菲利普斯66 (PSX) 2013 Q4 法說會逐字稿

Welcome to the fourth quarter 2013 Phillips 66 earnings conference call.

My name is Shannon, and I will be your operator for today's call.

(Operator Instructions)

Please note that this conference is being recorded.

I will now turn the call over to Mr. Clayton Reasor, Senior Vice President, Investor Relations, Strategy and Corporate Affairs.

Mr. Reasor, you may begin.

Thank you.

Good morning.

Welcome to Phillips 66 fourth quarter earnings conference call.

With me this morning are Greg Garland, our Chairman and CEO; our CFO, Greg Maxwell and EVP, Tim Taylor.

The presentation material we will be using can be found on the IR section of the Phillips 66 website, along with the supplemental, financial and operating information.

Slide 2 contains our Safe Harbor statement.

It is a reminder that we will be making forward-looking comments during the presentation, and our Q&A session.

Actual results may differ materially from today's comments, and factors that could cause these results to differ are included here on the second page of the presentation, as well as in our filings with the SEC.

So that said, I will turn the call over to Greg Garland for some opening remarks.

Greg?

Thanks, Clayton.

Good morning, everyone.

Thanks for being with us today.

We ended 2013 with a solid quarter.

We operated well.

It allowed us to capitalize on favorable crude differentials, while exporting record volumes of refined products.

Our adjusted earnings for the quarter were $800 million, and our cash flow from operations excluding working capital was $1.3 billion.

The fourth quarter, we hit a new record, exporting nearly 200,000 barrels a day.

Our total export capacity is just over 400,000 barrels per day, up from 285,000 barrels at the end of 2012.

Our full year 2013 adjusted earnings were $3.6 billion, which is down from 2012's adjusted earnings of $5.3 billion.

2013 was a volatile year in our refining business.

Adjusted earnings for this segment decreased $2 billion, compared with 2012.

However, in line with our strategy, the midstream, the chemicals, the marketing businesses all recorded higher earnings year-over-year.

Operating excellence continues to be a strong focus for us.

We believe that we protect and enhance shareholder value by being a leader in personal safety, process safety, environmental excellence and reliability.

During 2013, Phillips 66, DCP Midstream and CPChem were again among the very best in their respective industries.

We believe that our assets are uniquely positioned to benefit from the American energy revolution, and we have a strong portfolio of reinvestment opportunities across our businesses.

If you look at our 2014 capital budget for Phillips 66, we have announced $2.7 billion, and we believe this reflects the opportunities that we have.

Including our share of expected capital spending by DCP, CPchem and WRB, the 2014 capital program is expected to be $4.6 billion.

Of this $4.6 billion, about 70% is directed towards midstream and chemicals opportunities.

These businesses drive growth, and enterprise value appreciation through infrastructure investment and capturing NGL value uplift.

Our projects such as the US Gulf Coast petrochemical complex, and the Sweeny NGL fractionator, and the LPG export facility are expected to be large contributors of EBITDA, gearing us to grow in these more stable and higher value segments.

In next five years, we expect midstream and chemicals will represent about two-thirds of our Company's enterprise value.

Final investment decisions for both the NGL frac and the LPG export facility are expected during the first quarter of this year, with start-up of the fractionator in mid-2015, and the LPG export facility will follow about a year later.

Our refining business is attractively situated to capture value from rising US and Canadian crude production.

We do expect that average margins over the next five years will be better than the last five years.

We will continue to run well, optimize, improve returns, and limit growth capital in refining.

Cash flows from refining will be directed toward the higher value segments, and towards meeting our obligations to the owners of our Company.

We understand the importance of being a good allocator of capital, and we see value in returning capital to our shareholders.

During 2013, we distributed over 50% of operating cash flows in the form of share repurchases and dividends.

We continue our commitment to a secure, competitive and growing dividend, and we have nearly doubled our initial dividend.

Our Board has authorized $5 billion of share repurchases.

In addition, in December we announced exchange of Phillips Specialty Product shares for Phillips 66 shares currently held by Berkshire Hathaway.

This represents approximately 18 million Phillips 66 shares at current prices.

When you add that to the 44 million shares outstanding that we have repurchased since the spin, we will have effectively taken in about 10% of the Company.

