Kinder Morgan Inc - Class P (KMI) — Q2 2015 Earnings Call Transcript

Okay. Thank you, Jeremy, and welcome to our second quarter call. As usual, we may be making statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. I'll give a brief overview, then Steve Kean, our CEO, will talk about the quarter's performance and give you an update on our project backlog, and then, as usual, Kim Dang, our CFO will give you all the financial details, and then we will take any and all questions that you may have. We raised the dividend to $0.49 for the second quarter. We're on track to meet our target of delivering $2 for full year 2015 with substantial excess coverage, even after adjusting for the current commodity prices. And we expect to grow our dividends by 10% each year from 2016 through 2020. It's difficult to compare this quarter with the second quarter of 2014 because, of course, we completed our merger of all the Kinder Morgan entities only in November of last year. But that said, let me share what I believe are some relative numbers with you. In this quarter, we had approximately 2.2 billion shares outstanding versus about 1.034 billion in the second quarter a year ago. We declared a dividend of $0.49 versus $0.43 a year ago. We had DCF per share of $0.50 this quarter versus $0.32 a year ago. We had excess coverage in this quarter of $20 million versus a shortfall of about $113 million in the second quarter last year. And year-to-date for 2015, we've had excess coverage of $226 million versus $25 million for the first half of 2014. In terms of total DCF, in this quarter, we had 1.095 billion versus 332 million in 2014. Very importantly, we've increased substantially our backlog of future projects, as Steve will explain and we think we're looking at a bright future for natural gas demand. As an example of the increasing demand, the power generation throughput on our set of natural gas pipelines was up 16% for the second quarter compared with the second quarter of 2014. I might add anecdotally, that's pretty consistent. In Texas, the overall demand for gas as a source of power generation increased its share year-to-date to 48% from 37% in the first half of 2014. I think all of these factors and the numbers I've shared with you just demonstrate our belief that the strength of our assets, even in times of volatile and relatively low commodity prices, continue to demonstrate that we can produce stellar results even in these times. With that, I'll turn it over to Steve.

