Crosstex Energy's (XTEX) CEO Barry Davis on Q1 2014 Results - Earnings Call Transcript

May.11.14 | About: EnLink Midstream (ENLK)

Crosstex Energy, L.P. (XTEX) Q1 2014 Results Earnings Conference Call May 7, 2014 10:00 AM ET


Jill McMillan - Director of Communications and IR

Barry E. Davis - President and Chief Executive Officer

Michael J. Garberding - EVP and CFO

McMillan (Mac) Hummel - EVP and Head of Natural Gas Liquids and Crude Oil Business

Steve J. Hoppe - EVP and Head of Gathering, Processing and Transportation Business


Darren Horowitz - Raymond James

T.J. Schultz - RBC Capital Market

John Edwards - Credit Suisse


Good day, ladies and gentlemen and welcome to the First Quarter 2014 EnLink Midstream Earnings Conference Call. My name is Sue and I will be your operator for today. At this time all participants are in listen-only mode. 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 would like to turn the call over to Jill McMillan, Director of Investor Relations and Communications for EnLink Midstream. Please proceed.

Jill McMillan

Thank you, Sue, and good morning everyone. Thank you for joining us today to discuss EnLink Midstream's first quarter 2014 results.

On the call today are Barry Davis, President and Chief Executive Officer; Mike Garberding, Executive Vice President and Chief Financial Officer; Steve Hoppe, Executive Vice President and President of the Gathering, Processing and Transportation Business; and Mac Hummel, Executive Vice President and President of Natural Gas Liquids Crude and Condensate Business.

We issued our first quarter 2014 earnings release yesterday evening and the 10-K will be filed later this week. For those of you who didn't receive the release it is available on our website at If you want to listen to a recording of today's call you have 90 days to access the replay by phone or webcast on our website.

I will remind you that any statements that include our expectations or predictions should be considered forward-looking statements within the meaning of the Federal Securities Laws. Forward-looking statements are subject to a number of assumptions and uncertainties that may cause future events or our actual results to differ materially from those expressed in these statements, and we undertake no obligation to update or revise any forward-looking statements.

We will also discuss certain non-GAAP financial measures and you'll find explanations of these measures in the relevant reconciliations to GAAP measures in our earnings release which is available on our website. We encourage you to review the cautionary statements and other disclosures made in our SEC filings, specifically those under the heading Risk Factors.

I would also like to remind everyone of our upcoming Analyst and Investor Conference which will be held in Dallas on May 12th. For additional information please contact me directly or refer to the relevant press release on our website.

I will now turn over the call to Barry Davis.

Barry E. Davis

Thank you, Jill. Good morning, everyone, and thank you for joining us on our first earnings call as EnLink Midstream. Having closed our transaction with Devon Energy on March 7th, we have entered in an exciting chapter and I am pleased to join you today with new members of our management team to discuss our first quarter results.

Before I begin let me quickly introduce the speakers on the call. As a reminder, earlier this year we announced the new structure of our company into two business units. Our first segment is our gas gathering, processing and transmission business which is led by Steve Hoppe. Steve joins us from Devon Energy, where he served as Senior Vice President of Midstream Operations from 2010 to 2013 before joining EnLink Midstream.

Our second business unit is our natural gas liquids crude and condensate business. This unit is led by Mac Hummel. Mac joins us from Williams Companies, where he served as Vice President of NGLs and Olefins from 2010 to 2012 and as Vice President of Commodity Services in 2013. Also on the call is our CFO, Mike Garberding, who you all know well from Crosstex Energy.

Now I will discuss our vision and strategy for EnLink Midstream. EnLink Midstream is a leading integrated Midstream company with a diverse geographic footprint and a strong financial foundation delivering tailored solutions for sustainable growth. We are well positioned to secure and execute sizeable organic development and acquisition opportunities across the Midstream value chain driving growth over the near and long-term.

As we look to the future, our strong financial foundation and strategic positioning will provide us with opportunities for growth from four separate avenues including, drop downs, growing with Devon, organic development to serve a broad and diverse group of customers and end users and M&A activity.

