Martin Midstream Partners LP (MMLP) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Martin Midstream Partners L.P. third-quarter 2011 earnings conference call and webcast information. 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, this conference is being recorded.

I would like to introduce your host for today's conference, Mr. Bob Bondurant, Chief Financial Officer. Sir, you may begin.

Thank you, Chuck. And to let everyone know who's 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 head of Investor Relations.

Before we get started with the financial and operational results for the third quarter, I will 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 unitholders. The words anticipate, estimate, expect, and other 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 GAAP, and use certain non-GAAP financial measures within the meanings of the SEC Reg G, such as distributable cash flow and earnings before interest, taxes, depreciation and amortization, otherwise known as 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 on November 7, 2011, and will be available at our website then.

Now I would like to discuss our third-quarter performance. For the third quarter of '11, we had net income of $5.4 million or $0.20 per Limited Partner unit. In the third quarter, because of certain commodity and interest rate hedges that did not qualify for hedge accounting, our net earnings were positively impacted by $1 million or $0.04 per Limited Partner unit. So, disregarding this net non-cash impact to our financials, earnings would have been $4.4 million or $0.16 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 1.08 times for our rolling 12 months. Our distributable cash flow for the third quarter was $16.8 million, a distribution coverage of 1.02 times.

Our third-quarter DCF was net -- negatively impacted by certain one-time nonrecurring events. These one-time events negatively impacted cash flow by $2.5 million for the third quarter. Without these one-time events, our DCF coverage would have been 1.17 times for the quarter.

I will identify the specific events as I address the performance of our operating segments. So I would now like to discuss our third quarter's performance by segment compared to the second 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 $8.6 million in the third quarter compared to $8.6 million in the second quarter. Our marine shore-based terminals had cash flow of $4.4 million in the third quarter compared to $3.8 million in the second quarter. The increase was primarily driven by improved cost control at our newly acquired shore-based terminals. We also are beginning to see an improvement in the regulatory process to approve deepwater drilling permits in the Gulf of Mexico.

Based on discussions with our customers, we believe the activity in the Gulf will increase in 2012 compared to 2011. However, because some drilling rigs have left the Gulf, the activity will be less in 2012 when compared to the pre-Macondo oil spill Gulf activity.

Our specialty terminals portion of this segment, which includes our Cross lubricant processing operations, had a cash flow of $4.2 million in the third quarter compared to $4.8 million in the second quarter. The decrease in cash flow was driven by a fire at a 90,000 barrel fuel tank at our Stanolind terminal. The negative impact to our cash flow was our insurance deductible cost of $500,000. The tank will be rebuilt, and insurance proceeds should cover the replacement cost of the tank. The new tank should be operational in six to eight months.

Now looking toward 2012, we have two previously announced growth projects coming online in this segment. Our new crude oil tankage and marine terminal at the Port of Corpus Christi is progressing according to plan, and we will be able to accept trucked-in crude oil volumes by December 31 of '11. The terminal is anticipated to be fully functional by the end of the first quarter of '12. The cost of this terminal should be approximately $25 million and should carry a six to seven cash flow multiple.

Also, the new vacuum tower at our Cross lubricant processing facility is on budget and targeted to go online in March 2012. This investment will increase the facility's efficiency by reducing the amount of non-lubricant residual oil produced. When the new vacuum tower becomes operational, the processing throughput fee MMLP charges our general partner for processing crude oil will be increased. The cost of this upgrade should approximate $23 million and also carry a six to seven cash flow multiple.

On a smaller scale, over the last year, we have spent $4.1 million on miscellaneous growth projects at Cross. The throughput rate for these projects was increased effective October 1 of '11 at a six to seven multiple of cash flow of the Partnership's $4.1 million investment.

