Targa Resources Corp (TRGP) 2013 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the Targa Resources fourth quarter 2013 earnings webcast. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

(Operator Instructions)

As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference, Jen Kneale, Director of finance. Please go ahead.

Thank you operator.

I'd like to welcome everyone to our fourth-quarter and full-year 2013 investor call for both Targa Resources Corp and Targa Resources Partners LP. Before we get started I would like to mention that Targa Resources Corp. TRC or the Company and Targa Resources Partners LP, Targa Resources Partners or the Partnership have published their joint earnings release which is available on our website www.taragaresources.com.

We will also be posting an updated investor presentation to the website after the call. Speaking on the call today will be Joe Bob Perkins; Chief Executive Officer and Matt Meloy; Chief Financial Officer. Joe Bob and Matt are going to be comparing the fourth quarter and full year 2013 results to prior period results, as well as providing additional color on our results, business performance, and other matters of interest.

I would like to remind you that any statements made during this call that might include the Company's or the Partnership's expectations or predictions, should be considered forward-looking statements and are covered by the Safe Harbor provisions of the Securities Act of 1933 and 1934. Please note that actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings including the Partnership's annual report on form 10K for the year ended December 31, 2012 and quarterly reports on form 10-Q.

With that, I will turn it over to Joe Bob Perkins.

Thanks, Jen. Welcome and thanks to everyone for participating.

Besides Matt, Jen, and myself, there are several other members of the management team who will be available to assist during the Q&A session. For today's call, I will start off with high-level review of performance and highlights. We will then turn it over to Matt to review the Partnerships consolidated room segmented results another financial matters. Matt will also review key financial matters related to Targa Resources Corp. Following Matt's comments I will provide some concluding remarks and then we will take your questions.

We are pleased to announce that 2013 was a record year for Targa on multiple fronts. Record adjusted EBITDA of $629 million. Record logistics and marketing division operating margin of $424 million, driven by key organic growth projects that came online during the year. Record field gathering and processing volumes. Record distributable cash flow of $440 million. And of course, increased distributions for TRP and increased dividends for TRC.

We placed over $1 billion of projects in service in 2013. Largely supported by fee-based contracts. This impact full level of strategic CapEx was combined with a unique strategic acquisition of the Badlands Properties, which we closed at the end of 2012.

Yes, 2013 was a transformative year we predicted. The underlying fundamentals of our business are very strong. And 2013 EBITDA was on the strong side of our guidance.

We are pleased that we ended the 2013 with a very strong fourth quarter driven by first, higher than expected contributions from key organic growth projects that came online in the second half of the year, particularly fractionation and export projects at Mont Belvieu and Galena Park. Demand for propane and butane exports was very robust in Q4, and the first phase of our export expansion project came online in September for Q4 operations. Our new facilities performed very well, exceeding our expectations.

Second, full-year contribution and increasing quarter-over-quarter contribution from our Badlands operations in North Dakota. Third, increasing field gathering and processing volume growth year-over-year as producers kept the pedal to the floor, continuing to develop acreage across our basins of operations.

And forth, higher NGL and natural gas prices in Q4 that helped offset the operations impacts of very cold weather in the quarter and helped offset some of the lower prices realized during the first part of the year. And with those positive drivers, our record year was accomplished despite the impacts of a fire at our Saunders plant that reduced Versado volumes and an incident to the third-party NGL pipeline from our VESCO facility that impacted VESCO performance earlier in the year.

The additional export in fractionation capabilities drove another year of record operating margin for our logistics and marketing division up 39% compared to 2012. This was driven by daily LPG export volumes that more than doubled as a result of the September completion of phase 1 of our expansion coupled with increased export volumes to improved operational efficiency and Galena Park and Mont Belvieu in the first three quarters of the year.

We also saw continued strong producer activity across all areas of our field gathering and processing segment. Volumes were up at North Texas, Sand Hills, and SOU and they would have been up at Versado except for the temporary negative impact of the Saunders fire. We also benefited from contributions from the Badlands assets in 2013. With increases each quarter, we raised the Partnerships full-year 2013 distribution 11% over 2012, consistent with our original 2013 full-year distribution guidance of 10% to 12% that we gave you in the fall of 2012.