All right, thanks, Rich. So, I'll take the projects for you and give you some operating highlights from the segment. Since the April update, our project backlog increased by $3.7 billion from $18.3 billion to $22 billion. That's great progress and a sign of the strength of our network and the continuing need for additional midstream energy infrastructure. This was going to be an even bigger increase but for some delays on a couple of deals that we've been working on worth about another $1 billion. If and when we get those done, we'll announce those separately. Now, here are the main changes. We added $4.6 billion in new projects. And this is an important one, $3.3 billion of that is the addition of the market path portion of Northeast Energy Direct, a natural gas pipeline expansion to serve the New England market. We're expecting to proceed with that project. We're still working on the supply portion of that project. And we've made significant recent headway on that one, as well, but not to the point where we're ready to add it to the backlog. When and if we do, that would be another $1.6 billion to $2.1 billion. Now going back to the market path portion, we have discussed in previous releases that we've got commitments for 562 a day of capacity on that project. Much of that volume is currently going through the state Public Utility Commission review process, and we're optimistic about the outcome of those reviews. We're comfortable going forward, based on the commitments we have and the progress toward the state approvals on those commitments. Number two, our confidence that we can extract value for short-term sales of a portion of the unsold capacity, particularly during the winter months. And third, just the overwhelming need for additional gas capacity to serve Northeast markets. This level of sign-up would get us to an accretive return, but we fully expect to add commitments on the power side that will get us to a very attractive return. We preserve the ability to phase this project in as the commitments come. We're very enthusiastic about the project. The demand is already there and growing. Besides NED, we added $700 million of investments to the Elba Island liquefaction project primarily as a result of buying out Shell and taking 100% of the ownership and management of that project. Shell remains the off-taker for 100% of the project capacity under a 20-year contract. This deal represents a restructuring of the previous arrangement we had with Shell. The main benefits we are getting here are, of course, the opportunity to invest $2.1 billion at an attractive return. And, secondly, we gain control of the project and with that control we still expect a late 2017 in-service date. Shell benefits from secured cost reductions on the total project, which we expect to achieve and still earn an attractive return on the all-in investment. In other portions of the backlog we also added $100 million in other projects in the gas group, $100 million combined between products and terminals, and about $300 million in additional EOR investments over the time frame of the backlog in the CO2 segment. So, those are the additions, and, during this timeframe, we put into service $700 million worth of projects. The bulk of that is explained by two things, $200 million relating to further expansions and extensions of our very successful Kinder Morgan crude and condensate system serving the Eagle Ford Shale and multiple destination markets on the Texas Gulf Coast. We also put into service $300 million of projects in the terminals segment. The majority of that is attributable to our Edmonton crude-by-rail joint venture with Imperial, which was placed in service during the quarter. We removed about $600 million from the backlog. Nearly all of that is further deferrals in our CO2 source field investments outside the timeframe of the backlog. Part of this reduction is also related to scope efficiency where we are getting the same production with a smaller investment. We continue to believe that we can meet the current demand outlook for CO2 by concentrating our source development activities on the core of our portfolio. Overall, we grew the backlog by $3.7 billion even while putting $700 million worth of projects into service. And, as I mentioned, we think we're close to adding still more. Now, for the segment review. But before going into the segment-by-segment review, I think it's worth backing up for a moment and comparing where we were in Q2 of 2014 and where we are in Q2 of 2015. Over that period, the price of WTI declined by 48% and the price of natural gas declined by 43%. But in this quarter, we're reporting segment earnings before DD&A that are up 2%, and we're reporting volumes that are up, and I'll go through those separately. Certainly, there are a lot of moving pieces in there including capital investments we've made, and the commodity price impact on CO2, et cetera. But it still sets a very important context for our performance and the strength of our business model in a wide variety of commodity environments. All right, now for the segments, starting with gas. Earnings before DD&A for the gas pipeline segment were $965 million, that's up 1% year-over-year. That's led by the addition of Hiland and improved year-over-year performance on the Eagle Hawk gathering system, offsetting weaker performance in some of our other gathering and processing assets. Also recall that year-over-year results in this segment are affected by a major shipper buying out of its contract on the Kinder Morgan Louisiana Pipeline last year. We had higher transport volumes, up 3% across the segment, and we saw a 16% increase year-over-year, as Rich mentioned, in the power burn across our systems. We had higher sales volumes, up 9% on our Texas intrastate as we continue to see growth in our power and industrial markets in Texas. Gas gathering volumes were also up 5%. We continue to see strong demand for long-term firm natural gas transportation capacity. This is including the 562 associated with NED, but we added over the quarter 1.4 BCF of additional long-term transportation commitments, with the volume weighted average term length of about 20 years. We added commitments