Pembina Pipeline Corp (PBA) 2010 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Provident Energy Trust second quarter 2010 conference call. I would now like to turn the meeting over to Mr. Glen Nelson, Senior Investor Relations Analyst, please go ahead.

Thank you, Jonathan, and good morning, everybody. Welcome to Provident's second quarter 2010 conference call. Leading our discussion today we have Doug Haughey, President and Chief Executive Officer; and Mark Walker, Senior Vice President and Chief Financial Officer. Also during the Q&A session are--with us today are Murray Buchanan and Andy Gruszecki who run our Midstream business operations.

It is important to note that we will be discussing forward-looking information on the call today. This forward-looking information is based on a number of important factors and assumptions. As a result, actual results could differ materially from those discussed here. Information concerning the underlying factors and assumptions is available in yesterday's news release and is also discussed in our annual information form under the heading Risk Factors which is available on Provident's website or on SEDAR.

Also be advised that all dollar figures given today are in Canadian dollars unless otherwise noted.

Okay, well I'll take it over and thanks, Glen. Good morning, everyone. On June 30, as you know, we marked our first day operating as a pure play NGL Midstream business and we're going forward with a strong balance sheet and, in our view, very exciting prospects. And as you all know by now, the second quarter was a very complex quarter, to say the least., marked by two major transactions that facilitated the strategic repositioning of Provident Energy's Midstream business.

The first of these transactions was the sale of Provident's oil and natural gas production business to Midnight Oil Exploration forming Pace Oil and Gas. The sales represents the final divestiture of Provident's Canadian upstream business in a series of transactions that occurred between September 2009 and June 2010. Total consideration was approximately CAD429 million at the time of closing. It consisted of CAD120 million in cash which was retained by the trust, and approximately 32.5 million shares of Pace valued at CAD309 million. The share consideration of the upstream business unit equaled CAD1.16 per Provident unit which was distributed directly to our unit holders. Associated transaction costs related to the deal were CAD8 million and Provident recorded a loss in this transaction amounting to CAD319 million net of tax. It has been recorded as a net loss from discontinued operations.

And related to the transaction Provident also completed an internal reorganization that resulted in significant staff reductions at all levels of the organization including senior management. And with that I would like to thank Dan O'Byrne for his great contribution to Provident and his tireless efforts to ensure a smooth closing of the Pace transaction. Dan's last day with the Company was July 31. And we wish him well. As you know, we also announced that Mark Walker will be leaving Provident sometime around the end of September. Mark's wisdom and guidance will be truly missed. And I will have more to say on Mark's successor in the coming weeks.

Now the second major transaction in the quarter occurred when Provident completed the buyout of all of our fixed price crude oil and natural gas swaps associated with the Midstream business unit for a total cost of CAD199 million. The buyout of Provident's forward hedge position allows the trust to refocus its commodity price risk management program to better match hedges in place with products sold. Subject to liquidity, we plan to apply clean forward hedges routinely to hedge a portion of our commodity price exposure. the base hedge term will be a rolling 12 months but we may go out as far as 24 months depending on market conditions and liquidity.

Moving on to operations, gross margin from our midstream business was up 9% in the first half of the year. But the second quarter was generally characterized by lower sales volumes and margins in key markets. Midstream gross operating margins during the second quarter of 2010 was CAD49 million, a decrease of 12% compared to the prior year. Year to date margin was CAD138 million in 2010 which is 9% higher than the first half margin of CAD126 million in 2009.

Focusing on our business lines, Empress East gross operating margin was CAD11.5 million in the second quarter compared to CAD17 million in the same quarter of 2009. The decrease was in part due to a weak Michigan economy driving lower NGL sales volumes. In addition, extraction premiums increased close to 200% over those paid in Q2 2009. Higher premiums reflect the lower natural gas through put to Empress which averaged approximately 4.6 bcf per day in the second quarter, a year-over-year decrease of approximately 13%. And while concerning, we've recently seen a flattening of this trend which is good news so we continue to watch and we'll obviously keep everyone informed.

At Redwater West, gross operating margin during the second quarter was CAD23 million compared to CAD25 million in the second quarter of 2009. The decrease in margin reflects lower sales volumes driven by lower demand for propane in the US Midwest, butane in Western Canada and lower condensate margins. As I mentioned year to date, Provident's gross operating margins have increased 9% due to a strong year-over-year NGL pricing environment. A more detailed explanation of pricing can be found in our MD&A which we released yesterday.

