Enterprise Products Partners LP (EPD) 2005 Q2 法說會逐字稿

Thank you all for holding. At this time, I would like to inform participants that their lines are in a listen-only mode for the duration of the call until the question-and-answer session, and that today's call is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Randy Burkhalter. Sir, you may begin.

Thank you and good morning. And welcome to the Enterprise Products Partners conference call to discuss earnings for the second quarter of 2005. Bob Phillips, Enterprise's President and CEO, will lead the call, followed by Mike Creel, the Company's Executive Vice President and Chief Financial Officer. Also included on the call today from Enterprise are Dan Duncan, our Chairman and Founder, and several senior members of our management team. Afterwards, we will open the call up for your questions.

During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 based on the beliefs of the Company, as well as assumptions made by information currently available to Enterprise's management. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the Securities and Exchange Commission for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during the call.

Now, I will turn the call over to Bob.

Thank you, Randy, and good morning to all of you that have joined us for the call. We are very pleased to report another solid quarter for Enterprise Products. The highlight for the quarter, in my view, is the continued increase in natural gas, natural gas liquids and crude oil volumes which feed our downstream pipelines, our processing and fractionation facilities, our storage, our distribution network, and our terminals. A strong supply position is clearly the cornerstone of success for our integrated value chain business model. And I think in the second quarter of this year, the numbers speak for themselves.

Gas volumes averaged more than 8.2 Bcf a day, an 8% increase from the first quarter of 2005. Natural gas liquids, crude oil, and petrochemical volumes averaged more than 1.73 million barrels per day, also up about 8% from the first quarter of 2005.

The biggest contributors to the increased gas pipeline volumes were the Texas Intrastate Pipeline System, with higher gas throughput from the Barnett Shale in North Texas. And in the offshore area, our Viosca Knoll and Falcon Offshore Pipeline Systems saw higher volumes, largely due to the return of Hurricane Ivan shut-in volumes near 100% pre-hurricane levels. So we are very pleased with that throughput. The biggest contributor on the NGL pipeline side was our import/export facility in the Houston ship channel area and higher natural gas liquid volumes that we saw in South Louisiana, which reflect both the increase in Hurricane Ivan shut-in volumes, as well as new Deepwater Gulf of Mexico supplies that have come on stream in the past several quarters and continue to ramp-up.

The San Juan and Permian gathering systems continued to perform very well during the quarter. The Mid-America pipeline and Seminole natural gas pipeline system also performed very well during the second quarter of the year.

On the disappointing side, we stubbed our toe a bit in the petrochemical division. Strong performance at our butane isomerization plants was offset by a write-down of our propylene inventory due to a sharp price decline during the quarter. We think that the polymer-grade propylene market got a bit ahead of itself, so there was a market correction from the wintertime price run-up. Prices have since rebounded off the lows, and demand remains very strong for polymer-grade propylene, and we feel like it is going to be a solid contributor in the second half of the year.

Also during the second quarter, we continued to have some problems with the conversion of our BEF unit from MTBE to isooctane. The conversion was delayed a bit due to (technical difficulty) problems during the second quarter, but I am pleased to report we are now in full production and on track. And I expect that to be a good, solid contributor in the second half of the year also.

A quick report on our growth projects. We made very good progress during the second quarter of this year. The Cameron Highway Oil Pipeline System is running at a solid 100,000 barrels a day, with new production from Mad Dog and Holstein ramping up in the second half of this year. We recently completed new pipelines to the Constitution and Ticonderoga fields. The new production platform for Constitution and Ticonderoga will be installed in the third quarter of this year, with first production expected in early 2006. That will be additional volumes for Cameron Highway also.

Marco Polo saw a lot of activity in the second quarter of the year out in the South Green Canyon area. First production from the K-2 field came on in May. We have seen three new wells from the K-2 North field have been tied back to the platform with subsea tiebacks. We expect first production in the third quarter of the year from the K-2 North field.

