Plains All American Pipeline LP (PAA) 2006 Q3 法說會逐字稿

Welcome to Plains All American Pipeline's third quarter 2006 results conference call.

During today's call, the participants will provide forward-looking comments on the Partnership's outlook, as well as review the results of the prior period. Accordingly, in doing so, they will use words, such as "believe," "estimate," "expect," "anticipate," etcetera. The Partnership intends to avail itself of the Safe Harbor provisions that encourage companies to provide this information and directs you to the risks and warnings set forth in Plains All American Pipeline's most recently filed 10-K, 10-Q, 8-K, and other current and future filings with the Securities & Exchange Commission.

In addition, the Partnership encourages you to visit the website, at www.paalp.com; in particular, the section entitled "Non-GAAP Reconciliation," which presents certain commonly used non-GAAP financial measures, such as EBITDA and EBIT, which may be used here today in the prepared remarks or in the Q&A session. This section also presents a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and includes a table of selected items that impact comparability with respect to the Partnership's reported financial information. Any reference during today's call to adjusted EBITDA, adjusted net income, and the like is a reference to the financial measure, excluding the effect of selected items impacting comparability.

Today's conference call will be chaired by Greg L. Armstrong, Chairman and CEO of Plains All American Pipeline. Also participating in the call are Harry Pefanis, Plains All American's President and COO, and Al Swanson, Plains All American's Vice President of Finance.

I will now turn the call over to Mr. Greg Armstrong. Please go ahead.

Thank you, Diego. Welcome to everyone. As a reminder, the slide presentation accompanying this call is available for viewing or download at our website at www.paalp.com and on slide 3 is an outline of today's conference call.

On a personal note, Phil Kramer, our EVP and CFO, is unable to join us today due to a family medical matter, so Al Swanson, our Vice President Finance and Treasurer will be filling in during his part of the call.

During the third quarter, Plains All American once again delivered strong financial and operating results. As illustrated on slide 4, we reported EBITDA of $138.8 million and net income of $95.4 million, or $0.89 cents per diluted unit, representing increases of 33%, 38% and 13%, respectively, over similar results for the third quarter of 2005.

Excluding the selected items impacting comparability, which in the aggregate positively affected results by a total of $7.6 million, third quarter adjusted EBITDA was $131.2 million, and adjusted net income was $87.8 million, or $0.95 per diluted unit. These adjusted results represent increases of 23%, 24%, and, roughly, 0%, respectively, over corresponding metrics in last year's third quarter.

Each of these financial measures exceeded the high end of the guidance we provided on August 1, 2006. And, as shown on slide 5, this marks the 19th consecutive quarter that PAA has delivered solid performance relative to its financial guidance.

I should also note that both the reported and adjusted results for the quarter include the adverse impact of an approximate $5.2 million non-cash charge, primarily associated with the significant decline in oil prices during the quarter and the related decline in the valuation of work and inventory volumes, including approximately $3.4 million of crude oil linefill and pipelines owned by third parties. Approximately $1.6 million of the charge relates to the declines in LPG and related products prices. Although these volumes were at fixed prices, accounting rules under SFAS 133 did not allow us to offset the gain on the derivatives against the physical, since these derivatives do not qualify for hedge accounting treatment.

Before we get into the details of the quarter, let me give you a quick status report on our proposed acquisition of Pacific Energy, which is shown on slide 6. As of the end of September, we had received final clearances from the various state regulatory bodies, and the SEC had declared our S-4 Registration Statement effective. Proxy statements were mailed to both Pacific's and PAA's unitholders on or about October 2, and the unitholder meetings are scheduled for November 9. Assuming a favorable unitholder vote, we anticipate closing the transaction within three business days of obtaining the vote.

The remainder of today's call will be divided into three segments. First, Harry will review third quarter operating results, address the major operational assumptions for fourth quarter guidance, provide a status report on internal growth projects and recent acquisitions, and outline our integration plan for Pacific. Then, second, Al will discuss our capitalization, liquidity and recent financing activities, review our updated financial guidance, and provide our preliminary thoughts regarding our anticipated segment reporting, incorporating Pacific. Then, lastly, I'll wrap up the call with a few closing comments regarding our performance versus 2006 goals and distribution outlook. At the conclusion of our prepared remarks, we will have a question and answer period.

And, a complete written transcript of the prepared comments will be posted on our website shortly after the completion of this call. In addition, our website will provide you the option to download an audio version of the call.

With that, I'll turn the call over to Harry.

