Inter Pipeline's (IPPLF) CEO Chris Bayle on Q2 2014 Results - Earnings Call Transcript

Aug. 9.14 | About: Inter Pipeline (IPPLF)

Inter Pipeline Ltd (OTCPK:IPPLF) Q2 2014 Earnings Conference Call August 8, 2014 4:30 PM ET

Executives

Jeremy A. Roberge – Vice President-Capital Markets

Christian P. Bayle – President and Chief Executive Officer

Brent Heagy – Chief Financial Officer

Analysts

Linda Ezergailis – TD Securities

Carl L. Kirst – BMO Capital Markets

Paul Lechem – CIBC World Markets

Robert Kwan – RBC Capital Markets

Steven Ink Paget – Firstenergy Capital

Robert Hope – Macquarie Capital

Operator

Good afternoon, ladies and gentlemen. Welcome to Inter Pipeline Limited’s Second Quarter Conference Call and Webcast. I would now like to turn the meeting over to Mr. Jeremy Roberge. Please go ahead, Mr. Roberge.

Jeremy A. Roberge

Thank you, Rita, and good afternoon, everyone. Welcome to Inter Pipeline’s second quarter 2014 conference call. Joining me today are Chris Bayle, Inter Pipeline’s President and Chief Executive Officer; and Brent Heagy, our Chief Financial Officer. Today, we will discuss second quarter financial and operating results and provide an update of other corporate activities.

First, we’d like to remind you that certain information in this conference call may contain forward-looking information that involves risks, uncertainties and assumptions. Such information, although considered reasonable by Inter Pipeline at this time, may later prove incorrect and actual results may differ materially from those stated or implied from our comments today. Undue reliance should not be placed on such information. A discussion of the related risk factors, uncertainties and assumptions is available in our year-end MD&A, which you can find on our website at www.interpipeline.com or at www.SEDAR.com.

We are very pleased to present another strong quarter of financial and operating results. During the quarter, we invested about $235 million in growth capital projects, announced a new diluent transportation agreement and successfully accessed Canadian debt capital markets to maintain Inter Pipeline’s strong balance sheet.

I am going to turn things over to Chris to provide an overview of the quarterly highlights and then onto Brent to discuss Inter Pipeline’s financial, operational and corporate activities. I will wrap up the formal portion of the call with a focus on second quarter financial results before opening the call to questions. Please go ahead, Chris.

Christian P. Bayle

Thanks, Jeremy and good afternoon everybody. As Jeremy mentioned, it was another successful quarter for Inter Pipeline. In particular, financial results were led by strong performance in our oil sands transportation and conventional oil-gathering business segments. Together these two segments transported over 1 million barrels per day for the fourth consecutive quarter and generated approximately 70% of our quarterly funds from operations prior to corporate costs.

In the quarter, we also announced the signing of a long-term agreement to provide diluent transportation services to the JACOS-Nexen Hangingstone oil sands project. This highly capital-efficient project represents the ninth oil sands production facility to receive its diluent from the Polaris pipeline system. We continue to be optimistic on our ability to secure additional third-party projects and further strengthen our position as the leading diluent transportation service provider to Alberta's oil sands.

Subsequent to quarter-end, we announced that we are embarking on a $100 million expansion of our Mid-Saskatchewan pipeline system. This will be the largest capital expenditure program in the history of our conventional oil gathering business. We also announced that the first $1.1 billion phase of the Polaris pipeline expansion was successfully completed and placed into service. Approximately 300 kilometers of new mainline was installed, which added 700,000 barrels per day of additional capacity to the Polaris pipeline system.

Remaining major capital projects on the Cold Lake and Polaris systems are on schedule and expected to enter commercial service between late 2014 and mid-2017. In aggregate, the long-term oil sands transportation contracts that underpin our current $3 billion capital expenditure program are anticipated to generate about $400 million per year in incremental annual EBITDA once fully in service.

From an environmental health and safety perspective, I am pleased to report that all four of our business segments continue to operate to the highest safety standards with no major issues incurred year-to-date. This is an important corporate objective for Inter Pipeline that we will continue to focus on as we develop and expand our asset base.

So on that positive note, I’ll now turn things over to Brent for additional commentary on our second quarter results.

Brent Heagy

Thanks, Chris, and good afternoon, everyone. From a financial perspective, we are happy to report that second quarter results were near record levels and reflect our strong operational performance. Funds from operations increased 25% compared to the second quarter of 2013 and we maintained a conservative payout ratio of 82%. We also invested about $235 million on capital programs bringing our total expenditures for the first half of this year to over $750 million. Operationally, it was a very successful quarter as well.