In addition, we strengthened the balance sheet.

We have paid down $2 billion of debt, and that takes our debt-to-cap to about 22%.

So we like the opportunities we have before us.

We believe we have the portfolio of projects, people, and capabilities to play our part in developing the American energy landscape.

We are excited about the plans and the challenges that lie ahead of us in 2014 and beyond, and we look forward to seeing you and telling you more about this at our Analyst meeting in April.

And with that, I am going to hand the call over to Greg Maxwell to take you through the quarter results.

Thank, Greg.

Starting on slide 4, fourth quarter adjusted earnings were $808 million, or $1.34 per share.

The only adjustment this quarter is related to moving Phillips Specialty Products Inc.

or PSPI to discontinued operations.

If we take, excluding changes in working capital and discontinued operations, our cash from operations for the quarter was $1.3 billion.

For the quarter, we paid $232 million in dividends, and we repurchased $644 million or 9.9 million shares of our common stock.

On an adjusted basis, our 2013 return on capital employed was 14%.

Slide 5 provides a comparison of our fourth quarter adjusted earnings with the third quarter, looking at it on a segment basis.

Compared to last quarter, our earnings increase were largely driven by improved results in refining.

Partially offsetting this, are lower earnings from marketing and specialties, as well as midstream.

I will cover each of these segments in more detail later on.

The Midstream segment posted lower earnings this quarter, as higher earnings from NGL Operations were more than offset by lower earnings from DCP.

The 2013 adjusted return on capital employed from midstream was 15%, and this is based on an average capital employed of $3.2 billion.

Slide 7 shows Midstream's fourth quarter earnings of $121 million, a decrease of $27 million from last quarter.

Transportation made $50 million this quarter, which is pretty much in line with last quarter.

However, compared to last year this business line is up significantly, as results now reflect market rates.

DCP Midstream's earnings decreased by $50 million, primarily due to lower equity gains resulting from DPM unit issuances to the public, and along with lower volumes mainly due to adverse weather impacts.

NGL operations and other were up, primarily due to inventory and higher propane margins and sales.

On the next slide, we will cover -- we will move onto a discussion of our chemical segment.

In Chemicals, olefins and polyolefins ran well, with a global capacity utilization of 95% for the quarter.

In addition, the SA&S business successfully completed a planned major turnaround of its benzene unit located in Pascagoula, Mississippi.

The 2013 return on capital employed from our Chemicals segment was 26%, and this is based on an average capital employed of $3.8 billion.

As shown on slide 9, fourth quarter earnings for chemicals were relatively flat, compared to last quarter coming in at $261 million.

In olefins and polyolefins, earnings were up mainly due to higher volumes, and increased equity earnings from its Saudi Polymers Company joint venture.

Lower earnings from specialties, aromatic's and styrenic's more than offset this improvement, as a result of lower production and the cost impacts associated with the planned benzene turnaround in the fourth quarter.

Moving on to Refining.

Our realized margin was $10.75 per barrel, with a market capture rate of 112%.

The global crude utilization rate was 92%, and our clean product yield was 84%.

During the quarter, 94% of the Company's US crude slate was advantaged, and this compares with 66% last quarter.

The increase was largely driven by additional domestic crude's consistently trading at a discount to Brent.

We will cover this in more detail on slide 13.

The 2013 adjusted return on capital employed for refining was 13%, and the average capital employed for this segment was $14.3 billion.

Slide 11 provides more detail on Refining earnings improvements in the fourth quarter.

The Refining segment had earnings of $450 million, and this is up from a loss of $2 million last quarter.

This increase is mainly due to higher realized margins, in spite of market cracks dropping an average of 28% worldwide.

In the Gulf Coast, margins improved largely due to product differentials, as exports and blending activities helped us realize better clean product prices.

We also benefited from the fact that the distillate crack increased nearly 30% in the fourth quarter.

The increase in the central corridor was largely driven by the widening of Canadian differentials, as well as improvements due to butane blending into the gasoline pool.

Western Pacific's improvement is mainly due to improved clean product yields, product differentials, and also secondary product values.

For the Atlantic Basin, this region was down due to the impact of lower market cracks, as well as Bayway having a major scheduled turnaround during the fourth quarter.

