Plains All American Pipeline LP (PAA) 2013 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the PAA and PNG third-quarter results.

(Operator Instructions)

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

Thank you. Good morning. Welcome to Plains All American Pipeline and PAA Natural Gas Storage third-quarter 2013 results conference call. The slide presentation for today's call is available in the investor relations sections of our websites at paalp.com and pnglp.com. I would mention that the throughout the call we will refer to the companies by their New York Stock Exchange ticker symbols of PAA and PNG respectively.

As a reminder, Plains All American owns the 2% general partner interest and all the incentive distribution rights and approximately 61% of the limited partner interest in PNG, which accordingly is consolidated into PAA's results.

Today's presentation will include certain information regarding the proposed merger of PNG with PAA. This presentation does not constitute an offer to sell any securities, and investors should look to the registration statement and proxy statement relating to the proposed merger that will be filed with the Securities and Exchange Commission and will be available at the Securities and Exchange Commission's website at SEC.gov.

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 Safe Harbor precepts to 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 Exchange Commission.

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

I would also note that in mid-October, Plains GP Holdings, L.P., which indirectly owns an approximate 20% economic interest in PAA's general partner interest in incentive distribution rights, priced it's initial public offering, and is now traded on the New York Stock Exchange under the ticker symbol PHEP. We will provide additional comments on PHEP later in the call.

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

Thanks, Roy. Good morning, and welcome to everyone.

Yesterday after market closed, PAA reported solid third-quarter 2013 results. Third-quarter adjusted EBITDA totaled $480 million which exceeded the mid-point of our guidance by $50 million or approximately 12%. Overall crude market conditions for the quarter were generally in line with expectations incorporated into our guidance but meaningfully less favorable than that experienced in the third quarter of 2012.

Compared to last year's third quarter, adjusted EBITDA, adjusted net income, and adjusted net income per diluted unit decreased by 4%, 12%, and 27% respectively. The quarter-over-quarter decrease in adjusted EBITDA is the direct result of a $45 million decrease in our Supply and Logistics segment due to the change in market conditions I mentioned previously. Partially offsetting this decrease in non-baseline cash flow was a $23 million increase in PAA's fee-based Transportation and Facilities businesses, and a summary of our third-quarter 2000 (sic - see slide 4, "2013") results is on slide 4.

As reflected on slide 5, these results mark the 47th consecutive quarter that PAA has delivered results in line with or above guidance. Additionally, PAA has increased its distribution in each of the last 17 quarters and in 36 out of the last 38 quarters.

For the third quarter of 2013, PAA declared a distribution of $0.60 per common unit or $2.40 per unit on an annualized basis. This distribution represents a 10.6% increase over the partnership's distribution paid in November 2012, exceeding the upper end of our 2013 targeted increase of 9% to 10%. Distribution coverage was 111% for the third quarter, and 145% for the first nine months of 2013. Based on achievement of mid-point guidance, we expect full-year distribution coverage will be approximately 139%.

Yesterday evening, PAA furnished financial and operating guidance for the fourth quarter and full year of 2013 as well as preliminary guidance for 2014. Primarily as a result of PAA's third-quarter overperformance, we increased the mid-point of PAA's 2013 full-year adjusted EBITDA guidance to $2.24 billion, an approximate $50 million increase over the full-year guidance we provided last quarter.

PAA's preliminary guidance for 2014, as reflected on slide 6, targets the mid-point for adjusted EBITDA of approximately $2.18 billion. This guidance incorporates an approximate 20% increase in our fee-based Transportation and Facilities segments as a result of our ongoing capital program and assumes baseline type market conditions for our Supply and Logistics segment.

The mid-point of our guidance assumes our Transportation and Facilities segments will comprise approximately 75% of total adjusted EBITDA with the preponderance of the Supply and Logistics contribution comprised of baseline vehicle equivalent activities related primarily to our crude oil gathering activities. We believe market dynamics are such that volatility and market structure and basis differentials could provide above baseline opportunities during 2014 for our Supply and Logistics segment. This view is supported by PAA's meaningful presence in substantially all the primary North American producing areas, as well as our ability to participate in substantially all aspects of the midstream crude oil value chain.

