歐尼克 (OKE) 2012 Q3 法說會逐字稿

Good day and welcome to the ONEOK and ONEOK Partners 2012 third-quarter earnings call. Today's conference is being recorded. At this time I'd like to turn the conference over to Mr. Andrew Ziola. Please go ahead, sir.

Thank you and good morning, everyone. A reminder that statements made during this call that might include ONEOK or ONEOK Partners' expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor provision of the Securities Acts of 1933 and 1934. Actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings.

Our first speaker is John Gibson, Chairman and CEO of ONEOK and ONEOK Partners. John?

Thank you, Andrew, and congratulations on your new role. I don't believe I've ever heard that statement read as well as it was just read.

Good morning, and many thanks to all of you for joining us today. We hope this call finds all of our friends and their families who have been affected by the hurricane safe and sound. As always, we appreciate your continued interest and investment in ONEOK and ONEOK Partners. Joining me today are Rob Martinovich, our Chief Financial Officer, who will review our quarterly financial performance; Pierce Norton, our Chief Operating Officer who will review our operating performance and update you on the partnership's growth projects which are on time and on budget; and Terry Spencer, our President, who will discuss our NGL supply and demand outlook.

On this morning's call, we will review our third-quarter results, discuss our affirmation of our 2012 earnings guidance and update our progress with our growth projects, including the projects we have recently completed and an update on the Bakken Crude Express Pipeline.

So, let's start with our third-quarter performance. ONEOK Partners turned in a solid performance, driven by strong volume growth in the Natural Gas Liquids and Natural Gas Gathering and Processing businesses. The partnership's volume growth is driven by our past capital investments and we expect continued volume growth as a result of our current capital projects. Our Natural Gas Distribution segment turned in slightly lower results and our Energy Services segment reported a loss due to the continuing challenges it faces in a low natural gas price environment. Pierce will provide more detail on each segment's operating performance in just a few minutes.

Yesterday, we affirmed our 2012 earnings guidance ranges, reflecting our confidence in both the Natural Gas Liquids and the Natural Gas Gathering and Processing businesses of the partnership. However, we do expect to be in the lower half of the ONEOK net income guidance range due to the difficult market conditions our Energy Services segment continues to experience. As Rob will discuss in a few minutes, we remain confident in our ability to grow both ONEOK's dividends and ONEOK Partners' distributions over the next several years, even in a lower commodity price environment. The main driver of these increases will be volume growth at ONEOK Partners as a result of our announced capital investments.

At this time, Rob will now review of ONEOK's financial highlights, and then Pierce will review ONEOK's operating performance. Rob?

Thanks, John, and good morning everyone. ONEOK's third-quarter net income was $65.2 million or $0.31 per diluted share compared with $60.3 million or $0.28 per diluted share for the same period last year, driven primarily by the solid performance at ONEOK Partners from growth in natural gas and Natural Gas Liquids volumes. This was offset partially by lower realized natural gas and NGL product prices, lower NGL optimization margins and continued challenges in the Energy Services segment.

In September, ONEOK completed its $150 million accelerated share repurchase agreement funded by cash on hand and short-term borrowings, part of a Board approved $750 million share repurchase program through 2013 of which $300 million remains. Based on the repurchase of shares, we expect the average amount of diluted shares outstanding for 2012 to be approximately $211 million. ONEOK's year-to-date 2012 stand-alone cash flow before changes in working capital exceeded capital expenditures and dividend payments by $87 million. We expect our stand-alone cash flow before changes in working capital in excess of capital expenditures and dividend payments for 2012 to be at the low end of the $115 million to $145 million range. In October, we declared a dividend of $0.33 per share unchanged from the previous quarter.

As John mentioned, our 2012 net income guidance is now expected to be in the lower half of the $345 million to $375 million range due to continued difficult market conditions for our Energy Services segment. At the end of the third quarter, on a stand-alone basis, we had $677 million of commercial paper outstanding, $15 million of cash and cash equivalents, with $521 million available under our $1.2 billion credit facility and our stand-alone total debt-to-capitalization ratio was 54%.

ONEOK's cash flow and liquidity position continue to give us financial flexibility to increase our dividend, repurchase ONEOK stock and/or purchase additional units of ONEOK Partners. We have used all of these options and don't view them as mutually exclusive and are fortunate to have the financial capability to do one or more under favorable conditions.

Now, Pierce will update you on ONEOK's operating performance.