Pipeline volumes were high as producers continue to aggressively develop both oil sands and conventional oil projects. We transported 858,000 barrels of oil per day on our oil sands pipeline systems and over 200,000 barrels per day on our conventional oil pipeline systems. Also, we processed over 2.2 billion cubic feet per day of natural gas at our three NGL extraction facilities.

Our main focus continues to be developing and executing our large capital investment program, which should approach $1.3 billion in 2014 for all business segments. Both the Cold Lake and Polaris pipeline systems are being significantly expanded to meet our shippers’ production forecasts. We are pleased to report that progress on this front continues as planned. For Polaris, roughly 300 kilometers of new 30-inch diameter mainline pipe is now in service and delivering diluent on a daily basis.

Eight of the 10 facilities associated with the FCCL expansion have been commissioned with the remaining two on schedule for completion in the fourth quarter of this year. In our conventional oil pipeline business segment, we’re undergoing a $100 million expansion of our Mid-Saskatchewan pipeline system in response to increased customer production.

Significant drilling activity, as well as new well completion technology, has resulted in increased oil production around our system in the Kindersley Kerrobert area of Saskatchewan. As with our oil sands capacity expansion projects, we are building in incremental capacity on the Mid-Saskatchewan system to pursue additional third-party transportation opportunities.

Our conventional pipeline business is experiencing notable volume growth and is also benefiting from active midstream marketing activity as ownership and control of the infrastructure enables greater blending opportunities.

In NGL extraction, financial results increased primarily as a result of higher propane plus volumes at the Cochrane extraction facility. Throughput volumes at Cochrane increased 45 million cubic feet per day compared to second quarter 2013 levels when volumes were impacted by a planned 18-day full plant maintenance shutdown.

Natural gas throughput volumes at the Cochrane facility are impacted by several variables, but are largely driven by the demand for Canadian gas in the US west-coast region. We expect the demand for Canadian gas to remain strong and throughput levels to remain near historical levels.

In European operations, results were again divided along two lines with our UK and German facilities performing well with high utilization rates as did most Danish terminals. The large Gulfhaven terminal in Denmark continues to be negatively impacted by unfavorable market conditions related to a lack of contango in certain commodity markets. Outside of a single terminal being pressured by forward market pricing, European operations performed quite well.

I’d just like to reiterate that it’s been a very successful quarter for Inter Pipeline. And we remain focused on executing the same business strategies that have provided significant returns to our investors over the past number of years.

I will now turn things over to Jeremy for a more detailed look at our financial results.

Jeremy A. Roberge

Thank you, Brent. We are pleased to present another very strong quarter for Inter Pipeline. Key metrics such as funds from operations and cash dividends were both up substantially year-over-year and we continue to maintain financial strength and flexibility as we move through our largest ever capital program.

Together, these factors have led to a higher share price and increased our enterprise value to over $15 billion for the first time in our history. Our enterprise value has nearly doubled since the end of 2011.

Now moving into the more detailed information on our second quarter financial results. Funds from operations increased by $26.2 million over second quarter 2013 levels to $131.6 million, representing a gain of 25%. The increase was largely due to new business and growth in pipeline operations.

In the oil sands transportation segment, cash flow increased as new projects entered commercial service. The conventional oil pipeline segment generated the highest quarterly funds from operation in its history at $49.6 million as result of rising volumes, toll increases and increased midstream marketing activity.

In the past three years, quarterly funds from operations from the conventional oil pipeline segment has increased by 57%. Net income for the quarter was $85.3 million, a gain of $18 million over normalized second quarter 2013 net income for similar reasons as I just discussed.

Cash dividends to shareholders increased substantially compared to the second quarter 2013 levels due to two annualized dividend increases in 2013 that totaled $0.18 per share and to a larger number of shares outstanding. Dividend payments totaled $103.9 million for the quarter, a gain of 33%.

With excellent access to capital markets, we were able to issue $900 million of medium-term notes at very favorable interest rates. The net proceeds of the debt offering were used to reduce debt outstanding on our $1.25 billion revolving credit facility. As at June 30, we had about $1.2 billion of undrawn committed capacity available on our credit facility. In aggregate, Inter Pipeline has raised over $1.3 billion of debt and equity between the first half of 2014 to support our capital programs.