Anadarko continues to drill actively in the area. They're drilling a second development well to their Genghis Khan discovery. Genghis Khan is 3 miles from the Marco Polo platform. That should be tied back in the first half of 2006, with first production expected by mid 2006 -- additional volumes for Cameron Highway as well.

In the eastern Gulf of Mexico and on the Independence Hub pipeline project, in that area, producers in the second quarter discovered yet another field. The "Q" field was discovered in the second quarter. That now makes 10 new gas fields that have been discovered on acreage dedicated to this project, giving us what I think is the best reserves to production profile of any Deepwater project that we have undertaken in the Gulf of Mexico. Construction on the Independence Hub platform is on track in Singapore. More than 50% of our pipeline has been milled and has been delivered to South Louisiana for coating. Installation of the pipeline and platform is on track for the second quarter of 2006. And this project will be a significant contributor of cash flow growth in 2007.

Also during the second quarter, we announced the pending acquisition of a strategic natural gas liquid storage and terminal asset from Ferrell. We expect to close that deal in the second half of this year, and it will be accretive to cash flow as well.

Also during the quarter, we announced the new construction of a new 75,000 barrel a day fractionator in Hobbs, New Mexico to accommodate new natural gas supplies from the Rocky Mountain region. Both of these projects will be very important, strategic long-term assets and critical to our natural gas liquids business. So we are excited about being able to move forward with those projects as well. I think we continue to show a great balance between organic and acquisition growth. Our projects are very much on track and will continue to improve as production ramps up over the next several quarters.

That is an overview of our business performance and a project report for the second quarter. Now, I would like to turn it over to Mike Creel, who will take us through the numbers. Mike?

Thanks, Bob. Total gross operating margin for the second quarter of 2005 was $245.9 million. That is an increase of 130% over the 107.1 million for the same quarter last year.

Gross operating margin from NGL Pipelines and Services increased 107% or $62.1 million quarter to quarter, primarily due to improved processing economics, as well as contributions from the natural gas processing assets acquired in connection with the GulfTerra merger and the South Texas midstream assets we purchased from El Paso.

Indicative U.S. Gulf Coast natural gas processing margins for the second quarter of 2005 averaged $0.21 per gallon, and that compares with $0.12 per gallon during the second quarter of 2004 and $0.24 per gallon for the first quarter of this year.

Gross operating margin from the NGL Pipelines and Storage business increased to 46.6 million for the second quarter of this year compared to 42 million for the same quarter last year. The largest contributors were the Mid-America and Seminole pipelines, which accounted for $38.5 million of gross operating margin in the second quarter of this year compared with 30.8 million last year.

Transportation volumes for Mid-America and Seminole increased 4% or 35,000 barrels a day to 836,000 barrels a day for the second quarter of this year compared with the second quarter of last year. Gross operating margin was negatively impacted by the $4.3 million cost to remove propane ingested by third parties into our Dixie pipeline that did not meet quality specifications and to return that pipeline back to service. The pipeline has been returned to service. It was returned to service on June 1st after being down for about a month. We own 65.9% interest in Dixie, and that includes the interest that we acquired earlier this year from ConocoPhillips and ChevronTexaco.

Gross operating margin from Onshore Natural Gas Pipelines and Services was $84.9 million in the second quarter of this year, an increase of $78.8 million quarter to quarter, primarily due to the onshore natural gas pipeline and storage assets we received with the GulfTerra merger. Those contributed $79 million to gross operating margin in the second quarter this year. Onshore transportation volumes were 6 trillion Btus per day in the second quarter of 2005 compared with 620 million Btus per day in the same quarter last year.

Gross operating margin from onshore -- from Offshore Pipelines and Services increased $21.1 million over the second quarter of last year to $22 million. And this is primarily due to the offshore Gulf of Mexico assets we obtained in connection with the GulfTerra merger. Included in this segment were strong gross operating margin results from our offshore natural gas pipelines of $17.3 million, on average throughput of 2.2 trillion Btus per day and $11.2 million from our offshore platform services and production businesses in the second quarter.