Now in our Natural Gas Services segment, we had operating income before asset sales of $2.2 million in the third quarter compared to $0.1 million in the second quarter. In the third quarter, we had a $600,000 non-cash commodity hedging mark-to-market gain, compared also to a 600,000 non-cash mark-to-market gain in the second quarter. So, excluding the non-cash mark-to-market adjustments, we had an operating profit of $1.7 million in the third quarter compared to a $500,000 operating loss in the second 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, and our 40% ownership of Monroe Gas Storage through our Class B ownership interest in Redbird Gas Storage LLC. For the third quarter, our cash flow generated from unconsolidated entities in the form of distributions was $3.8 million compared to $3 million in the second 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 third quarter was $7 million compared to $4 million in the second quarter.

We were able to achieve this cash flow increase in spite of three weeks of downtime of 58% of our capacity of the Waskom Gas Processing Plant. The downtime occurred as we expanded the Waskom plant capacity from 285 million cubic feet per day to 320 million cubic feet per day. We believe this short-term downtime at Waskom negatively impacted our cash flow by approximately $1.3 million. And that is cash flow to the Partnership.

The increase in cash flow in the third quarter was primarily driven by our wholesale propane and other NGL business. The cash flow from this portion of our NGL business improved by $2.2 million. Our wholesale liquids volume and margins increased in the third quarter when compared to the second quarter. These increases were primarily driven by increased demand for NGLs from our industrial processing customers.

Our third quarter average processing volume at the Waskom plant was 263 million cubic feet per day compared to 286 million cubic feet per day in the second quarter. This processing volume was down for the quarter as a result of the expansion downtime previously discussed. Waskom's current processing contract mix is 42% [percent] of liquids, 35% fee-based, 23% [percent] of proceeds, and 0% keep-whole. We currently have 49% of our remaining 2011 volumes hedged and 36% of our 2012 volumes hedged.

For 2011, when factoring in our current hedged volumes, a $1 change in natural gas pricing affects our cash flow $16,000 per month. And a $10 change in oil pricing affects our cash flow $66,000 per month. For 2012, a $1 change in natural gas pricing affects our cash flow $14,000 per month, and a $10 change in oil pricing affects our cash flow $160,000 per month.

In the third quarter, we received our first distribution from our Class B interest we own in Redbird Gas Storage LLC, which owns a 40% interest in Monroe Gas Storage. The distribution was for the second quarter cash flow, which reflected only one month ownership. The distribution was $0.4 million. The distributions for the third quarter cash flow will not be made until the fourth quarter. Therefore, our third quarter DCF only reflected a one-month distribution. Going forward, all future quarterly distributions will reflect three months of cash flow. This one-time timing difference cost us approximately $700,000 in annualized DCF in the third quarter.

On the growth capital side of this segment, we have made substantial progress on the natural gas liquids railcar loading facility being constructed by Waskom, for the transportation of natural gas liquids produced at the Waskom gas processing facility to end-users. The project is anticipated to be placed into service in late December 2011. Also, looking forward to 2012, we understand one of our largest producers is embarking on a 22-well Cotton Valley drilling plan in and around our Waskom facility. This should be very beneficial to our cash flow going forward, as Cotton Valley gas is our preferred gas supply to the Waskom facility, as this gas liquid content is generally much better than drier Haynesville gas.

Now in our Sulfur Services segment, our cash flow was $6 million in the third quarter compared to $11.1 million in the second quarter. Our cash flow on the fertilizer side of the business was $3.3 million in the third quarter compared to $6.1 million in the second quarter. Our third-quarter fertilizer volume was down 15% and our gross margin per ton decreased approximately 47%.

The decrease in volume and margin was a result of the normal seasonal decline in demand for our fertilizer products in the third quarter. Also, we completed a planned 30-day turnaround at our sulfuric acid plant in Plainview. The plant is back operating, and daily production volume has improved by approximately 10% since the turnaround.

On the pure sulfur side of the Sulfur Services segment, cash flow for the third quarter was $2.7 million compared to a $5 million in the second quarter. The second quarter benefited from some large margin sales on the West Coast at our Stockton, California sulfur prilling terminal, which did not occur in the third quarter. Also, our bluewater sulfur tug experienced an unexpected broken shaft in the third quarter, which forced us to temporarily charter in a tug on a short-term basis, and also pay unexpected repair and maintenance costs. This negatively impacted our cash flow by $500,000. Our bluewater sulfur tug is back operating normally.

