歐尼克 (OKE) 2013 Q4 法說會逐字稿

Good day everyone, and welcome to the ONEOK and ONEOK Partners fourth-quarter 2013 earnings call. Today's conference is being recorded.

At this time it is my pleasure to turn the conference over to T.D. Eureste. Please go ahead.

Thank you, and welcome to ONEOK and ONEOK Partners fourth-quarter and year-end 2013 earnings conference call. A reminder that statements made during this call might include ONEOK or ONEOK Partners expectations or predictions should be considered forward-looking statements and are covered by the Safe Harbor provisions of the Securities Act 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.

We're starting our earnings conference call with Terry Spencer, President and CEO of ONEOK and ONEOK Partners. Terry?

Thanks T.D. Good morning and thanks for joining us today. As always we appreciate your continued interest and investment in ONEOK and ONEOK Partners.

Joining me on the conference call today is Derek Reiners, our Chief Financial Officer, who will review our financial results. Also with me and available to answer your questions are Rob Martinovich, our Executive Vice President of Commercial; Sheridan Swords, our Senior Vice President of Natural Gas Liquids; and Wes Christensen, our Senior Vice President of Operations.

On this morning's call we will review our fourth-quarter and year-end 2013 financial and operating results, bring you up-to-date on our current capital growth projects and review the NGL markets. We will discuss my areas of focus as CEO and what is important to me and we will answer your questions.

Let's start with our fourth-quarter performance. ONEOK's fourth-quarter performance was driven by continued volume growth in ONEOK Partners with increases in natural gas gathered and processed and natural gas liquids gathered as a result of the capital growth projects we completed offset by higher operating costs and one-time costs associated with the separation of our natural gas distribution business into ONE Gas. ONEOK Partners' fourth-quarter 2013 results were up as a result of the volume growth I just mentioned.

Derek will now review ONEOK's and ONEOK Partners' financial highlights and then I will review our operating performance. Derek?

Thanks Terry. ONEOK's fourth-quarter net income was approximately $91 million or $0.43 per diluted share including $22 million or $0.11 per diluted share of non-cash charges related to the wind down of the energy services segment and costs related to the separation of ONEOK's natural gas distribution business into ONE Gas. In the fourth quarter 2013 energy services recorded a $5 million after-tax non-cash charge as we continued to release capacity contracts to wind down the business and paid approximately $12 million related to previously released transportation and storage obligations.

Also in the quarter ONEOK incurred non-cash after-tax charge of approximately $10 million or $0.05 per diluted share and expenses of approximately $7 million after-tax or $0.03 per diluted share, both one-time items related to the separation. Excluding these one-time costs ONEOK's fourth quarter of 2013 net income would have been approximately $113 million or $0.54 per diluted share.

ONEOK's 2013 net income was approximately $267 million or $1.27 per diluted share. These results include non-cash after-tax charges of $87 million or $0.42 per diluted share associated with the energy services segment wind down and the previously mentioned non-cash after-tax charge of approximately $10 million or $0.05 per diluted share and after-tax expenses of approximately $9 million or $0.04 per diluted share both related to the ONE Gas separation.

The energy services charges for the year were $139 million on a pretax basis. And its cash payments related to the released contracts were approximately $18 million.

We expect future cash payments associated with the released transportation and storage capacity from the wind down to be approximately $80 million on an after-tax basis through 2023. 2014 cash payments are expected be approximately $33 million on an after-tax basis which is included in our 2014 financial guidance.

In 2013 ONEOK received $536 million in distributions from ONEOK Partners, a 23% increase over 2012. In connection with the ONE Gas separation, ONEOK received approximately $1.13 billion from ONE Gas in January of 2014 and used the proceeds to repay approximately $600 million of commercial paper borrowings, $150 million of senior notes through an early tender offer and exercised a make whole call on $400 million of senior notes that we expect to repay in March 2014.

Additionally we reduced ONEOK's credit facility to $300 million from $1.2 billion and terminated its commercial paper program. The future cash distributions received from ONEOK Partners are expected to be the principal source of cash for ONEOK to fund quarterly cash dividend.

