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Niska Gas Storage Partners LLC (NYSE:NKA)

Q4 2014 Earnings Call

May 8, 2014 9:00 a.m. ET

Executives

Bill Shea – President and CEO

Rick Staples – EVP and Chief Commercial Officer

Vance Powers – CFO

Sarah Steel – Controller

Kate Walsh – Director, Tax and IR

Jason Kulsky – VP, Business Development

Jason Dubchak – VP, General Counsel and Corporate Secretary

Analysts

Adam White – RBC Capital Markets

Ted Durbin – Goldman Sachs

Michael Blum – Wells Fargo

Selman Akyol – Stifel Nicolaus

Operator

Good day ladies and gentlemen and welcome to the Q4 2014 Niska Gas Storage Partners LLC Earnings Conference Call. My name is Sandra and I will be your operator for today.

At this time all participants are in listen-only line. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this call is being recorded for replay purposes.

I’d now like to turn the call over to Bill Shea, President and Chief Executive Officer. Please proceed.

Bill Shea

Thank you Sandra, thanks everyone for joining us this morning. As you read our earnings this morning, you'll see that Simon Dupere has resigned his position as President and Chief Executive Officer and as a Director of Niska. On behalf of the Board of Directors of Niska, I want to thank Simon for his strong leadership as CEO of Niska since July, 2011 and his dedication and service as a Senior Executive since joining Niska in 2006.

Yesterday the Board of Directors appointed me as Chairman, President and Chief Executive Officer joining me at Niska will be Mark Casaday, Chief Operating Officer, Rob Wallace, Vice President, Finance and Corporate Development and Bruce Davis, Vice President, Chief Administrative Officer.

As you know this team responsible for the transformation of PVR Partners from principally a coal royalty based MLP into a diversified business with Midstream assets in the both the Marcellus Shale and US Mid-Con.

As we joined Niska, we will again be looking for opportunities both organic and through acquisitions to increase the size and scope of Niska's operations. On our call today, we are going to discuss our results for the quarter and the year ended March 31, 2014 and provide an update on our current business environment.

Speaking on the call with me today will be Rick Staples, Executive Vice President and Chief Commercial Officer, who'll provide market update and Vance Powers is our Chief Financial Officer, who will provide financial details. With me today in the room are Sarah Steel, our Controller, Kate Walsh, Director of Tax and Investor Relations and Jason Kulsky, VP of Business Development. Following our prepared remarks we will open the call to questions.

But first, Jason Dubchak, our Vice President, General Counsel and Corporate Secretary is going to read the customary cautionary statements.

Jason Dubchak

Thank you Bill. Before we begin, I’d like to advise everyone that we may make statements on the call that could be considered forward-looking statements as defined by the SEC. Future financial performance and operational results are subject to numerous contingencies, many of which are beyond our control.

Any forward-looking statements we may make are qualified by the risk factors and other information set forth in our Form 10-K to be filed in June.

Additionally, in discussing our results, we will refer to the financial measures adjusted EBITDA and cash available for distribution, which are non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measure, net earnings, is included in the press release we issued this morning and is available on our website at www.niskapartners.com.

With that, I’ll hand things back to Bill.

Bill Shea

Thank you, Jason. As you saw in our press release issued earlier this morning, our adjusted EBITDA for fiscal 2014 was $140 million and cash available for distribution was $75 million. We are pleased with our results, as both key metrics exceeded the high range of our original guidance which was $125 million to $135 million of adjusted EBITDA and $60 million to $70 million for cash available for distribution.

Also this morning, we declared our quarterly distribution of $0.35 per unit, the unit holds the record on May 19, 2014. The distribution is unchanged from the previous quarter and will be payable on Tuesday, May 27, 2014. Looking back at fiscal 2014 and in particular our fourth quarter, Niska and the natural gas industry overall experienced extraordinarily dynamic times.

We successfully positioned Niska to take advantage of the extreme market conditions which hit North America and as a result we delivered solid returns to our investors this fiscal year. In addition to exceeding the original guidance range established at the beginning of fiscal 2014 for adjusted EBITDA and cash available for distribution.