As a result, PAA is positioned to deliver solid baseline performance in typical markets and above baseline performance if market structure in basis differentials remain volatile and transportation bottlenecks persist. The timing and impact of such developments are difficult to predict with any accuracy and thus are not incorporated into our baseline 2014 guidance.

With respect to distributions, we are targeting to achieve a November 2013 to November 2014 distribution growth rate of approximately 10% while continuing to maintain healthy distribution coverage. The midpoint of our 2014 preliminary guidance range implies a distribution coverage of approximately 112% with the low and high end of the guidance range equating to 105% and 119% respectively.

As shown on slide 7, at the mid-point PAA would retain more than $160 million of cash flow in excess of distributions to be applied toward the financing of our 2014 expansion capital program. I would note that our 10% distribution growth target excludes the impact of any significant acquisitions.

In addition to significant organic growth activity, we also had a fair level of financing activity during the quarter, as well as two strategic transactions. One involving our majority-owned subsidiary PNG and one involving the IPO of the minority interest in PAA's general partner.

With respect to PNG as described on slide 8, last month PAA entered into a definitive agreement to acquire the outstanding publicly traded units of PNG. PAA plans to file a Form S-4 with the SEC in the coming days that will describe, among other things, the proposed transaction, the rationale for this transaction, the background and negotiations leading up to the execution of the definitive merger agreement, and the factors considered by the independent committee of the PNG Board.

Subject to timing considerations associated with the SEC review process and soliciting the required unit holder vote, we are targeting to be in a position to complete this transaction by the end of the year or shortly thereafter. In any event, we fully anticipate that the transaction will close prior to the early February time period when PNG would normally establish a record date for a quarterly distribution with respect to the fourth quarter of 2013. In other words, we expect that PNG's public unit holders will have received PAA common units and will be eligible to receive a distribution on their PAA units held on the normal February record date.

I would also note that as previously announced, PNG will be paying a quarterly distribution of $0.3575 per common unit on November 14 to holders of its common units as of the record date of November 4. Given regulatory limitations and the level of information that is included in PNG's third-quarter earnings release, as well as the information that is already available to the public and will soon be available once the Form S-4 has been filed, we have suspended the issuance of any guidance regarding PNG.

Additionally, we do not intend to provide any additional information or take any questions regarding PNG's performance or the proposed transaction on today's call. We appreciate your understanding and cooperation in this regard. We will provide a few comments relative to the general partner IPO during Al's section and also in my closing remarks.

Throughout the remainder of today's call, we will discuss the specifics of PAA's segment performance relative to guidance, our expansion capital program, financial position, and the major drivers and assumptions supporting PAA's fourth quarter 2013 financial and operating guidance. With that, I will turn the call over to Harry Pefanis.

Thanks, Greg. During my section of the call, I will review PAA's third-quarter operating results compared to the mid-point of our guidance, the operational assumptions used to generate our fourth-quarter guidance, and provide an update on our capital program.

As shown on slide 9, adjusted segment profit for the Transportation segment was $205 million which is slightly above the mid-point of our guidance. Volumes of 3.7 million barrels per day and adjusted segment profit per barrel of $0.60 were in line with the mid-point of guidance. As discussed on our last conference call, we reduced the August guidance for the second half of the year by approximately $15 million related to pro-active shutdowns of certain pipeline segments in Western Canada, due to flooding conditions at certain water crossings and a precautionary replacement of some of these water crossings.

We currently estimated the second half impact of these shutdowns to be between $5 million and $10 million with the majority of the impact already reflected in our third-quarter performance. Adjusted segment profit for the Facilities segment was $150 million, $15 million above the mid-point of our guidance. Volumes of $120 million barrels of oil equivalent per month was slightly below mid-point guidance and adjusted segment profit per barrel was $0.42 or $0.05 above the mid-point of our guidance. Our performance in this segment was driven by lower expenses primarily related to timing of certain costs and a favorable mix of product recoverage from our NGL facilities partially offset by a lower than forecasted rail loading/unloading revenues and volumes.

Adjusted segment profit for Supply and Logistics segment was $124 million, $34 million above the mid-point of our guidance. Volumes of approximately 1 million barrels per day were in line with the mid-point of our guidance and adjusted segment profit per barrel was $1.34 or $0.35 above the mid-point of our guidance.