Our balance sheet remains strong with significant liquidity and our plans are on track to successfully fund our existing growth platform and future investment opportunities. Inter Pipeline’s recourse debt to capitalization ratio at June 30 was 51.7%, in line with our targeted 50-50 debt equity structure. It’s important to note that Inter Pipeline has now incurred the largest portion of the current capital program with the major pipeline construction phases nearing completion. These capital expenditures are being directed towards commercially-secured projects that will lead to material cash flow growth as phases enter commercial service.

Most of Inter Pipeline’s capital program is underpinned by long-term cost of service transportation agreements that will increase and strengthen visibility of our cash flow base. Revenue streams from these contracts are not subject to commodity price or throughput volume risk.

Adjusted EBITDA for the second quarter totaled $161.4 million, which can be broken down by contract type as follows: 46% from cost of service agreements, 36% was from fee-based contracts with no commodity price risk and 18% was from commodity-based agreements that are subject to both commodity price and volume risk.

As cash flow growth continues to come from predominantly long-term cost of service or fee-based contracts, cash flow that is subject to commodity price risk is expected to decrease on a comparative bases. As a result, Inter Pipeline has no frac spread hedges in place at present, but we will continue to monitor forward commodity markets and may enter heads hedge contracts in the future.

This concludes the formal portion of the conference call. We would now like to turn the meeting back to Rita to open the floor for questions. Thank you.

Question-and-Answer Session

Operator

Thank you, sir. We will now take questions from the telephone lines. (Operator Instructions) The first question is from Linda Ezergailis of TD Securities. Please proceed.

Linda Ezergailis – TD Securities

Thank you. I have a question about your conventional business. How much of your year-over-year increase in cash flows was driven by marketing? I mean there was some mention of volumes increasing helping the marketing growth. Can we assume that as your volumes continue to grow that your marketing business will grow commensurate with that?

Brent Heagy

Right. Midstream marketing, so adjusted EBITDA after taking into corporate cost allocations for the second quarter was about $10 million, Linda and year-to-date, it was around $15 million. So for the whole year, we would expect adjusted EBITDA to be between $30 million to $35 million, but most of that will depend on volumes and heavy oil differential at the same time.

Linda Ezergailis – TD Securities

Okay, that’s very helpful. And then could we see, assuming no change in heavy oil differentials, which is a big assumption, but if we continue to see volumes growing over the next number of years, might that $30 million to $35 million grow commensurate with that beyond 2014?

Christian P. Bayle

It’s Chris, Linda. Yes, that’s possible. As long as that volume growth is centered around our single shipper pipelines, which are predominantly Mid-Saskatchewan and the Central Alberta system.

Linda Ezergailis – TD Securities

Okay.

Christian P. Bayle

And quite frankly, that is where we’re seeing most of the volume growth today.

Linda Ezergailis – TD Securities

Okay. That’s very helpful. And maybe you can just help us out with what you’re seeing. I appreciate you are not feeling as much of a need to hedge your frac spread exposure, but can you tell us what you are seeing in terms of forward pricing indications?

Brent Heagy

Sure, Linda. For the balance of 2014, we’re about $0.77 per US gallon, for 2015 roughly $0.79 and for 2016 we’re at about $0.78.

Linda Ezergailis – TD Securities

That’s great. Thank you.

Brent Heagy

Okay. You’re welcome.

Operator

Thank you. The next question is from Carl Kirst of BMO Capital Markets. Please proceed.

Carl L. Kirst – BMO Capital Markets

Thank you. Good afternoon, everybody. If I could ask a question on the JACOS Hangingstone, in understanding that you all aren’t disclosing the EBITDA from that, but I am wondering if there is any color you might provide on what you think that ultimate size might be. And I was going to ask it in the way of what is the capacity of the lateral that is connecting that. I understand the firm commitments are 7000 barrels at this point, but I didn’t know what the capacity was.

Christian P. Bayle

It’s a good question of capacity I know what that number is off the top of my head, but certainly would be well in excess of the 7. It is a very short lateral. And in terms of ultimate size of the project, that’s really difficult to say right now JACOS and Nexen do have I think paper plans to expand that project but nothing is certain right now.

Carl L. Kirst – BMO Capital Markets

Okay, Chris, it wasn’t overbuilt for instance for any near-term expectation that is what I am understanding? Nothing to worry about?

Christian P. Bayle

No, no.

Carl L. Kirst – BMO Capital Markets

Okay.