We furthered our organic expansion program going our Wild Goose facility by 25 Bcf bringing the total capacity across all facilities to approximately 251 Bcf. We also completed a comprehensive refinancing of our long-term debt to the issuance of $575 million of Senior Notes which are due in 2019 and have an interest rate of 6.5%.

The proceeds of this offering, along with Niska's own working capital, were used to redeem the $644 million of the Company's previous 8.875% Senior Notes due 2018. We expect our cash interest cost to be reduced by approximately $15 million in fiscal 2015 compared to the cash interest that we incurred in fiscal 2014.

We also implemented a Distribution Reinvestment Plan during the year, in which our private equity sponsor and largest unitholder reinvested approximately $18 million in additional Niska common units. We are pleased to announce Carlyle/Riverstone intends to reinvest all amounts to be received from this quarter's distribution and additional Niska common units.

And finally as we announced at May 1, 2014. We completed the successful execution of a new storage services agreement with our largest volumetric customer; TransCanada Gas Storage Partnership. Which preserves a longstanding customer relationship and provides a stable revenue stream for another six years?

Rick Staples will elaborate on this new contract later in today's call. As we begin our fiscal 2015 storage cycle. We do continue to face headwinds and as the current seasonal spread where natural gas remains very narrowed. The extremely cold winter completed natural gas inventories in storage to the lowest level and over 10 years and we believe that natural gas markets are actively evaluating the ability of available production and infrastructure capacity to refill storage to appropriate levels, in order to meet the natural gas needs in the upcoming year.

We also believe that these circumstances introduce the prospect of significant volatility as the market adjust these annual storage market conditions. We expect market conditions to be dynamic, as the industry addresses the refill requirements and we are again positioning ourselves to take advantage of that potential volatility.

Assuming market conditions fall within our range of expectations which reflects both the challenges and the opportunities of the current environment. We estimate adjusted EBITDA for fiscal 2015 to be in the range of $120 million to $140 million and cash available for distribution to be in the range of $65 million to $85 million.

These estimates include, the one-time recognition of approximately $26 million related to the settlement of the previous storage services agreement with TransCanada. We expect revenues to follow a more traditional pattern of recognition, where by the majority of revenues will be earned in the last two quarters of the fiscal year.

I'm now going to turn the call over to Rick, who's going to discuss the commercial environment. Rick?

Rick Staples

Thank you, Bill and good morning everyone. Looking back on the commercial environment during fiscal 2014. We can certainly say that the extreme and prolong winter weather advance highlighted and be affirmed that crucial role of storage in balancing variations in the natural gas market.

Winter 2013, 2014 was about 6% cooler than normal and ranked as a coldest winter in the past 30 years. The lower 48 States entered the last year's withdrawal season with about 3.8 trillion cubic feet of gas in storage, which is within the 5-year average.

However, the severe winter conditions caused to draw to 3 trillion cubic feet, which was the largest in history and depleted inventory reserves to 0.8 trillion cubic feet, the lowest inventory level in 10 years. Heavy storage [draws] were compounded by production freeze offs, which further limited the supply available to customers.

Approximately 20% of the gas consumed in the United States this past winter continued for gas storage requiring average withdrawals of 20 Bcf a day to balance supply and demand and the largest single demand occurrence ever was reported, a record of 139 Bcf of gas was consumed in one day.

Niska's facilities performed exceptionally well and reliably during this peak periods of intense demand and we are pleased with the demonstrated ability of our diversified asset base and portfolio commercial strategies to deliver consistent results in a variety of demanding storage environments.

We significantly exceeded the high end of our original financial guidance for the year because of our unique ability to capitalize and what we're trying to double-digit spot price spikes. This winter reminded the market, that a perceived abundance in supply is not enough to hold natural gas prices in check.

This past winter has also set the stage for the largest storage refill challenge in history. The unprecedented draw down has created a situation, where we may have seen under supplied market this winter. The [USCIA] is currently estimating that the market will refill the 3.4 trillion cubic feet this year approximately 400 Bcf below both the 5-year average and a level, where we entered this past winter.

