Enterprise Products Partners LP (EPD) 2013 Q1 法說會逐字稿

Good morning. My name is Jay and I will be your conference operator today. At this time I would like to welcome everyone to the Enterprise Products Partners' first quarter 2013 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session.

(Operator Instructions)

I'd now like to hand the call over to Mr. Randy Burkhalter.

Thank you, Jay. Good morning, everyone, and welcome to the Enterprise Products Partners' conference call to discuss results for the first quarter 2013. Our speakers today will be Mike Creel, CEO of Enterprise's general partner, followed by Jim Teague, Chief Operating Officer, and Randy Fowler, Executive Vice President and CFO. Other members of our senior management team are also in attendance today.

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 and information currently available to Enterprise's management team. 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 this call. With that I'll turn the call over to Mike.

Thanks, Randy. I'll try to keep my comments briefer than usual since we just had our annual analysts meeting a couple weeks ago, which included a detailed review of our capital projects and business fundamentals. For those of you that are interested, the slides and the webcast from that meeting are available on our web site.

We're off to a strong start in 2013, with first quarter results that included record gross operating margin of $1.2 billion and record adjusted EBITDA of $1.3 billion. This led to record net income attributable to limited partners of $754 million and earnings per unit of $0.83 on a fully diluted basis. Net income for the first quarter of this year included approximately $64 million or $0.07 per unit on a fully diluted basis of gains primarily from asset sales and from insurance recoveries. Also included in net income for the first quarter of 2013 are non-cash impairment charges of $11 million or $0.01 per unit. Now if you're comparing these numbers to the first quarter of 2012, keep in mind that adjusted EBITDA and net income attributable to limited partners for that quarter included gains of $53 million from the sale of ETE units and $3 million of gains from the sale of other assets for a combined $0.06 per unit on a fully diluted basis. Net income for that quarter also included an income tax benefit of $47 million or $0.05 per unit on a fully diluted basis.

The strong performance from our fee-based businesses resulted in improved overall results during a weak natural gas and NGL commodity price environment, extending a trend that began in the second half of last year. We had higher fee-based gas processing volumes, NGL pipeline transportation volumes, record NGL fractionation volumes and record crude oil pipeline transportation volumes this quarter. This offset weaker results from our non-fee based gas processing business, which experienced lower processing margins and reduced ethane extraction at our Rocky Mountain processing plants. Distributable cash flow was $897 million for the quarter compared to $1.6 billion in the first quarter of last year. Included in distributable cash flow this quarter and in the first quarter of 2012 were losses from the settlement of interest rate hedges and cash proceeds from the sales of non-core assets.

After adjusting for these items, distributable cash flow increased 32% to $935 million this quarter compared to $708 million for the first quarter of last year. The distributable cash flow generated in our predominately fee-based businesses, allowed us to increase the quarterly cash distribution to $0.67 per unit for with respect to the first quarter of 2013, a 6.8% increase over the cash distribution with the respect to the first quarter of 2012. This is the 35th consecutive quarterly increase in our cash distribution per unit. Distributable cash flow provided 1.5 times coverage of the cash distribution to be paid with the respect to the first quarter if this year, and we retained $303 million of distributable cash flow to redeploy in the partnership to fund growth capital projects.

The NGL Pipelines and Services segment reported gross operating margin of $593 million for the quarter compared to $655 million for the first quarter of last year. Our natural gas processing and related NGL marketing business had a $152 million decline in gross operating margin compared to the first quarter of 2012, primarily due to lower processing margins and reduced ethane extraction. Partially offsetting the impact of lower processing margins was the increase in gross operating margin from fee-based processing contracts. Our fee-based natural gas processing volumes increased 4.5 billion cubic feet per day this quarter from 4.1 Bcf a day in the first quarter of 2012. Fee-based natural gas processing volumes increased by 38% and equity NGL production from our South Texas processing plants rose 532% as a result of production growth in the Eagle Ford shale. The three gas processing trains at our Yoakum Natural Gas processing facility, which began commercial operations in May and August of 2012 and in March of this year, continue to perform above expectations.

