歐尼克 (OKE) 2004 Q1 法說會逐字稿

Good day Ladies and gentlemen and welcome to your ONEOK First Quarter 2004 Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a brief question and answer session and instructions will follow at that time. If anyone should require assistance during today's program, please press "*" then "0" on your touchtone telephone. I would now like to introduce your host for today's conference call, Mr. Weldon Watson. You may proceed sir.

Good morning and welcome. As we begin this morning's conference call, I'll remind you that any statements that might include company expectation or predictions should be considered forward-looking statements and as such are covered by the Safe Harbor provision of the Securities Act of 1933 and 1934. It's important to note that the actual results could differ materially from those projected in such forward-looking statements or discussion of factors that could cause actual results to differ. Please refer to the MBNA section of ONEOK's filings with Securities and Exchange Commission.

And now David Kyle, ONEOKs, Chairman, President and CEO will moderate this morning's conference call. David.

Thank you Weldon and Good morning every one. I appreciate each of you joining us today to discuss our first quarter results for 2004. All of our business segments performed well during the quarter with three of five business segments reporting increased operating income. I am pleased to say that our first quarter earnings are within the range of our expectations. The wisdom of our recent reserve acquisition was evidenced during the quarter, and we also enjoyed the results of successful rate relief in our Kansas and Oklahoma distribution operations. Gathering and processing experienced a 158% increase in their operating income. Part of that increase reflects efforts that have been a focus of ours over several years to improve terms on unprofitable contract and part obviously reflects improvement in the underlying commodity price.

While we're seeing successes in much of fiscal marketing effort, we are seeing lower volatility in gas prices as compared to previous periods. We continue to support earnings guidance for the year in the range from $2.12-$2.18 per share of common stock. While we are not revising our guidance at this time, we are seeing some improvement in the gathering and processing segment and in the production segment, both reflecting higher prices while lower volatility may impact our marketing results for the year if it continues at these levels. We will be examining our marketing efforts to ensure that we stay focused on the higher margin and more stable areas of our fiscal natural gas business.

Earlier this month we raised the quarterly dividend on one of common stock by 2 cents increasing our annual dividend to 84 cents per share and we'll continue to evaluate our payout and increase the dividend appropriately. All of this activity during the first quarter has indicated that we are well on our way to having another successful year in 2004. At this time I would like to call upon Jim Kneale, our Chief Financial Officer to review the financial highlights for the quarter. Jim.

Thank you David and good morning. As we reported yesterday, first quarter 2004 earnings per share were $1.04 on a net income of $105.2 million compared to 28 cents on net income of $22.4 million last year. You will recall that last year, we had a charge of a $1.28 for two accounting changes. The majority of that charge related to the effect of the recession of EITF 98-10, mark-to-market accounting on certain transportation and storage contracts in our marketing segment.

Earnings per share from continuing operations for the first quarter were $1.04 compared to a $1.20 in 2003, which as David indicated was in line with our expectations. Items that increased earnings for the quarter include the earnings from the Texas production properties that were acquired in December 2003, improved key pull spreads and the ongoing restructuring of unprofitable contracts in our G&P segment that David mentioned, rate relief authorized in Kansas in late 2003 and in February 2004 and in Oklahoma, a pre-tax $6.9 million gain on the sale of some transmission and related assets, and lower interest expense resulting from using the proceeds from people January equity offering to pay-off short-term debt. We also terminated the interest rates swaps on $670 million of our long-term debt and locked in a gain of $91.8 million in the first quarter. Then we reset the swaps the same day. The $91.8 million cash payment was used to reduce short-term debt and will be amortized as reduction of interest expense over the remaining term of the related debt. Offsetting these increases, where lower margins in the marketing and trading segment due to reduced natural gas volatility and tighter spreads between the Rockies and mid-continent region.

Reduced natural gas sales from storage in the marketing and trading segment as net storage withdrawals were about 21 Bcf under last year. As a result, we had 33 Bcf in storage at the end of the quarter compared to about 14 Bcf last year. The first quarter also included a pre-tax charges of about $8.5 million for litigation matters and the repurchase of a portion of our Enron claim that we sold in 2002. There was also dilution of 2 cents per share caused by the equity units we issued in January of 2003. As our stock price trades above $20.63, under the treasury stock method of accounting additional dilutions occurs. For the quarter an average price of $22.57 for the last 20 days of the quarter was used to calculate this dilution. We estimate that for every dollar above $22.57, additional dilution of four-tenths of a cent per share will occur per quarter based on our guidance earnings for the full 2004 year. Cash flow from operations before changes in working capital remain strong at a $176 million; this exceeded capital expenditures of $49 million and dividends of $18 million by about a $109 million. At March 31, we had $22 million in cash and about $300 million tied up in natural gas and NGL inventory and related margins.

