Martin Midstream Partners LP (MMLP) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Martin Midstream Partners second-quarter 2011 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today's conference call is being recorded.

I would now like to introduce your host for today's conference call, Mr. Bob Bondurant, Chief Financial Officer. You may begin, sir.

Thank you, Kevin, and to let everyone know who is on the call today, we have Ruben Martin, CEO and Chairman of the Board; Wes Martin, VP of Business Development; and Joe McCreery, VP of Finance and our Head of Investor Relations.

Before we get started with the financial and operational results for the second quarter, I need to make this disclaimer. Certain statements made during this conference call may be forward-looking statements relating to financial forecasts, future performance and our ability to make distributions to unit holders. The words anticipate, estimate, expect and similar expressions are intended to be among the statements that identify forward-looking statements made during the call.

We report our financial results in accordance with generally accepted accounting principles, and use certain non-GAAP financial measures within the meanings of the SEC Regulation G, such as distributable cash flow, or DCF, and earnings before interest, taxes, depreciation, and amortization, or EBITDA. We use these measures because we believe it provides users of our financial information with meaningful comparisons between current results and prior reported results, and it can be a meaningful measure of The Partnership's cash available to pay distributions.

Distributable cash flow should not be considered an alternative to cash flow from operating activities. Furthermore, distributable cash flow is not a measure of financial performance or liquidity under GAAP, and should not be considered in isolation as an indicator of our performance. We also included in our press release issued yesterday a reconciliation of distributable cash flow to the most comparable GAAP financial measure.

Our earnings press release is available at our website, www.martinmidstream.com. Our 10-Q will be filed August 9, 2011, and will be available at our website then. The delay in issuing our Q was driven by the new XBRL format that is required by the SEC, and we are hopeful this will be the only time our press release and 10-Q are not synced up.

Now, I would like to discuss our second-quarter performance. For the second quarter of 2011, we had net income of $8.8 million, or $0.37 per limited partner unit. In the second quarter, because of certain commodity and interest rate hedges that did not qualify for hedge accounting, our net earnings were positively impacted by $2.8 million, or $0.15 per limited partner unit. So disregarding this net non-cash impact to our financials, our earnings would have been $6 million, or $0.22 per limited partner unit.

As with other MLPs, we believe the most important measure of our performance is distributable cash flow. Our distribution coverage is 1.09 times for our rolling 12 months. However, our distributable cash flow for the second quarter was $15.7 million, a distribution coverage of 0.95 times.

Our second-quarter DCF was negatively impacted by the continued timing of maintenance capital expenditures. Our combined maintenance capital expenditure for the second quarter was $3.5 million on a 100% basis. We had an additional $600,000 of maintenance capital expenditures spent at our Waskom partnership, which reduced distributions out of the Waskom partnership.

For the year, we have spent $11 million in maintenance capital and refinery turnaround costs and $1.2 million in our Waskom joint venture -- that is for our account. So, for the first two quarters of 2011, we averaged $6.1 million of total maintenance capital expenditures per quarter.

Looking forward to the back half of the year, we believe our maintenance capital expenditures, barring anything unforeseen, will average approximately $1.5 million per quarter. As a result, we should see a significant improvement in our DCF coverage ratio in the last half of the year, and by year-end, we believe our DCF coverage ratio will be in line with how we have traditionally performed.

Our large first half of the year maintenance capital costs were primarily driven by the fact we had four offshore tows experience required Coast Guard dry dockings, and we also had a refinery turnaround. These five large expenditures are behind us, and we will experience a much lower maintenance capital expenditure run rate in the foreseeable future.

Now I would like to discuss our second-quarter performance by segment compared with the first quarter. In our Terminalling segment, our cash flow, which is defined as operating income plus depreciation and amortization, but excluding any gain or loss on sale of assets, was $8.4 million in the second quarter compared to $7.8 million in the first quarter.

Our marine-shore-based terminals experienced a $600,000 increase in cash flow, primarily as a result of our 13 new shore bases being online for the full second quarter.

