Plains GP Holdings LP (PAGP) 2017 Q1 法說會逐字稿

Ladies and gentlemen, thank you for your patience in standing by. Welcome to the PAA and PAGP First Quarter 2017 Results. (Operator Instructions) Just as a brief reminder, today's conference is being recorded, and I'd now like to turn the conference over to Director of Investor Relations, Ryan Smith.

Thanks, Justin. Good morning, and welcome to Plains All American Pipeline's First Quarter 2017 Earnings Conference Call. The slide presentation for today's call can be found within the Investor Relations and News and Events section of our website at plainsallamerican.com.

During today's call, we will provide forward-looking comments on PAA's outlook. Important factors that could cause actual results to differ materially are included in our latest filings with the SEC. Today's presentation will also include references to non-GAAP financial measures such as adjusted EBITDA. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures can be found within the Investor Relations and Financial Information section of our website.

We do not intend to cover PAGP's results separately from PAA's as PAGP's results directly correspond to PAA's performance. Instead, we have included schedules in the appendix to the slide presentation for today's call that contain PAGP specific information. Please see PAGP's quarterly and annual filings with the SEC for PAGP's consolidated results.

Today's call will be chaired by Greg Armstrong, Chairman and CEO. Also participating in the call are Willie Chiang, Chief Operating Officer, U.S.; and Al Swanson, Chief Financial Officer. Harry Pefanis, PAA's President, and several other members of our senior management team are also available for the Q&A portion of today's call.

I'll now turn the call over to Greg.

Thanks, Ryan. Good morning, and thank you for joining us. Let me start the call by acknowledging that it was a difficult quarter. At the beginning of the year, we indicated that the first 6 to 9 months of 2017 would be challenging, but with the expectation that performance would improve meaningfully as we approach the end of 2017 and early 2018.

That characterization remains true today. What we did not anticipate was weakness in our NGL business that would make the first 9 months or so of 2017 even more challenging than we thought. As noted in the press release, overall results from our fee-based transportation and facilities as well as our margin-based crude oil marketing activities were generally in line with the modestly above expectations despite an unplanned outage at our Salt Lake City pipeline system in February and March. Combined with a few smaller non-recurring items, the impact of the pipeline outage was about $10 million.

First quarter results in our Supply and Logistics segment, however, we're meaningfully below expectations. This was due almost totally to our NGL marketing activities coming in approximately $50 million lower than anticipated. Results from our NGL activities were negatively impacted by warmer weather, increased competition in supply areas and tighter differentials between Canadian and the U.S. markets, among other factors. Certain of these factors will also weigh on NGL-related results for the balance of 2017, and was the primary reason for reducing our current year guidance.

Looking beyond 2017, we are modifying the way we manage our NGL inventory as well as our contractual rearrangements that will reduce earnings volatility and the quantity of seasonal NGL inventory we store in exchange for partially limiting our upside potential. As noted on Slide 3, first quarter adjusted EBITDA was $512 million, which was approximately $30 million all-in below the directional levels we provided in February. As also shown on Slide 3, we have been fairly active with respect to acquisition and operational activity, thus far, in 2017 with a significant focus on the Permian Basin.

We completed the acquisition of 2 Permian Basin pipelines for an aggregate of $1.3 billion, announced the expansion of 2 existing Permian Basin pipelines and announced an open season for pipeline service from the Permian to Cushing. We also completed a major financing and initiated an expansion of our STACK pipeline in Oklahoma. Despite both the expected and unexpected challenges of the first 9 months of 2017, we definitely like the way the crude oil sector is shaping up for the latter part of 2017 and beyond.

Specifically, producer drilling activity in almost every area is ahead of levels included in our outlook at the beginning of the year, especially with respect to the Permian Basin. Rigs are becoming more efficient, laterals are longer, fracs are bigger and well productivity is increasing.

Our outlook continues to incorporate an increasing delay or time lag between increased drilling activity and increased production volumes as producers shift to multi-well pad locations. Accordingly, we continue to expect our transportation volumes to ramp up in the latter part of this year and our confidence level with respect to that outlook has increased, particularly with respect to the Permian.

Since our February call, Permian Basin rig counts have increased by over 20%, adding approximately 60 rigs over the ensuing 3-month period. Additionally, upstream acquisition activity in the Permian basin since the first of the year has been robust with over $7 billion in acreage transactions announced. All of these transactions involve meaningful acreage positions in the northern Delaware Basin. It does not appear that rig counts currently fully reflect the expected increase associated with the recent upstream acquisitions. And therefore, we believe that those transactions bode well for sustaining, if not actually increasing drilling activity in the Permian Basin.

Consistent with our positive outlook regarding the next several years, we are seeing increased interest from potential shippers for pipeline space currently available in our existing assets as well as for incremental pipeline capacity. In a nutshell, we're seeing tangible evidence of rising production momentum that will increase our pipeline utilization and have a very positive impact on our Transportation segment. Although, the timing is hard to predict, we believe rising production levels will provide some potential relief on margin impression that we've been experiencing within our Supply and Logistics segment.

We'll provide additional color during PAA's Investor Day in 2 weeks, but I do want to highlight that we have updated our Permian production outlook and currently anticipate a 2017 exit rate of approximately 2.7 million barrels per day, which is approximately 200,000 barrels per day or 8% higher than the Permian Basin outlook we communicated in February. Based on current and anticipated activity levels in a $50 and $60 oil price environment, this directional rate of increase is forecast to continue through 2019. Collectively these factors reinforce our outlook and confidence in a back-end weighted improvement during 2017 in our fee-based growth and a meaningful increase in year-over-year performance in 2018 and beyond.

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

Thanks, Greg. Good morning, everyone. During my portion of the call, I will discuss our updated full year 2017 guidance, our 2017 capital program and provide an update on several recent announcements. Slide 4 contains the financial and operating guidance table that was included in our first quarter earnings release yesterday. Our updated 2017 adjusted EBITDA guidance stands at, plus or minus, $2.26 billion. This is a reduction of approximately 4% or $100 million from our initial 2017 guidance that we provided in February. The primary driver of the reduction is the first quarter shortfall attributable to our NGL marketing activities and our estimate of NGL margin compression over the balance of the year.

The impact of this adjustment is partially offset by strong performance in our Facilities segment during the first quarter and anticipated strong Transportation segment performance in the second half of the year as a result of the increasing producer activity, particularly in the Permian Basin. These changes are illustrated on Slide 5, which provides a high-level walk from the full year 2017 guidance furnished in February to our revised 2017 guidance, with the key variances noted.