At the TRC level, our full-year 2013 dividend was 35% higher over 2012. Above our original 30% plus dividend growth guidance given for the year. We continued to expect to deliver full year 2014 distribution growth of 8% to 10% at the partnership and expect to exceed 25% TRC dividend growth for 2014.

Later in the call, I'll discuss our expectations for 2014. Our 2013 distribution coverage tracked just as we said it would, finishing slightly over 1.0 times for the year and our 1.4 times coverage for the fourth quarter reflects the strong performance of our businesses with several expansion projects online.

I would also like to discuss our thoughts on some of the domestic propane market issues you may have been reading about, particularly the impact in the Midwest. While Targa doesn't have assets in the Midwest, and do not even have a Midwest region, we have responded to the market with our transportation assets and terminals outside the region hoping to serve the market needs.

For example, we are actively moving product or helping others move product to areas in need and our facilities and equipment are running essentially full out to help with the temporary logistics constraints. But even with available propane and storage we have reached physical limitations of our transportation assets. Namely trucks, rail cars, barges, and rack capacity on just how much propane we can move. The factors impacting the tightness in local propane markets have been widely published and discussed. For example, inventory levels going into the winter for the Midwest where the lowest in 10 years, made worse by a late in extensive crop growing season.

By contrast gulf coast inventories were slightly above the 10-year average as we entered winter and then the coldest winter in over 20 years hit the Midwest in successive waves. Plus the region experienced some key supply disruptions from two Midwest refinery shutdowns, major pipeline outage, lowering the typical regions supply which normally supports market. In that context, we support the emergency transportation measures such as extending working hours for truckers taken by states to accommodate the regional issues, and we are continuing to do what we can to help meet the market demand.

I'd like to conclude our introductory remarks with a great big pat on the back to our entire team for Targa's performance in 2013 and Targa's very strong position into the future. I think the following data points are pretty impressive. 2012 adjusted EBITDA of $515 million, 2013 adjusted EBITDA of $629 million, and 2014 EBITDA guidance of $750 million or higher. And that is combined with additional growth projects in process that will contribute in the future.

We really could end the call on that note, but I'll turn it over to Matt and return, perhaps repeating myself, in a few minutes. Matt?

Thanks Joe Bob. I'd like to add my welcome and thank you for joining our call today.

Joe Bob discussed some full-year 2013 records and highlights. So it's now to turn our attention to Q4 results. Adjusted EBITDA for the quarter was a record $250 million compared to $131 million for the same period last year. The increase was primarily driven by a 73% increase in operating margin from our logistics and marketing division, resulting from a full quarter of contributions from our export expansion and CBF Train 4.

Our Gathering and Processing division margin increased by 40% driven by contribution from Badlands and higher inlet volumes across all our field GMP systems, except Versado which was negatively impacted for two months due to the fire at the Saunders plan. Saunders is now running again and Versado would have also had higher volumes if it were not for the temporary interruption.

Overall operating margins increased 49% for the fourth quarter compared to last year and I will review the drivers of this performance in our segment review. As we have mentioned before please note that we benefit from the receipt of certain minimum contract payments at year end that we do not otherwise see in the first three quarters of the year. In Q4 approximately $15 million of our operating margin was from the receipt of take or pay reservation fee deficiency or other such contract payments. Net maintenance capital expenditure were $18 million in the fourth quarter of 2013, compared to $18 million in 2012.

Turning to the segment level, I'll summarize the fourth quarter's performance on a year-over-year basis starting with our Gathering and Processing business. Our Field Gathering and Processing operating margin increased by approximately 56% compared to last year, driven by contribution from Badlands increasing volumes and higher commodity prices. These effects were partially offset by the impact of an early and cold winter, third-party operational issues, and the fire at the Saunders plant in Versado.

Fourth-quarter 2013 natural gas plant inlet for the Field Gathering and Processing segment was 785 million cubic feet per day, a 9% increase compared to the same period in 2012. All of the field GNP business units other than Versado had higher natural gas inlet for the quarter. Natural gas inlet volumes increased by approximately 16% at both North Texas and SAOU, and 4% at Sand Hills.

