Martin Midstream Partners LP (MMLP) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Martin Midstream Partners LP fourth quarter 2013 earnings conference call.

(Operator Instructions)

I would now like to turn the call over to your host for today's conference, Mr. Wes Martin, Vice President for Corporate Development. Sir, you may begin.

Thank you Nicholas.

To let everyone know who else is on the call today, we have Ruben Martin, President and Chief Executive Officer; Bob Bondurant, Chief Financial Officer; and Joe McCreery, Vice President of Finance and Head of Investor Relations. Bob and I are switching places today as Bob's voice is temporarily left him. He is available for questions, however, and we should be back to normal on the next call. 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 relating 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 the SEC Regulation G, such as distributable cash flow, and earnings before interest, taxes, depreciation and amortization, or EBITDA, and also adjusted 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. We also included in our press release, issued yesterday, a reconciliation of EBITDA, adjusted EBITDA, and distributable cash flow to the most comparable GAAP financial measure. Our earnings press release is available at our website, www.martinmidstream.com.

Now, I would like to discuss our fourth quarter performance. For the fourth quarter, we had adjusted EBITDA of $38.6 million, compared to $26.8 million in the third quarter, an increase of 44% or $11.8 million. For the year, our adjusted EBITDA was $138 million compared to $121.3 million for last year, or an increase of $16.7 million or 14%.

Our total distributable cash flow, or DCF, for the fourth quarter was $24.2 million, a distribution coverage of 1.13 times. And for the year, our DCF was $87 million, a distribution coverage of 1.03 times. This coverage ratio 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, 2013, Our cumulative suspension amount was $9.6 million.

As noted in our press release yesterday, Cardinal Gas Storage took a non-cash impairment charge on their investment in Monroe Gas Storage. The financial impact to us flowed through the equity and loss of the unconsolidated entities in our income statement. The amount of this non-cash impairment charge to us was $54 million.

Monroe Gas Storage is a natural gas storage facility located in Eastern Mississippi, and was purchased by Cardinal in 2011. This asset has had a shortage of cash flow relative to the total investment for the last couple of years, which generated the impairment concern and, ultimately, the impairment charge. We received distributions from Monroe of $1.7 million in 2013, but we are forecasting to only receive $0.2 million this year. Therefore, this impairment charge will have no impact to the current distribution rate we are currently paying our unit holders.

Cardinal's other three storage assets, located in north Louisiana near the Perryville hub, have no impairment issues as they have been performing according to plan, have generated significant cash flow, and are largely under long term contract. However, the cash flow from these contracts is currently being swept to pay down project finance debt. As a result we have not received distributions from the cash flow of these three natural gas storage facilities. The sweeping of this cash flow to pay down debt will continue until existing project finance debt is refinanced into a structure that allows cash distributions.

Now, I would like to discuss our fourth quarter cash flow by segment compared to the third quarter. In the Terminalling segment, our fourth quarter EBITDA, which is defined as operating income plus depreciation and amortization but excluding any gain or loss on sale of assets, was $15.9 million in the fourth quarter, compared to a $16.6 million in the third quarter. Our specialty terminals cash flow was $10.4 million in the fourth quarter, compared to $12.1 million in the third quarter, a decrease of $1.7 million.

Although we had a cash flow increase of $600,000 at our Corpus Christi Crude Terminal, we had a reduction of cash flow in our Lubricant packaging business of $2 million. This fourth quarter decline is not unusual in the Lubricant packaging business, as demand for packaged Lubricants slows down significantly, especially between Thanksgiving and the new year.

However, when compared to the 2012 fourth quarter, our page Lubricant cash flow is actually up by $200,000. So, while we experienced expected negative seasonality in the Lubricant packaging business in the fourth quarter, our Lubricant packaging cash flow was greater than the previous year's fourth quarter.

At our Corpus Crude Terminal, we saw the benefit of our new dock being operational in late November. As a result of the new dock, our crude throughput increased by 15%, to 117,000 barrels per day in the fourth quarter. We will see a bigger pickup in throughput volume the first quarter of 2014, as the new dock will be operational for the full quarter.

Also, our three new crude tankers are still scheduled to come on line during the second quarter. So, between increased crude terminal throughput and the anticipated increase in Lubricant packaging volumes, our specialty terminal cash flow should increase in the first quarter of 2014, when compared to the fourth quarter of 2013.

