Martin Midstream Partners LP (MMLP) 2014 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Martin Midstream first quarter 2014 earnings conference call and webcast information.

At this time, all participants are in a listen-only mode. Later, we will have a question-and-answer session, and instructions will be given at that time. (Operator instructions). As a reminder, this conference call is being recorded.

I would now like to hand the call over to Bob Bondurant, Chief Financial Officer. Sir, the floor is yours.

Okay, thank you, Nicholas. To let everyone know who's on the call today, we have Ruben Martin, who's our President and Chief Executive Officer; Joe McCreery, who's our VP of Finance and Head of Investor Relations; and Wes Martin, VP of Corporate Development.

Before we get started with the financial and operational results for the first 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 SEC Regulation G, such as distributable cash flow or DCF, and earnings before interest, taxes, depreciation and amortization, or EBITDA, and we also use 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. 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 first quarter performance. For the first quarter, we had adjusted EBITDA of $38.8 million compared to the fourth quarter EBITDA of $38.6 million.

Our total distributable cash flow or DCF for the first quarter was $21.5 million, a distribution coverage of one times. This coverage ratio does not include any IDL payments to the general partner, as we have suspended IDL payments until a cumulative suspension of $18 million is met. At March 31, 2014, our cumulative suspension amount was $11.9 million.

As we previously disclosed on our previous earnings call, our first quarter DCF was negatively impacted by heavy maintenance capital expenditures in the quarter as a result of our lubricant refinery turnaround and required Coast Guard offshore vessel dry dockings. Total first quarter maintenance capital expenditures and turnaround costs were $6.5 million and we continue to forecast approximately $17 million to $18 million of maintenance capital expenditures in 2014, of which two-thirds should be spent in the first 6 months.

Now, I would like to discuss our first quarter cash flow by segment compared to the fourth quarter of 2013. In the Terminalling segment, our first quarter EBITDA, which is defined as operating income plus depreciation and amortization but excluding any gain or loss on sale of assets, was $18.1 million in the first quarter compared to $15.9 million in the fourth quarter of '13. Our specialty terminals cash flow was $13.4 million in the first quarter compared to $10.4 million in the fourth quarter of '13, an increase of $3 million.

Between these quarters, we had an increase in cash flow in our Lubricants Packaging business of $1.4 million, an increase in cash flow at our Corpus Christi Crude Terminal of $0.7 million, and an increase in cash flow at the Smackover Refinery of $0.6 million and an increase in cash flow from our legacy specialty terminals of $0.3 million.

The Lubricant Packaging business returned to a normal cash flow in the first quarter when compared to its weakest seasonal quarter, which is the fourth. The increase in cash flow out of Corpus Christi Crude Terminal was the result of having our dedicated marine dock operational for the entire first quarter. As a result, our throughput volume increased 20% to over 140,000 barrels per day.

Although our Smackover Refinery was down for 55 days in the first quarter due to our turnaround, cash flow was actually up due to required minimum throughput fees which were paid and lower variable operating costs due to the turnaround downtime. This, of course, is offset by actual turnaround costs that were capitalized in the quarter, which negatively impacted our DCF. The refinery restarted in early April and achieved its capacity production of over 7,600 barrels per day on April the 8th.

On the shore-based side of the terminal business, EBITDA was $4.7 million in the first quarter compared to $5.5 million in the fourth quarter of 2013. This decrease in cash flow was a result of normal repair and maintenance costs in the first quarter when compared to minimal repairs and maintenance costs in the fourth quarter of 2013. Looking toward the second quarter, overall terminal cash flow performance should be slightly improved when compared to the first quarter.

In our Sulfur Services segment, our cash flow was $11.2 million in the first quarter compared to $8.4 million in the fourth quarter of '13, an increase of $2.8 million. Our fertilizer cash flow was $7.4 million in the first quarter when compared to $3.4 million in the fourth quarter of '13. This increase was anticipated as the first and second quarters are the highest seasonal demand periods in the fertilizer business due to the timing of farmers planting crops. Volumes between the first and fourth quarters increased 71% and margins improved 17%. Generally speaking, farmers have had to delay planting in the mid south and Midwest due to this year's colder and wetter weather patterns. Because of this factor, we believe that additional cash flow we were anticipating in the first quarter will transition into the second quarter. As a result, we anticipate a strong second quarter in the fertilizer business.