Gross operating margin for our NGL Pipelines and Storage business was $232 million for the quarter, a 38% increase over the first quarter of 2012 supported by near record volumes -- pipeline volumes of 2.5 million barrels per day. Our South Texas NGL Pipeline, which includes the new Eagle Ford NGL Pipeline that was completed in the middle of last year, was responsible for a $22 million increase in gross operating margin and the Dixie Pipeline had a $12 million increase in gross operating margin, primarily due to a 49,000 barrel a day increase in throughput. Demand for propane was higher this quarter due to colder weather than in the first quarter of 2012. Our NGL fractionation business continues to perform well, earning a record $91 million of gross operating margin this quarter from a record volume of 708,000 barrels per day. The $28 million increase in gross operating margin from our Mont Belvieu NGL fractionators was driven by a 33% increase in volume and higher average fees. Our sixth NGL fractionator at Mont Belvieu began service in October of 2012, and the seventh and eighth Mont Belvieu fractionators are scheduled to begin operations in the fourth quarter of this year.

Gross operating margin from the Onshore Natural Gas Pipelines and Services segment decreased $15 million to $191 million for the quarter compared to the first quarter of last year, and that's primarily due to production declines and less drilling in areas served by our San Juan and Jonah gathering systems as well as higher operating costs on our Acadian system. This was partially offset by an $8 million or 10% increase in gross operating margin from our Texas Intrastate system, reflecting again the strong production increases from the Eagle Ford shale.

Our Onshore Crude Oil Pipelines and Services segment had record gross operating margin of $236 million, more than 500% higher than the first quarter of 2012 on record crude oil pipeline volumes of 981,000 barrels a day. Our South Texas crude oil pipeline system which includes the new 24-inch pipeline from Lyssy to Sealy that began service last June and the Seaway pipeline which was reversed in June of last year and fully powered up during the first quarter of this year, was responsible for more than 40% of the increase in gross operating margin. Our crude oil marketing business benefited from marketing opportunities on our South Texas pipelines, the Seaway pipelines and from increased crude oil production from the Eagle Ford shale, the Permian basin and the Rocky Mountain region.

Offshore Pipelines and Services reported gross operating margin of $41 million in the quarter compared to $52 million for the first quarter of 2012. And that's largely due to lower demand in processing fee revenues, volumes from the Independence Hub and Independence Trail pipeline. The Independence Hub, if you'll remember, earned demand fees of about $4.6 million a month from the time it began operations in March of 2007 until the demand fees ended in March of last year. Gross operating margin this year benefited from a decrease in insurance costs for our offshore assets.

Our Petrochemical and Refined Products segment reported gross operating margin of $171 million this quarter, a 75% increase over the $98 million reported in the first quarter of 2012. The octane enhancement and high-purity oxybutylene plant had a combined increase of $51 million due to higher sales margins and volumes and lower operating expenses. Instead of beginning the annual turnaround on our octane enhancement facility in the first quarter like we normally do, this time we started it in the fourth quarter of 2012 and brought the facility back online in mid-January of 2013 resulting in higher gross operating margins for the quarter.

Our Refined Products Pipeline and Related Services reported a $45 million increase in gross operating margin, primarily due to a decrease in operating costs, higher average pipeline fees and sales margins and an increase in propane transportation volumes. Gross operating margin from our propylene fractionation and related petrochemical marketing activities decreased $26 million this quarter compared to the first quarter of last year due to lower propylene sales margins and volumes. We completed construction and began operations on approximately $400 million of major capital projects in the first quarter of 2013, including the third natural gas processing train at our Yoakum complex in South Texas, the expansion of our LPG export facility on the Houston Ship Channel and the expansion of our DIB facility at Mont Belvieu.