On the Shore-based side of the terminal business, EBITDA improved by $1 million in the fourth quarter, compared to the third. This improvement was primarily a result of decreased operating expenses, primarily repairs and maintenance.

For the year, our cash flow from our Terminal and Storage segment was $66.3 million in 2013, compared to $51 million in 2012. This overall increase cash flow year-over-year was primarily due to the Corpus Christi Crude Terminal and the Talen's Marine shore-base acquisition. Looking ahead to 2014, Terminalling cash flow should increase primarily due to increased crude throughput volumes at Corpus.

In our Sulfur Services segment, our cash flow was $8.4 million in the fourth quarter, compared to $2.8 million in the third quarter. On the pure sulfur side of the business, cash flow was $4.9 million in the fourth quarter, compared to $3.3 million in the third quarter. We saw a 7% increase in our sulfur volumes sold, and a 23% increase in our sulfur margins.

Big picture, the price of sulfur fell in 2013 from $150 per ton in the first quarter, ultimately to $75 per ton in the fourth quarter. However, the downward movement of sulfur pricing changed directions as the Tampa posted price rose in the first quarter of 2014 to $110 per ton. This increase in sulfur pricing foreshadows what we believe will be an increase in sulfur demand from the large DAP fertilizer producers in the first quarter 2014, relative to the first quarter of 2013.

Our fertilizer cash flow was $3.4 million in the fourth quarter, compared to a negative $0.6 million in the third quarter, or an increase of $4 million. As we have previously discussed, in the third quarter, farmers had delayed their fertilizer purchasing decisions as corn prices had fallen by approximately $3 a bushel, and fertilizer prices were also falling. However, late in the fourth quarter, certain farmers felt fertilizer pricing had floored, and we saw a pickup in liquid fertilizer demand. This translated into the improved cash flow that we experienced in the fourth quarter when compared to the third quarter 2013.

For the year, in our Sulfur Services segment, our cash flow was $34 million in 2013 compared to $44.9 million in 2012, or a decline of $10.9 million. Of this decline, fertilizer accounted for $8.9 million, and the pure sulfur side accounted for approximately $2 million. Generally speaking, the cash flow decline for the Sulfur Services segment was the result of an overall softer fertilizer demand, driven by weaker agricultural commodity prices in 2013 when compared to 2012. Looking toward 2014, we feel our Sulfur Services cash flow will be slightly weaker than 2013 as a result of weaker fertilizer margins in 2014 when compared to 2013.

In our Natural Gas Services segment, we had cash flow of $12.7 million in the fourth quarter, compared to $5.2 million in the third quarter. The increase was primarily driven by the increase in sales volumes in both our refinery butane services business and our wholesale propane business. Our sales volumes for refinery butane services increased 111%, and our wholesale propane volume increased by 55%.

These volume increases reflect normal seasonality demand, increases by refineries for winter butane, and by propane retailers for winter sales of propane. We anticipate a strong first quarter in this business segment, as well as the demand for butane and propane by refineries and propane retailers should continue through March.

For the year, our cash flow for Natural Gas Services segment was $31.4 million in 2013, compared to $14.5 million in 2012. The year-over-year increase primarily came from three businesses within the segment. First, the refinery butane services business had a full year of activity in 2013, compared to nine months of business activity in 2012. Second, our wholesale propane margins were much stronger in 2013, compared to 2012, primarily as a result of colder weather in our market areas in 2013.

And finally, we benefited from the start-up of our NGL Marine Storage business in the Corpus Christi area. These three businesses within the segment accounted for $14.3 million of our $16.9 million cash flow increase year-over-year. Looking toward 2014, we believe our cash flow from our Natural Gas Services segment should be slightly improved when compared to 2013, primarily as a result of operating our NGL Marine Storage business for a full year.

In our Marine Transportation segment we had cash flow of $6.3 million in the fourth quarter, compared to $5.2 million in the third quarter. The increase in cash flow was driven by the inland side of the business, as there was significant reduction in repair and maintenance costs and outside towing costs. The offshore cash flow was flat for both periods.

For the year, cash flow for the Marine Transportation segment was $18.9 million in 2013, compared to $17.9 million in 2012. This cash flow increase for 2013 was primarily driven by increased utilization of our offshore assets. Looking toward 2014, we anticipate a slight reduction in Marine Transportation cash flow, as our entire offshore fleet has required Coast Guard dry dockings in the first half of the year. So, overall cash flow will be less in 2014 than 2013, primarily in the first six months of the year.