I also want to update you on our 2005 hedges for the production segment. We currently have 20 million per day of our natural gas production hedged at a net wellhead price of $5.68 per mcf. We also have an additional 10 million per day hedged for the first quarter of 2005 at a net wellhead price of $6.12 per mcf. So last item I want to address is the FASB's preliminary guidance on how employer should account for the provision of the recently enacted Medicare Reform Act and how that impacts ONEOK. The Medicare Reform Act allows employers to sponsor a post-retirement healthcare plan that provides a prescription drug benefit to receive a subsidy for the cost of providing that benefit. ONEOK qualifies for this subsidy. As a result, we expect our post employment benefit experience to decrease $2.7 million in 2004, which will be recorded in the next three quarters. David that concludes my remarks.

Thanks, Jim. Again today, I have asked John Gibson, who is over our gathering and processing and our transportation storage segment; and Chris Skoog, President of our marketing and trading business to join us for the question-and-answer portion of the call. And at this point we are ready to take your questions.

Ladies and gentlemen, if you have any question or comment at this time, please "1" key on your touchtone telephone; if your question has been answered and you wish to remove yourself from the queue please press the "#" key. Our first question comes from John Nelson.

Gentlemen good morning.

Good morning John.

Nice quarter, needless to say. Two questions, if I may, first, there is a [inaudible] profile of what a marketing results look like?

Yes, John. Within the revenue sources, we were within line what we wanted to be in marketing and storage, we were slightly behind our plan in that segment, primarily due to the fact that we left 33 bcf of gas in the ground at the quarter end. That reduction was offset by a retainage of higher demand dollars due to the lower volatility, so we kept our higher amount of our premiums that we pay -- we collect from the demand peeking business. Our retail segment was right in line with what we had planned and our trading component was down considerably primarily due to the low volatility in natural gas in our option strategy.

Just, if I can follow on that Chris what is the -- any progress on no notice peak day contracts, any more contracting for the coming year?

Yes, we've -- coming out of this first quarter, we already had three deals signed for next winter and that's more than we had last year at the first quarter, so the demand for our business is -- that side of our business is really picking up in the physical marketing side. So, if you look at it, we picked-up a new customer in the Northwest, a new customer in the Northeast and then this -- renewal of a customer hasn't accounted with a large volume already for next winter.

Okay, and one question if I may for Jim Kneale. Jim what is your projection on deferred taxes for this year?

John right now, it's in the -- I would call the $90-100 million range.

Okay, thank you very much. That's what I needed.

Thanks John.

Our next question comes from of Kathleen Vuchetich of WH Reeves.

Good morning guys,

Good morning Kathleen.

A couple of questions please. Could you please tell me what the annual reduction to the interest expense is because of the amortization of the swap gains -- I don't know if I am saying that right Jim but I hope you know what I mean?

I do, Kathleen it was -- let me give you may be a little longer answer then you'd ask for. When we gave our original guidance we had projected in that that we would save I think somewhere about $29 million -- I can't remember in swap savings for the year, and so what we did when we terminated those swaps is just locked in a big portion, a portion of that. So, and then we reset the swaps. So let me try to answer that question now more direct. For the rest of the year, on the terminated slots we'll pick up about $8 million more savings as we amortize that $91 million. For the next three years, its about $10 million amortization, but keep in mind we reset the swap, so we're still also having the incremental swap saving, so with the little higher cash and our swap position, we believe our swap savings are going to be about and interest savings are going to be about $4 million above our original guidance for this year. so that's we raised that or lowered our interest expense.

Okay. Think I understand that. Also could you tell me what the weather comparison was year-to-year in the quarter?

Kathleen, I believe and Chris or David might correct me, I think over all it was warmer this year, I think in 2003 what you saw specially in February were several major coal snaps that you know cause some real high volatility in natural gas prices, but overall the weather was fairly cold, I'd say just a little warmer this year.

Okay, so it was fairly cold. And finally can you tell me how the rate increases that you got on the two LDCs, how that balances against higher cost that you expect for the year? What kind of net pick up, I know what numbers you forecast for LDCs for the year, but I was just wondering how the fairly sizeable rate increases balance off against higher costs?