Other refining was down this quarter due to scheduled maintenance on the Keystone pipeline.

All available pipeline capacity was used to deliver crude to our refineries, however, a lack of surplus capacity prevented us from capturing additional gains.

Next let's look at our market capture on slide 12.

Compared to the market, our realized margin improved mainly from feedstock opportunities, most notably in the central corridor.

In addition, secondary products were less of a negative impact this quarter, reducing the margin by $5.54 a barrel, compared with $6.35 last quarter.

As captured in the other bar, we also benefited from clean product differentials.

During the quarter, we realized better prices on average for clean products, compared with the benchmark prices.

In addition, as RIN prices moderated, the benefit of resulting lower expenses is reflected in this bar.

Slide 13 shows the comparison of advantage crude runs at our US refineries by quarter, for 2013 on the left, and for the past three years, as shown on the graph on the right.

During the quarter, 94% of the Company's US crude slate was considered advantaged, and this compares with 66% last quarter.

The 28 percentage point increase reflects the inclusion of other light and medium crude's which have been trading consistently at a discount to Brent.

Some examples include HLS, LLS, and ANS.

On an annual basis, our advantaged crude slate has increased from 62% in 2012, to 74% in 2013.

And this is due to processing an additional 118,000 barrels per day of tight oil, additional domestic crude's that consistently trade at a discount to Brent, as well as higher volumes of heavy Canadian crudes.

The decrease in other heavy crude category from 27% in 2012, to 24% in 2013 is attributable mainly to downtime at our Lake Charles and Sweeny refineries this year.

This next slide covers our Marketing and Specialty segment or M&S.

Worldwide marketing margins were $0.028 per gallon in the fourth quarter.

And while our refining segment benefited from reduced RINS costs during the quarter, earnings in M&S decrease due to lower RINS values created by its renewable fuel blending activities.

As previously announced, we plan to exchange PSPI shares for PSX shares that are currently being held by Berkshire Hathaway.

At closing, the PSPI balance sheet will include approximately $450 million in cash, resulting in a total PSPI value of $1.4 billion.

With the announcement of this transaction, Specialties now primarily includes our lubricants business.

Prior to moving PSPI's results to discontinued operations, their earnings accounted for approximately 30% of our Specialties results.

The 2013 adjusted return on capital employed from M&S was 27%, on average capital employed of $2.9 billion.

Slide 15 provides some additional details about the M&S segment.

Adjusted earnings for M&S in the fourth quarter were $73 million, representing a $153 million decrease from the third quarter.

Marketing and Others earnings decreased $145 million, mostly driven by lower RINS values in the U.S., as well as lower margins internationally.

The business unit was also impacted by the third quarter sale of Immingham Combined Heat and Power Plant or ICHP, which had been generating about $15 million to $20 million in quarterly net income.

Specialties' decrease over the prior quarter was mainly related to lower base oil volumes.

Moving on next to Corporate and Other.

This segment includes net interest expense, and it includes corporate overhead costs, technology and other costs not allocated to our operating segments.

Corporate and Other costs were $97 million after-tax for the fourth quarter, and this compares with a $113 million for the third quarter.

The improvement of $16 million was mainly due to tax impacts, resulting in a benefit to our Corporate segment.

Partially offsetting this was an increase in overhead for staff costs, as well as other employee benefits.

Moving next to the fourth-quarter cash flow.

Cash from operations excluding working capital was $1.3 billion.

Working capital changes were a negative impact this quarter, driven mainly from reduced payables.

We paid $232 million in dividends.

We funded $623 million in capital expenditures, and we repurchased $644 million of our shares.

We ended 2013 with a cash balance of $5.4 billion, of which $425 million is tied to cash held by our MLP, Phillips 66 Partners.

As for our capital structure shown on the next slide, we ended the year with equity of $22.4 billion, and debt of $6.2 billion, and this resulted in a debt-to-capital ratio of 22%.

Now after consideration of our cash balance of $5.4 billion, our net debt-to-capital ratio was 3% at the end of the fourth quarter.

Slide 19 shows our sources and uses of cash for the year.

We started the year with $3.5 billion in cash.

