Targa Resources Corp (TRGP) 2014 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Targa Resources Partners first quarter 2014 earnings conference call. (Operator Instructions). As a reminder, this conference call is being recorded I would now like to turn the conference over to Jenn Kneale, you may begin.

Thank you, Operator. I would like to welcome everyone to our first quarter 2014 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.Targaresources.com. We will also be posting a updated investor presentation to the website later today.

Speaking on the call today will be Joe Bob Perkins, Chief Executive Officer, and Matt Meloy, Chief Financial Officer. Other management team members are available for the Q and A. Joe Bob and Matt are going to be comparing the first quarter 2014 results to prior period results as well as providing additional color on our results, business performance and other matters of interest, including our revised 2014 financial outlook that was released on March 31, 2014.

I would like to remind you that any statements made during this call that might include the Company's or Partnership's expectations or predictions should be considered forward-looking statements, and are covered by the Safe Harbor provision of the Securities Acts of 1933 and 1934. Please note that actual results could differ materially from those projected in any forward-looking statements. For discussion of factors that could cause actual results to differ, please refer to our SEC filings including the Partnership's annual report on form 10-K for the year ended December 31, 2013, and quarterly reports on form 10-Q. With that I will turn it over to Joe Bob.

Thank you, Jenn. Welcome, and thanks to everyone for participating. For today's call, I'll start off with a high level review of our record setting first quarter 2014 performance highlights,including discussing some of the factors that resulted in our reported quarterly results being higher than our preliminary results announced on March 31st.

We will then turn it over to Matt, to review the Partnership's consolidated financial results, the segment results, and other financial matters for the Partnership. Matt will also review key financial matters related to Targa Resources Corp. Following Matt's comments I will provide some concluding remarks and will include some additional color around our 2014 financial outlook, and our outlook for growth capital projects and expenditures. Then we will take your questions.

Our reported first quarter adjusted EBITDA was a record $232 million as compared to $132 million for the first quarter of last year,up $100 million rounded to the nearest million. This 75% increase was driven by record quarterly operating margin in the logistics and marketing division, and record quarterly operating margin in the field GMP segment. The Logistics and Marketing operating margin was 79% higher than the first quarter of 2013.

Likewise Field GMP operating margin was 75% higher in the first quarter 2014, versus the first quarter 2013. Our reported first quarter adjusted EBITDA, was also higher than our preliminary release by more than our normal conservatism. Therefore, a few comments on the increase. We typically have a number of pluses and minuses when numbers are reported for a quarter versus our preliminary estimates.

However, for Q1 the adjustments were almost all positive as we benefited from business-driven upward adjustments across most of our business units. The following business units all had meaningful increases averaging more than $1 million per business unit. North Texas, SAOU, Badlands, and Sand Hills, each within the Field GMP segment. LOU, southwest Louisiana, Invesco, each within the Coastal GMP segment. LAA, and CBF, each in the Logistics Assets Segment, and NGL marketing, wholesale marketing, and commercial transportation, each within the Marketing and Distribution segment.

So the upward adjustment to final realized quarterly numbers is due to positive business drivers for multiple business units, and maybe a bit of conservatism. Let's move to more performance highlights and discuss year-over-year results for the first quarter. Starting with the Field Gathering and Processing segment, which produced operating margin of $94 million, which as previously mentioned in the quarter representing that impressive increase of 75% versus the first quarter of 2013.

We are very pleased with our first quarter results, particularly given the impact of the severe cold weather that occurred throughout the quarter. Our margin increase was driven by the combination of a number of factors including significantly higher year-over-year contribution from Badlands, higher commodity prices, and an increased throughput volume across all our systems except for Versado, where some Saunders area connections have just now returned to pre fire levels. With the activity for the south part of Versado, we have highs versus recent years, we continue to expect that Versado volumes like all other Field GMP volumes to be higher or significantly higher in 2014 than in 2013.

The Logistics Asset Segment produced quarterly operating margin of $97 million, up 72% compared to last year primarily driven by higher LPG export activity and higher fractionation activityincluding some reservation payments received in both areas. Despite the temporary impact, of severe cold weather on domestic propane logistics, and on periods of higher Mont Belvieu propane prices during the quarter, overall long term, and short term demand, for exports was strong.