Our performance in this segment was primarily driven by favorable NGL sales margins. For the most part, this is an acceleration of margins previously expected that in the first quarter of 2014. Maintenance capital expenditures for the third quarter of 2013 were $42 million and were slightly lower than our forecast for maintenance capital expenditures for the year by $10 million to a range of $165 million and $185 million.

Let's now move to slide 10 and review the operational assumptions used to generate our fourth-quarter 2013 guidance. For the Transportation segment, we are forecasting mid-point adjusted segment profit of $218 million, volumes to be 3.9 million barrels per day, and adjusted segment profit to be $0.61 per barrel. Our fourth quarter Transportation guidance includes the benefit of recently completed organic growth investments including projects in both the Permian and Eagle Ford areas and the impact of the sale of our Rocky Mountain refined product pipeline assets which is scheduled to close this month.

For the Facility segment, we are forecasting mid-point adjusted segment profit of $149 million, capacity to average 122 million barrels of oil equivalent per month due to higher rail volumes, and adjusted segment profit to be $0.41 per barrel.

For the Supply and Logistics segment, we are forecasting mid-point adjusted segment profit of $177 million, volumes to be approximately 1.1 million barrels per day, and adjusted segment profit to be $1.70 per barrel reflecting a seasonal increase in NGL sales and volumes and crude oil grade differentials that are more favorable to us than were in the third quarter.

I'll now move on to review our capital program which is shown in slide 11. We have fine tuned our full-year estimate resulting in an increase in our 2013 capital program by $50 million to $1.65 billion. This increase is primarily due to timing of projects and to a lesser extent, higher costs on a couple of projects. By the end of the year, we will have invested approximately $2.6 billion in currently approved projects with the vast majority of these investments scheduled to reach full run rate cash flow in 2014 and beyond.

Our preliminary capital program for 2014 totals approximately $1.3 billion to $1.5 billion, and our bias is definitely to the upper end of the range as we have a number of projects in the Permian basin that are being advanced but not yet finalized.

Slide 12 provides an update on the expected in-service timing of some of our larger approved projects. I'll spend a few minutes providing an update on some of these projects. I would expect to begin construction on our Cactus pipeline the first quarter of 2014 and are targeting an in-service date by the end of the first quarter 2015. In conjunction with the cactus pipeline, we are expanding our Eagle Ford joint venture pipeline from 300,000 barrels per day to 470,000 barrels per day. This expansion is expected to be in-service by the end of the second quarter of 2015.

Phase 2 of our Mississippian Lime pipeline, which extends the system to Coldwater, Kansas, is expected to be in partial service by the end of the year and in full service by the end of first quarter 2014. Our Western Oklahoma Extension is also expected to be in service by the end of the first quarter 2014.

In Canada, our focus has primarily been on the expansion of our fractionation capacity and the development of additional storage cabinets for both NGL and condensate services at our Fort Saskatchewan facility. And while we elected to discontinue the joint venture development of the Western Reach Pipeline system, we are continuing to evaluate opportunities to participate in the expected growth in NGL volumes in Alberta's deep basin region.

And with regard to our rail projects, our Tampa, Colorado loading facilities expected to come into service this month and our Yorktown, Virginia facility is expected to be in service in December. We expect our unloading facility in Bakersfield, California and the expansion of our Van Hook, North Dakota loading facility to be in service by mid-2014. We are also developing a rail loading project in Canada which we expect to be in service in the first quarter of 2015.

Finally, I note that the completion of both our Gulf Coast pipeline and our Bakken North line have been moved to 2014 primarily due to the timing of permits or right-of-way. With that, I will turn the call over to Al.

Thanks, Harry. During my portion of the call, I will review PAA's financing activities, capitalization, liquidity and guidance for the fourth quarter and full year of 2013. I will also discuss PAA's 2013 distribution coverage and financial positioning.

As reflected on slide 13, in the third quarter we completed several financing transactions. First, we completed a $700 million offering of 3.85% 10-year senior unsecured notes. Next, we renewed our $1.6 billion five-year senior unsecured revolving credit facility and our $1.4 billion three-year senior secured hedged inventory facilities. These facilities now mature in August 2018 and August 2016 respectively.

Additionally, we established a $1.5 billion commercial paper program which provides a more cost-effective financing source relative to our credit facilities. Finally, through our continuous equity offering program, PAA issued approximately 1.2 million units in the third quarter raising approximately $69 million in equity capital.