Although our throughput volumes through our marine shore bases increased during the quarter, the increase was not as much as internally forecasted. This is primarily because the pace of regulatory approvals for Gulf of Mexico exploration and development plans have not increased. Based on a report from IHS CERA, since the lifting of the drilling moratorium ban in the Gulf of Mexico, there has been an 86% decline in the pace of regulatory approvals for development plans.

Also, the backlog of deep water plans pending approval have increased over 250%, from an average of 18 per year to a current pace of 67 per year.

Although this regulatory approval delay is currently negatively impacting our marine-shore-based growth opportunities, the demand for exploration and development in the Gulf still exists and is growing. We believe we are positioned to take advantage of this future growth if and when the difficult regulatory oversight environment eases.

Now the outlook for our specialty terminals portion of the business, which includes our cross-refinery operations, continue to remain very consistent with the second half of the year.

In the specialty terminal portion of this business segment, we were pleased to announce our new terminal at Corpus Christi, which will support the new crude oil production being driven by the Eagle Ford shale play in South Texas. This new terminal should be completed in December of this year and have storage capacity of 300,000 barrels at a cost of $25 million.

Now moving to our Natural Gas Services segment, we had operating income before asset sales of $100,000 in the second quarter compared to $3.3 million in the first quarter. In the second quarter, we had a $600,000 non-cash commodity mark-to-market gain compared to a $200,000 non-cash mark to market gain in the first quarter. So excluding the non-cash mark-to-market adjustments, we had an operating loss of $500,000 in the second quarter compared to $3.1 million operating profit in the first quarter.

Complementing our Natural Gas Services is our cash flow from our unconsolidated entities, which is primarily our 50%-owned operating interest in the Waskom Gas Processing Plant. For the second quarter, our cash flow generated from our unconsolidated entities in the form of distributions was $3 million compared to $2.5 million in the first quarter.

So excluding the impact of non-cash mark-to-market adjustments, and including our distributions from our unconsolidated entities, and adding back depreciation and amortization, our Natural Gas Services cash flow for the second quarter was $4 million compared to $7.2 million in the first quarter.

Now, the decline in cash flow was not unexpected, as we typically see a seasonal decline in cash flow in the second quarter, primarily due to our wholesale propane and other NGL businesses. The cash flow from that component of our Natural Gas Services business accounted for $3.6 million of the $3.2 million decline in second-quarter cash flow when compared to the first quarter.

Volumes and margins typically decline in the wholesale NGL business as heating demand basically stops for most of the second quarter when compared to the first. Offsetting this seasonal decrease in cash flow was a $400,000 increase in cash flow from our Prism and Waskom gathering and processing assets. We saw increased volumes and increased pricing in the second quarter when compared to the first in this segment of our Natural Gas Services business.

Our second-quarter average processing volume at the Waskom plant was 286 million cubic feet per day compared to 272 million cubic feet per day in the first quarter. This processing volume was up for the quarter, as we had downtime in the first quarter from a particular Inlet gas pipeline feeding Waskom.

Waskom's current processing contract mix is 40% percent of liquids, 36% fee-based, 22% percent of proceeds, and 2% keep-whole. We currently have 47% of our 2011 volumes hedged and 35% of our 2012 volumes hedged.

For 2011, when factoring in our current hedge volumes, a dollar change in natural gas pricing affects our cash flow $15,000 per month, and a $10 change in oil pricing affects our cash flow $25,000 per month. For 2012, a dollar change in natural gas pricing affects our cash flow $16,000 per month, and a $10 change in oil pricing affects our cash flow $105,000 per month.

In the second quarter, we announced our first investment into natural gas storage. We purchased a Class B interest in Redbird Gas Storage LLC. Redbird is a joint venture between our general partner, Martin Resource Management Corporation, and MMLP.

