Plains All American Pipeline LP (PAA) 2012 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the PAA and PNG fourth quarter and full year 2012 results.

At this time, everyone is in a listen-only mode. Later, we will have a question-and-answer session and instructions will be given at that time.

(Operator Instructions)

As a reminder, this conference is being recorded. I'd now like to turn the conference over to our host, Director, Investor Relations, Mr. Roy Lamoreaux. Please go ahead, sir.

Thank you and good morning. Welcome to our fourth quarter and full-year 2012 results conference call. The slide presentation for today's call is available under the conference call tab of the Investor Relations section of our website at paalp.com and pnglp.com.

I would mention that throughout the call, we refer to the Companies by their New York Stock Exchange ticker symbols of PAA and PNG respectively. As a reminder Plains All American owns a 2% general partner interest in all the incentive distribution rights and approximately 62% of the limited partner interests in PNG, which accordingly is consolidated into PAA's results.

In addition to reviewing recent results, we will provide forward looking comments on the Partnership's outlook for the future in order to avail ourselves of the safe harbor precepts that encourage companies to provide this type of information. We direct you to the risks and warnings set forth in the Partnership's most recent and future filings with the Securities and Exchange Commission.

Today's presentation will also include references to certain non-GAAP financial measures such as EBITDA. The non-GAAP reconciliation sections of our websites reconcile certain non-GAAP financial measures to the most directly comparable GAAP financial measures and provide the table of selected items that impact comparability to the Partnership's reported financial information. References to adjusted financial metrics exclude the effect of the selected items. Also for PAA, all references to net income are references to net income attributable to Plains.

Today's call will be chaired by Greg L. Armstrong, Chairman and CEO of PAA and PNG. Also participating in the call are Harry Pefanis, President and COO of PAA; Dean Liollio, President of PNG; and Al Swanson, Executive Vice President and Chief Financial Officer of PAA and PNG. In addition to these gentlemen and myself, we will have several other members of our Management team present and available for the question-and-answer session. With that, I'll turn the call over to Greg.

Thanks, Roy. Good morning and welcome to everyone. Let me start off today's call by briefly recapping PAA's fourth quarter and full-year financial results.

Yesterday, after market close, PAA reported fourth quarter adjusted EBITDA of $609 million, which marked a very strong finish to a record-setting year. These results exceeded the midpoint of our guidance by $89 million or 17% and were $64 million above the high end of our guidance. In comparison to last year's fourth quarter adjusted EBITDA, adjusted net income and adjusted net income per diluted unit increased by 29%, 33%, and 23% respectively.

With regard to annual performance during 2012, we delivered year-over-year increases of 32%, 38%, and 28% in adjusted EBITDA, adjusted net income, and adjusted net income per diluted unit respectively. Highlights of PAA's fourth quarter and full-year performance for 2012 are reflected on slide three.

2012 was a record year of performance for PAA in which we achieved or exceeded each of the goals we set at the beginning of the year. A recap of our performance versus goals is set forth on slide four. In addition to delivering results above midpoint guidance in each quarter of the year, we closed and substantially integrated the BP Canadian NGL acquisition which was under contract at the end of 2011. We also initiated and closed an additional $650 million of complementary acquisitions and completed our 2012 organic growth capital program materially on time and on budget.

Furthermore, we raised distribution from 2012 by just over 9% through November, which was in line with the high end of our 2012 target range of 8% to 9%, while generating distribution coverage of 160%. In January, we declared an increase in our annualized distribution to be paid next week to $2.25 per common unit, which equates to 9.8% year-over-year increase over the distribution payable last February. As a result of continued strong results, our extended visibility for organic growth, recent acquisitions, and very solid distribution coverage, we recently increased the range of our targeted distribution growth for 2013 from 7% to 8%, to a level of 9% to 10%.

As shown on slide five, PAA has increased its distribution in each of the last 14 quarters and in 33 quarters out of the last 35 quarters, delivering compound annual distribution growth of approximately 7.7% over the past 12 years. Yesterday evening, we furnished financial and operating guidance for the first quarter and full-year of 2013. As a result of acquisitions that closed in the fourth quarter and ongoing refinements to our forecast, we increased the midpoint of our full-year 2013 adjusted EBITDA guidance by $100 million, relative to the preliminary guidance provided in November.

As reflected on slide six, this guidance includes a 15% year-over-year increase in adjusted segment profit performance from our fee-based segments. Coming off a year in which market conditions were extremely favorable for our supply and logistics segment, our guidance for this segment assumes a return to baseline-type market conditions after the first quarter of 2013 as infrastructure expansions are expected to address bottleneck situations in a couple of regions. This assumption results in an approximate $260 million year-over-year reduction in our supply and logistics segment profit relative to last year. And total 2013 EBITDA guidance for PAA of $2.025 billion which is approximately $82 million less than our 2012 results.

I would point out that, should market conditions remain favorable beyond the first quarter of 2013, there is an upward bias to our guidance. I would also note, that based on the midpoint of both our financial guidance for 2013 and our 9% to 10% targeted distribution growth for 2013, we expect distribution coverage to remain very robust at around 125%.

During the remainder of today's call we will discuss the specifics of PAA's segment performance relative to guidance, our expansion capital program, recent acquisitions, and integration activities, our financial position and the major drivers and assumptions supporting PAA's financial and operating guidance. We will also address similar information for PNG.

At the end of the call, I will provide a brief overview of our rail activities and discuss our goals for 2013 as well is our outlook for the future. With that I'll turn the call over to Harry.

Thanks, Greg. During my section of the call, I'll review our fourth quarter operating results compared to the midpoint of our guidance, the operational assumptions used to generate our 2013 guidance, and our 2013 capital program as well as our recent acquisition activities.

So as shown on slide seven, adjusted segment profit for the transportation segment was $198 million, which was $5 million above the midpoint of our guidance. Volumes of 3.66 million barrels per day were slightly ahead of guidance. On a per-unit basis, adjusted segment profit was $0.59 per barrel.

Segment profit benefited from higher volumes but partially offset by expenses related to repairs and remediation costs for a release we experienced earlier this year. Adjusted segment profit for the facilities segment was $141 million or approximately $8 million above the midpoint of our guidance. Volumes of 113 million barrels per month were in line with guidance and adjusted segment profit per barrel of $0.42 exceeded the midpoint guidance by $0.03 per barrel.

The quarter benefited from the contribution from the rail assets acquired from US Development Corp. in December and higher than forecasted profitability from our Canadian NGL facilities, partially offset by higher expenses related to settlement and other miscellaneous items. Adjusted segment profit for the supply and logistics segment was $267 million, or $74 million above the midpoint of our guidance for the fourth quarter.