Partially offsetting these strong results was a gross operating loss from our offshore pipelines of $6.5 million. This included charges of 11.1 million for the make-whole premium and for the unamortized debt issuance cost associated with refinancing the Cameron Highway debt. This refinancing lowered the interest cost on the Cameron Highway debt by approximately 200 basis points.

Net crude oil transportation volumes for the second quarter were 151,000 barrels per day, with Cameron Highway averaging 48,000 barrels a day in the second quarter and currently transporting about 100,000 barrels a day. Cameron Highway is jointly owned by Enterprise and an affiliate of Valero Energy Corporation.

Gross operating margin from the Petrochemical Services segment was $18.6 million, and that is a decline of $12.6 million from the second quarter of last year. Approximately 8.3 million of this decrease was attributable to the propylene fractionation and pipeline business that experienced significant volatility in both its refinery and polymer-grade propylene demand and prices. A 33% drop in refinery-grade propylene prices during the quarter in the level of working inventory negatively impacted cost of goods sold for the quarter.

Our octane enhancement business recorded a gross operating loss of $6.1 million, largely attributable to additional startup costs associated with the modernification of the facility to enable it to produce isooctane. The plant was in production for about 1 month during the quarter before it was taken out of service for additional modifications to improve product quality. System operating improvement had been made, and the facility was restarted in July. It is currently producing about 11,000 barrels a day of isooctane. And at full capacity, it should produce 12,000 barrels per day.

The other gross operating margin in the first quarter of 2004 is the $10.7 million of equity earnings we recorded from our ownership interest in the GulfTerra general partner, prior to the completion of the merger on September 30, 2004. On completion of the merger, the general partner of GulfTerra became a wholly-owned subsidiary of Enterprise.

Mercuation (ph) expense included in operating cost expenses was $101 million for the second quarter of 2005 compared with $31.7 million for the same quarter of last year. This increase is primarily attributable to the depreciation, amortization associated with the values assigned to the GulfTerra property, plant and equipment and intangible assets.

General and administrative expense was 18.7 million for the quarter of 2005 compared to 7.1 million for the second quarter of last year. Year-to-date, it was 33.4 million, and that is on track for 65 to $70 million for the year. The year-over-year increase is attributable to higher expenses associated with the combined partnership, as well as miscellaneous acquisitions that we have made.

Operating income for the second quarter of 2005 was $125.5 million, which is 90% higher than the $66 million recorded in the same quarter of 2004. Interest expense for the second quarter of 2005 was $56.7 million compared with 31.9 million for the second quarter of 2004. This increase reflects higher average debt levels after the completion of the GulfTerra merger in 2004.

Our weighted average debt outstanding was $4.4 billion during the second quarter of 2005 compared with $2 billion during the second quarter of last year. Net income for the second quarter of 2005 was $70.7 million compared to 33.1 million for the second quarter of 2004.

Distributable cash flow totaled $220 million for the second quarter of 2005, resulting in a distribution coverage ratio for the quarter of 1.2 times. Excluding the $47.5 million distribution received from Cameron Highway as part of the proceeds from the initial refinancing with the debt, distributable cash flow was 173 million and would've resulted in coverage ratio of 1.0 times.

The Board of Directors of our general partner increased the quarterly cash distribution for the second quarter of 2005 to $0.42 per unit from $0.41 per unit for the first quarter this year. This increase represents a 12.8% increase over the $0.3725 per unit distribution rate that was paid with the respect to the second quarter of 2004.

Capital expenditures for the second quarter of 2005 totaled $260 million, including approximately $75 million on the Independence Hub and Independence Trail projects, both of which are on track. Capital expenditures also included $25 million for the acquisition of an additional 2% interest in the Mid-America pipeline, we now own 100% of that, and an additional 1.6% interest in the Seminole pipeline, which we own 90% of.