As illustrated on slide 14, PAA ended the third quarter with strong capitalization and credit metrics that are favorable to our targets. At September 30, 2013, PAA had a long-term debt to capitalization ratio of 48%, a long-term debt to adjusted EBITDA ratio of 3.1 times, and an adjusted EBITDA to interest coverage ratio of 6.7 times. Our committed liquidity at the end of the quarter was approximately $2.9 billion.

We used the majority of the proceeds from the senior note issuance to temporarily pay down approximately $600 million of our short-term hedged inventory debt. If this inventory were funded with short-term versus long-term debt at September 30, this would equate to a one-quarter turn, 0.25 times lower long-term debt to adjusted EBITDA ratio reflecting our proactive pre-funding for our capital investments.

Moving on to PAA's guidance as summarized on slide 15, we are forecasting mid-point adjusted EBITDA of $545 million and approximately $2.24 billion for the fourth quarter and full year of 2013 respectively. As Greg mentioned, our guidance for the fourth quarter assumes less robust market conditions than we experienced in the fourth quarter of 2012 and in the first nine months of 2013. This specifically impacts guidance furnished for our Supply and Logistics segment where we have assumed near baseline profitability with the typical fourth quarter seasonal uplift in NGL sales.

For more detailed information on our 2013 guidance, please refer to the Form 8-K that we furnished yesterday. As represented on slide 16, based on the mid-point of our 2013 guidance for implied DCF and distributions to be paid throughout the year, our distribution coverage is forecast to be approximately 139%. This equates to PAA generating and reinvesting over $450 million of cash flow in excess of distributions in 2013.

Given our strong capitalization at quarter end, proceeds from the expected refined products pipeline sale and our projection for retained DCF for the balance of the year, we have pre-funded the equity capital needs associated with our remaining 2013 expansion capital program and our preliminary 2014 capital program. However, as a result of our visibility for continued organic growth capital investment and our desire to stay well capitalized to participate the potential acquisition opportunities, we intend to continue to opportunistically pre-fund our organic growth capital needs through our continuous equity offering program. Accordingly, absent significant acquisition activity, we do not expect to execute an overnight or marketed equity offering during the balance of 2013 or 2014.

Before turning the call over to Greg, I would note that PAGP -- that the PAGP offering was priced on October 15 after the close of the third quarter. Including the partial exercise of the underwriters over allotment options, a total of 132.4 million shares were issued, representing an approximate 21.8% interest in PAA's general partner which is equivalent to a 20.4% economic interest.

Accordingly, although we will file a Form 10-Q for PAGP within 45 days of our registration statement being declared effective, we have not included any financial information regarding the PAGP in today's presentation. PAGP's only asset are its economic ownership interest in PAA's general partner and incentive distribution rights. As the control entity, PAGP consolidates PAA and the general partner into its financial statements.

Accordingly, during future calls, we do not intend to cover PAA's GAAP results. Instead, we plan to include a schedule that reconciles PAGP's distributions from PAA's general partner with a distributions to PAGP's shareholders as well as a summarized consolidating balance sheet. Using information based on the third-quarter balance sheet and related distributions, which pre-date the IPO, pro forma illustrations of these schedules are included in the appendix of today's presentation.

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

Thanks, Al. As demonstrated throughout this call, PAA continues to deliver solid operating and financial performance and we remain on track to meet or exceed each of our goals for 2013. Given the recently completed initial public offering of Plains GP Holdings, PAGP now owns an approximate 20% economic interest in PAA's general partner and the incentive distribution rights. PAGP's Up-C structure provides a tax efficient mechanism for PAGP to increase that ownership level in the future through potential sales of ownership interest by other owners of the general partner.

In contrast to PAA, which is a flow-through entity for tax purposes and issues K-1 to its partners, PAGP is a taxable entity and will issue 1099s to its shareholders similar to a typical corporate structure. However, as a result of the amortization and deductions associated with PAGP step up in tax basis, we do not expect this entity to incur current taxes of any material amount for several years.

The primary drivers to the PAGP public offering were to provide a targeted level of liquidity for our general partner owners and establish a public mark for the interest they retained as well as provide a healthy flow through PAGP's public shareholders. Although a secondary consideration, the Up-C structure also has the potential to provide the Plains organization with the structural acquisition tool not previously available.

