Summit Midstream Partners LP (SMLP) 2014 Q4 法說會逐字稿

Welcome to the fourth-quarter 2014 Summit Midstream Partners, LP, earnings conference call. My name is Christine 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 Marc Stratton, Vice President and Treasurer. You may begin.

Great. Thanks, Christine, and good morning, everyone. Thank you for joining us today as we discuss our financial and operating results for the fourth quarter of 2014.

If you don't already have a copy of the earnings release that was issued yesterday afternoon, please visit our website at www.summitmidstream.com where you will find it on the homepage or in the news section.

With me today to discuss our quarterly earnings are Steve Newby, our President and Chief Executive Officer, and Matt Harrison, our Chief Financial Officer.

Before we start, I'd like to remind you that our discussion today may contain forward-looking statements. These statements may include, but are not limited to, our estimates of future volumes, operating expenses, and capital expenditures. They may also include statements concerning anticipated cash flow, liquidity, business strategy, and other plans and objectives for future operations.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can provide no assurance that such expectations will prove to be correct. Please see our 2013 annual report on Form 10-K, as updated and superseded by our current report on Form 8-K filed with the SEC on July 3, 2014, as well as our other SEC filings for a listing of factors that could cause actual results to differ materially from expected results.

Please also note that on this call we will use the terms EBITDA, adjusted EBITDA, distributable cash flow, and adjusted distributable cash flow. These are non-GAAP financial measures and we provide reconciliations to the most directly comparable GAAP measures in our earnings release.

With that, I'm going to turn the call over to Steve Newby.

Thanks, Marc. Good morning, everyone, and thanks for joining us on the call.

I will begin by discussing our fourth-quarter highlights and our forward outlook for each area. Then I will turn it over to Matt for additional details on our fourth-quarter financial results. I will then end the call with some comments on our 2015 outlook and revised guidance before turning the call over for Q&A.

Yesterday, we announced our financial and operating results for the fourth quarter and full year of 2014. For the quarter, we reported adjusted EBITDA of $48.9 million, which was up $2 million, or 4.2%, over the fourth quarter of 2013. Adjusted distributable cash flow for the fourth quarter of 2014 totaled $35.1 million, which was flat to the comparable period in 2013, primarily due to $3.5 million of higher interest expense associated with our $300 million senior notes offering in July 2014.

On January 22, we announced our fourth-quarter distribution of $0.56 a unit, which was 16.7% increase over the fourth quarter of 2013 and a 3.7% increase over the third quarter of 2014. Our distribution coverage ratio for 2014 was 1.07.

We reported a record 1.5 Bcf a day of volume throughput in the fourth quarter of 2014, up 2% over the third quarter. We continued to see strong volume growth at Mountaineer during the fourth quarter, along with steady volume growth across our Bison and DFW Midstream gathering systems.

Together, growth from the Mountaineer, Bison, and DFW systems helped offset a 4.3% volume decline on our Grand River system versus the third quarter of 2014. I will go into greater detail on each asset later in my comments.

Since releasing our initial 2015 adjusted EBITDA guidance in early November, commodity prices have decreased anywhere from 30% to 50%. It's because of this decrease and the CapEx reductions that our customers have announced that we are lowering our 2015 adjusted EBITDA guidance by approximately 9% to a new range of $195 million to $210 million.

The reduction in guidance is split evenly between the small amount of direct commodity price exposure that we have in our business and the expected reduction in drilling activity around our systems, due to producers reducing their 2015 CapEx budgets.

We have structured our business with a high level of MVCs and fee-based revenues. However, we estimate, based upon $55 crude oil and $2.75 natural gas for 2015, approximately $10 million of our original 2015 adjusted EBITDA guidance will be directly impacted by the significantly lower commodity price environment.

Our direct exposure comes from our POP contracts in our Bison Midstream system in the Bakken, our POP contracts within our processing assets in our legacy Red Rock systems in the Piceance, and then we also have direct commodity price exposure associated with the sale of condensate that we retained from our Grand River operations and sell for our own account.