During 2013, we generated $6 billion in cash from operations which was sufficient to fund our capital program, to cover our shareholder distributions, and to reduce our debt.

Asset sales and MLP proceeds provided an additional $1.6 billion of cash, resulting in a year-end cash balance of $5.4 billion.

And again, noting that $425 million of this is held by Phillips 66 Partners.

This next slide shows 2013 adjusted earnings by segment.

Full year adjusted earnings were $3.6 billion.

Midstream, Chemicals, and Marketing and Specialties contributed over 60% of 2013's earnings, an overall increase from 2012.

In the coming years, as we grow these more stable businesses, earnings from these segments are expected to become a larger contributor to our portfolio.

In refining, despite a volatile commodity environment, this segment generated $1.8 billion in adjusted earnings, and $3.8 billion in cash from operations, largely driven by strong results in the Central Corridor.

This concludes my discussion of the financial and operational results.

Next I will cover a few outlook items.

In Midstream, specifically DCP, the start-up of the Front Range pipeline, the Goliad plant and the O'Connor plant expansion are expected in 2014.

In Chemicals, for the first quarter, we expect the global O&P utilization rate to be in the low to mid 90%'s.

In Refining, we expect the first quarter global utilization rate to be in the high 80%'s.

With regard to turnarounds, our pre-tax turnaround expense is expected to be about $400 million to $450 million for 2014, and between $120 million to $160 million in the first quarter.

In Corporate and Other, we expect this segments after-tax costs to run between $420 million to $440 million for the year.

The total Company's effective tax rate is expected to be in the mid 30%'s.

And lastly, we look forward to telling you about our future growth plans at our 2014 Analyst meeting, being held on April 10 in New York City.

With that, we will now open the line for questions.

(Operator Instructions)

Our first question comes from Doug Terreson from ISI Group.

Good morning, everybody, and congratulations on your results.

Thanks, Doug.

In the refining business, and specifically in the West Coast/Pacific area, I wanted to see if we could get an updated strategic and fundamental viewpoint on that business?

Meaning, even if the fundamentals remain lackluster, that is if you think that they will, there seems to be a variety of different strategic options that are available to the Company.

And so, I just want to see if we could get an updated viewpoint towards that business, please?

Sure.

So I think we have said many times, that we think the West Coast is a challenged operating environment.

It is a high cost area to operate.

Our assets are good assets.

We are on a path to fix it, I would say.

As you think about, a net income positive, single-digit return business, and how do we get crude advantaged to the West Coast?

So I think, you can ask me in April, we will probably tell you more about what we are doing to get advantaged crudes into California.

But it is a combination of investments and third-party as we work that.

And then, I think we said openly that all options for California I think are on the table, in terms of those assets, whether it could be a spin, an IPO, variable MLP, a joint venture.

As you look at the West Coast, we think those are valuable assets ultimately, because there is -- we have 110,000-barrels a day of coking capacity there.

And so, those assets in the future will probably be worth more than what people think they are worth today, is my view.

And I mean, the California market is a big market as everyone knows, and so, we have a continuing interest there.

But as we think through the assets, our path today is to make it better and more profitable, run those assets well.

We don't see any big capital investments in front of us on the West Coast, and so, the hold option really cost us nothing.

Okay.

Thanks a lot, Greg.

You bet, Doug.

Thanks.

Our next question comes from Evan Calio from Morgan Stanley.

Hello.

Good afternoon.

Can I ask for some more details on the flow improver business sale to Buffet?

Any detail, any deal metrics on the transaction, on a cash flow or EBITDA basis?

I mean, as it is one of the first, of potentially more M&A activity, given your asset position and optimization approach, just some more color around the metrics and the rationale driving, and how you thought about the -- and analyzed that transaction?

Yes.

So I will start, and then, Tim, can follow through.

It is not an asset that we were really actively marketing, or really wanted to sell.

And we had on-again, off-again conversations with Lubrizol, which is one of the Berkshire Hathaway companies about the asset.

And frankly, our aspiration levels were high, giving that it is a very specialty type business.

It had returns exceeding 30%, and it certainly fit well into the portfolio from that perspective.

But as we got to talking with Berkshire Hathaway about a proposed transaction, and we found a way that we could achieve high value for the asset, and at the same time do it very efficiently for both ourselves and Berkshire Hathaway.