For the segment we also benefited from higher commodity prices in the quarter. Condensate prices were 12% higher natural breast prices were 7% higher, and NGL prices were 7% higher compared to the fourth quarter of 2012.

Fourth quarter results for the field segment also benefited from volumes in our Badlands system where natural gas inlet and crude oil volumes were up significantly in Q4 and where operations effectiveness is improving. We previously indicated that we expect that our Badlands crude oil gathered volumes to be at least 20% higher in Q4 over Q3 and actual volumes ended up being 24% higher, illustrative of the progress that we continue to make in extending our system footprint even with the onset of winter.

In the Coastal Gathering and Processing segment, operating margin increased 6% in the fourth quarter compared to last year. Although we saw a reduction in total natural gas inlet volumes, in the coastal segment, NGL production increased by 5% and operating margin increased by 6% as a result of the volumes moving to more efficient and better located plants in the Targa system.

Turning now to our Logistics Assets segment, fourth quarter operating margin increased 110% compared to the fourth quarter 2012. Due primarily to higher export and fractionation volumes, partially offset by increased operating expenses associated with additional assets and service and higher system maintenance costs. Export activity at our Galena Park Marine terminal on the Houston ship Channel increased again this quarter with the first phase of our international export expansion project complete and running.

We benefited from robust international demand for both propane and butane during the quarter and loaded an average of 124,000 barrels a day, or 3.8 million barrels per month. In the marketing and distribution segment operating margin for the segment increased 25% over the fourth quarter of 2012 due primarily to increased LPG export activity. With that, let's now move briefly to capital structure and liquidity.

At December 31, we had $395 million of outstanding borrowings under the partnerships $1.2 billion senior secured revolving credit facility due 2017. With outstanding letters of credit at $87 million, revolver availability was about $718 million at year-end. Total liquidity, including approximately $57 million of cash on hand, was approximately $775 million.

At December 31 we had borrowings of $280 million under our accounts receivable securitization facility. Early in December we entered into an amendment to increase our facility to $300 million and extend the termination date to December 2014. On a debt compliance basis, which provides us adjusted EBITDA credit for material growth projects that are in process, but not yet complete and makes other adjustments, our total leverage ratio at the end of 2013 was 3.6 times, near the middle of our stated range of 3 to 4 times on a compliance basis.

In the fourth quarter we received gross proceeds of approximately $142 million from equity issuance under our at the market equity program which allows us to periodically sell equity at prevailing market prices. In 2013 we were very pleased to raise approximately $525 million of gross proceeds under this program. Subject to market conditions we believe that we could potentially use the ATM program to meet our equity needs in 2014. While always reserving the ability to utilize other equity operating forms if appropriate. So far this year in the ATM we have raised gross proceeds of $57 million and we expect to be back in the market in the near future.

Next I would like to make a few comments about our hedging and capital spending programs for the year. With contributions from fee-based capital projects placed in service in 2013 our fee-based operating margin was over 50% in every quarter increasing to approximately 62% in Q4, and 57% for full-year 2013. We expect operating margin to be approximately 60% to 65% fee-based during 2014.

For the non-fee-based operating margin, relative to the Partnership's current equity volumes from field GNP, we estimate that we have hedged approximately 70% of 2014 natural gas and approximately 20% of 2014 combined NGL and condensate. We are less hedged than in previous years, but our diversity and fee-based improvements reduce the need to hedge commodity prices to previous percentages across all commodities.

As you probably know the recent run-up in propane and ethane prices is primarily in the spot market and in the prop month with significant backwardation in the forward market. Perhaps driven by forward market liquidity, most energy impart is faced with significant backwardation, and we do not feel the need to hedge additional NGL volumes at this time. But we will continue to evaluate the appropriate timing for additional NGL hedges over time, as well as natural gas and oil hedges.

Moving to capital spending we now estimate approximately $650 million of growth capital expenditures in 2014 with approximately $1 billion of growth CapEx placed in service. We continue to expect maintenance CapEx net to our interested to be approximately $90 million.