Our volumes were in line with guidance at approximately 1.1 million barrels per day, and adjusted segment profit per barrel was $2.61 or $0.69 above the midpoint of our guidance. Financial over-performance for the quarter was driven by stronger butane margins resulting from various refinery outages and water basis differentials particularly between Midland and Cushing, but also between the LS market and WTI in several of the Canadian crude grades relative to WTI.

Let me now move on to slide eight and review the operational assumptions used to generate our full-year 2013 guidance. Our guidance includes the benefit of recently completed $500 million USD oil rail terminal acquisition and $125 million acquisition of Chesapeake's crude oil gathering assets in the Eagle Ford. For our transportation segment, we expect volumes to average approximately 3.7 million barrels per day which is a 6.5% increase over 2012 volumes. We expect adjusted segment profit per barrel of $0.61, an approximate 5% increase over 2012.

The volume increases include increases of approximately 105,000 barrels per day from our Permian Basin pipelines and 90,000 barrels per day from our Eagle Ford assets, plus a full-year contribution from the BPE NGL pipelines, partially offset by a planned asset sale in the second quarter. Average tariff rates are also expected to increase by approximately 6.5% over last year's levels.

For our facilities segment, we expect an average capacity of 123 million barrels of oil equivalent per month, an increase of 17 million barrels per month over the 2012 volumes. The increase is primarily due to a combination of new projects placed into service throughout the year, the acquisition of the USD rail assets, and the full-year impact of the BP NGL assets. I would note that we have added a line item in our facilities segment guidance to capture volumes handled by our crude oil rail terminals. Adjusted segment profit is expected to be $0.41 per barrel in 2013.

For our supply and logistics segment, we expect volumes to average approximately 1.1 million barrels per day compared to 1 million barrels per day in 2012. The increase is due to anticipated increases in our lease gathering activities as we expect domestic production to continue to increase. Adjusted segment profit per barrel is expected to be $1.49 which is $0.84 lower than the $2.33 generated in 2012. We expect differentials to moderate after the first quarter of 2013 when additional pipeline infrastructure is expected to be placed in service. However as Greg mentioned, should differentials be more favorable than expected, there would be upside to our guidance.

Let's now move on to our capital program. During 2012 we invested approximately $1.2 billion in organic growth projects which is in line with the guidance range provided last quarter. As reflected on slide nine, our expansion capital expenditures for 2013 are expected to total approximately $1.1 billion. And as is typical with our capital program, this is comprised primarily of a number of small- to medium-sized projects. The expected in-service timing of the larger projects in our capital program is included on slide 10.

I'll provide a status update for a few of our larger investments now. I'll start with our Mississippi Lime pipeline. The segment from our Garber Station to Cushing is expected to be in service in May of 2013 and a segment from Byron to Cushing is expected to be in service by July of 2013.

Now in South Texas, we previously expected some of our assets to be in service in December of 2012. However, the in-service dates have slipped into 2013.

The following assets are expected to be in service by March 1, 2013. First our Eagle Ford joint venture pipeline from Gardendale to Three Rivers and Corpus Christi, and the northeastern lateral of our Gardendale gathering system and our stabilizer at Gardendale. Our Corpus Christi dock is expected to be in service by June 1, 2013, and both the extension of our joint venture line to the Enterprise Pipeline at Lyssy and the completion of the western lateral of our Gardendale gathering system are expected to be in service in August of 2013. A map of our Eagle Ford area assets is reflected on slide 11.

In the Gulf Coast area, we have a pipeline project to connect our Mississippi-Alabama pipeline system to the Gulf Coast refinery. This is a $95 million project that is supported by a shipper commitment and the line is expected be in service in the fourth quarter of 2013.

In Canada, we remain on track to bring our Rainbow II diluent pipeline into service by June 1, 2013. The pipeline will transport diluent from Edmonton to our Nipisi terminal to meet the increasing demand from heavy oil producers in that area.

In the Rockies, we expect to invest approximately $90 million for our 36% share of the cost to expand the White Cliffs pipeline. That pipeline is operated by the same group.

At our terminal at St. James, we've begun construction of our 1.1 million barrel phase five expansion. We are also improving the connectivity to our rail facilities and the loading capacity of our dock. We expect this construction to be complete near the end of 2013.

We also have several rail projects in progress including the expansion of our loading capacity at Manitou and our Van Hook facilities in the Bakken area, and our car facility in the Niobrara. Our DJ Basin loading terminal at Tampa, Colorado, is expected to be in service by the fourth quarter of 2013 and the expansion of our Yorktown, Virginia, unloading facility is expected be in service in July of 2013. We are also developing a rail unloading terminal in the Bakersfield area that will cut into our pipeline infrastructure there. We anticipate that being in service in the first half of 2014.

Shifting to maintenance capital, our maintenance capital expenditures for the fourth quarter were $48 million, resulting in a 2012 total expenditures of $170 million. We expect maintenance capital expenditures for 2013 to be in the range of $160 million and $180 million.

On the acquisition front, during 2012, we completed approximately $2.3 billion of acquisitions. The vast majority of this total relates to the BP Canadian NGL assets, USD rail terminals, and Chesapeake's Eagle Ford gathering system. We continue to be very active in evaluating potential opportunities, but for competitive reasons and due to confidentiality restrictions, we're unable to discuss any of the specifics with respect to future activities.\\15.18

So with that I'll now turn the call over to Dean to discuss PNG's operating and financial results.

Thanks, Harry. In my part of the call, I will review PNG's fourth quarter and full-year operating and financial results, review PNG's performance relative to our 2012 goals, provide an update on PNG's first quarter and full-year 2013 guidance, and cover our 2013 goals.

Let me begin by discussing PNG's fourth quarter and full-year 2012 results released last night, the highlights of which are reflected on slide 12. PNG reported fourth quarter adjusted EBITDA, adjusted net income, and adjusted net income per diluted unit of $35.2 million, $23.2 million, and $0.31 respectively. In comparison to our 2011 fourth quarter results, adjusted EBITDA increased approximately 5%, and adjusted net income and adjusted net income per diluted unit were the same as prior period results.

For the full year 2012, PNG reported adjusted EBITDA, adjusted net income, and adjusted net income per diluted unit of $122.4 million, $77.2 million, and $1.04 respectively. Full-year adjusted EBITDA results were $1.4 million above the midpoint of our November guidance. In comparison to our 2011 full-year results, adjusted EBITDA, adjusted net income, and adjusted net income per diluted unit increased 14%, 13%, and 7% respectively. As reflected on slide 13, these results marked the tenth consecutive quarter that PNG has delivered results in line with or above guidance.