Additionally, we estimate that another $10 million of our original 2015 EBITDA guidance will be indirectly impacted by commodity prices. This includes areas where our customers are flowing above their minimum volume commitments or have no minimum volume commitments, and lower upstream CapEx budgets translate into lower volume throughput on our gathering systems.

Again, accounting for the direct and indirect exposure, we are lowering the midpoint of 2015 adjusted EBITDA guidance by approximately $20 million, or 9%.

Before I discuss each of the SMLP assets in greater detail, I will make a few comments on the recent activity at Summit Investments, our GP development company. Activity levels continue to remain high at Summit Investments, as evidenced by our December 2014 announcement related to the development of a new 0.5 Bcf gas gathering system for XTO Energy in the southeastern core of the Utica Shale. Going forward, we will refer to this asset as Summit Utica. It is important to note that Summit Utica's wholly owned and operated by Summit Investments, and is outside of our Ohio Gathering joint venture with MarkWest Utica EMG.

This $400 million organic project is already underway and the acreage is being actively drilled by XTO. We expect the backbone of this system to be built out over the next 12 months and expect the connection of additional pad sites to drive volume growth as construction progresses throughout 2015 and 2016.

We are also actively involved in a number of discussions with various producers in the area and we expect to announce new customers on this system over the next several months. We continue to be very excited with our growing position in the Utica Shale and we look forward to partnering with XTO in this important play.

Our Bakken Shale development projects continue to progress forward and we continue to be encouraged by the level of volume growth and drilling activity we are experiencing around our systems, even in today's low commodity price environment. We believe that lower commodity prices will force producers to high-grade their drilling activities toward their highest return acreage and we're already seeing this.

Our Polar system in Williams County is in what we believe is a core area of the play and has seen steady drilling activity to date. Our Divide system in Divide County sits in a core area of the Three Forks play where our anchor customer, SM Energy, is actively drilling and has had very good success.

Some specific highlights from our Bakken systems during the fourth quarter include we amended and significantly expanded a crude oil gathering agreement with one of our anchor customers on the Polar system in December to further expand our receipt points and gathering services. That expansion is currently underway.

We also commenced operations on our Tioga Midstream asset for Hess during the quarter. As we have mentioned before, this is a multiyear buildout for Hess, but we're excited to bring our first production to market in the fourth quarter.

With the recent expansion of our Bakken Shale gathering assets and the recent announcement of Summit Utica, we have increased our total inventory of assets under development at Summit Investments to over $2 billion. We plan on dropping the vast majority of these assets into SMLP over the next three years. As stated by our drop-down guidance, it reflects a range of $400 million to $800 million of transactions per year through 2017. We believe that these drop-downs will serve as a catalyst to accelerate distribution growth over the long term at SMLP.

I would also remind everyone that we expect some of the $2 billion of development capital to actually be spent by the MLP after we drop the assets down. So the assets will be dropped down with remaining growth capital associated with them.

Now for the MLP and further discussion around each area. As I had mentioned earlier, our total average throughput for fourth quarter of 2014 was 1.5 Bcf, which was up 2% over the third quarter. The largest driver of volume increase was our Marcellus asset, Mountaineer Midstream, which averaged 459 million cubic feet in the fourth quarter, up 10% over the third quarter.

Mountaineer volumes continued to grow throughout the fourth quarter of 2014 as third-party compressor stations located upstream of Mountaineer's gathering system were commissioned, which unlocked new sources of production from Antero.

As we look out through 2015, our guidance reflects continued volume growth in the Mountaineer system through the second quarter, before volumes begin to moderate as a result of Antero's announcement to reduce its drilling activity in the Marcellus and concentrate its 2015 expenditures in western Doddridge County.