Comparing the first quarter of 2014, versus the first quarter of 2013, we obviously benefited from full quarter contributions, from phase one of our international export expansion, and from our 100,000 barrel per day Train 4, both of which came online in the second half of 2013. These two projects are also somewhat related in that capability of Train 4 to make low ethane propane help support the export effort. Operating margins for our Marketing and Distribution segment were 90% higher in the first quarter of 2014, than the same time period last year,primarily, as a result of the increase in LPG export activity, and also due to higher NGL marketing margins and higher wholesale propane margins from increased logistics-driven opportunities, and a favorable market environment in the first quarter.

Distributable cash flow for the quarter of $189 million, resulted in distribution coverage of approximately 1.6 times. Based on our first quarter declared distribution of $0.7625, or $3.05 on an annual basis. Consistent with what we have said previously, regarding the impact of a single quarter's performance on our distribution and dividend policies, we want to reiterate, that we use multi year views for our dividends and distributions.

When we declare them, or when we announce guidance relative to our expectations. The last 2 quarters of performance have exceeded our expectations and we expect to use that out-performance to increase our coverage while continuing to steadily grow our distributions and dividends with that same multi year view. The Partnership's first quarter distribution represents a 9% increase, compared to the first quarter of 2013.

At the TRC level, the first quarter dividend of $0.6475 or $2.59 annualized, represents a 31% increase compared to the first quarter of 2013. So for 2014, we continue to expect partnership distribution growth of 7% to 9%, and are clearly on track to be on the high side of that expectation. At the TRC level, we continue to expect dividend growth of more than 25%. That wraps up my initial comments, and I'll hand it over to Matt.

Thanks, Joe Bob. I would like to add my welcome and thank you for joining our call today. As mentioned, adjusted EBITDA for the quarter was $232 million compared to $132 million for the same period last year. The increase was primarily the result of higher LPG export activity, and fractionation activity in our Logistics and Marketing division, a higher contribution from Badlands, and higher commodity prices and volume throughput in our Field GMP segment.

Overall, operating margin increased 58% for the first quarter compared to the first quarter last year, I will review the drivers of this performance in the segment reviews. Net maintenance capital expenditures were $12 million in the first quarter of 2014, compared to $19 million in the first quarter of 2013. We continue to expect $90 million of net maintenance capital expenditures for the full year 2014. Turning to the segment level, I'll summarize the first quarter's performance on a year-over-year basis and we'll start with our Gathering and Processing segments.

Field Gathering and Processing operating margin increased by 75% compared to last year, driven by increased commodity prices, higher natural gas inlet volumes, and higher crude oil gathering volumes. First quarter 2014 natural gas inlet volumes for the Field Gathering and Processing segment were 853 million cubic feet per day, a 17% increase compared to the same period in 2013. The overall increase in natural gas inlet volumes was due to increases in the following business units. 108% in Badlands, 27% in North Texas, 19% at SAOU, and 9% at Sand Hills.

Inlet volumes at Versado were 4% lower during the same period last year due to some producer delays and returning some effective Saunders area wells to pre fire levels. We continue to expect growth across all ourField GMP systems in 2014. Crude oil gathered increased to 75,000 barrels per day in the first quarter, 137% increase versus the same period last year and highlights our continued progress in North DakotaWe also continue to expect 2014 average Badlands crude volumes -- crude gather volumes to approximately double 2013 average volumes.

For the segment natural gas prices increased by 49%, NGL prices increased by 19%, and condensate prices increased by 4% compared to the first quarter of 2013. Turning now to the Costal Gathering and Processing segment, operating margin increased 11% in the first quarter compared to last year. The increase was primarily driven by higher NGL sales prices and the receipt of some short term volumes with higher average GPM at LOU, which we do not expect to replicate going forward. Gross NGL production decreased slightly as a result of the impact of severe weather and some third party operational issues.

For the segment natural gas prices increased by 45%, NGL prices increased by12%, and condensate prices decreased by 11%. Next I'll provide a overview of the two downstream segments. Starting with the Logistics Asset Segment, as Joe Bob mentioned in the opening, first quarter operating margin increased 72% compared to the first quarter 2013, driven by higher LPG export and fractionation activity including the receipt of reservation fees in both areas. For the quarter we loaded an average of 3.5 million barrels per month of LPG exports and also benefited from reservation fees for two VLGCs that were scheduled but not loaded.