On the pure sulfur side of the business, cash flow was $3.8 million in the first quarter compared to $4.9 million in the fourth quarter of '13. Our cash flow in the first quarter was down when compared to the fourth as we had our molten sulfur offshore tow in dry dock for the month of March. This tow came out of dry dock in early April. Looking forward to second quarter should reflect our cash flow performance in the first quarter on the pure sulfur side of the business.

In the Natural Gas Services segment, we had cash flow of $9.1 million in the first quarter compared to $12.7 million in the fourth quarter of '13. The decrease in cash flow was primarily on our refinery grade butane business as refineries began to transition away from butane demand in March due to regulatory burning requirements that begin every year on April 1. This drove our overall NGL volume down approximately 5% and our overall NGL margins down 16% when compared to the previous fourth quarter.

Looking forward to the second quarter, our Natural Gas Services segment will face a seasonal decrease in cash flow as the demand for refinery grade butanes will end and not pick up again until late September. During this period, we will be purchasing refinery grade butane supply and transporting a significant portion of it to storage. As a result of this process, we will see inventory and working capital build in this segment through the second and third quarters.

In our Marine Transportation segment, we had cash flow of $4.5 million in the first quarter compared to $6.3 million in the fourth quarter of '13. The decrease in Marine cash flow was primarily attributable to the offshore side of the business as we had offshore NGL tow go into dry dock in late February. This tow came out of dry dock on April 22nd. We also had a crude oil offshore tow go into dry dock in late March. We anticipate this tow will come out of the shipyard in mid-May.

Now looking forward to the second quarter, we anticipate Marine cash flow to be slightly less than the first quarter due to our crude oil offshore tow being out of service for half of the second quarter.

Our unallocated SG&A costs were $4.7 million in the first quarter compared to $5.6 million in the fourth quarter. In the fourth quarter, we experienced acquisition due diligence costs on two failed acquisition opportunities. Looking forward, our unallocated SG&A costs should average between $4 million and $5 million on a quarterly basis.

In addition to our 4 business segments, we own 100% of Redbird Gas Storage, which now owns a 42.2% interest in Cardinal Gas Storage. For the first quarter, we had distributions from Cardinal of $0.2 million, the same as the fourth quarter.

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 first and fourth quarters. We anticipate receiving distributions from this investment of $2.3 million in total in 2014.

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

Thanks, Bob, and good morning, everyone. I'll start with our normal walk-through to 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. I'll keep my remarks brief this morning so we can get to Q&A.

On March 31, 2014, the partnership had total funded debt of approximately $644 million. This consists of approximately $424 million of senior unsecured notes and $220 million drawn under our $637.5 million revolving credit facility. Thus, the partnership's available liquidity on March 31st, 2014, was $417.5 million.

For the first quarter ended 2014, our bank compliant leverage ratios, defined as senior secured indebtedness to adjusted EBITDA and total indebtedness to adjusted EBITDA, were 1.58 times and 4.63 times, respectively. Additionally, our bank compliant interest coverage ratio, as defined by adjusted EBITDA to consolidated interest expense, was 3.24 times.

Looking at the balance sheet, our total debt to total capitalization at March 31st was 71.5%. When looking at a comparable year-over-year balance sheet, after adding back the $54.1 million equity impairment related to the Monroe Gas Storage write-down to partner's capital, which was taken on December 31st, 2013, our debt to cap would have been 67.5%, which is slightly improved from year end 2013 as working capital associated with our NGL business fell during the quarter. In all, at March 31, 2014, the partnership was in full compliance with all banking covenants, financial or otherwise.

Now, reconciling our current outstanding indebtedness from quarter end March 31, 2014, to today, our current net revolver balance is $240 million borrowed, and creating available liquidity of $397.5 million. This higher outstanding revolver balance reflects incremental borrowings associated with our debt retirement in early April, which I will describe momentarily.

Next, let's discuss capital raises during the first quarter of 2014. As we mentioned during the last call, we added one lender to our revolving credit facility, increasing our total commitments to $637.5 million. We believe this incremental liquidity provides additional flexibility as we execute our plan of finance. Likewise, we view the current bank market as a favorable source of capital for potential acquisition scenarios. That being said, it is likely we will continue to access that market by increasing the size of our revolving credit facility before year end 2014.