At Bison, we are encouraged by our fourth-quarter operating performance as volumes to average 22 million cubic feet a day, representing an increase of 6.4% over the third quarter. We saw good growth throughout 2014, with volumes increasing every quarter since the first quarter when volumes averaged 12 million cubic feet a day. Volume throughput at Bison has primarily come from our most active customer, Oasis, and we continue to have MVC protection from our other anchor customer, EOG.

We invested heavily at Bison in 2014, both with new compression assets to increase throughput capacity and with maintenance capital to increase the reliability of the system. By the end of the first quarter of 2015, we expect to commission two additional compressor stations, which will further reduce field pressures and provide us with additional capacity.

Given where current commodity prices are, we do not expect significant drilling activity in the Bison system in 2015. Our revised guidance contemplates volumes to decline from 22 million cubic feet a day in the fourth quarter to the upper teens range in the first half of 2015, and then hold relatively flat throughout the second half of the year.

We also expect our margins associated with our POP contracts will be negatively impacted by current commodity prices, which is a primary reason for revising our adjusted EBITDA guidance.

At DFW, total volumes for the fourth quarter averaged 372 million cubic feet a day, which was up 0.5% over the third quarter of 2014. The Texas Energy Midstream acquisition, which was completed at the end of the third quarter, added approximately 18 million cubic feet of incremental volume throughput during the fourth quarter and helped offset declines related to several large pad sites that were off-line during much of the quarter for drilling and completion activities.

Several of these pad sites recommenced production late in the fourth quarter, and in December, DFW volumes averaged more than 400 million cubic feet a day. We also had our mandatory shutdown in the fourth quarter at DFW for two days, which negatively affected our volume during the quarter.

As we look into 2015, our guidance contemplates volumes stabilizing at DFW in the 375 million to 400 million cubic feet a day range, as completion activities at several additional pad sites that are currently shut in are finished and volumes come back online.

For Grand River, which includes the Red Rock assets acquired from a subsidiary of Summit Investments in the first quarter of 2014, volumes averaged 638 million cubic feet a day in the fourth quarter, which was 4.3% lower than the third quarter of 2014.

Our fourth quarter of 2014 results reflect a theme consistent with the third quarter at Grand River, with declines from Encana's reduced drilling activity being partially offset by growth from WPX's increased activity in the legacy Red Rock service area. We expect this theme to continue throughout 2015. We currently expect that Encana will continue to suspend its drilling activities in the Piceance under their JV agreement with Nucor in our area for 2015, before picking back up in 2016. As a result, our revised 2015 guidance reflects continued volume declines related to their inactivity.

We do expect our other customers in the Piceance, namely WPX, Black Hills, and Ursa, to continue to be active, albeit at a slower pace than in 2014. Further, we remain highly contracted in this area. Our anchor customer MVCs increased in January and, through 2018, average over 725 million cubic feet a day versus our reported fourth-quarter volume of 638 million cubic feet a day.

With that, I will turn it over to Matt to review the quarterly financial results in more detail, and then I will conclude our formal remarks.

Thanks, Steve. I will cover the results of Summit Midstream Partners, LP, or SMLP.

Adjusted EBITDA for the three months ended December 31, 2014, was $48.9 million, compared to $46.9 million for the three months ended December 31, 2013, an increase of approximately 4%. The $2 million increase in adjusted EBITDA was primarily due to the increase in volume throughput on the Mountaineer Midstream and Bison Midstream systems.

Also, certain of SMLP's gas gathering agreements on its Grand River system contained annual MVCs and gathering rates that increased in the beginning of 2014.

Adjusted EBITDA in the fourth quarter of 2014 included approximately $12.3 million related to MVC mechanisms from our gas gathering contracts. This amount included $19.5 million of MVC shortfall payments that were recognized as gathering revenue, $13.9 million associated with a net increase in deferred revenue related to MVC shortfall payments, offset by $21.1 million associated with quarterly adjustments related to annual MVC shortfall payments. Additional detailed regarding our MVCs is included in the fourth-quarter earnings release.