Redbird owns a 40.08% Class A interest in Cardinal Gas Storage. The other investor in Cardinal Gas Storage is Energy Capital Partners, which owns a 59.92% Class A interest. MMLP's Class B ownership in Redbird tracks Cardinal's investment in Monroe Gas Storage, which Cardinal purchased on May 31 of 2010.

For the month of June, we had equity and earnings from Monroe of $153,000. Of course, this is a bookkeeping entry and does not reflect a cash distribution to us. The distribution for June was paid in July, and future distributions from Monroe should also be paid monthly. So we had no cash flow from our Monroe investment in the second quarter, but will have full quarterly distributions paid monthly going forward. Based on current market conditions and operation estimates, we believe we will receive $6 million to $7 million in annual distributions from our Monroe investment.

Moving to our Sulfur Services segment, our cash flow was $11.1 million in the second quarter compared to $9.6 million in the first quarter. Our cash flow on the fertilizer side of the business was $6.1 million in the second quarter compared to $5 million in the first quarter. Our second-quarter fertilizer volume was up 9% and our gross margin per ton increased approximately 21%. This increased gross margin per ton was the result of the mix of fertilizer sold in the second quarter.

On the pure sulfur side of the Sulfur Services segment, cash flow for the second quarter was $5 million compared to $4.7 million in the first quarter. As mentioned on previous calls, we have significantly reduced price-risk volatility out of the pure sulfur side of the business, as we have restructured our largest sales contract to pass through actual sulfur costs plus a margin. This contract became effective January 2 and will continue to significantly reduce cash flow volatility on the pure sulfur side of this segment.

Looking toward the remainder of the year, our fertilizer side of this segment should experience a seasonal decline in cash flow in the third and fourth quarters due to anticipated reduced demand. This reduced demand reflects the agriculture growing season, which primarily occurs in the spring. Our pure sulfur side of this segment should remain consistent.

In our Marine Transportation segment, we had cash flow of $2.3 million in the second quarter, compared to $4 million in the first quarter. The decrease in cash flow was primarily on the offshore side of the business, as two of our offshore vessels which operate in the spot market were off-charter for the second quarter. Offshore cash flow fell $900,000 and inland cash flow fell $800,000.

Looking toward the third quarter, we should have a significant increase in Marine cash flow, as one of the two offshore vessels in the spot market went to work for a customer hauling Eagle Ford Shale crude oil at the end of June. The other offshore vessel continues to have customer interest for the same Eagle Ford crude oil movement, but has not yet become employed.

Our cash flow on the inland side of the business should also increase, as we had six barges down for a period of time in June to add vapor recovery systems to accommodate Eagle Ford's crude oil. These barges will be fully utilized in the third quarter as those vapor recovery systems are now installed.

Also, we had some unanticipated downtime in the second quarter for tug repairs caused by logs and trash in the flooded river systems. This should not occur again in the third quarter.

So to summarize, for all four segments, we should have improved cash flow in the third quarter from our new Monroe gas storage distributions and improved cash flow from Marine Transportation, somewhat offset by a seasonal decline in fertilizer cash flow.

Of course, lying on top of these operating cash flow improvements will be a significant decrease in maintenance capital expenditures in the third and fourth quarters when compared to the first half of the year.

Now I would like to turn the call over to Joe McCreery, who will speak about our liquidity and capital resources and our recent growth initiatives.

Thanks, Bob. Let's start by walking through the debt components of The Partnership's balance sheet. I will then highlight further our recent acquisition and capital markets activity for the quarter. I will keep my comments brief this morning to allow for additional time for Q&A.

Back on June 30, 2011, The Partnership had funded debt of approximately $430 million. This consists of approximately $198 million of senior unsecured notes, $219 million drawn on our $350 million revolving credit facility, a long-term note payable for marine equipment of $7 million, and approximately $6 million of capital lease obligations. Thus, The Partnership's liquidity on June 30 was approximately $131 million.