We are firmly within 2014 guidance and expect cash flow available for dividends to be in the range of $560 million to $640 million reflecting growth and cash distributions received from our general partner and limited partner interest in ONEOK Partners. Please refer to our earnings release and investor day materials for more information on our 2014 guidance.

Now let's move on to ONEOK Partners. ONEOK Partners' fourth-quarter net income was $228 million or $0.67 per unit. And full-year 2013 net income was $804 million or $2.35 per unit.

In the fourth quarter distributable cash flow was $245 million resulting in coverage ratio of 1.02 times for the quarter and nearly $950 million for the year resulting in a 1.03 times coverage ratio. We increased the distribution by $0.05 per unit to $0.73 for the fourth quarter of 2013, an increase of 3% from the fourth quarter of 2012.

In the earnings news release we've provided some updates on our hedges as we continue to hedge commodity risk when appropriate. At the end of the fourth quarter the partnership had $135 million in cash and cash equivalents, no commercial paper or borrowings on our credit facility outstanding, long-term debt capitalization ratio of 55% and a debt to an adjusted EBITDA ratio of 4.0 times.

As a result of the debt and equity financing we completed in the second half of 2013, we began 2014 with $135 million of cash, full access to our credit facility that has been increased to $1.7 billion and our after-market equity program available to fund our ongoing capital programs. With ample liquidity we are able to be opportunistic in the timing to put in place permanent financing.

We are affirming the partnership's 2014 financial guidance and expect the partnership's distributable cash flow to range from $1.15 billion to $1.25 billion. Please refer to the earnings release and our investor day material for complete ONEOK Partners' guidance that we mentioned. Terry, that concludes my remarks.

Thank you Derek. Let's start with our former natural gas distribution segment whose fourth-quarter 2013 earnings benefited from new rates which were more than offset by higher operating costs and one-time charges related to the separation into ONE Gas.

The energy services segment's fourth-quarter 2013 operating loss was higher than the same quarter in 2012 and reflects the non-cash charges related to the wind down of the segment which is expected to be completed by the end of the first-quarter 2014. At ONEOK Partners the natural gas gathering and processing segments for fourth-quarter operating income was slightly lower. It benefited from higher natural gas volumes gathered and processed offset by lower realized NGL product prices and higher operating costs and depreciation expense due to completed capital growth projects.

Natural gas volumes gathered and processed continue to grow driven by increased well connections in the Williston Basin as a result of more efficient drilling programs. While the absolute number of Williston Basin rigs has decreased, multi-well pad drilling has increased significantly.

In addition the quality of the producing acreage yields some of the highest returns in our producers' portfolios. Also the transition to a manufacturing mode from exploration continues to accelerate. We expect to see continued drilling in the Williston Basin as more than 90% of the economics come from crude oil production.

We connected 210 wells in the fourth quarter and 1,160 wells in 2013 compared with 940 wells in 2012. And we expect to connect approximately 1,300 wells to our Williston Basin and midcontinent gathering systems in 2014.

We experienced extreme weather conditions in the Williston Basin and Mid-Continent in December that marginally affected our processed volumes which increased by almost 25% in the fourth-quarter 2013 compared with the same period last year. We plan accordingly for these conditions and the loss of productivity during the winter months.

ONEOK Partners' natural gas liquids segment's fourth-quarter results were higher due to increased NGL volumes gathered and more favorable NGL product price differentials. NGL exchange services margins and NGL volumes gathered continued to grow and we saw an increase in marketing margins compared with the same period in 2012.

Our integrated NGL system enabled us to capture higher margins from more favorable NGL product price differentials. The NGL exchange services business will continue to see volume growth in the Williston Basin and Niobrara not only from our natural gas processing plants but also from third-party plants connected to our system.

This volume growth also was occurring in the Mid-Continent region through connections to our plants and others. We expect 10-plus new natural gas processing plants to connect to our system in 2014.