Both of our segments exceeded the high end of our third quarter guidance. As I review performance today, I'll be comparing our actual results to the guidance we provided on Form 8-K on August 1, 2006.

In our pipeline segment, adjusted segment profit, as shown on slide 7, was $56.7 million, or $0.29 a barrel, which was $3.7 million above the high end of our guidance. Overall pipeline volumes for the quarter were approximately 2.1 million barrels per day, which was substantially in line with guidance. As you can see from the slide, volumes on our major pipeline systems were in line with guidance, although the Basin volumes were down slightly, as we had some shippers build inventory during the quarter.

Slide 8 shows the performance of our gathering, marketing, terminalling and storage segment. Adjusted segment profit was $72.9 million, which was approximately $2 million above the high end of our guidance range. On the same basis, our profit was approximately $1.01 per barrel. Total gathering, marketing, terminalling and storage volumes of 785,000 barrels a day were about 1% above guidance, with our lease gathered crude oil and LPG and third-party processing volumes coming in at 705,000 barrels per day and waterborne imports of foreign crude oil coming in at 80,000 barrels per day. The [inaudible] Contango market contributed to the strong performance of the segment, as well as the successful execution of our risk management strategies and an increase in foreign waterborne imports.

Maintenance capital expenditures for the third quarter were approximately $8.2 million, which was a little high on a quarterly basis but, year to date, were in line with our expected expenditures. We expect maintenance capital during the fourth quarter to be around $4 million.

Let me spend a moment on the major operating assumptions that are incorporated into the fourth quarter financial guidance that Al will walk you through in a few minutes. We've excluded any contribution from Pacific. Forecasted volumes in our major pipeline assets for the fourth quarter are as follows - 45,000 barrels per day on the All American system, 350,000 barrels per day on the Basin system, 185,000 barrels a day on our share of the Capline system, and 70,000 barrels a day on the Manito pipeline system. Our guidance for the fourth quarter also incorporates 650,000 barrels per day of crude oil lease gathered volumes, 90,000 barrels per day of LPG sales and third-party processing volumes, and 50,000 barrels per day of waterborne foreign crude oil imports.

Let me now move on to our expansion capital projects. In September, we announced that we are proceeding with the phase 6 expansion of our Cushing terminal facility. Under the phase 6 expansion, we will construct approximately 3.4 million barrels of additional tankage. The project will expand the total capacity of the facility to 10.8 million barrels and, including manifold modifications, is expected to cost approximately $48 million. Of the $48 million total value, we estimate we'll spend approximately $14 million during 2006, with the remaining expenditures to be completed in 2007. We estimate that the new tankage will become operational during the fourth quarter of 2007. Notably, the phase 6 project is supported by multiyear lease agreements with customers.

In October, we announced that we are proceeding with the phase 2 development of our St. James terminal, which is currently under construction. The initial construction of the St. James terminal commenced in mid 2005. The facility is anticipated to become operational during the first quarter of 2007 at a total cost of approximately $93 million. The phase 2 project will add 2.7 million barrels of additional tankage, expanding the total capacity to 6.2 million barrels. The cost of phase 2 is estimated to be $64 million, of which approximately $12 million is expected to be spent during 2006. We estimate that the phase 2 tankage will become operational during the first quarter of 2008.

In Canada, we completed 300,000 barrels of the 900,000 barrel expansion of our Kerrobert terminal. The next 300,000 barrels of capacity will be completed during the fourth quarter. The final 300,000 barrels of capacity is expected to be in service in the first quarter of 2007.

At the Pine Prairie gas storage facility, owned through PAA/Vulcan Gas Storage, we have now completed the drilling of the first cavern well and are in the process of drilling the second cavern well. We also started leaching operations on cavern well one, and construction of gas handling and compression facilities are scheduled to start in December. We're still forecasting the approximately 4 bcf. The storage capacity will be in service in mid 2007, with the remaining 20 bcf of working capacity coming online in stages throughout 2008 and 2009.

Due to the two new expansion projects, as well as the typical midyear adjustments, our 2006 expansion capital program, excluding Pacific, now totals approximately $310 million, which is an increase of 35% over the $230 million program that we announced at the beginning of the year. The major projects are listed on slide 9, along with corresponding costs expected to be incurred in 2006.

As we discussed in our June 12 conference call announcing the Pacific transaction, we also believe that Pacific has very attractive inventories of growth projects that will complement our activities. We understand Pacific will be providing you with an update on their major 2006 projects on their conference call later today, and we expect to be in a position to discuss the specific projects and the timing of the projects for 2007 and beyond when we hold our year-end conference call in February.

