Martin Midstream Partners LP (MMLP) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Martin Midstream Partners LP fourth quarter 2012 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions to follow at that time.

(Operator Instructions)

As a reminder, today's call is being recorded. I'd now like to turn the conference over to your host for today, Mr. Bob Bondurant, Chief Financial Officer. Sir, you may begin.

Thank you, Ben, and to let everyone know who is on the call today, we have Ruben Martin, President and Chief Executive Officer; Joe McCreery, Vice President of Finance and head of our Investor Relations; and Wes Martin, VP of Business Development.

Before we get started with the financial and operational results for the fourth quarter, I need to make this disclaimer. Certain statements made during this conference call may be forward-looking statements related to financial forecasts, future performance, and our ability to make distributions to unit holders. We report our financial results in accordance with generally accepted accounting principles and use certain non-GAAP financial measures within the meanings of SEC Reg G, such as distributable cash flow or DCF, earnings before interest, taxes, depreciation, 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 can be a meaningful measure of the Partnership's ability to pay distributions.

Distributable cash flow should not be considered an alternative to cash flow from operating activities. Furthermore, DCF 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 DCF to the most comparable GAAP financial measure. Our earnings press release is available at our website, www.MartinMidstream.com. We also issued a press with these this morning that furnishes all four quarter business segment information for 2012.

Now, before I begin my discussion on our fourth quarter performance, I want to point out the financial statement reporting impact of our acquisition of the Cross Oil lubricant packaging business and the remainder of the Class A interest in Red Bird Gas Storage from our general partner. On October 2, 2012, the Partnership effectively redeployed cash generated from the sale of our discontinued operations acquiring the Cross Lubricant packaging business for $122.7 million and the remaining Class A in Red Bird Gas Storage for $150 million. The Partnership accounting for these transactions is a transfer of net access between entities under common control pursuant to FASB accounting rules. These net assets were recorded at the amounts reflected in our general partner's historical consolidated financial statements. These same FASB rules also require that all historical quarterly and year-end income statements be revised to include the results of the acquired assets as the date of common control. Accordingly, the Partnership's historical financial statements have been recast back to 2007.

On a segment basis, the recast effective Lubricant Packaging acquisition shows up in our Terminalling segment and the recast affect of the acquisition, the Class A interest in Red Bird Gas Storage, shows up in the equity and earnings of unconsolidated entities line of the income statement. The financial impact of recasting the Lubricant Packaging acquisition for the first three quarters was to increase EBITDA of the Terminalling segment by $8.5 million. The financial impact of the acquisition of the Class A interest in Red Bird for the first three quarters was to increase equity and earnings of unconsolidated entities by $0.8 million.

With that background behind our numbers, we had fourth quarter 2012 net income from continuing operations of $9.2 million compared to a recast $8.7 million for the third quarter. And for the year of 2012, we had net income from continuing operations of $37.1 million compared to a recast $13.4 million for the prior year. Now, as with other MLPs, we believe the most important measure of performance is distributable cash flow. Our total distributable cash flow from continuing operations, or DCF, for the fourth quarter was $20.1 million, a distribution coverage of 1.1 times.

This coverage calculation is based on our actual distribution paid in the fourth quarter and does not include the impact of the 3.5 million shares we issued in late November 2012. It also does not include any IDR payments to the general partner as we have suspended IDR payments until a cumulative suspension of $18 million is met. At December 31, 2012, our cumulative suspension amount was $1.6 million and as of today it is $3.4 million. For the year, our actual DCF was $83.8 million, a distribution coverage of 1.1 times based on the actual cash distributions paid in 2012.

Now, I'd like to discuss our fourth quarter cash flow from continuing operations compared to the third quarter. In the Terminalling segment, our fourth quarter cash flow, which is defined as operating income plus depreciation and amortization but excluding any gain or loss on sale of assets was $12.9 million in the fourth quarter compared to a recast $13.3 million in the third quarter. Our specialty terminals, which now includes our newly acquired Lubricant Packaging business, has cash flow of $9.2 million in the fourth quarter compared to a recast $9.7 million in the third quarter. The Lubricant Packaging business had cash flow of $2.2 million in the fourth quarter compared to the inclusion of a recast $1.7 million in the third quarter. Also, our Corpus Christi crude terminal had cash flow of $3.3 million in the fourth quarter compared to $2.2 million in the third quarter. The crude volumes at our Corpus crude terminal have constantly increased over time and we are currently consistently receiving over 100,000 barrels per day into our 600,000-barrel capacity terminal.