Spending for pipeline integrity totaled 4.2 million for the quarter. Of that, 2.8 million was recorded as operating expense and 1.4 million was capitalized.

At the end of the second quarter, we had just over 4.5 billion of debt outstanding. Consolidated debt-to-total capitalization was 44.3%, and we had liquidity of about $573 million, including 33 million of unrestricted cash on hand and 540 million of available credit under our $750 million multiyear credit facility. Our floating interest rate exposure was approximately 27% of our total debt at the end of the quarter, and that includes project financings. And our debt had a weighted average life of 11.4 years.

Our banks use a measure of debt to consolidated EBITDA for the last 12 months, as defined in our credit agreement, to evaluate our leverage. In the credit agreement, EBITDA is adjusted by subtracting equity earnings from unconsolidated affiliates and adding actual cash distributions received from unconsolidated affiliates. It is also adjusted to reflect a full year of EBITDA from acquisitions that we have completed within the last 12 months. This rolling 12-month consolidated EBITDA at June 30, 2005 was $1.12 billion. Dividing this into our debt of 4.58 billion at June 30, 2005 gives us a debt-to-EBITDA ratio of approximately 4.09 times.

And with that, we will open the call up for questions.

(OPERATOR INSTRUCTIONS). Ron Londe, A.G. Edwards.

It looked like a pretty good quarter -- lots of moving pieces as usual and more with GulfTerra added.

Two things -- before you acquired or during the acquisition of GulfTerra, you talked about -- are there synergies involved, especially with GulfTerra being positively affected by gas prices moving up and Enterprise negatively affected. Can you give us some examples of how this worked out since the merger has become effective? And what you are looking for going forward?

Yes, Ron, what we had indicated was that the gathering systems that GulfTerra had had prices that were indexed to natural gas prices. So they benefited from rising natural gas prices. The flip side was that we used fuel for our plants for shrink for the compressors, and the volumes between the two largely offset each other. And we have seen that worked pretty well. We have not drilled down to the specific dollar numbers. But looking at the overall results, it looks like that natural hedge has held up.

So it has been pretty successful. Okay also, Thunder Horse, what effect is that going to have on you for 2006? It looks like that is -- production is going to be delayed there.

Well, the production that was going to come across there -- the only production that we would have seen would have been the natural gas that would have gone into the Pascagoula plant. But let me let Bart speak to that. Bill? Sorry, let Bill Ordemann.

Yes, I haven't got a good handle on what the delay is right now, but the vast -- where that is going to affect us mostly will be on transportation volumes on our tri-states and Belle Rose and Wilprise pipelines and into the fractionators of Baton Rouge and Promix. That will be the primary place we capture value from that. The vast majority of that production on the gas processing side belongs to BP, and they will process under their ownership. We will not share in that. But at this point in time, I don't have a firm handle on what the delay is and how much it will impact us into 2006.

On the offshore side, we do not own an interest in the export pipelines of the Thunder Horse platform.

Okay. That is all I had for now. Thanks.

Yves Siegel, Wachovia.

Mike, can you just give me an update on what you are looking to spend for the second half of this year, and if you have a preliminary number for '06? And what is the thought on future financings at this juncture?

Yves, the last half of the year obviously when we talked before, we had indicated that the Independence Hub and Trail spending was going to pick up in the back half of the year. My best guess is that that number is going to be somewhere around $600 million in total for all of our CapEx for the last 6 months of the year.

With respect to the financing that, obviously we are cognizant of keeping our balance sheet in shape. As we spend money, we are currently evaluating how we fund that. And it clearly, it's -- at some point, to fund these growth projects, there will be a need to raise some equity. But we have not decided on a timeline yet.

The last question is -- any update on filing a rate case for Mid-America and Seminole?

Let me let Jim Collingsworth speak to that.