The first avenue of growth is taking advantage of drop downs from our GP into the MLP and drop downs from Devon. Our end goal is to turn ENLC into pure-play GP model by dropping down multiple assets over the next two to three years including our legacy Crosstex's E2 assets in Ohio River Valley and the 50% interest in Devon's Midstream business that was acquired in the combination.

We anticipate drop downs from Devon including their 50% interest in the access pipeline in Canada and their Victoria Express Pipeline or VEX in the Eagle Ford. We expect to realize significant growth from these efforts and we will hear greater detail about the timing of these drop downs at our Analyst and Investor event on May 12.

Our second avenue of growth comes from growing with Devon. As we provide key services to support Devon's upstream needs we will look to reap the benefits of eventual further Midstream development. At our Analyst and Investor event you'll learn more from Devon's CEO, John Richels about their commitment and powerful financial incentive to help grow EnLink Midstream.

The third growth avenue is organic growth to expand in areas of our core businesses and in new Basins. Our South Louisiana expansion with the cadence of owned project and our Permian Basin gathering and processing expansion with the Bearkat project are two examples of where that is happening today.

As a result of the Devon transaction we see opportunities to grow the significant positions we have in Texas and Oklahoma and we have the financial flexibility to fund our growth plans. EnLink Midstream has more than $1 billion of organic growth projects underway and the financial capacity to continue funding annual capital programs at these levels or greater. With an investment grade credit rating we also benefit from increased access to capital.

Our fourth avenue of growth comes from external merger and acquisition opportunities. We continue to seek platform expansion opportunities and will be strategic acquirers of assets that naturally complement our core businesses. EnLink Midstream will also pursue larger scale acquisitions to enter new basins, products or service lines, especially in areas where Devon is active. We will remain disciplined in our approach.

We look forward to discussing in more detail these growth initiatives at our upcoming Analyst and Investor event. In regard to the key messages you will hear at the event and in summary of what you we want you to hear today we are well positioned for long-term sustainable growth. Our strong relationship with Devon will create abundant opportunities. We have a solid business platform positioned for growth and we have the right people to execute.

Before I turn the call to Mike Garberding I want to briefly address a senior leadership appointment and the key leader in our growth strategy. Earlier this week, we announced that Brad Iles who previously served as Vice President of Business Development at Crosstex has been promoted to Senior Vice President of Business Development at EnLink. In his new role Brad will work closely with leadership from the gas business unit and the liquids business unit on projects aligned with our growth strategy. Having one leader in this role to oversee both gas and liquids development opportunities furthers our goal of being a total solutions provider to our customers.

With that I'd like to turn the call over to Mike Garberding for an update on EnLink's first quarter financials and guidance for 2014.

Michael J. Garberding

Thanks, Barry. Good morning, everyone. This is an exciting time for us. We closed the combination March 7th, so have been operating as EnLink Midstream for about two months now and we are now even more excited about the combination of combined business in our future then when I spoke to you.

Before I get into the financial results for the quarter I think it makes to walk through the combination and its effects on financial reporting. The combination of Crosstex and Devon Midstream Holdings was treated as a reverse acquisition. This means that Devon Midstream Holdings has acquired in the transaction because its parent Devon obtained control of the partnership. The assets and liabilities of Devon Midstream Holdings, the entity that Devon formed and that's held the contributed Devon assets is the starting pointed for the combined balance sheet.

Our Crosstex assets and liabilities were recorded at fair value at the time of the acquisition. Fair value is defined by GAAP rules for purchase accounting. For the income statement financial results are only combined for the period after closing. As a results our first quarter revenue and cost represents two months and six days of standalone Devon Midstream Holdings' financial results and 25 days of combined Crosstex and Devon Midstream Holdings financial results.

To make it even more complicated the new fee-based contracts, the legacy Devon assets were effective on March 1. Before that the assets operated on a percentage of proceeds contracts. So when you look at the stock compares for comparisons the current period only Devon Midstream Holdings results will be shown for the prior periods and further the contractual changes limit the usefulness of even that comparison.

All of these changes will make typical disclosures in M&A and non-GAAP measure like adjusted-EBITDA look a little different than in the past. What we really have is a new beginning for the combined business and our historical numbers don't provide much insight or relevance for analysis because of all these changes.