Offsetting these fourth quarter increases in specialty terminal cash flows was a decrease in cash flow from our Arkansas lubricant refinery. Cash flow from this operation was $2.6 million in the fourth quarter compared to $3.8 million in the third quarter. We experienced unexpected downtime at the refinery due to a boiler outage. This issue reduced our daily throughput revenue and also increased our operating expenses for boiler repairs. We do anticipate the performance of the refinery to be more normal in the first quarter of 2013 when compared to the reduced performance in fourth quarter 2012.

The other portion of our Terminalling segment, Marine Shore Bases, had cash flow of $3.7 million in both quarters. We continue to remain long-term bullish on the shore-based business as we believe there will be continual increase in the Gulf of Mexico rig count year over year. As a result, our diesel throughput volume should increase driving an improvement in operating cash flow. To further show our commitment to the shore-based terminal business, we closed the Talen's acquisition on December 31, 2012. We purchased Talen's for $103.4 million. We immediately sold the working capital to our general partner for $56 million, leaving a net investment in Talen's of $47.4 million subject to certain working capital adjustments to be determined. We entered into a fee-based diesel throughput agreement with our general partner and, as a result, we believe this business will add incremental cash flow of $6 million to $7 million to us in 2013.

For the year using a recast 2012 segment income statement, our overall Terminalling cash flow was $51.1 million compared to $41.9 million in 2011. Using 2012 as a baseline for 2013, we believe we should have increased cash flow above that baseline from the Talen's acquisition of $6 million to $7 million. Also, with expected increase business at our Corpus Christi crude terminal and our Lubricant Packaging business, we should realize an additional $10 million to $13 million of cash flow growth in 2013. Now, in our Sulfur Services segment, our cash flow is a $8.6 million in the fourth quarter compared to $7.9 million in the third quarter. For the year, our Sulfur Services segment had cash flow of $44.9 million in 2012 compared to $34.4 million in '11. Our cash flow on the fertilizers side of the Sulfur Services business was $5.1 million in the fourth quarter compared to $4 million in the third. The third quarter is traditionally our weakest quarter in the fertilizer business, so this increasing cash flow was expected.

Also, we performed a turnaround on our sulfuric acid plant in our Plainview Texas facility in the third quarter, so we do not experience that down time and associated costs in the fourth quarter. For the year, our fertilizer business had cash flow of $28.7 million compared to $18.7 million in '11. This increase is primarily driven by both volume and margin growth. Looking toward 2013, we are forecasting a slight decrease in fertilizer cash flow as we believe there may be some margin compression this year.

On the pure sulfur side of the business, our cash flow was $3.5 million in the fourth quarter compared to $3.9 million in the third quarter. This decrease was primarily volume driven as our sulfur sales volume fell 10% in the fourth quarter. This was driven by decreased export sales at our Beaumont and Stocking [prilling] facilities as there was reduced sulfur supply production running through these two prilling operations. For the year on the pure sulfur side of the business, our cash flow was $16.2 million compared to $15.7 million in '11. Looking toward '13, we see a slight decrease in the pure sulfur business cash flow as we feel there may be fewer logistical opportunities realized in 2013 compared to 2012.

Moving to our natural gas services segment. We had cash flow of $8.8 million in the fourth quarter compared to $3 million in the third quarter. The increase in cash flow in the fourth quarter was primarily driven by our refinery butane business which generates a significant majority of its margin based cash flow in the fourth and first quarter. This winter seasonality is when refineries demand butanes for gasoline blending. For 2012, we had cash flow from our natural gas services continuing operations of $14.5 million compared to $6.8 million in '11. The year over year increase in cash flow was primarily driven by our refinery butane business. This was the first year we have focused on this business as we started the business in the second quarter of '12. As a result, 2012 cash flow shows no benefit of first quarter profitability.

Looking toward 2013, we believe cash flow should increase in this segment I the benefit of having the refinery butane business operating in the third quarter of '13. Again, there was no such benefit in the first quarter 2012. In addition, the wholesale NGL marketing business, we now own 100% of Red Bird Gas Storage which owns a 41.7% Class A interest in Cardinal Gas Storage and a fully diluted 38.7% interest. For both the third and fourth quarters, we had distributions from Cardinal of $0.8 million. For 2012, we received $4 million in distributions compared to $1.4 million in 2011. However, our forecasted distribution with Cardinal should be reduced in 2013 as recontracting rates at Monroe Gas Storage are less when compared to 2012.