We have another settlement discussion in Washington, D.C. on August 1st. We have had preliminary discussions with a couple of shippers, and there may be one that we can reach an agreement with, but we are still working through the process. And I think it is going well right now.

Is there any way to sort of ballpark what kind of increase that could mean?

It is probably a little early at this point, Yves.

Okay, I’ll pass it on. Thanks.

Apsa Kwadry (ph), Schroders.

I was just wondering, what are your plans on becoming investment-grade debt in regards to your current credit profile?

Well, we are investment-grade at two out of the three rating agencies. And obviously, we are continuing to work on improving our financial ratios to get to investment grade at Standard & Poor's.

Okay, and -- oh, do you have a set schedule of reducing your debt levels or anything like that -- like goals for your debt-to-capital ratios and stuff like that?

Well, our debt-to-cap right now is less than 45%. I think that the rating agencies would look at a debt-to-EBITDA ratio as perhaps being a bit more important. We are at -- on a trailing basis, the way our banks look at it, just under 4.1 times. Obviously, we would like that to be below 4 times, closer to 3.5. And that will come about from a couple different things. Obviously, as we continue to grow the business and increase the amount of cash flows from the business, the debt-to-EBITDA ratio is going to change. And clearly, the way that we fund that growth is going to impact it as well.

John Freeman, Raymond James.

My question -- the first one dealing with the Cameron Highway. Obviously, the volumes are increasing pretty strongly. You averaged 48,000 during the quarter -- currently at 100,000. You said you got Mad Dog and Holstein that will be continuing to ramp up second half of the year. Combine that with Constitution, Ticonderoga, Genghis Khan -- all coming on early to mid '06. Any guidance you can give on kind of your outlook for volumes on that?

John, this is James Lytal. I don't know that we can provide any guidance, but I think you are on track. You see there is a lot of volumes coming on. I think we can tell you that Holstein and Mad Dog -- both of those platforms are 100,000 barrel-a-day platforms. Constitution is a 70,000 barrel-a-day platform. Atlantis comes on mid 2006. It is a 200,000 barrel-a-day platform. So you can see there is a lot of potential there.

Yes, that's very helpful. Last question I had was -- if you all could speak to you all's view strategically -- how you're going to utilize the assets that you got from Ferrell?

John, this is Dan Duncan. Most of our marketing people happen not to be in this particular room, so let me speak for them. The concept that we was coming from was -- we have got a whole Maple system from Hobbs, North -- appraising. And we have a long-term storage deal with Williams up there. But it is only as far as the actual material that comes down from the EP from -- on EP, coming from the Equistar deal. And that is the basic -- the 2.5 million barrels of storage that we use in its pipeline throughput.

As we move forward and go back down a little bit -- go back to the 75,000 barrel a day new fractionator that we planned on putting in at Hobbs -- we also expanded -- and this has all been announced -- we are expanding the pipeline from Hobbs to Conway by about 80,000 barrels a day. We can go either north or come south with it.

What if -- what with the 75,000 barrel-a-day fractionator at Hobbs, we plan on competing with the other people in the Conway area to go ahead and shift prices. When prices are firm in Midwest like propane in wintertime, isobutane all the time or gasoline all the time -- we will be able to ship product from Hobbs up to the fact -- to the storage facilities in Conway. The vast majority of the storage, we get from Ferrell. So it really fits into our long-range plan of the Hobbs fractionator, and that is the reason we went after it.

We also picked up a storage up in Moab, Utah that we used for a supply (technical difficulty) marketing people, provided there are finders in Utah in that area. We also picked up a storage in Arizona -- I think it's right out of Phoenix -- called Adamabem (ph). That serves the West Coast market that we are very strong in. We have long-term contracts with Shell that rolled over and a couple of other refineries out there, supplying the West Coast deal through our marketing deal. But it fits into our value chain very nicely.