We have another $2.2 billion of growth projects that we expect to complete during the remainder of this year and an additional $5.3 billion of projects under construction that are scheduled to begin service in 2014 and 2015. Remember, these are only the capital projects that we've announced. We have quite a backlog of projects that our commercial teams are working on that will be added to the list as we get further into the year. Our predominately fee-based diversified portfolio of assets continues to perform well, enabling us to strengthen our balance sheet, fund our growth capital projects and continue our strong track record of increasing the quarterly distributions to our partners. We're excited about the growth opportunities available to Enterprise and we look forward to working for our investors to create even more value.

Before I turn the call over to Jim, I'd like to thank all of you who participated in our Analyst Day on April 17. Based on the positive feedback we received, it was beneficial for everyone, including our employees who attended the meeting or listened to that webcast. And with that I'll turn over the call to Jim.

Thanks, Mike. As Mike said, you can see that our system continues to show the strengths of a growing fee-based foundation, but I think equally important, maybe underappreciated, the growing diversification of our businesses. We serve both the supply and demand side of the equation. We have a strong presence across multiple commodities--natural gas, NGLs, petrochemicals, refined products and crude oil. We have geographic diversity within the US, and we have a significant and growing presence to global markets. That diversification means we don't try to weather cycles, we capitalize on them.

Stating the obvious, our processing margins are off considerably compared to this time last year when it seemed money was falling from the sky, but the reason for the downturn, abundant supplies, is significantly benefiting our development activities for things like pipelines, processing, fractionation and storage. From a price perspective, we believe ethane prices will remain depressed. We expect some ethane to be in rejection in transportation disadvantaged regions of the country. Propane however is enjoying a late but decent winter and more importantly is now also benefiting from our export dock, where we are consistently pushing the upper end of our expected delivery capabilities, currently loading in excess of 12,000 barrels an hour and on our way to 14,000 barrels an hour by the end of the week, without losing much sleep over the heavier part of the barrel.

Natural gas prices have recently developed a pulse and we've even seen modest spreads across parts of our system. Crude has become more than just a WTI to LLS story as our crude business has benefited from midland Cushing opportunities, West Texas to South Texas opportunities and Houston Ship Channel to Mississippi River opportunities. Our guys and girls in our crude oil business has adopted the Enterprise Way. Relative to our projects, we remain excited about our build-out of natural gas processing and crude oil assets in the Eagle Ford. We recently brought on our third train at Yoakum and, like the others, it's performing well above design specs.

Yoakum may be the largest NGL-producing plant in the country. We've averaged well over 130,000 barrels a day and have touched just over 140,000 barrels a day on selected days. Our crude oil pipelines are being extended deeper into the Eagle Ford play and we're nearing completion of our JV line with Plains, which allows our crude oil producers access to either Corpus, Three Rivers or Houston. Within about six months, virtually all of our Eagle Ford projects will be complete. Separately but related, we have 750,000 barrels of storage capacity in service at ECHO with 900,000 barrels under construction and plans for at least 6 million barrels at this location.

Our vision is that ECHO becomes the crossroad for crude oil and the Houston, Texas City, Beaumont, Port Arthur area. When we acquired TEPPCO, our crude oil business consisted of our Cushing storage, Seaway flowing the wrong way, and three gathering systems, one in South Texas, one in West Texas and one in North Texas, Oklahoma. Today, we have those same three gathering systems, but each have been augmented with expansions. Seaway has been reversed and is being looped and extended ECHO on to Beaumont Port Arthur. ECHO is being built out. Our Eagle Ford pipeline has been built.

Our JV with Plains to Gardendale is nearing completion, and volume through our Cushing system has grown since we reversed Seaway. In other words, our footprint in crude oil has been dramatically expanded and has the same value chain characteristics as our NGL and natural gas businesses. Our West Texas gathering system lies right in the midst of the activity in the Permian, and our Red River system is home to some interesting new prospects. As a result, our crude oil business is prospering and growing. As we discussed at our analyst meeting, construction on our Texas Express Main Line is on schedule.