On the equity side of the balance sheet, we officially commenced our at-the-market issuance program in early March. The partnership successfully placed units on 12 trading days during the first quarter for total net proceeds of $5.3 million. Although the effectiveness of this program is largely dependent on the daily float of our MMLP units, we are pleased with the early results of the ATM and continue to believe the program will be a helpful tool in the ongoing management of our balance sheet.

Next, I would like to discuss some of the debt refinancing opportunities that took place in the early second quarter. On April 1st, we redeemed at our option all the remaining $175 million of 8-7/8 senior unsecured notes due in 2018. We utilized our revolving credit facility to fund the redemption and the prepayment premiums required to complete this optional redemption. That amount was approximately $183 million. Associated with the early redemption of those notes, the partnership will be subject to noncash expense charges of approximately $3.9 million, which includes $2.7 million of deferred debt costs. These charges will not impact distributable cash flow in the second quarter.

Now, let's move to growth initiatives. First, I'd like to provide a brief update on a previously noted intension to construct a crude oil condensate splitter in the Corpus Christi market. Our project continues to move forward. We remain in substantial negotiations with our proposed partner, who's the sole customer of the project, to provide 50,000 barrels per day of splitting capacity for a minimum 5-year period. This contract will be take or pay and provide stable fee-based cash flow to MMLP. We remain optimistic that we'll be in a position to announce a formal agreement with that customer in the next 90 days.

On the corporate development side, we continue to be very active in our pursuit of multiple potential opportunities. Acquisition deal flow has remained robust in the first four months of 2014, continuing last year's trend. We continue to see potential opportunities in all segments and while some valuations have gone beyond our reach, we believe that we can meaningfully grow the partnership through continued support from MRMC and Alinda. There are so many unique opportunities out there that we like and both MRMC and Alinda are lined in supporting the growth of MMLP through transaction support if and when necessary or through potential drop down scenarios.

As we've said before, there's no timetable obligation for drop downs and that continues to be the case. However, we have begun preliminary high level discussions with Alinda regarding certain drop down scenarios and we look forward to working with them to develop those potential opportunities.

Finally, the partnership was pleased to announce our sixth consecutive quarterly distribution increase last week. Again, modest in size, our board of directors approved a one quarter cent or one penny annualized distribution increase, reflecting our positive view of the business during the first quarter, where we exceeded our projected level of DCF and our outlook going forward.

Nicholas that concludes the prepared remarks this morning. We'd now like to open the lines for Q&A.

(Operator Instructions) Edward Rowe with Raymond James.

Good morning, guys.

Good morning.

At the analyst day, you guys discussed a little bit about the potential drop down of Arcadia Terminal. Can you provide some updates around that?

Yes, this is Bob. We are -- the plan the board has approved that drop down. It's going to be executed sometime in May, I believe. Well, I'll disclose the amount. I think we can do that at this time. It's about $7.5 million. Then we -- the rail rack that's going to be developed has been approved by the board and that will be executed as well. It's a one-year build out. Ruben, would you like to make some comments about it?

Well, the two were dropped down -- it was dropped down in conjunction with the approval of building a rail unloading facility at Arcadia that will allow us to take different types of butanes from different parts of the country into that storage facility, unload them, retain them during the summer, ship them back out in the winter by both truck and rail. So it gives us a lot of flexibility on that system over there. We will have multiple rails that will be able to take in non-ferritic types of butanes, pure, high-purity, low-sulfur normal butanes, propane that we've been doing for years over there and anything we can mix and match that's going to help us in our butane optimization program that we have around the country. So it's really just an add-on to that system and the -- it's all done in conjunction with rail, building out our rail facility.

So, you mentioned that the drop down's $7.5 million and then how much would it be the build out for the rail?

It's probably around $15 million.

$15 million, okay. All right, that's helpful. Just a couple questions, modeling questions. In terms of the maintenance CapEx and obviously the Marine segment, you targeted around $17 million to $18 million in maintenance CapEx for the year. Is that inclusive of the $2.2 million in the turnaround expenses this quarter?

Yes, it is. And total turnaround expenses, of that $17 million to $18 million, total turnaround expenses are going to be about $4.5 million. So we got another $2.2 million that will roll through in the second quarter. So of the $18 million, approximately and these are all top of my head, about $4.5 million is turnaround and probably $5 million to $6 million is marine costs.

All right.

Then in the sulfur division, you had a marine turnaround. That will probably be -- that was probably a million which hit this quarter.