Next I will make a few brief remarks about the results of Targa Resources Corp. On January 14 TRC declared a fourth quarter cash dividend of $60, $0.75 per common share, or $2.43 per common share on an annualized basis, representing an approximately 35% increase for the full year 2013 versus the full year 2012. TRC standalone distributable cash flow for the fourth quarter 2013 was $27 million, and it declared $26 million in dividends for the quarter. At year-end TRC had $84 million in borrowings outstanding under its $150 million senior secured credit facility and $9 million in cash resulting in total liquidity of $75 million.

That concludes my review, so I'll now turn the call back over to Joe Bob.

Thanks, Matt.

We know the year end call always seems a little long and we thank you for your attention. To wrap up the final proportion of our prepared remarks I'd like to briefly review some thoughts on 2014. At this time last year, we said that 2013 would be a transformative year for Targa. Given the $950 million that we spent on growth CapEx helping drive a record on the number of fronts and further increasing our scale and diversity combined with integrating Badlands I'd say 2013 was truly transformative. After declaring transformative success for 2013, I wonder if we can say that 2014 will be transformative also. I think we asserted that during our November investor and analyst meeting, and we all still believe that is true today.

We will continue to deploy significant capital in 2014 and organic growth opportunities across our business. Continued producer activity is driving opportunities across our gathering and processing and downstream businesses and we are not expecting slowdown in 2014.

Although it has only been a couple of months since we forecasted $590 million in major project CapEx for our investor day, we have updated that list and have approved a couple of projects that were on the development radar screen. The 2014 estimated total for the major project list is now $650 million after we made additions and cost and timing estimate update.

Our board recently approved the construction of a new pipeline in the Permian Basin and associated compression, D high and treating facilities. That new pipeline will conduct our SAOU in Sand Hills systems. It's about 35 miles of pipe and about $30 million of investment including the facilities, and it is a strategic investment providing us with some key synergies. It will allow us to move volumes across the two systems and serve producers between the systems.

In the near term, it provides a very quick augmentation of processing capacity that was filling up at Sand Hills. It creates an almost immediate ability to serve the high activity and growing producer volumes in the Sand Hills area by sending volumes to High Plains. It also helps more quickly fill the more efficient 200 million a day High Plains Plant, which is currently under construction and expected to be in service in May 2014.

It provides flexibility and additionally insurance for Targa and our customers, and the pipeline allows us time to contemplate the optimum location for an additional plant capacity across the two interconnected systems, which have multiple plants and multiple NGL and residue take-aways. Some of us have wanted to do this for a long time.

Our board also approved an additional plant in the North Dakota. Doubling the current processing capacity in support of robust producer activity in the Bakken Three Forks plays. We are still working on the details and timing for that new plant, but I'm happy to say it was approved.

I mentioned in the expected mid-2014 completion of our High Plains Plant, and I want to update you on some of the other projects that you know are currently underway. After significant delayed due to greenhouse gas permitting issues, our $200 million a day Longhorn plant in North Texas is expected to be in service in the second quarter. Producers continue to be active in the Barnett combo where we have been using a third-party to process gas that is in excess of our current capacity.

So were glad that Longhorn will soon be in service. When Longhorn is operational, it will be more efficient and more flexible on ethane rejection than our other plants. This plant and its residue and NGL outlets will also increase North Texas system flexibility, while creating reserve processing capacity to meet continued growth in production over time.

Moving to Galena Park, and Mont Belvieu, the second phase of our international export expansion is underway. As we've mentioned previously, the expansion will be completed in stages during 2014 and will be fully operational by the third quarter of 2014. We have already completed the new 12-inch pipeline and it is in service at this time.

In North Dakota, we were able to make a lot of progress at Badlands in 2013. All though it started slower than anticipated we made significant progress during the year and are continuing to expand our system and capabilities to support producer customers. In 2014 we will continue to build out the system with an estimated additional $180 million of CapEx spending. For 2013, we exceeded the volume expectations that we provided you for Q3 and provided you for Q4 and we expect to double our average 2014 volumes over 2013.