Shifting to the acquisition front, we have closed and funded three acquisitions since June 30. First, in July, we closed on the acquisition of three gulf coast crude oil pipeline systems from BP for an aggregate of $130 million. The majority of cash flow associated with these assets is subject to long term leases, so the assets will provide stable, fee-based cash flow.

Second, in early September, we closed on the $65 million acquisition of several refined product pipeline systems from Chevron. The pipeline systems, located in west Texas and New Mexico, provide tariff-based revenue. The majority of the cash flow from these assets will be from the El Paso to Albuquerque pipeline system.

Lastly, yesterday, we announced that we acquired a 50% interest in Settoon Towing LLC for approximately $33 million. Settoon Towing owns and operates a fleet of 57 transport and storage barges, as well as 30 transport tugs. Its core business is the gathering and transportation of crude oil and produced water from the inland production facilities across the gulf coast. I would point out that PAA is currently Settoon's largest customer, with 22 tugs and 22 tank barges under a five-year chartering agreement.

Combined with the five other acquisitions we made during the first half of the year, we have now completed eight acquisitions in 2006, for a total of $610 million. The integration of these acquisitions has either been completed or, in the case of the recent BP and Chevron transactions, is on schedule. I should also point out that these transactions are performing in line with our expectations.

Before I turn it over to Al, I want to spend a few minutes discussing our integration plan for Pacific. As permitted by continuing regulatory requirements, we have a meeting with key members of the Pacific [Energy] team in order to begin planning for the integration of the two companies. Although each integration process brings its own set of unexpected challenges, we believe that, on the whole, the integration of Pacific will be less cumbersome than our integration of Link in 2004, principally due to the predominantly fee-based nature of Pacific's assets and businesses and the lack of significant marketing activities. Our current estimate is that the integration period will be substantially completed by the end of the first quarter of 2007. We expect to provide a more detailed status report regarding the integration on our year-end earnings call.

With that, I'll now turn the call over to Al.

During my portion of the call, I will review our capitalization and liquidity at the end of the third quarter, discuss recent financing activities, walk through our updated financial guidance for 2006 and briefly discuss our anticipated plans for post-Pacific segment reporting.

As summarized on slide 10, we maintained a strong credit profile and capital structure during the third quarter. As of September 30, PAA's long term debt outstanding was approximately $1.2 billion, while book equity was $1.84 billion. As a result, our long term debt to total capitalization ratio was approximately 39%. Our third quarter adjusted EBITDA to interest coverage ratio was approximately 6.8 times, and our long term debt to third quarter annualized adjusted EBITDA was approximately 2.3 times. You should keep in mind that the foregoing metrics exclude our short term debt and Contango-related interest costs. Debt classified as short term primarily reflects borrowings under our Contango facility and revolver for hedged crude oil and LPG, as well as NYMEX and IPE margin requirements. At September 30, 2006, the balance in short term debt was approximately $994 million, a $195 million decrease relative to the $1.19 billion at June 30.

Since June 30, we have executed several financing transactions that I want to briefly touch on. In July, we sold 3.7 million common units at a price of $43 per unit in a direct placement to a group of institutional and private investors. Net proceeds from the transaction were $163 million, including the 2% general partner contribution and net of operating expenses.

Also in July, we completed an extension and $600 million increase in our committed revolving credit facility, thereby significantly increasing our liquidity. This $1.6 billion credit facility matures in July of 2011 and has an accordion feature that enables us to increase the size to $2 billion, subject to receipt of lender commitments for the incremental amount.

We also entered into a committed $1 billion, 364-day acquisition bridge facility, with a one-year term-out provision to finance the cash portion of the Pacific acquisition and enable us to maintain a high level of liquidity, pending the execution of permanent financing.

Earlier this week, we completed a $1 billion private placement of senior notes. We priced $400 million of 6.125% 10-year senior notes and $600 million of 6.65% 30-year senior notes. The net proceeds will be used to fund the cash portion of our proposed merger with Pacific, repay outstanding borrowings under our revolver, and for general Partnership purposes. In the meantime, until closing the acquisition, the proceeds have been invested in short term investments and used to repay revolver borrowings on our committed credit facility. As a result of this financing, we will not need to draw down on the bridge commitment, and it was terminated. If for some reason the Pacific merger does not close by February 15 of 2007, we are required to redeem the notes at 101% of par value.