Additionally, as Greg mentioned, we continue to expect our 2017 performance to be back-end weighted as we complete several projects over the next few quarters and build our volumes. This expectation, along with the impact of inherent seasonality of our NGL business, is also illustrated in the upper-right portion of Slide 5.

As shown on Slide 6, we continue to progress our multiyear capital program, which is expected to be one of the major drivers for our fee-based cash flow growth in 2018. We have increased our 2017 expansion capital program from $800 million to $900 million, primarily due to our STACK pipeline JV expansion, which I'll address in a moment, as well as some additional projects in the Permian and an expansion of dock capacity at our St. James terminal.

Major projects in our 2017 capital program include: completing the Diamond Pipeline JV; build-outs of a Permian Basin area gathering systems and connections, including the Alpha Crude Connector gathering system; and our multiphase project at Fort Sask. In-service timing information for all these projects is included on Slide 6 as well.

In the mid-continent region, we're pleased to announce expansion plans associated with our STACK pipeline JV with Phillips 66 Partners. As shown on Slide 7, the existing pipeline from PAA's Cashion Terminal to Cushing will be looped, which will expand the capacity of the system by a 150,000 barrels per day, bringing total capacity to 250,000 barrels a day. The system can be further expanded by approximately 100,000 barrels a day through the installation of additional pumps, if warranted.

Additionally, the pipeline will be extended 35 miles west of the Cashion Terminal through the heart of the STACK play to further excess area producers. This pipeline system is strategically located to meet the STACK production's growth takeaway needs and is supported by producer commitments. We anticipate that the expansion will be in service in the fourth quarter of this year.

I would also mention that our Alpha Crude Connector gathering system and Advantage Pipeline acquisitions have been successfully closed. We're pleased to report that the Alpha integration went smoothly and is essentially complete and the integration of our Advantage Pipeline JV with Noble Midstream is also proceeding as planned. Both these systems support significant long-term growth opportunities, both in the north and southern Delaware Basin.

Lastly, based on our discussion with several potential large shippers, we recently announced an open season related to capacity expansions of our pipelines from the Permian Basin to Cushing. The open season will provide additional capacity to Cushing for incremental volumes originating from Midland or Colorado City. We believe we have sufficient demand to support an expansion of roughly 150,000 barrels a day from our current bottleneck, Colorado City to Wichita Falls. But if there is enough demand, we can parallel-loop the entire system from Midland to Cushing. A complete loop of the system would provide additional capacity of approximately 450,000 barrels a day. New pipeline capacity to Cushing could be operational by early 2019.

Regarding our previously announced BridgeTex and Cactus expansions, both are on track to be complete this year. The BridgeTex's increase will be ready early in the third quarter and Cactus will have a staged increase starting mid-third quarter through mid-fourth quarter. Our current outlook includes utilizing a good portion of this capacity in late 2017 or early 2018.

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

Thanks, Willie. During my portion of the call, I will discuss our capitalization, liquidity and financing activity and provide an update on our noncore asset sales program.

As shown on Slide 8, at March 31, PAA had a long-term debt to capitalization ratio of 48%, a long-term debt to adjusted EBITDA ratio of 4.8x on an LTM basis and $2.8 billion of committed liquidity. Our leverage is elevated relative to historical levels than our target, primarily as a result of significant investments we have made to increase capacity throughout our Transportation and Facilities segments, compounded by margin compression with our -- within our Supply and Logistics segment during the industry downturn.

However, as noted, at the bottom of the slide, during the first quarter, long-term debt decreased approximately $245 million and total debt decreased $619 million.

Looking forward, we anticipate that the proceeds from the pending asset sales will largely fund the remaining balance of our 2017 expansion capital program, such that the long-term debt will remain relatively the same. We are also undertaking a review of our hedged inventory management practices with an eye towards balancing our total debt level against optimum inventory-related earnings activities.

Moreover, as Greg and Willie highlighted, we expect to see meaningful improvement in our leverage over the latter part of 2017 and into 2018 through significant earnings growth as projects are completed and utilization on our existing pipeline capacity increases. Additionally, we intend to manage our capital structure such that we expect to exit 2017 with a long-term debt balance at or below year-end 2016 level and with our short-term hedged inventory debt balance measurably below the year-end 2016 level.

During the quarter, we raised just under $1.7 billion of equity. This includes approximately $190 million through the PAA and PAGP continuous operating programs in January, as discussed on our last call in February. Additionally, PAGP completed an equity offering during the first quarter, raising net proceeds of approximately $1.5 billion. The proceeds of which were used to purchase an equivalent number of PAA common units. This offering funded the equity portion of our Alpha Crude Connector acquisition and the balance will be used to fund our revised 2017 capital program. With a $1.7 billion of equity completed and pending asset sales proceeds that I will discuss in a moment, we will not be required to access the equity market over the balance of the year absent any material increase in our capital program or additional acquisitions.

Based on our updated 2017 DCF guidance and with the accelerated and upside equity raised we compete in the first quarter, 2017 distribution coverage has been negatively impacted and is expected to be slightly below 1:1 for the entire year, but strengthening, be meaningfully above 1:1 by the end of 2017 and into 2018.

As an update to our asset sales activity, our program currently sits at $1.2 billion, of that $550 million closed in 2016 and approximately $180 million has closed so far in 2017. We have 2 pending transactions under contract totaling approximately $500 million that are anticipated to close in the second quarter or early in the third quarter depending on the timing of regulatory review completions.

We continue to evaluate additional opportunities to accelerate the achievement of our leverage objectives and high grade our asset portfolio by pursuing incremental noncore asset sales and strategic joint ventures.

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

Thanks, Al. As highlighted on Slide 9. During our February conference call, we described 2017 as a transitional year with multiple advance and anticipated fundamental improvements, driving improved performance in late '17 and 2018. We also shared our view that the most important quantitative measure for assessing PAA's performance in 2017 will be the level of preliminary 2018 adjusted EBITDA guidance that we furnished in connection with our third quarter conference call in November.

While not without some unanticipated challenges, on balance, we are incrementally more positive about 2018 than we were in February. Summarized on Slide 9 is a recap of items discussed during today's call that support our outlook. We intend to provide additional details supporting our outlook for 2018 during our Annual Investor Day, which will be held in about 2 weeks.