With respect to distributions, in January we announced a quarterly distribution of $1.43 per unit on an annualized basis. This distribution, which is payable next week, is equal to the distribution that was paid in November 2012. For the full-year 2012, PNG increased distributions paid to limited partners by approximately 2.7% over 2011. Our distribution coverage for the fourth quarter and full-year of 2012 was approximately 124% and 108% respectively. PNG continues to be financially well-positioned.

Included on slide 14 is a condensed capitalization table. As of December 31, 2012, PNG's long-term debt to capitalization ratio was 29%, the long-term debt to adjusted EBITDA ratio was 3.9 times, and PNG had $168 million of committed liquidity.

Looking back on last year, and as detailed on slide 15, we delivered solid results relative to our first two goals for the year, namely delivering financial results above guidance and completing our organic growth projects on time and on budget. Regarding our organic growth projects, we brought over 17 BCF of incremental working gas storage capacity into service at Pine Prairie and Southern Pines. Overall we exited 2012 with aggregate capacity of approximately 93 BCF, a 22% increase over the 76 BCF we had entering into 2012.

With respect to the third goal, to selectively pursue accretive acquisitions, we evaluated a number of opportunities throughout the year, but none met our criteria. I would note that we remain active in pursuit of potential acquisition and business development opportunities that provide a strategic complement to our business. Overall, we are pleased with PNG's 2012 financial performance during a period of continued challenging market conditions, and I want to thank the entire PNG team for their contributions to these results.

Prior to discussing our 2013 guidance, I would like to note that there has been little movement in the gas storage market since our last conference call with continued narrow seasonal spreads. These historical and current values are reflected on slide 16.

As shown on slide 17, as we entered the 2013 storage season and look forward to 2014 and 2015, PNG has leased approximately 95% of its available capacity for the 2013 season and approximately 80% and 50% respectively for the 2014 and 2015 seasons. These figures include two firm storage agreements that total 20 BCF at Pine Prairie under which a subsidiary of PAA will hold the capacity. Both agreements with PAA are market-based agreement with the first 10 BCF contract having a two-year term commencing March 31, 2013, and the other 10 BCF contract having a three-year term starting on the same date.

From PNG's perspective, these agreements allow PNG to maintain a higher percentage of contracted capacity while avoiding the earnings volatility and working capital costs that would have come along with managing a larger percentage of its capacity on a merchant basis. From PAA's perspective, it will be able to utilize its lower-cost working capital to manage the capacity, and will have the opportunity to realize any option value inherent in the leased storage capacity. We view this as a win-win transaction that has attractive elements for both PNG and PAA.

Let me now turn to our 2013 guidance. Our first quarter and full-year guidance is reflected on slide 18. PNG's adjusted EBITDA guidance range for the full-year 2013 is $117 million to $123 million with a midpoint of $120 million. On balance, incremental revenues from our recent and planned low-cost capacity additions are expected to largely offset the impact of higher price contract expirations on existing capacity.

Based on achievement of the midpoint of our 2013 EBITDA guidance, coverage of our current distribution levels should approximate 103%. Additionally, our 2013 capital program calls for approximately $42 million of organic growth capital investment. This capital primarily relates to continued capacity expansion via incremental leaching of existing caverns at Pine Prairie and Southern Pines.

Our 2013 goals are straightforward. Number one, deliver operating and financial results in line with or above guidance. Two, successfully execute our organic growth program. And three, continue to selectively pursue potential acquisition and business development opportunities that provide a strategic complement to our business.

Although we continue to face challenging market conditions, we are executing our strategy well in the current environment and believe we are positioned to generate upside to our forecasts if market conditions improve or volatility increases.

We appreciate your continued investment and support of PNG and look forward to updating you on our progress throughout the year. With that, I'll turn it over to Al.

Thanks, Dean. During my portion of the call, I will review our financing activities, capitalization, liquidity, and distribution coverage, as well as our guidance for the first quarter and full-year of 2013.

As reflected on slide 19, in December we raised $750 million through the sale of $400 million of 10-year senior notes and $350 million of 30-year senior notes with interest rates of 2.85% and 4.3% respectively. We also raised $167 million including our General Partner's proportionate capital contribution during the fourth quarter through our continuous equity offering program by issuing 3.6 million common units. This brings the total equity raised through the continuous equity offering program for 2012 to $524 million including our General Partner's capital contribution. Additionally, we have retained cash flow and raised equity and debt capital in advance of investing it in our organic or acquisition capital programs.

We have applied a portion of the excess proceeds to reduce our inventory-related borrowings. Accordingly, we have pre-funded the equity component of our 2013 capital program with room to expand the program or complete moderate sized acquisitions without needing to raise more equity.

We have also raised sufficient capital to enable us to repay our $250 million 5.625% senior notes that mature in December 2013 using short-term borrowings from our credit facilities. As a result, given our ongoing access to the continuous equity offering program, absent significant acquisition activities, we do not anticipate we will need to execute an overnight or marketed equity offering in 2013.

Before moving on to our balance sheet, liquidity, and credit metrics, I wanted to briefly touch on PAA's financial growth strategy as summarized on slide 20. Slides 21 and 22 provide additional detail regarding our consistent and disciplined execution of this strategy which we believe has served us well. A key component of our strategy includes targeting high, BBB-equivalent credit ratings, and our financial growth strategy has been designed to target this higher credit rating.

We were pleased that we received upgrades from the rating agencies during 2012 to BBB and BAA 2, which is currently the highest rating level for any MLP. We are hopeful that the rating agencies will expand the MLP eligible ratings to include BBB+, BAA 1 rating level. We believe our size, scale, diversification, and performance through various cycles, as well as our strong credit metrics and disciplined adherence to our financial growth strategy, should make as is a candidate for the inaugural BBB+ BAA 1 class of MLPs.

Moving onto our balance sheet liquidity and credit metrics, as illustrated on slide 23, PAA ended 2012 with strong capitalization and credit metrics that are favorable to our targets and approximately $2.4 billion of committed liquidity. At December 31, PAA's long-term debt to capitalization ratio was 47%, our total debt to capitalization ratio was 51%, our adjusted EBITDA to interest coverage ratio was 8.2 times, and our long-term debt-to-adjusted EBITDA ratio was 3.1 times. I would also note that slide 24 summarizes relevant information regarding our short-term debt, hedged inventory, and line fill as of year-end.

As we have discussed previously, we target minimum distribution coverage of at least 105% to 110% on baseline distributable cash flow or DCF. When our business outperforms baseline expectations, we can generate meaningfully higher distribution coverage. Our practice has been to retain excess DCF to fund our growth.