I think overall Kathleen and I didn't bring it. I -- let me answer that two ways, so far what we're seeing for the first quarter is the two rate increases with the costs that further rate orders they were, you know to amortize or tracking exactly with our estimates. And in terms of benefit cost and payroll cost, those are tracking pretty much in line with our forecast. We are seeing a little higher bad debts right now..

Okay.

But as we come out of the cold winter, you know -- I mean we have different rules in different jurisdictions about when you can shut people off and things like that, we are beginning to see that turnaround a little bit. So overall, we still feel good about our guidance for the distribution unit -- for the year.

Okay.

--segments.

Thanks so much.

Thank you.

Our next question comes from Yves Siegel from Wachovia Securities.

Thanks, good morning everybody.

Good morning.

A couple of questions, one is can you give an update on the contracts status in gathering and processing and what the outlook is for the rest of the year; are you primarily done with the renegotiations?

John?

Yves this is John. Where we stand right now on volume is about 46% in fee-based contracts; 31% in percent of proceeds; and 23% in key pull. And the second part of that question is, no we are not done. We still continuing our efforts of increasing the amount of volume inside of our key pull contracts that we have with conditioning language, which is you'll recall there is a provision that when the key pull strip goes negative, the contract converts to a fee-based contract. And we continue to work with producers to move more of our volume from key pull to percent of proceeds and fees.

Are you hedging any there under the [Pops]?

No. We are not.

Is that by designed because of, Chris?

It is by design.

Okay. The second question, where do you stand in terms of 8 Bcf of idle storage?

We have -- we are currently working on 5 Bcf of that. In Texas, we have a project that we have underway and we hope to if executed, we haven't gone out in the market with this yet, but we hope to be ready to go back in the service, no later than first quarter of next year and then the other 3 Bcf remains in of course in Kansas and is under regulatory and restrictions by the Kansas Corporation Commission and we are working and we continue to work on that field with those regulatory authorities as well.

Great and I got two more if I could.

Sure.

Jim, could you just review the average share account, how that is -- you know why that's moving up so strongly, through the rest of the year?

Yves, yes. Good morning. Two things are impacting that. One is, in our original guidance we had factored in a equity issue, which is January 1 and it was based on $20 stock price and so that added 5.8-5.9 million shares on an annual basis. When we did our offering in late January, the after number shares issued were 6.9 million. So, when you use those 6.9 million shares for 11 months of the year, it adds about an additional 300,000, I think, 315,000 shares for the year. The remainder of the difference is coming from the equity units, which I've mentioned in my remarks and just to make for everybody on the call I know you know what this is but what we do with those equity units is we use for treasury method of accounting. And what that means is, at the end of the quarter you do a calculation as if the equity units were settled, and so the way those equity units actually settle is, you look at the last 20 days trading price and average that, so for the end of this quarter that was $22.57. So the calculation is, you assume we issue the equity units at the $20.63 price and receive $402 million plus of proceeds, and then you go out in the market and you repurchase ONEOK stock, in this case it is $22.57. And what's result is a net delta in those shares counts of about 1.7 million shares. So you add that to your fully diluted shares outstanding, which reduces your earnings per share, and you make that calculation every quarter and then at the end of the year, you average the [fore]-diluted amount. So if the price states 22.57, you have 1.7 million at the first quarter, 1.7 at the second quarter, third quarter, fourth quarter. You add that up, divide it by 4, and the annual impact would be 1.7 million shares. So my estimate of four-tenth a share -- four tenth a cent per a dollar move really, you have to look -- you look out then on the annual earnings. So we -- if we have a averages 23.57 for the second quarter, third quarter and fourth quarter on the year-end earnings, that would dilute earnings about another 1.2 cents or four-tenth of $0.01 times 3.

Okay.

Hope that wasn't too long winded, but does that help?

It does. So it sounds like you are assuming the stocks are going to continue to go up throughout the year in your assumption. Because it just seems like you are going from 101 to roughly 104. So the delta is fairly high throughout the rest of the year and so I was just trying to back into that. And it just seems that the number was higher than I would have thought.

Yeah I think our original guidance is for the year was a $102 million shares on an average basis like a $102.2 million and I think now we have raised it to -- I am trying to recall what we -- 104, so that's basically the equity units, I mean, that really is what that is. And in our assumptions right now, we have modeled it where that -- because the price fluctuates we've just tried to use the flat 22.57.

Okay

And because if it -- let's say I hope this isn't the case. Today, lets say we closed the second quarter at call $1 down, well that would average out some of the impact of this price increase. But, of course, we are hoping it goes up and not down.