To summarize, we had cash flow from our four business segments of $43.3 million in the fourth quarter, compared to $29.8 million in the third quarter. For the year 2013, we had cash flow in our four business segments of $150.6 million compared to $128.4 million in 2012, or an increase of 17%. Our unallocated SG&A costs were $5.6 million in the fourth quarter, compared to $3.8 million in the third quarter.

This increase was primarily the result of expensing due diligence costs related to two acquisition opportunities we ultimately were not able to close. For the year, our unallocated SG&A cost was $16.8 million in 2013, compared to $12 million in 2012. Included in unallocated SG&A costs is a non-cash unit based compensation expense, which was $0.9 million in 2013, and $0.4 million in 2012. Looking toward 2014, our total anticipated unallocated SG&A cost should approximate 2013 levels.

In addition to our four business segments, we own 100% of Redbird Gas Storage, which now owns a 42.2% interest in Cardinal Gas Storage. For the fourth quarter, we had distributions from Cardinal of $0.2 million, which is the same as the third quarter.

Looking toward 2014, we anticipate distributions to only be approximately $200,000 for the year because of tissues at Monroe we have already discussed. Also, our $15 million preferred stock investment in Martin Energy Trading, an affiliate of our general partner, yielded a distribution of $0.6 million for both the third and the fourth quarters. We anticipate receiving distributions from this investment of $2.3 million in 2014.

For the fourth quarter, we had maintenance capital expenditures of $4 million. Total maintenance capital expenditures and turnaround costs for all of 2013 were $11.4 million. Looking toward 2014, our maintenance CapEx should increase to approximately $17 million to $19 million, and the reason for this increase is due to the Smackover refinery turnaround, which is currently in progress, and the dry docking of our entire offshore fleet during the first half of the year. As a result, approximately 65% to 70% of our maintenance CapEx will be spent in the first half of 2014.

With that, I would like to turn the call over to Joe McCreery, who will speak about liquidity, capital resources, and recent partnership activities.

Thanks, Wes. I will start with our normal walk-through of the debt components of the balance sheet and our bank ratios. I will then highlight some of the partnership's financing, growth, and other activities during the quarter.

At December 31, 2013, the partnership had total funded debt of approximately $659 million. This consists of approximately $424 million of senior unsecured notes, and approximately $235 million drawn under our then $600 million revolving credit facility. Thus, the partnership's available liquidity on December 31 was $365 million. For the fourth quarter and year end 2013, our bank compliant leverage ratios, as defined as senior secured indebtedness to adjusted EBITDA and total indebtedness to adjusted EBITDA, were 1.66 times and 4.66 times, respectively. Additionally, our bank compliant interest coverage ratio, as defined by adjusted EBITDA to consolidated interest expense, was 3.51 times.

Looking at the balance sheet, our total funded debt to total capitalization was 71.7%, or, for comparative purposes, after adding back the $51.4 million equity impairment related to the Monroe Gas Storage write-down to partners' capital, our debt to cap would have been 67.7%, which is comparable to the quarter ended September 30. Moving through the first quarter of 2014, we expect to see balance sheet improvement, as we continue to deplete seasonally high working capital levels at year end, primarily associated with our butane business.

In all, at December 31, 2013, the partnership was in full compliance with all banking covenants, financial or otherwise. Reconciling our outstanding indebtedness from quarter end December 31, 2013 to today, our current revolver balance is $250 million borrowed, and, given our recent revolver up-sizing, our availability has improved to $387.5 million.

Although there were no financing activities during the fourth quarter, as mentioned, the partnership did add one lender to its banking syndicate and revolving credit facility last week. With our new lender commitment of $37.5 million our revolving credit facility is now $637.5 million. We believe this incremental availability and liquidity will provide additional flexibility to execute our near-term plan of finance, and likewise give us more dry powder for acquisition scenarios.

Additionally, the partnership recently filed a new registration statement on Form S-3, granting us the ability to raise additional equity proceeds at the market. This is commonly referred to as an ATM program. Now commonplace among MLPs, our ATM program will give us yet another alternative -- raising capital. The ability to issue small amounts of equity without the market disruption and heavy discounting, which are typical of follow-on equity issuances.

Now, let's take a look at where we expect increased cash flow in the near and longer terms. As we discussed during the third quarter earnings call, we were rapidly constructing an additional dock at our Corpus Christi Crude Terminal to allow our customers quicker crude oil loading, which is provides us increased terminal throughput. At the end of November last year, we successfully placed that dock into service.