It really became a must-do deal for us, in terms of creating shareholder value for PSX.

So Tim, if you want to go through some of the details, that's fine.

Yes, Evan, when you look at discontinued operations, it really highlights that.

So that is a $70 million, $90 million, $100 million EBITDA type of business.

So very strong multiple, very tax efficient, good value, a good strong business, so I think it was a great way to accomplish value on both sides of that.

Yes.

Great, great.

I will leave that.

And then secondly, you mentioned building more crude by rail offloading at Bayway and Ferndale.

Can you give any volume guidance, capacity or capital spend for that in 2014, like how much will you be able to move into those assets crude-wise?

Yes, Evan.

In Bayway, we are roughly looking at 50,000 a day on unit trains of additional capacity with that -- obviously, scheduling and flexibility can impact that.

Relatively modest capital amounts, tens of millions, we have never really come out with the final number.

Ferndale, very similar, probably more on the order of 30,000 a day.

Bayway would be operational first half of this year.

We would expect Ferndale to be operational in the second half of the year, and both of those will supplement our efforts through other third-party logistics to increase the flow of light crudes into Ferndale and Bayway.

And then, maybe lastly, if I just could on the -- I know you just announced that the Cross-Channel Connector project, I guess Phase I and Phase II, any other details around that on a potential EBITDA or -- and/or, sorry, the benefit to the refining sector from that connection?

Thanks.

Yes.

The Cross-Channel Connector is -- goes from our Pasadena terminal on the east side of Houston, across the ship channel and allows more logistics connections to other pipelines and terminaling assets.

So overall, it has got nice volume opportunity on that line.

It is really a short haul line, and I think a lot of the value accrues, really from an MLP perspective on that piece.

But just as importantly, it creates more some commercial opportunities for us, particularly with our Sweeny volumes.

Got it.

Thanks.

Thanks.

Our next question comes from Jeff Dietert from Simmons & Company.

Good morning.

You talked about your product export capabilities, and how you have expanded that to 400,000 barrels a day.

I believe that is more rapid than you had discussed previously.

Could you talk about where you have been successful there in getting those volumes up, and provide a split between the Gulf Coast and other regions?

Yes.

So most of that, it is primarily Gulf Coast.

So I think we have just been more successful than what we thought, in terms of scheduling efficiencies and minor debottlenecking, in terms of pushing more products through -- I think in December, we are kind of at a 250 rate.

So I think we will continue to push the limits.

We are looking for cheap ways that we can just get more barrels across there.

Certainly, we have stated our ultimate target is about 500 a day, but almost all that increase is going to be on the Gulf Coast.

Minor debottlenecks on the West Coast, and then we have underutilized capacity today on the East Coast.

Got you.

And on your Cedar Bayou hexene project, you talked about first half of 2014 in-service date.

Perhaps that is a little bit of slippage from previous discussions, but could you provide an update there, and what the current margin environment looks like for that asset once it comes on?

That project is still on schedule, on budget, so looking for it in the latter part of the first half of this year.

So we feel very good about that project, and margins are really in line with the guidance we have given in the past.

So that 15% to 20% return on a roughly $250 million investment.

So it is a nice increment of growth for the chemicals business, and a fairly high growth, high demand product.

Thank you.

You bet.

Our next question comes from Ed Westlake from Credit Suisse.

Yes, just a good morning, everyone.

Just a quick question on the Gulf again.

I mean, obviously more of your assets are over on the Louisiana side, and you know the crude production is growing, and as you get into your assets, there should be some up lift in earnings, which maybe is more apparent already in some of the peers.

But are there any logistical issues in getting access that you are seeing from crude for Texas?

I am thinking, any barge or shipping issues?

Well, Ed, we have put in service now, two MR tankers on the crude side.

We move Eagle Ford primarily into Louisiana from Texas, but we have also taken, frankly, LLS up the East Coast last quarter as well.

So we use that flexibility, where it delivers the most value.

The HoHo pipeline has started up, and that is a major connection to the Gulf, so or to the West side of the Gulf, and that is a very positive development, in terms of new crude sources.

So I think more barges are in service, more options are developing, and I think you are going to continue to see a wider selection of domestic crudes available to run in our Louisiana refineries.