And me too.

Okay.

Yeah and then Chris do you have the specific numbers on the three buckets for the quarter?

I have got them in a percentage basis; I don't have the actual number with me but for the -- is that going to help on a percentage basis?

Yeah, and then I can get back with you.

Okay, on a percentage basis. It will be almost 85-90% marketing and storage.

Okay.

5% retail, 5% trading.

Okay. And then last question is given you are still generating a lot of excess cash flow, I guess there is two questions, one would you consider offsetting some of the dilution by buying back in some stock right now? And correlating to that also is how is the acquisition market looking for you?

Let me take that one Yves. I think where we are right now obviously we have factored in nor does our guidance reflect a stock repurchase and the history of this company has been one of grow through acquisition, and I would just answer it this way that I think our view would be that we would much to be adding to the asset base and growing that way than to affect the earnings as a result of stock repurchase. That's just a general view that we hold, I think the acquisition or the potential acquisitions out there, the pipeline is pretty strong. I think there are a number of deals that are being marketed currently and obviously we are going to take a look at many of those. So, I think, the short answer is that we will try to focus on using any excess cash towards growing the asset base.

Okay, thank you very much for all the answers.

You are welcome.

Our next question comes from Mike Heim of A.G. Edwards.

Thanks. One quick question just for modeling on the new swaps. Can you give us more of a detail, are these LIBOR attached stuff?

Yes Mike, this is Jim. I have -- I'll give you -- in total, we still have about $740 million of long-term debt swapped. The effective rate of that debt is 6.8% and the swap rate is right at 4.

Okay. Have you -- do you have any rough idea, have you done any calculations? What type of -- if the interest rates were to rise, what type of exposure that it is turning?

Well there is $740 million of debt that is swapped, so 1% increase would be, if we didn't lock the swaps about $7.4 million pre-tax.

Okay and then did I hear, Dave, in the beginning that you are still comfortable with the guidance, but that it's possible that the marketing might be below original forecast and processing above original forecast?

Mike I think that's an essence to some of what we're saying. You know the parts may move around a little bit in terms of the overall total. But we're still careful with the overall guidance.

Okay very good thanks.

Thank you.

Our next question comes from Kevin Gallagher of RBC Capital Markets.

Hey Good morning. Just on that same point, for marketing and trading can you give us a sense of what magnitude is that potential shortfall and how you generally see segment income broken out over the next three quarters with that you saying that Q4 will be stronger than Q2 and 3?

Chris?

Good morning Kevin. The shortfall within the three buckets if there is one will be in the trading bucket, if you want to call it that.

Okay.

Just due to the lower natural gas volatility in the option division. So within the shift of the three our marketing and storage segment will be up probably significantly -- when you look at, we left at the end of the quarter with over 33 Bcf of gas in the ground and as of today we have in excess of 44 Bcf of gas in the ground that [will call] below $5. And like -- we like our winter, summer position as we go into this fourth quarter and first quarter of next year. And with the additional capacity here of 7 Bcf of new storage we are comfortable that that segment is going to be up significantly. Our retailer is right in line with where we wanted to be. The well part is our trading segment.

Okay, call option?

Yes, the call option business, that's right.

That versus your 30-35 million assumption going forward you -- what are you looking at now, possibly?

I would probably look at somewhere in the $20 million range in the option side.

Okay.

But like I said, the increase will come from the -- we are doing significantly better than the 50 cent winter-summer spread that everybody assumes on my storage segment.

Right. And how are you generally looking at the quarterly breakdown for the segment? I mean yet -- you know, you got your guidance of a 182 million and how are you looking at falling out over the next three quarters?

In a percentage basis, the fourth quarter will be significant like the first quarter.

Okay.

And the middle two quarters will be what left. Just we pay all the demand dollars for those storage facilities over the second and third quarter, we don't typically receive a lot of revenue from those net segment in the second quarter and third quarter so.

Right. Okay. That's all. Thanks.

Thank you.

Our next question comes from Sven Del Pozzo of John S. Herold.

Hello.

Good morning.

Good morning. My questions are just about the gathering and processing. The increase in operating income attributed, primarily attributed to improved profitability, the key pull spreads and I was just looking at the prices in your press release and it seems like the NGL prices were flat according to this OPIS composite and averaging natural gas prices are cheaper by about 87 cents. So, I was wondering, I mean just the decrease in gas prices is sufficient to cause an increasing in profitability in key pull spreads, I mean I was wondering if these composites are really indicative of what you guys are doing?