In our Marine Transportation segment, we had cash flow of $6.1 million in the fourth quarter compared to $4.3 million in the third quarter. Of the increase, $800,000 came from the offshore side of the business as utilization increased as a result of minimal downtime for repairs and maintenance. The balance of overall Marine Transportation increase in cash flow was the result of the recovery of a previously written off bad debt on the (inaudible) side of the business.

For the year, Marine Transportation cash flow was $17.9 million in 2012 compared to $14.1 million in 2011. This increase was entirely driven by an improvement in the offshore side of the business. The utilization of our two offshore tows that usually operate in a spot market was significantly improved. This improvement in overall offshore utilization has been primarily driven by the increase in Eagle Ford shale production. Looking toward 2013, we forecast this offshore utilization to again to be slightly improved, so we are forecasting a slight increase in Marine Transportation cash flow over 2012.

Finally, our own allocated SG&A was $5.3 million in the fourth quarter compared to $2 million in the third quarter. $1 million of this increase is due to an increase in overhead allocation we received from our general partner, and for the quarter this allocation was $2.7 million. The balance of the increase is due to transaction costs surrounding the fourth quarter acquisitions of the packaging business, the Redbird Class A interest, and the Talen's marine shore-based Terminalling business. Legal audit, consulting, and fairness opinion costs related to these acquisitions were charged in the fourth quarter. Now, looking toward 2013 and absent any acquisition costs, we believe unallocated SG&A costs should be $13 million to $14 million for the year compared to $11.7 million in 2012 and $8.7 million in 2011.

So, to summarize, MMLP had overall cash flow from continuing operations and including distributions for Cardinal of $31.9 million in the fourth quarter compared to a recast $27.3 million in the third quarter. For the year, we had recast $120.7 million in cash flow from continuing operations compared to a recast $89.9 million in '11. Now, for the fourth quarter we had maintenance capital expenditures and turnaround costs of $4.6 million, and for the year these costs totaled $10.7 million. Looking toward next year, we are forecasting approximately $13 million to $15 million in maintenance and turnaround costs.

Now, I'd like to turn the call over to Joe McCreery who will speak about liquidity and capital resources, our recent acquisitions, and our 2013 growth capital plans.

Thanks, Bob. I will start with a normal walk through of the debt components of the balance sheet and our banking ratios. I will then highlight the recent M&A and growth initiatives of the Partnership followed by an overview of the financing activities that impacted our liquidity position. So, here we go.

At December 31, 2012, the Partnership had total funded debt of approximately $475 million. This consisted of approximately $173 million of senior unsecured notes, approximately $296 million drawn under our $400 million credit facility, and approximately $6 million of capitalized lease obligations. Thus, the Partnership's available liquidity on December 31 was $104 million. For the fourth quarter 2012, our bank compliant leverage ratios defined as senior secured indebtedness to adjusted EBITDA and total indebtedness to EBITDA were 2.31 times and 3.65 times respectfully. Additionally, our bank compliant interest coverage ratio as defined by adjusted EBITDA to consolidated interest expense was 3.89 times. Looking at the balance sheet, our total funded debt to total capitalization was 57.1%, which is higher than the September 30 quarter primarily as a result of funding multiple acquisitions during the fourth quarter. In all, at December 31 the partnership was in full compliance with all covenants, financial or otherwise.

As of last Friday, February 22, 2013, the current amount borrowed under our revolving credit facility was $40 million. This large reduction in credit facility borrowings is attributed to the $250 million notes offering executed by the Partnership in early February which I will discuss momentarily. First, let's discuss the Partnership's M&A and growth initiatives from the fourth quarter. On our last call, we discussed the two drop-down acquisitions that occurred in October of 2012. Let me recap those fourth quarter transactions before moving to the acquisition we close at the end of the year.

In the first transaction, the partnership purchased certain specialty lubricant product packaging assets from Cross Oil refinery, a wholly owned subsidiary of MRMC. For this drop down, we paid total consideration of approximately $122 million, including working capital of approximately $37 million at closing. The entire purchase was funded using availability under the Partnership's credit facility. We expect incremental distributable cash flow from these assets of approximately $11 million to $13 million in 2013.

In the second transaction, the Partnership purchased all of the remaining Class A equity interest in Red Bird Gas Storage for $150 million. This was also funded using the Partnership's revolving credit facility. Through Red Bird, MMLP currently owns approximately 38.7% fully diluted interest in Cardinal Gas Storage. Cardinal is currently developing three gas storage projects and owns a fourth which is fully operational. We again note that pertaining to the three Cardinal development projects, the Partnership anticipates total required investment of approximately $35 million over the next 24 months.