These pressures have led to higher summer prices as demand related to injection price. As winter prices have remainder relatively flat. This is led to continue weakness in storage spreads in the forward market, despite last winter being our clear indicator about how reliant the gas markets are on storage and weathering unpredictable seasonal events.

Due to the likelihood of upcoming injection shortfalls. Even a normal winter this year could create dynamic market conditions. We expect continue volatility, as the natural gas markets adjust to new found challenges and we are committed to ensure that Niska is well positioned to take advantage of such opportunities.

We will continue to update you regarding the commercial environments throughout the coming year. Shifting focus now, I'd like to take a moment to further discuss our recently signed contracts with our largest volumetric customer TransCanada gas storage partnership or TransCanada.

As we mentioned, our May 1, press release we executed a new agreement with TransCanada. The new agreement extends through the end of fiscal 2020 and is approximately 40 Bcf until the fiscal 2017 at which drawn contracted capacity is reduced to approximately 20 Bcf for the remainder of the contract.

With the execution of this contract, the weighted average life of our long-term contract is now approximately four years. Though, negotiated rates under this new contract are lower than under the previous contract, the rates are of prices that are significantly favorable to current rates for shorter term contracts, by terminating the prior agreement TransCanada become obligated to make an early termination payment, which will be reflected in our 2015 results as they were mentioned earlier, with that I'll turn the call over to Vance for our financial overview.

Vance Powers

Thanks, Rick and good morning everyone. As Bill mentioned Niska's adjusted EBITDA was $140 million for the fiscal year ended March 31, 2014 compared to $138.6 million excluding inventory write-down benefits for the fiscal year ended March 31, 2013. Adjusted EBITDA for the quarter was $55.5 million compared to $52.4 million in the same period last year again excluding the benefits of prior year inventory write-down.

Cash available for distribution was $75.2 million and $39.3 million for the fiscal year and quarter respectively compared to $74 million and $36.6 million for prior year comparative periods. For the full year, we had a 1.5 times coverage ratio on common unit distributions and our fixed charge coverage ratio was 2.8 times.

I will point that coverage ratio would be based on full distributions even though, our private equity sponsor Carlyle/Riverstone took advantage of the distribution reinvestment program during the year.

The FCCR was 2.8 times, this FCCR includes the pro forma effects of our recent debt offering excluding these effects FCCR would have been 2.1 times. Niska's net loss for the fiscal year ended March 31, 2014 was $9 million compared to a net loss of $43.6 million in the prior year.

Net earnings for the three months ended March 31, 2014 was $4.3 million compared to a net loss of $1.3 million in the same period last year. Fiscal 2014 fee based revenue was $135.4 million compared to $163.3 million last year and for the fourth quarter, these were $40.2 million in fiscal 2014 compared to $44 million in fiscal 2013.

The decrease in fee based revenues this year reflects lower contract rates coupled with less capacity allocated the fee based revenue strategies as well as some impact related to foreign exchange rates. Realized optimization revenues were $85.5 million this year compared to $46.4 million last year.

Last year's announced again exclude the benefits of inventory write-downs. The increased year-over-year realized optimization revenues is related to short-term pricing opportunities at [ACO] during the summer of 2013 coupled with the sharp increase in prices due to demand spikes related to the extreme cold weather across North America last winter, which Rick discussed earlier.

Operating expenses for fiscal 2014 were $40.8 million compared to $32.5 million during fiscal 2013. For the fourth quarter, these expenses were $13.1 million and $7.3 million respectively. The increases this year were driven by higher facility utilization, as higher cycle volumes at all of our facilities increased fuel and electricity costs.

General and administrative cost for the year and fourth quarter were $39.9 million and $9.8 million respectively compared to $38.6 million and $12.2 million in the same periods last year. The overall increase year-over-year is primarily due to incentive compensation accruals related to our long-term incentive compensation plan, which will partially offset by lower consulting incurred throughout the year.

Interest expense for the fiscal year and fourth quarter were $66.3 million and $16.6 million compared to $67 million and $16.6 million in the same periods last year. During fiscal 2014, we issued $575 million of senior notes due 2019 at an interest rate of 6.5% and used the net proceeds along with borrowings under out asset based revolving credit facility to redeem and extinguish $644 million of outstanding principal on our previous senior notes that had an interest rate of 8.875% and were due in 2018.