For the second quarter ended June 30, our bank compliance coverage ratios, as defined by total debt to adjusted EBITDA and senior secured debt to adjusted EBITDA, were 3.45 times and 1.86 times, respectively. Additionally, our bank-compliant interest coverage ratio, as defined by adjusted EBITDA to consolidated interest expense, was 3.2 times.

Looking at our balance sheet, our total funded debt to total capitalization was 58.1%. This is higher when compared to the quarter ended March 31, 2011, primarily due to incremental revolver borrowings from the acquisition we completed during the quarter.

In all, at June 30, 2011, The Partnership was in full compliance with all banking covenants, financial or otherwise.

Now I would like to discuss The Partnership's growth from an acquisition that occurred during the second quarter. As Bob mentioned earlier and you may have seen from our press release back in May, MMLP and the owner of our general partner, MRMC, entered into an agreement to create a joint venture named Redbird for the purpose of investing in natural gas storage assets. Through Redbird, we own an approximate 40% interest in Cardinal Gas Storage. Let me take a minute to discuss who Cardinal is and what they are focused on developing.

Cardinal is a joint venture between Redbird and Energy Capital Partners that is focused on the development, construction, operation and management of natural gas storage facilities across North America. Cardinal owns three gas storage projects in various stages of development in addition to Monroe, which of course, is currently operational. Two of the three projects under development are salt-dome storage facilities and the other is a depleted reservoir.

Cardinal also owns International Gulf -- Gas Consulting, or IGC, which is one of the best-known consulting firms in the gas storage industry, having served as the independent consultant on approximately 80% of all salt-dome facilities and nearly two thirds of all gas storage facilities in the US. IGC, as we call it, provides technical services for the planning, engineering, project management and operational assistance across the oil and gas industry. It has also been integral in the development of the Cardinal projects to date.

As we mentioned, we made our initial investment in gas storage through the Redbird joint venture, which corresponds to an approximate 40% equity interest in the Monroe gas storage project, for $59.3 million back in May. The Monroe asset is located in the Black Warrior Basin of Northeast Mississippi and we believe has a competitive advantage to other storage assets in the area due to multiple pipeline interconnects. As Bob mentioned, we expect $6 million to $7 million annually in upstream distributions from our ownership interest in Monroe.

Finally, we believe the formation of the Redbird joint venture positions us well for further gas storage investment in the future.

Now on to our only capital raise for the quarter. As we disclosed on the first-quarter earnings call, in April, we upsized our volume credit facility to $350 million. Additionally, the partnership is now benefiting from new financial covenants that include total debt to EBITDA and senior debt to EBITDA of 5.0 times and 3.25 times, respectively. Additionally, our interest coverage ratio is now 2.75 times.

Our new credit facility will provide ample liquidity for The Partnership for the foreseeable future, and as of August 1, our availability under the credit facility was $117 million.

Kevin, this concludes our prepared remarks this morning. We would now like to open the lines for questions and answers. Thank you.

Operator Instructions) James Spicer, Wells Fargo.

Yes, hi. Good morning, guys. In the press release, it mentioned that part of the weakness in the natural gas segment during the quarter was due to a decline in producer activity in your area, as those producers migrated towards more liquids-rich areas. Can you just review what areas those are and sort of what you are seeing there?

Yes, this is Bob. Primarily, we are seeing a decline. We had budgeted more new wells being drilled in the area and they didn't really come to pass. Probably only 40% of our expectations have hit. And those wells primarily have moved to the Eagle Ford Shale area, leaving Haynesville, the dryer gas, and going to Eagle Ford Shale.

So you really just have exposure to the Haynesville?

Haynesville, but primarily, we are Cotton Valley driven, which has more -- which has wetter liquids, obviously, than Haynesville. But those guys were drilling both Haynesville and Cotton Valley. There are more liquids in the Eagle Ford Shale than even Cotton Valley, so we have seen that. There are some Cotton Valley wells being drilled, just not at the pace that we expected.

And, Bob, this is Ruben. I think it is notable to say that they are horizontal wells, Cotton Valley.

Correct.