Additionally, pertaining to the development projects, each has an existing project financing in place. These financing arrangements require free cash flow sweeps which amortize the outstanding indebtedness and prohibit distributions. For this reason, Cardinal has not historically made distributions to its members with respect to these developmental projects. Without a refinancing of this project level indebtedness, MMLP can assume no material distributions from these projects in 2013 and 2014. The partnership intends to assist Cardinal in the refinancing of this project level indebtedness into a consolidated financing prior to January 1, 2015.

Finally, in conjunction with the Red Bird transaction, our general partner has agreed to suspend its rights received the next $18 million and incentive distribution rights that would otherwise be entitled to receive from MMLP. The suspension commenced with the fourth quarter 2012 distribution. Further, our general partner has agreed to relinquish up to an additional $7.5 million in incentive distributions if certain cash distributions for the Partnership from Cardinal are not achieved in 2015 and 2016.

Next, on December 31, 2012, the Partnership successfully closed the acquisition of Talen's Marine Fuel LLC for approximately $50 million subject to certain working capital adjustments. The Talen's transaction represents a significant enhancement to MMLP's existing marine terminal infrastructure as we added 10 marine Terminalling locations on the US Gulf Coast and incremental tankage of approximately 300,000 barrels. For 2013, MMLP expects incremental cash flow from the acquisition of approximately $6 million to $7 million. The acquisition was funded under the Partnership's revolving credit facility.

Now, let's move on to capital raises and partnership liquidity. First, our November 2012 equity offering. In late November last year we completed a follow-on public offering of $3.45 million additional common units. Total proceeds to the Partnership, net of underwriter's fees and offering expenses, was approximately $103 million. Including this offering, an issuance of units to various employees as part of our long-term incentive plan at year end, we currently have 26.6 million common units outstanding. Concurrent with the offering, MRMC contributed $2.2 million in cash to the Partnership in order to maintain its ongoing 2% general partner interest. All proceeds of the offering were used to reduce outstandings under our credit facility.

Next, our February 2013 notes offering. Earlier this month, the Partnership completed a private placement of senior unsecured eight-year notes to qualified institutional buyers under Rule 144A. Net proceeds to MMLP after underwriter's fees and expenses were approximately $245 million, all of which was used to repay borrowings under our credit facility. We were pleased with the outcome of this offering, particularly when compared to the previous notes issuance in 2010. Primarily due to improved market conditions, we were able to outperform our existing notes by 162.5 basis points on a comparable interest rate basis. Given affect to the Partnership's note offering, our Partnership's liquidity has never been better and we are well-positioned to finance our planned capital expenditures in 2013 and beyond.

Ben, this concludes our prepared remarks. We would like to open the lines for questions and answers.

(Operator Instructions)

Our first question comes from the line of Edward Rowe from Raymond James. Your line is open. Please go ahead.

Hi, good morning, guys. There's been a lot of talks around the amount of condensate production out of the Eagle Ford, namely EOG had an interesting presentation around this. I wanted to see if, given the lack of available barges and lack of Jones Act vessels and docking congestion, if you are looking at other alternatives to take advantage of the amount of condensate production out of the Eagle Ford?

Ruben, you want to answer that one?

Yes. And the answer is yes, we are looking at a lot of different things that we've done. Of course, with that light condensate comes a lot more of natural gas liquids that are coming out of that area, so we have purchased some Marine barges for LP gas that we will be utilizing in that area for transportation and transloading. So, yes, the answer is yes. We are looking at a lot of different things, and we are looking at our tanks to where they can take the lighter product and so forth that we are building around our crude terminal. So, we realize there is a lot of that starting to come out of there, and we are making ways to handle that product.

Edward, what Ruben is referring to -- you are probably going to see a press release later today. We are closing an acquisition as we speak with respect to some additional assets that we are going to put in place there, specifically for this purpose. We are looking at this more as an NGL play than a Marine play, given the fact that we've got this increased handling capability. Clearly, there's a lot to be done down there. It is certainly high on our priority list.

All right. Very good. Last question -- with improved coverage and improved cash flows coming from these various projects, how are you guys looking at targeting cash distribution growth going forward?

I think we are going to kind of stay the course. We've been pretty open with our disclosure that our target is kind of 1.15 times. We typically take that to the Board. It is obviously their discretion as to if and when we increase our distributions, but nonetheless, I think we are going to stick with that target. We do have a lot of growth planned on the organic side that theoretically would be a drag to some of these better coverages that we've seen. But nonetheless, that is a Board-discretion item, but I think our target remains 1.15 times.