And finally, our Commercial Services operating margin in the second quarter was CAD15 million, representing an increase of 6% compared to 2009. The increase in margin was mostly due to incremental storage revenues from Provident's condensate storage caverns which were completed in the third quarter of last year.

So I now turn the call over to Mark who will give us more detail on the second quarter financial results.

Thank you, Doug. Good morning, everyone. Before I get into the financial details of the quarter I wish to discuss two additional non-GAAP measures presented in our second quarter results that adjust for the two major transactions described earlier by Doug. For further clarity, the transactions were the sale of our Upstream business and the hedge buyout. The adjusted non-GAAP measures presented were adjusted funds flow from continuing operations and adjusted EBITDA excluding buyout of financial derivative instruments, strategic review and restructuring costs. These adjusted non-GAAP measures were provided as an additional measure to evaluate the performance of Provident's business in the period and to provide additional information to assess each of the funds flow and earnings generating capability associated with the Midstream business. Also, the Upstream business resulted in it being accounted for as a discontinued operation commencing with the second quarter reporting. In short, any references to continuing operations refer to the results associated with the ongoing Midstream business, and references to discontinued operations related to the Upstream business.

Given the preceding, the financial results reflect an adjusted EBITDA from continuing operations, excluding the realized losses on the one time buyout of the financial derivative instruments and strategic review and restructuring costs, of CAD35 million in the second quarter. An increase of 25% over the second quarter of 2009. The increase was largely attributable to lower realized losses on financial derivative instruments and lower year-over-year general and administrative expenses as a result of staff reductions and cost cutting measures throughout the organization. Second quarter adjusted funds flow from continuing operations was CAD40 million, an 82% improvement from the second quarter of 2009. Lower gross operating margins during the second quarter of 2010 were more than offset by lower realized losses on financial derivative instruments as a result of the Midstream derivative contract buyout program, lower general and administrative expenses and a current income tax recovery. Year to date adjusted funds flow from continuing operations was CAD87 million, 9% above the CAD80 million in the same period of 2009.

Cash distribution to unit holders in the second quarter were CAD48 million or CAD0.18 per unit, resulting in a payout ratio based on an adjusted funds flow from continuing operations of 120%. The second quarter payout ratio reflects the seasonal nature of Provident's business. Year to date Provident's payout ratio based on adjusted funds flow from continuing operations totaled 110% which includes approximately a CAD30 million impact associated with the fixed price derivative contracts incurred in the year prior to the Midstream derivative contract buyout. These numbers are included in the adjusted funds growth. In addition to cash distributions Provident also made a non-cash distribution to unit holders in the second quarter of 2010 related to the distribution of Provident's Upstream business. The distribution at the time the deal closed on June 29 was valued at CAD1.16 per unit. This represents the 15.96% of a Provident unit, as calculated for the plan of arrangement, contributed for each unit in exchange for 0.12225 of a pay share.

On the balance sheet, Provident maintained its natural flexibility with net debt to adjusted funds flow from continuing operations for the 12 months ended June 30 of 2.5 to 1. Total net debt was approximately CAD450 million, 12% lower than December 31, 2009. On the capital side, the Midstream capital expenditures for the second quarter totaled CAD3 million and CAD10 million year to date. During 2010, CAD8 million has been spent on growth projects including the construction of a truck rack at the Provident Empress plant, continued development of cavern storage at Redwater and development activities related to the recently acquired Corunna storage facility. Provident also spent approximately CAD2 million on sustaining and maintenance capital requirements.

A net loss of CAD345 million was reported in the second quarter. This was attributable to the CAD356 million net loss from discontinued operations that included a CAD319 million loss net of taxes on the sale of the Upstream business. However, net income from continuing operations for the second quarter of 2010 was CAD11 million compared to a net loss of CAD55 million in the second quarter of 2009. Total realized and unrealized losses on financial derivative instruments in the second quarter of 2010 were CAD11 million, CAD87 million lower than the same period of 2009. Partially mitigating this difference was the lower future income tax recoveries in the second quarter of 2010 which were driven by the losses on the financial derivative instruments--lower losses.

Provident also secured during the quarter a new credit facility on June 29 with a syndicate of Canadian chartered banks and other Canadian and foreign financial institutions to support the Midstream business. The new CAD500 million facility can be expanded to CAD750 million under an accordion feature at the option of the trust. The facility has a revolving three year period starting on June 28, 2013. The credit facility also provides for a separate CAD60 million letter of credit facility. At the end of the quarter Provident had drawn CAD247 million against the CAD500 million term credit facility and had CAD33 million outstanding against its separate CAD60 million letter of credit facility.