Given the amount of capital we will spend this year, I want to take a minute to update you on our equity financing activities and the impact on our capital structure, as well as our cash flow retention. Slide 11 illustrates that, despite our current forecast to spend approximately $3.3 billion in growth capital during 2006, we have maintained a strong capital structure by using cash flow in excess of distributions and proactively raising equity in lockstep with our growth. We have a well defined financial growth strategy that targets funding at least 50% of acquisition and expansion capital expenditures with excess cash flow and equity. Based on our current forecast, we will have raised equity or generated excess cash flows during 2006 totaling approximately $1.56 billion. This consists of $95 million of excess equity capital we raised in late 2005, $315 million of equity capital raised in direct placements during 2006, $1 billion of equity that will be issued to PPX unitholders in the merger, $20 million for the 2% general partner contribution due to the issuance of the units in the merger, and our current forecast of $129 million of cash flow in excess of Partnership distributions during the year. As a result, we anticipate exiting 2006 having achieved 94% of our stated 50% equity financing and excess cash flow funding targets; and, based on the preliminary guidance we have previously provided, we are well positioned to maintain a strong capital structure and credit profile in 2007. We intend to complete any remaining financing necessary to reach our target by the end of the first quarter of 2007.

Let me now shift to a discussion of the Partnership's financial guidance, which excludes any contribution from Pacific. As it relates to 2007, we have already provided preliminary 2007 guidance for PAA, excluding the impact of Pacific, and separately provided directional guidance for Pacific's contribution during 2007. We do not intend to update 2007 today, but we expect to address the combined guidance during our next conference call, which will be held in February to discuss year-end results.

Our guidance for the fourth quarter of 2006 is based on reasonable expectation of volumes and expense levels, as well as our judgments and assumptions about potentials associated with our business development activities, where the outcome is less than certain at this point, including estimated contributions from recent acquisitions. In addition, please keep in mind that the guidance I will be providing excludes selected items that we believe affect comparability between periods. Our detailed guidance for the fourth quarter and, based on that, the expected results for the full year of 2006, was furnished via an 8-K this morning, so I will just touch on the high points, which are summarized on slide 12.

For the fourth quarter of 2006, we guide you to an adjusted EBITDA range of $115 million to $125 million, with a midpoint of $120 million. For interest expense purposes, we anticipate an average long term debt balance of approximately $1.3 billion and an all-in average interest rate of approximately 6.2%, resulting in interest expense of $19.3 million to $20.1 million. As a reminder, interest on Contango-related borrowing is included in cost of sales because we view the interest on these borrowings as part of the inventory cost. As I will address in a moment, the range of interest expense and average long term debt balance does not include interest associated with the $1 billion issuance of new senior notes completed this week. Depreciation and amortization is projected to be $26.6 to $27 million. These estimates result in adjusted net income of approximately $67.9 million to $79.1 million, or approximately $0.68 to $0.81 per diluted unit.

For the full year of 2006, based on year to date through September 30 and fourth quarter guidance, we expect adjusted EBITDA to be between $479.7 million and $489.7 million, with a midpoint of $484.7 million. Interest expense is expected to range from approximately $71.8 million to $72.6 million. Approximately $1.3 million of 2006 projected interest expense is expected to be non-cash, as it relates to amortization of deferred amounts associated with terminated interest rate hedges. Based on these estimates, we forecast adjusted net income of approximately $313 million to $324.2 million for the full year 2006, or $3.49 to $3.62 per diluted unit.

Consistent with past practice, we do not attempt to forecast any potential impact related to FAS 133, as we have no way to control or forecast crude oil prices on the last day of each quarterly period. Accordingly, the guidance I provided for the fourth quarter excludes any potential gains or losses associated with this accounting statement.

As I mentioned a moment ago, the fourth quarter interest expense guidance does not include interest associated with the $1 billion principal amount of notes issued earlier this week, nor have we included in our adjusted numbers the income earned on investing the proceeds, pending the completion of the Pacific acquisition. The indenture governing the notes requires us to call the notes at 101% of par if the acquisition is not completed by February 15, 2007. Since we have not included anything for Pacific in our guidance, we believe that it's consistent to exclude the interest expense and corresponding investment income associated with the notes. As such, in the 8-K furnished this morning, we have identified it as a selected item impacting comparability and excluded it in our adjusted net income amount. For more detail on these projections, as well as other assumptions, I would once again direct you to the 8-K.