All right. Thank you, guys.

Thank you. Our next question is from the line of TJ Schultz from RBC Capital Markets. Your line is open. Please go ahead.

Hi, guys. Good morning. I guess a lot of acquisition activity, obviously. As you look at some of your organic opportunities around some of your assets now, is there any color for kind of organic growth CapEx in 2013, or how are you thinking about organic growth versus some of the acquisition opportunities like we may see announced today?

Yes, TJ. This is Wes Martin. I'll take that question. In terms of organic CapEx budget for 2013, we are looking at $120 million to $140 million, call it, of capital expenditures. We took the vast majority of those -- those have been approved by the Board, so I think that's a good number for where we sit today.

In terms of how that's allocated amongst the four different business segments, the primary expenditures, CapEx are going to be in the terminalling and storage group, and more specifically, the majority of that would be with respect to the Cross assets both on the packaging and the refining side. And then also we are looking at an expansion -- a potential expansion at our Corpus Christi crude terminal there that would take up the remaining capacity that we've got there. That has not been approved yet by the counter-party there, but we are looking at that, and we think that that is likely to happen.

So, I'd say about 50% of that budget, of the $130 million midpoint is in the terminalling and storage group. The $50 million -- there's about $50 million, plus or minus, on the natural gas services group, primarily with respect to the floating LPG barges that Ruben and Joe mentioned briefly before. And then the remainder of the CapEx budget would be sort of between the sulfur group and then also within the Cardinal investment, which is obviously embedded in the natural gas services business. So, when you add all that up, it's about $120 million to $140 million of organic growth this year.

Okay. (multiple speakers) Go ahead.

I was just going to say -- and then with respect to acquisitions, we don't have anything definitive working right now. We have looked at several opportunities here recently, but we are continuing -- it is similar from the perspective that we are trying to grow our terminalling and storage business, and certain parts of our natural gas services business. So, those are the opportunities that we continue to look at, but nothing definitive or in the works at this point in time.

Okay. Thanks. That's helpful. The terminal and storage segment, if I just look at fourth quarter, you guys mentioned some of the issues in Arkansas, I think. If there's just a little bit more color there, maybe specifically what was the impact on OpEx for some of those boiler issues? And then just to kind of clarify when were those issues fixed, and how are things kind of running now?

Yes. This is Bob. I will take that. The impact of the boiler activity -- we had reduced throughput revenue and increased operating expenses. I don't have the specific split, but it was a negative impact of about $2 million. I would say the majority of it on the expense side, probably two-thirds on the expense side and one-third on the revenue side.

As far as -- the refinery has been running ever since we got it back up and running, north of 7,000 barrels a day, and still operating at that level. We do believe -- well, we do have a temporary fix. I believe that sometime in probably April or May, we may have to go down for four or five days to get the final, final, final fix on the boiler. So, that's where it stands today.

Okay. Thanks. And then, the unallocated G&A obviously upticked in fourth quarter from some of the transaction-type costs. Just trying to see if there's any other of those costs that would fall into the first quarter from some of this activity outside of that run rate of the $14 million for the year for unallocated G&A?

There might be just a hair from the Talen's acquisition since it closed on December 31. There might be something trickling in, but we feel highly confident it would not be significant.

Okay.

Real quickly, TJ, on Bob's comments with respect to Cross, we don't have a planned turnaround at that asset this year. And so, a boiler repair for two or three days, four days, whatever it is, with respect to completing that repair isn't the end of the world from a capital perspective nor forecasted perspective.

And to give a little more color behind that, and just so you know, in 2012 we were actually down for 45 days turnaround when we did the vacuum tower. So, we won't -- so, those 45 days won't come back again this year, and you'll only have theoretically five or six for boiler repair.

Okay. I appreciate it, guys.

Thank you.

(Operator Instructions)

Our next question comes from the line of Ethan Bellamy from Robert W Baird. Your line is open. Please go ahead.

Good morning, gentlemen. It's Mike Gaiden for Ethan Bellamy. I wanted to please ask about the natural gas storage business, and specifically how does the partnership best plan to operate in the continued soft demand environment? And, relatedly, are current market conditions a factor at all in determining when the additional storage capacity from Cardinal comes online in the next few years? Thanks.