Thanks, Rob, and good morning everyone. Let's start with our Natural Gas Distribution segment. Third quarter 2012 earnings came in slightly lower than expected. Net margins benefited from higher rates, but higher share-based compensation costs more than offset those increases.

A brief regulatory update -- last week, Kansas Gas Service reached a settlement with the Kansas Corporation Commission staff in the Citizens Utility Ratepayer board which, if approved by the Kansas Corporation Commission, would result in a $28 million increase in base rates and an $18 million reduction in amounts currently recovered through surcharges, effectively increasing its annual revenues by a net amount of $10 million. The Kansas Corporation Commission is expected to make a final ruling by January 2013.

Energy Services' third quarter 2012 earnings were lower than expected as the segment continues to be challenged by narrow seasonal and location natural gas price differentials. Transportation margins were down, primarily due to lower hedge settlements in 2012 and the premium service margins were down due to lower demand fees. We continue to realign Energy Services' leased transportation and storage capacity to serve our premium service customers which means we are not renewing certain transportation and storage leases.

John, that concludes my remarks for ONEOK.

Thank you Pierce. Now, Rob will review ONEOK Partners' financial performance, and then Pierce will review the partnership's operating performance as well as the growth projects.

Thanks, John. In the third quarter, ONEOK Partners' net income increased 11% compared with the third quarter of 2011 due primarily to volume growth in the Natural Gas Gathering and processing and Natural Gas Liquids segments. ONEOK Partners reported net income of $232.3 million, or $0.78 per unit compared with last year's third-quarter net income of $209.7 million or $0.84 per unit.

There were 219.8 million units outstanding for the third quarter this year compared with 203.8 million units outstanding for the same period in 2011. The equity offering and private placement in March 2012 included the issuance of 16 million additional units. Quarterly distributable cash flow increased 12% compared with the third quarter last year resulting in a coverage ratio of 1.34 times. We increased the distribution $0.025 per unit for the third quarter, an increase of 4% and, subject to Board approval, expect to increase it another $0.025 per unit for the fourth quarter of 2012. At our recent investor day, we announced that we expect to increase declared distributions $0.02 per unit per quarter for 2013 subject to Board approval.

We have affirmed the Partnership's 2012 guidance ranges of net income of $860 million to $910 million and distributable cash flow of $975 million to $1.025 billion.

In September, ONEOK Partners completed a $1.3 billion public offering of senior notes consisting of $400 million of five-year senior notes at 2% and $900 million of 10-year senior notes at 3.375%. Interest expense for the third quarter was $47.8 million compared with $55.7 million in the same period last year. This decrease was primarily driven by higher capitalized interest related to the partnership's capital expenditures associated with our $5.7 billion to $6.6 billion growth program. The amounts of interest expense capitalized are now noted on the income statement.

We hedged the commodities we received for our services to lock in margins on our expected equity volumes in the natural gas gathering and processing segment. For the rest of 2012, 77% of our natural gas volumes are hedged while 71% of our NGLs are hedged. Hedging information for 2013 and 2014 is included in the news release.

At the end of the third quarter, the partnership had $964 million in cash and cash equivalents, no commercial paper or borrowings outstanding, a debt to capitalization ratio of 52% and a debt to adjusted EBITDA ratio of 2.9 times.

Now, Pierce will review the partnership's operating performance.

Thank you Rob. As John said, the partnership continued to perform well in the third quarter. Operating income was up due primarily to higher natural gas volumes gathered and processed in the natural gas gathering and processing segment, offset partially by lower realized natural gas and Natural Gas Liquids product prices, particularly ethane and propane. The natural gas liquids segment benefited from higher NGL volumes gathered and fractionated, offset partially by decreased optimization and marketing margins.

The Natural Gas Gathering and Processing segment's third-quarter financial results were higher due primarily to volume growth driven by increased drilling activity in our Williston Basin assets. Lower realized natural gas and NGL product prices on our unhedged portions of these commodities and higher compression and processing costs associated with the volume growth partially offset these increases. The Garden Creek plant continues to operate at its capacity of 100 million cubic feet per day. Our 100 million cubic feet per day Stateline I natural gas processing plant in the Williston Basin was started in September and we expect this plant to be at capacity by early next year.

For the year, we expect process volumes to be up 25% compared with 2011 and gathered volumes to be up 12% compared with 2011. Lower NGL prices did result in periods of ethane rejection in the Mid-Continent, but did not have a material impact on this segment's results.