PAA's general partner owners have been very supportive of PAA's growth and we expect that certain of these same owners will continue to control the general partner for the foreseeable future. In structuring PAGP, we were careful to preserve the general partner's ability to make timely, appropriate adjustments to the incentive distribution rights in order to facilitate PAA's future growth through acquisitions. We also made a conscious decision to preserve PAA's strong credit profile and financial flexibility by maintaining very modest levels of debt at PAGP.

Looking forward, we see a positive and constructive environment for the midstream crude oil sector and believe that PAA is one of the best positioned companies within that sector. High levels of North American crude oil focused drilling activity and projected crude oil production growth are expected to increase the utilization of existing midstream infrastructure as well as require construction of new midstream assets. As a result of PAA's significant asset position and substantially all of the major producing regions, its active involvement throughout the crude oil midstream value chain and its proven business model, we believe PAA is exceptionally well positioned for the expected environment.

As reflected on slide 17, over a 10-year period, solid execution of our business model has allowed PAA to deliver compound average annual distribution growth of approximately 8.3%, while maintaining an average distribution coverage of approximately 137%. I would note that this time span includes a multi-year period of uncertainty related to the great recession and the associated financial market chaos for which we proactively elected to slow distribution growth. Following the end of the great recession and the commencement of the renaissance in North American crude oil production, PAA's distribution growth increased average unit approximately 10% per year since November 2011, while at the same time generating division coverage of nearly 150%.

Underpinned by expected fee-based cash flow contributions from PAA's ongoing expansion capital program and healthy distribution coverage, we have established a 10% distribution growth target for PAA in 2014. As a result of PAGP's structural leverage to PAA's growth through the incentive distribution rights, this should equate to distribution growth at PAGP of approximately 20% with further upside as PAA issues units to fund its growth.

Looking beyond 2014, we believe the combination of a favorable crude oil environment, PAA's current and planned expansion projects, and solid execution of our business strategy will enable PAA to continue to deliver attractive distribution growth for many years to come. We also believe that significant acquisitions represent an opportunity to further increase our distribution growth rate and/or extend our future growth visibility.

If the industry encounters unexpected adverse developments, we believe PAA's strong balance sheet provides downside protection as well as enhances its ability to capitalize on attractive potentially distressed acquisition opportunities.

In conclusion, we are very excited about the future of PAA and PAGP. We thank you for participating in today's call and for the confidence that you have placed on us for your investment in PAA, PNG, and PAGP. We look forward to updating you on our activities in our next call in February. Marly, we are now ready to open the call up for questions.

(Operator Instructions)

Mark Reichman, Simmons.

Morning. Just wanted to address crude by rail. It looked like the rail volumes were 218,000 barrels per day during the quarter which was down a little bit from the second quarter, and you're guiding to 265,000 barrels per day in the fourth quarter which should reflect Yorktown. But if I remember correctly, I think in the second quarter you were kind of expecting higher volumes in the third, fourth quarters and also even full-year volumes to average 250,000 versus 232,000. So I was wondering if you could just address kind of how you project crude by rail volumes ramping in 2014, and at which facilities and also address the timing of Bakersfield.

Bakersfield mid-2014. I think we mentioned that in the call. The part of the difference between what we forecasted earlier and what happened in the third quarter was timing in both the start up of Tampa and Yorktown. Both of them have been delayed mainly by weather. And then also in the third quarter, we saw a little bit of an impact. We saw some stronger differentials in the Bakken area which pulled crude from some of the rail facilities to pipes. So we saw little bit of an impact from that, not tremendous but the bulk of it was really just timing on the in-service dates on those two facilities.

Yes, I think Mark, it's also a great question to kind of get the issue out there. I think going forward, as differentials fluctuate in general, you're going to see some volumes move from pipeline to rail or from rail back to pipeline when it's available. Certainly we have seen that already in our assets in the US. And I think going forward, you're going to see a similar phenomenon happen in Canada as well. That is going to, in some cases for a company like ourselves that has both pipe and rail out of an area, it may make a difference on the margin, but the volume is probably going to show up on one system or the other one. But there are certainly areas where we may see volumes get pulled away or sent to us that aren't necessarily a one-for-one balance. Is that pretty fair, Harry?