Okay, that's helpful. Just noticing in the 10-K, there's some like dock 193 and a few contracts that may be reaching the end of its term. Do you guys anticipate being able to re-contract that or re-contract that even at a higher rate, given tightness in some of the markets?

I'm not sure. Are you talking about like at Corpus Christi?

Yeah.

Oh, okay. Yeah, no, that contract was extended.

Okay.

We added three new tanks and then we added another dock to decongest our existing dock facility. So we've been able to put more throughput through there but no those contracts for that Corpus Christi are long-term contract.

Yeah and --

Go ahead.

As he said, I think he's referring to one of the fuel terminal. Dock 193 is one that we acquired in the [Talon] field. Relatively, I don't know what the status of that one is right now but I know in terms of the overall contributor of cash flow, it is a very, very small piece of the overall pie.

Okay, all right. That's all I had. Thank you.

Really just a substitute. We were substituting another facility to take care of that business. It was more of a merger.

Okay.

Consolidation.

All right. Appreciate it. Thank you.

Ethan Bellamy with Baird.

Hey, good morning, guys.

Morning.

With respect to Redbird, do you guys -- where do you think Monroe Gas Storage will shake out in terms of re-contracting? How does the re-contracting environment as a whole look right now?

Yeah, this is Wes. I'll take that. We're obviously, I guess April 1 is really sort of the start of the season if you will. I think we're in discussions on that. The only sort of comment that I can give you there is that at least I think with the cold winter, people are actually interested in storage again. Does that mean that rates are going to go through the roof? No, I think that's not what we're seeing per say, but I think there's a little bit more interest this year, if you will, in gas storage in general given the really cold winter and some concerns I think overall with respect to the ability to inject over the summer to get back to where we were previously. So I think there's a little bit, there's a slight undercurrent, if you will, of people that are interested in gas storage again. But overall, we think that's going to materially change the picture there in the short run. Right now, we don't think so.

So not as poor as last year, but not great?

Yeah, I think --

Okay. With respect to Martin Energy Trading, could you talk about how that business is performing and if there's any chance that the partnership will end up owning more of that?

Yeah, this is Joe, Ethan. Martin Energy Trading is owned by MRMC, our affiliate at MRMC. There are no current plans or contemplated plans to drop that down. They do have their own capital structure, a working capital inventory credit facility in place. They've had a very good winter, as you might imagine. There's been a lot of volatility in the price dynamics. So from that perspective, I think the partnership is very pleased with its investment. What they're really doing is rolling up their retained earnings to try and have a bigger capital base to continue to grow that platform. So currently that's the initiative there is growth at the MRMC level.

Okay, thanks. One last one, with respect to what Alinda could bring to the table in terms of asset value for drop downs, could you give us some benchmarks for what that asset value might be and duration of how long -- what does Alinda look like in terms of moving those assets in?

Yeah, I'll answer your second question first. I think with respect to timing, you know I think this is the first sign I think that we really sort begun any discussions with respect to even big picture wise talking about drop down. So we're in the early stages of that. I can see something happening probably let's say over the next six months. But again, don't want to bind ourselves by that timeframe.

With respect to valuation, I think there's multiple assets at that level. Some of them I guess you can do some diligence and dig into some filings and such with such things like the rig's partnership to get a feel for what the size of those are. But there's other contractual provisions in place with respect to that that asset may or may not open up or be able to end up in our partnership. So the size is on a collective basis between the various assets, it is -- I don't want to get into specific numbers at this point, but it is substantial relative to our existing size and it would be a meaningful -- any transaction we would do with them would be of meaningful size.

All right. Thanks very much. I'll get back into queue.

TJ Schultz with RBC Capital.

Great, thanks. Joe, maybe just following up on that last point on kind of discussing I guess for the first time preliminary discussions on the drop downs. Just trying to get what the takeaway is here. I mean is there any read through? You mentioned kind of increasing valuations on some of the acquisitions you're looking at. Is there something where we should look now at drop downs kind of being the first opportunity to leverage the relationship? Or just still how active are you kind of on deal flow that's coming through?

Yeah, this is Wes. I'll take that. In terms of that being the first, I think the answer to that is no. I don't think that's something that would be the first work. As Joe mentioned, we continue to work various opportunities. We think that we've got a good shot at maybe two or three that might be strategic to us and I think we generally have discussions at the board level on those acquisitions as well as at management level. We continue to be positive in terms of outcome of those. So I would say any sort of drop down transaction would probably happen after sort of the little, just call it, third-party asset transaction.