The refinancing, which has left overall debt largely unchanged but reduced our long-term debt by $69 million was completed in mid-March 2014. I would note, that we recorded a loss on the redemption of the old bonds of $36.7 million which represents the call premium on the bonds, plus the unamortized debt financing cost.

Due to the lower interest rates cheap, we expect to see meaningful interest savings from Niska on a go forward basis. At March 31, 2014 we had $119.5 million outstanding under our revolver. As of today, we have minimal balances outstanding. It have letters of credit of approximately $150 million related to early purchase of natural gas, which will settle in late May.

So we currently have approximately $250 million available under our $400 million revolving credit facility and with that, I'll turn the call back over to Bill.

Bill Shea

Thanks, Vance. In conclusion, let me say that I'm really excited to have the opportunity to be involved with and to lead Niska in its next phase of growth and value creation. The company has a great set of assets, but more importantly it's got a skilled and experienced management team and workforce.

As a board member, I've seen the Niska team work incredibly hard and be very nimble in responding to what has been a very, very challenging market environment of the last couple of years. going forward it's my goal to not only grow the gas storage business as market conditions improve, but to diversify into Midstream business segments that we can operate in.

Joining me here at Niska, as I said before are Mark Casaday and Rob Wallace and Bruce Davis, the key executives that executed with me, the transformational strategies of PVR Partners taking it from a coal royalty MLP to a Midstream gathering and processing MLP. I've known Vance Powers for more than 15 years. We first met while at the Union Pacific Corp back in the late 1980s.

I then brought Vance into Buckeye Partners in 2002. I've great confidence in Vance and we're good friends. Rick Staples and Jason Dubchak, I've known since I've been on the board of Niska and we've got a great relationship. Rick has demonstrated his flexibility, creativity and experience as the spread environment has deteriorated.

He developed and executed on strategies and created value and what is still a very trying time for us. Jason has gone through a myriad of transactions. The subordinated unit's transactions, the recent debt deal and a myriad of legal issues that lies in all companies. I'm very fortunate to step into a position with people I know and believe in to get the job done.

I know, I'm also leaving out many others at Niska that I've met and seen the high quality of the work that they produce and the commitment that they have at Niska. We want to grow outside the gas storage business by adding complimentary Midstream, gathering, processing and other businesses.

We anticipate adding these businesses through acquisition, but also agreeing to development and as you know from our past, we've been successful at both. Although, we are searching for and developing these value additions in Niska. We are going to continue to maximize the potential of our existing storage business.

Those of you have heard me on these calls over the years at Buckeye and PVR however, know that I won't talk about opportunities that we are working on, but you can be assured that we are searching for and will be executing on expansion opportunities. At this time, let me turn the call back to Sandra for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Adam White from RBC Capital Markets. Please go ahead.

Adam White – RBC Capital Markets

Bill, Rob, Vance, Mark etc, didn't think you'd [indiscernible] so soon.

Bill Shea

Thanks, Adam.

Adam White – RBC Capital Markets

I guess the first and most obvious question or set of questions is about the change in strategy and if you can talk a little bit about what drove it and then a little bit more on where you might be looking next stream and allocate, to country to start with and the type of opportunities you might be looking at, as oppose to the specific ones and what you're thinking about in terms of capital to fund, whatever you might do?

Bill Shea

Well, Adam let me take the first part and then Vance can maybe talk about the capital question. You know I don't think the strategy really has changed much, other than the fact that we will focus maybe a little bit more on other Midstream gathering and processing types of expansions and opportunities. I mean that's what Mark Casaday had done for living, that's what we were successful at PVR and we see lots of opportunities out there, Adam. Whether it's in the Marcellus or the Utica, the Mid-Con, the Permian Basin.

So from a geographic standpoint, basement standpoint. We are going to be pretty open, although again our experience recently is been in the Marcellus and the Utica and the Mid-Con. We also believe their opportunities for expansion in Canada. So we are not going to leave Canada out of it and we also see on occasion storage facilities that businesses that come up for sale.