And we are really taking advantage of that, particularly at Alliance and Lake Charles.

Right.

And then, coming to the sort of the LPG -- I guess, condensate export facility that you are building, I guess down the road, you have given some guidance on EBITDA and CapEx.

So just maybe a status update on any permits or anything for that?

But a broader question is, I mean, it doesn't make sense to sort of add things like condensate splitting capacity at that port facility, given the rise of the super lights that we are seeing in the system?

So in terms of permits, we got the permits on the frac.

We are working the permits on the export facility.

They will take a little longer in terms of that.

I think, in terms of the guidance we have been giving on CapEx, we are still in that range, and EBITDA is still in the $400 million to $500 million range.

We are going to take it -- well, you should expect FID this quarter, and we said that.

I think the other thing is, we are doing engineering work on the next frac.

We are doing, what I would say is preliminary engineering analysis around the condensate splitter.

And so, you should expect us to start moving those projects forward.

We just look at the infrastructure that we have in place at Sweeny and Freeport, and the geographic location of those assets, and they are just ideally situated for us to capitalize on them.

Yes, and we will give you more detail at the Analyst meeting in April.

Okay, yes.

And then, generally across the system, and you have a lighter refining slate than some of the others perhaps, with the exception of the West Coast and your Mid-Con area.

Are you doing any more investments to sort of -- do you need to do more investments to actually, at the plant level access light crude?

Yes.

So we are kind of 65/35 light, medium, heavy.

We kind of like that configuration, given the crudes we see coming at us.

We are always looking for debottleneck opportunities.

I mean, the Eagle Ford is an interesting crude.

We do see limits on processing Eagle Ford, and -- but we are talking about spending $5 million, $10 million increments to remove those limits to process more Eagle Ford, even at a light refinery like Alliance, for example.

But we are running about 325 a day or so, on the Gulf Coast of light sweet.

And at this time, we don't envision significant capital investments to change that slate, Ed.

Okay.

Thanks very much.

You bet.

Our next question comes from Paul Cheng from Barclays.

Hello.

Good morning.

Good morning.

Greg, I think that there is some news coming out, from different news [matter] talking about your Whitegate and the Malaysian refinery up for sale, and people are looking at that, and may have some interest.

Is there any update you can provide?

So yes, at Whitegate, we are kind of in the middle of a process, and probably shouldn't comment too much on that.

There is interest in the facility, but you have to context that interest with, it is an Atlantic Basin refinery, I would say.

And then in Melaka, I think we have said that, it is a non-strategic asset.

And there is a process underway around that, but it is a process that's really defined by the formation agreements of the joint venture.

And so, we are working that, and I think that you should expect that this year in 2014, we will get the decision points on both Whitegate and Melaka.

All right.

That's great.

And when earlier, I mean, you provide -- talking about the secondary quarter, the loss is narrowing, and also that the feedstock benefit is two of the really big reasons behind the strong refining result.

Specifically, on the Western Pacific and the Central Corridor, those two regions, if we comparing to the third quarter, can you help us then to break down, what is the benefit of those two items, in those two regions sequentially?

So I think, we can kind of go through that at a macro level.

You just start with the West Coast, first of all, unit pricing was lower.

So the hurt was less, because the relative spread between the crude price and secondary products was lower.

Fuel oil prices were a little bit better, and NGL prices were a little higher, and so that is the primary driver on the -- on that.

And then, when you move to the Central Corridor, it is around -- well, I think coke was a little better.

And then, of course, higher NGL prices drove that also.

Yes, is there any kind of number you can share?

With regard to, what aspect of it, Paul?

Right.

I mean, that is a -- $3 per barrel improvement sequentially on the secondary report, up $2, or anything that you can share?

Well, on the secondary products if I am following you, what we include in the appendix of -- for the Central Corridor, for example, the secondary products were a negative impact on a realized margin by $6.27 a barrel.

And I would say about two-thirds of that, Paul, is coke.

That's right.

Yes.

And do you have that number for the third quarter?

I am just looking at sequentially, what is the improvement or the narrowing in that loss?

That --

Yes, third quarter was $6.35 --

Right.

for 2013.