As a final note, we recently announced several officers' retirements and promotions. These actions include the promotion of Roy Lamoreaux, the Vice President of Investor Relations and Communications. Many of you know Roy from his previous role in Investor Relations. Roy recently completed a multiyear rotation in a commercial role as business -- Director of Business Development, most recently in the Rocky Mountains, and we're excited about his return. Ryan will be rotating with our Finance Department to Director of Credit and will be working together with Roy to ensure a smooth transition over the coming months.

I want to thank you for participating in our call today. Ryan has 2 brief items to discuss before we open the call up to questions.

Thanks, Greg. As Greg referenced in his comments, we will holding our 2017 Investor Day on Wednesday, May 24 here in Houston. Although, we are approaching maximin capacity, there's still space available if you would like to attend. Please call Investor Relations at (866) 809-1291 for instructions on registering for the event.

(Operator Instructions)

Operator, we're now ready to open the call for questions.

(Operator Instructions) Our first question from the line of Jeremy Tonet with JPMorgan.

Just want to touch-base with as far as the expansion to Cushing from Basin. And I was just wondering a lot of industry participant say that the incremental production, being light in nature, would want to find its way to the water for export. And just wondering expanding into Cushing versus Corpus, just kind of if you could walk us through your thoughts there?

Let me take a crack at it?

Yes, go ahead.

Yes, so we think there's going to be some incremental demand coming out of Cushing. If you look at some of the dynamics that have occurred, Diamond Pipeline will create something in the order of magnitude of 170,000 barrels -- just 150,000, 170,000 barrels a day of demand out of Cushing -- new demand out of Cushing that was previously sourced from Gulf Coast areas. Our Red River pipeline probably has another 50,000 to 75,000 barrels of demand of Cushing-based Mid-Continent crudes. Recognize we have increasing supply of STACK production coming in, but that will also -- most likely be offset by lower volumes of Bakken crude coming into with Dakota Access going into service. So all in all, we think there's enough demand to satisfy at least a 150,000-barrel a day expansion of the Basin pipeline system into -- its not really an expansion of Basin pipeline, it's an extension of our Sunrise pipeline system into -- to debottleneck Basin into Cushing.

Yes. And Jeremy, I guess there's 2 issues, and Harry hit on the demand side of it. Again, if you add those numbers up, there'll be incremental pipeline exports out of Cushing of roughly 200,000 barrels a day, you need to source that somewhere. The other side of the equation is the rising production in the Permian Basin needs to find an outlet. We've talked about this in the past. And today, I think it's not quite on everybody's radar screen, but we think it will be in 2 or 3 years. And that's ultimately, you're right, the lighter production is going to want to try and find its way to the water, but there's a lot of better quality or lower-gravity crude in the Permian Basin that, either through segregation or just simply a lack of blending within the Permian Basin, can cause some of the better quality crudes to go to the better markets for it. And then some the lighter quality crudes to go to markets that are best for it. So with our ability to take crude to Cushing for the better quality and our ability to take some of the lighter quality crude down Cactus to the water, we think we can provide producers both solutions.

Okay, great. And then for the NGL activities during the quarter, just want to -- hope you could provide a little bit more detail on what went wrong there or I guess what -- I mean, it seems like you're changing your contract provisions to kind of stamp out some of the risks there. But I'm just hoping you can provide a bit more color what happened there specifically and how you can ensure that won't happen again?

Yes, I mean, if I -- just probably say what you're thinking. It was a terrible quarter for NGL. And with respect to kind of what happened, and I'll let Harry kind of help cleanup any of my misspeaks here. But clearly, if you followed some of the other MLPs, it was bit of a warmer weather and it created pressure on margins because of that, so you had to clear the product out. In addition, what we're seeing and quite candidly, Jeremy, our job is to look around corners and see problems before they show up. In this particular case, we were either late or in some cases didn't see it. And that was -- it's been a dramatic increase in exports that's kind of changed the dynamics and some of the regional relationships that affect margins. Just to put it in perspective, I think first quarter 2017 exports propane-related products was, order of magnitude, 1 million barrels a day. That's a 50% over what it was in the first quarter of 2016 and it's up somewhere closed to -- double what it was in the first quarter of 2015. So what's happened, and in some cases we've had situation where we had inventory that was based on old contract structures and the clearing mechanism was always, if you couldn't -- if you didn't have enough of a warm winter to get it out at that location, you could ship it to a place like Bellevue. Well, the infrastructure was basically full and we didn't have the ability to get that out of there. So we ended up basically getting our face peeled off on the margin on that. What we've done already is we've changed the contract structure and put basically floors underneath there. We've given up some upside to do that. But given what just happened, we think that's a good trade-off. And so where we can, we're basically going through -- in fact, as in many places already, changed the contract structure so that it won't affect the 2018 season. It's certainly going to effect the rest of -- some in 2017 just because of some of the dynamics. And then in addition to that, candidly, we'll carry less inventory and I think the market will be a little bit more at risk and have to put a higher value on our storage assets if it turns out that -- because we don't carry enough inventory, they can't get all the product that they need. The next season around, that should manifest itself into a recognition of the value of our storage.

And so -- and a little bit more on just sort of what compounded the impact of a little warmer weather in like February. You had the dynamics of warmer winter decreasing demand in sort of the demand markets in the U.S. But you also had some products like butane that were in backwardation. So when you would typically have a weak market, you [wouldn't] expect a contango, but there were some dynamics that caused butane to be backwardated. So when the hedges rolled to meet the demand, there was a cost associated with that. And that's somewhat Greg touched on implementing processes to better manage the inventory and match it with the demand and cycles.

And since you asked, I'll add one other element that's affecting kind of the margins for the rest of the year and that is there's other -- especially in our Canadian markets, there's incremental frac capacity coming on stream. And so the bottom line is the purchase price of the feed stock for that has gone up. It's impacting our margins. And so this was kind of a real -- recent development because a lot of those facilities weren't in service. And obviously, with the downturn, some of the activity that they were built for hasn't manifested itself as much in the Canadian production market and so there's more competition for that incremental molecule. Effectively, it's a microcosm or at least a view of what's happened in certain areas in the United States, where midstream capacity got ahead of the production volumes, the downturn happened and as a result of that, there was margin compression fighting for the incremental barrel. So it's really those 3 elements that we just talked about, all kind of added together. We chose not to try and put that in the press release because everybody would've quit reading, but I'm glad you asked the question.