Current tax recoveries for the three months ended June 30 of CAD10 million were attributed to the lower earnings subject to tax in the US. Midstream operations allow for the recovery of taxes paid in prior periods and these were generated by the realized loss on the buyout of financial derivative instruments which occurred in the second quarter.

I would like now to turn the call back over to Doug who will provide some closing comments.

Okay, thanks, Mark. Before we wrap up the formal portion, everyone, I'll make a few comments on our business development and capital deployment efforts over the next while. In terms of Empress East business development, on April 1 Provident completed construction of our truck rack at our Provident Empress facility and began trucking in NGL mix, partially mitigating the impact of lower gas based NGL supply at Empress. We are also continuing to work on upgrades at our storage facility at Corunna. We intend to spend approximately CAD25 million through 2011 to complete an eight dual-spot loading/unloading rail rack and a fully automated two-spot loading truck rack. We are also reviewing joint venture opportunities to facilitate the rail and pipeline movement of NGLs from the Marcellus Shale play to our storage facility at Corunna. The facility's ideally situated to be a terminal and storage hub for NGLs from the rapidly growing Marcellus play.

In terms of Redwater West business development, we have been focused on three new 500,000-barrel high rate multi-purpose storage caverns that will be commissioned in 2011, '12 and '13. Provident has also begun construction of a brine pond to facilitate future cavern operations. In addition to these item, we have a number of other business development projects underway, all of which, as you would appreciate, are commercially sensitive. We will however be discussing those further as they progress. And as always, we will continue to pursue accretive acquisition opportunities as they arrive.

With respect to 2010 capital spending, management anticipates capital expenditures to be about CAD65 million and we've revised that down from CAD86 million for the year. This is simply the result of project costs being moved into the early part of 2011 and not an overall reduction in our capital deployment plan. With respect to capital spending in 2011 and beyond, we've estimated a future annual run rate of approximately CAD50 million for growth capital and an additional CAD10 million a year for maintenance capital under normal operating conditions. For 2011, we are considering a one time deployment of an additional CAD15 million in maintenance capital to support safe and reliable operations of our assets, and that could help us save maintenance capital in future years.

Finally, Provident is finalizing our plans for corporate conversion expected to occur near the end of the fiscal year. Clarity in the final legislation from the government of Canada is expected soon, at which time we will have more to say on our corporate conversion approach and dividend policy. Based on the available information, we expect Provident will be in a position, subject obviously to the business environment, to utilize existing tax pools to offset corporate income taxes through 2013.

In closing, everyone, Q3 will be our first full quarter as a pure play NGL Midstream business. Provident is a leader in this industry driven by strong fundamentals. We have a favorable business platform and we feel we are very well positioned to grow. So obviously we are excited about the prospects going forward.

So, that concludes our prepared comments. I would like to turn the call over to the Operator to open the line for questions. Operator?

Thank you. We'll now take questions from the telephone line.

(Operator Instructions).

Our first question from Linda Ezergailis from TD Newcrest. Please go ahead.

Thank you. I just wanted, first of all, a clarifying question related to your additional maintenance CapEx. That CAD15 million, is that a total number or on top of a regular CAD10 million run rate?

Linda, it's up to an additional CAD15 million We are still reviewing this but it's something we are considering for 2011. Little early days in terms of providing more details but we'll certainly be out with details when they become available. But it would be in addition to the CAD10 million run rate that we talked about.

Thank you. And another clarifying question on your CapEx. The drop in spending to CAD65 million from CAD86 million, I don't know, maybe offline, maybe Glen can help me get a breakdown or if it can be done quickly now as to what the composition now of the 2010 CapEx is?

We can provide details afterward. Most of it was just a shift in capital into the first quarter of 2011. By the way, just to be crystal clear on the maintenance capital, that's a one-time bump that we are considering.

Great. And then the new brine pond CapEx, can you give some estimates around that?

Sure. We are looking at a cost of somewhere in the vicinity of CAD7.5 million. As mentioned, as we continue to grow our storage business and put in new storage caverns, you need the offsetting increase in brine. And that project is anticipated to be concluding towards the latter part of this year.

And, Andy, just so we're clear, that is included in our existing capital?

Yes, it is, yes it is.

That's helpful. It was helpful to get an update on the impact of Southern Lights with respect to pricing in your outlook. But I'm wondering, maybe you can comment on any sort of volume metric impact or shift in services that you are experiencing now that Southern Lights is in service?