The partnership's natural gas pipeline segment's fourth-quarter 2013 results were slightly higher compared with the same period in 2012. Equity earnings from Northern Border Pipeline were lower in the fourth-quarter 2013 due to reduced transportation rates that became effective January 1, 2013.

Northern Border's long-haul transportation capacity continues to be the most cost advantage provider from Western Canada and the Williston Basin. Substantially all of Northern Border's long-haul transportation capacity has been contracted through June 2015.

Now an update on our capital growth projects. The MB-2 NGL fractionator at Mont Belvieu was placed in service in December 2013. The Sterling III Pipeline is expected to be completed in March 2014 with the flexibility to transport either unfractionated NGLs or NGL purity products from the Mid-Continent region to the Texas Gulf Coast.

The Canadian Valley plant a 200 million cubic feet per day, natural gas processing facility in the Cana-Woodford Shale of Oklahoma is also expected to be completed in March 2014. And the Mont Belvieu ethane propane splitter, a 40,000 barrel per day deethanizer also is expected to be completed in March 2014.

Now a brief review of our outlook on the NGL markets. We still believe that ethane rejection by natural gas processing plants connected to our NGL system will continue through much of 2016 after which new world-scale ethylene production capacity is expected to begin coming online.

The industry experienced a volatile propane market in January and February as a result of higher seasonal demand from late crop drying in the upper Midwest followed by extensive and prolonged cold weather covering much of the US and the decision by many NGL producers to access the traditionally higher valued Mont Belvieu NGL markets which have been bolstered by strong propane demand. These events led to a significant decline in Mid-Continent propane inventories and periods when the propane price at Conway was higher than at Mont Belvieu. This propane price volatility highlights the fact that much of the NGL industry's infrastructure is primarily designed to move products from the producing basins to the Gulf Coast markets.

Our fully integrated NGL system with its connectivity to major supply basins and market hubs has on a limited basis the flexibility to deliver certain NGL products between Conway and Mont Belvieu. While we don't comment on the specific operational actions we have taken we did utilize the flexibility of our assets to help meet the Midwest propane demand.

In closing I would like to make a few comments about my new role and areas of focus. ONEOK is a different company today than it was a month ago following the separation of our natural gas distribution business into ONE Gas. But the talented, experienced and dedicated team of employees executing our growth plans remain the same.

However our vision for the future is different. As a pure play general partner we will provide the management and resources for ONEOK Partners to continue to grow so that ONEOK can continue to increase its dividend.

We will maintain prudent financial strength and flexibility while focusing on attracting, selecting and retaining a diverse group of employees to execute our growth strategy which will not change. It goes without saying that I will focus on successfully executing our 2014 through 2016 strategic and financial plan that we shared with you all in December.

We will continue to foster a culture that enables us to be successful as a company and as employees with special emphasis on being more entrepreneurial which means understanding how our customers view us and making sure it is how we want to be viewed. We need to be creative, fast moving, responsive, committed to continuing to solve customer's problems and reducing the time it takes to get things done and satisfy our customers.

We will maintain and continue to strengthen our strong commercial and operating capabilities and focus on developing new supplies and markets either organically or through acquisitions in our natural gas and natural gas liquids businesses as well as develop a new growth platform in the energy value chain. We will continue to provide reliable energy and energy-related services in a safe and environmentally responsible manner to our stakeholders.

We will continue to seek opportunities to acquire assets at ONEOK Partners that fit with the partnership's vision while maintaining financial discipline to ensure they create exceptional value for our investors as our internal growth projects do. And finally we will continue executing our long-term growth objectives at ONEOK Partners to continue increasing distributions to the partnership's unit holders and giving ONEOK the flexibility or the ability rather to continue to increase dividends to its shareholders.

As I have assumed the CEO role, I would like to thank the ONEOK and the ONEOK Partners Boards for their support of and confidence in me and in particular John Gibson for his willingness to help prepare me for this new role through mentoring, guidance and encouragement as well as the many other people who have helped me during my 30-plus year career in the energy industry. John has been an exceptional leader, trusted advisor and coach, but more importantly a good friend.