in the East, Central, and West regions and across LNG, LDC, and producer markets. Over 400 of that is attributable to sales at existing capacity, showing again that we benefit from rising gas supply and demand not only in terms of new project opportunities but also enhancing the values in some of our existing systems. So that 1.4 BCF addition brings the total capacity sign-ups since December of 2013 to 8.7 BCF of new and pending long-term commitments. So, again, the summary here for gas is we continue to see strong demand for existing and expansion capacity in our gas assets. We believe that we're well positioned for the growth that we see in this market. Turning to CO2 which is, of course, very much affected by commodity prices, segment earnings before DD&A in this segment were $286 million, down $74 million or 21% year-over-year due to lower commodity prices for oil and NGLs and including the deteriorating ratio of NGL to crude prices. Our volumes are up year-over-year, led by SACROC at 9%, and an overall increase of 8% net to Kinder Morgan across all of our enhanced oil recovery developments. Katz and Goldsmith are also up year-over-year and, of course, reported at 8% that I just mentioned. We've made recent significant progress on Goldsmith in particular, but we're still well under plan on both of those fields. We're also extracting some significant cost savings in this price environment. We continue to forecast reductions in OpEx and maintenance CapEx of just under 25% for the year. Now turning to the products pipeline group, segment earnings before DD&A were $275 million, up 32% year-over-year. And that's driven by the ramp-up of volumes on KMCC, the addition of our HH pipeline with the Hiland acquisition, and improved performance on FFPP, as well as better year-over-year results on Cochin. Recall that Cochin was shut down for part of the quarter last year as we were completing the reversal project. In this segment, we see the upside of lower commodity prices. Our refined products volumes were up 4% across all our systems year-over-year, led by higher gasoline volumes, particularly on our SSPP system. We continued to advance our Palmetto refined products pipeline, our Utopia NGL pipeline projects. We also launched an open season on UMTP proposed pipeline closing in September of this year, but we still don't have that project in our backlog. We did suffer a setback on our Palmetto project. The Georgia Department of Transportation denied our request for a certificate of public convenience and necessity. We did get the approval we needed from FERC during the quarter. A favorable ruling from Georgia DOT is not essential for us to proceed with the project, but we are appealing the ruling because it would help, and we're exploring all our routing options to allow us to move forward with the project. Turning to terminals now, segment earnings before DD&A were $271 million, up 16% from last year. 75% of that is attributable to organic growth. We continue to see strong performance in our liquids facilities. And our earnings benefited from expansions in Edmonton and the Houston Ship Channel, as well as higher year-over-year results due to our Jones Act tanker acquisition. We placed our Edmonton crude-by-rail facility into service, as I mentioned. On the bulk side, a different story, steel volumes are lower as are coal volumes. This segment was also hit by FX on the Canadian portion of its operations. The liquids part of the segment, in addition to its strong performance in our existing business, is also driving our future opportunities. Almost really every bit of our backlog in this business is in the liquids part of the business. As we continue to see promising opportunities in the Houston Ship Channel, which we are actively pursuing, some of those are in the backlog, there are others that we're pursuing that are not yet in there. We've built great positions in two very important hubs, Edmonton and Houston. In Edmonton, our expansion projects, when complete, will bring our merchant crude storage positions to 12 million barrels, the largest in the area, and up from zero ten years ago. In Houston, our expansions will get us to 43 million barrels of liquid fuel storage, 45 when you count our recent Vopak acquisition. So, we continue to build strong positions in these two markets. And, very importantly, we continue to add connectivity to our assets in each of those markets which further enhances the value of our positions there. Finally, Kinder Morgan Canada and a quick update on our expansion of Trans Mountain. First, we're still expecting to see draft conditions by the end of this month from the NEB, so that's fast approaching. We do expect to get the final NEB recommendation in order in January of 2016. Intervener evidence was filed during the quarter and is fully expected and as some of you probably read; it lit up the press as the opposition got plenty of airplay. This wasn't any surprise to us, and our Canadian team continues to do its job, fulfilling their outreach and consultation responsibilities. Most of our route, as a reminder, is along our current pipeline, except where community or landowner needs dictated a variation. So, we have existing relationships with many of the communities and First Nations along the way. And as I mentioned last quarter, we have community benefits agreements in place that cover 87% of the route. We also have agreements with about a third of the First Nations that are most directly affected by the project. We're working to get more. Progress is slower than we would like on getting the expressions of support, but we are fulfilling the obligation we have to consult and accommodate in any case. I'll remind you that the expansion is under long-term contracts which have been approved by the NEB. Overall, we think it was a very good quarter with strong performance in a very significantly lower commodity price environment year-over-year. And we made several strong additions to the backlog, and overall I think demonstrates the value of our network and the continuing opportunities to expand off that network. So, that's it for the segment and for the projects, and with that I'll turn it over to Kim for the numbers.