We continue to improve our capabilities to load vessels at Galena Park and are also now benefiting from a new, additional 12-inch pipeline for Mont Belvieu to Galena Park being in service. The addition of the pipeline is part of the broader second phase of our international export expansion, which we are completing in stages through the third quarter 2014. The pipeline is completed, the dock and refrigeration are expected to be in service ahead of schedule, and the balance of the projects should be completed as expected.

In the Marketing and Distribution segment, operating margin for the segment increased 90% over the first quarter 2013 due primarily to higher LPG export activity and higher NGL marketing and wholesale margins related to a more favorable market environment. With that, let's now move briefly to capital structure and liquidity. As of March 31st, we had $355 million of outstanding borrowings under the Partnership's $1.2 billion senior secured revolving credit facility due 2017. With outstanding letters of credit of $97 million, revolver availability was about $748 million at quarter end.

Total liquidity, including approximately $81 million cash on hand, was about $829 million. At quarter end, we had borrowings of $234 million under our $300 million accounts receivable securitization facility. In the first quarter we received net proceeds of approximately [$115] million from equity issuances under our At-the-Market equity program, which allows us to periodically sell equity at prevailing market prices. We continue to be very pleased with the success of our ATM program and expect to continue to use the ATM program to raise equity in 2014.

Total funded debt on March 31st was approximately $2.8 billion or about 55% of total capitalization. And our first quarter compliance debt to EBITDA ratio was 3.0 times. Next I'd like to make a few comments about our fee based margin, hedging, and capital spending programs for the year. For the first quarter 2014, our operating margin was approximately 60% fee based and we continue to expect operating margin to be about 60% to 65% fee based during the year.

During the first quarter we added some additional hedges for natural gas. For our non-fee based operating margin, relative to the Partnership's current estimate of our equity volumes from Field Gathering and Processing, we estimate that we currently have hedged approximately 70% of the remaining 2014 natural gas, and approximately 20% of remaining 2014 combined NGL and condensate volumes. When we updated our 2014 financial outlook on March 31st, we indicated that we had not made any changes to our price [staff] for 2014. We also provided an updated sensitivity that a $0.05 change in the weighted average price of the Partnership's typical NGL gallon would correspondingly change 2014 adjusted EBITDA by approximately 1%.

Last fall, our original guidance sensitivity was a $0.05 change NGL price would change 2014 adjusted EBITDA but approximately 2%. The reduction and the sensitivity is driven by higher fee based margin expected during the rest of the year than previously contemplated, as well as a realization of one quarter's financial results. Moving on to capital spending. As announced on March 31st we now estimate approximately $700 million of growth capital expenditures in 2014.

The most visible changes to our capital expenditure estimates were the additional Badlands spending for our new 40 million a day plant that may be in service by the end of the year, inclusion of some spending in 2014 in our petroleum Logistics business related to the construction of the condensate splitter at our Channel View terminal, and of course, the revised estimate also includes some small projects and a re-evaluation of the expected timing of existing expenditures. Next, I will make a few brief remarks about the results of Targa Resources Corp. Targa Resources Corp., stand alone distributable cash flowfor the first quarter 2014, was $27 million and TRC declared approximately $27 million in dividends for the quarter.

On April 15th, TRC declared a first quarter cash dividend of $0.6475 per common share or $2.59 per common shareon an annualized basis, representing an approximately 31% increase over the annualized rate paid, with respect to the first quarter of 2013As of March 31st, TRC had $72 million in borrowings outstanding under it's $150 million senior secured credit facility, and $14 million in cash, resulting in total liquidity of approximately $92 million. We continue to expect a 27% effective cash tax rate for TRC for the full year in 2014. That concludes my review, and I will now turn the call back over to Joe Bob.

Thank you, Matt. As mentioned at the beginning of my remarks, I will now provide some additional color around our revised 2014 financial outlook, and a update on the status of our growth capital projects. When we first provided you with our 2014 financial outlook back in early November, we had only been operating phase one of our newly completed international export expansion for less than two months, part of which was a very rapid startup and testing phase. With this limited view of our operational capabilities at Galena Park as well as a limited view of export market demand for a not-yet-proven facility, we provided guidance at the time that only included the contracted cargoes to date.

We have now been loading low ethane propane, servicing VLGCs, and continuing to serve our HD-5 and butane business, for more than six months. We have clearly benefited from the high levels of export activity and higher than expected facility utilization, and see continued customer interest in short term and long term contracts for our services. Since that time, we have also experienced favorable activity in volumes across all our businesses. As a result of our activity at Galena Park and other factors, we raised our financial outlook on March 31st to provide a updated expected guidance range of $820 million to $880 million for 2014 adjusted EBITDA.

The biggest drivers in the upward guidance revision are, the successful completion of the first quarter where results clearly exceeded our initial expectations. The inclusion of already contracted short term and long term export volumesat the contracted rates, and some expected volumes beyond those that were already contracted. And increased volume expectations for the year, across our Field Gathering and Processing segments as I previously mentioned. Because there is still a range of outcomes around key factors, we are providing a range to account for upsides and downsides in particular for the range of potential export performance, as well as for potential upsides and downsides relative to our volume expectations in our other businesses.

We also want to remind you that similarly to the last two years, we expect the second quarter EBITDA to be lower than the first quarter EBITDA. It may be the lowest quarter in the year for 2014 as a result of the impact of seasonality on several of our businesses, and the start up of additional projects that will occur throughout the year. Moving to the status of our major growth projects I am very pleased to announce that our 200 million cubic feet a day LongHorn plant in North Texas is expected is to be fully operational this month. LongHorn will be online earlier than was expected when we finally broke ground, and will also be under budget. At SAOU, we expect our 200 million cubic feet a day High Plains plant, to be completed by the end of the second quarter.

We are also in the process of constructing the 35 miles of pipeline that will interconnect our Sand Hill system and our SAOU system, and expect that pipeline to be completed along a similar timeframe to the high plains plant. And with activity around all of our Permian Basin plants remaining at high levels, we are looking at other opportunities to expand in the area. Moving to North Dakota, we are pleased with our continued volume growth. Despite a very cold winter, our assets and our Targa employees performed very well in the first quarter and we were able to gather 2.4 times more crude, and 2.1 times more times more natural gas than during the same time last year.

The volume growth that we are experienced is evidence of our progress in significantly expanding our system and capabilities. Producers around our system continue to be incredibly active, and there is still a lot of opportunity for improvement. We are adding, as announced, another 40 million cubic feet a day natural gas processing plant at Badlands that may be in service by the end of 2014. Natural gas flaring remains a major issue in the Williston Basin and we are doing our best to serve our producer customers by increasing our capabilities.

In late December 2013 we announced that we had signed a joint venture with Kinder Morgan to provide fractionation services downstream of their and MarkWest's Utica/Marcellus Texas pipeline, abbreviated UMTP. UMTP is continuing to gain traction with producers, but as mentioned in Kinder's Q1 2014 earnings call, UMTP does not yet have commitments. Given the continued success of producers in the Permian, Eagleford, Mid-Continent, as well as the Partnership's growing equity volumes, there are other potential commercial needs for Train 5 beyond UMTP. And commercial discussions are ongoing related to Train 5 capacity.

Obviously the timing of Train 5 is subject to the conclusion of sufficient commercial arrangements but we do have the permit in hand, and we do have the land for the construction. And we expect to proceed sometime in the near future. Similarly, the timing for Train 6 is subject to commercial demand, and I believe that Train 6 is simply a question of when and not if. As mentioned earlier in the call, we are completing the second phase of our international export expansion in stages. And our operational capabilities will continue to improve as each stage is completed, with phase two expected to be fully operational in the third quarter of 2014.

We continue to benefit from significant demand for long term and short term contracts at Galena Park. For the remainder of 2014, we have an average of 4.2 million barrels of exports per month contracted. That 4.2 million barrels of exports includes both short term and long term contracts. Looking forward for 2015, we have a similar amount already contractedunder just our longer term arrangements.

Some of those longer term arrangements extend as long as 2020. And obviously, as we complete our expansion projects, our export capabilities for next year are even greater than this year, providing potential volume upside. On March 31st, we announced the Partnership approved construction, of an approximately $150 million 35,000-barrel per day condensate splitter at our existing Channel View facility. We have begun the permitting process for the splitter and its associated infrastructure, and expect that construction will take approximately 18 months after receipt of all our permits.

So, given everything we have discussed today it is safe to say we are very pleased with Targa performance to date, and feel very positive about the future. We continue to execute across our business units, and demand is robust for our upstream and downstream services. Our assets benefit as producer activity remains high, and we see no slow down at all around our Field Gathering and Processing areas of operations. Our 2014 outlook of a range of $820 million to $880 million, is about 30% to 40% over the adjusted EBITDA record we set in 2013. And we think our performance in the first quarter got us off to a really good start. So with that we will open it up to questions, I will turn it back to you, operator.

Thank you. (Operator Instructions) The first question comes from Jerren Holder of Goldman Sachs your line is open.

Good morning.

Good morning.

Just wanted to start off with the commentary around distribution growth, and understand that you guys are taking a multi year outlook and making those decisions. I guess just looking back over the past two years, the rate of growth has been in the double digit range. So I guess kind of going forward with the strong coverage, and expectations for the year, at least, should we be thinking about the multi year growth outlook to be in the double digit range as well?

Kind of go back to that question often. I understand asking us to provide multi year guidance. But we continue to try to give it to you one year at a time. And our guidance for 2014 should be viewed with our historical performance. And we are comfortable with that 7% to 9% at the MLP. And the 25% plus at Targa Resources Corp.

Thank you, and I guess thanks for the color on the growth projects. Just wanted to touch upon some the stuff in your backlog. Seeing one of the condensate splitter announcements, and take place, and what is the outlook, I guess, from a demand perspective for incremental condensate splitters, and what regions are you seeing that activity in?

What we have said publicly about those discussions with potential customers is we were having discussions about splitters, plural. We've announced one and I think we can still say we are having discussions about splitters, plural. The interest in activity is high for parties such as Targa, who are well positioned to execute on them.

Okay.

We also have, just to bring it to your attention, an investor presentation will be posting shortly after this call. And you will see in our backlog where we outline $1.5 billion of of additional growth projects, not yet approved or on the official CapEx forecast. You will see a condensate splitter, and it's going to say "additional condensate splitter." So we have another one still on that backlog.

Okay, thank you.

Thank you, and the next question is from Ethan Bellamy of Baird, your line is open.

Hey, Ethan.

Good morning, guys. One of the more interesting things to occur recently is the success out of Continental Hawkinson unit up in the Bakken, and Harold Hamm says he thinks the Bakken is going to do 2 million-barrel as day. Street consensus would be a lot lower than that. You have had Badlands for a year now, just curious about where you think wells per section is going to shake out, and is there a chance that Harold is right about 2 million barrels a day, and if so, would that mean another billion dollars you can spend there potentially?

That was a lot of questions. I'll share my perspective. From the time we first started looking at the Williston Basin, my perspective has continued to go up. To some extent, we suffer by looking backwards at tight curves and well performance, and what producers are doing. Harold's in a good position to be looking forward. Each time we think we understand how many wells there will be per section, we end up raising our internal estimate.

There are better parties to be the official spokesmen for what that will look like, and it does vary by sub-section of the Bakken/Three Forks. But not unlike the personal Permian Basin, producers continue to find more and more of it to be productive and continue to improve the technology such that each completion is better than the last one in a particular area. That's very very good for our Badlands position, and for potential to expand that position.

Okay, fair enough. Another big picture question, a little closer to home. TRGP has been one of the greatest value creation stories in the history of the MLP sector. The last sort of stage for GP tends to be bringing them into the MLP. Is that something you guys have looked at any time recently, and is that something we should consider as part of our investment framework?

We look at everything. But it's not on our near term radar scope. There's not a reason to do that right now. We have a lot of projects to pursue with MLP, we are not constrained by the burden of IDRs or cost of capital, which is the argument you usually see. And whereas I wouldn't say never, I certainly would say don't expect it any time soon.

Helpful, thank you so much.

I haven't gotten a question in this area so I want to correct a Perkins misspeak. It may not be the only one I made. But as I was describing our relationship with Kinder Morgan, I probably got a little off script. It's a good thing that people listen to me instead of what was printed on the page for me. But I said "joint venture." It just came out that's not what it is. It is a letter of intent, and a relationship that we are working very closely to try to make things happen. So we should strike the "joint venture" from the transcript part. But I continue to remain positive about their project and us working with their project.

Thank you. (Operator Instructions)And the next question is from T.J. Schultz from RBC. Your line is open.

I know you were just getting ready to ask me that question.

Exactly. I will stay far away from that. But the $1.5 billion of projects under development, I guess with that list [with the slides] maybe you could quickly add what else is maybe been added or taken off that committed list? Or what is now still under development? Is it just the additional splitter possibly?

Really the only change is the additional splitter. Most of the things we talked about are Badlands additional expansion, Permian additional expansion, Train 5, Train 6, those things are still in continued development.

And how do we think about timing there for some of those projects to move into kind of the -- committed bucket, and kind of when would you expect some of the timing to -- for those projects to be put in place? And if you could talk a little bit about the expected returns that you are looking at on that CapEx?

We have had -- I guess it is almost a tradition, of showing you the ones that have been approved one page, and then showing the ones that are publicly known we're working about on another page. And then we have a tradition of not showing you the ones that are not publicly known that we are working on. If you think of those three pages with we have a good track record of projects rolling from one page to the other, including the ones that have been approved getting done on time and on budget.

We have given some examples of what we think the timing are. It doesn't take that long for the first condensate splitter project to be approved. I would like to think we would get another one approved sometime in the future, I use the term the near future for Train 5, because I believe that, and people have been looking at it for a while, and know we have the permit in hand, know we have the land, know that we have internal needs for it. I really think that's all we have said publicly about what moves from the second panel to the first page. And I am not getting ready to say anything about what is moving from the third page to the second page. Our Permian activity, just recently, I think additional activity on the Permian was defined as pipes and plants. We announced the 35 mile plant that's already in progress and under construction.

We continue to look at other opportunities there, we remain very active. Additional Permian work could be in the future. May not call it the super near future, but certainly in the future. Is that helpful?

That's good, thanks that's all I've got, appreciate it.

Oh, you asked for returns also, we have characterized the returns on both of those sheets as pretty attractive. Most of them leverage our existing assets that's good. The range of the first page which is the approved ones that we have said officially is...

Five to seven times. (Multiple speakers)

Five to seven times. And some of those on that list have been better than that range, as you know. I don't expect that the second page, the not yet approved projects under development, look very much different at all. And the third page looks like the second page.

Appreciate it. Thanks.

Thank you. And the next question is from Chris of Jefferies your line is open.

Hey, Joe Bob how are you?

Good Chris, how are you?

I'm great. Thanks for all the added color, and in particular the insights into Galena and the operations, sort of the educational learning curve as you have had that facility online. I am wondering if I can explore it a little bit more, in terms of the delta from 4Q to 1Q. And then from a spot cargo activity perspective, any additional color you can provide into that? Apologize if you have said it and I missed it. And then in addition as you refine the operations of that asset, the thoughts around contracting more volumes on a firm basis. And if you give a update as to how much is open versus contracted at this point in time?

I understand all the questions Chris. Let me try to summarize what we carefully chose to do from a competitive standpoint. For the remainder of 2014, we have an average of 4.2 million barrels of exports contracted. And we are increasing our capacity along that time too. But I am not drawing the capacity increase curve.

We have said that once phase two is done, that we will officially be 5.5 million to 6 million barrels per month of capacity. Now we also then carefully said that for 2014, relative to that 4.2 million barrels a month remaining average, we have already contracted for a similar amount in 2015. So it is clear that we have an increasing amount of term for early 2014, to now 2014, 2014 to 2015, we have more term. I don't want to provide more color for competitive reasons. That exact mix for the remainder of the year.

I sort of did provide what the mix looks like right now in 2015, because looking out into 2015, we probably haven't booked spots that far in advance. And beyond that color, I am just not comfortable with it right now.

I appreciate the competitive dynamic and your added color. I guess we were just thinking about -- there's a number -- we talked about this at your analyst day, obviously you and Enterprise have done quite well in the export [dynamic] to date. It seems to me like a lot of midstream players would now like to get involved and we have a slate of projects on the drawing board, and so just in that sense is, trying to get a feeling for the appetite internally, given the active performances contract over time more and more and more of that capacity. So that is where I was coming from. I do appreciate the comments on this and everything else this morning. Thank you.

Thank you. (Operator Instructions).

Thank you all very is much. If you have any follow up questions feel free to give Jenn, or Matt, or myself any of us, a call. Good day.

Thank you. Ladies and gentlemen, this concludes today's program. You may now disconnect. Good day.