The dedicated dock allowed to us more than double our previous handling capacity, resulting in increased throughput at the terminal of approximately 40%, which was at the high end of our forecasted improvement range. The current throughput flow rates at the terminal are exceeding our forecast of 150,000 barrels per day.

Next, let me quickly update the construction progress on the final three 100,000 barrel tanks, numbers 7, 8, and 9 at the Corpus Christi terminal. Our new planned in-service dates call for tank seven to be completed by mid-April, and both tanks eight and nine by the end of May. These dates are slightly delayed from the schedule we gave during our third quarter earnings call, primarily due expedited completion of the new dock absorbing all available resources. Nonetheless, we are reaffirming our previous forecast of a 25% year-over-year increase in EBITDA contribution from the Corpus Christi Crude Terminal in 2014.

Now, let me provide an update on our previously announced intention to construct a crude oil condensate splitter in the Corpus Christi market. As we had mentioned on the last call, we have been evaluating this opportunity for an extended period of time, and are well into detailed engineering and design. At this point in our evaluation, we're also strongly considering including a joint venture partner for this large scale project.

Under this scenario, MMLP has substantially negotiated a joint venture agreement with a reputable partner that we believe will bring a high level of credibility to our commercial contract counter parties. From MMLP's perspective, the benefits of having a JV partner include the sharing of capital requirements, which is particularly helpful should the partnership ultimately decide on a larger scale asset. A 100,000 barrel asset, for example, and the risk associated with operating this type of asset.

We believe the specific partner we have identified has similar points of view pertaining to developing a best-in-class asset that capitalizes on the growing Eagle Ford Shale condensate and presents a fee-based opportunity to its stakeholders. MMLP remains highly committed to the splitter project. We expect a decision will be made in the very near future regarding whether or not we partner up or go at it alone.

With respect to acquisitions, as conveyed in yesterday's press release, unfortunately, the partnership together with our general partner and co-owner Alinda Capital played a bridesmaid role in a very large acquisition opportunity in December 2013. Additionally, we walked away from another large opportunity due to unacceptable findings in our due diligence. Accordingly, we were forced to expense acquisition-related costs of approximately $1.9 million against our strong fourth quarter distributable cash flow.

Regarding our partnership with Alinda, we continue to work with them on growth initiatives. Presently, we are together again, pursuing multiple acquisition targets simultaneously. Given the multitude of potential acquisition opportunities in the marketplace, we are currently less focused on Alinda drop-downs at this time.

Next, I would like to comment on our recent distribution growth and our distribution growth strategy. As most are aware, based on a solid fourth quarter performance Wes discussed earlier, our Board of Directors approved a $0.0025, or $0.01 annualized distribution increase. Though modest in size, this most recent action marks the fifth consecutive quarter distribution increase for the partnership.

Like other MLPs, our Board makes quarterly decisions regarding distributions based on performance and outlook. I would like to refresh our publicly stated target range where Management will typically recommended a distribution increase to the board. Management feels most comfortable supporting distribution increases when our coverage ratio ranges from 1.1 to 1.15 times for the quarter. We were pleased to achieve this level of performance during the fourth quarter, 2013.

I want to reiterate the earlier comments that we see no adverse impact from Monroe Gas Storage impairment to the continued ability to make distributions to our unit holders. As mentioned, cash flow from Monroe to MMLP was forecasted to be less than $200,000 for 2014, based on continued weak market conditions.

Next, I would like to highlight a corporate organizational change that took place at MRMC during the fourth quarter. At year end, Martin Resource Management Corporation, the controlling owner of the general partner of MMLP became fully employee owned. This action completed the journey that commenced long ago, when Ruben's father, R.S. Martin, Jr., began parceling out equity interests in his company to employees as a form of gratitude for their hard work and dedication.

Today, Ruben Martin and our executive management share R.S.'s long held belief that employees and ownership go hand in hand, and should be one in the same. Since the mid-1980s, MRMC employees, through the company's ESOP and profit sharing plans, owned at least a minority stake in the company. Today, we're proud to say through the leverage buyout at year-end, the employees and their ESOPs own and control 99.8% of MRMC.

From the partnership's perspective, MRMC's employee ownership solidifies the fact that current leadership and management team will be in place for the foreseeable future. This includes President and CEO Ruben Martin, and other key members of Management that were previously MRMC shareholders who elected to receive long dated subordinated notes from the company instead of cashing out. MRMC is grateful to all its employees, former shareholders, and advisors helping to make the goal of a full ESOP owned -- ownership a reality.