Our primary frustration as we've said before with Badlands is the pace of progress on that the right way of the Fort Berthold Indian Reservation. And we will continue to work with the tribe, the BIA and others to improve the situation. We don't have the same kind of right away issues on the portion of our system that is not located on the reservation.

I should also mention the current status of train five. We received that permit in late December and the timing of construction will be dependent on market demand. In December we announced that we had entered into an LOI with Kinder Morgan to form a joint venture for new fractionation facilities to help support the needs of potential customers on the Kinder/MarkWest Unica Marcellus Texas pipeline. That's a mouthful. We will abbreviate it UMTP.

We are currently working with Kinder Morgan in jointly discussing our services with producers and the result of UMTPs open season will help determine that timing. Similarly the design of for and timing of Train 6 will be determined by growing market demand rather from the Unica Marcellus or elsewhere, the Permian, the Eagle Ford, we expect this demand to continue as long as EMP companies are active in continuing to seek access to the market hub.

So as we have discussed the fourth quarter was the strongest quarter ever for Targa, and it is obviously that Q4 2013 exceeded our expectations, primarily as the result of some factors that might not affect 2014. You certainly would not want to extrapolate take or pay reservation deficiency payments received in the fourth quarter into each of the subsequent quarters.

Also as we've discussed before our 2014 guidance does not include activity at our export terminal beyond what we had contracted or had expected to contract at long-term market rates. In Q4 we benefited from high international demand for propane and butane, both long-term and short-term or so-called spot.

Early in Q1 we continued to benefit from high international demand for exports, both spot and our long-term contracts. More recently we have seen some of that short-term spot demand diminish as prices in the US rose relative to other global markets. It's difficult to forecast what will happen to spot demand exports for the rest of 2014. And such spot export demand and spot rates are not included in our guidance as we have said before.

On other business fronts, despite weather impacts, particularly in Q4, we are pleasantly surprised by volume performance across the board. But volume improvements over time are already included in our guidance.

Those who were at our Analyst Day know that we used a $0.90 per gallon weighted average NGL price in our 2014 guidance. Obviously we've seen prices significantly higher thus far in Q1, but again it's difficult to predict what will happen with prices for the rest of the year.

For example, our weighted average NGL prices for January range from $0.93 a gallon up to $1.14 a gallon. And that same average barrel is currently at $1.01 a gallon. So given some of the factors I just discussed, you probably can tell that we feel comfortable indicating at this point that we expect 2014 EBITDA to be $750 million or better. I warned you earlier in the call I would have to repeat myself at the end.

I really think that the following EBITDA data points are pretty impressive and should be kept in mind. 2012 adjusted EBITDA of $515 million, followed by 2013 adjusted EBITDA of $629 million, followed by a 2014 EBITDA guidance of $750 million or better, and additional growth of projects in process that will contribute to the future. As I mentioned earlier in the call we continue to expect to deliver full year 2014 distribution growth of 8% to 10% at the Partnership and expect to exceed 25% TRC dividend growth for 2014.

So with that, we'll open it up to questions. I'll turn it back over to you operator.

(Operator Instructions)

Darren Horowitz, Raymond James.

Good morning guys.

Good morning.

Joe Bob, thanks for all the color around spot shipments regarding propane and butane. I just had one quick question their and this is with regard to the Galena Park terminal. I know that you guys can do somewhere between 5.5 million and 6 million barrels a month. Could you just remind us what the spot volume was, and more importantly looking forward, I know that you were thinking about engineering to dock five, so does the thought process change their with regard to the contracting mix, or if you move forward with the dock five expansion, would it be similar to the first two expansions where it was just about all take or pay long-term contracts?

That was a little longer than one quick question but thank you, Darren. I did provide some color on what was going on with exports. You are correct.

Our published nameplate capacity is 5.5 million to 6 million barrels after the second phase of our expansion. The additional dock work that you mentioned is underway. And there's nothing different about our expectations of the need for that additional dock work. I think I answered the question. Didn't I?

