank farms inside of a logistics [indiscernible].

Steve Sherowski - Goldman Sachs

Okay, thanks. And I’m just wondering did you see any benefits from your asphalt marketing agreements this quarter or is that most likely going to come through during the second half of this year?

Jennifer Straumins

That will all be second half of this year. We spent the majority of the first quarter filling up those assets with asphalt and then we have started to sell product out of those terminals as we’ve did in the second quarter.

Steve Sherowski - Goldman Sachs

Got you. And just a final quick question, for the Shreveport planned maintenance in the second quarter, can you gauge the likely economic impact of that?

Jennifer Straumins

We have not disclosed what that economic impact is going to be, we’ll talk more about that in the second quarter.

Operator

Next question comes from Edward Westlake with Credit Suisse.

Edward Westlake - Credit Suisse

Yes, couple of questions actually. So on the specialties just following up, I mean if you look at that margin expansion obviously I hear you [indiscernible] was due to the acquisitions. But anything else going on beyond the acquisitions? It still feels like a bigger jump than I guess folks would have expected.

Jennifer Straumins

No, it’s driven exclusively by the acquisitions.

Edward Westlake - Credit Suisse

Okay, that’s helpful color. Just on the Eagle Ford -- sorry the San Antonio Eagle Ford logistical switch, how much savings you think you get from the change in logistics?

Jennifer Straumins

We’ll be much better prepared to speak to that number after that pipeline is operational. We’re still negotiating risk and crude suppliers for builds going into San Antonio, so I am not in a position to disclose that.

Edward Westlake - Credit Suisse

And then maybe a mechanical question, obviously there was a lower as you go and look at the buildup to a distributed cash flow, there was a lower sort of reserve for turnaround expense. Do you do it on a sort of full year average and then divide it by what you think you should do every quarter or does it sort of peak in years where you have high turnarounds. I am just trying to understand because obviously last year you had a high number and this year it’s lower, it feels like it’s more linked to when you actually do the turnarounds.

Pat Murray

That’s correct. It’s linked to when we actually complete the work. So, we saw kind of peak last year and then slight this year with a lot lower scheduled activity and we always have a little bit of turnaround activity at various plants but you saw it peak last year and then we expect to be in this lower realm for the next three to four years and then it should peak again based on the next cycle which we believe is 2018.

Edward Westlake - Credit Suisse

Right, so obviously less expense on that, more specialty products and obviously that will lead to better coverage over time and then at some point you will change your distribution once you feel the balance sheet is in better shape.

Pat Murray

Yes, our stated strategy is to be in the 1.2 to 1.5 realm, as Jennifer mentioned it’s a discrete decision made by the Board each quarter. I think we're also and we’re focusing on coverage on a LPM basis also and we do expect to see both not only the outright quarterly coverage improve but also as we trail forward here and drop off some quarters that were because of the turnarounds last year and the impacts of those were not where we would like. We should see some natural improvement over the course of this year in both of those metrics, not only the discrete quarterly coverage but also the LTM coverage.

Edward Westlake - Credit Suisse

And then on the fuel gross profits which was perhaps a little bit weaker than the benchmark indicators, I mean just is it secondary products in asphalt again or maybe just talk through what’s going on there?

Jennifer Straumins

Yes, it was the asphalt.

Edward Westlake - Credit Suisse

Okay. And I guess that’s just going to depend on oil prices, any signs that any of these states are going to actually increase asphalt’s usage to repair some of the roads?

Jennifer Straumins

We’re seeing some increased demand in our asphalt segment and quite honestly our asphalt margins for the first quarter were substantially higher than they were a year ago and surpassed our internal budget, so we’re pleased with where we’re at on asphalt right now.

Operator

Next question comes from TJ Schultz with RBC Capital.

TJ Schultz - RBC Capital Markets

Just a follow up on the structural options here, Jennifer I guess first just how far along are you on those discussions? And maybe Jennifer or Pat, what are some of the hurdles to making that happen really from a financial perspective or cost perspective more so than anything? And just to be clear, the end result that you’ve kind of laid out or envision is two separate entities with a variable rate responding MLP that would be made up solely of your fuel segment and then the remaining assets stand in the current structure, just wanted to try to clarify that.

Jennifer Straumins

We’ve looked at several different things, we’ve looked at those two options, we’ve also looked at the logistics MLP. And quite honestly we are in the infancy stages of these discussions. So certainly can’t even begin to speak to the cost or the timing associated with that.

Operator

Next we have Cory Garcia with Raymond James.

Cory Garcia - Raymond James

Very much appreciate some of the incremental data points and detail regarding your synthetics business and recognizing there is still pretty early days in the whole integration and growth of your small box sort of products. I was hoping to get anymore incremental color maybe as it relates to how you guys see a growth target perhaps year end or even into 2015. Just trying to get a little better gain on the trajectory of that specific business.

Jennifer Straumins

That part of our business has been growing at about 20% a year.

Cory Garcia - Raymond James

You expect it to accelerate at all just given you guys are now in Walmart and some of the acquisitions that you guys have had, maybe kick start that a little bit higher, are these 20% a great number to baseline off of.

Jennifer Straumins

I think it will grow higher than 20%. 20% is the number that we committed to our Board.

Cory Garcia - Raymond James

Okay, great. And switching topics over to Anchor and obviously it broadened out your logistics reach profile. Should we be viewing this as an acquisition not only sort of complementary to your existing oil field related products, but also maybe as a beachhead to kind of bury a little bit deeper closer to the well head as it pertains to more of a logistics gathering type of footprint.

Jennifer Straumins

Absolutely. If you are aware about rollouts in the year ago, we bought Murphy oil gathering assets in Montana and North Dakota. And this is demonstrated strategy of our to get closer to those -- to the producers and to the well heads and Anchor helps open those doors and provide those relationships.

Operator

Okay, and we have no other questions. So I’ll turn the call back over to Jennifer Straumins for any closing remarks.

Jennifer Straumins

Thank you operator and thank you all for joining us on today’s call. Should you have any questions please contact Noel Ryan, our Director of Investor Relations at 317-328-5660. Have a great afternoon.

Operator

Thanks so much for your time and your participation. You may disconnect.

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