And finally, a short commercial. MMLP will be holding its first Analyst and Investor Day in several years next month. We'd like to invite those listening to join us on the morning of March 25, 2014, at the Houstonian hotel in Houston, Texas. If you will join us in person that morning and listen to the presentation, Ruben will graciously buy your lunch. Registration for that even is now open on our website at www.MartinMidstream.com. I hope all can attend.

Nicholas, that concludes the prepared remarks this morning. We would now like to open the lines for Q and A. Thank you.

(Operator Instructions)

Our first question comes from the line of Edward Rowe, with Raymond James. You may proceed.

Good morning, guys. Congrats on the quarter. With the natural gas segment driving some upside, and the potential for a butane oversupply, do you guys see some incremental opportunities to capture some of the widening margins in terms of butane?

This is Ruben. Yes, we do. We're actually already evaluating two projects that will put us deeper into that market, and give us more flexibility in that market. Concerning different modes of transportation, concerning the butane, because we do see a surplus going forward in this area.

Okay, that's helpful. And, in terms of the growth CapEx, organic for 2014, I know that MRMC has, I think, I believe allocated around $60 million for Redbird and Cardinal. Is that funding somewhat mandatory, or have you guys considered allocating that capital to higher or better IRR projects?

This is Wes. The $60-million number dedicated for gas storage is -- that's high. I think we're really looking more along the lines of $10 million to $20 million. I would say a piece of that is discretionary, and still subject to Board approval at the Cardinal level.

So, I would say some of it is mandatory, but I think the bigger piece of it is sort of discretionary and still subject to Board approval.

Okay. And last and final question: I know you guys provided a little bit of color on the Alinda project. Can you share with us the outlook on the potential [hosco] drop-down to MMLP? Are you guys just looking for a good structure in moving those assets down, or just trying to see, in terms of the timing-wise, when we should see this asset down at MMLP?

With respect to the timing, there's nothing on the books. There's no plan right now, in terms of that timing. They're still doing some things at that facility. Again, I can't get into too much detail, but they're still working -- making some investments at that facility, where they're trying to optimize the layout and the structure. So, we're really not contemplating anything with respect to that in the near future at all.

I would just say that, obviously, again, in the long run, I think the economics and the math would make sense that something would happen there. But there's no obligation for them to drop anything down. And right now, as we continue to say, our plate's pretty loaded with respect to some of the stuff we've got going on, [call it the] splitter and some other potential acquisition opportunities.

Ruben, do you have something to add?

Yes, Edward, I wanted to add: You had asked about the excess butane and how the NGL is going. These guys are always afraid I'll say something stupid, but they said I could get more specific.

We went out and purchased six inland pressure barges that we are currently using in Corpus Christi as marine storage to transfer from land to offshore for marine storage. And then eventually we'll be adding additional steel storage in Corpus Christi, and put those barges out into the marketplace to do exactly what you're talking about.

We're also evaluating rail at our storage facilities at different places -- rail for movement of NGLs around. So, the answer to your question is definite yes; we see it coming, and we're working hard to provide the customers with the service that we think they're going to need in the future.

All right, that's helpful.

Last and final question, kind of just a modeling -- in terms of the dry docking, I know you said first half of the year. Is it going to be somewhat ratable in terms of the dry docking, or is it going to be -- most of it already completed in the first quarter? That's all I had. Thank you.

Yes, this is Bob, and I apologize for my voice.

But it is evenly split between the first and second quarter. So, it is in the marine transportation segment. But also, we carry one offshore vessel in our sulfur services segment, the Margaret Sue, and that will impact our sulfur business from that perspective -- maintenance CapEx for our sulfur business. But I said it was kind of 50/50 first quarter/second quarter. I would say it's probably two-thirds in the first quarter, and one-third in the second quarter.

But, again, 65% to 70% in the total first half of the year for the budget. So, about $14 million. $9 million in the first quarter, probably $5 million in the second quarter.

Thank you.

Our next question comes from the line of Michael Peterson, with MLV & Company.

Good morning, gentlemen. I appreciate your candor this morning, and the level of disclosure that you have been providing.