Sure. Thanks, Steve. Turning to the first page of numbers, which is the GAAP income statement, let me highlight a couple of points. In this quarter, similar to last quarter, revenues are down significantly at $474 million. However, OpEx is down by almost the same amount, $475 million. As I mentioned last quarter, changes in revenue are not good indicators of our performance. We have businesses where revenues and expenses can fluctuate due to commodity prices, but the margin typically remains stable. We believe the best measure of our performance is the cash we generate, which we evaluate through DCF per share, as well as the cash we return to our investors via dividends per share. Now, moving to the second page to discuss DCF, it was $1.095 billion for the quarter before certain items, an increase of $763 million or 230%. This increase is mainly due to not paying the limited partners as part of the Fusion transaction, but it does not factor in the approximately 1.1 billion shares we had to issue in that transaction. On a per-share basis, accounting for both aspects, we generated DCF of $0.50 for the quarter, an increase of $0.18 or 56% from the same quarter last year, and year-to-date DCF stands at $1.07, which is a 23% rise compared to the six months ending June 2014. Our dividend this quarter was $0.49, giving us a coverage of $20 million year-to-date. The $1.07 DCF sufficiently covers the $0.97 dividend by $226 million, a significant improvement from the $113 million deficit in the second quarter of 2014, as mentioned by Rich. Focusing on the segments, we generated segment earnings before DD&A of $1.827 billion, up $35 million or about 2%. Steve has gone through each segment and the drivers of these changes. Year-to-date, segment earnings before DD&A are up $28 million or 1%. I also want to discuss our expectations for the segments against our full-year budget. We anticipate gas to exceed its budget by about 1% due to the Hiland transaction, although some benefits will be offset by direct commodity exposures, which we've previously highlighted, alongside approximately $35 million in lower volume from falling commodity prices. For CO2, we expect it to come in about 13% below its budget for the full year primarily due to price factors, with other moving components largely balancing each other out. We have cost savings in the segment that are being countered by reduced CO2 volume and lower capitalized overhead related to CO2 spending, which is about $450 million less than initially budgeted. The products pipeline is expected to exceed its budget thanks to the Double H Pipeline from the Hiland acquisition, although there's a minor offset from commodity prices consistent with our earlier metrics. Regarding CO2, the price impact is greater than what our earlier metrics suggested due to the worsening NGL to crude ratio; NGL prices have dropped more sharply than crude prices, affecting Kinder Morgan by approximately $40 million, primarily in the CO2 segment. For terminals, we expect them to finish slightly below budget due to weaknesses in steel and coal, along with FX impacts from a declining Canadian dollar affecting earnings translations. Some of these negatives are somewhat offset by contributions from acquisitions compared to our budget. KMC is anticipated to come in below budget mainly due to FX factors. Overall, we expect segment earnings before DD&A to fall in the range of 1.5% to 1.75% below our original budget estimate. Moving on to G&A, the expense for the quarter was $164 million, an increase of $16 million from a year ago, and up $22 million year-to-date. Part of this increase is related to the Hiland transaction against our budget. For the full year, we anticipate G&A expenses to be around 4% over budget, primarily due to G&A absorbed from the Hiland transaction and lower capitalized overhead than initially planned, mainly due to reduced spending in our CO2 segment. Interest expense for the quarter was $527 million, about $78 million higher than the second quarter of 2014, balanced by slight savings in rates compared to last year. This trend continues over the six-month period, where interest expense rose by $147 million, largely balanced by a $7.3 billion higher balance than the first six months of 2014 and slightly lower rates, providing a benefit. For the full year, we expect interest to remain flat against our budget, as interest from the Hiland acquisition offsets lower balances and rates from existing businesses and anticipated expansion capital. Looking back at our DCF calculation, which accounts for net income plus DD&A and other segments, the G&A and interest expenses I just covered address the first four lines of that calculation. The next line, cash taxes, was an expense of $18 million this quarter, representing a decrease of $282 million compared to the second quarter of 2014 and $288 million year-to-date. This reduction stems mainly from the consolidation transaction, which allowed for increased depreciation deductions due to the step-up in assets, keeping more depreciation within KMI instead of allocating some to the limited partners.