SMLP reported a net loss of $37.7 million for the three months ended December 31, 2014, compared to net income of $21 million in the fourth quarter of 2013. SMLP reported a net loss of $21.2 million for the year ended December 31, 2014, compared to net income of $53.3 million for the year ended December 31, 2013.

Net income for the three months and the year ended December 31, 2014, included non-cash charges recorded in the fourth quarter of 2014, including a $54.2 million goodwill impairment charge related to our Bison Midstream System. Recall that SMLP paid approximately $250 million for the Bison Midstream System in a drop-down transaction in June 2013.

Given the nuances of accounting for entities under common control, the Bison Midstream assets were actually dropped into SMLP at their carrying value, which approximated $305 million as of June 2013.

In connection with the sharp decline in commodity prices in the fourth quarter, we have reassessed the carrying value of the Bison Midstream assets and compare that to its fair value, including goodwill. As a result of this evaluation, we recognized a $54.2 million non-cash goodwill impairment charge.

Also, SMLP recorded a $5.5 million non-cash asset impairment charge related to its DFW Midstream system in the fourth quarter. This charge relates to a new compressor station project that was terminated and replaced with a more cost-effective pipeline looping project, which came about in the fourth quarter of 2014.

Adjusted distributable cash flow totaled $35.1 million in the fourth quarter of 2014. This implies a distribution coverage ratio of 1 times relative to the fourth-quarter distribution of $0.50 per limited partner unit, which we paid on February 13, 2015. For the full year, our distribution coverage ratio was 1.07 times.

FX for the fourth quarter of 2014 was approximately $24.2 million, of which $1.8 million was classified as maintenance CapEx. We had $208 million of debt outstanding under our revolving credit facility at December 31, 2014, resulting in a borrowing capacity under our $700 million credit facility of $492 million as of December 31, 2014.

Total leverage at December 31, 2014, was 3.9 times.

As Steve mentioned, SMLP has revised its 2015 adjusted EBITDA guidance from a range of $215 million to $230 million down to a range of $195 million to $210 million. The 9% reduction in the midpoint from early November's guidance is a result of the 30% to 50% decline in commodity prices, as released in our initial financial guidance.

This revised guidance reflects management's expectation of the direct and indirect exposure to a 2015 price deck of $55 crude oil and $2.75 natural gas. With that, I will turn the call back over to Steve.

Thanks, Matt.

Just to reiterate what Matt said, in light of the current commodity price environment and lower expected drilling activity, as a result of this price backdrop, we are revising 2015 to a new range of $195 million to $210 million. This new adjusted EBITDA guidance is based on recent strip pricing of $55 per barrel for crude oil and $2.75 per MMBtu for natural gas.

As a result of the lower guidance, we are reducing our 2015 distribution growth from our existing SMLP assets to a new range of 3% to 4%, excluding drop-downs. With drop-downs, which we still expect at a pace of $400 million to $800 million annually through 2017, we expect high single-digit distribution growth for 2015, and that's measuring fourth quarter of 2015 over fourth quarter of 2014 distributions.

I would guide everyone to the lower end of the range of the drop-down guidance for 2015, given current market conditions. This is more of a timing issue related to development pace of the assets at Summit Investments than any change to overall strategy. We still expect the current development pipeline to be largely dropped into the MLP within the next three years, and we still have a very supportive sponsor, GP sponsor, to make that happen.

To be clear, our revised 2015 adjusted EBITDA guidance and distribution growth does not include the impact of any asset drop-downs from Summit Investments to the MLP. When those drop-downs occur, we will revise our guidance accordingly.

With that, I will open it up for questions.

(Operator Instructions). Praneeth Satish, Wells Fargo.

Just a couple quick questions. I guess, first, can you talk -- provide a little bit more clarity on the pace of drop-downs this year? I think previously the thought was to do two drop-downs. Is that still the case? Maybe what assets would you say are closer to being dropped down versus others?

It's Steve. I think two is probably still directionally the right way to go, and then I don't think our thoughts around what is ready has really changed.