The short answer is yes. If you look quarter-to-quarter, you basically have flat NGL prices as you pointed out. But you have following a lower natural gas prices, which results in a widened spread. So, of you look quarter-to-quarter, first quarter of last year, the spread was about 50 cents and for this quarter, this year is about a $1.30 and most of that is attributable to the fall in gas price, 5.22 versus 6.09. Now the other thing that really kicks in here is that we've been restructuring and renegotiating contracts, so as overtime we've moved more of our contract mix to percent of proceeds, what happens is that we benefit from $5.22 gas and 62 cent NGLs, so although on a relative basis to the prior period, gas prices are lower -- $5.22 gas is still a good gas price, 62 cent NGL per gallon is still a good NGL price, and we benefit from strong NGL and gas prices through our percent of proceeds contract. So you kind of have the benefit of both of those things occurring in the quarter.

Okay. Do you keep the producers hold with any gas from the E&P segment?

We do not.

Okay, last question -- my final question is are the key pulls current -- in the current market environment, are they as profitable as they were more or less in average for the first quarter?

In the current market they are about the same.

Okay thank you.

Thank you.

Once again, ladies and gentlemen, if you have a question or comment at this time, please press the "1" key on your touchtone telephone. Our next question comes from Craig Shere of Standard & Poor.

Hi, I've just got two questions. The first you may have already alluded to the answer, but it seems like that free cash flow is a major factor in investments opportunity at ONEOK, I want to ask it anyhow. It is possible to explain, but I guess on the ground, but some comment -- the operating cash flow pertains from working capital year-over-year seems down and CAPEX increased and, normally one would think that gathering and processing and production, which did more would have more cash flow than the flexible trading and marketing. But can you just comment on that and what you see as far as actual free cash flow, trends going forward? And the second question is in your annual report you mentioned that you see a multiple discount that's excessive versus pears and that you expected this change overtime as opposed to consistent earnings and cash flow growth. In light of that statement, which I agree with, why would you not be considering buying back some shares with your cash flow?

Jim.

Yeah Craig this is Jim. Let me try to answer both of those. First, on the cash flow from operations before changes in working capital, it is down a little bit this quarter, which we had anticipated because earnings were down, primarily because earnings were down as compared to last year. So on an annual basis, I think, in our guidance we had indicated that we expect cash flow to exceed dividends and CAPEX by about a $155 million. That's about $50 million less than last year and there are two things that work there -- the dividends are about $10 million higher and we estimate dividend payments in '04 versus '03. And the other thing is the CAPEX that you mentioned are a little bit -- primarily although there are about $60 million over last year, a portion of that comes from our production business where we made the acquisition, so the cash flows are also up, so those sort of offset.

In the G&P segment, capital spending is about $25 million over last year that includes about $10 million for some pipeline integrity cost that should not be recurring on a go-forward and it includes about $15 million for a pipeline project that we are considering that we just haven't given any details on that yet. And then we are spending about $10 million this year as we put all of our three distribution entities on a common customer platform, which again we would repeat next year. So, the second question that I think David address and why we wouldn't consider a stock buy-back, I think, as David indicated, we would much rather grow the Company and grow earnings and to buy equity back and just create the vision that earnings were growing. But I think as important is our credit rating, and as we look forward and move forward, having been an acquisitive company and continuing to being an acquisitive company, we will make additional acquisitions. And if we were to buy back a substantial amount of equity, it would put our credit rating in jeopardy and that has been one of our keys to implementing this strategy as successfully as we have.

Two quick follow ups. On the question of share buyback, do you at least consider the expected return on investment of potentially new opportunities, CAPEX, acquisition, versus the value of your shares? And the second question follow-up, so to sum up is it fair to say that relative to other companies, your trading and marketing settles much more in cash immediately and so a decline in earnings there can be seen to offset -- in terms of earnings can be seen to offset more basic operating businesses like gathering and processing and production?

I think the shorter answer to that last question is yes. And I'll ask Chris to elaborate on you know the cash portion of his business at least as what we're seeing for the first quarter. One of the -- going back to your first question one of the measures that each of us have within this organization in terms of performance in addition to earnings is return on invested capital. And so clearly as we look at investment alternatives, where we might place this free cash, that's one of the factors that goes into that analysis. We believe and we strongly believe that, that is a very affective way to measure performance and consistent with overall long-term shareholder value. Now we'll say that the ROIC calculation at least here include short-term debt. So, that you know any financing that might be done on an acquisition using short-term debt would also go in to that calculation. So that's part of the analysis that we look at when we look at a potential acquisitions. We also in addition look at earnings accretion and have focused on accretive transactions and if it is not going to be accretive very soon then its the transaction we're not likely going to do. Chris you want to talk about your cash business.