In addition the first quarter reporting is a bit complicated because of the split period. So let's walk through it. The partnership realized adjusted EBITDA of $115.4 million for the first quarter of 2014. For the 25 day period after the closing of the transaction which is the period that includes the full contribution from both the Devon and Crosstex assets, the partnership generated $30.8 million of adjusted EBITDA and $24.5 million of distributable cash flow.

The partnership declared a distribution of $0.36 per unit for the quarter. In the case of Devon's units for the first quarter they were technically ENLK Class B Units that received pro-rating distribution of $0.10 per unit. And these Class B Units have converted to common units now that we have passed the record date for the first quarter.

To provide some relevance and for illustrative purposes only if we gross out the 25 day period after the combination into a 90 day quarter the implied adjusted-EBITDA of the MLP would have been about a $105 million and the implied distribution coverage ratio would have been 0.93 times on partnership to current distribution of $0.36 per unit on all of the units for the quarter including Devon's Class B Units.

For the general partner the cash available for distribution was $29.1 million for the first quarter of 2014 which resulted in a 1.5 times coverage ratio on the declared distribution of $0.18 per general partner unit including a partial distribution on all of Devon's ENLC Class B Units. These two have converted in a common unit since the record date.

The partnership also has made some big impact by repositioning the balance sheet during the quarter. With our strong new credit rating of BBB and BAA3 we refinanced our $725 million of 8.875% bonds at annual interest saving around $30 million. We issued $1.2 billion in new five year, 10 year and, 30 year bonds with a weighted average yield to maturity of around 4.2%.

We also entered into a new $1 billion revolver for the partnership which is largely undrawn. Our spreads on this new facility also improved to about 125 basis points versus 300 basis points on our prior facility. Combined we have achieved over $35 million per year of financial synergies on an annualized basis. Our strong balance sheet and the access to low cost of capital it provides positions us to better take advantage of growth opportunities both organic and in the M&A market. We are excited to be investment grade.

Now that we have two months under our belt as EnLink Midstream we have a clear line of sight to growth and a better picture of the timing of various projects and the initiatives that we have underway. However we are seeing some slower growth on our base business as a partnership. Steve and Mac will address the specifics but the overall impacts are that we originally estimated annualized adjusted EBITDA of approximately $500 million at the partnership.

Today, looking forward through the year we believe we will see annualized adjusted EBITDA of approximately $475 million in the partnership. Given our larger size this variability only represents around 5% of the projected annualized adjusted EBITDA of the partnership.

On the other hand we have achieved better than expected financing savings and have seen some positive adjustments in our maintenance capital forecast that offset the impacts on distributable cash flow. So our distribution expectations have not changed. We continue to expect our 2014 partnership distribution to be approximately $1.47 per unit and our 2014 general partner distribution to be approximately $0.80 per unit representing an approximate increase of 8% and 50% respectively over 2013.

From a capital standpoint the partnership expects to spend between $435 million and $500 million related to identified growth projects and the general partner expects to spend between $20 million and $25 million over the next three quarters of the year. These capital estimates do not include any drop downs like E2 which is expected in the second-half of the year.

Now I'll turn the call over to Steve and Mac to walk through the results of the business.

Steve J. Hoppe

Thanks, Mike, and good morning everyone. I am pleased to join you on EnLink Midstream's first earnings call. Today I'll cover the operations of our gas gathering, processing and transmission business.

Starting in North Texas, our assets continued to perform well despite a reduction in drilling activity in the Barnett Shale. We are quickly repositioning these assets to take advantage of the many opportunities the Crosstex and Devon combination has created in North Texas. During the quarter our gathering and transmission volumes average just below 3 billion cubic feet per day and our processing volumes were over a 1 billion cubic feet per day.

In Oklahoma, our gathering and processing volumes averaged over 400 million cubic feet for the quarter and we continue to see strong and even increasing producer activity in many parts of Oklahoma and we have already used our assets to take advantage of those opportunities. We'll continue to capture opportunities with our existing assets and we are well positioned to expand to meet the producer's needs as they develop in this area.