Before I turn the call back over to Greg, I would like to briefly discuss our segment reporting. On our last call, Bill touched on the fact that our GMT&S segment has experienced significant growth over the last several years, supported by a sizeable portfolio of hard assets and linefill. In addition, we have also increased the amount of fee-based activities that are included in this segment. Prior to pursuing the Pacific transaction, we were in the process of evaluating alternative reporting metrics to enable us to better monitor this aspect of our operations. Given the extremely high percentage of Pacific's cash flows from tariff and fee-based activities, we feel that it will even further support our desire to reconfigure our segment reporting to provide more clarity with respect to managing our fee-based versus non-fee-based activities.

Based on our internal discussions to date, we are considering dividing our business into the following three segments - transportation. This segment would include our pipeline tariff revenue and margin activities, pipeline leases, barging revenue, third-party trucking revenue, and equity earnings from our investments in [Butte] and Frontier pipeline systems and Settoon Towing.

Facilities. This segment would include leases of storage capacity, throughput revenue, fractionation facility revenue, LPG facilities, and equity earnings from our investment in PAA/Vulcan Gas Storage.

And the third segment would be marketing, which would include our purchases, sales, exchanges, buy/sell exchanges of crude oil and LPG, quality arbitrages, merchant activities, including Contango storage, and trucking activities for PAA where the expense is netted with purchases and sales.

The intent is to capture our fee-based activities in the transportation and facilities segments. Our more market-influenced activities will be captured in the marketing segment. However, I would point out that these activities are still underpinned by a substantial asset portfolio, including storage tanks and linefill. We expect to provide additional details on the potential revisions to our segment reporting in conjunction with our year-end conference call in late February.

With that, I will now turn the call over to Greg.

As we indicated in today's press release, 2006 is on the course to become our most productive year yet. At the beginning of this year, we shared with you five specific goals for PAA in 2006. These goals are listed on slide 13, and I am pleased to report that, with approximately two months remaining in the year, we are on track to achieve or exceed each of these five goals. In a few cases, the objectives have already been accomplished.

The details of our performance against these goals are also listed on slide 13; but, to summarize, based on our current EBITDA guidance midpoint for 2006, we will exceed our 2006 guidance by 22%, excluding contributions from unforecasted acquisitions. Including contributions from unforecasted acquisitions, our EBITDA will exceed original guidance by 33%. We have also completed $610 million of strategic and accretive acquisitions as of November 2, and upon consummation of the Pacific transaction, the total will climb to $3 billion. Our 2006 capital program expanded throughout the year as we added new growth projects, increasing 35% from $230 million to $310 million. Collectively, these acquisitions and internal growth projects provide a very solid foundation of growth for future years to come.

With respect to Partnership distributions, effective with the payment of the third quarter distribution on November 14, we will have paid out $2.87 per unit in distributions in 2006, which represents an 11.5% increase over distributions paid in 2005.

I think it is very important to reinforce that we are committed to maintaining a strong capital structure and credit profile and to funding at least 50% of our acquisitions and expansion capital programs with cash flow and equity. In that regard, despite being on track to incur aggregate capital expenditures of $3.3 billion in 2006, we expect to end the year with a strong capital structure and a high level of liquidity. I think it's very notable that, even after increasing our distribution 11.5% in 2006, our forecasted cash flow in excess of distributions is expected to be $129 million for the year. By reinvesting this excess cash flow and raising equity in a timely manner, we have been able to grow the Partnership's base EBITDA, grow our distribution, and still maintain a very strong capital structure and credit profile. All in all, we are extremely pleased with our performance during 2006.

Looking forward, we believe the Partnership is well positioned for continued growth, and we have announced our intention to recommend an increase in the Partnership's analyzed distribution to $3.20 per unit for the first quarter following the closing of the Pacific transaction.

Without question, we have some challenges in front of us to integrate the Pacific assets and operations. However, we believe the skill sets developed by PAA's management team and the experience that they have gained from integrating and optimizing over 40 acquisitions over the last 8 years, position us to be equal to the challenge. As we look at 2007 and beyond, we believe the cash flow contributions and synergies provided by the Pacific assets and businesses, in combination with the other acquisitions we completed in 2006 and our ongoing expansion projects, will support our efforts to deliver 7% to 9% annual distribution growth for the next several years, while maintaining prudent distribution coverage and a strong capital structure.

We thank you for your continued support of the Partnership and look forward to updating you on our progress on these challenges and outline our 2007 goals on our year-end call in February.