Okay, good. On the ATM, do you have goals on leverage improvements to accomplish through that program? If you'd just comment around the 4 or 6 I think was the debt leverage now, where you see that turning in '14? Then if you look to improve leverage more meaningfully in conjunction with some type of transaction, where would you like to kind of shake out following that?

Yeah, sure. This is Joe. So, the program has been helpful. Obviously, we're realistic about our ability to use that given our overall float in the 50,000 to 60,000 units a day kind of range. So we're range bound there. But nonetheless, from a target perspective, I think we continue to want to work on our balance sheet and get below 4.5 times. You know I think long term, sustainable target would be 4.25 times and that's kind of what we're doing with the rating agencies from a corporate rating perspective. So we've got some work to do there. I still hold out for a transaction, transaction-oriented event that would take us to the equity market and I think given the success, likely success I think of the corporate development team, that'll be sooner rather than later. But nonetheless, from a long-term perspective, we're going to continue to manage the balance sheet and really try and achieve below 4.5 times.

Okay, thanks, guys.

Michael Blum with Wells Fargo.

Good morning, guys.

Morning.

Just one more question on the drop downs. You guys did a really good job at the analyst meeting kind of outlining all the various assets at Alinda and what could or could not likely make any kind of (inaudible) over time. What you're saying today is that different from what you were saying at the analyst day or should we just think of it in that way and maybe this is just more an indication that perhaps one of those could start moving in the next six months or later?

Yeah, I don't think the outlook's any different, Mike. I think we're just saying that those and from a prioritization or wish list to a desired list of assets we'd like to own. I don't think anything's changed. I think we're just saying now that those conversations have begun. The first quarter or two with Alinda, we were so swamped with third-party acquisitions, as we mentioned, we continue to be busy with those. But I think also realistically we're looking at some Alinda activity. So, just a change of momentum I would say.

Got it. Thank you very much, guys.

Andrew Burd with MLV & Co.

Given the recent ramp up in Corpus Christi throughputs, how should we think about a run rate going forward for existing operations there? Should there be a significant acceleration over the roughly 164,000 barrels that you released during the analyst day or are we kind of there right now?

I think the 140 was a little lower than what we were anticipating cause there was a lot of fog, believe it or not, in January. So I think a better run rate kind of 150,000 to 160,000 barrels a day on average kind of throughput.

Okay, thanks. Back to Redbird, kind of timing aside, how should we think about post refinancing distribution levels that receive, especially the given the write down of Monroe. Is there kind of an indicative range you're thinking about? I realize there are a lot of variables at play.

Yeah, this is Wes. It's exactly right. There are a lot of variables in play. I think the key thing that we've got to get a handle on with respect to any distributions coming out of that investment will ultimately be some sort of Cardinal level refinancing. That's obviously not in the cards right now. There's some other things going on that we can't discuss that are happening that are partner-level type issues that are -- and not issues in the negative sense. Just sort of the things trying to take place that -- it'll happen here probably over the next call it three to six months that will help to set the course for timing.

So, right now with respect to where we stand on that, I think the assets are performing if you guys will recall in past conversations, there's a lot of substantial piece of that is under long-term contracts. You got 50 plus BCF with the vast majority of them under long-term contract. So they are performing and they are cash flowing and we continue to see that cash flow, it's going to pay down the debt at those subsidiary levels right now. But I think over the next six months, we'll have a better handle on the plan in terms of going forward and the timing with respect to a refinancing and essentially unlocking those distributions to flow up.

Great. Thanks very much.

(Operator Instructions) James Spicer with Wells Fargo.

Hi, good morning. Most of my questions have been answered. But just on CapEx here, I think that your guidance was for organic spending this year was $50 million to $60 million. In light of the Arcadia drop down, the rail facility you just mentioned, the condensate splitter and other things out there, can you just review where you are today just in terms of what's been authorized? Then really what the potential is for the rest of the year?

Yeah, James, this is Joe. I think from an authorization perspective, we're still in that range in the kind of 68 plus or minus included the completion of the Corpus Christi crude terminals, the tanks 7, 8 and 9, which are coming on line now. So we've got that behind us and there's been no further authorizations from the board really with respect to final spins on splitter, any other organic projects. So we're kind of still in that same range. As we kind of mentioned, we thought at analyst day, we thought that by the second half of the year, we'd probably bring some more projects to the board, but we haven't done that at this time.