As reflected on slide 25, PAA has consistently delivered solid distribution growth and coverage throughout a variety of industry conditions, and in 2012 our coverage totaled 160%. Based on the midpoint of our guidance for DCF and distributions to be paid throughout the year, our coverage for 2013 is forecast to average approximately 125%, and we will retain approximately $285 million of excess DCF or equity capital. This is our least expensive source of capital, and given PAA's historically strong performance in our supply and logistics segment, it is also a meaningful source of capital that enables us to convert market-related over-performance into enduring fee-based cash flow streams.

Moving on to PAA guidance for the first quarter and full-year of 2013, as summarized on slide 26, we are forecasting midpoint adjusted EBITDA for the first quarter of 2013 of $615 million and $2.025 billion for all of 2013. Although our 2013 guidance reflects an approximate 4% decrease in adjusted EBITDA relative to last year, a very important take-away point is that our fee-based transportation and facilities segments are forecast to grow 15% in 2013, primarily reflecting the benefit of capital investments made in 2011 and 2012.

I would also point out that the $1.1 billion we expect to invest in 2013 is also focused on our fee-based segments, and that the majority of the cash flow benefit from these investments will not be realized until 2014 and beyond. We believe the cumulative effect of these capital investments provides us with good visibility for continued multi-year growth in baseline adjusted EBITDA. The slight year-over-year decrease in our adjusted EBITDA for 2013 is associated with a 30% decrease in our supply and logistics segment as our guidance assumes a return to baseline-type market conditions after the first quarter.

There are a number of infrastructure projects that are projected to be placed into service around the beginning of the second quarter of 2013. As a result, we have adopted a baseline outlook for the last nine months of 2013 as it pertains to market opportunities for this segment. As in prior years, there is an upward bias to our guidance if market conditions for the supply and logistics segment remain favorable beyond the first quarter.

We also wanted to share two other observations about our guidance for 2013. The first relates to seasonality that is primarily associated with our NGL business conducted in our supply and logistics segment. Our NGL volumes and margins are typically highest in the first and fourth quarters of each year, the forecast for this seasonal impact to our final logistics segment adjusted segment profit is illustrated by the yellow bars on slide 27.

The second observation relates to the quarter-over-quarter results that we expect to generate during 2013. As illustrated on slide 27, throughout 2013, we expect our fee-based transportation and facilities segments to generate favorable comparisons relative to the corresponding quarters of 2012. However, due to the exceptionally strong results delivered in 2012, our guidance assumption that favorable market conditions benefiting the supply and logistics segment will not extend beyond the first quarter, our baseline forecast results negative quarter-over-quarter comparisons for the last three quarters of 2013 relative to the corresponding quarters of 2012.

Before turning the call over to Greg, I wanted to mention that our fourth quarter depreciation and amortization expense was approximately $40 million higher than the midpoint of our guidance, primarily due to year-end true ups and adjustment on the carrying costs of certain assets including the expected asset sale that Harry mentioned earlier.

With that I'll turn the call over to Greg.

Thanks, Al. Rail related activity, especially with respect to crude oil, has been attracting a fair amount of attention, both from the industry press and financial analyst reports. And we have recently increased our investment in rail assets.

In relation to our entire business platform, our rail related activities represented a relatively modest component of our adjusted EBITDA. However, these activities serve a very important purpose with respect to balancing disconnects in the regional supply and demand volumes and qualities, and bridging the gaps in pipeline access to the East and West Coast. With that in mind, I wanted to take just a few minutes to summarize the strategic rationale for expanding PAA's rail activities into crude oil transport over the last few years as well as our competitive positioning. I intend to be brief and will hit just the top of the waves with my comments, but we have included some slides in today's presentation to expand on my comments. And there is an even more detailed presentation available on our website.

The recent and forecasted renaissance in US crude oil production is having a profound effect on the transportation routes and modes by which end markets are supplied. Crude oil flows are changing, new infrastructure is being constructed, and the historical pricing relationships for various qualities and geographic locations of crude oil are in flux. As a result, both producers and refiners are actively seeking to optimize their profitability during a dynamic and evolving period in the industry.

At PAA we believe that rail, particularly when coupled with the scale and scope of PAA's existing asset footprint and business model, provides our customers with the optionality they seek to take advantage of premium markets in the case of producers, and attractively priced feed stocks in the case of refiners. As shown on slide 28, PAA has been directly involved in rail related transportation of energy related products for over 11 years, beginning with our interest into the NGL business with the acquisition of CANPET in 2001. In 2010, we began expanding our rail transportation activities to include crude oil by working closely with USD to construct a rail unloading facility at our St. James Terminal through our facilities segment and also commencing commercial operations for crude oil rail movements through supply and logistics segment.

Over the last three years, we have taken additional steps to construct or acquire multiple additional rail loading and unloading facilities including the acquisition of USD's crude oil rail assets in late 2012. As shown on slides 29 and 30, we currently have an extensive crude oil rail network with loading facilities that service the three most active US shale and resource plays, and unloading facilities that currently service markets on the East and Gulf Coast. We are also in the process of developing an additional unloading facility that will enable us to service markets on the West Coast. Our current combined crude oil loading and unloading capacity is 140,000 barrels a day each for loading and unloading capacity. And we have expansion projects underway that will increase our daily loading capacity by 70% and more than double our daily unloading capabilities.

We believe that PAA's combined crude oil and NGL rail network, which is shown on slide 31, is one of the largest, if not the largest, networks in North America and offers our customers tremendous optionality to transport products and access markets. There will undoubtedly be periods and regions where demand for rail related transportation services will subside as new pipeline infrastructure is constructed and differentials and end markets change. As a result, over time rail activity will taper off, but we believe that rail will continue to play role in balancing the market over the long-term.

As detailed more fully on slides 32 and 33, given the potential for an extended period of dynamic and volatile market conditions, we believe the combination of scale, scope, and flexibility of PAA's rail capabilities, our extensive network of crude oil and NGL pipelines, terminals, trucks, and barges, and our proven business model provide PAA with a competitive advantage over other rail participants with smaller scale and limited scope. As Harry indicated, we have expanded our reporting metrics to incorporate additional information on our rail activities, and we look forward to updating you on our results in this area in future calls.

Rail is just one component of PAA's story in our positive outlook. As we look forward across all of our business platforms and activities, we believe that PAA is very well-positioned to continue to deliver solid operating and financial performance for the next several years and beyond.