Yes David, Craig, for the first quarter, [inaudible] marketing and trading had $96.8 million in cash earnings and yet we still had over a $160 million of gas and inventory. So we're managing this business from a cash perspective like you said. Last year -- to give you a comparison last year first quarter, we only had -- even though we had a much bigger quarter, we only had 60 -- $76 million in cash earnings for the first quarter last year on 137.5 total earnings. This year we had 96.8 million in cash earnings and reporting only 60 -- 63 million from operations. So, as David said, I mean that the cash is important to us and it's in all our incentive is to make sure we stay focused on that side of the business.

Great, thank you.

Thank you.

Our next question comes from Devin Geoghegan from Zimmer Lucas.

Hi, I just wanted to follow-up on the [charges made at the] accounting for the remaining to convert, is that you know - I haven't seen somebody do that before, and may be because I haven't paid attention but is that an optional meaning of you can choose how to account or does that predetermined by the security?

Devin this is Jim. It is required by the Financial Accounting Standards Board.

Okay -- okay then that's -- that make sense. Thank you very much.

Thank you Devin.

Our next question is a follow-up question from Kathleen Vuchetich with WH Reeves.

David, I just wanted to -- I forgot to ask you when I talked to you earlier. Can you tell me, you've done a wonderful job increasing the dividend both this year and last; at what point in time do you think you are going to get into more of -- a standard practice or an annual increase or how do you look at the periodic dividend increases versus a more standardized timings looking at dividend?

I think probably the best way to answer that Kathleen is to sort of describe the process that we go through and you know at the Board level and determining what to do with the dividend each quarter and part of that analysis is a segment by segment review of sort of a peer type component make up and we look at the sources of income, we look at the sustainability obviously and part of the increase that we did in this last quarter, was to reflect our belief that the sustainability of our earnings is there and that we need to reflect that view with the strong dividend increase. I will tell you that we also compare the weighted view against the weighted peer. And we certainly don't want to be lagging peer but same time we want to make sure that we are representative of our peer group. If you look at in oil payout relative to our peer, we still are somewhat behind. But I think, as we move forward with these increases, that we've done and what we will be looking at going forward. We are going to make up that ground. Now I would say on the other side that we talked earlier on one of the questions about the PE, I think we are trading at a significant discount to our peers in terms of the PE and I think there are lot of reasons for that. Historically, we cleaned up the number of those and what we need to demonstrate is this business is a solid business and I think we close the gap on that PE multiple.

Thanks so much.

Thank you.

Our next question comes from Yves Siegel with Wachovia Securities.

David, if I could just follow up with one question on the acquisition front. Could you again just, sort of, prioritize what type of assets you would like if you had your wish list? And may be -- that's one question. And a slightly different tint would be, that's your wish list, but what's the most likely asset that might be acquired?

I think that the way we look at it is, is that we would much prefer to add to our pipe businesses, that's our core competency, it's around the natural gas business. So both transmission type -- transmission stores type assets and distribution type assets would be those that we would cover. I don't see it's adding much to our G&P segment. We might look at the NGL side of that business, in terms of NGL transport and those sorts of things, NGL storage, but I don't see it adding much in terms of G&P type assets, other then those. Clearly the easier type assets to, to in terms of just pure deal flow are producing type asset, but I am, at this point, fairly pleased with where we are in terms of that segment size. But as we grow the overall organization longer term, that's an area that we might look at some growth, but generally the short answer is that transmission, storage type assets and distribution type assets.

I am assuming that you can digest a pretty large one at this juncture in time.

We believe that we can, obviously we will look at the effects of large transaction on the balance sheet and how that may affect our credit but -- because we have cleaned up the situation with respect to Westar, we are much more able today to do those kinds of transactions.

That's great. Thank you.

Thank you.

Ladies and gentlemen this concludes our question and answer session, I would now like to turn the conference back over to Mr. Weldon Watson.

This concludes ONEOK's first quarter conference call. As a reminder, our applied period for first quarter of 2004 will start when we close our books in early July and will extend until earnings are released. We will provide a reporting date and conference call information later. This is Weldon Watson, and I'll be available throughout the day for follow-up questions. You may call me at 918-588-7158. On behalf of ONEOK thank you for joining us and good day.