It also frees up capacity -- when we put the fractionator in at Hobbs, we also -- we going after the local business in West Texas, New Mexico, and also moving propane into the Mexico market through Leonotio (ph) and El Paso. It also frees up capacity from Hobbs to Belvieu, which, right now, we are in -- we pay overload facilities. Hobbs is -- our Seminole to Benlotis (ph), in about '97/'98 timeframe. We overload into Chaparral. We overload into long-term contracts with the Chevron pipeline to (technical difficulty) deal. We are also overloading to the Dreyfus pipeline; it is the old ExxonMobil pipeline. And we are discussing overloading it with Phillips. Phillips' pipeline comes out of the West Texas into Sweeny, which you can get into Belvieu.

So it fits into all of those occasions. It really is a backup to a whole -- the 1.5 to $2 billion of assets that we have in that part of the country. This is the key to having storage to back up those assets.

Great, I appreciate it. Thanks, guys.

Harry Matier (ph), Lehman Brothers.

Good morning; it's Paul Tice. Two quick questions -- first, on the M&A side, you have got a lot that you are spending on in-house right now. And I was just curious what your view is of the M&A market, and specifically, any interests you might have in the Dynegy assets there that are on the auction block right now?

Well, as you probably know, the M&A market is a bit frothy at the time. We have seen some assets go at prices that we scratch our heads trying to figure out how people make them work -- certainly not at prices that we would be willing to pay.

With respect to the Dynegy assets, those are not assets that we are looking at.

Okay. And I am sorry if I missed it before, did you guys cuff a 2006 CapEx number?

No, we are in the midst of doing our budgeting for 2006. And we will probably have something early in the fourth quarter on that.

Okay, directionally, Mike, do you think that's down or is kind of flat to '05, something to think about?

I don't see it as any more than '05. I think that with the project that we have currently got on the drawing board that we are currently working on that we are working through some of those big projects. So I wouldn't expect it to be much more than what we are doing this year.

And lastly, is there any color you can give around why S&P changed their outlook on you recently? And what was driving that decision?

I wish I could. You can read their write up and probably get as much out of it as I can. Obviously, we are very interested in continuing to work on the balance sheets and then get our financial position in a situation where S&P would be inclined to upgrade us.

And you are still targeting 3.5 to 4 times as a leverage metric, right?

Yes.

Let me add a little bit of color to the kind of the philosophy that Mike and Randy and them is going down the road on. In the past, I know Enterprise has been part of this deal too. We would go out and do a big acquisition, or we'd go out and do a big organic product. We would start spending that money. Then, we would come in behind time and raise capital and raise debt.

Under the going forward -- and this has been in place now for a little over a year -- we do not go out and spend the money before we raise the capital. Our goal right now is -- if we see something coming up that is large enough or even a bunch of little bitty things that is large enough, then our goal is to raise our capital ahead of time, get our balance sheet in real good shape -- so then when we go out and step in and do those type of deals, we stay in this low 40% total debt to cap and also stay below the -- stay in the 3.5 to 4 times EBITDA. So that is the philosophy that we are going forward on. If we do do anything, we plan on our balance sheet being shaped before we do it, rather than do it afterwards.

Okay, great. Thank you.

Robert Ling (ph), Sanders Morris Harris.

Good morning, gentlemen. I was wondering first on the Dixie pipeline, are you looking to recover those costs and what is the time line for recovering the lost revenue from there?

Yes, Robert, we are looking to make recoveries from those responsible persons. We have obviously got some work to do to figure out exactly where it came from, who is responsible. But we do (technical difficulty) reimbursement.

Let me add a little bit of colors to that, then Collingsworth can say something. We was not the operator at that time. We did not take over the operator of the Dixie pipeline until July 1. So at that time, the responsibility of the Dixie pipeline was still under the ConocoPhillips operations, and they was in charge of it. They feel pretty sure of the injection points that we came in at. That is one thing in tiebacks.