As represented on slide 34, we expect continued increases in North American crude oil production with much of this activity occurring in specific shale and resource plays throughout the US and Canada, where PAA has a significant asset presence. As a result, we expect to enjoy continued strong demand for our services that will not only increase or maintain utilization of our existing assets, but also provide multiple opportunities to expand and extend our asset base on attractive economic peers. These fundamentally sound conditions are a primary driver for our multi-billion dollar project support portfolio, supporting our strong visibility for distribution growth.

With this outlook in mind, let me now review our 2013 goals which are highlighted on slide 35. Specifically during 2013, we intend to deliver operating and financial performance in line with or above guidance, successfully execute our 2013 capital program, and set the stage for continued growth in 2014 and beyond, increase our November 2013 annualized distribution level by approximately 9% to 10% over our November 2012 distribution level, and finally, selectively pursue additional strategic and accretive acquisitions. We do look forward to updating you on our progress towards these goals throughout the year.

Prior to opening the call up for questions, I also want to mention that we will be holding a joint PAA and PNG 2013 analyst meeting on May 30 in New York. If you have not received an invitation but would like to attend, please contact our Investor Relations team at 713-646-4489.

Once again, thank you for participating in today's call and for your investment in PAA and PNG, and the trust that you have placed into us. We look for to updating our activities in May, and operator, we are now ready to open up the call for questions.

(Operator Instructions)

Darren Horowitz, Raymond James & Associates.

Morning guys. Greg, a couple of question. The first one leverages off of what you were discussing with regard to slide 34.

When you look at the amount of lower 48 production growth for crude oil, specifically in the Eagle Ford, and let's just say by that 2016 to 2018 timeframe, you get up to wherever it is, 1.6 million or 1.8 million barrels a day. How much of an influence do you think that ultimately has, not just on the Gulf Coast refinery network, but more importantly on what seems to be a rather looming significant disconnect in Louisiana light sweet? It would occur to us that you might have effectively a double discount in the Gulf Coast where you see significant dislocations with Louisiana light relative to Brent.

Darren, I think it is fair to say that there is going to be a lot of cross-currents that are going to challenge conventional relationships for the next several years. And again, part of that is going to be sheer volumetric imbalances, and some of it is going to be an over concentration of light, sweet crude in particular areas, and I think that is what you are referencing to.

There are a number of alternatives that will become available over time, and they will evolve. I think, for example, what we see in the next 12 months may differ from what we see 12 months beyond that point, or 24 months into the future. And so I think logistics is going to be a critical part of that.

Rail, I think is going to be the pressure relief valve in the short-term. Longer-term, there is issues with respect to Jones Act relief, and potentially either exporting crude or exporting slightly refined crude products when you have condensate splitters, et cetera. So, I think the important thing from our perspective is we are really prepared for it to go any way it wants to and we will be a participant. But I don't think there is any one solution that will come about. And certainly none of us are very good at predicting what Washington DC may or may not do, however logical or illogical it appears.

No, I appreciate the color. My final question is more on this discussion around condensate production, certainly with the growth coming out of the Eagle Ford and other areas.

Obviously, you've got a lot of condensate moving north on cap line, and I recognize the demand drivers that underpin that Rainbow II line expansion. But as you guys look forward, do you think there's going to be enough Canadian diluent demand to keep pace with the expected condensate production growth? And when does it get to a point where it might just make more sense for you all to think about constructing a condensate splitter in Louisiana, possibly near St. James, and start thinking about exporting NAPs and gas oil?

From our perspective, it seems that it would certainly allow you guys to become even more vertically integrated and give you a lot of bang for your buck leveraging your existing transportation and facilities footprint, right?

Hi, Darren. This is Harry. Let me just make a couple of comments.

There are a lot of things driving the market as well. Condensate splitter is obviously one alternative. St. James is certainly a location where we could have a condensate splitter. There are also some refineries that are tweaking, or have permits in place, or are applying to be able to run more, lighter crudes too. And you will see some of the pet-chems trying to run some of the condensates as well.

So I think it goes back, a lot of what Greg said earlier, there is going to be a lot of twists and turns over the next couple of years. And just trying to position ourselves to be able to participate, whether it is moving up to Canada, going to refineries, going offshore. Greg, chime in if you want to.

Maybe build a splitter in St. James.

I don't think we are prepared to comment on that. I will say this, Darren, that markets are pretty resilient, and if the discounts for condensate get wide enough, the demand for condensate in Canada is going to go up, and will turn around and equalize. So I think there is -- clearly there is no static forecast anywhere, and there is going to be cross-currents.

For example if the Eagle Ford continues to climb at extremely high rates of production, I think it could have an impact because of the differentials on how much crude could be economically drilled in the Bakken. And so there is that type of cross-currents going on. So, all I can say is we've tried to position ourselves, but no matter what happens, we win and in some cases we win big.

Yes, I appreciate it, Greg. Thanks.

Steve Sherowski, Goldman Sachs.

You mentioned in the supply and logistics segment that a return to more baseline market conditions is likely to follow the first quarter of this year due to new infrastructure coming online. I was just wondering, are you looking at any corridor in particular? Or I guess asking it another way, is there any particular corridor where that is driving the majority of margin growth in the segment?

Well, certainly, we are seeing some significant activity and opportunities to use our assets and our business model in West Texas, as we've seen differentials widen out quite a bit there, Steve. There's a number of pipeline projects that are supposed to come into full service or partial service around the first of April. I will say that we have a history of under-promising and overperforming, so it is likely some of those projects could hit a roadblock or speed bump, and if they delay, there's going to be benefit to our business model that we are not currently reflecting.

I would also point out that the other area where you have activities going on is in the Rockies. Clearly the increased rail capacity and the increased ability to unload that capacity has relieved some of the differentials up there, and we expect some of those proportionately to come on and the traffic to pick up.

And then also I would just say in the Eagle Ford, over the next 12 months but in the near-term, there is just quite a bit of pipeline capacity coming on. So I would say that the biggest three areas are the big three shale plays right now, are South Texas, West Texas, and the Bakken. So yes to your question in all three of those areas.

Okay, understood, thanks. And just as a quick follow-up question.

In your transportation segment, for the first quarter guidance, it looks like the bottom end of the range is a little bit lower than the first quarter of last year's results. I was just wondering what scenario would drive that?

You've got me at a loss here. Harry, you going to bail me out there?

I think it was probably NGL related last year. I think we had a pretty strong first quarter in the NGL segment.

Okay. Primarily NGL related?

Yes, let us verify that, but I think that was the case.

Okay, that is it for me. Thank you.

Brian Zarahn, Barclays Capital.