Hi, Mike. This is Wes Martin. I will take that. In terms of the overall gas storage market, you hit the nail on the head with respect to the softer demand, with respect to need for gas storage. One of the benefits that we do have from the Cardinal perspective, particularly with respect to these projects that are coming online that will be coming online this summer is -- a substantial majority of those are contracted under long-term contracts in the range of 5 to 10 years. Those contracts were entered into back in 2009-2010 timeframe under different market conditions. But those contracts are on approximately 80% of the capacity that we've got coming online in 2013, so we are protected to a large extent from the current marketplace.

Now, obviously, 5 to 10 years in the future, as those contracts roll off, whatever the market is at that point, we are obviously exposed. But with respect to the soft demand side, we do have protection in the form of contracts on a big chunk of that. So, we feel comfortable with respect to, call it, the near- to mid-term from a cash flow perspective in that business.

I'm sorry, what was your second question?

I think that covered them both in terms of the current environment and how it relates to the new projects coming online. If I could lastly ask a question about the capital structure. Certainly, with the strong debt markets, you guys have already taken advantage of the available funding out there. What minimum levels of liquidity would you guys seek to maintain going forward? It sounds like there's still quite a bit of capital to deploy in the year ahead. And with the markets continuing to be [ripe] to term-out debt, are you guys at all thinking about maintaining minimum levels of liquidity on the revolver?

Good question. I think, the answer is yes. As we think about our planned capital spend for the year, a cushion of no less than 75% distribution is kind of our bogie, so that gets you into kind of the $60 million, plus or minus, range at a very minimum. Obviously, we are nowhere near that now, and given the fact that we are planning about $140 million, plus or minus, of capital expenditures for 2013, I think we are in very good shape, as I alluded to in our comments.

We're additionally looking at the bank market again, given the fact that the high yield market is so strong and a lot of lenders have seen their outstandings flushed into the debt market. You can imagine the bank market being pretty robust. So, that is certainly something we are considering, grabbing liquidity while it's available in this form.

Great. Thanks a lot. Appreciate the color.

Thank you. Our next question comes from the line of James Spicer from Wells Fargo. Your line is open. Please go ahead.

Hi, good morning. Can you just remind me what the contracted situation is on the Monroe facility?

Yes, this is Wes. Right now we are 100% contracted with respect to that. I don't want to get into the rates that we are contracted there for obvious reasons, but right now we are effectively 100% contracted. We went out for an open season, I think it was in the fourth quarter of last year. Obviously, the bids were -- relative to some of the rollover previous contract prices, were disappointing, but we have decided to contract again. So, effectively right now we are 100%, and going forward for the next, call it, I think it's about 12 to 18 months, we'd be roughly 100% contracted.

Okay. And can you just -- I think this is the case, but just to confirm, when you talk about your facility as generally being under contracts of 5- to 10-year contracts, and those contracts being put into place a couple years ago, that 5 to 10 years doesn't begin until the facilities start to deliver or start to become operational, correct?

Yes, that's a good point. That's exactly right. So, those contracts basically go in service at the time that the facility goes in service. So, when I quote the 5 to 10 years, that's from the in-service date. That's correct, James.

Okay. Great. Lastly, one more on the storage side. Can you just talk a little bit about, in terms of the refinancing of the project debt, what you are thinking about in terms of timing and structure there?

Again -- this is Joe. James, what we will have to do at that level is essentially roll up the project debt specific to each of the three development projects to a sort of Cardinal level of consolidated financing. Our timing is such that, as we look at 2013, I think right now it's imperative first and foremost that we complete the projects and get them operational. I think that gives us much more leverage from a starting point with the lenders. So, I think that is our first focus.

As you know from the disclosures, we are not anticipating any cash flow to the partnership until 1/1/15, which is to say this is probably a next year event at this point. If we could focus on operational completion of these projects for 2013, I think that would be a successful milestone, and then we can get into the refinancing probably late this year, early next year.

Okay, great. That's it for me. Thank you.

Thank you. I'm showing no further questions in queue, and would like to turn the conference back over to Mr. Bondurant for any closing remarks.

Thanks, Ben, and thanks, everyone, for joining the call this morning. As we have outlined today, we believe the Partnership is as strongly positioned as it has ever been. Our balance sheet is well-positioned with ample liquidity to execute our 2013 growth plan, and we also believe our existing business operations, and the commercial opportunities surrounding those operations, will give us the ability to squeeze out incremental additional cash flow. And now, thanks again for everyone for joining and your continued support.

Ladies and gentlemen, thank you for your attendance in today's conference. This does conclude the program, and you may all disconnect. Have a great rest of the day.