I'll turn it back over to Rich for the Q&A.

Good afternoon.

Hi Christine. How are you?

Good. How are you?

Good.

So, we've had some M&A attempts and announcements in recent weeks, one of which was an unsolicited bid. With talks about the bid-ask being too wide and maybe some companies not even thinking about putting themselves up for sale, would an unsolicited bid and maybe even going public with such an offer if any potential targets said no be something on the table for you guys? Just asking because you guys did make an unsolicited bid for El Paso on the heels of the KMI IPO back several years ago. So, there is some history there but wondering if anything has changed on your side or if you even think anything out there is worth the trouble.

Christine, it's quite challenging to make predictions in advance. All acquisitions depend on specific circumstances. We wouldn't definitively say that we wouldn't pursue deals in a different manner, as we've previously negotiated agreements like we did with El Paso. However, due to the unique nature of each situation, we can't provide a clear answer. Dax, do you have anything to add?

No, I think it's something that I would agree with your summary that bid-offer spreads still exist in many places. Obviously, you've seen certain situations where there has been some movement and some deals getting done. My thought is that you'll probably see a little bit more activity in the second half of this year than you've seen in a while. However, I believe Steve's point about not speculating on any tactic or specific situation is exactly how we've approached it.

Okay, great. And then I thought I saw that Gulf LNG filed the FERC application last month. It's been fairly quiet with news on that front so was just curious what you were seeing on the customer contract side. Also, was the filing more of a check the box to have the regulatory side of things not be the bottleneck or was it something customers wanted to see you do before talking more seriously given the time it takes to receive approval?

You're right. We filed on June 19th, and we are continuing to advance that project. We are still in discussions with customers about it. It is the last brownfield site that hasn't been put under contract. We believe it is a promising location, and we are very optimistic about U.S. LNG and its potential. There is currently a pause in the market, and there are questions about how long it will last, what the true capacities are, and how long the market may be oversupplied. However, we view this as a good project and are considering it in the early part of the next decade. We think it aligns well with the potential market recovery. But as you know, we don't have it in the backlog yet. We're actively engaging with customers, but we don't have anything definitive to report at this time.

Great. And then the last one for me, can you talk about the steps leading to Shell's decision to sell its equity interest of the Elba JV? Did you approach them; did they approach you, et cetera? Any color would be helpful.

Yes, we've been working together for a long time in developing this project. Costs have been increasing on it and scope has been adjusted. I'm not going to speak for Shell at all, but you don't need to be a rocket scientist to see that they bought BG, that the market outlook on LNG has changed a bit. They wanted to restructure the contract. We were certainly willing to restructure it on the terms that we got here and invest additional capital, $2.1 billion in total now, on the project at the return that we're getting for it. We got a different risk allocation. Shell is retaining certain risks. We are picking up certain risks, but the risks that we are comfortable dealing with in today's market environment for materials and construction services and the like. So, we think we can do this project and do it successfully. The added benefit, from our standpoint, as I think I mentioned, is that we get control now. This is not a two-headed thing anymore. We've got control over this project and its development and construction, and we'll get it built. And we're happy to have Shell as the customer of the facility and we're very happy to be in charge.

And we're happy to put more money into this project at returns that we think are very good, particularly given Shell credit for a 20-year contract.

Good. How are you?

Fine.

Just a couple quick questions. Steve, in your prepared remarks, you sort of talked about how much the backlog has actually grown. And some of it is the acquisition; some of it is projects that you've been talking about for some time. I was wondering if you can give us some color. We're nine months into the commodity collapse. The E&P budgets from a CapEx perspective have been coming down for the last six months. How are the discussions about incremental ideas, concepts, logistics projects going at this point right now? Are things slowing down? Are some opportunities cropping up? I was wondering if you can give us some insight as to how you think the backlog would grow over the next 12 months beyond the projects that you're hoping to add to the backlog at this stage right now.

First of all, it's clear that what impacts our customers also impacts us. The backlog likely would have grown even more rapidly under different commodity price conditions, which also influences who we are engaging with. As I previously mentioned, we had observed significant push from producers for gas projects, but we are now starting to see more market pull. Interestingly, the recent 1.4 BCF of sign-ups is nearly equal among local distribution companies, producers, and LNG. This presents a slight contrast to previous trends. Nevertheless, what affects our customers affects us. We see this as a positive indication that, despite the current commodity price environment, our backlog is expanding where we operate. We are close to more additions, and we expect to capture a significant portion of those and continue our growth. There are many factors at play and a variety of markets we are addressing, so it's important to evaluate them individually to identify opportunities. We are still in the early stages of experiencing substantial demand pull, with LNG demand anticipated to kick in early next year and the current power demand pull evident this year. The 9% increase in sales volume for intrastate projects is impressive and reflects the strong industrial and power demand in Texas. The recent 1.4 BCF of contract sign-ups also highlights that even in a downturn, our network is well-positioned in areas with growth potential. We remain optimistic about our prospects and our capability to build on our backlog. Looking ahead to the next 12 months is challenging, but we have made significant strides on NED supply and are working diligently on UMTP, which has been a lengthy process. We continue to develop Gulf LNG and see opportunities in John's business related to liquids terminals. There is a lot happening in the Houston Ship Channel that we are actively pursuing. We are noticing emerging interest from chemical companies in seeking midstream support for their projects separately rather than integrating it within their projects. These are all encouraging signals, despite the negative impact of a downturn on G&P investment. Overall, we remain positive and believe we have a strong opportunity to further enhance our backlog as we progress.