Our next question comes from the line of Shneur Gershuni of UBS.

The S&L segment seems to create a lot of noise and anxiety each quarter, but I think you gave a thorough explanation to Jeremy's question there, so I'll leave that for now. But you've had a lot more success at guiding your Facilities and Transportation segment and you've got a big 4Q exit rate for Transportation and it sounds like not all of your growth projects are kind of included in that number. How much is the 4Q annualized rate step-up in 2018? And does the step-up basically offset all of S&L kind of on a go-forward basis? Do you have any plans to talk about that at the Analyst Day or are you able to provide that now?

That's a great question and the answer is, yes, we do intend to talk about it at quite a bit length at the Analyst Day. It will be hard on this call to try and condense 100 slides into the time that we have. Willie, you want to answer the question on kind of the step-ups as we go through the year? Go ahead.

Sure. As you think about the rest of the things we've got this year, it's predominant -- the leverage is the Permian Basin. So as Greg talked about, the increased expectations for production. We've got this great system out there we've built and we continue to build. So it's between the gathering projects, the long haul pipes. Those all start to fill up in the end of the year. And you'll see those -- that should carry over to 2018. The other thing is we've got projects that we're completing, the Diamond Pipeline will complete, STACK JV will complete, we've got a number of new tanks we've put in. So all of those will contribute to 2018 numbers.

So you'll see a part of that, for example, the Diamond, I think, will be up -- maybe will be filling the pipe certainly in the fourth quarter. You may see a little bit of that, but then you won't see the full benefit of that until 2018. The same thing is true for some -- as Willie has talked about in his prepared comments, the Cactus expansion that we've got coming on won't be totally complete until about midway through the fourth quarter for the last piece of it. So if your question is if Supply and Logistics remain challenged, do we have enough fee-based activity to offset what we've given up plus some? And the answer is yes. And that's -- Al's comments about our kind of robust look at improvement in leverage metric is really underpinned by a fairly significant step-up in the fee-based aspects of not only Transportation but also our Facilities, because we've got our Fort Sask and other projects coming on that are basically committed in -- as we go through this year and part of next year. So we're going to try to highlight as much of that as we can in the Investor Day that's coming up in 2 weeks.

Great. And just a clean-up question here. You mentioned $0.02 transactions for $500 million. Does that negate any need to issue any more equity this year? And also your -- you had a small decline in Transportation profit per barrel, is that just a reversal of deficiency payments as volumes return?

There's -- in the transportation per barrel, I mean, there can be volume mix. I mean, we've got short hauls and long hauls. And so depending upon how the volume shift, if you had a significant increase in short-haul volume, okay, it wouldn't take away from your long-haul margin but dilutes the average. So I wouldn't get too carried away by variations in those volumes. They're going to be dynamic as we go forward. I think Al covered in his section that at this point in time, we see no reason for incremental capital markets activity on the equity side either through the ATM or the -- any kind of overnight transaction.

I think Greg mentioned in his comments also, we had about a $10 million impact from a pipeline that was down in the quarter.

Our next question comes from the line of Chris Sighinolfi with Jefferies.

This Corey Goldman for Chris. Just actually a quick follow up to Shneur's question about the Transpo volumes. So it looks like you raised the guidance for the actual volumes by about 150,000 a day, but EBITDA only went about $10 million. So that's a relatively muted EBITDA per barrel relative to your guidance. So just wondering if there are any offsets that are happening that we're not seeing or if those are just lower-margin barrels that are being added onto the previous guidance?

Part of it will also MVC related. So for example, to extent they've already paid as, but they're not shipped -- hadn't shipped the volumes, so there will be some of that noise in there, Corey, each quarter in there as we get better information. Some of these -- we have certain annual makeups for some, multiyear makeups for other. So when they communicate to us that they're going to try and ship and make up, we include that in our forecast.

And then remember the first quarter was impacted by the incident that probably reduced volumes by 50,000 or 60,000 barrels a day in the quarter.

Okay. So it's also -- it's even more than the 150,000? Is that what we're supposed to take away from that? So about 210,000?

Third quarter would've been higher volume if the pipeline would've been in service for the whole quarter.

Yes, yes. But if you raised guidance -- full year guidance for volumes by 150,000. That would imply that actually it's more than 200,000-a-day raise, right?

Well on a blended average, just keep in mind that, that was already in our forecast before. So it did -- I think that wouldn't have changed our forecast. So it would've been just the 150,000. But again, the MVCs, for example, if somebody is shipping 50,000 or 60,000 barrels a day and effectively with no incremental tariff because we've already recorded it through adjusted EBITDA, then Corey that's going to affect your lack of step-up, if you will.

Okay, okay. That makes a lot of sense. All right. That's helpful. All right. And then just as a follow-up and, Willie, I think this probably would be for you. It kind of refers back to that chart -- that illustrated chart on Slide 5 about -- with the seasonality of the EBITDA there. So it looks like 3Q is fairly close to 1Q, which implies a fairly large step-up in, obviously, 4Q. And from a percentage basis, it looks like S&L is driving a pretty significant piece of that. And I know that you guys get this question a lot, but just given how fickle that S&L business has proven to be and the fact that you do have those PIKs converting to cash by '18, just is that 1:1 to 1:1.5 coverage still the right scenario to play here? And I guess as a follow-up to that is, would we expect in 2018, as you do have some more ratable Transportation and Facilities EBITDA ramp-up, can we expect that S&L will not be contributing to the distribution in the out years?

Well, I'm not so sure I can break it down exactly the way you did it. We certainly expect, over time, S&L to recover. But our track record of recent of trying to predict S&L in any given quarter, much less on the future years, have not been too precise. So I think what I was trying to communicate to Jeremy earlier is I think we've got significant movement in our fee-based Transportation and Facilities that we think would overcome the weakness that we're experiencing and potentially even more if it was to happen because we just got so much of the harvesting, if you will, of the capital expenditures that we made. And then there's also some MVC step-ups that are already associated with assets already in service. It's just that there's a ramp out there. So I guess, I'm not quite sure how to interpret your question other than the fact that we've -- the big step-up in the fourth quarter is related -- there's a seasonality to a part of our S&L business and that's what's reflected, a portion of it at least in the fourth quarter, as you see there. And I think you probably gauged the relationship of the first quarter and the third quarter correctly.