In our Marine Transportation segment, we had cash flow of $3.8 million in the third quarter compared to $2.3 million in the second quarter. This increase was primarily driven by the offshore side of the business, as revenue increased 78% due to increased utilization of our two offshore tows that have traditionally been in the spot market. The increased demand for these two spot tows has been primarily driven by increased Eagle Ford shale crude production in South Texas.

Our inland side of the business also increased cash flow by $600,000 in the third quarter compared to the second quarter. This increase was also driven by increased Eagle Ford Shale business. Offsetting the combined marine generating cash flow improvement of $2.2 million was an increase in SG&A costs of $800,000. This was caused by a bad debt write-off of an old accounts receivable. We believe we have legally positioned ourselves as best we can to potentially ultimately collect, but the certainty of the ultimate collection is unclear; so we conservatively booked a bad debt reserve for the account this quarter.

Finally, I would like to talk about an unusual increase in our Partnership unallocated SG&A costs. Our unallocated SG&A costs were $1 million higher than normal, as a result of expenses we paid for an unsuccessful acquisition opportunity that we worked on most of the summer. While we had one-time negative cash flow events occur during the third quarter costing $4.8 million, we did have a one-time benefit from closing out $100 million fixed to floating interest rate hedges, realizing a benefit of $2.3 million.

So, to summarize all our segments, our distributable cash flow increased from $15.7 million in the second quarter to $16.8 million in the third quarter. However, recorded cash flow was negatively impacted by $4.8 million as a result of one-time events, including our failed acquisition cost of $1 million; our marine bad debt reserve of $800,000; the Waskom plant shutdown for expansion, which cost us $1.3 million; the timing of our Monroe distribution of $700,000; the broken shaft on our offshore sulfur tug of $500,000; and the Stanolind fire, which cost $500,000.

Offsetting these negative impacts of $4.8 million was the closing of an interest rate swap, which benefited the Partnership by $2.3 million. Our maintenance capital expenditures and turnaround costs returned to a more normalized amount of $1.2 million in the third quarter compared to a total of $11 million in the first six months. As a reminder, all of our offshore marine tows were in drydock in the first six months, which is highly unusual.

Now I'd like to turn the call over to Joe McCreery, who will speak about our liquidity and capital resources, and other Partnership initiatives.

Thanks, Bob. Let's start by walking through the debt components of the Partnership's balance sheet. I'll then highlight our recent growth initiatives and capital markets activities for the quarter.

At September 30, 2011, the Partnership had total funded debt of approximately $439 million. This consisted of approximately $198 million of senior unsecured notes, $230 million drawn under our $350 million revolving credit facility, a long-term note payable for marine equipment of $7 million, and approximately $6 million of capitalized lease obligations. Thus, the Partnership's available liquidity on September 30 was approximately $120 million.

For the third quarter ended September 30, our bank-compliant leverage ratios is defined by total debt to adjusted EBITDA, and senior secured debt to adjusted EBITDA, were 3.62 times and 1.99 times, respectively. Additionally, our bank-compliant interest coverage ratio, as defined by adjusted EBITDA to consolidated interest expense, was 3.23 times.

Looking at the balance sheet, our total funded debt to total capitalization was 59.4%. This is slightly higher when compared to the second quarter ended, primarily due to incremental revolver borrowings we used for organic growth projects during the quarter. In all, at September 30, 2011, the Partnership was in full compliance of all banking covenants, financial or otherwise.

Now I would like to discuss one of the Partnership's growth initiatives that occurred during the quarter. As Bob has mentioned earlier, and you may have seen from our press release last week, we have several organic growth projects currently underway. We expect all previously announced projects to be completed and generating cash flow by the beginning of the second quarter of 2012.

By order of magnitude, these projects include an approximately $25 million crude oil terminal at the Port of Corpus Christi; a new $23 million vacuum tower unit at our Cross Oil specialty lube processing facility; and, finally, a natural gas liquids railroading facility at our Waskom asset at a cost in the $10 million range. As our press release indicated, we continue to believe that these type of organic growth projects are the best low-cost multiple alternatives for MMLP and its unitholders to achieving long-term distribution growth.