We're certainly--Southern Lights is in service and we are certainly aware the volume is coming into the market. There seems to be a pretty good uptake on that volume. As a matter of fact, the pricing for September so far on the trading platform is actually stronger for--relative to WTI than prior to Southern Lights. We did put that in our outlook. In terms of volume coming, we're seeing a pretty stable volume of rail cars coming in. Obviously, we have the advantage of having the product coming from offshore which is very cost competitive and probably less costly than product coming out of the United States. We certainly got that as a base volume to our facility that's a major advantage over others. And we are still seeing a pretty ratable volume coming from the United States. Not as high as last year, but still pretty solid volume. Andy, is there anything you would like to add to that?

No. Southern Lights is something that will have some impact on how volumes are received into Western Canada. However, the offset there is the anticipated continued growth in the oil sands and the requirements for more and more development.

So, net-net the impact on your Q3 operating margins should be negligible?

I'd say it should not be material.

Ok, great. Thank you.

Thank you. Our next question is from Robert Catellier from Clarus Securities. Please go ahead.

Hello. Just a follow-up question on the additional CAD15 million in maintenance capital that you are considering. It might be a little bit too early but can you tell us the nature of the projects you are considering and the potential cost savings?

You know what, Rob it's a little early for that now. We'll get something out on that as soon as we can. But we wanted to advise everybody as early as we can that this is something that we're contemplating. We will be out with details in due course.

And we believe that it can save maintenance capital in future years by taking that decision out.

Okay. It's understandable that you don't have all of the details at this point. With respect to the rest of your guidance, there's a few more data points than we are used to. To put it in perspective, can you comment on the decline rate you're contemplating, particularly at Empress when you give your 2010 guidance?

The 2010 guidance that we provided, when we came out with our sensitivities and basically outlined our volume of frac spread volume we'd be buying, we fully anticipate to be achieving those target numbers and those forecast numbers that we already presented. The decline rates that we have seen so far in the market are in line with what we put in those estimates. As Doug has already mentioned, the July decline rate actually slowed to about 6.5% versus the year prior. We use third parties to give us, for example somebody like [Perkin & Garts] to give us a forecast for the border and we use that when we're doing our budgets and forecasts. And the decline rates have been very much in line with what was forecast. That is where we sit on that, and so the number that we presented before a few months ago as our total frac spread volume, we are quite comfortable in saying we are going to achieve that--those numbers of the frac spread.

For the frac spread volume, what was the actual figure? And also, it would be helpful to get a realized frac spread number for the quarter including your realized hedging losses.

The number that we released for frac spread volume was 20,000-barrels a day of total frac spread volume and we just put that out July 15.

Right. But for the quarter, though, we have the realized loss that is disclosed in the financial statements but we don't actually know how much you produced in the quarter to get a net realized frac spread per barrel.

Nor have we for competitive reasons released that. We get an overall frac spread volume for the business but we haven't traditionally, because of the nature--competitive nature of the business and sensitivity, haven't released that kind of level of detail at the Empress facility.

Okay. That's understandable. As far as deferring the CapEx to 2011, you mentioned it's largely timing. But what's the source of the change in the timing? Are you revising the scope of your projects or are there regulatory reasons or customer reasons for the delay? Or can you give a little more clarity there?

Rob, it's basically just some time slippage. A couple are tied to just getting permits, some of them around Corunna, for example, where we thought we would be spending more money on the actual facilities in Q4. Now going to be spending it in Q1.

Our program was initially set up so it was heavily skewed toward the second part of this year. And as Murray said, that's exactly right. Commercially everything is in place and proceeding well. And it's just simply a slight deferral.

So it's just regular operating items then?

Yes. And perhaps a little bit of optimistic timing on when the projects were put together. They slipped a little bit.

Okay. And then with respect to the guidance you've given on the restructuring cost in the past, I believe the number was CAD25 million. From the statements today I see that CAD28 million has already been spent. So I'm wondering what context we take that CAD25 million in? Is it just for the--Is that CAD25 million relating to the continuing ops only?

The CAD25 million was meant as an estimate for the restructuring costs across both business units. In this quarter we incurred about CAD11 million in the continuing and CAD17 million is sitting in our discontinued ops. We have currently, at this point, basically accrued for all the individuals and all changes that would be anticipated for individuals leaving subsequent to June 30, so we believe that number you are looking at now will not change in any material fashion.