We expect a late second, early third quarter start and I have to tip my hat. Our partners at Anadarko, Enbridge and DCP brought a lot to the table on this project. Our other western pipeline projects, Front Range and MAPL, are on schedule end of the year/first quarter next year. Our PDH activities are progressing as planned. We remain on schedule for our 2015 startup. Also we're encouraged with progress on our project to move diluent on the TE Products line and with developments around the ethane header. Ultimately we will have a dedicated ethane header from Corpus Christi in South Texas all the way over to the Mississippi River.

While we still have plenty of assets under construction, we have projects being incubated with new customers, some of whom aren't necessarily household names here in the states. We're always looking at our assets, listening to our customers and analyzing the market. We're looking at further repurposing over the next two to four years. And although there's nothing imminent, our recent actions should tell you that we don't let assets sit that aren't reaching their full potential. Given the dynamics that are underway for both supply and demand, including growing global opportunities, our results continue to show we're situated to capitalize on a growing slate of opportunities across all commodities, and we are proud and well served by our diversification. And with that I'll turn it over to Randy.

Thank you, Jim. I'll take a few minutes to comment on additional income statement items and capitalization. Interest expense increased to $196 million this quarter from $187 million for the first quarter of last year. The $9 million increase is primarily due to a $2 billion increase in our average debt principal balance outstanding. The provisions for income taxes was $6 million this quarter compared to a benefit of $34 million for the first quarter of 2012. This change is primarily due to the conversion of certain subsidiaries to limited liability companies in the first quarter of 2012. We had capital spending of $914 million this quarter, including approximately $857 million spent on growth capital projects. We expect to invest approximately $4.2 billion in 2013 on growth projects. Sustaining capital expenditures were $57 million this quarter. We still expect to spend approximately $350 million in sustaining capital expenditures in 2013.

Adjusted EBITDA for the 12 months ended March 31, 2013, was $4.5 billion. Our consolidated leverage ratio of debt to adjusted EBITDA was 3.7 times for the 12 months ending March 31, 2003 (sic -- 2013), that's after we adjust for the 50% equity treatment of the hybrid securities. If we further adjust debt for unrestricted cash on hand at March 31, which was approximately $1.3 billion, debt to adjusted EBITDA would have been 3.45 times. The average life of our debt is 14.3 years using the first call date for the hybrids. This is also after adjusting for the payment of senior notes that matured earlier this month.

Affiliates of privately held Enterprise Products Company, which collectively own our general partner and 37% of our limited partner interest, expect to purchase another $25 million of common units from Enterprise through the distribution reinvestment plan for the distribution that we'll be paying next week. This purchase would bring total purchases by these affiliates in 2013 to $50 million. ECHO had previously stated an interest in purchasing at least $100 million of Enterprise common units in 2013. We had consolidated liquidity of approximately $4.8 billion at March 31, including availability under EPD's credit facility and unrestricted cash. $650 million of this liquidity was used during the first half of March to repay maturing notes. With that, Randy, I think we're ready for questions.

Okay. Jay, we're ready to take questions from our listeners.

(Operator Instructions)

Darren Horowitz with Raymond James.

Jim, just one question for you, and it goes back to your comments around the onshore crude oil pipes business. If you back out that 40% increase in gross operating margin from the fee-based projects that came online, I'd just like to get your thoughts on the other side of that business. You mentioned the regional and great quality spreads, and how it contributed to marketing's profitability. I recognize it's a tough question to answer, but you all have such a big asset presence really everywhere from West Texas, east to Cushing, and then south to the ship channel, so I'd appreciate any thoughts that you guys have on supplying logistics, marketing opportunities, particularly as you guys see more pipe and storage capacity coming online for this year.