I have two questions in follow-up. The first one regards the fertilizer business. Both price and volume have been very positive in the fourth quarter. That wasn't the case for the early part of the year, and I'm trying to get a sense as to how you look at things going forward. Is your expectation that the volumes are going to hold out, and that we might see some seasonality on the price side? Or do you see both peak seasonality on the price side, and maybe volumes going back down more into the range that we saw earlier in 2013?

As we see it right now, volumes are actually up, and we think that's going to continue. There is a lot of acreage, compared to the other years, getting planted this year. Now, with that said, we do see margins down slightly. So, that's the reason for the reduction in some of the -- going forward. But the volumes are still very good.

Okay. If I can follow up on that, sir, any thoughts on the expectations for the drought, and how that may change things?

We don't see a lot of -- a lot of the things that we're doing officially in our panhandle and fertilizer -- that's mostly irrigated land around Lubbock, up on the Caprock there in west Texas. And we don't see it in the Midwest. We haven't seen a big decrease due to drought.

Okay. (multiple speakers)

Yes, in California, we really have very little market in California.

Some of the products that we do in California are more tied to the wine industry.

Let's hope that doesn't stumble at all.

I'm telling you, I worry about it every day.

Hopefully not top of the list.

Next question I have is another cut on understanding the prospectivity of your relationship with Alinda, and particularly potential acquisitions. Wes, I understand that there is no obligation, and I can appreciate your reticence to provide too much visibility on timing. I think a lot of us are hoping that, 2014, we see some of that unfold, but my question is two-fold.

First, is it inappropriate for us to anticipate that there might be something forthcoming with that relationship specific to the Houston assets in 2014? Secondarily, given the scale of those assets in aggregate, can you give us a sense, whether it be in 2014 or years ahead, as to what size you would be comfortable with in terms of maybe not taking the whole thing, but taking it in chunks?

With respect to your first question, I'd say, let's agree not to be presumptuous. For 2014, in terms of when we've gone to the Board and had discussions with the Board with respect to both budgets, acquisitions, and organic growth projects, that's not been brought forward. And for our purposes, our plate is loaded right now for 2014. As Joe mentioned, on the splitter, we've got a lot going on, on that front, as well as trying to finish up Corpus and some of these other things.

I would say, for 2014, let's assume that nothing happens; and then if it does, it would be a bonus. But definitely -- really, we make no assumptions here, internally, as to the timing with respect to that.

On the second question with respect to the size, it's a high-teens million barrel storage facility, primarily resid based. I think they're doing some things there to maybe try and change that profile, without getting into too much detail. I think overall what would make the most sense for us is maybe to take it in tranches versus trying to swallow the whole thing at the same time. But, with that said, we'll look at it both ways, but I would expect chunks versus the full bite.

I might just add -- Michael, this is Joe again -- with respect to Alinda, these guys just continue to show up with additional deal books all the time for things to look at. As Wes alluded, our plate is thoroughly full with acquisition opportunities. And I'm almost looking at the drop downs as a, quote unquote, rainy-day fund. That they're there, and it's nice to have the halo, but right now there's just a lot of wood to chop in the marketplace. As long as these guys continue to bring deal books forward, we're going to assess those opportunities first in sort of real time.

The perspective is helpful; thanks for sharing that. Those are all the questions I had this morning. Thanks, gentlemen.

Our next question comes from the line of TJ Schultz, with RBC Capital Markets. You may proceed with your question.

Good morning. Just -- the two acquisition opportunities in the fourth quarter that did not go through. If you could just comment a little more there, and maybe on the one where you said you played bridesmaid, as it is. Was that primarily price, or if there was something else in the process?

Yes, this is Wes, I'll take that. With respect to the bridesmaid deal, that was part of a process, right? So, we gave it our best shot, but in the end, I think, just given where we are with respect to cost of capital and what our expectations for this specific -- or these assets was, we just couldn't hit the bid, if you will.

Now, I will say that that's a deal that's out there, and it has not been announced, so we'll wait and see what happens on that front. But we think we were close, but in the end, I think it was a price issue.

On the other one, that was a diligence issue. I think -- it was a large acquisition. It was a negotiated transaction. We had been working on that relationship for that transaction for a period of, really, a couple of years. And ultimately, in diligence, we got in and found some things that we were concerned about, and that we didn't necessarily like. And ultimately, the sellers thought that they could reap more value, I think, going elsewhere.

And then, we also looked at another package that was part of a smaller process that was fairly interesting for us. While that one didn't end up with a lot of cost, it had a lot of attraction for us, but we ultimately played second fiddle on that one as well.