Also as a reminder we have ten year fixed fee contracts and significant minimum five year volume commitments in Oklahoma and Texas for a large portion of our gathering and processing business. In addition to the financial synergies Mike mentioned earlier, we are also beginning to realize operational synergies from the combination. We are working on projects that will reduce our annual operating cost by $4 million and our capital spend by $15 million. Our goal is to capture $20 million in annual operational synergies.

In West Texas we continue to expand our operations in the Permian to take advantage of the growing production in the region. Our investments in the Bearkat gathering and processing complex where we have made substantial progress on construction of these over the last few weeks and expect them to be completed in the second-half of the year.

The initial capacity of that plant and system will be 60 million cubic feet per day. When combined with the Deadwood plant this will increase our total operating processing capacity in the Permian to approximately to a 115 million cubic feet per day. In January, we announced the 35 mile expansion of the Bearkat gathering system. The Right-of-way acquisition is almost complete and construction will begin soon. The Permian is an important growth area for us and we continue to see tremendous opportunity in this region. We are confident that this region is developing into a core asset and will be an integral part of EnLink Midstream success moving forward.

In the Eagle Ford we remain excited about our investment in Howard Energy. Howard has a strong asset position in the region and we continue to see solid producer activity around our assets. The team is making great progress on several growth initiatives and the Reville processing plant became operational at the end of last year and Howard is progressing on the construction of its Brownsville terminal and Live Oak stabilizer. These are two major liquid handling facilities that will significantly increase Howard's platform services in South Texas.

Howard expects both projects to be completed in mid-2014. We did receive $2.7 million in distributions from Howard in the first quarter and we continue to be pleased with our investment in Howard.

With that I'll now turn the call over to Mac Hummel and he will give you an update on our Louisiana and ORV operations.

McMillan (Mac) Hummel

Thanks, Steve, good morning everyone. I am pleased to join you this morning to discuss EnLink Midstream's natural gas liquids, crude and condensate business. I am also very pleased to have taken the opportunity in early March to join EnLink Midstream and be a part of this exciting story.

Beginning with our Louisiana NGL business, our Cajun-Sibon phase 1 pipeline is now flowing near its full capacity of 70,000 barrels per day with first quarter average volumes of approximately 54,000 barrels per day. At our Eunice fractionator we have worked through the operational and equipment issues experienced as we started up the expanded facility. Those start-up issues along with power supply interruptions from our service provider caused first quarter volumes to be lower than expected. Currently we are fractionating volumes of around 50,000 barrels per day with a number of days near full fractionation capacity of 55,000 barrels per day.

First quarter average volumes, were approximately 41,000 barrels per day. Fuel usage each at the Eunice fractionator has been higher than expected. Yet we are encouraged by improving fuel usage as our operations stabilize. We believe that the start-up issues are largely behind us and are confident in the operating capability of the facilities going forward.

We continue to make progress on Cajun-Sibon phase 2, which will increase the Cajun-Sibon pipeline capacity by an additional 50,000 barrels per day to a total of 120,000 barrels per day. Construction on the new 100,000 barrel per day fractionator at our Plaquemine facility is on schedule. We expect the phase 2 pipeline and fractionation expansion facilities to be completed in the fourth quarter of 2014. The total capital cost for the Cajun-Sibon expansion project is currently estimated at $800 million, which includes the addition of a new treater at our Plaquemine facility.

Once phase 2 is completed and in service we expect our Cajun-Sibon of own expansion projects to contribute a run-rate of approximately $115 million to our annual adjusted-EBITDA and we expect to continue to see additional opportunities in our Louisiana NGL business since our assets are located in such a growing and dynamic market area.

In our Louisiana gas business our Bayou Corne permit was issued earlier this year and our construction on the pipeline re-route is underway. We now expect the re-route to be complete in the second quarter of 2014.

Turning to our Ohio River Valley business, the Utica is a tremendous resource and we remain intrigued by our possibilities for growth given our position in the area. One of our strategies to achieve that growth is to use our E2 investment to provide much needed condensate stabilization and other services. E2 completed its second condensate stabilizer in April and expects the third stabilizer to be completed in the second quarter of 2014.