Yes. No, I appreciate that. Matt just a quick question back to guidance and the basis for the 2014 guidance. Can you just give us a little bit more color around the hedge percentages for NGL and condensate production that's built in, and also if you could just outline the processing contract mix between what you guys have allocated for fee POL or POP, I'm just trying to get a sense for the variability for those West Texas assets.

Yes. Sure. We had I think we said about 20% of our NGLs in condensate is hedged into 2014 and that's included in our guidance. The contract mix we have really hasn't changed a whole lot over time for the field out in the Permian North Texas primarily percentage of proceeds that's commodity sensitive and that's the volume that we do hedge.

We did provide a sensitivity in our guidance that had $0.05 NGL move would equate to about a 2% EBITDA and I think we are still comfortable with that sensitivity.

Okay. Then Joe Bob last question just curious about the development or the evolution of all of those Badlands assets, obviously when you look at the ramp in gas inland volumes and crude oil gathering volumes, in which you've laid out for 2014 guidance, it would argue that you would probably have to spend more than $180 million in CapEx to keep up with the production. So I'm just curious how much incremental gathering capacity do you think that you'll need going into 2015, and more importantly it would seem like adding incremental 20 million cubic feet a day processing plants is probably not going to be enough, so if you could just give us your thoughts on how 2015 in terms of CapEx and development could shape up that would be helpful. Thank you.

Okay. First to kind of correct so everybody understands. We've got about 38 million a day of processing capacity right now in the Badlands. But that's a bit of a misnomer because you eat NGLs and not MCFs, and this is very high liquid content gas. But in any event that 38 million a day rating for our current capacity with some work in the additional plant will go up to about 80 million a day.

So we are doubling the plant capacity hopefully here in the reasonably short-term. $180 million of CapEx really is our best estimate for 2014 to try to meet the producer demand, and most of that is focused on just handling our dedicated acreage, as we build out the footprint and the plant for that footprint.

Thank you.

Brad Olsen, Tudor Pickering.

Good morning Brad.

Good morning everyone. Hey guys. Quick couple of questions. Obviously the quarter was very strong versus the $750 and up guidance range you've provided and you also provided some helpful adjustments like the $15 million of contract true-ups.

Would be fair qualitatively to say that when thinking about a $750 million annual run rate and the difference between that and the $215 million less the $15 million of true-ups, that the remaining margin uplift that you realized in Q4 was largely due to dock activity above and beyond what was contracted?

Brad, I did enumerate, I will kind of repeat that we have high international demand first of all. I said that first so it was the largest factor, we benefited from that. That secondly, we had volume increases that exceeded expectations despite a very cold winter.

I said thirdly that prices were up considerably from the $0.90 a gallon. And without giving you the exact numbers and that's pretty much in rank order.

Okay. So the actual fee-based volumes on the dock were the biggest factor and I guess I can just imply from all that, that those were significantly above what the actual contract in volumes on the dock were expected to be?

All we had in our guidance was what contracted volumes were expected to be.

Okay. Great. Another question on kind of that condition or, of the export market as you see it. Obviously most expansions including yours on the dockside have been focused on refrigerated international grade propane.

Is there anything that you are seeing as a result of inventories getting drawn down here domestically on the propane side that shifted market interest towards more expansions focused on the butane market?

Well, I won't try to speak to other persons expansions. But our original capability had both propane and butane semi wrap and if you went back over time that was probably up to even a third butane. As we expanded our export project it give us the capability to handle more butane as well and most of our term contracts give customers the right for butane.

You add refrigeration, you can refrigerate butane, you add pumping capability and pipes and dock capability the butane can go with, and sometimes it goes on the same ships.

Okay. Great. So the latest international expansion, I guess it's appropriate to think of that as being butane capable, as well as refrigerated propane capable?

Yes. We got separate systems and you have to think of it that way. That's the right way to think about it, Brad.

Okay. Great. And one more question, I know I probably asked this one on every quarterly call, but are you seeing anything in the condensate markets where you operate that would either encourage you or discourage you incrementally, as you think about potentially setting up some kind of a splitter or export facility on the Gulf Coast, for heavier NGLs and lease condensate.

We are still involved in discussions I think that, that demand remains high and we got some facilities that are pretty well-positioned for the right project.