Okay, thanks. There's a comment in the press release that you're exploring growth initiatives for Martin Lubricants. If you could just expand on that? What some of the options are for that business as we think about the growth pipeline?

With respect to that, we're looking on both fronts, both organic opportunities, and then also acquisition opportunities. These are smaller deals. Typically, on the organic growth projects, we're talking about small expenditures, like buying cork fillers and packaging equipment, which is less than $2 million to $3 million, typically, on stand-alone basis. So, we're looking at multiple smaller organic opportunities there.

But we're also looking at acquisitions in that space. We're being pretty selective on that. We're only looking for certain niche-based opportunities, more specialty talent, if you will, and assets. There's nothing that's imminent on that front, but we are talking to various parties with respect to opportunities on that front. But overall, those are smaller deals, in general.

Okay. Understood.

What's the 2014 growth CapEx expectation, and where do you expect total debt to EBITDA to be by the end of this year, or where would you like it to be?

Growth CapEx this year -- we're roughly $58 million to $60 million. Some of that is the Corpus terminals, and there's lots of smaller odds and ends, the largest being a $3.5-million type number on down. So, very modest on the current plate for organic growth.

I would add to that -- that excludes any sort of splitter project that we've been talking about. That has not been brought to the Board for final approval yet. So, to the extent that one of those -- that we move forward with that opportunity, both -- either by ourselves or with a partner, that could add a significant amount of capital going forward.

With respect to leverage, or debt to EBITDA, our target -- being pretty open with this, publicly stated, is about 4.25; 4.25 times is ideal for us. We came out of this quarter with some improved -- about 20 basis points of improvement to 4.6. I think, given the fact that we still have some high levels of inventory, particularly in butane, and unrealized cash flow, I think there's leverage improvement on the way, with respect to the first quarter of 2014.

So, we're going to let that play out. We're not running to the equity window or anything like that at this point. I think we're in good shape. We'll work our way to our target of 4.25.

Okay. On the ATM, have you used that yet, or your expectation -- is that your primary source of equity this year?

We have not used it yet. Our intention is to file our 10-K next Monday, and then sometime thereafter commence bringing down units through that methodology. Our target there is probably something in the $50-million range on an annual basis for the next few years. So, I would say, given where we are, we can manage through that. Nonetheless, to the extent that we're successful, and Wes and the team are successful in acquisitions, I think that will be the main driver to follow-on offerings as you're seeing, typical with other MLPs.

Great, thanks, guys.

Our next question in the queue comes from the line of Michael Gaiden with Robert W. Baird. You may proceed with your question.

Thanks for taking my question. I wanted to ask, outside of the splitter, and the currently contemplated 2014 CapEx and expansion in the terminalling in Corpus Christi area, what other projects could we expect over the intermediate to long term from Martin, as it relates to capitalizing on growth in the Eagle Ford?

Well, aside that, we're also looking at pipelines in the area. We're looking at natural gas liquids, small export-type terminal, handling NGLs in that area. When Bob said that there was -- about $50 million to $60 million, that's what's approved by the Board. Right now, we're probably working on, internally here, another $400 million-plus of projects. Not counting all the acquisitions and so forth that we're looking at.

So, we've got plenty on our plate as we're going forward. But I don't like to go to the Board until I know that we've got all of our numbers in place, and everything lined up for the Board presentation.

So, in the Eagle Ford, we're looking with finishing the expansion on that. We're also talking to some people about some additional tanks down there on some other property that we have. So, we've got a lot going on concerning all of these types of projects. But internal growth is something that I try to emphasize and follow very, very closely.

The number Ruben threw out, $400 million, that development time would be over a two- to three-year period.

What I'm talking -- it would be mainly 2015 and 2016.

Great. Thank you.

And for your 2014 growth CapEx of $58 million to $60 million, could you refresh us on what multiple, or range of multiples, of EBITDA you expect to realize on those deployments?

Yes. Just looking real quick at -- again, these are smaller deals, and typically with the smaller-size stuff that we work on, we have better multiples on those kinds of things. But I would say, probably, if you took the whole thing and blended the sort of EBITDA multiples across all of these, these are probably $5 million to $8 million on the high end. But I'd say closer to the $5-million side on an average basis.

Great, thank you.

And can I also follow up on your commentary regarding the employee stock plan at MRMC? Can you confirm that Ruben Martin continues to drive the MRMC vehicle, or has that changed at all with this transaction?

I'm going to let Ruben answer that.