He will continue to play an important role in ONEOK and ONEOK Partners through his new role as nonexecutive chairman. His accomplishments as our CEO are many but most easily summarized in his genuine desire to help people and a balanced and tireless approach to creating value for all of our stakeholders, employees, customers, communities and our investors.

As employees I think we'll all agree that ONEOK is a wonderful place to work due to John's many contributions over the years. And for all of our stakeholders I look forward to continuing to build on the accomplishments of John and the leaders before him.

I am honored and appreciative of the opportunity to lead this growing and dynamic Company and its hard-working and dedicated employees. And I look forward to 2014 and the opportunities ahead.

I would also like to congratulate Pierce Norton and the 3,000 employees who now work for ONE Gas on the successful completion of the transaction and thank the 2,000 employees of the new ONEOK whose commitment, dedication, skills and experience allow us to operate our assets safely, reliably and environmentally responsibly every day and create exceptional value for investors and customers. Our entire management team appreciates their commitment and hard work to make our Company successful. Operator, we are now ready to take questions.

Thank you. (Operator Instructions). Carl Kirst, BMO Capital.

Thank you, good morning everybody. You have got a micro question maybe on hedging and then maybe more of a macro question.

Just happened to notice that the NGL price realizations in the fourth quarter for instance were a little sequentially down from third quarter you know with the market I think sort of more advancing. I did not know if that was basically just due to entering fourth quarter with essentially just a full hedge profile. I just wanted to confirm that it was that versus say for instance perhaps a wider structural basis being experienced.

Carl you are correct. That is exactly right. We came into the quarter fully hedged basically and so the prices that we carried into the quarter obviously were slightly lower than where the actual market turned out for the quarter.

Understood, appreciate that. So as we look at say for instance fourth quarter and you all obviously ratchet up prudently the hedging profile for 2014, is that something that we should take as roughly equal through the year or is it something where again maybe because there has been so much price volatility in the first quarter, should we be thinking that the first quarter is already fully hedged out at that same level? I just didn't know if there was going to be any additional color you could provide there.

Carl, I think that would be a true statement. We are going to be fairly levelly hedged throughout the year. So I think that's right.

Okay. And then lastly and understand this may be more challenging to answer, given the volatility that we have seen in the first quarter, I didn't know if there was any additional color you could provide on optimization opportunities in the first quarter. I think there may be desire to look back on some prior years given how well the optimization had done in periods of volatility; by the same token with the exchange services ramping there would seem to be not quite the same exposure and then with Sterling III kind of now coming in March maybe there wasn't the same opportunity to perhaps capture those spreads.

I didn't know if there is any color you could provide as far as what the market should be expecting or not expecting given the volatility.

Well Carl we can't give you, we can't talk about the first-quarter financial performance obviously. But what we can do is talk about what happened in the first quarter, what were the market responses if you will.

And really what we saw in the first quarter was just unprecedented demand driven by going into the winter obviously with low inventories and an unusually cold winter. We've seen producers have an increased desire to move their production to Mont Belvieu. That -- obviously to take advantage of more attractive prices at Belvieu.

So that all equated to what we saw, a shortage of propane. January, February heavy demand. Pull has subsided though as we look at the market currently.

Prices are now, we got trading today back down below $1.20 a gallon and clearly the market has demonstrated that it is getting the volume that it needs and at least as far as how it relates to ONEOK is certainly we were able to utilize the flexibility of our assets to make sure the propane got to where it needed to go. And as far as we are aware there are absolutely no customers that did without propane during this season.

So that is really about all I can say. I think that propane demand will continue to be somewhat robust as we move into the year, certainly as we go into the fill season. We won't see prices back at these levels during the year. We will see prices certainly moderate.

So I think one of the key things, too, that I will say is that we will see more propane supply come online during the year to satisfy the market needs. So we feel pretty good about where we are with respect to the propane markets. Does that help you?

