Jay Hatfield of HAK Capital asked, on ETP's $650 to $710 EBITDA guidance - what is a good number to use for a base? ETP - We have not included any income from new projects in those numbers - and no weather anomalies. Every year has an anomaly. As we look back on our original 2006 projections, we are comfortable with 660. Jay: For the additional expansion of XTO project - can we forecast another $60 million in EBITDA? ETP: That is a logical assumption Jay: There could be large return on invested your capital? ETP: yes Jay: What is repeatable about the anomalies? ETP: We use money gain from those to pay down debt, or use money for new projects - decreasing our needs for new units. . or new equity offerings Jay: In your initial guidance, you gave a distribution guidance of an increase of more than 10% - given your large increase already, it seems trivial guidance at this point - is there new timing for your distribution expectations? ETP: We do not forecast distribution increases - our board will fire us if we did. The new pipelines are being integrated - and they are performing better than anticipated - the company is performing better than expected - and you can use that to build your own distribution expectations. ETP has become MORE weather sensitive - and even given that handicap of the warm weather, ETP has produced these great numbers.
Eves Sigel with Wachovia noted that based on ETP's $710 EBITDA guidance - that implies a 'flat' second half. ETP: Our second half will be up
Kevin Gallagher from RBC noted that. . on the 42 pipe expansion . . you must be anticipating having a big chunk of market. ETP: No one else in Barnett Shale can provide our level of service. Other pipelines take gas from one glutted area to another glutted area - so we will get most of the business. Kevin inquired about the recent "shelf filing" ETP: We had used up last shelf. We are not signaling anything - this shelf should last 3 years. We do have a planned public debt offering in the summer Kevin: Your Maintenance cap ex for Q1? ETP: 19.6 million
Ron Londe AG Edwards wanted ETP to give more details on the way ETP is hedging - and how that will change when Houston contract expires ETP: The way those contracts are structure - our largest customer can call on up to 1.8 BCF/day - which can only be filled with a withdrawal from Bammel. We acquired the Houston pipeline knowing that we had this responsibility. Most of the load is humane need. We sell [or hedge] on Houston based index price. We forecast how much we will need for the winter - and start injecting in the summer. We sell/hedge based on Dec price. The contract expires this time next year. If renewed, and this customer has few alternatives so we expect are renewal - and as you know we are not a fan of merchant business. For the new contract, we will not take title of the BTUs. We will charge to transport gas to Bammel for storage, then charge to store at Bammel, then charge to transport from Bammel. We will still use Bammel. Ron: do you anticipate the new contract will be more or less profitable? ETP: I think it will be more profitable. The current contract requires ETP to own approx $600 million in gas. With a new contract where ETP does not have to buy/own the gas, ETP's liquidity needs will go down Ron: Did this [Bammel storage] help you in Q1 - having the gas on hand? ETP: Bammel is fabulous facility. There was chaos after the hurricanes. The Houston natural gas suppliers locked the fences and went home. That gas which we had in storage allowed us to get profits last year.
Jeff Murser of Raymond James asked how does ETPs approach trading differ vs. its approach to hedging? ETP: Marketing is buying and selling molecules. Marketing is moving the gas. Jeff: On seasonality - Houston pipe is very seasonal. What is volume swing? ETP: Billion cubic feet per day in the winter
Devin Gagan with ZLP asked about when the Barnett Shale pipelines would be full ETP: The 42inch pipe moves gas other than Barnett Shale. Producers will not tolerate having gas shut in. So it is reasonable that other pipes will be built, and will be announced. But producers will not commit long term to one pipe. If you look at what ETP pipes do - it is hard to see how we will not fill up. Devin: On your distribution coverage ratio of 1.2 to 1.15, this ratio - had been 1.25. Sounds like you are comfortable going down on that ratio. ETP: We look at our life cycle - our appetite for capital - and look at our credit ratings. So we balance a lot of needs.
Eves Segal of Wachovia asked how much gas ETP has in storage. ETP: 21 BCF Eves: Have you started injecting? ETP: Yes Eves: Are there expansion opportunities in regard to having more processing facilities? ETP: In connection with the 42 inch pipeline, we will have opportunities to treat gas - and these are sweat contracts because it adds gas to out pipes Eves: What about the long lead times for construction? ETP: Steel costs are up - it is now harder to buy pipe. Lead times to buy pipes getting longer. For pipes we have announced, we will anticipate pipe will take longer to get Eves: What about 2007 Guidance? ETP: It is too early
Jeff Davies with Wachovia asked about any update with conversations with the debt agencies? ETP: We can not update. Jeff: Look at credit stats compared to others - you want an investment grade - are their any things that you can talk about - what are the sticking points ETP: We have filed the info with the SEC - numbers are now not just projections - which may help.