We've continued on a record-setting pace for new well connections and expect to connect more than 900 wells this year. During the third quarter, we connected approximately 280 wells to our system compared with approximately 180 in the same period last year. This brings our year-to-date total 2012 to approximately 710 compared with approximately 420 in the same period last year.

As of mid-October, rig count in North Dakota was at 186, a 15% reduction compared with an all-time high of 218 during May 2012. The largest factor driving this decrease is producers achieving significant increases in drilling efficiencies. Through a combination of newer, more efficient rigs and producers moving from single well sites to multi-pad drilling, spud-to-spud dates have decreased to 25 days or less from a historical average of 30 to 35 days, a 25% efficiency improvement allowing producers to drill more wells with fewer rigs.

The Natural Gas Pipeline segment third quarter financial results were relatively unchanged due primarily to higher contracted capacity of with gas producers on our intrastate pipelines, offset by higher outside service costs associated with maintenance projects and higher employee-related costs.

Equity earnings from Northern Border Pipeline were slightly lower. Northern Border is substantially contracted on its long-haul capacity through March 2014. Results of re-contracted long-haul capacity have terms of three years or longer now 74% sold through the end of 2014. In September 2012, Northern Border filed with the FERC a settlement with its customers to modify its transportation rates beginning in January 2013. This settlement is expected to be approved by the FERC before the end of the year. If approved, the long-term transportation rates will be approximately 11% lower than current rates. These lower rates were included in our recently announced 2013 financial guidance.

Our Natural Gas Liquids segment benefited from higher NGL volumes gathered and fractionated and higher isomerization margins resulting from wide price differentials between normal butane and isobutane and higher isomerization volumes. As expected, we experienced lower optimization and marketing margins from narrow NGL price differentials and lower NGL transportation capacity available for optimization activities as more transportation capacity between the Conway and Mont Belvieu NGL market centers is contracted to produce fee-based earnings. The partnership also realized margins in the third quarter from the sale of NGL inventory held at the end of the second quarter of 2012 associated with the scheduled maintenance of the Mont Belvieu NGL fractionation facility MB-1 which returned to full capacity in late September. NGLs transported on our gathering lines were up 20% averaging 530,000 barrels per day during the quarter as a result of increased production through existing supply connections and new supply connections in the Mid-Continent and the Rocky Mountain regions.

For the year, we expect NGL gathering volumes to be up 22% over last year and fractionation volumes to be up 11% compared with last year. For the fourth quarter 2012, we are assuming a $0.10 per gallon Conway to Mont Belvieu average ethane price differential in the ethane-propane mix. A reminder, the ethane price differential is only one part of the optimization picture. Our integrated NGL assets and day-to-day business strategies provide us with opportunities to generate incremental margins with other NGL products.

Now, an update on our projects. First, all of our previously announced internal growth projects are on budget and on schedule. As I previously mentioned, the Stateline I natural gas processing plant started in late September. Additionally the 60,000 barrels per day expansion of our fractionator in Bushton, Kansas was also completed in September, ahead of schedule. Several other projects are approaching completion, including the 60,000 barrel per day Bakken NGL pipeline and the Stateline II natural gas processing plant, both expected to be in service in the first quarter of 2013.

We are currently conducting an open season process on our or 1300-mile Bakken Crude Oil Express line. We expect the process to conclude November 20. We continue to see interest in the pipeline and expect to announce the results after the Thanksgiving holiday.

Finally, we continue to develop and evaluate our backlog of natural gas and NGL-related infrastructure projects that still total more than $2 billion. It includes investments in processing plants, natural gas pipelines and NGL fractionation and storage facilities. As we have done in the past, we will announce the projects when we have significant producer and/or customer commitments to make them economically viable.

John, that concludes my remarks.

Thank you Pierce. Now, Terry will give us an update on our view of the current and the long-term NGL market.

Thanks, John, and good morning everyone. Today, I will provide a brief outlook of the NGL markets.

Over the past several months, NGL prices have somewhat stabilized, primarily as a result of increasing demand as numerous petrochemical facilities returned to service after being down earlier in the year for major scheduled and unscheduled maintenance. Production growth from shale drilling continues in NGL-rich supply areas with some limited ethane rejection occurring primarily in the Rockies, the Mid-Continent and Midwest due mainly to weak ethane prices at the Conway market center. US Gulf Coast NGL inventory levels, especially for ethane and propane are decreasing as consumers, particularly the petrochemical manufacturers and international markets continue to exhibit strong demand to take advantage of the attractive low price environment.