And I would say, coke is going to represent two-thirds of that loss in most -- (Multiple Speakers).

And the fourth quarter was $5.54.

Then maybe let me ask the other way.

If I -- looking at say, sequential, I mean, the fourth quarter, is there any sort of one-off operating item, whether it is an extremely high level of that distressed cargo you have been able to acquire, that you think maybe somewhat unique to the third -- to the fourth quarter, and may not be repeatable into say, the first quarter of 2014?

I don't think so.

Ponca ran really well.

Yes.

And it increased the amount of its domestically produced crudes around Oklahoma in Ponca City, but I don't think there was anything unusual, pretty clean quarter actually.

It was.

Not only in the central corridor, but most regions.

Yes.

Okay, great.

And the biggest impact, as you think across was really, was Bayway and the turnaround at Bayway, as you think about unusual items across the system.

Right.

(Multiple Speakers).

Yes, sorry.

Two final short ones -- (Multiple Speakers).

Yes, go ahead.

I was just going to say, the -- when you look at the refining results, the unusual items that I would think about were a negative impact that happened in the Atlantic, because of the downtime at Bayway, and impacted Humber.

Those would be the two things I would point to, that were kind of unusual for the quarter.

Perfect, two really quick ones.

One, do you have the current market value of your inventory, in excess of the bulk?

And secondly that, because of the wide difference or substantially wider difference in the fourth quarter, I thought that the other refining would have some better results, because of some trading opportunity.

But it is still coming with a loss.

Is there anything particularly in the quarter that led to a loss, and not seeing a profit, that what we have seen in the other period difference was really why?

So let's do the inventory one, first.

On the inventory, the replacement costs at the end of the year, Paul, was about $7.6 billion.

Thank you.

And then, I will kick it over to Tim.

But as we have mentioned earlier, part in some of our earlier comments, part of the driver was the planned maintenance on the Keystone pipeline, coming down out of -- on the Canada side.

And I don't know is there any?

That is primarily the difference that we saw.

I see.

Okay, very good.

Thank you.

Thank you.

Thanks, Paul.

Our next question comes from Doug Leggate from Bank of America Merrill Lynch.

Thanks, good morning, or good afternoon, everybody.

In your presentation, you obviously talked about the change in definition, I guess of how you see advantaged crudes.

What was -- I just want to get a little more detail on that.

Are you saying basically that you are -- you have changed the definition, which means you are no longer pursuing a more aggressive change in the slate?

Or are you still expecting to have some substitution within that newly-defined 94%?

And I have got a couple follow-ups, please?

Okay.

Doug, the definition really -- it is not definitional.

It is just the fact that these -- particularly the Gulf Coast crudes and ANS have consistently traded in the fourth quarter at a significant discount to Brent.

And I think that is a part of our crude slate -- we have always said that we expected those crudes to discount, and when they did, they would turn to advantaged.

That said, we continue to work on logistic solutions, particularly to the East and the West Coast and to the Gulf Coast.

And we are very active in finding ways to substitute one advantaged crude for another, particularly with options that we see in the Permian and Mid-Con for crudes that deliver more value to our refining operations.

So it is a very active area for us, both in terms of light, medium and heavy crudes, and the logistics and the operating optimization that we go through.

I guess what I am trying to understand is that, was it a proactive -- there wasn't a proactive change in the slate?

It was really more to what the market gave you that pushed you up to 94%?

Is that the right way of thinking about it?

I think that, generally, that is probably right.

I think that, we, in the past we had not included LLS or HLS, or ANS for that matter, in advantaged crudes because it was trading at Brent or better.

And what we are saying is, given that we -- products are priced off of Brent, and we think that will continue, that if the crudes are pricing at -- consistently at a discount to Brent, then we should consider those considered -- or consider those advantaged.

Now I don't think it says that we are any less aggressive about substituting higher discounted crudes.

But your point is correct, in that the market is the primary reason why we are considering LLS or HLS or ANS advantaged at this point.

Thanks Clayton.

That is very clear.

If I could just get two quick follow-ups, please?

I don't hold a lot of hope in this one, but any chance you can give us a breakdown between Bayway and Europe, in terms of the split of earnings in the quarter, or the loss in the quarter?

There -- you are right.