There is some questions of who may have been using that particular injection point on which refinery it came out of. But it is not going to be a hard type of answers to get back into it. And we have several mechanisms that you can recover on a pipeline like Dixie. You can recover directly from the people that put it in. You can also recover from the shippers that invest in that shipping point. So there is two, three different levels of recovery that we can go to, depending on what all we find. But we will be covered -- on basic, it's going to be 100%.

Fantastic. The second question has to do with SG&A costs. They were up about 4 million from the previous quarter from what I can see. I was wondering if that was an aberration because I was under the impression that the synergies were going to keep it down closer to about 15 million a quarter. I wonder if you could give a little bit of color on what caused the bump. And also, if that is a temporary thing, or if that is sort of the new levels we should be looking at?

No, Robert, I think that the levels that you ought to be focused on are for the 6 months we had some reclassifications between the first quarter and the second quarter that frankly made the first quarter look a little low and the second quarter look a little high.

And the last question -- and you may not be able to answer this because of the quiet period -- but is there any news on the timing of EPE?

We, as you can probably find out, we filed a Second Amendment to the S1 last week.

I saw that, yes.

-- Waiting on a response from the SEC.

Okay. Thank you, gentlemen.

Patrick Rau, Harris Nesbitt.

Most of my questions have been answered, but maybe just a higher level question for you guys, and that has to do with LNG. Can you talk about how -- I guess with your GulfTerra assets -- but how they are being an intrastate pipeline system? What kind of competitive advantages do you think that gives you with regard to the potential expansion opportunities with LNG coming into Texas?

The location of our assets -- obviously, there is one facility moving forward down the Freeport area. And these facilities are going to require interconnects into several pipelines. So we think we're well-positioned to get interconnected into these facilities, and they will be good supply sources for us. There is always a potential to build the header pipeline for the LNG facility. And those are things we look at also. But regardless of whether we provide that asset, we think these plants are going to be great supply sources for our assets.

Is there anything from a regulatory standpoint that might give your pipelines an advantage, say, versus a lot of the interstates that run through the area?

I don't think so. I think it is a fairly competitive process. And everybody is kind of on a level playing field.

Okay, great. That’s all I have, thanks.

This is Dan again. I will add a little bit of color to that. The advantage that it gives us, no matter who brings it in is, we will in time -- our Texas Intrastate System operates in the 3.5 billion cubic foot a day average for the year. Louisiana Intrastate System is in the 6 to 800 million. So numerically, we are in the 4 to 4.5 billion cubic foot a day of demand in the Louisiana/Texas coast, which is all these LNG facilities come in.

So no matter who brings them in, numerically, it'd be an advantage to us from a supply point that makes more gas available on the areas that we need it.

Mark Easterbrook, RBC Capital Markets.

Just a quick two questions. Maintenance CapEx seemed to be right in line with what we are expecting. You are still looking for 90 million in maintenance CapEx for 2005?

That's about right, Mark.

Any kind of change in 2006 that you can give us?

No, I think it is going to be right around there for 2006 as well.

Okay. On the processing spreads though, they came down in the second quarter. How are they looking through the third quarter?

Let me get Bill Ordemann to talk to that.

They have been kind of volatile. We have seen oil and gas prices and NGL prices kind of moving around pretty dramatically. For example, July -- going about 2 weeks ago and end of July -- it looked like it was not going to be a real good month for spreads. And then it turned out to be a very good month for us for spreads. So they have been changing pretty dramatically. I think the spreads in general for the third quarter are looking down a little bit as compared to the second quarter right now. But I am just going to keep your seatbelt fastened and see where they go.

At this time, I am showing no further questions.

Okay, Operator, would you like to give the replay call information?

Certainly, sir. If you wish to listen to the replay of today's conference call, you may dial 800-839-1151. (Repeat).

Okay. Thank you very much for joining us today, and have a good day.

This concludes today's conference. You may disconnect at this time.