I think, Darren, you were at the Analyst Day, and I think I had a slide and Lynn Bourdon had a slide that reflected what we call our Enterprise Way. I guess that was kind of the theme of the whole thing. What I've been proudest of from a crude oil perspective is how these guys have adopted that way, and are working together and wringing every bit of opportunity out of that system. Each of our marketing groups effectively have strategies. These strategies reflect what the capabilities of the system are, and every day what they're doing is looking at those strategies as it relates to market opportunities, and invariably there's something there.

I don't know if that answers your question or not, Darren?

Well, if you -- it does, and I appreciate it. If you break it down a little further, Jim, is it a situation where you guys see maybe more opportunity to move physical crude barrels -- Eagle Ford barrels out of Corpus east, or is it a situation where you might be able to pick up an arbitrage on movements between the Houston Ship Channel and the Mississippi River or --? Is there any one area that stands out to you as having potentially more opportunity in the back half of this year?

Probably if I knew what the answer was to that, Darren, I wouldn't be sitting here and talking to you.

I know it's a tough one. There was just such a huge variance in gross operating profit in the quarter, and all of us crunching numbers are just trying to figure out what it means for the back half of the year.

I think for the back half of the year we're going to see the same sort of opportunities. I think you're going to -- you may see that the opportunities vary. Frankly, surprising to me was -- anybody could have taken out capacity on Seaway. I don't take -- we took out some.

What was interesting to me, and why I said in my comments, it's more than a WTI, LLS thing because that was probably no more than one-third of what our guys realized. Where they really made -- where we really did some good work was West Texas to South Texas where we put one heck of a lot of trucks in place. Now, that's evaporating. Now we're seeing opportunities to move a lot of barrels across our barge dock at Morgan's Point over to the river. That seems to be creating opportunities to make a little extra money.

I appreciate it, Jim, thank you.

Brad Olsen from Tudor, Pickering.

I just wanted to follow up on Darren's questions, specifically on the comments you made about Morgan's Point. Am I correct in understanding that the spread you're making barging there is a spread between crude on the west side of the Gulf of Mexico and the east side of the Gulf of Mexico?

I can't -- I really don't know. I'll tell you, part of the time the spread was -- I'm looking at Robbie. The spread was West Texas to LLS, as we had a boatload of trucks moving stuff down to Morgan's Point and barging over to the river.

That's correct. That's right.

Great. And one of the segments where you appear to be up pretty big year over year was refined products. I know it wasn't all that long ago that you all were talking about potentially repurposing the Centennial pipeline, or finding out something new to do with that. Given the fact that refined products seem to be up about $50 million a quarter over the last couple of quarters, is that something you're still considering, or is there another moving piece that maybe I'm not considering in what's driving better results in that segment?

Let me take a shot at it, and then I'll throw it to Tom Zulim to talk a little bit about what he's doing on TE Products. One of the things we did is that Gulf Coast pipeline that traditionally that went from -- that goes from the Houston Ship Channel over to Beaumont, traditionally just flowed west to east, and fed the TE Products pipeline going up to the Midwest. We made that bidirectional, and we've had a huge increase in business on that pipeline because we can go bidirectional, because it can be fed by Colonial and moved back to the Houston Ship Channel. So, that's been one of the places.

The other thing is -- you're probably going to get tired of hearing it -- we've adopted that same Enterprise Way in our refined products business as we've done in our crude oil business that has served us well in our NGL and natural gas businesses.

Yes, Jim, the only thing I'll add to that, and on what we call our Southern Complex, and you saw it at our analyst day, is by reconfiguring that both bidirectionally and with a greater connectivity, we've already increased volumes on there substantially, so you see a lot of that. I think we mentioned almost 150% more volume on it. Plus, you've got to remember, not only Colonial connections, but we're connected to 10 refineries in that particular area. And that system, which used to be the feeder system for both the TE pipeline going south to north, and Centennial aggregating volume on the Gulf Coast and moving it to the Midwest, has now become a system unto itself. Like we mentioned on Analyst Day, we're working to expand that system, both in terms of its capability, directional ability, connectivity, and also getting the customers to the water, which they really want to do out of that area.