Okay. Thank you.

Rob, one other thing because obviously there's lots of interest around what we said about maintenance capital, I think it's fair to say that some of what we are looking at may actually be just a reclassification of expansion capital to maintenance capital. And obviously while it has zero cash impact, it does have a material impact on how you look at our payout ratios given the definition of distributable cash includes maintenance capital. We want to be really clear with people if a portion of this was maintenance capital so we are just going back through and making sure that it's as clean as we can get it. Stay tuned on that, but that's directionally part of where we're headed.

So the implications are you're expecting returns on it?

Yes, exactly right. Exactly right.

Thanks.

Our next question is from Robert Kwan of RBC Capital Markets. Please go ahead.

Good morning. Just on the extraction business. You mentioned that volumes look like they are flattening out here. Extraction premiums, as you mentioned, were up significantly year-over-year. Can you just give some color as to where you see that going in the third quarter and where you expect that to go over the coming quarters?

We have a situation because of, again, the competitive nature of that business we've been advised not to discuss our specific extraction premiums for fear that we could indicate market signal to other competitors as to what we might be paying for that.

I think we've provided everything we can, Robert, and for us to give any indication of forward extraction premiums I think would be inappropriate in contravention of the Competition Act.

Is it possible if we just look at the guidance guiding to the lower half of the range, it looks like your frac spread assumptions have come down a bit. Can you talk about the impact that any changes you had on the volume outlook and extraction premiums just in terms of those three big buckets, or if there is a fourth, as to what pushed the guidance into the lower half of the range?

What pushed the guidance lower than initially certainly has been the--partially the lack of demand. We saw reduced demand particularly in Michigan where we sell product there. There was a reduced demand, which was a part of it. The press release also talked about the higher extraction premiums, perhaps higher than we anticipated they would be for the quarter and that would be--certainly another piece of it. Going forward in terms of our guidance, we're comfortable given everything we know today with the guidance we provided.

Maybe one thing to restate it is that when we moved-- started guiding toward the lower end of the range, that actually wasn't driven by any sort of fundamental issues with the business. It was driven almost entirely by commodity prices and to a lesser degree softness in the market. So if you look at the commodity price assumptions that we used in the guidance, that's a pretty good indicator of how we got to the lower end of the range.

Just in terms of the hedging profile for 2011, I know there is a lot of product numbers. Is there just an overall percentage of frac volumes that you've hedged and to the extent there is a blended per barrel price?

At this point in time, recognize that we are in the process of executing that strategy as part of it. I don't believe we've published anything yet in terms of those updated hedges. We're really not at liberty to release that at this time. We will. We will be posting and--you will be able to see it, just not at this point in time.

Robert, we will get those out as quick as we can.

And is that going to be the specific breakdowns that you've got but also just even just a higher level aggregate X percentage of volumes hedged at X amount of barrel?

Remember that on July 15 we gave you our frac spread volumes. We provided that to the market in terms of how much our frac spread volume is. When you see the hedges, it will be a matter of taking the hedge volume as the numerator and then taking the frac spread volume as the denominator and you will be able to see what percentages that is.

That's great. Then the last question I have, you had some comments on propane, just where the inventories were. With the lower US inventories, their view then that that could be setting out for a very good winter season here?

Absolutely. Certainly we've already picked up on the lower US inventories. Assuming a normal winter which we didn't have last year. When you look at our results this year, for the first half of the year which included January, February, March, the fact that we are ahead on our operating margins versus a year ago is an excellent sign of the core strength of our business. Going forward, if we have an average winter or normal winter, definitely the lower inventory should set us up for higher prices relative to crude, for example, on propane primarily. So your point, Robert, is absolutely correct. We're also still seeing exports out of the United States because Mont Belvieu relative to the world markets, is low in price. So we've been seeing a couple million barrels a month being exported into Central and South America because of the demand there. That's how we can keep the propane supply in the United States tight. In addition to that, the demand by the (inaudible) for propane has been pretty strong as well because it's a preferred feedstock with the lower ratio to crude than some of the heavier products. Normal winter sets up pretty well for this business.

Okay, great. Thanks very much.

Our next question is from David Noseworthy of Scotia Capital.

Good morning.

Good morning, David

A lot of my questions have been asked. But just maybe some bigger picture questions. You mentioned that you've seen growing volumes going to your Younger facility due to the Montney gas production. Do you see an opportunity there or a need for additional fractionation at Redwater or additional extraction capacity at Younger?