All right. Great. It's a lot, guys.

Thanks Brad.

T.J. Schultz, RBC Capital Markets.

Good morning TJ.

Good morning. Good quarter. Just if some of the spot exports continue or just in general as you look at 2014, if we're to see some of these results trend above your expectations on EBITDA, how do you look at balancing kind of growth versus coverage longer-term? Would your preference be to build additional coverage this year, or is there upside to that kind of targeted distribution growth range as some of these trends continue?

I understand the question. But you kind of started with and if. If it was high just because of some unexpected spot cargos then I'm going to build coverage with it. That's, that was how you started the -- it. I feel very comfortable with our distribution and dividend guidance and our dividend guidance had a level or exceed that level.

Okay. Great. Everything else has been asked. Thanks.

Thanks.

Ethan Bellamy, Baird.

Good morning you all. What could the or better in EBITDA guidance look like assuming everything runs smoothly and conversely if we had a $75 crude price this year what would be the biggest kind of threat to guidance of volumes in the CapEx budget? I just want to understand better the upside and the downside scenarios.

Okay. That's two separate questions. On the first question, the or better, depending on the causes, I don't know another way to explain why were better. I think I undervalued it in my notes, if I didn't emphasize it, I meant to and I don't think it's going to be worse.

Then you said what happens with $75 crude price. Is that a differential cause to WTI? Is that a world recession? What are the expectations of producers for what the price is going to be in the future, will determine their activities. As long as producers remain active, I don't see a downside to our activity.

Okay.

Or our guidance.

The Panama Canal expansion looks like it might be hitting some trouble with the contractors there. Do you think that, that caps the LPG export opportunity or would the volumes just go elsewhere?

We don't think it caps it. I'm sure I'm not the Panama Canal expert. We know some people believe that the Panama Canal will sort of arb the difference in transportation and that it won't matter. It'll be a little bit, the transportation will be a little bit shorter, but they'll pay the difference at the Panama Canal. So none of our contracts are dependent on the Panama Canal getting finished.

Our contracts, some of our contracts go beyond that dimension, so I'm sure it's impacting how the users of those contracts think about their shipping. But I don't see it as a major difference, I see it as a potential upside to exports longer-term once people figure out how they'll use it.

Okay. With respect to the propane deficit and price spike recently, do you see that as transitory, or are there any lasting changes were impacts or opportunities for you from recent pricing?

My view is that the recent pricing and logistics issues are a transitory issue. The longer-term issues and trends haven't changed. This was a very, very cold winter and propane wasn't in the right places.

Excellent. Thank you very much.

(Operator Instructions)

Norman Kramer, Kramer Investments.

Good morning Joe Bob. It was a really good quarter. My question revolves around ethane. Have you been getting inquiries regarding exports of ethane's and do have any thoughts about this area plans to think about going into this part of the business?

We have had discussions about ethane exports. We understand the technology. We could do that.

The challenge is of an export project start first with challenges on the other side of the water. Combined with a willingness for that customer to term up supply at Mont Belvieu based pricing. If receive such a contract, we would undertake such a project, and it would take a couple three years to get done after the announcement.

Okay. Thank you for that and a second question, I know from your presentations that you have, I think three facilities on the ship channels. Are there any expansion plans on the other two that are in some sort of your thought process at this point?

Well, taking them in order of activity, the Galena Park expansions have been going on for some time and we've got a little more land and a little more space and the ability to do more things in the future at Galena Park.

Moving next to Channelview, great deal of activity. We acquired acreage after we first acquired the project. We've added tankage and we've got other projects in the works. And I sort of addressed that relative to the condensate splitter question a little while ago.

Patriot we purchased has less activity on it, but it's nicely located most likely to help with condensate splitter or other petroleum logistics opportunity, but could have some utilization associated with our LPJ exports down the road. It's nicely situated.

Okay. That does it for me. Thanks very much.

Thank you, Norman.

Michael Blum, Wells Fargo.

Hi. Good morning everybody.

Good morning Michael.

Just a couple of quick work questions really. One, you know you are just seeing a lot of assets trade hands in West Texas and the Permian. I'm just curious if that's changing anything from a competitive standpoint, from your perspective, or are your systems just really kind of captives to where you are sitting?