It does and I understand you can't talk about the first quarter at this point but I do appreciate all the color. So thank you very much.

You bet.

Ted Durbin, Goldman Sachs.

Thank you. I want to talk a little bit about you've cited this favorable NGL product price differentials as being helpful to you. I'm just wondering if you can give us a little more commentary around that? If it's just sort of a normal butane to isobutane spread or where are you benefiting from the price differentials?

Sure, I think at least as far as the location differentials from Conway to Belvieu, I think we have guided you to about $0.07 to $0.08 a gallon. And so that is what we expect for the balance of the year.

I think in the iso to normal spread we are in that $0.10 to $0.15 a gallon range for the balance of the year. So compared to last year we see significant improvement in that iso to normal spread.

I think we averaged less than a nickel last year. So this year we are looking for some improvement.

Got it. So it is really on the prices itself, iso to normal, that is fine.

And then next question for me was just in the Bakken itself, you know the outlook here for the need for additional processing plants up there, how you're thinking about the contract structure if you were to go forward with that? Maybe just talk about your plans in the Bakken.

Sure Ted. As far as the contract structures we do not anticipate any changes at all. We continue to enter into acreage dedications with percent of proceeds contracts with a fee-based component. In certain areas where there might be heated competition we may have to flex that percentage upward a bit but for the most part we have been able to stay pretty much in line with the historical percentages that have supported the past capital investments for the future.

Got it. And then how are the conversations going around the need for additional processing? Obviously a lot of flaring going on up there.

Yes. We will continue to have a lot of flaring going on. We are doing a pretty good job up there keeping the flares in line.

We are at about 30% flaring within our footprint even in the midst of just tremendous growth that we have experienced, producers have a very high sense of urgency to get these flares put out and to reduce the flaring levels. We have got a targeted expectation of around 10% to 15% going from 30% to 10% to 15% over the next couple of years. So a high sense of urgency and as a result it is certainly increasing the need for more processing capacity and gathering systems.

Got it. And then if I could just ask one more.

You know the operating costs here in particular in the gathering and processing segment look like they have continued to tick up pretty quickly. I'm just wondering if we should think of this as a continuing to go up here as you add the new processing plant capacity or are there some maybe operational synergies that we should see as you bring on additional plants and are able to do some shared services or whatnot let's say in the Bakken.

Ted, yes, some of our operating costs and I may let some of these other guys talk about this but some of our operating cost are kind of more fixed. And so you are feeling that right now.

Now as we load these plants up and fill that capacity there will be less and less incremental operating costs to go against that revenue. Nothing here surprises us from an operating cost standpoint. And what I'm saying is on a pre-unit basis we will see those operating costs continue to drop as we fill these plants.

Perfect. That is very helpful.

That is all I had. Thank you.

Great, thank you.

Jeremy Tonet, JPMorgan.

Good morning. I was just wondering after the LDS spend if you could provide any updated thoughts on does this change ONEOK's appetite for strategic or transformational acquisitions? Just any thoughts you have on M&A would be great.

Sure, would be glad to. Certainly as I said in my remarks ONEOK is a different company today.

And our strategy certainly in terms of maximizing the dividend is to do of course in fact that and to operate this Company as more of a holding company. Our strategy is for our M&A opportunities to be done at ONEOK Partners. And so I don't see ONEOK considering M&A opportunities that we can't keep blinders on. We can't ignore the fact that we have got a great currency at ONEOK.

But as we sit today our strategy is pretty straightforward. And at this point in time I don't have any intentions of pursuing M&A opportunities at the OKE level.

Okay, that is helpful. And I was just wondering if you might be to provide a little bit of color as far as CapEx timing throughout the year. It seems like there is a lot of projects that could be coming on earlier in the year. Is that CapEx more weighted towards the front end?

Actually for 2014, our CapEx spend is going to be weighted more toward the backend. Those projects that are coming online early in 2014, their capital spend is winding down of course. But then we have got other projects that are coming online during the year and that will heavily weight the capital toward the backend.