And Corey, maybe -- this is Willie. If I can just add, I'm not sure I got the full gist of your question. But when you look at that illustrative by-quarter slide on the top of Page 5, if that's what you're referring to, our fee-based business ramps up steadily through the year. So second, third and fourth quarter. It's the green S&L piece is what Greg was talking about. If you -- the fee-based business is increasing as we go through the year.

Okay. No, that's helpful. I think -- yes, it was a little convoluted the way I had asked that. I think the primary gist there is that we were always told that kind of a good baseline to think about for S&L is that kind of $500 million to sort of low $500 million EBITDA per year. But clearly baseline is different than floor, which is proven to be the case at least in '17. So just as it relates to distribution expectations in the future, can we think about a distribution range that would consider S&L floor as part of the payout and not really anything more than that?

Yes, we haven't gotten that precise in it, but I would tell you, we are targeting the 110%, closer really to the 115% range. And if, in fact, it takes longer for S&L to build up, it may delay by a quarter or 2. We -- somebody might have thought we were going to reengage in raising the distribution, but right now our primary focus is getting that coverage back to the 115%. We think we can do that through a substantial build in our fee-based transportation and storage facilities. And right now we're -- I mean, I couldn't give you an answer on Supply and Logistics other than the fact, we're trying to figure out how much of this is one time. I mean, again, we made changes to the NGL related and it's not going to fix the rest of this year, but it should fix all of 2018 with a higher confidence level. And so we're taking the steps that are certain to make sure that it is effectively a non-recurring issue as opposed to an unpredictable issue.

Our next question comes from the line of Brian Zarahn of Mizuho.

Just on Supply and Logistics topic. How historically understanding the seasonality and variability on differentials. Historically, what has been the average mix of NGL in crude marketing, cash flows and S&L? Is it similar to the volumes?

No, it’s varied over time partly because of acquisitions. I'm looking at Al here. And clearly in 2012, '13 and '14, Brian, when we were pushing upwards of $800 million to $900 million, it was predominantly on the crude oil side of it. And it shifted as margin compression happened first in the crude oil side of it and some of the constraints that caused that to come down have been relieved. And not to -- I mean, just to remind people, I mean, at the point in time when we were having these conference calls before and we were reporting some really stout numbers in Supply and Logistics, we went out of our way to focus people on the fact that many of that was not necessarily predictable and in some cases, not recurring. So at this point in time, we're still kind of feeling like we're around $500 million base when things kind of returned to normal. But candidly, Brian, we're trying to figure out what normal is because normal didn't use to involve 3x as many competitors as we have now that have gotten into business, because it's not been as fun to be in natural gas or at least has not been for the last 2 or 3 years. So there's clearly some things that we saw coming that we could foreshadow and say, "Don't count on this being recurring." And there's been margin compression that we didn't see coming because of new builds and the MVCs and basically people willing to take a loss on the S&L to fill up on MVC, on their fee-based activities. So hopefully that kind of addresses the direction of your question. But today, I think the answer is it's -- we'll try and cover that at the Analyst Day and try to give you a breakdown of kind of what the percentage is between NGLs and crude to see if you can kind of do a relationship. I think what you're trying to do is, say, is it a function of volume? And the answer is not so much.

Okay. Understood it's a fluid environment right now. I guess on the topic of increasing competition, obviously, robust production growth in the Permian is attracting some new entrants. How do you assess the competitive landscape going into 2018 and potential impact to your base business and growth projects? Is there enough to go down or is there something to monitor in terms of increasing competition for crude infrastructure?

Well, there's no question, it's intensely competitive. I think there's probably been 3 or 4 announcements of projects to try and move crude from the Permian Basin to the Corpus Christi area. And in at least a couple of those cases, these are players that aren't really meaningful players today in the Permian Basin. So there's clearly the robust outlook for crude production is attracting other parties in there. We think ultimately, we stand the best chance in -- I say the best chance, certainly a very good chance against many of them because we can leverage off of our existing asset base and infrastructure. What we can't rule out is that somebody basically buys their way into the business, willing to take an unbelievably low return or at risk of almost no return if the volumes don't develop. So one of the things I mentioned earlier on the question, I think, that Jeremy asked and I brought up was the crude quality issue. I will say that to the extent we have producers or end-users that are focused in on quality, I don't know if anybody else in the Basin, maybe one other of our competitors that can actually segregate and deliver the high-quality barrels that those end-users would want than Plains because we start at the wellhead and we go all the way to basically to the refinery inlet or to the export location. So hopefully that carries the day on distinguishing between all things being equal, do you go with Plains or Brand X? Ultimately, I think we're certainly beat about the head and shareholders severely by basically this comment that "well, they'll build it for transportation of X," and we'll say, "Well, they don't really have a system." But the answer is they're willing to do it and the producer or the shippers won't take that risk. We've got to be sensitive to that. So we're being competitive. We're looking at our excess capacity and saying, "How do we price that to make sure we're competitive against new build opportunities?" And that may mean giving up margin somewhat on the transportation side and to gain volume and keep our competitive edge there. So start off against -- or end up the way I started, it's very competitive out there but I think we've got a competitive advantage.

And the next question for us comes from the line of Christine Cho of Barclays.

I'd like to start on the S&L business. If I'm just to look at that illustrative graph that you guys provided where S&L EBITDA is lower in 2Q and 3Q and combine that with today's revision for the S&L guidance, it would appear that we're going to see minimal EBITDA in the next 2 quarters in (inaudible), which sends us up for a big 4Q expectation to meet full year? I was just wondering how confident are you in this number given the NGL weakness we saw this quarter as well as a large amount of crude pipeline capacity that's slated to come online in fourth quarter of this year that I would think would put some continued pressure on the spreads?

Well on the bump in the fourth quarter, you don't realize that a lot of that is the seasonality in the NGL business. So it's possible that some of that could swing over to the first quarter and some of the first quarter demand could swing over to the fourth quarter really be sort of weather sensitive. But the way our -- we've structured our contracts and our business, we should see that margin. It's just which quarter flips into on the NGL side. On the crude side, I think we've been in a situation where it's been very competitive because of mineral volume commitments and what we're seeing is, you'll -- we'll start seeing some MVCs roll off in '17 and '18, we'll see new MVCs come on in '17 and '18. We also see increase in production that today is going to satisfy deficiency credits that existed. So anything can happen. But we think we've gauged the competition and the impact that it could have on our margins pretty well in the second, third quarters.