Yes.

Great. I appreciate the color. Thank you very much.

Cory Garcia, Raymond James.

Good morning, fellas. I appreciate the time. Just circling back to Bakersfield a little bit. I know some of the California refiners have actually cited some permitting delays out there for their own unloading facilities. Curious as to how you guys are looking at that facility in terms of the ultimate scale and ultimately, the flexibility of the facility to bring in Canadian heavies as well as access a number of different light US shale basins.

It is currently permitted. It can move unit train a day 65,000, 70,000 barrels a day. The facilities are such that we could move two unit trains a day but we need a increase in our emissions permitting for the increase, which we have recently or in the process of making. So ultimately, we think we will be able to bring up both light and heavy. But initially, it probably will be more lighter groups and sort of a unit train a day type of volume.

Cory, I would also add one of the things that is pretty unique about PAA's system is again, we integrate our rail activities with our pipeline. So our rail and loading facility will feed kind of at the headwaters, if you will, of our pipeline distribution system into California. So as long as we can unload at our facility, we can then feed our pipelines to go to Bakersfield as well as to the LA market and then we have connections that would also allow our shippers to get to the northern markets in San Francisco area. And so, we are working hard to not only raise our ability to unload more railcars at Bakersfield beyond one unit train, but also to expand we believe certain of our pipeline capacities. We'll fill up what we think is some of the slack in our existing pipelines and we want to base the increased capacity on a few of them to be able to feed future volumes through there as we see volumes ramp up from rail unloading.

Okay. Yes, that was very helpful. So in terms of connectivity to your pipeline system, it is sort of the one unit train match right now before you maybe need to put some more capital in the pipeline end? Or could you get to the two unit train type of levels without really expanding the pipeline network?

Well, it is a little trickier than that. We have the capacity on the two lines. We have some integrity work that we need to complete on Line 63. So without the completion of the integrity work on Line 63, we would probably limit it to a unit train a day going south. That does not limit us going north, but on our pipes going south, we would one unit train. So we have a flex set of little bit of integrity work that needs to be completed on Line 63. When that’s completed, I will certainly have a capacity to move close to two unit trains a day.

Yes, and on that expansion of the Line 63, again, it is not building new pipeline. It is basically beginning permits to be able to go in and test and so we are subject to the same maladies that others are in California that it takes a little bit of time there. But we are not talking about having a loop a pipeline or anything else. We're just talking about activating the pipelines currently inactive.

And it's to be all about permitting out there. I appreciate the color guys.

Paul Jacob, Credit Suisse.

Yes, good morning, guys. I just wanted to spend a bit of time on the Transportation segment. I saw that this quarter the refined products volume seemed to have dropped on a sequential basis. And I was curious, is that a result of pending asset sales? Or what are you seeing on the refined products side?

When we closed on the segment on one of the refined product pipelines July 1. So we closed our Albuquerque system and that is the main reason for the volume decline. We also had some weather impacts with the flooding in Colorado that impacted the Rocky Mountain system in the quarter.

Okay, that's helpful. And then on the Mississippi Lime, it sounds like you're going to have that on towards the end of the year, early next year. Just curious what the ramp in volumes is likely to look like?

It's in partial start phase. One is in service right now. It's moving about 30,000 barrels a day. So the extension of the Coldwater will be in partial service by the end of the year. I think we disclosed -- it's embedded in the mid-continent growth for 2014.

Okay. So in utilization on that should be pretty much 100% when it comes on? I guess that's what I'm trying to get at.

It's going to be a 150,000 barrels per day pipeline. So when we developed it, we had some excess capacity in it already. So I think over time, our ramp-up was probably forecasted to ramp up to around 100,000 barrels per day. About two-thirds utilization with excess capacity depending on what developments happen up there.

Okay. All right. That's helpful. That's all I had. Thanks guys.

(Operator Instructions)

At this time, gentlemen, no one is queuing up. Please continue.

Thanks Marly, and thanks to everybody that is participating in the call and that chooses to dial back in or listen to the replay. We look forward to updating you on our call in the near future. Thanks.

That does conclude our conference for today. Thank you for your participation and for using AT&T teleconference service. You may now disconnect.