Got you. That is it for me. Thank you.

Thank you.

Ethan Bellamy, Baird.

Good morning gentlemen. How is the Sage acquisition tracking versus your expectations at the time of purchase?

Well, the acquisition actually is going very well. We are having considerable success at signing up new acreage dedications from producers. We have generated a lot of interest and certainly as you will recall as we have said many times before this is a significantly underserved basin which sits well for us having the ability to not just gather and process gas but as importantly transport natural gas liquids out of this basin.

So because of that flexibility we are able to generate a lot of interest and have a lot of success at signing up customers. So it is going very well.

That is good to hear. With respect to your 2014 guidance, can you give us the delta that you would expect from if you did not reject ethane this year?

We actually have not provided that level of detail. So I can't really comment on that. So that is about all I got to say about that.

Okay.

They're telling me I can't say anything.

All right. What impact if any has there been positive or negative on the timing or the amount of maintenance capital spending due to weather?

Well, good question. There really has not been that much impact from weather as it relates to the maintenance capital spending.

The weather has occurred over such a very short period of time. So it really hasn't impacted us.

I think we have probably been more impacted by our decisions as relates to discretional capital spending. So there is a tranche within all of our maintenance capital budgets of discretional spending that we may choose from time to time during the year to do or not to. And we had some of that this year and that is one of the reasons why our maintenance capital is lower.

Okay, last question. Should we be worried about any issues with natural gas pipeline volumes just maybe Northern Border or anything long term? Obviously that has been a big question for the industry.

Really as it relates to our assets all of our assets, including Northern Border, are market connected, direct market connected. And they aren't really exposed to the classic basis spreads that you might see from other pipelines that are kind of more hub connected.

So the end-user customers have to have the gas. They have got to have the gas and in many cases they don't have the economic alternatives.

So in that scenario they need the service. So from a recontracting standpoint we really don't anticipate any problems in particular in the case of Border.

It is a very low-cost provider so it's extremely competitive in the marketplace as are the rest of our assets. So they are very well connected. They meet specific customer needs.

So when we get to the point in time where we renew contracts, we generally don't have any problem renewing them certainly as long as the rates and the fees we charge for the services are fair. From a macro perspective, our typical contract life is about seven years across all of our interstates and intrastates. So we are really in pretty good shape.

Okay, thanks much.

You bet, thank you.

Chris Sighinolfi, Jefferies & Co.

Hey Terry, how are you?

Hey Chris, how you doing?

I am great, thanks. I was just hoping to hit real quickly on a couple of points, Carl had asked about the NGL price realizations. I was curious if you could add some color to what happened on the condensate front?

It seemed like a very similar sort of step down. We obviously saw natural gas do a sort of similar head fake last quarter and you explained it was related to some acute issues in the Bakken. I was just curious if you could comment on the condensate front.

I think some of it is the same as what I indicated to Carl. But I think in particular why you see a lower condensate price is in that realized price we have transportation costs that are netted out.

Okay, so in the case of condensate we will see anywhere from a $10 to $15 a barrel transportation charge applied to that net realized price. So that is why you can't get that price to really correlate to the WTI posting.

Got it.

Does that help you?

Yes it does. That is very helpful. Thanks. And then I guess one comment obviously a lot of commentary about what NGL pricing supply and demand trends have meant for the ONEOK assets and sort of responded to the market.

I was wondering within that given the strong propane price particularly in Conway, in 4Q and thus far in 1Q, what have you seen ethane rejection wide across the system? Has that sort of created a corresponding desire to recover more in order to boost up the propane yield? Can you comment about that?

Chris, that is a great question. We really have actually not seen that.

We have actually seen a slight ever so slight increase in the amount that we are rejecting, actually. Part of it is from new supplies that we are connecting that are not recovering ethane.

So our impact from ethane rejection actually is slightly higher. You understand what I'm saying?

We haven't seen ethane come off but what we have seen is from the new supplies that we have connected they are not coming out of the box recovering ethane.