Great. Just as a follow-up question I was wondering if we can talk about the balance sheet for a second, a two-part question. I understand your expectation to get to 5.6 times by the end of this year. Is the commitment to the rating agencies to get it to this year or is it during 2016? And then I was wondering if you can also talk about the warrant repurchase program. It seems counterintuitive to be buying back one side of the capital structure while issuing equity on the other. Just wondering if you can talk in context of the overall plan to de-lever.

On the commitments to the rating agencies, this was in all of the materials at the time we did Project Fusion, which was we were going to start out of the box at 5.6 times. We were going to remain elevated for a couple of years and that when the larger projects, Trans Mountain and Elba came on, that was the biggest driver of deleveraging over that period. So, that is still our expectation. And getting to 5.6 times at the end of the year is consistent with that, consistent with what we showed the rating agencies at the time of the transaction and consistent with what we budgeted and they saw in our projects when we published that in January. On the warrant repurchase, that is just when there are disconnects between where the shares are pricing and where the warrants are pricing. We think that there may be opportunities to buy those warrants. We evaluate that from time to time, and when we see those opportunities, then we'll execute on the warrant repurchase.

Doing well. Good afternoon. Just a question for Steve. So, on Northeast Direct you indicated you've moved two-thirds of it now to the backlog. But if memory serves, the amount of commitments you've secured are about the same as it was last quarter. So, help me understand better what change that you're able to move that to backlog and you're in position to move forward with it.

Yeah, that's right, John, and it's really three things. One is those contracts; we've developed greater confidence around them as they're starting through their LDC approval process. Secondly, we looked hard at the project and as we were phasing the capacity in, sort of where would we have unsold capacity and what do we think we could do with that capacity, what value could we attribute to it. That's not under contract, that's based on our judgment that, because the demand is there and it's growing, that we're going to be able to market some of that unsold capacity. We'll still be trying to actively sell it, of course, long-term, but we'll have good economic opportunities on some of the unsold capacity, particularly during the wintertime. So, we put that into our expectations. And then finally, just the overwhelming need for the project overall, the demand. And frankly we think that getting out there with our customers, telling them that we're going forward is going to help in the additional sign-ups that we need. It helps us get through the approval process, it helps us make the project concrete for the people who we want to get concrete with us in terms of signing up for long-term commitments. So, those are the things that improved our confidence quarter-over-quarter.

Okay. And then how did you factor in one of the major competing projects there into this calculus?

Okay, we have our eyes on our own homework here, basically. We're trying to fill this thing up with commitments. And whether the other guys get theirs done or not, we're tunnel vision on this. We're just focusing on our deals and getting those in. We think we have a very good project and that that project is properly located in size to serve New England markets and to attract our share, if you want to call it that, but certainly the most accessible power demand to that footprint. And so we have no commentary here at all on what that means about the other guy's project. We're fighting for this like it's a one-project deal and we'll continue to do so.

Okay, that's helpful. And just on the backlog, you did increase substantially and congrats on that. I guess did it move? How was that relative to your expectations? I mean higher or lower I guess if you can give any color on that?

It depends on the time frame that you would look at it from. If you'd asked at the end of last quarter, it's higher than I would have expected. If you'd asked me last week, it's lower. We're not going to do anything uneconomic just to put something in the backlog. We're negotiating on a couple of other things and we think we'll get them done. And if and when we do we'll get them out there. But I personally am pleased with the addition for this quarter. I think this is very strong, particularly when you look at the overall market out there.