With the major plant outages behind them, the petchems are consuming the excess ethane inventory and we expect this drawdown to continue throughout the remainder of this year and into 2013. The petchems are operating at high utilization rates with ethane as their primary feedstock and we see no signs of that slowing down.

Ethane continues to be the preferred petrochemical feedstock versus oil-based feeds due to ethane's price advantage driven by the low ethane-to-crude-oil price ratio which is now below 15%. While we expect ethane pricing to remain volatile, we do expect ethane prices to increase moderately in the near term. While we also expect NGL prices to improve relative to crude, we do not expect them to reach their historical price relationships. Higher propane inventories are flattening out from the buildup from last year's mild winter. With the reduced price relative to crude oil-based feeds, we have seen some petchems crack more propane compared with previous years. We expect the propane surplus to decline as additional export capacity is developed over the next 12 to 24 months due to the continued pricing incentive for international propane buyers to purchase US Gulf Coast propane. This new propane export capacity provides new markets for our industry, which is a good thing.

A more normal winter and continued international demand should reduce propane inventories and strengthen pricing. Like ethane, we expect propane prices to improve but certainly not back to their historical pricing relationship to crude. We expect NGL fractionation capacity to remain in short supply but gradually increase as new fractionators, including our own, are completed over the next few years. Fractionation capacity, especially in the Gulf Coast, remains at a premium as growing unfractionated NGL supplies from the prolific shale developments continue to seek the premium price to Gulf Coast NGL markets. Accordingly, new NGL pipeline capacity between Conway and Mont Belvieu is being built to accommodate NGL growth from the shale plays.

In recent weeks, we have seen Conway to Mont Belvieu ethane price differentials narrow to as low as $0.06 per gallon. Much of this narrowing is due to some continued to petrochemical maintenance outages, the continued but declining Gulf Coast ethane inventory overhang and Mid-Continent buying interest due to ethane rejection.

For the remainder of the year, we expect Conway to Mont Belvieu ethane price differentials to be approximately $0.10 per gallon. As the petchems return to near full capacity and ethane inventories continue to get worked off, we expect the Conway to Mont Belvieu ethane price differentials to average approximately $0.19 per gallon during 2013. As we communicated at our recent investor day, our three-year forecast assumes the Conway to Mont Belvieu ethane price differential will narrow the cost to build range of approximately $0.10 per gallon in 2014 and 2015.

In spite of the volatile and challenging commodity markets we continue to focus on helping our supply and market connected customers deliver the products to where they need to be. The growth projects we announced in July, the new MB-3 fractionator and E/P Splitter in Mont Belvieu and the expansion of the Bakken NGL pipeline allow us to continue to provide reliable services to our customers through our integrated NGL asset base.

As NGL growth continues at a rapid pace, we expect the ethane markets to be periodically over and undersupplied through 2013 and then trend more to an oversupplied states through 2015. And, as we move through the 2015 to 2017 time frame, we anticipate an undersupplied position as demand increases from the completion of expansions and new world-class petrochemical facilities. Certainly, given the attractive outlook for NGL supplies, the petrochemical industry continues to find ways to consume excess ethane by maximizing their ethane cracking capability. John, that concludes my remarks.

Thank you Terry. Before we take your questions, most importantly I'd like to express my thanks to our more than 4800 employees whose dedication and commitment results in our ability to operate our assets safely, reliably, and environmentally responsibly every day and create exceptional value for our investors and customers. Our entire management team appreciates their efforts to make our Company successful. So, at this time we are now ready to take questions.

(Operator instructions). Mark Reichman, Simmons.

I wanted to ask about, when the Bakken NGL pipeline gets completed and the gas processing plants in the Williston Basin start recovering more ethane, there was a comment in the release about the composition of the NGL barrel changing and I was wondering if you could just maybe elaborate on that, kind of where it's been and where you expect that to go over the course of the next year?

Okay, Pierce, do you want to handle that?

Yes. Mark, what that's alluding to is we do not recover ethane in the Williston Basin currently. So we do anticipate if pricing warrants doing so that those ethane molecules would actually be recovered in the future. So right now, it's a little heavier barrel in the Bakken, and as it goes forward in the future, as you recover ethane, the barrel gets a little bit lighter. So that's what that was alluding to.