That wraps up the items on our agenda. Due to SEC regulations surrounding the Pacific merger, the audio replay of this call and the Q&A transcript will not be available until tomorrow, in order to allow us time to transcribe the content and meet the required filing obligations. However, a complete written transcript of the prepared comments for this call will be posted on our website at www.paalp.com very shortly after this call's completed, as well as an option to download to an MP3 file.

Operator, at this time, we're ready to open the call up for questions.

[OPERATOR INSTRUCTIONS]. Our first question comes from Sam Arnold with Credit Suisse. Please state your question.

Just a couple of questions. Strategically, with the acquisition of the towing and barge company, where do you guys see the growth opportunities there? And, would you consider other acquisitions in this area, or is this just kind of a one-off that met your criteria because you already use a lot of their services?

I don't think it's a one-off. We do think it's complementary to our core business with fee-based revenue. We think it fits in an MLP structure. But, yes, we hope to be a consolidator in that industry as well. We would like to add to the fleet.

Sam, I would say we've expanded our footprint in the gulf coast with respect to the St. James tankage and also what we bought at Mobil. And, then, with what we-- once we close Pacific, we'll be in the refined products. I think tugs and barges are the natural progression to continue to increase our access to waterborne cargos and moving that on an intercoastal basis.

And a follow up to that. Do you guys actually--? Do they use tugs to take the crude tankers into, say, [loop] to unload?

Not these tugs.

Okay. All right. Thanks.

[OPERATOR INSTRUCTIONS]. Our next question comes from Arthur Hall. Please go ahead.

Good quarter. Could you comment on the impact of the Canadian tax issue that arose yesterday and hammered the royalty trusts in Canada?

Well, I can. Let me start by saying that, right now, there really hasn't been any change in the Canadian tax law. Instead, it's really a proposal by the Canadian Federal Finance Minister, which, we understand, is intended to curb, I guess, the growing corporate move toward income trust. Second, we'd point out that it is in draft form, and it was only announced two days ago. So, a lot of the discussion that's circulating right now is quite a bit of speculation. Third, I'd just point out that PAA-- While we do have Canadian operations, we're not either a Canadian income trust or royalty trust.

But, with those qualifying comments, I will tell you it is a development we intend to monitor closely because we do have a fair amount of assets and operations in Canada. Even though we're not an income trust or a royalty trust, our structure has some similar tax characteristics. In addition, I would tell you that it appears that the Finance Minister's proposal has some considerable political backing within the government.

What I can tell you is, based on what could only be characterized as preliminary assessment involving some pretty significant assumptions, if those same rules that are applied to income trusts were to be applied to limited partnerships and, in particular, our operations in Canada, it would have some impact on PAA. It appears it would be in 2011. But, in those circumstances, we don't think, if it applies the same way it's, at least, been represented to apply to income trusts, it would have a significant impact on PAA as a whole.

I would point out that the assets and operations we're acquiring in the Pacific transaction are already structured as a taxable corporation, so we do not expect the proposal to have a significant, if any, impact on those operations. Our current operations in Canada PAAs are structured as a partnership, which is not a taxable entity in Canada, and the general partner of that entity is a Nova Scotia unloaded liability corporation, which is a flow-through entity in the U.S. But, as we understand the current draft of the tax proposal, there will be a four-year tax holiday before the changes become effective. So, assuming PAA's Canadian entities are treated the same as a Canadian income trust, any impact would not be immediate. I would also point out that in order to optimize both PAA's and Pacific's operations in Canada and extract the most operating synergies, we've already contemplated some restructuring of the entities.

But, taking a look forward, on a crystal-ball approach, to our projected distributable cash flow in 2011 and the potential impact of what appears to be a 31% marginal tax rate to our estimate of our Canadian taxable income within the PAA current operations, we'd estimate that the impact of the tax proposal is not significant, potentially falling in the 3% to 5% range. Again, that's a very rough estimate. It is based on assumptions about rules that haven't even been drafted yet, much less enacted into tax law. So, that's about all we know right now. We've seen a few write-ups from analysts that cover MLPs in general that probably feel that the overall development in Canada is a positive for the U.S. MLP market, simply because the income trust market in Canada is about $200 billion. I think roughly 50% to 60% of that is probably owned in the U.S. So, if they lose their benefit there, we would expect to see a lot of capital be reinvested in probably the equivalent entities in the U.S., and that would be in MLPs.

Okay. Thanks.

There are no further questions at this time. I will now turn the conference back over to your host to conclude.

If there are no other questions, we'll conclude the call. I just want to thank everybody for their continued support, and we look forward to updating you in February on our plans for 2007 and beyond.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you, all, for your participation.