On the TE system, you know it's been under a lot of pressure for its traditional south to north demand. We've already configured or are in the process of reconfiguring a major part of that system, and that's putting it into ATEX service for ethane coming out of the Marcellus and Utica down to the Gulf Coast. And we're continually looking at that to see what's the best and future use of it.

And honestly, Centennial falls into that as well. Centennial, again, was a pipeline that moved south to north that hasn't been in much use today. It still stands ready to move volume today in that traditional service. As we had mentioned at the Analyst Day, we'd looked at a lot of different possibilities around it, but nothing has really come together yet for it. So, we're also looking at what's the best use of the assets, and Centennial is certainly one of them. And I will point out, we do have a partner in that, that we try to work with as well.

Great. It looked like octane enhancement was another segment that was up very strong year over year, and is that simply the result of higher gasoline export volumes on the Gulf Coast? Was there any quirkiness as a result of the RIN spike that we saw during the quarter, or is there maybe another factor at play there?

Yes, I think the primary factor there was -- is in 2012 -- in 2013 we operated primarily -- we had a high operating percentage of days in the first quarter of 2013 as compared to 2012, which related to a turnaround. We actually started our turnaround on that plant in December 2012, and completed it in early January of 2013. So, a quarter-over-quarter comparison is not comparing apples for apples because of a turnaround plan on that asset. That's what's driving the difference.

Great, that's all for me. Thanks, guys.

Brian Zarahn with Barclays.

Just a little more on onshore crude pipelines because now it came in as your second-largest segment. It had a very strong quarter, I think beating all of our estimates. Beyond Eagle Ford and Seaway, and I know Jim touched on this a little bit, but is the marketing performance ratable, and can you give us a little bit of a sense of the growth and market volumes in the first quarter?

I don't remember. Do you guys remember? No. We're going to have to get back to you. I just absolutely -- it seems like we handled 1 million barrels a day, but I don't know what our marketing volume was.

I don't know what the volumes were, but clearly with Seaway being reversed and powered up, we had more capacity there. And on the pipelines into the Eagle Ford shale, that provided some opportunities for marketing.

Yes, Brian, in taking a look at it, volumes were up, but they weren't up that significantly -- not up more than sort of call it less than 50,000 barrels a day.

On the marketing side?

Yes.

With differentials coming in, it sounds like -- what impact do you expect that to have? I know Jim mentioned it was not the majority of the margin, but give us a sense of what -- relative to this quarter's performance, what type of impact do you think that could have?

You're, I think, trying to get us to figure out what the spreads are going to be going forward, and --

I guess just directionally, because sequentially it was a significant growth, over $100 million -- about $100 million of gross operating margin and -- which is terrific. Just trying to get a sense of -- do you see a variety of opportunities, or is it more just a few different differentials that are driving the marketing growth?

I think for the quarter, quarter over quarter, we certainly had more toys to play with this year, so -- and we're always looking for more opportunities. I don't think that you can take the growth that we had in the first quarter of last year and the first quarter of this year, and kind of make some kind of a trend line.

Okay. And then on -- maybe switching to NGLs, can you talk a little bit about what type of ethane rejection you're seeing in your system, and what do you think, industry-wide, is taking place?

This is Tony, Brian. We think rejection is somewhere around 175,000 barrels a day industry-wide.

Okay. And then last one probably for Randy -- on your ATM, can you give us a sense of how much availability you have on that?

Brian, it would be the same amount that we had at year end, which I believe was $795 million, ballpark.

Okay, thank you.

Ted Durbin with Goldman Sachs.

First is just trying to figure out here the sequential increase in the equity volumes in the processing business. I guess, is that all kind of Yoakum coming online. It's kind of broken a trend here, where your head equity volume is down pretty much every quarter for the last, call it, three or four quarters, and now we're up a lot. I'm just trying to figure out what's the driver of that.