Now let's shift gears and talk about natural gas storage. And because we've added a further level of complexity here, let me first describe again our gas storage joint venture and its purpose.

As you may recall back in May of this year, MMLP and the owner of our general partner, MRMC, entered into an agreement to create a joint venture named Redbird Gas Storage. The purpose of this joint venture is to invest in natural gas storage assets and grow the fee-based cash flow of the Partnership.

Also, at that time, MMLP made its first investment into natural gas storage with the acquisitions of Monroe Gas Storage assets by Cardinal. Redbird in total owns approximately 37.3% interest in Cardinal gas storage. Redbird has two classes of equity interest, with a Class A interest primarily representing the development storage projects of Cardinal, and the Class B equity interest representing the Monroe Gas Storage investment.

Recall that 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 the Monroe Gas Storage assets acquired in May, which are fully operational.

During the third quarter, we revised our Redbird LLC arrangement with MRMC and commensurately amended our revolving credit facility accordingly. Under the revised terms of the Redbird agreement, MMLP now has a long-term commitment to invest in Redbird and a longer-term option. Under the revised agreement, MMLP will make approximately $8 million of ongoing Cardinal development capital calls during the remainder of 2011. As MMLP makes these capital contributions, MMLP will earn into Class A equity ownership interest in Redbird.

Going forward, MMLP will have the option to continue to fund ongoing capital development, and receive incremental Redbird ownership interest up to investment levels governed by MMLP's revolving credit facility. Working closely with the MMLP Board of Directors Conflicts Committee on this revised agreement, management and the Board continue to view natural gas storage as a long-term strategic path towards viable fee-based cash flows for the Partnership.

Now let's move onto liquidity and capital raises during the third quarter. The Partnership did not raise any capital during the quarter. However, during the fourth quarter of this year, we may seek to upsize our revolving credit facility by exercising the accordion option of the revolving credit agreement. This feature allows us to seek an additional commitment of up to $100 million from new or existing lenders. Given that we view the current bank market conditions as favorable, we may elect to exercise some or all of this option.

As mentioned earlier, our current credit facility is $350 million, and we have approximately $120 million available under that line of credit. Finally, just a quick note that our units will trade ex-dividend today. That being said, we'd expect an immediate impact of $0.76 at market open.

Chuck, this does conclude our prepared remarks this morning. We would now like to open the lines for questions and answers. We thank you for your time.

(Operator Instructions) Ethan Bellamy, Baird.

A few questions for you. Could you comment, Ruben, on the fundamentals at Redbird and Gas Storage? We saw Niska this morning cut its distribution on its sub-units and you guys are going long storage. I'd just like to hear about, like, who the customers are and how that business is being contracted, and what kind of fundamentals you're seeing there?

Yes. In most of those projects that we have that are going have either just entered startup within the last three months or so, and then some coming on next year. Now these are covered under long-term contracts. So we've got five-year contracts on them from the startup date.

And as we've got contracts rolling over, in all of our projections, we've taken into account the market rollover prices that we've done. And we've been very conservative, I think, in what we expect to get when the markets do roll over. It's -- when you look at it on a percentage of the total cash flow of the Company, at this time, it's not totally material to what we may lose on a contract differential when we roll some of the contracts over. And that's mainly just at the Monroe Gas Storage facility.

So, yes, we are very cognizant of what's happening in that market. We have planned for it, expected for it, and it's built into our numbers.

Is there anything, Wes, that you want to add on that?

Yes, I would just say, in terms of a broader thesis, if you will, in terms of what we see, our facilities obviously are concentrated, the three facilities in North Louisiana and the Monroe facility, primarily in the Southeast. So long-term, with respect to coal retirements, we think we're strategically placed there as coal plants convert into gas-fired plants.