Yes but I mean, could you kind of put some numbers around there, I mean in terms of what percent you would expect, you know, to be ethane?

Well, it's about -- in the neighborhood of what, Terry, 30%, 40%? Something like that?

Pushing 50 is (multiple speakers).

So it would just be a normal barrel? Okay.

Up from about 32% roughly currently to about 50%.

Okay. Great. And then also, you finished the quarter with a lot of cash on your balance sheet. I know you've got some spending to do in the fourth quarter and I think roughly capital expenditures were expected to be about $2.5 billion in 2013. I was just wondering if you could maybe talk a little bit about the spending -- the spend each quarter and kind of how you plan to -- how you think about the financing over the course of the next year.

Okay, Rob?

Sure Mark. With -- we're certainly going to be supportive and timely for the capital spend that Pierce and Terry have laid out for us with the projects, and this was our opportunity to get some of the debt to balance off the equity we had earlier this year. And so we historically have not certainly signaled when we are going to come to market, but the dollars that you had mentioned, I mean, we expect to be timely on that as we go forward next year and into 2014, both on a -- both with equity and debt.

Okay. Then the last question, the Natural Gas Pipeline segment, you know, that came in pretty much in line with my expectations, but the expenses were up a little bit. I think that it was the higher maintenance costs. And I was just wondering, are those -- I think the revenues increased about 2%. Expenses went up to about 7%. Do you think those will start to abate in the fourth quarter? Or you know, what is your expectation on costs in that segment?

Mark, that was a timing issue. So yes, we would expect those to abate in the fourth quarter.

Okay great. Thank you very much.

Carl Kirst, BMO Capital Markets.

Thanks. Good morning, everybody. A couple of questions, one at OKE and one at OKS. Just on the OKE level and just to kind of get a better flavor on the Energy Services, and I'm just wondering, with respect to as we sit here about to enter November, I think there was guidance previously given for the year talking about maybe a $60 million negative hit with the goodwill impairment. And with the third-quarter results, do you -- has that deteriorated a little bit such that the performance at OKS is basically offsetting, or do you still see that $60 million kind of as being the right number, and thus we'll see a sequential improvement into the fourth quarter? Just trying to get a better sense of color on that if at all possible.

Carl, this is Pierce. We do expect that there could be some deterioration there from the $60 million. It's going to primarily be driven by that -- the winter or summer spread being a little bit less than what we thought it was originally. But I think you characterized it correctly is that we do expect that the OKS to primarily offset any kind of negative impact of those spreads for the rest of the year.

Okay. And I guess, just given the fact that we really haven't gotten into winter yet, there is nothing really at this point to read through, for instance, the potential of 2013 at this point?

No. That's correct.

Okay. And then, one question on OKS -- the $2 billion backlog, and you guys have given color on that, so appreciate that. And not to throw additional things on your plate, but of course there was the private letter ruling that came out from the IRS on petchems and the like. My question is not so much, are you going to go out and buy a and ethylene facility, but I did note that they specifically said that olefin pipeline storage, other logistics assets would qualify for an MLP. And just given how much you guys do touch that market, I didn't know if that section is something that is being contemplated or not.

Well, we've looked at opportunities like that, and we will continue to do so. The ruling of course influences where the assets would be owned, i.e. at ONEOK or at ONEOK Partners over the long term, but our primary focus is to make sure that we acquire assets or build assets that make sense. So, looking downstream would be a natural extension.

Great, appreciate the clarification. Thanks guys.

John Edwards, Credit Suisse.

Yes good morning everybody. I just noticed you had reaffirmed 2012 guidance. Just any thoughts on 2013? Obviously the analyst day was very recent. Any updates or thoughts on that?

No updates and no changes from the analyst day, from that information that we have out there right now. We're good with it.

Okay great, thanks. That's all I had.

Christine Cho, Barclays.

During the quarter, you saw some higher fees from contractor negotiations for the NGL exchange services activities. Can you tell us what the average contract life for this is and how much higher these commitments are being re-contracted for? And do these things happen at the same time every year, or are they kind of ongoing?

Christine, we really -- it's kind of obvious for competitive reasons, we really don't want to disclose those percentages or what they are contracted for or, frankly, the terms, so sorry I can't answer that.