Okay, and is this something -- is this a trend that you think is going to continue or accelerate? And if so, what do you think the impact is going to be on the business going forward?

I don't believe there is any acceleration. I think what has moved has been moved, and it is just less drilling rigs in the area. I think they are going to go at this slower pace that we have kind of experienced the first six months.

But I think it is notable to note, too, that some of the distribution that we have with the gas liquids at the plant are going to improve over the next few months, by the end of the year, and it's going to give us really more of a competitive advantage in that area. So with the gas expansion, we should see more and more gas coming our way.

And I want to go back to the Cotton Valley horizontal. They have had good results on those, and so we could see an increase in that.

We also, just to kind of talk about our capital projects going on there -- Ruben talked -- kind of hinted at the expansion. We're going from 285 million a day to 320 million, and we believe that the gas will be full there.

But, moving beyond that, we -- our new rail rack will be online in December. And that is going to allow us to get some liquids, like natural gasoline and normal butane, out of our local area demand, which has been somewhat weak and pricing has been weaker than other areas of the country, and it is going to allow us to move those products to the East Coast for aerosol demand, potentially, and to Canada for natural gasoline going into the tar sands projects as a diluent to make the crude more liquid, to be able to ship back down the pipeline.

So we are -- we have got some real pricing benefit staring us in the face, really starting in December, and then obviously all of next year because of that project.

Great. That's helpful. And, you mentioned CapEx. Can you just remind me what your CapEx budget is for the remainder of the year?

Yes, it should be about $3 million the rest of the year, about $1.5 million a quarter, on average.

And for growth CapEx?

Growth CapEx? Of course, we are wrapping up -- well, we just started our contract at Corpus. That is $25 million. We have already got the pilings going in now, and we should be online in December. We obviously have got with the Prism/Waskom about another probably $15 million to spend. We are probably $50ish million in all, when you think of all of the odds and ends; it will be more like $50 million the back half of the year.

And that is all this year, that doesn't stretch into next year?

Correct.

Okay. Good. Then, I actually had a couple of accounting questions for you. I noticed that there was a decrease in PP&E during the quarter. Did you guys sell assets or take a writedown?

Yes, there was an interesting accounting [deal]. And we referred to it in the first-quarter financials. When we bought -- when the GP bought L&L -- the Company L&L, and then dropped down the assets, a purchase price allocation had not been done. And we reserved the right in our first Q to get the purchase price allocation done and clean it up in the second quarter, and there was a reference to that.

And when the analysis was done by outside third parties, we had booked a dropdown of $36.5 million at full PP&E. And when the analysis was done, pure PP&E was only $18 million or $19 million. So we actually had to -- wrote down PP&E and the offset was to equity. So we didn't sell assets; it was really an accounting entry.

But the purchase price was a function of the cash flow, and we still believe it is a 6 kind of multiple cash flow.

Right, right. So the purchase -- for the purchase price, it was still $36.5 million, although your PP&E [account] ended up only being -- what did you say -- $18 million or $19 million?

Correct.

Okay. And then lastly, in the press release, you mentioned going for -- doing a thorough review of operating costs. Operating costs to me looked relatively stable from quarter-to-quarter. What type of initiatives are you looking at and what kind of impact are we talking about in terms of dollars there?

Well, we feel like we've just had a slow expense creep over time, and we haven't done this in a while. And we are really -- actually just bringing in our managers that run these business and really challenge them. We think there is some money there to get. And it is not just operating expenses, but also on the SG&A side; at the operating level, there is some SG&A costs.

It is just a more disciplined kind of approach, that we just haven't challenged them in a while. And it is really more along that line. Ruben, (multiple speakers) --?

This is Ruben. I think one of the things that you look at when you go into these kind of things is when you are doing things where you are subcontracting outside, you have got outside people coming in, doing certain maintenance items and so forth, you evaluate your costs with outside people and what you can do with it internally. So there will be a lot of that going on, looking at our outside vendors and trying to determine where there is savings that we might can get by moving it in-house so to speak.