Understood. So on a total basis the implied rejection number then picks up.

That is correct.

Okay, understood. And then I guess final question from me, can you give a little bit of color around the delay for Sterling III sort of I know you still had at least in the last night's release some capital to deploy on that. We are saying March in service.

Just an update on that, and update real quickly on the outage you had at the Belvieu frac in -- I think that was a planned outage in January, just if everything went sort of to plan on that? And then a reminder on Sterling I, just the size of that pipe.

Chris, we would be glad to do that. I'm going to let Wes Christensen take that Sterling III and Mont Belvieu frac question.

Sure, the Sterling III pipeline construction was primarily delayed due to all the weather conditions we had from both rain and snow during the construction period. That was the primary reason for the delay.

In the Mont Belvieu area we started in the (inaudible), we gained the capacity and allowed us to take it a scheduled outage forward and then complete the planned maintenance.

Okay. A little difficulty hearing but I will look for the transcript for full details. I will hop back into the queue, thanks for the time Terry.

Thanks Chris.

Helen Ryoo, Barclays Capital.

Thank you. So Terry I appreciate your color on the NGL market and I realize that it is difficult for you to comment on Q1 but just so that I understand in general how your optimization business works, are you limited by your physical capacity to move products from one hub to the other or is some part of your optimization business entail barrel exchanges? And therefore you're not limited by actual the amount of barrels you have to move around.

Well it's a combination of all those things Helen. We are in fact affected by and limited not just by the capacity of the pipelines themselves as we have multiple diameter pipes between the Mid-Continent and the Gulf Coast.

The other thing that affects us to capacity is the type of product, what product you are actually moving and to where. So that can affect you as well, the heavier the barrel the more difficult it is to pump those barrels, and requires more horsepower per mile.

So that will affect you as well. And we did, we had extreme demand and certainly when you have periods of extreme demand you may or may not be able to meet on an hourly basis the delivery rates that are required. So we did have some of that.

Okay, and does it matter in general which hub has the higher price let's say in this quarter, Conway propane is so much higher than Belvieu but in the past it was always the other way around, does it matter which hub has the higher price or as long as there is a decent spread it's the absolute level of spread that matters more.

Helen, I'm going let our resident expert Sheridan Swords answer that question.

Helen I think your answer is that our systems are designed to move barrels from Conway to Belvieu because as you have said historically that has been the higher price. So it is actually more advantageous for us most the time if Belvieu is higher than Conway.

Okay, but I guess given that you have these projects coming online with Sterling I and II having bi-directional capability, does that change the ability or not really?

Actually only Sterling I has bi-directional capabilities.

Okay, okay. That's fine.

So you are limited even if that was the choice to do that, you would be limited by that capacity.

Okay, got it. That is helpful. And then switching onto your comment on these 10 more, 10-plus processing plants are being connected to your system during 2014, are these plants solely connected to your system, are you guys the sole sort of NGL takeaway solution for these new plants? Or are they connected to other third-party lines?

These plants will be solely connected to our system.

Okay great. And then just lastly what is the size of the ATM program you have in place?

It is a $300 million program.

Have you used any of that?

We have, we have used a little bit during 2013. We just kicked that off during 2013. I think I said in the last quarter of March that we expect to use that a bit more heavily in 2014.

Got it, all right. Thank you very much.

Thank you Helen.

Becca Followill, US Capital Advisors.

Good morning guys.

Good morning.

Could you talk a little bit about your expectations whether or not there is going to be changes in your expected volume growth in the NGL segment for gathered volumes to be up 13% and fracked volumes to be up 8% given that volumes were down sequentially and that 2013 came in a little bit below guidance.

Becca, I think the answer to your question is that fractionated volumes are down because we frac some barrels that we don't gather especially coming off of OPPL which we saw a bigger decrease in volume coming off of OPPL. We continue to think that we will meet our guidance for 2014 but the new plants that are coming on which most of them we will be gathering as well.