And then, just your hedging price and percentage hedged was relatively the same for this quarter as it was last quarter, but NGL prices for Mont Belvieu and Conway were -- should've been down for the from the second quarter, yet your composite price went up from $1.01 to $1.10. Can you guys talk about what's driving that?

That's really more of your -- you know the hedges that are put in place. That's our net realized hedge. And so based on what we realize versus what it was hedged, that's what drove it from the $1.09 to the $1.10.

Okay, and then, lastly, in your analyst day presentation, you gave a $0.71 gallon estimate for unhedged NGL volumes in the second half of 2012 and $0.76 in 2013 which, if I understand correctly, reflects what you expect to realize proportionally at Mont Belvieu and Conway. Do you have a comparable number for what you've realized for the quarter or year to date for just the unhedged portion?

I actually do not have that right here in front of me but we could follow up and get that through Dan.

Okay great. That's it for me.

Bernie Colson, Global Hunter.

You alluded to some other NGL opportunities when you were talking about the Conway/Mont Belvieu ethane spread. I was hoping you could elaborate a little bit on what you were thinking there.

Well, refresh my memory as to what --?

I'm sorry. I thought in the comments that when you talked about the Conway/Mont Belvieu spread declining somewhat that there was some discussion of there potentially being some other optimization activities that are available to you utilizing maybe different parts of the barrel or infrastructure, and just hoping that you could give some elaboration.

Okay, the light bulbs went off, so we'll try to answer your question now.

What we were talking about there is there is different spreads between Mont Belvieu and Conway on each of the products, whether or not that be ethane, propane, isobutane, normal butane. And with the flexibility of our system, having the ability to take raw feed south or purity products both north and south, it gives us the ability to take advantage of those and to capture those opportunities as those spread increases. So what we've seen is that actually as though ethane has actually decreased in its spread, we've actually seen increases in some of those propane spreads over the years. So that's really what we're talking about.

Okay. So mainly on the propane -- focus on propane.

That's correct. Mainly on propane, although the isomerization spread there to normal has been very strong as well.

Okay, and then lastly for me there, on the press release, it looks like the condensate volumes were down quite a bit sequentially. And I don't know if you addressed that. I'm sorry if you did, but if not, I'm just wondering what's driving that.

No, I think that's -- what happens as you go through the summer, you actually -- when you get a really heavy barrel primarily in the Williston Basin -- this is getting a little technical -- but the ground heats up and actually flashes some of that off, so more of it goes into gas form. So it's kind of normal for the condensate volumes to fall off during the summer periods.

Okay, all right, thank you.

James Jampel, HITE.

Thanks for taking my call. How might the Thanksgiving announcement regarding the Bakken Crude Express influence your near-term need to access the capital markets?

I don't believe it has any influence.

So, would it not significantly increase your capital needs, and therefore make it more likely that you would need additional external financing if you were to go forward?

I thought your question to me was -- the announcement in November, would it change our thought process or the things we would do going forward? And it won't. Obviously, what you what you say is correct, but I don't anticipate us to take any additional or different actions than those we currently contemplate.

So should we then take away from that that you have adequate financing in place, whether or not you go forward with the Bakken Crude Express?

That would be -- that's what we have said. And as Rob alluded to, we will continue to look for opportunities to either issue equity or debt as our financing plans dictate relative to opportunities.

Okay thank you.

Craig Shere, Tuohy Brothers.

Just standing in for Craig, thanks for taking our call. One question he had was basis differentials have narrowed a little bit in the Bakken. And with the Express Pipeline currently in open season, wondering if those narrowing of differentials have impacted at all, or do you expect they may impact the process that's currently underway for the marketing of that?

That's the reason we go through the process. What you're weighing is the person that's going to -- the shipper that's going to submit their response to the open season will look at that over a longer term than what the current spread is. So we can't -- spread today is no indication of what the spread will be five years from now. So, the individual shippers have to go through and come up with their own view of what they feel that market value is for that transport.

Fair enough. That's very helpful. Thank you.

And we have no further questions at this time. I'd like to turn the conference back over to Mr. Ziola for additional or closing remarks.

Thank you for joining us, everybody. This concludes our call. Our quiet period for the fourth quarter starts when we close our books in early January and extends until earnings are released after the market closes on February 25, followed by our conference call on February 26, 2013. We'll certainly provide details on the conference call at a later date. I will be available throughout the day to answer your follow-up questions. Thank you for joining us and Happy Halloween.

This concludes today's presentation. Thanks for joining and have a nice day.