So, there is just a lot of things that -- we have been in such a growth mode and things moving so very fast, that we've decided to sit down and tried to evaluate all of our expenses from a high-level view and see where we can save money.

And it gets down into even the operating efficiencies of the plants, it gets down into turnaround times. Energy costs at all of these plants, where can we save energy, electrical costs, all of those kind of things. You evaluate everything, every cost that you have got, and try to squeeze it out of it.

Because we have got a good bunch of assets; we just -- we are looking at some growth areas, but we need to lower those expenses as we can.

Do you have any targets in mind there?

Targets being --?

Targets in terms of cost reduction or efficiency improvements (multiple speakers)?

No, we don't have any targets in there. We just know -- we know that there are some there. We can't sit there and say that we are going to be able to do this, this and this, because we have to evaluate each one as we go forward.

Okay, great. Thanks. That's it for me.

Ethan Bellamy, Baird.

Good morning, gentlemen. With respect to the CapEx outlook for the second half, and you said you expect coverage to be in-line with traditional performance, could you just clarify -- do you expect trailing 12-month coverage to be something like 1 to 1.2 times range, or should we be looking for the individual quarters to be at that type of level?

No, I think by the end of the year, we would be in that range, what you just quoted.

The former or the latter? (laughter)

Somewhere in the middle.

Okay. In 2012, should we expect any more lumpiness in the maintenance CapEx or the marine expense --

No, no (multiple speakers).

-- for now?

No, it will migrate toward a -- on a run rate basis, we believe, in the kind of 10-ish, 10-ish to 11-ish kind of number.

Okay.

And so everybody just kind of gets a little history here, a year ago, we were only $5 million to $6 million in CapEx -- maintenance CapEx. This year, we're going to be $15 million to $16 million, when you throw in the Waskom part. That doesn't roll up in the CapEx line, but you are spending CapEx down there. $15 million to $16 million.

So when you average the two, that is the normal run rate of about $11 million. It was just the lumpiness, just primarily because of the timing of the offshore vessels.

Okay. With respect to the Corpus Christi terminal, is that still on schedule for completion in the fourth quarter? Will that hit positively to fourth-quarter numbers or is that going to be first-quarter 2012?

Yes, it's going to end -- it's going to be finished really around Christmas time, so it won't really kick in until next year.

Okay. And can you give us some insight into what type of accretion or maybe cash flow multiple that is -- that project is working at?

It is roughly a 5.5 times project, Ethan.

Okay. And just kind of a softball question for you, Ruben. The release didn't read all that positive. I know there are some things that you are working on that you are really excited about. And I just kind of wanted to hear -- what segments of the business or what potential expansion opportunities get you guys excited right now?

Well, we believe when you look at it, again, across the whole thing, that the fertilizer and the sulfur, we are still working through contracts that are coming on, as we go into the future, that are going to start adding the fee-based monthly fees that we charge these guys, whether they prill or don't prill concerning those kinds of things.

We have seen the sulfur business with the turnarounds in the refineries has been a little bit slow, but it is now coming back. The refineries are running good, for obvious reasons. They are running a little bit lighter crude, so we have seen a little bit less there, but we still are very positive about the sulfur and the fertilizer segment of our thing.

We have seen the Marine, with this Eagle Ford Shale, we are tied in. At the private company, we are doing a lot of the truck transportation down there in the Eagle Ford Shale, and that allows us to tailor it into the Terminalling. As you've see with the new terminalling, we are doing other terminalling for people down there. And that takes into the Marine system, with the vapor recovery on these vessels. You have to have it, because the crude is pretty light, and so you have to be able to take the vapors off and flare the vapors as you load the product.

So, we do have the equipment. We have put that equipment on. And we do have several vessels that are down there that are operating in the Eagle Ford, and we are seeing some real positive ramp-up to volumes. Everybody is excited about the things that are happening down there for obvious reasons.