Yes. Christine, just I think to address the first part of your comment. Yes, I think you're gauging that correctly that there is very minimal supply and logistics contribution expected in the second and the third quarter. On the issue of the ramp up in activity or ramp up in capacity, it's a regional issue. For example, in the Bakken area with the capacity that's come on there, obviously, DAPL coming on June 3, you know it's already had an impact on differentials up there and competitive capacity or competitive on S&L. And I believe, we think we've got that dialed into our numbers because that's obviously a very visible development. With respect to the West Texas in the Permian, certainly some capacity coming on. But I got to tell you, we think it's needed because production is coming up rather dramatically and if we're right about what we think is going to be a tail end loaded ramp in some of these production volumes, we're going to need, most if not all of that capacity is being brought on. You have already seen a shift. I mean if we were having this discussions 6 months ago, I think the Midland differential was a premium to Cushing. So it was trading anywhere from $0.50 to $0.75 premium to Cushing in Midland and yet, today that number has gone back, may have been as low as $1 negative and maybe even more than that. And you're seeing the kind of a return to normal differential. I think that's a combination of 2 things: rising production, fulfilling some of the MVC commitments that are there so there's not as much pressure on the margins. And then at the same time, rising volumes beyond that but also what we're a little bit worried about is the capacity going to be there in time. I think between Plains and Magellan and Enterprise, we're all doing the most prudent thing we can, which is try and bring on more capacity as much as we can to avoid a train wreck out there. But you are seeing that the recognition of the markets at least that there is an improving differential or a return to the differential where there is a potential for space to get tied out there in the Permian and we're seeing -- as we said in the press release and we said in our prepared comments, we're having some conversations with shippers and producers today that we weren't having 6 months ago about concerns about making how (inaudible) secure export capacity out of the Permian basin to make sure they have the market.

Okay, very helpful. And then just on this call, you guys have talked a lot about Diamond coming online later this year. How should we think about what's going to happen on Capline if the volumes fall off here because 200,000 barrels per day are flowing through Diamond, plus or minus. Is there a scenario in which this pipeline can keep running as it is currently configured today?

So -- that's a two -- great question. There's 3 partners in that pipeline, us, Marathon and BP. We're probably of the view that the answer is most likely no. But we're not only one of the partners, we happen to be the largest one. And I will say this that the annual cash flow of revenue contribution to us one way or the other is probably the order magnitude $10 million or less. So if it does shut down, we think it creates an opportunity to redeploy an asset to another type of activity. There's a potential that could be in purgatory for a little bit. But ultimately, there's operational issues that need to be factored in as well. And then we didn't touch on it, but Marathon also purchased -- they're the other big user of pipeline space on Capline and they have purchased Ozark and plan to expand it. So they're certainly planning on at least fulfilling part of their needs from Cushing through that pipeline system we believe, and then they've also become a partner in DAPL. So if we're having this discussion 5 years from now, I'll be amazed if Capline is still in service, where between where we're at right now and 5 years from now, it happens is hard to predict.

And the next question for us comes from the line of Ethan Bellamy of Baird.

You've had some protesters on Diamond, will that be on time and what kind of a multiple all-in should we expect there?

Yes. I don't think we disclosed a multiple. Right now, I mean, we're planning on bringing on time, or we wouldn't have said we're bringing it there. It's -- we've certainly taken pages out of the playbook of what didn't work. And we consulted with the guys at Energy Transfer and they've been open about trying to say, if we do things differently, here's what it would be. We're working with the locals and the local tribes and everything and trying to be as good a citizen as we can, high level of engagement. Doing everything the right way. We think they did as well but we probably certainly had the ability to emphasize and take steps that the time side wouldn't have told all of us that would have been done differently. And so we've been -- I can't tell you what happens in the future about activists, but I can tell you what we think we're doing all that the right things to bring it on time and on budget.

Ethan, this is Willie. We haven't seen any significant unplanned delays due to protesters so far. So, so far so good. But as Greg said, we can't predict the future.

Okay, that's helpful. And then with respect to the expansion projects, can you give us a, maybe a range of multiples or a median multiple on what we can expect on that capital?

Let's think about that for the -- part of it is a little bit we're leveraging off of our existing system is who gets the benefit of the incremental cash flow. If we're -- is it the incremental capital that you spend or is it the leverage on the system that you have because most of the things we're doing aren't standalone and I'll probably stop right there.

And it looks like our next question comes from the line of Tom Abrams of Morgan Stanley.

I just want to go back to relate some of the earlier questions to the $1 billion operating leverage number that we've talked about in the past. I think 40% of that was S&L. So you're changing the way you operate, maybe some upside. Is that $400 million less now because of the way you're operating it?

Yes, the part of the issue, Tom, is going to be what do you add it to. And so we'll be trying to address that at the Analyst Day with some additional color that probably we couldn't get into as much detail on the phone here today. But we'll try to revisit that $1 billion uplift and refresh it and refine it both -- in some cases, there is some ups and in some cases, there is some downs. But we'll be trimming that up in about 2 weeks.

All right. Just a follow-up on the MVCs which underlie, I guess, the delay in part to the recovery on the transportation side. Are we seeing any progress toward chewing through those MVCs? Or we just go another quarter where we really, because of some other things haven't made progress in having that pipes fill up, if you will, to -- with volumes that underneath those MVCs.

No, I think you -- and again, we're seeing it on the transportation side of it, we have yet to see it materially in the S&L side of it. And that's very hard to predict what's going to happen as people start to take pressure off the system a little bit. But volumetrically, absolutely, I mean, we're seeing -- part of that, can't remember who asked the question earlier. But part of reason that the volumes are going up in the tail ends here is there's enough volume for people catch up on some of the MVCs that they were short on. And clearly, because of the encouragement we're getting to hurry up and finish our expansions that we have announced both on BridgeTex and on Cactus, we're seeing interest in not only filling that space up from people that believe they've got volumes coming, but also talking about what expansion opportunities we have such as the Basin expansion. So I think in the Permian and the answer to your question is now we're making up good progress on the transportation side. Yet to be determined what exactly it's going to do to the S&L business. But again, the fact that the differentials have gone from trading at a premium in Cushing and Midland to trading at a discount would tell you that it has the potential to come sometime, hopefully it's in 2018.

(inaudible) comes from the line of Ross Payne with Wells Fargo.