Christian P. Bayle

But if they were to expand their facility we would be very capital efficient in our expansion to accommodate their capacity their capacity needs I should say.

Carl L. Kirst – BMO Capital Markets

Excellent. If I could ask another question just – and certainly congrats on bringing phase one of Polaris into service. As we think about the EBITDA associated with that, can you refresh my memory if that is something that now that that is in service, we start seeing the EBITDA associated with that CAD1.1 billion coming quickly or does that sort of smoothly grade up perhaps on escalating minimum volume commitments? I know there is a little bit more spend I guess to bring some additional injection stations online by the end of this year, if I am not correct. So I’m just trying to get a better understanding of the EBITDA coming in.

Christian P. Bayle

Yeah, it’s really kind of light switch with the original – with the expansion that’s coming to service today, it is out from day one, CAD90 million of annualized EBITDA. And then as we layer in the other components of the Polaris expansions beginning with the next step is the connection between Edmonton and Lamont to link up the Edmonton hub to our Polaris main line. That will come into service we believe in later part of this year and that will turn over the additional chunk of EDITDA and growing all the way up to $130 million by the time Narrows is in service, I believe which is, let’s say mid-2017.

Carl L. Kirst – BMO Capital Markets

Excellent. And then just last question, if I could. Great to see the Mid-Saskatchewan spend expansion. Should we think of that now as basically considering the amount of volumes coming out of the Viking, et cetera that this expansion will kind of put you in a sense of balance for a little while or is this just perhaps the first of several steps, meaning 2015 potentially we could see some additional growth spend on the conventional side?

Christian P. Bayle

Well, we are taking a big step forward this year with putting in a significant amount of new mainline capacity, which is a big chunk of the CAD100 million. And that additional main line capacity will give us an incremental almost 100,000 barrels a day of capacity of which a less than 50% is allocated to the new shipping contracts that we executed last month. So incremental capital in future years will largely be around new laterals to connect and access that new mainline capacities. And we are quite hopeful that we will secure a number of new connections here over the foreseeable future.

Carl L. Kirst – BMO Capital Markets

Excellent, thank you so much for the color.

Operator

Thank you. The question is from Paul Lechem of CIBC. Please proceed.

Paul Lechem – CIBC World Markets

Thanks. Good afternoon. Just some questions around the Polaris expansion, and I understand that the JACOS-Nexen contract for instance, that is on the original Polaris line. So first of all, is there any more spare capacity on the original Polaris line at this point? Or is it all being committed to the various shippers?

Christian P. Bayle

It is essentially fully under contract today, but not all those contracts are necessarily, extremely long term. The majority of them are, but not all.

Paul Lechem – CIBC World Markets

Okay. So to go to another phase of Polaris expansion to maybe extend it back up to Fort McMurray, into the Fort McMurray region, what do you need to underpin that kind of expansion? How much further capacity do you need or commitments do you need to do that? I mean you have roughly 350,000 barrels of the expansion currently committed, so 350,000 free. How much of that 350,000 do you need to have committed before you move forward with another phase of the expansion?

Christian P. Bayle

Well, that’s a difficult question to quite frankly it’s the culmination of toll times volume. So obviously there is going to be at certain amount of minimum call it EBITDA that we are going to require to do a major expansion of the, let’s call it the 30-inch mainline to further extend the loop north and we are under discussions with various counter parties to extend the new Polaris mainline north through the Cheecham area and up into the Hangingstone area. So time will tell on the timing of that expansion.

Paul Lechem – CIBC World Markets

Should we read anything into the Norlite pipeline being upsized from 20-inches to 24-inches? Should we read through that there is more competition now than previous for those additional commitments?

Christian P. Bayle

I don’t think so. I personally I think what I have been surprising if they give anything but make a 24-inch pipeline. Given the current commitments they have just with Fort Hills that would have used up an enormous amount of capacity related to a 20-inch pipeline. So if Enbridge had any plans long term to additional shippers then they really do need a 24.

Paul Lechem – CIBC World Markets

It hasn’t changed in terms of your discussions or competitive dynamics for any of these additional shippers?

Christian P. Bayle

No. not at all.

Paul Lechem – CIBC World Markets

Okay. Just last question, switching to Cochrane. So volumes are up year-over-year, but still below, well below where they were Q1. Last year, in the back half, we saw volumes rebound quite strongly. Should we expect a similar kind of pattern this year? What is your view in terms of Cochrane volumes through the back half of this year?