Yes, Ted, hang on just a minute. It was principally South Texas being up because of Yoakum and, if you would, better extractions, and then Rocky Mountain's being down. If you would, we were up 10,000 barrels, and a little bit of noise in here, but for the most part, call it, down 13,000, 14,000 barrels a day in the Rockies, and up 27,000 in South Texas.

Okay. On the fractionation volumes, not a lot of growth here in the first quarter relative to last quarter, but margins look like they're a little better. Is there more spot volume flowing through on the frac side -- where are spot rates for fractionation these days?

I think it's probably new contracts coming in at higher fees, and some others rolling off.

Okay, but a lot of your new fracs are fully contracted, right? But you've still got -- I'm trying to get a sense of how much --

Say again?

A lot of your fracs are fully contracted -- your new ones. I'm just trying to just get a sense of how much of it is you're actually running spot rates versus contracted rates on the fracs.

We're not -- we have -- I don't think we have any spot barrels in our fractionators. They're all termed.

Got it. A last one for me is -- I know you've been trying to get market-based rates on Seaway here for a while. I'm just wondering if you can give us an update on your outlook for getting market-based rates there.

That's still up with the DC Court of Appeals right now. We're still waiting to hear back from them, and I'd hate to put odds on that.

But you have a pretty good precedence.

But I think, yes, we do have a pretty good precedent with what went on at Pegasus.

That's it for me, thanks, guys.

Ted, one other thing on the fractionator -- I think one moving piece in there is our Norco fractionator. Some of the historical base volumes in that were a percent of liquids, or a part of it was tied to NGL prices. You've got lower NGL prices, plus we had a decrease in volume coming through Norco, so that may be causing a little bit of the heaviness that you saw overall in fractionation.

Got it. Thanks, Randy.

(Operator Instructions)

John Edwards with Credit Suisse.

Just a couple quick follow-ups. I'm not sure -- I guess going back here to the onshore pipeline services. Is there a sense of how much of that contribution -- that increase was from marketing? Was it about $100 million or so, to follow on Brian's question?

Yes, ballpark, that's about right.

Okay, great. Also, the volumes -- the equity NGL volumes that had been trending down for some time, and then this quarter it reversed back up. Is that just because you're counting them differently, or if you could maybe explain that a little bit?

Yes, John, it's really just the -- if you would, the real principal changes is South Texas versus the Rocky Mountains. Again, with the Yoakum plants, highly efficient plants where we were able to come in and increase volumes by filling up the Yoakum plant. Again, South Texas plants were up about 27,000 barrels a day, equity NGL production in the first quarter, and then the Rockies, if you would, were probably down about 15,000 barrels a day. And that's, again, you just got less drilling activity to a degree, and where the Rockies still have rich in NGLs, it's, if you would, a lower GPM content where you might see a little bit of decreasing in drilling and a little bit less volume going through to the plants.

So, equity volumes should be trending now at about this level -- instead of around 100,000, about 120,000. Is that fair to assume?

Yes, this is Bill. I think one additional piece of color we need to put on that is a lot of that increase in South Texas barrels are what I call opportunistic barrels. I don't think they reflect that we've changed our portfolio back to keepwhole. I think what's happened in there is we have producers that have elections under their contract for reduced recoveries in plants like Yoakum. When they elect not to recover those barrels, we can step in and take those barrels or we can reduce the recoveries in the plant. Since we're operating on a variable cost with the pipelines and the fracs, we tend to continue to produce those barrels a lot further than other people will. I don't know that that's a permanent fixture that you're going to see those volumes go up in South Texas, but I think that's really what's driving it. We haven't gone out and signed a bunch of keepwhole contracts. It's really that opportunistic barrel that I think is causing that growth.

So, that could come back down depending upon the behavior of your customers?

That's correct.

Okay, fair enough. And then probably a question for Mike. I know in the past I've asked about project backlog, and you've -- give honor to Carl Sagan. (laughter) Can you give us a little more detail on what that is?