Just continuing on the rail terminal acquisition. It seems like the majority of the capacity is contracted to third parties. Do you anticipate your marketing group to become a bigger customer over time as contracts roll off? And can you give us a general sense of what the current contract length is on the rail assets?

Certainly, there was a fair component of third-party contracts but we were also a user of those rail facilities as well. For example, obviously at St. James.

And then I would just point out, that the answer your question is yes, but primarily because of us increasing the capacity. We are going to go from roughly 140,000 barrels a day of loading capacity to 250,000 barrels, and we are going to go from 140,000 barrels days of unloading capacity a day to over 300,000 barrels.

A fair portion of that, certainly, we will make available to third parties when the price is right. But we also have clearly the ability through our supply and logistics, to actually be a part of that transport. Now we will always, the way we do it, we will charge our supply and logistics segment a fee, just the same as we would charge a third-party, so it will show up partially in facilities and then partially in the S&L sector.

And then in terms of contract length, shorter-term two- or three-year contracts on average, or can you talk about that a little?

They generally, I think, Harry, it is fair to say, five years is probably a long-term contract for rail, and they will be as short as a year, mini spot. And you will give several three-year type contracts, but I think the longest that we've actually initiated and signed is probably five years.

Yes, that is right.

Okay and then in the lease gathering business, I guess longer-term, what type of growth potential do you see in the various basins? Do you think you could be over 1 million barrels a day in terms of lease gathering?

We'd better.

Brian, if you look at what we are looking for in the Eagle Ford area, clearly we have, I think -- if we'd had this discussion 18 to 24 months ago, we thought the Eagle Ford was only going to be probably about 1.2 million barrels per day. We've tweaked that up to about 1.6 million.

And in the Permian area, where we had originally targeted probably 1.6 million barrels, we think that could growth to as high as 2 million barrels a day. And there's a lot of again cross current issues, but if you just look at the sheer increase in those volumes, and you add onto it the Bakken, we better be at least maintaining our market share should drive is up a bunch. And we are not about just maintaining, we are about growing.

Okay, and then the last one from me. More from an industry perspective, we are beginning to see some MLP consolidation. As someone who has actually done -- acquired an MLP, can you just give your general view of the pace of consolidation? Will it continue or do you think it's going to be a very gradual process?

I think it's probably going to be pretty dynamic. That word gets used a lot around here, but I think, Brian, we are up to 90 plus MLPs today. My understanding is that there is probably 10 to 15 more in the hopper. It would surprise me if the answer is that number just gradually goes up and doesn't contract all with respect to some consolidation. So I think MLP consolidation will be a component going forward, and certainly we've got and had our eyes on things, and there is fundamental industrial logic as to why some of that consolidation should happen.

It is easier to do when the markets aren't as robust as they are right now, because quite candidly, people -- capital is abundant and it is relatively cheap, and people would rather do their own MLP than they would consolidate. So, a little bit of aberration in the market wouldn't hurt that at all. But I will tell you just structurally, MLP consolidation is challenging to do and you have to really be committed to it. And you've got to know that the seller is committed to it because if you have a two-tiered GP structure on both sides of it, that is a whole lot of legal fees and investment banking fees to get that deal done.

Okay, appreciate the color, Greg.

Ross Payne, Wells Fargo Securities, LLC.

Quick question for you, I know cap line is being reversed and is moving condensate north and up into Canada. Does it ever make sense to backload some of these rail cars coming into St. James with condensate?

Let me clear it up. I think I understood what you meant, but I want to clarify before I say. Cap line, right now, is not reversed. It's moving basically crude and condensate north, and it is probably -- Harry, what is it running, about probably 30% of capacity?

35% maybe.

So clearly there is capacity there. I think, from time to time, depending upon what the discounts are and what the comparable travel logistics are, there could be reasons to bring different types of crudes into St. James to put on the cap line system. I think the answer may be different today than it is six months from now or 18 months because, again, of this robust activity that is going on in all these areas. So, I don't think there -- it is really prudent to try and forecast any particular trend as to what is going to be shipped on that at the margin, because I think the margin will change constantly.

I think you might see barge movements come over into St. James and go up cap line. We are set up to receive barge as well.

Okay. All right. So you could also be looking at that as just a crude south at some point as well?

Yes, and I think you can also look at St. James. Harry, we are also making modifications to load ships, and so again, I think it's just going to be a constant state of change. If there is such a word as a constant state of change.

That is a good thing for you guys. All right, thank you, Greg.

Becca Followill, US Capital Advisors.

On the crude rail, thanks for providing that additional data. You guys have the first quarter going from 235,000 barrels a day versus an average year for 280,000 which implies greater than 300,000 by year-end. Can you talk about the -- I know part of that is additional loading, unloading facilities, but can you talk about how many rail cars you are going to from the first quarter to the fourth quarter? And then beyond 2013, what does the trajectory look like in terms of those volumes?

Harry, you want to take that? I can give a directional comment on that, but I think we are supposed to pick up close to 2,000 rail cars by the end of 2013?

And we will be at just over 6,000 total rail cars by the end of 2013. A lot of that volume doesn't necessarily go on our rail cars either, Becca, but I think the range is probably 2,500 going to 6,000.

Yes, on the crude side, Becca, I think it is probably close to 2,000 just associated with the crude side of it. Our NGL is kind of a constant, evolving business and it got bigger, obviously, when we did acquired BP's NGL assets.

And in some cases, we provide rail cars to our customers. So they might not be where we are actually controlling the direction of those cars. And as Harry said, we actually then have loading capacity that we provide for a fee to somebody who's got their rail car going to a different location and vice versa on our unloading.

Thanks, and then the trajectory beyond 2013?

We peak out just about at that level right now, as we see it, and then we've staged in, and I don't want to go into a lot of detail on this call. We certainly will be providing some additional information in our analyst meeting on May 30 as a way of a hook to get you there. But we will actually -- we've maintained, if you will, contractual ladders on our rail cars the same way we do on debt maturities, just kind of in reverse right now.

We think it is going to be robust for rail cars for the next couple of years. But if you were looking at our profile, you would see tailing off toward the end of that three to five-year period, just because, again, pipelines are the most efficient way to move crude when you have established routes. Right now we just see for the next three to five years, those routes are going to be -- lack clarity as to where the best place to build a pipeline is. And therefore rail cars become the most versatile way to get it to the best market.

Thanks, and then on a supply logistics segment, same thing, the first quarter LPG sales go from 270,000 barrels a day to a full-year of 190,000, implying a pretty big drop off across the year. So can you talk about where you see that drop off?