And just in general, as Ruben said, to add to his comment, these are existing facilities that are contracted or under long-term contracts, in some cases, five years, and in one case, 10 years. So, we have taken those things into account. And again, from a materiality perspective, right now not a huge contributor to cash flow or CapEx, if you will, but in the long run, call it, two to three years from now, we expect the fundamentals to be significantly different than they are today.

Okay, appreciate that, Wes. With respect to the failed acquisition, what segment or asset type was that? Is that something that we've seen show up somewhere? And did you miss on price? Can you give us any insight into what that was?

This is Wes. I'll answer that. That was in our Natural Gas Services segment and it was basically along the lines of the -- some of the gas storage, in this gas storage vein, if you will. I can't give any comments beyond that but to say that just was -- it was a non-consummated deal.

Okay, thanks, Wes. Last question, and I think I've always wanted to ask this question on a conference call. What breaks a driveshaft on a tugboat? Was that a whale?

(laughter) I wish that was, because that would have made it a whole lot easier to understand. But usually, when you have a situation like that, you're coming in or out of a port, and you may have a situation where you need to change either a power setting or even reverse on the shaft itself or on the vessel.

So it was just a failure in the machinery that happened. And it's just one of those rare events that does happen. But we're pretty busy on those vessels, and so we had to charter in for three weeks as we put the vessel in the shipyard. So when you take the charter-in costs, and then you take the repair and maintenance costs, it hit us for the $0.5 million. And so, I'm not going to say it's a one-time event, but it's very rare on an annual basis.

Thanks, Ruben. Hopefully, the Partnership slot will be better next quarter, more in line with Bob's luck on the gulf course.

(laughter) That's right.

[Figure eight].

It was luck, by the way.

No.

Ron Londe, Wells Fargo.

A lot of pieces to your puzzle. It looks to me like you've got some pretty visible growth coming up in 2012 from the projects you announced. What's on the table for 2013?

A good question. Right now we're still looking at expansions -- not expansions, but quality improvements concerning our product slate at our lube processing facility. And so we've still got some numbers there. Then we've got a couple of other good project that we're working on concerning terminalling and some things that we'll be pursuing in the Corpus Christi area, with the Eagle Ford shale. And so we've got several things down there that we're continuing to grow.

I think the terminal that we're building down there, which, I like I said, is on budget and on time schedule, will be completed and going. And I think that that's really peaked some interest of some other people in the area. So we are definitely pursuing that area.

I might just comment, Ron, that the Board now is seeing already the next phase or round of growth projects, as Ruben mentioned. We started to show the Board this quarter the projects that will be completed in the 2013/2014 timeframe. So, the next round is already gearing up to keep the growth going.

Okay. That's about all I have right now. I might come back with another question.

(Operator Instructions). Bill Bunn, Fort Washington Investment.

I've got about -- I've got three questions. Unfortunately, they're unrelated. But first, could you just give me the brief summary or rundown as to why sulfur has a seasonality to it? What caused the seasonal weakness or --?

It's the fertilizer piece of the business, in that the spring planting and time kind of overlaps between the first and second quarter, so you have increased cash flows in the first and second quarter. The third quarter is typically harvest time, and so that you're not really putting fertilizer out in the fields. But then you have in the fourth quarter, a kind of a winter (multiple speakers) --

You have a fall field season that they call it, where a lot of the farmers will start to go ahead and fill up their warehouses. And the distributors will fill up their warehouses. So sometimes you have a fall field system that they call it. But the majority of your product moves between, like, March, February/March and probably June -- May and June. So you do have -- it's seasonality in the fertilizer side of it.

Okay, thanks. Number two, the one-time items contributed to a decline in your distribution coverage ratio to just about 1 time. Is there a level that you have established for that, that makes you comfortable or that you target?

Yes, I think with our diversity and concerning the Company and all that, our target has been in the 1.1 to 1.15 area. We're very comfortable with those numbers simply because we are pretty diverse. And you have different drivers in different seasons and things that do affect our cash flow; but is all driven by different things.

And my last question is what kind of targets or metrics do you look at that would tell you when it's time to issue -- to term out your debt or to issue new equity? What is it that you're going to be looking for that's going to cause you to make those two decisions?