Yes, John, there's not a whole lot to add from the slide that we showed on the Analyst Day, but we are looking at a number of projects that we think are pretty exciting. If you look at what we have approved and announced, the capital spend for 2014 looks like it's going to be light compared to the last couple of years. I wouldn't expect that number to stay there. I would expect it to be more in the order of $3.5 billion, maybe $4 billion again.

Okay. Any plans to break out the LPG facility on your selective financial data?

Not at the current time.

Okay, thank you very much. That's all I had.

TJ Schultz with RBC Capital Markets.

First, on the proposed diluent project you just completed the open season. First, any comment coming out of that? And then to follow up, understand that the connects to Southern Lights and Cochin would take some time, but maybe if you could discuss what needs to be done at Mont Belvieu or how extensive some of the projects that would be required there?

Yes, TJ, this is Tom. Our open season on the diluent did close. We have not announced anything yet around it, but I will say that -- watch for positive information to come from that. We just haven't formally announced the results yet.

Secondly, I think your second question was -- what's on the south end of the system? And there's really a couple of facilities that they're not within the pipeline, i.e., they're not part of the regulated pipeline that would move the diluent, but there are treating facilities at Mont Belvieu for the diluent quality natural gasoline and the de-gassing facilities. Once it's treated, it's got a certain compound of gas in it, and it's got to be de-gassed. So, that's what's being built there in connection with the diluent project -- or will be built.

Okay, thanks. To follow up again on the refined products or your Southern Complex -- understand the volumes are up from the bidirectional move. Just as the refiners continue to retool, what's the potential or the capacity there to keep increasing volumes? And then, secondly, what kind of capacity would you look for, for export capabilities?

Well, as far as the first part of that question, TJ, I think the customers are looking for greater connectivity to not only pipes that go to other markets than the Midwest, like Colonial, but also to get to the water. As we mentioned in our Analyst Day, we're looking really hard at those projects now that would use that system to give access to the customers to not only different markets from the Midwest by pipeline, but also waterborne markets.

Honestly, I don't remember the second part of your question. (laughter)

I was just -- the capacity that you would look for, for [market] --

I don't know. I don't know. We haven't determined that yet.

Okay, fair enough, thanks, guys.

(Operator Instructions)

Michael Blum with Wells Fargo.

Thanks. My questions were answered. Thank you.

Noah Lerner with Hartz.

I guess this question is really directed towards Jim. I do appreciate the diversification, as I was going through the press release this morning and everything, and how some different business lines have helped out the softening that's going on in the NGL markets. I was just wondering -- do you guys think -- is there any holes within any of your systems that you think need to be filled, as far as other products that you're not touching or are there parts of a value chain for any of the products you do that you'd like to add on to -- add some more diversification and eliminate some of the yings and the yangs that go on in the commodity markets?

There's always holes that you see. But any time you fill that hole, you find another hole that you'd like to fill. Tom's mentioned it -- water access on refined products is obviously a focus that we have. When you look on the Houston Ship Channel, that connectivity from -- for crude oil deliveries, that's an obvious hole that we would like to be trying to fill. You look at C4s, and you think of the vacuum being created by ethane cracking. We've said before -- creating an on purpose butadiene plant might be something that we would like to look at in the future. And then, we export a lot of propane. We think we're going to export a lot more butane, and we're going to be looking at the -- at what we need to do to increase that capability. But invariably, once you fill a hole, you find another one.

Nope, that's great. Thanks a lot, Jim.

Jason Stevens with Morningstar.

I'm looking at -- maybe squinting at gnats here, but looking at your marine transport business, it's been pretty steady for a long time. Given the increase in activity moving around the Gulf, and looking to me like lights eventually trying to move up towards the East Coast, is there room for this to expand?

We are always looking to fill holes, as Jim said, so there is always room for that business to expand, yes.

All right, thanks.

There are no further questions at this time. I turn the call back over to Mr. Burkhalter.

Thank you, Jay. We have no further comments. If you would, please give our listeners the replay information.

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