I think our crude oil system in the Bakken is probably the most developed, and we actually feel good about what we have seen here over the last three months and how that -- the impact to the system or the lower amount of impact to the system. So I think that area is still ripe, and I think the Polar system particularly, which is in the core area in Williams County.

And then, I think we've guided pretty consistently that we thought the earliest that our OTC system or pieces of our OTC system would be ready would be late 2015, and then that will come down probably in multiple pieces through 2016.

Okay, and then, I guess when we think about the multiple on the drop-downs, given the uncertainty in producer drilling plans and volume growth, could the multiple be lower than past transactions to reflect this uncertainty? I guess, how should we think about that?

Yes, I think -- I would put it that our strategy is to try to handle the development and ramp-up risk at the GP, and also when those assets come down to the MLP, they are going to come down reflective of current market conditions and market prices, based upon current market conditions.

So that is how I would phrase that, and I think we have a very supportive general partner who also owns a very large amount of units as well, too, so the alignment of interest is pretty good there.

Okay, and then just last question for me. As you look across your asset footprint and the operating environment, are you seeing any flexibility on the operating cost side or maybe small debottlenecking projects? If the answer is yes, how much of that is built into your guidance, if at all?

I would say some. Unlike some of our peers that come out, I think we run pretty lean anyway and try to -- even in good times, we try to control costs as much as possible. So I wouldn't expect us to have 15%, 20% type cost reductions. I just don't think we have gotten to that point to be able to wring that out, if that makes sense.

There are some cost reductions that we will be able to do. I wouldn't -- and they are embedded in our revised guidance, but for us, it's more around the edges than anything significant.

Okay, thank you.

Helen Ryoo, Barclays.

Steve, you mentioned some of the assets may be dropped down with development projects executed at the MLP level. Has there been some change in thoughts regarding how much more development projects the MLP would take versus at the Summit level, given the new environment or if --

No, Helen, I don't think it's related really to the new commodity price environment. I think it's more of -- a little bit more of an art than a science of we're going to do about $75 million, $80 million of growth CapEx at the MLP this year. We're going to do $450 million of growth CapEx at the GP this year.

We think we can do more at the MLP. I don't think we can do $450 million at the MLP, given our size today, but I think we can do some more. Just given the pace of development and the fact that a lot of these systems have add-on opportunities as you go, we do expect them -- our goal is not at the GP to completely build out everything 100% and then drop it down to the MLP. So they will come down.

I don't think it's a change in strategy. I think our strategy overall has been to drop assets down and still have development exposure to them, and I think we can do more development -- organic CapEx development at the MLP.

Out of that $450 million that is going to be done at the GP level, what's the breakdown in terms of region? How much of that will be on the Summit Utica versus Ohio JV for (multiple speakers)

Yes, yes, let me first make the comment that if you go back, that $450 million is probably lower by about $300 million to $350 million from November, to just give you a sense of what's -- how the commodity price and slowdowns occur, so it is somewhat variable.

I think -- let me get the numbers. I think about -- so let's see here, of the $450 million, about $300 million of it is in the Utica and the balance of it is in the Bakken, basically.

That Utica, you're talking about Summit Utica, not the JV, or in total?

Both. Both, Helen, so both capital we have committed to the JV to build out there and then our buildout of Summit Utica as well.

Okay, great. Then, just lastly, the coverage -- given this kind of -- one could argue this is a trough price environment. What kind of coverage is assumed in your base case 3 to 4 times growth rate without drop-down, and with drop-down you said you were targeting high single digits, so how should we think about the coverage side?

It's a great question. The 3% to 4% base is coverage of, call it, close to 1, 0.95 to 1 times coverage. Then the high single digits would be 1 to 1.1 times.

Okay, sorry, on the base case, could you repeat that? Sorry about that.

Yes, close to 1. 0.95 to 1 times coverage on that, yes. Pretty close.

Okay, thank you very much.