It is the seasonality, I think. When you -- if you recall back to Al's comments, our fourth quarter and our first quarter are generally our most robust for the NGL sales. Another place we are actually storing it. So when we are storing it, we are not counting those volumes as actually moving.

So clearly what you're seeing is probably some shifting of a weak winter in the late 2012 into -- coming into -- it will be coming out of storage in 2013. And a normalization of that into the December, the fourth quarter of 2013. So there is no underlying story there of deterioration or erosion, it is just simply the way you shift the seasonality between quarters.

Yes, I think the other impacting it, Becca, is if you remember when we did the BP acquisition, we stated that they were net long as a supplier -- in the supply area. Our LPG business, or NGL business is typically, we were -- our facilities were in the market areas. So, a lot of times we would be buying from third parties to fulfill our obligations, and BP would be selling to third parties to dispose of the supply they had. And what you're seeing in 2013 is a consolidation of that effort.

So, some of the BP supply is actually going to our markets in 2013. That wasn't fully implemented in 2012 because of pre-existing conditions -- arrangements that both of us had.

All right, thank you so much, guys.

Connie Hsu, Morningstar.

I just have a quick question on Plain's General Partner incentive distribution. With the BP acquisition, the GP agreed to, for the first time, a $10 million reduction in IDR's. I'm wondering if this figure, if we should expect it to increase over time, especially with larger acquisitions going forward?

Just to clarify, Connie, this is actually the fourth time that we've actually modified the IDR's. It is the first time, and the $10 million reference was a permanent reduction. The others have been temporal.

In connection with the BP acquisition, just for the other listeners out there, we agreed to a $15 million reduction in the IDR for two years and then decreasing to $10 million permanently for perpetuity. And so, that is, Connie, the first time that we've actually had a permanent reduction in there. As far as what we've always said and we continue to reiterate, our General Partners understand the value and the burdens of the IDR and have shown that they will be very flexible to accommodate larger transactions.

Clearly, the IDR burden increases our cost of capital. That is really not an issue at all with respect to organic growth, because there is a huge spread between our returns on our projects and our current cost of capital, even including the GP IDR. But where it really challenges you is on the initial transaction -- on big transactions, because acquisition transactions typically, you are having to pay a higher multiple, and it takes time to feather in the synergies or have the commercial benefits that you are forecasting.

So, I think it is fair to say that our General Partner has steadfastly said they will support the growth and make whatever appropriate modifications that have been requested of Management. I think the longest it has taken us to get approval for an IDR reduction is like 48 hours, when we've got a transaction that is in front of them. And so I think what you should walk away from here is that PAA's General Partners is going to be very flexible and supportive.

John Edwards, Credit Suisse.

Greg, I was just wondering if you could comment on, given several other partnerships or companies that have been looking at re-purposing natural gas pipelines into crude pipelines, just your thoughts on how that impacts your plans and strategies going forward?

Well, we certainly take all potential projects out there into mind, any time we are looking at either expanding or -- our pipelines or building new pipelines or even making long-term commitments with respect to say rail cars, et cetera, because clearly pipelines are the most efficient over time, it's just they may not be taking you to the right market. And so, we have looked at -- we certainly monitor all of the announced projects.

We monitor probably several projects that we know are being looked at that may not be visible to the public. And we've dialed those into our thinking, and certainly have reflected a realistic if not conservative impact in the forecast that we provide to the financial community.

Okay, and just your thoughts on the number of or the backlog of projects that you are evaluating? You've got this $1.05 billion to $1.2 billion range for capital expansion this year, backlog, and maybe, is this a reasonable baseline for the next few years going forward?

What we've guided to so far is, and I was trying to think of the last public forecast we made from a multi-year. Last year I think we gave some charts that showed that we were going to show, I think for example, for 2013 we showed $700 million to $1 billion range with what we called an upward bias. Clearly we are now formalizing our guidance at $1.1 billion and so that upper bias is true. We'd also given ranges I think $500 million to $700 million beyond that ,again with the same kind of upward bias.

I think again the takeaway -- we wanted the people to know that roughly within the ranges that we've given, forget the upward bias, we believe that we will be able to generate very attractive distribution growth, partly because even with the falloff in investment activity levels. So if the investment activity levels remain in the $1 billion plus range, at a minimum it extend that visibility in perhaps even increases either the coverage of the potential growth situation there.

In general I would say we've got -- if we had this discussion 24 months ago, the number was about the same then as now. We had roughly about $5 billion backlog, of when I say backlog, it is a project inventory or portfolio of things that we are actively monitoring. Some are very high probability, some of which are maybe not so high, then some are actually just in the possible category. But what we've seen is, that when one falls out another one replaces it, or one doubles in size in terms of demand.

And so today we are sitting there again with kind of $5 billion plus. Out of that we've pulled in advance, I think the right way to say it, the projects necessary to fill up the $1.1 billion. Hopefully by the end of this year, 2013, we will have grown that $1.1 billion, I'd say there is still an upward bias to that, based on projects that we are trying to advance as we speak.

But our visibility in terms of what we would actually say, put in your model, is still probably in the $700 million range in 2014 and 2015 each. Not because we don't think you can't be higher, but because it is just not prudent at this point in time to assume that whatever we are looking at that is in the environment can't change. I think we've all seen it change, but if you like that answer, you're really going to love it if it stays this way.

All right, thanks for that. That is very helpful. Thank you.

Michael Blum, Wells Fargo Securities.

Two, one just to circle back on Ross' question, do you have any update in terms of the potential to reverse cap line?

No.

There has been a lot more press around lately, but nothing really that we can report.

Okay. The other question I had was actually around Cushing.

It just seems like Cushing inventories keep reaching new highs. There had been talk in the past and at some of your meetings about a potential overbuild at Cushing and Cushing rates being under some pressure as contracts rollover. I'm just curious, what you are seeing in terms of the environment there right now and if that is still a good assumption?

I think that the big difference between, and you are right I think two years ago, we made the comment that we worried that Cushing could be approaching an overbuild situation. In fact it may have gone so far as to say it probably will be overbuilt. But, I probably wouldn't have forecasted 1.6 million barrels a day out of the Eagle Ford, and 1.6 million going to 2 million barrels a day out of the Permian, and the Bakken being what it is. And then also having Oklahoma also start to participate in this renaissance of crude oil production.

So, today it is certainly not overbuild. There is actually more demand and we actually have some projects ourselves. So, I'm going to give you the same answer I gave you two years ago, it is just kind of two years behind. I think it is going to feel like one of these days it's going to get overbuild but we're not seeing it right now.

Harry any comments on that?