We are currently evaluating that as we speak. And that we do view that as being a very good opportunity for our facilities. Your question is very timely and astute.

And just to give you a little bit of color on it, the Taylor facility with the re-wheeling, can go up to a higher number. It can go back--at one time it did run as high as [CAD]700 million. So being able to pick up the Montney gas, there wouldn't be any significant capital expenditure to run Taylor at a higher level. From Taylor downstream there's going to be more dollars needed to be spent, clearly Redwater is running full out. So, yes, we are looking at perhaps expanding Redwater.

You know, David, as a midstreamer, these are the situations you really like because, at Younger, if we see the additional volumes, those are additional volumes we can do with little or no capital and that's exactly the position you want to be in. You picked up on one of the projects we are thinking about and that is a potential expansion of the bottleneck at Redwater.

Excellent. Just in terms of the expansion capacity available at Younger that would take very little CapEx, what kind of volumes are we looking at there?

You could have [CAD]200 million a day of processing fairly easily.

Okay. Perfect. And then in terms of your current assets, assuming you're done with your rehabilitation of it by Q1 2011, are you contracting that storage capacity and handling capacity right now? How is that coming along?

We are contracting some now, to the extent we can. The facility has limited ability in terms of receipts and distribution, if you would. We do have some product contracted but it's not a large volume, we are actually seeing product flow in--starting to flow in as we speak. But the majority of the contracting for storage will start with the next contract year which is April 1 of 2011. We've had--the interest level in storing at that facility has been higher than we certainly anticipated or planned for. Some of that is the base business of the local refineries in addition to railed in product but of course the real large incremental chunk has been the interest of bringing products in from the Marcellus. And we certainly--there were some indications of people wanting to rail in C3 plus even as early as this year. That's the big incremental wedge of value that proposition that could be there for us.

And would that be the Marcellus producers or just anyone who's able to aggregate that volume and bring it over?

We've had different parties from each sector talk to us, including facility operators. In some cases the party that does the processing, it can be those parties as well, too.

So am I correct in thinking that the bottleneck of being able to receive that current, it's going to be de-bottlenecked as of Q1 2011, basically in time for that recontracting?

In time for us to-- we hope that it'll be done, the current plan is we'll be done such that we can contract for product starting April 1. That doesn't mean that everything will be physically, necessarily done by that time but we can start to contract in volumes and start to move in. We may not be 100% complete on some of the things.

And have there been any discussions with either Kinder Morgan or Buckeye with respect to connecting their pipeline to your facility, their proposed pipeline, I should say?

There are numerous options. We are talking to really all of the pipelines and we in turn are also examining the feasibility of rail options to accelerate some of the programs, so it's actually a very exciting opportunity that we think will provide great potential for Corunna over the next few years.

We are certainly pursuing any possible pipeline option that could tie in to Corunna, plus the rail, as Andy said.

Right. In terms of your sales volume decrease 9%, you mentioned part of it was from lower demand and part of it was from lower production. Am I correct in thinking the part that was from lower demand, does that mean you just put more volume into storage for potential sale later on and so even though it's a 9% decrease in sales volume, the actual volumes that you are eventually going to sell weren't impacted 9%? Or is that just if you didn't have demand you didn't go acquire it and therefore you didn't sell it and it didn't go through your system?

No, Robert. In terms of--you are absolutely right. The delta between the lower sales and lower production would go to storage.

Do you have a relative breakout between what was lower production versus lower demand?

Not right now with me, no I don't.

The lower demand, the 9% in the Empress East piece was primarily Michigan and the fact that Michigan unemployment is pretty weak. The listings on that side generated that. And the majority of that product went to storage because we are very much on plan for production out of Empress East relative to what we've projected. So you can probably assume that most of that 9% drop went to storage. That's probably got you to that number.

I think--just my last question. In terms of your tax pool guidance. Through to 2013, is that in 2013, up to 2013 or through the end of 2013?

It's meant to be through 2013, David. So it will be until 2013.

Okay. Perfect. Thanks.

Thank you. Our next question is from Steven Padgett from First Energy. Please go ahead.

Thank you but my question's been answered.

Thank you. Mr. Haughey, we have no more questions at this time, sir. Please go ahead.

In the absence of any other questions, thanks everybody for the time today. Thanks in particular for digging through that complex quarter. You all know that we're working hard to enhance our disclosure in this very complex business and will be as timely as we can in getting information out. So with that, we are looking forward to moving Provident forward as a pure play Midstream business and see everyone on the call at the end of Q3. Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.