Thanks. I'm not sure about drive it, but let's put it this way: I'm on the front bumper because they keep hitting at me.

Basically, what happened in that situation was that the employee stock ownership plan owns the stock, but all of the management and the stock that we had beforehand -- we not only received a note that is due anywhere from five -- most people, the longer-term note, eight years out. We received that, but our equity position and the economic development of the Company is the same. And so, everybody that is involved in the management, we have the same economic drive, the same economic incentive, so to speak, to increase the value of the Company.

When you look at economic benefits, nothing changed for management. That's the way I am, everybody is. I'm feeling pretty good, and so, I'm 62 years old, but I got a couple more years left in me.

To answer your question, the answer is yes. He's still front and center, and I think there was no change with respect to management on that front. And I think the key out of all of that, in my opinion, is just the fact that now the employees are effectively the owners of the Corporation. They were, on a minority basis, prior to that, but now we, as the collective employee group, own the private company, and I think that's great for the future of this Company.

Thanks for that insight, gentlemen. Appreciate it, that's it from me.

Our last question comes from the line of James Spicer, with Wells Fargo.

Just a couple follow-ups for me. First of all, on the condensate splitter, I think on the last call you had talked about $200 million to $300 million as a sort of a total spend range for that project. If you could just confirm that that's still a good way to think about it. And then, if the project does get approved, how much of that do you think might be spent in 2014? And then also, finally, if you brought in a partner, how they would share in those costs?

Yes, okay. So, on the first side, we'll talk on a 100% basis, then I'll get to your question on the partner economics, if you will, under that scenario.

It's obviously contingent upon the size of the splitter. We've been evaluating anything from a 50,000-barrel-a-day splitter up to a 100,000-barrel-a-day splitter. Generally speaking, on a 100% basis, the costs of that are anywhere from -- and it's a broad range, so bear with me here. But it's anywhere from, call it, $200 million, $250 million, up to maybe $500 million. So, that's a broad range, I know.

But I'll answer your third question second, which is, in terms of partnering, if we were to partner up with somebody like that, what we've envisioned, and what we've been discussing with potential counterparties, is a 50/50 concept, where a 50% capital responsibility, but also 50% of the economics. So, you can take those numbers, and depending upon the ultimate size of the splitter, you could take the $200 million to $500 million and cut it in half if we were to do that from our perspective.

And then, finally, your second question with respect to the timing of the CapEx, I would basically -- if we move forward, the year-one piece of the overall CapEx is probably in the range of 10% to 20% of the overall cost of the project. So, it's pretty heavily year-two weighted CapEx in terms of the capital spend.

Okay, great. That's very helpful.

And then secondly from me, can you just talk a little bit about the plans to refinance the project debt down at Cardinal, so you can upstream those distributions?

So, where we are there, as Wes mentioned, with respect to Cadeville, Perryville, and Arcadia, those projects are operating well, and cash flowing as planned. The debt is still a little too high.

I think as we look at it on a consolidated basis, we're probably moving our refinancing target into 2015 at this point. I think we said probably a year, 1.5 years ago, that we thought it would be at the end of 2014. I think that's, at this point, not as realistic, given the leverage multiples.

But nonetheless, it's still our intention to go ahead and do that, to consolidate those financings into a Cardinal-level financing, if you will, and then from that point have upstream distributions to the sponsors. I would give guidance now; I'd think that we can assume cash flow would be coming to the Partnership beginning of 2016, conservatively.

Okay. That's great. Thank you very much.

I'm not showing any further questions in the queue. I would like to turn the call back over to the speakers for any closing remarks.

Okay, great. Thanks, guys, for dialing in, and we appreciate your interest in our Business. So, overall, we felt very good about the fourth quarter. And we think we've got a good lift or a good start for Q1, especially in the NGLs, of course, helped by the colder-than-normal weather that we've experienced throughout the United States. Fifth consecutive quarter that we have been able to raise our distribution, and, hopefully, that will be able to continue on as we go forward.

The splitter project, the other projects that we have going around the Eagle Ford and other locations in Louisiana and so forth, we continue to be fully committed to these projects, and, going forward, to a lot of other organic growth projects. We don't want to lose focus on those organic growth projects, and we are continuing to chase acquisitions, but again, as you've seen, we've been the bridesmaid on a couple, and we're not going to jump out there and overpay for what we've done.

So, anyway, with that, we appreciate everybody's time, and we will talk to you next time. Thank you.

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