Christian P. Bayle

I’d say that right now we are moving, I think it’s about 1.5 to 1.6 Bcf a day through Cochrane and that is not far off of our annual expectation for Cochrane. We look at that as a pretty strong level, quite frankly. Our long-term forecast for Cochrane volumes is somewhere in and around 1.2 Bcf. So anything above that is we think it is very strong.

Paul Lechem – CIBC World Markets

Okay great. Thank you very much.

Operator

Thank you. The next question is from Robert Kwan of RBC Capital Markets. Please proceed.

Robert Kwan – RBC Capital Markets

Hi, good afternoon. If I can just quickly come back to clarify your answer on the conventional system and midstream ops growing in volume, are you referring to just volume growth as the system as it stands today or the new contracts that you’ve signed, is the form of those contracts allowing from a single shipper status for you to continue to grow the midstream business on those incremental volumes?

Christian P. Bayle

Well, I am not totally sure I understand your question, but let me take a shot at it. With any new connection, any new shippers or producers that we add to our pipeline that’s single shipper like Mid-Saskatchewan, once the connection is made, the volumes are essentially – we purchase essentially the volumes those producers want to transfer in the pipeline and then resell it in a back-to-back contract at the delivery point which in Mid-Saskatchewan’s case is the Kerrobert area.

So we get to enjoy any blending opportunities associated with those new volumes, as a result of that. So to the extent we are successful in adding new shippers and growing the volumes on those systems and assuming blending margins stay the same, we should earn incremental revenue as a result.

Robert Kwan – RBC Capital Markets

Yes, absolutely. And then just keeping with conventional, obviously, the Mid-Saskatchewan system has benefited here with the Viking trends. Just what are you seeing as drilling moves west both for the Western end of the system, but also some of your other systems? Are you seeing anything activity-wise that gives you some hope that we may see expansion there as well?

Christian P. Bayle

Well, we certainly are seeing higher than historical average drilling on the central Alberta system in particular, which we find quite encouraging. And we are entertaining a variety of discussions with the producers in those areas of about potentially new connection opportunities or expansions. Now again, it’s too soon to tell whether that will turn into the same sort of percentage volume increases like we’ve enjoyed on the Mid–Saskatchewan system, but we’re optimistic.

Robert Kwan – RBC Capital Markets

Okay. And just last question here with the European terminals capacity utilization was down a bit from Q1 for the Inter Terminal side. I am just wondering what is the outlook for that. Do you think we have reached bottom or how much lower could you see that capacity utilization moving?

Christian P. Bayle

Yes, we’ve have been saying for past few quarters, that we do feel like we are at a bottom on the Inter Terminals business and that thing largely has played out, from financial perspective. Now we’re kind of happy to note that we did actually land a new contract at the GOT terminal, the Gulfhaven terminal, which is the one that’s experiencing all the pressure, as a result of a lack of contango. And I do believe as a result of signing that new contract the Inter Terminal’s utilization rate has jumped up to about 70% as of today. Now again, we’re not saying that that’s indicative of what’s going to happen over the medium term here. But that is an encouraging sign.

Robert Kwan – RBC Capital Markets

Okay. I guess prior to this, at least for the quarter, you were down around 65%. Is that kind of where you would have seen pretty much the floor?

Christian P. Bayle

Yes.

Robert Kwan – RBC Capital Markets

Okay, that’s great thank you.

Operator

Thank You. The next question is from Steven Paget of FirstEnergy Capital. Please proceed.

Steven Ink Paget – Firstenergy Capital

Thank you and good afternoon. What metrics does the Board consider when looking at raising the dividend and how often do they look at dividend raises?

Brent Heagy

I think my honest answer is, we don’t have a – there’s not a defined process that we follow. Obviously we discuss dividend, we could discuss dividend matters as often as quarterly, depending on how the business is performing. Typically, we do an annual strategic planning process in the fall, where we have a healthy discussion on a lot of topics in the business including dividend, policy and strategy. But as we know last year, we raised dividends twice in that period, simply because of certain circumstances.

So in terms of what the Board uses as broad guidelines as we look at a long-term forecast for the FFO generated from the business, I think it is fair to say that our directors are very comfortable around 80% payout ratio in our business and to the extent we are growing our cash cost of service cash flow, which we are, with it being about 40%, 40% to 45% of our business last year to probably north of 65% next year when the majority of the FCCL-related expansions go into service that the quality of our cash flow is ever-improving.

Does that answer your question?