Probably permitting and doing a Greenfield storage project might be a little difficult and time consuming at this time, but there are acquisitions that are available from time-to-time. So again, I don't think the strategy exchange. I think maybe it's a now we've added four new people to the equation and was just going to turn up the heat to find the opportunities and to execute on them and I'll let Vance tell you, how we are going to pay forward.

Vance Powers

Adam, as you know Niska has been a conservatively financed business from time that it initially the original bonds in March 2010 and going public in May, 2010. When we were on the road, on the recent bond transaction. We were very forthcoming with investors that we are prudent financiers of all the activities that we have, we've improved their financial posture with the reduction of overall debt. Any opportunities that came along, I would expect would be conservatively financed in line with the kind of ratios that MLPs use going forward.

So I would not expect any change in the financial structure of the business or change in its overall ratios. As you know with the equity restructuring that was completed over a year ago, it gave us great access to the capital markets. We believe, we continue to have that access to both debt and the equity markets. We have an ATM program up and running as you know as I would point out, yet again that our private equity sponsor Riverstone has been incredibly supportive of the business through these transactions and it's reinvestment that will total $25 million as they drip on these current units.

So we recognized our responsibility to reward all of our investors and we are going to continue to do so.

Bill Shea

Adam, let me just add to that Vance mentioned Riverstone and I should have, they are also an important and critical part of the ability to grow and expand here in Niska going forward. They've been a great private equity sponsor in Niska, since the moment that they bought it. I have been involved with Riverstone related investments for 10 years now and Buckeye and PVR and I've been on the boards of Niska and couple of other Riverstone portfolio company.

So we've got a great relationship with them as you know and they're incredibly supportive and helpful and constructive, as we try and will be, as we try and grow the company in expand. So and reward, Bartow Jones worked very closely with us and it goes right up the line.

We know David Leuschen and Pierre and they're very supportive of the efforts here at Niska.

Adam White – RBC Capital Markets

Thanks. If I had one little follow-up on that question in line and with another detailed question and something else, but are you thinking at all about Grass Roots projects or are you more interested in jumping into something that's already in existence.

Bill Shea

Adam, I think Grass Roots projects are going to be a big part of this, you know that's what we were successful at PVR and Mark Casaday had the vision and developed and executed on a Grass Root strategy in the Marcellus and in the Utica and at the end of the day acquisitions are great and the Midstream business as you know right now, they tend to come in pretty high multiples.

Whereas when we do a Grass Roots, Greenfield kind of development project unfortunately we have a year or so, where there is very little cash inflow and a fair amount of cash outflow, but generally those projects when they mature or in a much lower multiple, EBITDA multiple.

So yes, the Greenfield projects are going to be a big piece of the growth expansion profile.

Adam White – RBC Capital Markets

Thank you and then lastly, you've got this early termination fees that coming in, can you just give us some idea, what the magnitude of that might be and if it's significant as been indicated, what do use of proceeds might be since, you're planning to grow. I'm guessing shrinking the balance sheet isn't a priority.

Vance Powers

This is Vance. Adam, we anticipate recognizing $26 million in fiscal, 2015 specifically associated with the termination of the old TransCanada contract. I would say that, the renegotiation is an extraordinarily recent event, as we've published the press release with just last week. I can tell you, what we did with it last week was, we reduced borrowings under our credit facility, but long-term uses of those proceeds were now evaluating that as we go forward, but as I said is the overall philosophy of the business hasn't changed and I think we will use conservative financing and everything that we have.

Adam White – RBC Capital Markets

Great, thanks. Welcome back, guys.

Bill Shea

Thanks, Adam.

Operator

Thank you for your question. Your next question is from Ted Durbin from Goldman Sachs. Please go ahead.

Ted Durbin – Goldman Sachs

Thanks. If I can just come back to guidance, I guess first is, what should we think about for cash interest expense for 2015 now, after the debt refinancing?

Vance Powers

I think something in, this is Vance here, Ted. And I think something in the $50 million range will work just fine.

Ted Durbin – Goldman Sachs

Good. So I guess, what I'm struggling here a little with is, given the current environment in the forecast. If you, except the one-time payment, it looks like you're not covering your distribution, if you sort of move forward to 2016. So I'm wondering, if what's to say, we fast forward a year from now, we are still looking at the same storage environment. How do you work through that, realizing you have the dripping place with the sponsor, but I guess that's what I'm struggling is really not covering given the current storage environment, so what are your thoughts there?