Bill, the primary driver for balance sheet management is kind of the guidance that we've given the rating agencies more or less. And that, from a leverage perspective, is about four times. We want to manage our balance sheet under four times debt to EBITDA. Clearly, we know that we may have slipped out of that range; but at that point in time, we'll look to either get to the equity window or term out the debt behind the lenders, and kind of maintain the balance sheet that way.

Thank you.

T.J. Schultz, RBC Capital Markets.

Just quickly going back to Monroe, can you rehash what's going on with the distributions in the third quarter? Is this still something you're expecting to receive monthly? And then I guess, given current market conditions now and some of the changing dynamics there, is there still the expectation for kind of a $6 million to $7 million annual distribution from that investment?

Well, I'll comment on the first part of the question. The agreement we have with our partner at Monroe, which is Energy Capital Partners, was that the quarterly cash flow distributions would be made in the months following the quarter. So what we were received in the third quarter, we only owned it for one month in the second quarter, the month of June. So we only received a one-month distribution. And then the three months of earnings that were created in the third quarter, we're not getting that until -- well, we just got it.

So, in effect now, we have owned Monroe four months, but we only have one month of distributions. And our policy as far as DCF calculations is when the cash is received, not when it's earned. So from a distribution perspective, is that's how we have done Waskom all these years. So that was kind of the one-time deal. But from here on, we'll receive a full three months of distributions every quarter.

And I'll turn it over to Wes to talk about expectations.

Yes. With respect to Monroe, we're still in the process and I'd say we'd refer to Cardinal management, because those are the guys doing all the work. But they're still working on integrating and upgrading the facility, trying to figure out how it operates in certain conditions and environments.

We recently held an open season, and it's my understanding that those guys are currently negotiating those contacts, potential contracts. So I think we'll ultimately have a better feel for what that asset is going to be able to do come next conference call, I think, first quarter of '12, after we've had a chance to parse through the open season and enter into some new contracts.

But I -- this is Ruben -- I don't think we expect any kind of major reduction in the cash flows that we projected. I think that we did have a little less of the excessive cash flow that you can generate from product moving in and out this summer, because obviously, you had a tremendous amount of natural gas consumed for electrical generation. And so you didn't see as much coming in and out as we would normally would. So your enhancement of the cash flows on that were down slightly.

But again, it's only a small portion of the total cash flow. The majority of the cash flow is due to the contract for storage (multiple speakers) [that are added].

And when we ran the acquisition economics, we significantly impacted to the downside the re-contract rates versus what was currently projected -- or what was currently in place at the time we acquired it. So we took into account the overall environment when we ran the economics on that deal. So, but, again, to the point, once the open season -- those contracts have been negotiated, we'll have a better feel going forward in terms of giving you a better -- some better guidance in terms of the distributions from that.

Okay, great, thanks. That's helpful. I guess just one last thing, over to the marine transport segment. I guess last quarter, you said two offshore vessels were in the spot market, and one went to work hauling Eagle Ford crude and one had not become employed. Are both of those now moving Eagle Ford crude? And is the increased activity there on the Eagle Ford expected to remain sustainable going forward here?

Yes. That's -- during the quarter, we had -- the Spirit Endeavour was running Eagle Ford Shale crude. Now, see right now, she's not, because she's being upgraded with some vapor recovery on her that should put her back into that market. It requires for some of the lighter condensates coming out of the Eagle Ford, you've got to have vapor recovery on the vessel. So she's being upgraded to that.

The larger vessel, the Orion Poseidon, is working in a different trade right now. And so she's managed to find work not in the Eagle Ford, but she can -- she is perfectly capable of hauling Eagle Ford if she needs to. So -- but yes, they are -- one's in the shipyard now being upgraded and one is working.

And both did work in these (multiple speakers) --?

(multiple speakers) Yes, both did work in the third quarter.

Okay, how long will the Endeavor be in the shipyard?

Three weeks, I believe, is what we're projecting.

And that's with vapor recovery upgrade.

Yes, vapor recovery upgrade.

Okay, great, thanks, guys.