The truth of it is that we're damned pleased with having a $22 billion backlog in this kind of environment, number one. Number two, we have a heck of a lot more opportunities out there, and it's a reflection of the fact that we have just a very good footprint spanning North America. And so, we're going to continue to look at this. Steve is absolutely right. We have some more opportunities that are pretty close to getting the horse in the corral. We hope to get it in and put the saddle on shortly and when we do we'll advise you of it. And we've got a lot of other potential here. But we're doing really well on the backlog. And I think to predict exactly where we are going to be in one quarter or two quarters is a fool's errand. But we're very pleased with where we are and what we have out in front of us.

Hey, fine. Thanks Rich, I hope you and everyone are doing well. Just one question for me on UMTP. I realize you're involved in the open season until September, so, Steve, as you said, the saga continues. But with respect to all the recently proposed acquisitions and volatility across all of the NGL dynamics, including price expectations in the Northeast, how do you guys think about Northeast NGL supply/demand balance? How do you think it could change? And, more importantly, to what extent does that influence your thoughts either on scale or scope of the project or maybe even downstream market demand for batched NGL service on UMTP?

Okay, yeah, so a few things there. I mean one is, again, lower commodity prices do dampen the enthusiasm for making longer term commitments by the producers. But having said that, the long-term outlook, we think, for NGL production out of that region is very robust. And there are producers who are focused on that and realize that for their netbacks to be attractive they need to have an outlet and they probably need to have multiple outlets or have options. And we think having the option to access basically the capital of the U.S. NGL market in Mont Belvieu, as well as the heart of petchem demand along the Gulf Coast here, as well as access to export docks, that's pretty attractive. And so, the people who are thinking about it longer term are going to be attracted to it. But there were a couple of modifications that we made to help improve our chances. You alluded to one of them, the batch system that makes us really not a competitor with the local fractionators. We can still move Y grade, that's one of the options. But we can move purity products. And just having the ability to batch different products adds options and therefore adds value to the outlook for producers associated with the project. The second thing is, quite frankly, we started working on the market side of this. And Ron McClain and his team have been talking to international off-takers who have a different timeframe and perspective that they bring to the table. And so, we're branching out, outside of just the traditional producing community and trying to find a way to cobble this together by focusing on the demand side, as well, with the market end of it as well. So, we continue to believe we have a good project. We've been here before. This is not our first open season. So, we're not putting in the backlog; we're not promising success here. But it's also not costing us a lot to maintain this option. We have the ability, as we've said before, to keep it in gas service and make it part of an additional southbound haul. So, we're going to keep working on it because we believe in it and we're going to keep trying to make it better and get people to sign up for long-term commitments.

Thanks, Steve.

I am good. How are you doing?

Good.

This will be a short one but I wanted to tag on the back of Darren's question on EMTT. Is this part of the natural progression, the open season, or was there a catalyst in quarter that kind of shifted the balance to get you guys to go ahead and do an open season? In particular, I'm wondering if the spread on a percent realization of NGLs to crude helped spark interest on an end-market perspective.

No, not really any, call it, short-term spread difference. It was really the progression here was Ron's team reconceived the project a bit in terms of the batch system and then spent a lot of time on the international, or on the demand side, let's call it, and developed that a bit and then we spent some more time with producers. And so, it was just the natural next step after having been out there socializing with everybody what the new configuration looked like and trying to figure out the right destinations and the right receipt points. It was just a natural next step. We often go out in open seasons with an anchor shipper and a pretty high probability, pretty high confidence level of success. I wouldn't call this open season one of those. We are out there in the marketing effort right now. We're going to see if we can get it done. It's not a seeded or anchored open season the way some of ours are.

Great, perfect color on that. Almost 1.5 of incremental term gas capacity signed up in the quarter. I'd call that impressive. As you look forward, is that going to be a high watermark for the next few quarters or is there something in the hopper, so to speak, that looks equally as good?

Tom, do you want to comment on that?

It's a big quarter, but I think we'll do more before the end of the year, I think. That would be probably another B out into the year, if possible.

Okay. That's it for right now. Thank you, guys.