Vance Powers

Well, I think this is Vance again. As you look at where we are, in either side of the bracket. We are kind of at the midpoint, you're covering your distribution. You're a little late on the bottom end of it, I think that as we've approached each storage year has been completely different and extraordinarily dynamic as we approached it.

So I think that reaching out into 2016 and going forward, it is we're not quite ready to go there. I will and I will give it to Rick for a little bit of additional color. We have noticed that, as you go out the beyond fiscal 2015. You're seeing improvements in the storage spread and storage markets in the out years, as we believe the market is anticipating higher demand and therefore tighter markets and greater volatility and already upped demonstrably some greater spreads in those period.

So we are confident in our ability going forward, but yes for this year actually one-time payment you're sitting at around one.

Rick Staples

Hi, Ted. It's Rick Staples here, just to add a little color. Obviously, when you look out on the forward curve we're seeing, you will see much wider spreads we are facing for this current fiscal year and especially when you look in the regions, where we operate when you look in the April market and factoring basis. We are seeing even wider spread still then what's manifested in the Nymex spread environment.

So we're excited about, what we see in those other years. we still have an entire year to get through this year and we believe that to the volatility that's going to come to place results of a much tighter market is going to play very well for the storage gain and as we look keeping at the following year, it's much too near to say, what the spreads are ultimately going to be, when we get there.

So I think at this point, we have provided the guidance that we feel is appropriate for the business and we are looking forward to hoping [indiscernible] for this year.

Bill Shea

And Ted finally this is Bill. I think the other thing to remember is, that's the whole purpose of the thought of diversifying and transforming the company into other things besides, the storage business, which is channel itself and that's all part of the strategy to add EBITDA on accretive basis. So that coverage ratio is above one.

Ted Durbin – Goldman Sachs

Yes and then, kind of in -- just strategically also. I don't know if there is any change in terms of your thought on the mix on the storage that you would like to firm versus the proprietary optimization activity that you take on.

Rick Staples

Ted its Rick here again. The way we were thinking about it for the coming year. We probably going to have a pretty similar mix to what we had last year, as we recall last year. We said, we would have between 25% and 30% of our capacity allocated to proprietary optimization. The balance of that is going to be allocated to fee based revenues and we are going to have a very similar mix coming into this year.

Ted Durbin – Goldman Sachs

Got it, but the longer term, you think that's probably the right mix as well for the answer. So is there any change there?

Rick Staples

We will take a look at the portfolio and we are going to adjust and as we feel it's necessary as we counter various storage conditions. So it's way too early to say, what we are going to do next year, but we do try to make sure we've always maintained solid mix above the fee based and a proprietary optimization.

Ted Durbin – Goldman Sachs

Understood. I'll leave at that. Thanks.

Operator

Thank you. We have another question for you and this one is from Michael Blum from Wells Fargo. Please go ahead.

Michael Blum – Wells Fargo

Hi, good morning everybody. Long time, no speech.

Bill Shea

Hi, Michael.

Michael Blum – Wells Fargo

Maybe just a little more on strategy, a couple of questions. One, is it fair to assume you're not going to be looking acquire any additional gas storage assets and would you consider selling any of your current assets?

Bill Shea

I think the answer about selling is no, we would not be considering selling any of the assets and as far as purchasing storage assets, this maybe the very best time to be looking for storage assets. We are in a down cycle in the market and maybe prices have come down and so I would say that this is probably a good time to be looking for storage assets.

Michael Blum – Wells Fargo

And I guess, even more broadly as you think about strategy and diversifying into Midstream. Is M&A another possibility, is that some of you guys are open to in terms of doing some sorts of merger combination to combine Niska's business with a Midstream player.

Bill Shea

Please, Michael I just started today. You're merging me out of business today. I think the key motto is, we are here to create value that's the bottom line. So that's the best way to create value, absolutely and I think you've seen, we've all seen consolidation in the MLP market.