The assets, the major assets changing hands in the Permian have not really affected competitive landscape in my opinion. The big change is just so much activity in this giant trend going from vertical to horizontal. There's a lot of room to go on that too.

If you look at percentage of horizontal in the Permian basin. We like our position. And we try to play primarily in, around, and between those positions.

SAOU nicely positioned on the east side of the Permian basin. Sand Hills and what you might call sort of south southwest of the Permian basin and we're linking those two together. Which really gives you sort of coverage and ability from the west side of Sand Hills all the way to the East side of SAOU.

Then I'd like to mention Versado just because it's so fun to see that throughput volume growing after waiting for the shale revolution to get to it. And we are expanding with pipe to under-utilize processing capacity there.

Thanks. That's very helpful. The other, in the past you talked about a shadow backlog of projects and I think the $1.5 billion type range, obviously you've got the $650 for 2014. Has that number changed at all or is that still kind of in the range that you are looking at?

Those are our official number is right now I think they put out a new Q1 investor presentation on the web. For this call or immediately afterwards. And that's what those numbers will still reflect.

Okay. And then my last question actually on that presentation was just curious if there was anything in that slide deck that's going to be different from our incremental to what's been discussed on this call today?

No. There should not be. I repeat.

Okay, great. Thank you.

Jerren Holder, Goldman Sachs.

Good morning. Obviously a great quarter, but just wanted to get a sense of I guess the financial impact of the throughput that was constrained by operational issues in the cold weather in Q4, if you could provide that number?

There were ups and downs associated with that description. First on the gathering and processing side, plants performed very well considering the weather. But there was some impact during the cold waves.

That impact was more than offset by their sort of unexpected strong performance, not in the cold waves and pricing. Then the wholesale propane and our natural gas liquids logistics businesses, just worked very, very hard to try to help meet demand. There were some costs involved with that and there were some profits involved with that. I sort of gave a description of impacts in Q4 that might not repeat in 2014 and it didn't quite hit that list.

And as far as what you're seeing in the first quarter has some of those trends kind of rolled through so far, would you said?

We had a repeat of some of that in the first part of January.

Okay. And looking at the Bakken on the natural gas infrastructure side are you guys, how is the outlook there? I know obviously, you have your hands full with your crude oil expansion program there, but in terms of adding on a processing plant or incremental infrastructure, what is like the outlook there?

I guess in addition to saying that we were adding processing capacity, because that was large enough on the radar scope that we thought we should mention it, the board approved it outside our authority. We are -- we continue to be active, along with needing more processing capacity, you have to sort of, we continue to add pipe and more important we are adding compression to meet those customers' needs. Is that the color you were looking for?

Sure. I guess beyond the additional, yes. That's fine. Thanks.

John Edwards, Credit Suisse.

Yes. Good morning. Great quarter. Just following up the last question, so net was weather a positive or a negative on the fourth quarter? And so far on the first quarter, has it net been positive or negative?

I mean, there's mixed, it would depend on whether you are in the field or in the NGL marketing division. If you look across the field segment, we report by area of the volume, but you'll see slight incremental downs in North Texas, SAOU. The volumes were down $15 million a day across our field and that was impacted the Saunders fire, as well as some weather impacts in the other areas.

In the wholesale business it's seasonal and we expect more margin to be earning Q4 and Q1. But we don't necessarily get into specifics with those, but you can go back and look at historical quarters and trends.

I would say if you include the impact of price into weather, that you would have to say that weather was net positive to us. Every way I've cut the numbers. But that's because of the price --

Because of price.

Yes. Because of the price part in there, and because we performed very well despite really rugged temperatures. I'm proud of the operations.

Great. Thank you very much.

Thank you and I'm not showing any further questions at this, I would now like to turn the call back to Mr. Joe Bob Perkins for any further remarks.

Thank you, operator and thank you everyone who attended and for your patience on this call. We love talking about the business hope we covered the things you wanted to cover. If you have any other questions, feel free to contact Jen, Matt, or any of us. Good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.