So, just on the condensate splitter then, if you're able to announce a transaction in the next 90 days as you indicated along the same -- along those lines, what do you think the potential spend on that would be this year?

Yeah, it's my understanding that's probably backend loaded and you're talking about a two-year build on that project. Is that fair, Ruben?

Yeah, it's -- it would basically be involved in some permitting, some land development and a lot of engineering. So it's probably in the $20 million range by the time you start the ball going.

For this year?

For this year. And then it'll ramp up, of course, in '15.

Right. Okay, that's helpful. Thank you.

Ethan Bellamy, Wells Fargo.

Ruben, I want to climb the mountain and ask my one question to the sage for the year with you, which is where do you see the chess match ending up with the condensate splitters at Corpus? Is there room for you and the Magellan project there? Then does that put you in a position to potentially add another splitter down the road if they are there as well?

Don't forget the caveat was I get a big check whenever you ask those questions.

All right, maybe I should retract that question.

No, I believe that as we're seeing now, we're actually seeing a lot of crude oil hit certain areas that we knew that would be in an oversupply situation. I think we're seeing that now as we've seen some of the builds in inventories. We've seen some of the relationships with Brandt and LLS come to positions that show a build in inventory in all these locations. So, the answer is that there's still, when you look at the announcements that are in Corpus, there's still more condensate that's available, that's been going some different directions but it's trying to make its way out of Corpus now and continue to make its way out by vessel.

So, I think you'll always have part of that, the lighter condensates go out. We're also seeing some really lighter light. We're seeing some 55 plus gravity stuff that's out there right now that people are still having trouble moving into the markets that are most convenient for them. So the answer is yes. There seems to be plenty of room for what's been announced, there still doesn't seem to be enough capacity that'll handle the light -- lighter products that we've seen, lighter condensates that we've seen down there. Just on the -- happened to that product but it has to find a home somewhere.

So to that end, we have this looming oversupply situation on the Gulf Coast for just about everything. How do you think that's going to shake out in the crude oil market? I mean what -- from a big picture perspective, where do you think prices are going to head? Is that going to push back on production at some point?

Gosh, I never make predictions on prices, cause you know who does, it's always wrong. But I think it's still going to be driven by the world. So when you look at the local crudes and when I say local I mean the US crudes, they're going to gravitate towards the refineries that are best able to process that particular gravity of crude. It's still going to be driven by the world type pricing. I think that's where there's going to be a lot of call for -- about export and crude oil in the next two to three years. I don't believe it's going to be very difficult to get that through the current regime.

All right. Thanks, you all.

Thank you. 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.

Yeah, real quick. This is Joe and I just want to give a little bit of modeling guidance of one subsequent event pertaining to our balance sheet that I think it's important from an interest expense perspective. One thing we did do as you're all aware, we did a follow-on notes offering on April 1st to our $250 million senior unsecured notes due in 2021. So that effective offering or issuance now is $400 million. On the same day, we actually swapped $200 million of that $400 million back to floating to get a positive carry of about 2%. So we're expecting out of that swap or hedge about $2 million -- I'm sorry about $4 million annually of net interest income that would offset interest expense. So I think that's important from a DCF perspective I want to make that note.

Okay. Thanks, Joe. I think as you look at what we did in first quarter, we still feel like we had a good solid first quarter. It exceeded our budgets in both the NGLs and in the marine. We're seeing the inline marine business is very, very strong. As I'm sure you're aware of the refinery utilization that's out there now, we're running at refinery rates that are getting close to historical highs. That's really helped the inline type marine business be strong. We do have a lot of CapEx coming in that business. When you look at 2014, two-thirds in the first half of the year. So you'll see some differences there, but we're still on budget for CapEx for '14.

We increased our distribution slightly again. I think it just shows that we're -- we're thinking about the future and we've got a lot of good acquisitions that we're working on in the hopper and even more importantly to me, is we've got a lot of good organic growth in the hopper that we're starting to work on and working on permitting and everything. We all know what permitting has done to us in the last year or two. It's massively slowed down our business. I think we've talked about it at the investors' conference. But, anyway, we're real happy with the way things are running, turning out and looking forward to the future. With that, we thank you for your time.

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