Jerren Holder, Goldman Sachs.

Thanks for the guidance, in particular the crude oil or commodity prices that you're using. I think the $55 for oil is pretty consistent with what other commodity sensitive MLPs have put out, but the $2.75 seems to be -- I know it's closer to spot, but it seems to be a below, call it, $3.50 which other guys have guided to. Can you talk a bit about sensitivities, whether it's directly or indirectly from volumes, you think? Whether $1 oil or $0.25 gas, any color like that, if prices were higher?

Yes, I will let Matt go through it.

I can give you something pretty specific. As you know, we are 96% fee based, so it's not real sensitive. Just from a gas standpoint, $0.50 is about $0.5 million from an adjusted EBITDA standpoint, both directions, and from a crude oil standpoint, $10 is about $1.5 million to close to $2 million.

All right, that is -- that's very helpful.

I guess, lastly, the minimum volume commitments, so those are expected to increase, I guess, over time. Can you guys maybe provide a little bit more color about maybe some assets, regions, that are underwater, that as we move forward may increase to the degree that actual volumes don't actually increase?

I think I understand your question, so I will answer what -- consistently in our western Colorado, right, our Legacy Grand River system, our minimum volume commitments with Encana will step up in not only rates, but volumes in 2015, and we really don't expect any drilling activity in that region, so therefore the minimum volume commitment will increase due to the increase in the MVCs, as well as a decrease in volume that they are actually bringing on the system. Does that make sense?

Yes.

Then, also, the MVC -- the large MVC payment from EOG that we received in -- for 2014, we would expect it to be relatively consistent in 2015.

Then our payments that we had talked about from a monthly standpoint from WPX and Vanguard on our legacy Grand River system, $1 million to $1.5 million a month, we expect to remain consistent in 2015 as well. That's about 90% of the activity related to MVC.

Got it, thank you. Very helpful.

Derek Walker, Bank of America.

Just to go back on the MVCs there real quick, 2015 guidance, is that -- does that effectively assume throughput is really at that, call it, the total average MVC level, which I think is 1.2 Bcf a day?

No, it doesn't.

I think it is -- throughput from 4Q was roughly a little bit north of 80% of total throughput, but I didn't know if the revised guidance brings that in line with the MVC level. I know there is some variability there, but just wanted to get a general sense of what you are assuming for the base case.

Bear with me here. I will say in 2015, relative to what we recorded in 2014, there still is a volume decline -- I'm sorry, a volume increase for the partnership on a volume standpoint.

Okay, so it's still going to be north of the total MVC value?

Yes.

Again, remember, if you look at Antero and Mountaineer, that ramped up dramatically, right, in 2014, so as you look at it (multiple speakers) annual standpoint, the annual per day is expected to increase year over year.

Got it, okay.

We are above our MVCs pretty significantly at Mountaineer and at DFW, so -- for the most part. You almost got to look at it by asset.

That's fair. Okay. Appreciate it. Then just on the coverage, I know you said for the base case you are at 0.95, 1, but do you just have a general sense of what you are assuming for maintenance CapEx?

Yes, I think it's $15 million to $18 million, somewhere around that range.

Our guidance is $14 million to $18 million and we haven't adjusted that. We're obviously going to evaluate that very hard as the year goes on, but we are still at $14 million to $18 million.

Got it. Then just real quick, as you think about the drop-downs longer term and as the MLP grows, you're going to potentially take on more development projects arguably at higher returns versus doing drop-downs. You talked about the high single digits for this year and distribution growth with the drop-downs. How do you think of it longer term as the MLP does development projects? Would you maintain that high single digit or is it -- would you expect to increase that to the low double-digit growth rate long term?

I think -- look, if we're in this commodity price environment for the next three years -- I'm going to answer that two ways, if I can, because if we're in this commodity price environment -- what we released back in November was multiyear mid-teens. With this commodity price environment, I think you knock some of that off to probably low double digits type range over the multiyear's guidance.