Thank you. And then can you discuss on those 10 plants that are coming online, what is the capacity of those plants?

They range from 50 million to over 200 million.

But in total do you have the capacity?

Becca, I don't have them off the top of my head right now, what they all total up to be.

Okay, thank you. And then last question is, you guys have a meaningful storage position in the Mid-Continent area to store LPGs, can you talk a little bit about how this winter's shortfall or extreme conditions have impacted producers' decisions to maybe contract down the road. Is that storage normally full? What happens to rates as a result of this?

Becca, the storage season that we are coming into usually starts about March when we start recontracting and that goes through April. It is kind of the season for the next year's recontracting. So we will see as we get into that time period if this winter has changed the appetite of the end users on the propane side for more or less storage.

So, it's just too early to tell at this point.

Yes.

Okay, great. Thank you guys.

Thank you Becca.

Craig Shere, Tuohy Brothers.

Good morning.

Good morning Craig.

Terry congratulations on running your first call as CEO.

Thank you sir.

Kind of a follow-up question here. Given your existing contract structures and the capacity of existing Sterling pipelines, I and II, does the capacity take advantage of the bi-directional nature of Sterling I? In other words the reverse flow north increase when Sterling III comes online.

No it does not.

Okay. Can you provide some color around trends and bundled NGL services from the Bakken down to Belvieu? Maybe something directional though not absolute in nature as a response like the proportion of that such business represents of contracted capacity that is on the Bakken NGL line now or say on the Sterling lines now down to Belvieu.

Craig, I'm going to take this question at a high level and then Sheridan can kind of clean it up. The barrels that we move out of the Bakken you understand originate from our own processing plants. Our third-party volumes will grow.

We have contracted those volumes at competitive rates. That business because it is some of the longest haul business that we have got, it is those barrels are the furthest away, we move those barrels through multiple pipes, and fractionation facilities, those will be some of the highest per unit margin barrels that we move.

So from a revenue standpoint, much like the margin we generate in the Bakken, these will be some of the highest margin barrels and most viable barrels yet the volumes are going to be, relatively speaking, small. So to get to your question, they are not going to take up a whole lot of capacity in the downstream infrastructure relative to movement say out of the Mid-Continent or other parts of our system. Sheridan, anything?

I don't think I have anything to add to that.

Okay, I didn't do that bad then. Good. I'm glad you approve.

So just as a follow-up. I think historically one of the concerns the market has had is that on the optimization revenue it was always a little unclear for commercial proprietary reasons what was available and obviously no one knew the future and so there wasn't much of a multiple put on those types of revenues.

And of course you didn't distribute them when you got windfalls. But to the degree you are able over time to make this a little more of a bundled, less volatile more bundled fee based type business as far as these spreads between basins or hubs then obviously you should get more of a multiple on that. Are you saying that though the Bakken margins are very high that it's never going to substantially derisk some of these basis points?

Craig let me try and address your question this way. We have had for some time, and we have been very open about this, a strategy to reduce our exposure to that Conway to Belvieu spread, i.e. our optimization business. We have been very successful at doing that and contracting the capacity under fee-based contracts.

And I guess included in some of that is the Bakken barrels move through some of that capacity. What is happened during 2013 is the ethane rejection created some available capacity that we wouldn't otherwise have. So as a result we took advantage of that available capacity and captured whatever spread was there.

So generally speaking we are making very good headway with taking that volatility out and our associated dependence on that spread.

Okay, and there's still a market for long-term contracting regardless of the level you have currently in the very high single digits maybe upwards of a dime? Between Belvieu and Conway, I'm sorry.

Sheridan's looking at me. I will let him handle that question.

I think the answer to your question is when we look at our bundled service if we have a customer that wants to go down to Mont Belvieu it all comes down to where they are located at on our system to determine what the rate is going to be and what the competitive position they are in at the time.

Okay, understood. Thanks for all the answers.

Thanks Craig.

(Operator Instructions). Lin Shen, HITE Hedge.

Thank you, my question has been answered. Thanks.

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