No, I think that is right. There is a lot of these pipelines that are being built into the corridors that move from West Texas down to the Gulf Coast are going to have some ebb and flow differences coming into Cushing. But as Greg said with the growing production forecast in mid-continent and West Texas it's -- there is certainly demand for tankage right now.

And I would also point out, Michael, that if and when that day ever does comes, we think PAA's tanks are at, if not near the top -- at the top of the list or certainly near it in terms of desirability because of their pure functional capabilities versus some of the tanks that are really purely repositories for financial arbitrage.

Okay, great, no that is very helpful. And my last question is just on PNG. I guess, as capacity rolls over there from contracts and with the plan B for PAA to continue to take more of that capacity over time, assuming the market does not improve anytime soon? And is there any limit to how much of that you want to own directly?

I think the takeaway there is PAA has been supportive in a lot of ways to PNG and will continue to be. We have, if you look at our capacity, not only lease today going out a couple of years, but also including the capacity we expect to build. I think next year we will still be 80% leased, assuming no rollovers from existing customers okay, and assuming no new customers. So I don't think there is any real identifiable need for PAA to step up to the plate in the next couple of years.

I think part of the situation may depend on how you view the markets, whether you think the markets stay this way forever, or whether you call a turn in the market in two or three years. We will be, again at the analyst meeting, sharing with you some pretty much in depth views on our view of what the natural gas storage market could look like over the next three- to five-years. And if you will ask me that same question then, I think the answers will probably be a little self-evident, but I don't want to go into it on the call here today.

Okay, thank you very much.

Ethan Bellamy, Baird.

Let me just follow up on Michael's question. Can you help us handicap the probability of acquisitions at PNG and what is the posture of the private owners? Are they coming around to a new normal in economics there or are they waiting for some sort of upturn in that environment before they sell?

Great question. I think what is different today, and I'll let Dean dive in here, Ethan, is I think 18 to 24 months ago we were probably one of the first ones that called, maybe a little bit longer than that, that we thought the market not only was going to get pretty soft but it could stay software for a while. It came in a hurry. Clearly, it didn't look that way in late 2009 or early 2010, but when it showed up, it didn't look pretty.

As far as the potential reduction in need for natural gas storage because of the increasing rise in production in natural gas and the US, and then also combined with competition in terms of new facilities coming on. I think what we are hearing now is, repeatedly, others are embracing, when you see people announcing they hope they break even next year on their gas storage facilities, et cetera, that is not what we were hearing from some companies two years ago. And so I think that the field for potential acquisitions is getting riper, and PAA clearly has its view on what long-term gas storage markets will be. And it's got a strong sponsor in PAA and that we can look at it in the mix of our entire business and talk about the counter-cyclical or counter-commodity balances that actually provide good risk management.

So, I would say we are going to -- you can call when people are going to give up and say that they have an isolated one storage facility is not a good business investment. Clearly, we have multiple storage facilities, and we also have an energy view across the entire US and Canada that gives us a little bit better platform to be able to consolidate into, if and when they are ready to consolidate. Dean, you want to comment on the people's views with respect to their assets?

Yes, Ethan, Greg is exactly right. When you look out there, I think it is going to come down to how committed these one owner facility owners of one facility are, how patient they want to be, things will change, but are they committed to that? I think some of them got in late and thought things were going to continue as they were a few years ago. And I think you will see some reevaluation of what they might do particularly as we go through the next two to three years. So, that is what we are seeing.

I think the owners of facilities that are committed to it and have a large portfolio, I think they are patient, and it comes down to the strength of the support and the parent, there. So, I think you will see some or we will see some opportunities, but it comes down to commitment and patience to the business.

Thank you, switching gears to -- back to oil. Greg, you talked about expectations for volumes coming out of the EFF and the Permian, what is your expectation for the Niobrara? And do you think the White Cliffs expansion is adequate to cover those volumes or do you think another expansion or another line is in order?

Well I think both the expansion of White Cliffs, and also we're putting in a rail facility at Tampa, and we've got some volume metric commitment, Ethan, behind that. And we've got certainly some other assets in there that can provide additional relief. So I think, ultimately, moving volumes out of the Niobrara probably won't be the problem. The question is where should they go?

And at this point in time rail provides a better swing factor for those volumes on the margins than additional line into Cushing. And so, ultimately, where they should be routed to is a little bit of a function of just how fast they build it and how are the markets shape up.

Harry wouldn't you agree with that?

Yes, so between car and our Tampa facility, we will have 100,000 barrels a day of rail capacity out of there. You've got local refinery demand that is 50,000 or 60,000 barrels a day, and then you've got White Cliffs with the expansion that will be 160,000 barrels a day, so --.

We think it's probably going to be adequate and clearly once we have, and I think early '14, we would expect to have our first half of 2014, we expect to have our Bakersfield unloading facility and that would give you access to a market right now that is clearly a pretty good premium. And once we get it there we have the ability to distribute the crude throughout our existing pipeline system. So, again, it's a dynamic market that if you just look at the current slate of alternatives to take it to market, you would be probably looking at an incomplete picture that is going to change over the next 12 to 16 months.

Thanks, guys, appreciate it.

Mark Reichman, Simmons.

My questions have been a addressed. Thanks.

Dennis Coleman, Bank of America Merrill Lynch.

Great, thanks and good morning. Obviously a lot of exciting market stuff going on here, I wonder if I might just finish with more mundane question about the balance sheet and the credit rating.

I'm encouraged to hear that you're targeting that high BBB range, and you and a couple of your peers seem to be poised for that. I wonder, as you are think about that, are you thinking that from here, with your credit ratios are quite strong? Are you thinking you need further improvement to achieve the high BBB and maybe just talk about how your conversations with agencies are going in that regard?

No, Dennis, do we think we need to improve our credit profile, our balance sheet from here, I think the short answer would be no. We think as we look at the group of MLPs, that if the agencies do open up the BBB+-equivalent, our stats and size and performance and credit metrics are right there with the group that would be looked at for that. And so, ultimately, as I commented, we think our performance, how we manage the capital structure over a large number of years is there, once you decide to actually open up that top level of BBB+ criteria. We think that capital markets, the US in that same light with how we trade today. Clearly, again, the agencies have to take the step to say, yes we're going to have a BBB+ MLP, and so we are hopeful that that occurs.

Okay.

I might even just say expected.

As am I, I think the performance does speak for itself, it sounds more like it's an agency decision then financial. So, thanks very much.

Thank you, and I'll turn it back to your our speakers for any closing remarks.

We appreciate everyone for participating in today's call, and we know it's been long. Hopefully it's been informative, and we look for to updating you in our call in may. Thank you.

Thank you. Ladies and gentlemen this concludes our conference for today.