This might be a question for Al, but Moody's would like to see you get to about 5x by year-end with their adjustments down from prior writeups of 5.5x. I assume they're still looking for 5x with their lease adjustments and preferred equity treatment, et cetera. If you look at Slide 8, it looks like year-over-year, you've got a slight increase. I think they had you in at 6x leverage for 2016, and it looks your long-term debt to EBITDA is going up a little bit year-over-year. So how are you going to get to 5x? And I guess the second question is, if supply and logistics does not make your number by Q4 and leverage comes in higher than they expect, how much are you willing to defend that rating? You've got S&P and Fitch, are you okay with 2 out of 3 in case they move you down? Or are you willing to do everything including maybe a distribution cut to keep Moody's?

I'll start and maybe let Greg address that end part of it. But clearly, Moody's is focused on it. All 3 agencies are wanting to see us get to that 5x under their metric. Yet roughly a turn to long-term debt so the 4.8x, it's roughly 5.8x under the metrics. All 3 have a slightly different approach with their -- they're pretty consistent now. Clearly, we expect to see cash flow grow. Leverage, as you know, Ross, is a numerator, denominator. And so clearly, we just took the denominator down on a trailing basis with the adjustments in our guidance. We've got other tools and other things we're looking at on the numerator side as well. So we're very much focused on that. We want to retain Moody's, we want to retain all 3. And the bottom line is that we fully intend to do that. Clearly, asset sales, as I commented, we're continuing to focus on the portfolio there, managing our hedged inventory debt, lower is another tool. And so we're focused on both of them clearly. Denominator came down. Numerator is something that we can work on. We do have access to the equity markets to the preferred market, et cetera, asset sales, as I mentioned, so I'll let Greg kind of finish on the back end of that question.

Yes, I think on what you should take away with that is we've got a lot of arrows in our quiver to defend the investment-grade rating. We do want to keep all 3 and we can't control what somebody does or how they change their views. But I think our target was to just do 5x or less by year-end. And as Al said, there's other things that we can pull besides just an EBITDA trailing number, one of which, and I think, Ross, you would agree with, is that the trailing number is a metric but it's not always the most important metric. If by the time we get to year-end, our fee-based contracts committed run rate for EBITDA has solidly performed in the forecast we are, you sit there and say, "Gosh, a quarter or two that thing changes." Okay, then I think that's a consideration all reasonable people should take into account. As far as distribution cut, I would tell you that's not on the table right now because we don't think it's appropriate, especially given the way our look forward is. Distribution should be based upon the ability to generate it on a prospective basis. And again, we see 2018 as returning and even the tail end of 2017 returning to well above one-to-one and meaningfully above it as we get into '18 as we step up with these fee-based growth and supply logistics slags more than what we would've thought 6 months ago. We don't think that changes our coverage, it may change the delay and perhaps raising the distribution depending upon what the nature of that lag is.

And the next question comes from the line of John Edwards of Crédit Suisse.

Did -- I don't know if you've answered it to an earlier question on the S&L. If you go back to that Slide 5, you've got the -- where the relative contributions are. Not much contribution Q2 and Q3, then a big step up in Q4 and just -- is that going to be a volumetric contribution there? Or is it margin? How should we think about that? I know you're likely to say well, that's combination of those, but I just thought if you have any color on that would be great.

No, I think it's primarily margin because there will be some volume side because of the seasonality of the NGL side of it. But we'll have volume growth we expect in this final logistics on the margin side. Again, we tend to -- on the crude oil side, I'm sorry, we tend to view it as on the integrated system and clearly we're trying to move volumes and fill up our pipe. And if you recall some of Harry's and Willie's comments 4 or 5 quarters ago, we understand that we may have to give up margin on the supply and logistics to get it to the right pipe location. We do think we're starting to see, and again, it varies by region. But clearly, in 3 of our areas, the Permian, the STACK area and the Eagle Ford, we're seeing volumes not only level out but growing and effectively all 3 of those areas in our Bakken area and certain other areas in the Rockies, our margins are still under complete attack because there's not as much recovery there and there is a lot of incremental pipe competition. So it's a combination of those 2 which is what's presumed. But we typically see a sag in profitability during the second and the third quarters. It's just going to be more pronounced because of some of the carryover, the hangover effect, if you will. The time it takes us to retool some of our NGL activities.

Okay, that's helpful. And then my second question. You indicted with regard to inventory management, you would limit your upside a bit. I'm just -- I mean, any quantification you can put around how you're thinking about the upside limiting as you've, in effect, as you're putting some floors in there.

It's a balance with also, as Al mentioned, in terms of how we're trying to manage our credit metrics as well. But in certain areas like in the NGL side of it, quite candidly, I think we've been the mullet of the industry in terms we've been carrying more inventory than we've been -- being paid for in terms of the service. And so if we quit doing that and it turns out to be a cold winter, I think people will recognize, gosh, there's value, in trying to make sure somebody stores this and we need to be protected. Our whole game plan here is to provide a service, not to provide a commodity exposure for them. So it will vary within the commodity and it will vary by the region. But it's going to painful for us to try and make sure the market recognizes it because we're going to have to maybe have to forgo some margins that we could make if we were willing to carry inventory. But if we're not making enough for the risk and we can't retool our contracts, then the answer is, we'll make the storage available to third-party if they want to lease it from us, that's fine. If they don't, then we'll just wait until next year and see if they still think we're not important.

And our next question comes from the line of Michael Blum of Wells Fargo.

Just maybe following up on that topic. So when you talk about managing the hedge inventory facility going forward and kind of limiting the risk there, are you only talking about the NGL side of that business or also on the crude side?

On the credit metrics side, we're talking about both of them. From a -- managing the margin side of it, it's more on the NGL side for the reasons, Michael, that I just mentioned on the prior question.

Okay. And then second question is, you kind of talked informally in the past about potentially looping Cactus if there is shipper interest to go to Corpus. Obviously, there's a bunch of projects shooting for Corpus. Can you just give us your latest thoughts on that potential project than just generally your thoughts on crude going there and all the competing projects?

So what I'd like to do is defer that to the Analyst Day because I think we'll end up with a much more effective discussion and presentation on that. Clearly, as I mentioned earlier, we've got a fairly significant increase in our capacity on both BridgeTex and on Cactus and we're having engaged discussions about that. There are certain other competing projects out there. We think we can provide a better solution whether it be on our existing pipes or on potentially expanding the pipes and we'll talk about that on the Analyst Day with some props that will help us put that in perspective.