James Spicer, Wells Fargo.

This is Patrick Lee. I'm calling for James Spicer. I apologize, I might have missed this, but I'm just wondering, with respect to the Redbird distributions, what do you think about that going forward, in terms of what kind of expectations should we be getting, in terms of what the cash flow should be from that?

Go ahead, Wes. (multiple speakers).

Yes, again, in terms of giving specific guidance, we don't give specific guidance for specific assets per se. But, again, I will say that with Monroe specifically, I think, if you go back and look at our press release, we sort of gave a general range in terms of multiples there. Those sort of -- that guidance, if you will, or range of guidance, if you will, basically was -- we took into account sort of the negative contract rollover impact when we were discussing that. We just recently held an open season again. And those results are basically currently being negotiated; new contracts are looking to be entered into.

Once we have that done, hopefully, I think, by this next conference call we have, we'll have a better feel on a going-forward basis as to what the distributions we expect from that asset are. Maybe a little bit of a -- as Ruben said, overstatement, but this is -- it's a very tiny piece of the overall pie.

Then I guess then with respect to your CapEx spending, I'm just wondering what the -- if you can give any guidance or expectations on the, ultimately, in fourth-quarter. And I know you're probably budgeting, but for 2012.

Yes, this is Ruben. I was going to mention this as we closed, but I'll go ahead and go with it. It's basically by the end of the first quarter, we'll have finished up pretty close to about $70 million worth of capital expenditures that will be kicking in and generating cash flow. So with $15 million or $20 million of that being at Waskom with our expansion, which is already done; with our rail rack, which will be in business here late fourth-quarter, I believe. And then you've got the terminal in Corpus, of course; and then you've got the processing plant, which will be on at the end of the first quarter.

So all these items have already spent a substantial amount of that cash going forward. And that's what makes it a little bit different from our Company from a lot of others, is that we're trying to work on the organic growth. So everything we have is kind of delayed from a standpoint of cash-out until the cash starts in, since it's not like an acquisition.

But I think when you look at that at the end of the first quarter, and then we've got some other projects that are yet to be approved by the Board, and going to the Board and working on -- we're working on next year's budgets right now. So, we're still not -- don't totally have our '12 and '13 budgets finalized yet.

Thank you.

Selman Akyol, Stifel Nicolaus.

Quick questions. First of all, you guys talked a little bit about asset sales, but I was wondering, is there anything else that you guys would be looking to dispose of as you go forward, when we think in terms of 2012?

Not at this time, Selman.

Okay. Then the other is, appreciate the comments on the activity within the Gulf starting to pick back up again. But as I recall, I mean, some of those -- some of your assets are secured with contracts with the parent MMRC. And I think those were subject to sort of certain volume throughputs? I was just kind of wondering how that's going.

Yes, we are, at the current run rate of throughput volume, exceeding the minimum of those throughput agreements. So from that perspective, we're okay.

We've only hit the minimum one year and, of course, I believe, that was last year. (multiple speakers).

All right, so on a go forward basis, as the activity continues to pick up, we should expect that to continue to grow as well?

Correct. As revised last year, so in that throughput minimum is 195 million gallons annually. And we're exceeding that pace through three quarters.

Great. All right, thank you.

Thank you. At this time, I'm showing no further questions. I'd like to turn the call back over to management for closing remarks.

Okay, great. This is Ruben. I realize that we had a little bit of noise in this quarter, given a lot of the one-time items and everything, but we've continued to improve our distribution coverage. And as we finish up all of the projects that I've just discussed concerning the question about it, most cash flows will kick in. And we expect our cash flows to go back to our target coverages that we talked about earlier in these things.

So you have to take in mind that this Company depends heavily on organic growth capital projects, which we believe is a -- gives us better multiples and better cash flows than acquisitions -- than what we've seen in the acquisition market. So we're looking forward to all of these opportunities. I believe that a lot of these things that we have going, and the organic projects we have going, are going to create more growth in organic projects out of them as they get up and running and so forth.

So we appreciate everybody's investment in MMLP and your interest in MMLP. We thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a great day.