But we still -- we have the benefit of having a large amount of development projects in growth embedded within the family. That's a big luxury we have. Still, it will hit that teens growth rate some if we're in this commodity price environment, no doubt about it. We would probably guide to more of low double digits, if that was the case, over the longer term. Does that help?

It does. I appreciate the color on my questions. Thanks, guys.

Elvira Scotto, RBC Capital Markets.

Can you just remind us -- the development projects that are up at the parent, can you remind us on those projects what's -- whether they are all fee based, if there is any MVCs on those projects?

They are all fee based.

Let's take them by area a little bit. On the gas side in the Utica, the Utica is mainly an acreage-only play, has been since inception, for the most part. That's what Summit Utica and OGC is, primarily, and hence why we are cautious on making sure we take that risk at the GP, quite frankly, that the development in the ramp-up risk is taken there.

Then in the Bakken, contracts vary. We typically have -- in our crude gathering deals, we typically have look-back provisions that, more so than volume commitments, that help protect our economics over a period of a few years, so you're able to look back and adjust rates if you don't receive the amount of volume that you anticipated.

Then some, we have minimum volume. Our Stampede project at the Bakken is underpinned with minimum volumes as well, too. So it varies up there, but typically we have some protection.

Okay, great. The revised guidance that you provided, is this based on the most recent discussions that you have had with all the producers on your systems?

The answer is yes. You have probably noticed that most producers have waited as long as they could to come out with their own guidance, so we are one of the ones that issue our guidance in November, early November. So we had to adjust based upon, obviously, what we are hearing from our customers.

Yes, it is based upon very active conversations with all of our major customers throughout our systems and I would say, look, to their defense, based upon the most -- their best estimates, as well, too, to their plans. I think things are pretty dynamic.

Okay, great. I think everything else has been answered for me. Thank you.

Matt Niblack, HITE Hedge.

Just a question on the financing. Given the direction that the unit price is going, I think in the past you have talked about the GP might be interested in taking back units, rather than issuing them to the public. Obviously, that would also save on the transaction costs.

Is that something that you are thinking about fairly seriously at these levels to finance drop-downs or would you expect that even trading down here you would go with the more standard public offering?

We're still -- our financing strategy still will remain to be when the dust settles from a drop-down transaction, our intent would be -- we would probably come out about 4 times levered as calculated by our bank covenants, and then typically the drop-down will have some growth embedded in that, which will bring leverage down over time.

The amount of equity versus debt really isn't -- is really based upon that, on a drop-down transaction. Then, also, whether we issue equity to the market and use those cash proceeds to give to the general partner or actually issue those, that would be up to the general partner, I think, from an accretion/dilution standpoint. It isn't a lot different, but I will caveat that to say that our general partner still remains very supportive of the MLP and would be willing to take back equity, if that was the right thing to do.

Great, and to make sure I understand that correctly, you are saying in the first part of your statement that the leverage after the next drop-down at the scale that you are anticipating would be 4 times before issuing equity or that's what you're targeting after all the financing?

After the dust settles from the transaction, so after all the financings, typically -- so we're at 3 to 4 times leverage long term is what we have talked about with the market and that's what we continue to -- how we continue to operate.

After a drop-down transaction and all the financing associated with it, on our last two deals and we would expect in the future, we have ended up about 4 times levered.

Understood. Then I guess more longer term, is there any thought of bringing the general partner public?

I would say it's a little early for that, given the level of development we have at the general partner. I think our sponsor is going to have to -- we've been pretty clear it's going to have to look at monetization of the general partner over the next several years and IPO is one of those ways. There's others as well, too, but right now the focus has really been on getting this development done and down into the MLP.

Great, well, congratulations on continuing to execute in a tough environment. Thanks.

Thank you and we have no further questions at this time.

We appreciate everybody joining and please follow back up with Matt or Marc or myself if you have additional questions. Have a good weekend. Bye-bye.

Thank you and thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.