So I think we have a base. We have a footprint down there now that is going to allow us to grow and expand in other areas, because we are already talking about a potential of another terminal in other locations, all of these kind of things.

So we are very excited about what is going on down there, and I think we will see some potential there. And then I think it gets down to is that every so often you have to squeeze out what you can out of the existing businesses, which we are all, very, very busy. We just feel like we do need to sit down and evaluate what we have got and look at all of the costs and expenses, which they don't cost any capital expenditures to increase that cash flow.

Good point. Thank you very much, Ruben, gentleman.

(Operator Instructions) T.J. Schultz, RBC Capital Markets.

Hey, guys. Good morning. Just a question on the gas storage acquisition. Congrats on getting that done. I just kind of want to get your view on the gas storage market. And obviously, it's no secret that it is a difficult environment right now, and just kind of what kind of conservatism you have built into that cash flow expectation from that acquisition. And then maybe as you look forward to acquisition opportunities there, kind of what the market looks like.

Yes, this is Wes. I will take that. I think in general, in terms of -- you are right, correct, obviously, the natural gas storage market is a little bit out of a favor, if you will, compared to what it was, say, 12 to 18 months ago, given the re-contract rates and the current storage rates.

I think when we did our Redbird investment, we took that into consideration and really lowered our assumptions in the next two to three years with respect to re-contract rates. So we tried to take that into consideration over the midterm.

I will say, in terms of being a buyer, we would much rather be a buyer in a low market than in a high market, and I think in the past, that has tended to be our modus operandi, if you will. And so we see an opportunity here, particularly with respect to some of these gas storage assets and the gas storage business in general, seeing that it is a little bit on the -- in terms of out of favor, if you will, relative to what it was 12 to 18 months ago.

Again, we continue to be focused on migrating more and more of the cash flow to fee-based nature, and gas storage inherently has that characteristic with longer-term contracts, higher EBITDA margins, low maintenance CapEx, structure, if you will.

So we are excited about it. Going forward, we think this is a opportunity. The current market is providing us to go and acquire some assets and make some investments at lower costs than what we would have been if we were out there in the market, say, 12 to 18 months ago.

Okay, great. Just one other thing really quick. On the Corpus Christi terminal, I know you have talked -- you have the ability to expand capacity there by another 600,000 barrels. Just trying to get a feeling for the dynamics or constraints on the decision-making process on looking to expand that capacity over time.

Well, this is Ruben. As you look at it going forward, of course, we will both have the capability of bringing in both truck and we will be hooked up to a major pipeline that will be gathering through the area. So you will be looking at the volumes that are going to be coming into that pipeline and the capacities of that pipeline, as we grow forward to expand it.

And it's just going to be strictly driven by getting the contracts that are there that guarantee us the throughputs and the minimum throughputs that we are going to need to justify the capital expenditures. It is not a situation where you go out there and build a tank and hope that they will come. It is a situation to where other people are going to say, gee, I need that; I will give you a contract, minimal throughputs, and we will build the tanks.

And, TJ, specific to the initial volume capacity we talked about in our contract in our press release, the major integrator we're working with does have sort of a [rofer] type contract with us to take additional capacity if their demand is there.

So we're tied in with them to start. But as Ruben said, we will have sort of demand-based growth if those volumes come to us.

Yes. And as you build the tank -- if we build more thanks, it is a situation where if -- they would take it under the same terms and conditions [that] somebody else. There is going to be a point that their system maxes out too.

Okay, great. Thanks, guys.

I am not showing any further questions at this time.

Okay. This is Bob. I will just summarize. It was highly unusual that we experienced softer conditions across multiple business segments [that hit] our diverse business. In fact, only Sulfur Services performed to expectations this quarter.

However, looking forward, with the majority of our maintenance CapEx behind us, we see stronger coverage ratios for the rest of 2011. And finally, our gas storage acquisition creates yet another platform for fee-based growth, which, as Ruben mentioned, is the long-term goal of our Partnership. I want to thank everybody for joining and appreciate your interest in the Company.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect.