威廉斯 (WMB) 2002 Q1 法說會逐字稿

Good day, everyone. Welcome to the Williams Companies 1st Quarter, 2002 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I will turn the call over to the President and CEO, Mr. Steve Malcolm. Go ahead, sir.

Thank you and good morning. This is Steve Malcolm, President and CEO of Williams. And welcome to our 1st quarter earnings call. As always, we appreciate very much your interest in our company. Let me dispense with some forward-looking statement information. Certain statements that we will make today will discuss Williams' expected future results based current and pending business operations. We cannot guarantee the outcome of all of our predictions and factors which may cause results to differ from our expectations are describe made our current 10-K report on pages 29 through 31, which can be found on your website. If you don't have access to the web, contact our investor relations department and we will be clad glad to send you a 10k and other materials. So, that said, moving on to some preliminary comments relative to 1st quarter, I believe very strongly that we had a solid 1st quarter. Recall the guidance that we gave in early March of 40 to 45 cents per share. I think first call estimates range between 38 cents and 44 cents on a recurring basis. We came in at 51 cents a share on a recurring basis, versus a first call consensus of 41 cents per share. We enjoyed good earnings balance in that 60% of our operating profit was tied to our asset businesses, 40% em&t, and as we've demonstrated over the last few quarters, our diverse earnings fate is key to our earnings growth, we're not having to rely on one particular business unit to drive our earnings. And so I believe we're well on our way to the $2.15 to $2.30 guidance range for the year that we provided, again, back in March. Let me now offer some business unit highlights. Marketing and trading came in at $281 million, which I believe is an extraordinary quarter for Bill Hobbs's group, considering the slow historic, the credit, liquidity and Enron fallout issues that we had to contend with. I can recall that many on the street believe that we would be lucky to break even on the quarter and certainly, [$128] million, I believe, is very strong. Significant origination deals were closed during the quarter. We completed two petroleum deals that have allowed for some diversification of our portfolio. International marketing and trading was profitable, approximately six months ahead of schedule. But there's no question that credit issues did impact our cash earnings during the quarter. Letters of credit were replace we did cash, pre-pays were required in some of our commodity purchases. However, we believe that we are through our major credit issues and importantly we remain very optimistic about our 2002 mix of trading and origination earnings. Deal slow continues to be very robust. Our 1st quarter VAR, which Andrew can address in more detail, stands at $75 million, and if you would look at our business as if we owned the generation facilities, you can compare on an apples to apples basis, our var would be about $20 million. Turning to [INAUDIBLE] energy services, a strong quarter for Phil Wright and his team. Again, I'm talking about our unregulated or lightly regulated energy businesses. In round numbers about $230 million of operating profit versus about $117 million last year. The components of that solid performance certainly [INAUDIBLE] with a $100 million-plus quarter was very strong, generated by growing barrett production. The attractive hedge which we had put on last year which allows most of the production to generate prices north of $4. And we're seeing total production now approaching $600 million a day -- 600 million a day. Certainly, our performance [validates] the Barrett acquisition. Secondly, in terms of mid-stream, much improved numbers versus last year 1st quarter. Again, about double. And tied specifically to improving processing margins being up about 4 cents a gallon for the period. Petroleum service is up, also by a factor of about two. Here I would want to make a few comments about refining. I'm sure that you have read about the very difficult refining environment that was faced during the 1st quarter. You read about some of our peers in terms of what they experience in the 1st quarter, Ashon, a loss, Exxon, a loss. Marathon down I think 87% for the quarter. Contrast that with our results from our niche refineries. $41 million of operating profit versus $44 million that we generated last year. And -- and the points are the ones that we have made many times in the past. Our niche refinery is like those of other refineries in the Gulf Coast and West Coast experienced. We made the appropriate investments to maximize and optimize our niche positions. Our [INAUDIBLE] refinery not a [INAUDIBLE] business. We are long markets there. We are able to make use of margins when necessary. Speed of markets is an important advantage that we have. We used hedges very effectively during the 1st quarter and I think the theme for [Memphis] would be putting the right product in the right market at the right time and we've been very successful in took that. Our other refinery has been consistently profitable. No quarterly losses in the North Pole in the last seven years. It is located close to the crude source, the task quality bank allows the refinery to have significant product flexibility without a complex refinery configuration. So, the -- again, just want to make sure that you understood very clearly how our performance in the refinery area compares with others that you've read about recently. Turning to gas pipes, doug and his team have continued to post very steady earnings, 1 out million of operating profit versus $176 million last year. And those numbers exclude Kern River. But, as well, good progress in terms of construction on projects such as -- as Coke Point and Gulfstream. That completes a -- a brief overview of some of the business unit highlights. I thick I should also mention that we continue to overachieve in terms of the balance sheet strengthening plan, as you know, we're pursuing to improve our balance sheet by $5.7 billion versus the $2.5 billion that we talked about initially in mid-December. We did sell Williams Pipeline for $1 billion, which is about $100 million more than we originally projected. Sold Kern River for $960 million. Non-core Wind River assets for $73 million. Non-core South Texas gathering facilities for $56 million. So, we've made significant progress in terms of asset sales. Reduced taxes spending by almost $2 million. Made significant progress on eliminating triggers on our various financings and I think all but two of the triggers have been eliminated and we expect to complete that effort by the end of the 2nd quarter. We've taken dramatic steps to improve liquidity, an example being the $1.5 billion that we raised through the 144 private debt offering. A couple other comments that I would want to make, with respect to California, I'm sure that you have read about the most recent renegotiations of contracts. I think eight contracts, four of five of which were [calpine]-related. And California talked about reducing the power costs from $15 billion to $11.5 billion on the contracts and savings, with from shortening the duration of contracts and reducing the average cost of power, as well, yesterday, I'm sure you heard about the fact that [INAUDIBLE] agreed to review the long-term power contracts signed by California last year. The commission is urged the state and power sellers to settle the dispute on their own prior to the ALJ getting involved later this summer. And this is a similar order that we saw coming out of Nevada a couple of weeks ago. I would is simply like to say that clearly we are ready, willing and able and anxious to negotiate with California in a way that creates a win/win solution, but we continue to feel very strongly that California has no ability to you know laterally aggregate or change the contracts and we don't believe by any stretch of the imagination that [Furk] will reach any conclusion suggesting that the contracts can be aggregated. We feel good about our position in California. We're -- we're anxious to continue negotiations with the state on those contracts. With respect to WCG, based on continued deterioration in the telecommunications industry, based on the restructure being pursued, based on our latest assessment of WCG'S business plan, as you've seen by our release, we've written off an additional $232 million of our receivables, which now essentially writes down those receivables to about 10 cents on the dollar. To summarize, I believe that we did have a strong quarter, 51 cents per share on a recurring basis. We've made significant progress on our balance sheet strengthening plan. We've made significant progress in terms of our initiative to reduce corporate cost by $50 million and based on where we are today, I believe we will overachieve in that area, as well. Our growth plan is in tact, I believe we have the very best assets in the industry. And just to review those,the gas pipeline area we have the second largest pipeline network, our pipelines are local made growth areas all across the country. We've seen unprecedented growth opportunities along our pipeline and these are real projects that are backed by our customers. In energy services, our ENP reserves, particularly those that we acquired through the baird acquisition, offer us low-risk, low-cost opportunities to develop reserves. We've locked in prices, which means that we have locked in cash flows. In the mid-stream area, we believe we have the premiere assets in North America located almost exclusively in growth basins among [INAUDIBLE] peers, we have a greater percentage of revenues tied to fee business. We think that's very positive. In the refinery area, we have two niche refineries and we've, I think, contrasted very clearly what our refineries have to offer versus what the other industry is faced with in a -- in a down or challenged refinery environment. And lastly, with respect to marketing and trading, I believe that we have the best and most valued risk-management shop in the business. We are offering a project that is valued by the marketplace as evidenced by the robust deal flow that we continue to experience and the fact that we are able to continue to close deals.

Today's question and answer session will be conducted electronically. If you would like to ask a question, please press the star key followed by the digit 1 on your touch-tone phone. We will proceed in the order that you signal. If your question has been answered and you would like to remove yourself from the queue, press the star key followed by the digit 2. Again, to ask a question, press star 1. We will pause for a moment to give everyone an opportunity to signal. We will take your first question from Carol Coale with Prudential. Please go ahead.

Hi, good morning, Steve, how are you?

Good, Carol.

I had a question on the treatment of the cash collection from prior period power sales in the west. We estimate -- we understand that pre-tax cash received of about $42 million, which we calculated roughly at 5 cents a share. On a recurring basis, you say your earnings are 51 cents, does it include the 42-cent cash benefit -- or the $42 million cash benefit, or do we need to cut another 5 cents off the number?

I will let Andrew take the number.

I believe the is [INAUDIBLE] includes the $42 million, primarily around the fact that credit, which is what this one. Our history is to consider credit issues as recurring earnings like we did with Enron. The R&R payments we will receive from Edison, that they owed us from past sales, those are recurring earnings, as well. We took the credit risk out of previous earnings and had reserve for that.

Okay. All right. That was really my only question. I appreciate it. Thank you.

Thank you, Carol.

We will go next to Jeff Dietert with Simmons. Please go ahead.

Yeah, I'd like to compliment you on the decisiveness on the balance sheet during the quarter, but would like an update on your divestiture process that's currently ongoing. How much more do you expect to divest and how quickly and how quickly do you think you can get the credit agencies comfortable with a new balance sheet.

Well, with respect to asset sales, I think that be to a certain extent we've already overachieved in terms of the sale of churn and the WPL, but -- but moving those to the side for a minute, we continue to pursue about $500 million of -- of sales of non-core assets and I think that -- that we're in about $125 million to date. We continue to -- to look at opportunities to sell other non-core assets, like soda ash, like our ethanol business and other assets that are situated in non-core areas from a geographic standpoint. I'm very confident that we will be able to achieve the $500 million that we had talked about with the rating agencies back in December. I'm going let Jack McCarthy, who has been most involved with the rating agency discussions, to give you a little flavor to how those have gone. Clearly we've been spending a lot of time with the rating agencies and it seems like every week we're meeting with one or another of the rating agencies. So, Jack?

Yeah, the process continues and right now it is still in a discussion stage, primarily with -- with Moody's and with S&P and we have had a ongoing dialogue, I can't tell you at this point where we are with them other than that we continue the discussion going forward. But we continued to look at the marketing business primarily, I think that has been the focus both as to liquidity and the ability of how to value that and how to recognize the credit impacts of a marketing business. I think it's a education and learning process on both sides. So, when we are able to sit down and finally come to a conclusion with both of them, I think we will be able to come to the market and be able to identify and be able to clarify the issues that we have going forward.

So, it sounds like they're continuing to ask questions and come up with new questions -- I mean, do you sense that the rating agencies are getting their arms around the issues? And that they're moving towards some closure on their understanding? Or is there still significant uncertainty or significant questions that they have?

Well, I think -- I think it's probably more towards the first part of your statement there that they are starting to, we would hope, get more clarity as to what the issues are. Now as to how they are going to treat those issues, I think that's probably where the biggest -- I hesitate to use the word disconnect, but I think that's where the disconnect is right now. We have a view, obviously, and I think what they're trying to do is clarify their view and what we're going to be doing is having ongoing discussions as we go forwards. I think that we have continued, hopefully, to supply them all of the information they needed and we've had, as Steve said, ongoing discussions almost on a weekly basis going -- or with it. So, to -- to -- to tell you how soon the process is going to end, I really don't know, we would hope that clarity comes quickly so we can both get on with it.

Yeah. Thanks for your comments and good start on improving the balance sheet and getting in the position you needed.

Thank you.

We will take your next question from David Fleischer with Goldman Sachs. Please go ahead.

Yeah, hi. I wanted to broaden the credit question and -- and ask, you know, particularly within the marketing business, really within the marketing business, you know, what you are experiencing with customers, what they're telling you, you implied in your comments, Steve, that, you know, the credit requirements may be lightning, that the -- the season and cash [INAUDIBLE] to do, you know, origination on the deals could be less. I want to be more specific on terms of what you're hearing and seeing there, you know, your to do deals on an old basis or prior year basis is right now?

I will let Bill Hobbs and Andrew Sunderman take that question.

David, really, my view right now is we're back to business as usual. We're not getting any special credit requests of any significance. What I think Steve was referring to is really about the first 60 days of the year and during that time, the crude supplies were vying for the refineries. We had to pay for a lot of that and replace LCs with cash. And in Europe, especially, because the -- the confusion was over our affiliation with communications, a lot of our counterparties over there flat refused to trade with us. And that, again, is largely behind us. I don't foresee any issues at this point. We're back trading with all counterparties, not requiring pre-pays or LCs beyond the way things used to be. Our hope is that with the steps we've taken that we've done everything we need do to show folks that our credit situation is solid.

What about specifically on the origination side? The willingness of customers to sign longer term deals or not quite as long, perhaps, but, you know, where are you in that process of working on deals with customers and what might we expect to see, you know, with the slow period over coming months?

Sure, we had probably about the same situation through the first part of the quarter, was our counterparties on the origination side are waiting to see what was going to happen. But with the steps we've taken, and -- and discussions that we had, our senior management and we will and others with our counterparties, we finished the quarter very strong. I think we closed somewhere around eight or nine origination transactions, with the majority coming in the latter half of the quarter. I would expect that to continue. Our deal flow is good. And we've said that in past quarters and you guys have said, well, show us some deals, get some deals closed. Well, we certainly did in the 1st quarter and I think we're set up, barring any -- any moves by the ratings agencies, I think we're succeed up for an extraordinary year.

Second question, I want to address to you, Steve, you talked about the sale of assets and get aging your balance sheet strengthened and pore is on the way here. You've done a lot. I guess my question is, you know, you've done a quick job, you sold, you know, some better assets in many cases and certain instances, but pointed out ash soda and ethanol, but there are other products you've acknowledged. What are your plans, your thoughts, about restructuring taking, you know, actions -- various actions to fix the many underperformers around the company, you know, what's the time frame for us seeing more and hearing more, to what extent there?

David, I -- I think that we are going to be more disciplined in terms of -- of looking critically at assets, but we have followed a strategy, particularly within energy services of looking at those three criteria, you know, the attractive stand-alone returns, the platform for growth, the potential for a value creation associated with marking and trading. We will continue to look at those standards to decide which assets we want to have in our portfolio. I don't know need to talk more about the assets that we've already indicated are probably non-core. I think that we will go through a more comprehensive analysis of assets and how they're performing relative to a variety of performance metrics and we will make appropriate decisions. But, you know, we've sold a couple of large assets, we're continuing to make progress with respect to non-core assets. We will continue to apply the standards as appropriate and we will, we will achieve the asset sales that clearly we have discussed and talked about with the rating agencies in the street. There may be other assets that we sell during the year, but I don't want to give you any -- highlight any timetable that you're going to hold me to.

Well, what is all of this -- say, the implications of this as far as Cap-X going forward, not only for this year, but say for next year.

Well, we -- I guess the theme that -- that we've been talking about both externally and internally living within our means and we feel very strongly about that and intend to do so. And so we think that we can still support a -- a capital program on an annual basis over the next few years of somewhere between 2 to $2.5 billion. And still live within our means. And, importantly, also generate the kind of growth, the 15% per year growth that we've talked about before.

Okay, thank you, Steve.

Our next question is from Will Mays with Banc of America Securities. Please go ahead.

Yes, good morning.

Hi, Will.

Thank you for a pleasant surprise this morning! Just wanted to ask and then forgive me if it's already been talked about. I've been having to jump on and off here, but on the Furk and the California contracts, they've suggested folks get together and start negotiating. Can you provide us your thoughts on that and where you stand right now. Has there been any activity?

Yeah, Will, I did address that in my opening remarks and just made reference to the settlements that -- that the state of California entered into this past week with Calpine and others and the fact that Furk has agreed to take a look at those contracts. And I just wanted everyone to be aware that -- that we don't believe that those two developments really change our position in any way. We are anxious to negotiate as we would be anxious to negotiate with any large customer, or anxious to negotiate with the State of California. We believe that a win-win solution is available and we're committed to finding that solution. However, we don't believe that the State of California has the ability unilaterally aggregate the contracts in any way referring to Williams. Nor do we believe that Furk will reach a decision that's detrimental to our relationship in California.

Has there been any movements since Pat Woods made the discussion, too?

We've had discussions with them, and, you know, my sense is that there will be future discussions, as well.

Okay, thanks.

We will go next to Raymond Niles with Salomon Smith Barney. Please go ahead.

Good morning. Thank you. I have two questions, one is, I'm wondering if you could tell us the value of your mark-to-market and accrual books and, you know, how much is going to be realized of each over the balance of the year for 2002? That's question number one.

Yes, this is Andrew. I believe what we reported in the 10-K at year end was that the lock and cash flows for 2002, from a revenue standpoint were right at a billion dollars. Their origination [INAUDIBLE] we did in the 1st quarter, about 40% of those cash flows will be realized in the next two years. And nearly 75% of those cash flows will be recognized in the next five years. So, the origination deals we've done most recently are of a shorter tenor and primarily because of the fact that they were petroleum origination deals. So, the cash flows are expected to come in much sooner and the vast majority of those values have actually been -- been realized, I'm sorry, recognized through actively quoted markets. Very little of that is coming from marketing. Association those are very good deals from a cash flow standpoint. Very near-term. As far as the exact numbers, based on the total portfolio, I don't have those in front of me.

That's something that will show up in the "Q"?

I would imagine, but it's not a [INAUDIBLE] show up that way in the "Q", we will make reference to it in our upcoming analyst meeting, I would assume.

Thank you, and the other question, just a further sense of the flavor of deal flow, can you get a sense of how many long-term originations, longer term origination contracts you closed in the quarter and maybe just a flavor as to the level of activity you're seeing now. And I'm thinking, you know, deals just longer term, more structured deals.

I think what we talked about in the conference call will be referencing the six or eight and are all longer term structured deals. The minimum term of a deal that we closed in the 1st quarter was the announcement we made earlier in the quarter for a one-year deal. The longest deal was the capacity deal for 13 years. Many of the other deals were in the four to five-year range. So, while I certainly wouldn't say they're as long as our totaling for requirement fields, but they are significant deals and deals that are outside of gas of power area that represents the fact that what we said to the analysts was that this model is repeatable across all commodities and we've been successful in doing that.

Okay, great. So, basically -- bottom line, you're seeing sort a rebound back in terms of deal flow?

That's a fair comment, yes.

Okay, thank you.

Next is Anatol Feygin with J.P. Morgan. Gone ahead.

Thank you, everyone. Just a couple of questions, can you update us on the Gulf [INAUDIBLE] and when it will be operational?

Yeah, I believe that cold point is still expected to be operational in July. In terms of the first phase I'm looking at notes that, was my understanding, June or July.

Okay.A couple of questions on the petroleum basis, which obviously was a big swing factor, a nice, positive surprise. If memory serves in the third quarter of last year, that business was transferred into petroleum services. Is that a different part of the business or has it been transferred back into EM&T now?

Yeah, I think what you're referring to is Steve made reference to we closed petroleum origination deals in the 1st quarter. What we transferred to the assets was the marketing efforts in and around the refineries, and like purchasing of the crude supply and selling the finished products are handled now by the asset side of the business, although the folks do resign on the trade floor and they use our traders for any forward-hedging activities around the cracks. Also, what we have gone on is we started a petroleum trading business and origination business, that isn't per se focused around our existing assets, but is focused on more of a global nature around building a petroleum book internationally. And so that, when Steve is referencing that, that is, in fact, what -- what we're looking to do. So, it's kind of the assets we're focused on taking care of the customers that are attach we did their assets. We're out focusing on building a book of business that doesn't necessarily require only assets and if it would require owning some assets, we will work with Phil Wright and his team acquiring assets.

Gotcha. Thanks, Bill. And the volume step up in the 1st quarter is close to five times what it was on average in the last year. Is that something to expect to stay at these levels going forward?

I think so, Anatol. When referring to volume, you mean deal flow?

No, in terms of a proxy for deal flow, the thousands of barrels per day in crude and refined products jumping up from the 2250 range to well over a million barrels a day.

And yes, Phil Wright is nodding his head yes!

Terrific! And just one last question on the power portfolio. Is -- is it correct that the 2000 megawatt in New Jersey deal has been recognized, has been mark-to-market and recognized in the quarter's financials?

That's correct. It is a one-year deal. The cash flows will come in over the next 12 months.

And why isn't that 2,000 megawatts then reflected in the megawatt portfolio?

It should be. You're saying there is no jump in volume?

There is no jump in the megawatts. Can it goes from year end, 145852 to quarter end 15152.

The reason I would say is it may just be an outright power sale that we're doing and there is no long-term totaling or full requirements attached to it.

So, it's recognized more as a trade?

Yes.

Got it. Last one, I promise, the $42 million that came in, does that reduce the $388 million California reserve by the 42?

Yes, we would have taken the reserve down by that amount, yes, that's correct.

Thank you very much, everyone.

I want to take the opportunity mention at this point that there's some issues that have been made public regarding Dynegy and there will be questions around our exposure. And our exposure is basically zero, but we don't expect negative outcomes in any respect with them, but would be zero.

Thanks, Bill.

If you have a question at this time, please press star one. We will go next to Rosiland Armstrong with SAC Capital. Go ahead.

Hi, I'm looking for more information regarding energy guard and training. You indicated you signed 8 to 9 deals. Do you indicate the amount of contribution, origination contribution in the quarter? And if you could talk in terms of contribution from gas or power trading.

The 1st quarter, of the $280 million on the 1st quarter, about 75% of that was origination and we've talked about the nature of those deals spanning gas storage, absolute power transactions, power capacity transactions as well as the two new deals in petroleum. As far as our training operations, I think we made mention in the press release that natural gas and power for propriety trading was down from the same period last year, primarily because of the program of hemming in sparks, fairly high rates last year. We didn't have as much open delta position in our portfolio this year to hedge, although spark square improved from the 4th quarter of last year and we've seen that in our earnings. We have not seen that more since the 1st quarter of last year and we made mention of the fact that we did have the gas markets, we did have a position in the gas markets that we settled out in the 1st quarter. Because of the liquidity and the gas markets, we did take a little greater loss on that position than we had expected. But gas prices have subsequently come back very nicely. We've made most of that loss up and as a matter of fact, for the 2nd quarter, we're bullish on gas prices.

Okay. Thank you.

We will take your next question from Ron Barone with UBS Warburg go ahead.

Good morning, everybody. Two quick questions, first off, can you give us more flavor on the charge you've taken with the WCG? And what was the rational of going down to 10 cents on the dollar for receivables? And what percentage of wcg will you own and then on your L&G plant, Gulf Point, have you gotten the air quality permit that was going to be required by maryland?

This is Jack Mccarthy. The rationale on the further writedown is that we need to continue to evaluate the receivable that we have on the books and we have to evaluate that on a market basis. So, when we looked at the some $460 million which was the receivable at the ends of the year, we evaluated that based upon, as I think Steve said, the revised business plan from the company and what our evaluation of that business plan, than how it might end up to ultimately value that receivables. So, what it is, it's a -- it's a continuing look at the possibilities and the probabilities, I guess, of making that 460 a good number. And, again, based upon market, so, you have to use discount aid cash flows and look at that when you're going to be able to receive that. That's why we further wrote that down. If you look at what the percentage ownership of WCG if you just do the simple math right now, and that's the relationship of the unsecured bond holders to our unsecured position, the math comes out 5248 of whatever equity would be issued. And you have to remember that in any plan of reorganization there could possibly be some warrants given to the current holders. There could be options given to management going forward. So, what we would end up with, then, is on the basis of the math, would be the 48% of whatever ultimate distribution of the equity could be.

Jack, going back to that for one second, I was just wondering if you thought down to 10 cents on the dollar was sufficient.

Well, it is our best estimate at this point in time. I mean we have no basis on which we've taken any lower, and, you know, it will be a continuing process and a continuing evaluation as communications proceeds through the reorganization, you know, we're going have to keep evaluating that as we go forward.

Okay.

And just to add to that, we certainly looked at the possibility of writing it down zero, but our view as well as outside consultants that we have retained view, is that you know, no one could support a no recovery scenario and therefore, after significant analysis on the part of our accounting group, felt that the write down to 10 cents on the dollar was appropriate. In terms of cold point, Ron, I'm not aware of any outstanding permits that we have yet to receive. But will have Jay Henderson or one of his folks give you a call due to confirm that.

Okay. Thank you.

Next we go to John Olson with Sanders, Morse, harris. Please go ahead.

Good morning, everybody. A couple of quick questions. Bill Hobbs, you mentioned that, I believe that your 1st quarter, 75% of our marketing and trading earnings were origination, do you recall the number a year ago? How much was origination?

Actually, Andrew mentioned it. I don't recall.

Very little of our earnings from a year ago were origination, if you recall, we were in an environment where spark spreads, primarily in the west, were blowing out. So, I don't recall any significant deals that we closed in the 1st quarter last year. We probably [INAUDIBLE] some, but was immaterial to the overall earnings.

Are you all still on track for about $1.6 billion of operating profit from marketing and trading this year with about 900 from origination and 700 from cash or accrual.

Yeah, I think we are. I'm still -- I'm still very bullish on the year. When we had our analyst conference in New York at that time, despite all of our troubles, I thought we would still come out of it and have a good quarter and we did, as Steve pointed out. I'm not at a point where I would revise estimates down and I still think that from a cash perspective we will come in around what Andrew talked about, in those ranges. I want to clarify something that Andrew did say. We actually, in the 1st quarter of last year did have a very robust origination quarter, if I remember right we probably closed eight or nine deals. And I think what Andrew is referring to is that even with that, our propriety trading and in general, increase in our portfolio, still is largely the driver to our 1st quarter earnings last year. We certainly could get you the percentage breakdown and if you want to call Andrew back and ask for it of the but we did have the good 1st quarter last year, as well,closing deals.

Next, a question for Jack McCarthy or Jimmy Ivy. On the capital structure that you all show in the March 31st, '02 quarter, you put in debt current and non-current stockholders equity and split between the two, net equity, I presume are the majority interests, the feline packs, the snow goose and the Omaha Preferred, et cetera. I wonder if it would make better clarity for to us understand things if you would itemize the preferreds and as a minority interest separately? Jack, is there a split in the opinion between Moody's and S&P as to how they regard the minority interests?

No, I think the feline packs, the way we have to show that is as debt and what we've really -- I mean for a financial balance sheet, but the rating agencies, on both sides, are treating that as -- as equity. And with respect to the minority interest, what we are basically doing is adding that back to the balance sheet for rating agency purposes. So, I think in all cases, the rating agencies are treating it the same way it is different than what really shows up on the physical financials as far as the -- I mean the way we are treating, if the rating agency and the way you have to physically report it on your financials.

And John, this is Jim Ivy, I will add one point. One of our minority infrastructures, we are in the process of paying down and discard the process in the 1st quarter, we don't believe the minority interest on that was doing us good one way or the other. We will amortize it over five quarters. Minority interests is true minority interests in things like our ownership in the MLT. They do count that as equity when it is true minority interest of consolidated subsidiaries.

Okay, one last question, if I may. The elimination of goodwill amortization, any impact?

Thank you very much.

We will take our next question from National Bank Financials. Go head.

Thank you, I have a question [on] the Buccaneer Pipeline. Are you arrangements with the shippers such that you are are w no respect with respect the recovery with return income taxes and depreciation at this time?

I think you're talking about gulfstream?

I'm sorry, yeah.

Could you repeat your question?

Are your shipper contracts such that you have absolutely no exposure to the non-payment of return income taxes and depreciation.

Well, the -- the depreciation and the income taxes are an integral part of the rate process. So, to the extent that we are getting the rates, we are getting both the depreciation and the income tax at the full statutory rate back to the rate process.

You qualified your answer by saying to the extent that you will get the product at the rate that covers depreciation income taxes, but didn't say whether you have what's called in the industry, an all-events cost of service tariff that keeps you whole regardless of through-put variations. That's what I'm interested in.

Well, your -- and again, when you have the contractual obligation and the through-put is going through, you will be collecting the rates based upon the committed volumes. So, once you have that contractual obligation from the shipper, in the through-put volumes our -- you're indifferent to that.

That's my understanding and my question still is do you have those contractual [INAUDIBLE] that protect you from any fluctuations in through-put?

Not at this time. I mean we are still in the process of getting the commitments to Gulfstream. I mean -- and I don't know the exact percentage right now of committed contracts to the pipe. But that was something that we knew going into it that this was going to be a process that as we were building the pipe we would be getting the commit means going forward.

When, if and when you get [relief] to open, are you confident that you will have all of your firm transportation agreements in place? Or is there risk that you might have some exposure for some time initially?

Well, I think, Winifred, at this point in time, no, we're not confident that we will have all of the capacity contracted for. You know, some of the regulatory developments in the state have -- have not been positive in terms of our ability to fill up the pipe.

Correct.

But we continue to focus a lot of attention to lining up shippers and we will continue to do so in the future. But to answer your question, no, we are not confident at this time that we're going have 100% of the capacity [INAUDIBLE].

Thanks very much.

And while we're waiting for the next caller, just some -- the wonders of the [INAUDIBLE] have allowed us to get information on the Maryland Air Quality Permit that Ron asked about, we do not have that in hand, but expect to have it in hand by June.

And we think no further questions at this time. I will turn the call back over to Steve Malcolm for closing comments.

Okay, well, again, we appreciate your interest. I -- I sincerely believe that we had a strong 1st quarter. We've continued to make great progress on our balance sheet strengthening plan, the deal slow that we're seeing across the board, not only in marketing and trading, but in gas price and energy [southbounds], is unprecedented and we feel very good about our ability to grow the business during 2002. Thank you very much.