In our brine disposal business, although volumes were lower than expected in the first quarter due to operational difficulties with two disposal wells we believe we have an appropriate solution to the operational issues and will be commencing repairs in June. We are confident that these and other projects and our base business can add significant value to our company.

With that I will turn it over to Barry.

Barry E. Davis

Thanks, Mac. These exciting times at EnLink Midstream. We are working hard to execute on growth projects and are taking advantage of the many growth opportunities that our partnership with Devon has already and will continue to bring us.

Enlink is a strong innovative and growing Midstream company that delivers value to all of our stakeholders in the early days of our new combined company. We are well positioned to create value for our equity holders well into the future and in this first year. As EnLink Midstream, we will work diligently towards becoming not only one of the largest Midstream companies in the U.S. but also one of the best.

We are looking forward to providing you with additional updates on all of the exciting work we are doing at our Analyst and Investor Conference next week. With that operator you may open the line for questions and we'll happy to take any questions you may have.

Question-and-Answer Session


Thank you. (Operator Instructions). Please standby for your first question. And your first question comes from the line of Darren Horowitz, Raymond James. Please go ahead.

Darren Horowitz - Raymond James

Good morning, guys.

Barry E. Davis

Good morning, Darren.

Darren Horowitz - Raymond James

Barry I want to back to your opening comments about the four big growth drivers and specifically the one where you are talking about the ability to grow with Devon and get incremental producer commitments to back infrastructure development. And I realize within the context of this you will cover I am sure all of this Analyst Day. But I am just curious how you think about kind of a balance between getting critical volume in scenarios like the Mississippi or the Woodford play or up into Rockies from your perspective? And how do you view the timing of having if you will kind of core base volume commitments and then adding more infrastructure in order to keep pace not just with Devon's production growth but maybe some other producers there?

Barry E. Davis

Yeah, Darren. It's a great question and something that we are seeing really good progress working with Devon. One of the first things we wanted to do was to be able to establish a relationship where we are in the room together looking forward to their development plans and their activities kind of their strategies and activities going forward. And what we are pleased to report is it couldn't be going better.

Our teams are working together extremely well. So we would anticipate having Devon as an anchor shipper on particular growth projects will be a realization in the near term. And so we'll just kind of go into an area work closely with Devon to see if we can get something established and then we are going to rely on doing what we think we have been good at all along and that is the business that we're doing with a long list of core customers, so whether it's in the Rockies or Oklahoma or the Permian. You know Devon is just one of many producers that we think we can get to support projects and we'll be strategic about how we kind of leg in to a project and continue to build.

Darren Horowitz - Raymond James

Okay. And then Barry, if I can move over to the Permian where you guys have a presence and obviously Devon has a core presence, beyond the expansion at Deadwood and your progress at Bearkat, as I think about the ability to kind of link in to Mesquite and have a more of a vertically integrated presence in the Midland Basin and the money that Devon's spending for the drill bit to ramp production, how do you think about allocating more CapEx in West Texas?

Barry E. Davis

Well, we love what's happening in the Permian. Broadly, West Texas, New Mexico area we think it's an area that for the next several years is going to be one of the most active basins and as and mentioned Devon has a very large and active position there to go along with, the several other producers that we are already working with. So I think we simply project confidence in significant growth long term in the Permian basin and I think it's something you'll hear us spending a lot of time working on and talking about.

Darren Horowitz - Raymond James

Okay. And then last question from me, Mike, as it relates to kind of step functioning in 2014 to 2015 EBITDA and again I appreciate probably all of this will be discussed in greater detail at the Analyst Day, but as I'm thinking about the E2 projects getting complete this quarter, and drop in the partnership I realize that's the only drop down that is included in this years' guidance.

But as we start to think about kind of that step function into 2015 and we assume that at least the first portion of those 50% assets that are held at Devon Midstream Holdings gets considered for drop down in to '15. Can you give us a little bit of a rough outline of how we think about the sequential progression of EBITDA growth over the course of the next 12 months?