Sure, I don't think there is anything that's off the table, but I just think we've got some – we've got a good team here. We've got good assets and I think we've got a great sponsor in Riverstone. So I think, we will have some opportunities to grow Greenfield and through acquisition and if a bigger transaction comes up, it comes up.

It's probably not something, we will be looking for right out of the box.

Michael Blum – Wells Fargo

Okay and then, you're trying to give a guidance. So I'm trying to just think about in terms the way you're formulating your guidance. So you're just looking at the forward spread at this point and what you've locked in and what you think can locked in, but at the same time. You've kind of articulated a story where you could end the winter very short inventory and so that, I mean that would suggest that your guidance could be conservative, is that the right way to think about it?

Rick Staples

The way think about is, Michael is we think about guidance is appropriate to the market conditions that we are facing, it's either optimistic or pessimistic. What we do though, we have them as we've made sure that we factored in, what we see a is a very volatile market given the certainty market conditions that we are facing.

I want to re-clarify that, we are not talking about how much gas we as Niska are necessarily going to have in the ground. When we make those references to the market being challenged over gas in the ground, we are talking about the broader market, not just our assets.

Michael Blum – Wells Fargo

Yes, understood. Okay, thank you.

Operator

(Operator Instructions) I have another question for you, apologies for pronunciation. This one is from Selman Akyol from Stifel Nicolaus. Please go ahead.

Selman Akyol – Stifel Nicolaus

Thanks, nice try. Selman Akyol from Stifel Nicolaus.

Bill Shea

We knew Selman, we talked to you.

Selman Akyol – Stifel Nicolaus

Well, anyway. So couple questions here if I may, to start – Bill I understand, it's your first day on the job and everything but how well do you think, you would go before we would see some changes or what you might be doing, I mean we wait till the next conference call and here more updates, do you expect to come quicker than that?

Bill Shea

Selman, that's a loaded question. Growth opportunities come when they come and we will take advantage of them, when they come. The strategy will be laid out, we will out there searching for them and we hope to be able to execute on them. If one falls in our lap tomorrow or today this afternoon, we will jump on it, but you know how that is, it's kind of spotty and lumpy.

The Grass Roots, Greenfield projects their ideas and visions first and sometime it takes quite a while for them to develop into real investment of pipe in the ground or generating revenue. So we'll, you're going to hear from as we go along and when we've got something to report, you'll be the first to know.

Selman Akyol – Stifel Nicolaus

And just going back to Riverstone for a moment. Clearly they have a number of portfolio companies, should we expect anything you're doing to be outside of anything that they currently have?

Bill Shea

Yes, I believe so. Yes. Let me just say, they do have a lot of portfolio companies and there are companies that we should be doing business with, whether they're vendors or we're providing services to some of their companies, but in terms of combining or anything like that, I don't know if anything like that.

Selman Akyol – Stifel Nicolaus

All right and then just last comment here and this one's probably a little tricky but, I mean clearly you guys see value in storage and then you think about your largest customers, who you know several years out hence the option to term back a fair amount. How do you guys reconcile that in your mind?

Rick Staples

Hi, Selman it's Rick Staples here. The way we think about is, as you say they're our largest customer. They've been with us for a quite a number of years and they would like to take on an additional 6-year contract for large volume. Our views that they're, we can't speak on their behalf. When typically when a customer takes a storage contract for a long term at large capacity, we think that they find storage pretty attractive.

So what's going to happen in six years times, when the contract terminates. We really can't say that, but I'm assuming that if they liked it over the six years they have it, they probably extend. So we really can't say, until we get there.

Selman Akyol – Stifel Nicolaus

All right. Thanks again.

Operator

Thank you for your question. We have no more questions at this time, so I'll hand the call back over to Bill Shea for closing remarks.

Bill Shea

Thank you, Sandra, appreciated. That's it for today, there's a lot of news, a lot of things to digest from your standpoint I'm sure and make sure, you call us if you any other follow-up, but other than that, we will talk to you, with next earnings call. Which will be in August? Thanks.

Operator

Thank you. Ladies and gentlemen, thank you for participation in today's conference call. That concludes the presentation. You may now disconnect. Thank you.

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