And the next question is from Rebecca Followill with U.S. Capital Advisors.

Back on S&L. On the NGL business, is part of that a loss that if we just take that to breakeven, we can, if added to the [230] for 2017?

No, there -- within the overall $50 million shortfall, there's a portion perhaps that you'd say. I mentioned earlier, we've got our face peeled off on one deal where we effectively had to roll a hedge that was protecting us against macro (inaudible) but didn't protect us against all the basis risk and we've changed the contracts on that. So there's some of that, but it's probably -- it's less than 40% of that for sure.

Of the first quarter impact.

Of the first quarter impact, I'm sorry.

So looking forward, a lot of that is just driven by tighter supply costs.

So it is not -- for the rest of the year that's not losses?

Right.

And then it's hard to tell on -- I'm sorry?

It's a reduction of what we had previously forecasted for earnings and not embedded losses in it.

Okay. And then on Page 5, it's hard to tell from this chart at the top that is there any forecast for S&L to have a loss in Q2? Or is that just breakeven?

It's so close to breakeven, I mean, if you had a movement one way or another, you might have a $5 million or $10 million swing in that. I can't tell you that it won't. Just -- because with carrying cost on inventory, et cetera, it could impact it.

So it's just the seasonality in NGL, you're not really selling NGLs, but you are incurring storage costs, transportation costs to get it to storage and things like that, that the margins captured in the fourth quarter this year and first quarter next year.

So it's a reporting issue, it’s not a loss against the transaction. It's just a match in the transaction versus the profit.

And the next question is from Sunil Sibal of Seaport Global Securities.

Just one question from me. When you think about the M&A environment in Permian and the areas of operations, seems like you there's still some asset packets out there. You obviously have done a fair bit of participation already. I was wondering with your cost of capital, where it is? How are you guys thinking about that and what kind of levers (inaudible) to you to pull off any significant transactions?

I'd say, I mean we're still chewing through the acquisitions that we just made. We continue to participate, Sunil, in the projects because, again, there are certain -- that if we can bring enough synergies to the table that we think we can compete with some very aggressive capital. So far if you look at some of the transactions that have happened away from us, the buyers haven't necessarily been using synergies as much as us. So they've been trying to enter into what's a great area. And their view of the future maybe a little bit different than ours. But the way you win these things is you pay more than anybody else will pay. And so if somebody is willing to -- that needs to get into the area and they don't have it, they may be willing to pay more than what the synergy adjusted number for us would be. If your question is are we out of the acquisition market? The answer is absolutely not. Do we feel like we are compelled to try and make acquisitions to build up our business out there? No. But are we prepared to if it's the right fit? Absolutely. And there's other ways to do it than just acquisitions and we've been pretty creative. Jeremy and his team did a combination of acquisition joint venture at the same time with Noble who had a big supply that they could commit. We had a system that had flexibility that made sense for them and us and we made some commitments on it. So there's other ways to work with parties to become more competitive and, in fact, in some cases making a very good rate of return even though you're paying more than anybody would pay to get the asset.

I think we've got time for a few more questions. I think we've got 3 more on the board. We'll take them and call it a day. So we can go ahead, Operator.

Next from Andrew Weisel of Macquarie.

Just a couple of quick ones. The joint venture contribution of the Transportation segment was down a little bit sequentially. Can you walk us through the drivers of that reduction versus the fourth quarter and what's embedded in your outlook for the full year, please?

Just timing?

Yes.

Like I said, it's just the timing issue on the step change there.

It's just between first quarter and second quarter timing.

And if you're caught there between first quarter and second quarter timing.

Okay. But I meant more, why was it down from the fourth quarter?

It was because of the incident in the Rockies, (inaudible) JV lines, part of it. There are 3 lines that were impacted, 2 of them were JV lines.

Yes. And, Andrew, just to put a final point on that, we didn't have a release or anything. We actually just had a (inaudible), basically said the pipeline maybe moving a tremendous of rain and we shut the pipeline in because we didn't want an issue to occur. And so we lost about 30 days worth of transport on that. That was in the JV line.

That's actually 2 JV lines (inaudible).

2 JV lines.

Okay. And then the full year, what type of numbers are embedded in your segment guidance?

Andrew, I don't have that right here. If you don't mind, we'll have -- maybe call us back offline and we'll have the contribution there, if it makes sense.

Sure. Okay, great. And then my other one, I just want to clarify. I'm pretty sure that this is the case. But the STACK JV expansion, do you think you've got to be totally independent from the potential Permian to Cushing line? Or is there any synergy of any sort, might one affect the other?

No, we're -- it's separate.

Looks like our last question comes from the line of Jean Ann Salisbury of Bernstein.

I'm sorry to be the 20th person to ask about S&L, but does the Q4 S&L guidance anticipate wider crude differentials, particularly Midland than Q1 through Q3? Or is that step-up pretty much all NGLs?

Well, the first quarter actually started off with tighter Midland differentials, then they got weaker. So -- but it's probably consistent with where the market is -- been in the second quarter, I would say.

Okay. So if Midland differentials widen from here that would probably be upside from what's in your forecast.

If they move meaningfully, yes.

Yes.

Okay. And then secondly on your marketing expansions on both BridgeTex to Houston and Cactus to Corpus. I was just wondering if you could walk through a little bit of color on the talks with shippers and what causes a shipper to currently prefer one to the other, or if one is just generally more attractive.

Well, we have 2 kids, we think they're both great in their own different ways. A lot of the movements to the Houston are refinery kind of delivery where people kind of source supply there. Certainly some on the water movements. But in general, the latter products probably are going to go on Cactus to get to the water and there's also some splitter facilities down there (inaudible). So it really depends on what the producer has and what their objectives are.

Okay. But on the whole, they are actually fairly equal.

It's equal demand. The demand is there for different reasons.

And there are no further questions in queue. I'll turn it back for any closing remarks for you, sir.

I want to thank everybody again for dialing in and we wanted to make sure we took as many questions or all the questions if possible. Hopefully, we were able to do that. We look forward to updating you on the next quarter conference call and also we'll be seeing you on the Investor Day in about 2 weeks. Thank you.

And ladies and gentlemen here on the phone, today's conference will be available for replay, 1:00 p.m. today through June 9, 2017. You can dial and access that replay at any moment by dialing (800) 475-6701, or internationally, at (320) 365-3844, both using the same access code of 421795. We do thank you very much for your participation and using our executive teleconference service. You may now disconnect.