Michael J. Garberding

That's a great question Darren and that's going to be great question we're going to walk you through in detail at Analyst Day. But your facts are right, you'd expect to see the E2 dropdown later this year, and then as we've talked about in the marketplace, we expect to see a portion of the 50% of EnLink Midstream Holdings being dropped as well as looking at access pipeline. And Barry did mention the Victoria Express pipeline which was part of Devon's GeoSouthern acquisition in the Eagle Ford.

So again, the thing we like is we have lots of opportunity for growth and again this opportunity, going back to last question not only represents Devon production but also represents additional opportunities for us to expand in to third party production with that. So I think we'll layout clearly next week how to think about 2015 and how to think about each of those drops.

Darren Horowitz - Raymond James

Okay, I appreciate it. Look forward to catching up next week.

Barry E. Davis

Thanks Darren.


Thank you. Your next question is from T.J. Schultz of RBC Capital Market.

T.J. Schultz - RBC Capital Market

Hey guys.

Barry E. Davis

Hi, good morning.

T.J. Schultz - RBC Capital Market

Just to be clear the 5% I guess reduction on 2014 pro forma EBITDA I got if you will, can you just give a little more color on the base business that is impacting that outlook, maybe that's a mix legacy Crosstex assets, so if there is any kind of mix of South Louisiana ORV assets that are just in that outlook and then Mike maybe if you could help me just because the first quarter had a lot of the accounting movements, you had given guidance before for 2Q through 4Q EBITDA, I think of $375 million. So maybe you could just update that guidance for that $25 million reduction.

Michael J. Garberding

So I will take you second question first as really all we did to get the $475 million was annualized. So you can just use math to get back to just the comparable number, that $375 million. So just as a point of reference. And when you think about the guidance, again like you mentioned it is a small piece of the business. It's only about 5% and now that we have had about 2 months under our belt to really look forward and see how the operations and we look to some of the short term issues and again that we believe these are just short term issues or timing issues.

The key things that you would look to again is things that you mentioned like the timing of the growth in ORV that Mac talked through. Again we believe in the long-term viability there but have seen some slowness in development like we've talked about. You have seen some smaller issues across the business and that what we are finding is that this is not one big thing but again what we've seen some small things and represent timing issues.

So I think the other thing that Mac mentioned was just getting really [inaudible] up and running through really this month of the year. So but again we feel real confident on distributions and dividends for the year and ultimately like Barry said very confident on future growth.

T.J. Schultz - RBC Capital Market

Okay, and thanks. On the drop downs beyond what you've kind of identified thought on the development of some other Devon assets that could become drop downs in the future, sounds like Victoria Express is near term so maybe if you could give a little more color on that asset and then beyond that one what visibility do you have in to your backlog for future drops.

Barry E. Davis

Yeah, T.J. this is Barry. To-date we've really only talked about the access pipeline and then the Victoria Express pipeline or VEX really is a new project that we are talking about here. That is related to Devon's recent Eagleford acquisition. When you look across the Devon assets I mean certain we will have conversations about other things including their Mid-Continent position that they are building around the Cana and Mississippian play there. So there will be opportunities but really the focus for now are the two things that we've identified.

Additionally and we've talked about this so Devon's got a very aggressive growth plan in all of the core basin's that they operate in around the country. So we will continue to look at infrastructure build on the front end or drop downs on the back end if they build those facilities at their production.

With all the talk though let me just be sure that you understand Devon certainly still has the capabilities to develop mid-stream assets internally. They will look at all alternatives but the key is that we will work very strategically with them to do what makes the most sense and also they are financially incentivized to use the low cost of capital that we see at the MLP as well to monetize the value of the assets that they currently hold. And to see that value creation through EnLink. So I think we've got the right relationship and the right activity levels to drive long term growth coming from Devon activities.

T.J. Schultz - RBC Capital Market

Hey, thanks Barry. Just lastly the Cajun-Sibon phase 2 I think the last disclosure I saw from you guys was that more than 50% of the remaining cost are made up kind of fixed priced turnkey contracts. I am just trying to understand your line of sight on what once the project is complete is kind of the total turnkey cash flow for you, or how quickly you expect to get to that $130 million run rate EBITDA from that project? That's all thanks.