There is no chance on that one.

(Laughter).

Okay.

And the last one for me is really more of a kind of big picture issue.

And I guess, Greg, you have been quite vocal about your support for crude exports, in contrast to some of your refining peers.

I wonder if you can just give us a quick kind of summary as to why you are taking that view?

And I will leave it there, thanks.

Well, thanks.

Well, first of all, I think I came out in May of 2012, and said we wouldn't be opposed to lifting the ban on crude exports.

We do encourage a thoughtful and broad conversation around energy policy in our country, and I think you have got to look at that holistically.

It is not just crude exports, but it is also infrastructure.

And that could be pipelines, that could be marine, and I think you just can't take one of them and pull it out separately.

So we don't oppose lifting the crude ban.

But I think you have got to look at RFS.

You have got to look at infrastructure pipeline.

Can we approve a pipeline or not in this country?

All the way to marine infrastructure limitations that we have in this country.

So and generally we are free-traders, but we would like to see a free market also.

Okay.

I appreciate the answer, thanks, Greg.

You bet.

Thanks.

Our final question comes from Roger Read from Wells Fargo.

Thank you for sliding me in here, under the end of the process.

(Laughter).

I guess, I would like to maybe ask a little more about the midstream.

I mean, obviously one of the segments you really want to grow.

You talked about, at the beginning of the call some of the things starting in 2014.

What else can we look for there, and what are the sort of expected contributions of those projects?

Well, certainly as you know, our own midstream business, we are -- I would say, we are in an engineering investment heavy phase of that, and we see the EBITDA contributions of those investments starting in 2015 and 2016.

And this is very typical of an organic build activity.

DCP Midstream has had quite an active capital program over the years, the last couple years.

And going forward, we still see $4 billion to $6 billion of ongoing capital opportunity in front of DCP.

And so, I think we have got several pipelines coming on.

Certainly, we have got Sand Hill, Southern Hills, they are in process, and they are ramping up.

And over the next, I would say, two years maybe three years, we'll get those products -- or pipelines fully ramped.

Of course, you have the Front Range, the Texas Express pipelines this year that will come in.

And so, we start the Goliad plant, and so we have got a host of gathering and processing facilities that are -- that will be coming on in 2014.

And again, these will be -- help to fill the pipes that are already constructed and under way.

So I think we feel pretty good about the growth profile, in terms of NGLs for DCP.

We look at that, and expect something in the order of 4%, 5%, 6% a year growth in terms of that business -- in terms of our expectations of that business, I think we will be able to meet that.

And then, of course, you have got the additional transportation assets that we would expect to come on this year.

The rail and loading facility at Bayway, we think happens in the first half, and Ferndale, probably second half of this year.

There is some additional things that we are doing in transportation, we haven't been public on yet, probably want to talk about those in April.

But the transportation assets, or transportation business line within the midstream segment will probably contribute EBITDA faster than the NGL business line, and NGL investments are going to take a little bit longer to pay out.

Sure.

And I guess, given the exceptionally cold weather, and the impact on the pricing especially of propane, but across the NGL space, how do you look at that, in terms of a net impact on midstream here in the first quarter?

Is there enough positive out of the price moves to offset negatives you might see elsewhere in the business with higher prices?

Any help you can offer us though in that area?

I think, in general, we would say in the first quarter would be directionally positive for us.

Ethane continues to kind of follow natural gas, and trade it at parity with natural gas.

And then, you are always going to have the -- what I would say, is the instantaneous impact of a cold weather and limited infrastructure that is going to make things very volatile going forward.

Yes.

We are all aware of volatility, that is for sure.

Last question, just sort of a housekeeping issue.

The other refining segment was negative in the quarter.

Was that attributable to anything in particular, or just a function of how things are moving during the quarter?

It's really a function of how things were moving.

And then again, that limited, somewhat limited pipeline space, bringing Canadian crudes into the US -- that we can trade around that asset a bit.

Okay.

Thank you.

Thanks.

So I guess, that was the last question, and I do appreciate everybody's participation and interest in the Company.

All this material will be posted on our website.

We will have transcripts available soon, and we look forward to seeing a lot of you in April in New York.

Thanks a lot.

Bye-bye.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may now disconnect.