Steven Ink Paget – Firstenergy Capital

Yes, thank you. The oil sands pipeline network continues to grow and IPL is, of course, responsible for handling its contracted volumes, but if another mid-streamer fails for whatever reason to have diluent available or capacity available at Hardisty Edmonton for DilBit and you temporarily shut down, are you protected from other people’s issues?

Brent Heagy

You’re saying related to our take-or-pay contracts in the oil sands.

Steven Ink Paget – Firstenergy Capital

Exactly.

Brent Heagy

From down or upstream issues, yes we are.

Steven Ink Paget – Firstenergy Capital

Right, right. Okay, thank you those are my questions.

Operator

Thank you the next question is from Rob Hope of Macquarie Capital. Please proceed.

Robert Hope – Macquarie Capital

Thank you. Good afternoon. The majority of my questions have been answered, so maybe I will go a little bit broader. With your large capital program tailing off right now and significant amount of capacity in the ground up to the oil sands, does your focus turn away from oil sands new-build to a new product line or new geography either through greenfield or acquisitions?

Christian P. Bayle

No, I don’t think our strategy changes at all. And quietly the opposite we’ve put a significant amount of pressure and effort into expanding our oil sand facilities so that we actually can very capital efficient basis layer in new connections to make use of that unutilized capacity. So we certainly don’t plan to go to sleep at the switch here and we’re going to work very hard to layer in a number of new contracts, make use of that extra capacity on both Polaris and Cold Lake. And we certainly have the internal capacity work on a variety of ventures. Just because focused on oil sands for the last several years does not mean we haven’t been paying close attention to opportunities in the NGL storage and conventional pipelines.

Robert Hope – Macquarie Capital

Okay, that is very helpful. Thank you.

Operator

Thank you. The next question is from Carl Kirst of BMO Capital Markets. Please proceed.

Carl L. Kirst – BMO Capital Markets

Thank you. I appreciate the time for a follow-up. I was just kind of keying off of Robert’s question on the bulk liquid storage. I was just kind of wondering, granted, we are talking about small numbers in the grand scheme, but some of the headwinds perhaps that you had were offset by good currency translation and the euro/dollar spread is still relatively close to the high of its five-year band. Does that get you thinking especially if perhaps we’ve seen the bottom and recovery might be underway that you would think more about entering into some currency hedges? I was just curious about that.

Christian P. Bayle

Yes, we will consider it. Obviously, you are right that you’re seeing some strength right now, but on other hand, as you mentioned it’s a pretty small part of our EBITDA. So if we’re going to be hedging anything, it’s probably going to be much more on an opportunistic type of basis if we see further strengthening. So I’m not going to commit that we’re going to exactly do a hedge right now because it is a relatively small part of our revenue stream, but if we see further strengthening, that’s something we would consider Carl.

Carl L. Kirst – BMO Capital Markets

Okay, thanks guys.

Operator

Thank you. (Operator Instructions) The next question is from Steven Ink Paget of Firstenergy Capital. Please proceed.

Steven Ink Paget – Firstenergy Capital

Thank you. Looking at Polaris and the quarter of system. You had working relationships with a couple prominent global super majors for several years now. Do these companies give you feedback on some of our relationship, between fame and archaeologist working and is there any feedback you can share at this point?

Christian P. Bayle

Well, I think my general comment would be we think our relationships with our shippers is very strong, it’s very symbiotic. We are in the business providing very reliable long-term transportation service to these very well-established oil producers and the counter point of that is they pay their bills on time every month and that relationship continues to be very strong.

Steven Ink Paget – Firstenergy Capital

And what is the secret to continuing to create new relationship with companies like this.

Christian P. Bayle

Quite frankly, I think one of the big strengths of our organization is the strong track record. We do have a very deep list of shippers across Corridor, Polaris and Cold Lake and we’ve been providing that reliable service for decades. And so, I think that speaks of volumes about doing business with IPL and we are not saying we are the only company that’s been doing that for the past decade. But it surely does make the barriers to entry for new entrants to be that much higher in order to compete. It is much more than just toll.

Steven Ink Paget – Firstenergy Capital

All right, thank you. Those are my questions.

Operator

Thank you. There are no further questions registered at this time. I would now like to turn the meeting over to Mr. Roberge. Please proceed, sir.

Jeremy A. Roberge

Okay, thank you to all of our participants today, we look forward to our next conference call on November 6, 2014 where we will discuss our third-quarter results. Thanks everyone.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.

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