Michael J. Garberding

Hey, T.J. let me make sure and separate the question, because I think when we said the turnkey we are talking about the constructions contracts really to get the project up and running. For example a large portion of the new fractionator is under turnkey contracts. So we are talking more about surety of what the capital spend would be to get that up and running or complete. We have about $200 million left to spend over the final three quarter a year on that.

With regard to the cash flow of Cajun-Sibon, again the key for us is really the creation of the platform asset and when we talked about it we have talked about it as one project just because of the linking of the two project when it gets up and running.

What Mac talked about really was that we talked -- that the cash flow right now when you look at it given what we know is probably around the $115 million level that we have given guidance in the past of the $115 million to $130 million. We still feel that guidance is good. And so far there is a lot of optionality around this asset given the long term nature of it but again as we see it today we really think it's going to have sort of that operating run rate of about $115 million or [$119 million].

T.J. Schultz - RBC Capital Market

Okay, perfect. Thanks Mike.


(Operator Instructions) And your next question come from the line of [inaudible], Wells Fargo.

Unidentified Analyst

Hey guys, good morning. Just two quick questions for me. I guess the first given that it looks like Bluegrass may or may not get constructed at this point, is there a possibility we could see a Cajun-Sibon 3 project to support those Louisiana [Petchem] expansions.

McMillan (Mac) Hummel

This is Mac Hummel. We would love to see a Cajun-Sibon 3 project; we'd love to see Cajun-Sibon 4 and 5 project. What we believe is that fundamentally Cajun-Sibon positions us in the right area and with the right platform in the right areas. So we believe we are well positioned, we're excited about the opportunities we see and with or without Bluegrass we think we're well positioned to participate in those kinds of opportunities.

Unidentified Analyst

Okay. And you'll give a similar answer to this too but the follow-up to that would be if you have sufficient NGL supply from the Cajun-Sibon expansions and fractionation expansions, do you think you could support the construction of an LPG or say an export terminal or are those kind of off the table at this point.

Michael J. Garberding

No, I don't those are off the table at this point. We continue to look at those opportunities, we continue to work to progress those and are actively thinking about what the alternatives are for us there. So that's very much on our list of things to work on. We are working on it and don't see lack of supply being a significant issue to that. It is an issue that we'll have to tackle along with the market side on an export facility but we continue to work on those possibilities.

Unidentified Analyst

Okay, great. Thank you.


Thank you. Your next question comes from the line of John Edwards with Credit Suisse.

John Edwards - Credit Suisse

Yeah. Good morning, everybody.

Barry E. Davis

Good morning John.

John Edwards - Credit Suisse

Just following up T.J's question, so on the 5% I mean is it more on a legacy Crosstex side, more on the Devon side, is it more of an integration issue or I mean anything beyond Mike sort of the I guess as you said there's a lot of small items, anything, any other insights you can provide for us on that?

Michael J. Garberding

Yeah, hey John, this is Mike. It's not an integration issue at all. We feel great about the integration and the team's working together. As I said before, it's a timing issue, you know the example I brought forth was really the timing of production, ORV was an example. And it is a combination of factors across the business and as we said it really hits at the partnership level. So it's not any one big thing to point toward but really what we think is something that from a time standpoint will work itself out and we have a strong belief in the growth of those areas.

John Edwards - Credit Suisse

Okay. So with that -- it's a timing issue, would that suggest that basically that extra $25 million is being pushed in to '15, is that the way to think about it?

Michael J. Garberding

That's an easy way to think about it, yes.

John Edwards - Credit Suisse

Okay, great. Alright, thank you very much.

Michael J. Garberding

Thank you, John.


Thank you. I would now like to turn the call over to Barry Davis for closing remarks.

Barry E. Davis

Thank you, Sue; and everybody for being on the call. As you can tell from our tone today and the communication these are exciting times and we look forward to providing you with more information on our progress at our Analyst and Investor Event on Monday, when we'll share our specifics on our growth initiatives through 2017.

You'll also hear more around the messages that I highlighted earlier which is we are well positioned for long term sustainable growth. Our strong relationship with Devon would create abundant opportunities. We have a solid business platform positioned for growth and we have the right people to execute. And so thank you for your support and for dialing in today and have a great day.


Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect.

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