Crestwood Equity Partners LP
Q1 2016 Earnings Call Transcript

Published: 3 May 2016

[Operator:]

Good morning, and welcome to today's conference call to discuss Crestwood Equity Partners' First Quarter Financial and Operating Results. Before we begin the call, listeners are reminded that the company may make certain forward-looking statements as defined in the Securities and Exchange Act of 1934 that are based on assumptions and information currently available at the time of today's call. Please refer to the company's latest filings with the SEC for a list of risk factors that may cause actual results to differ. Additionally, certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, and distributable cash flow will be discussed. Reconciliations to the most comparable GAAP measures are included in the news release issued this morning. Joining us today with prepared remarks our Chairman, President and Chief Executive Officer, Bob Phillips and Senior Vice President and Chief Financial Officer, Robert Halpin. Additional members of the Senior Management team will be available for the question-and-answer session with Crestwood's current analysts fallowing the prepared remark. Today's call is being recorded. A question-and-answer session will follow the formal presentation. [Operator Instructions] At this time, I'll turn the call over to Bob Phillips.

[Robert Phillips:]

Thank you, operator and good morning. Thanks to all of you for joining us. I know it's early. We certainly have accomplished a lot so far in 2016, all of which is I might remind you a continuation of our strategic plan, which we put in place last year to reposition Crestwood in this lower for longer environment that we find ourselves in. As you'll recall, since early 2015 we have implemented significant cost reductions to improve our operating margins, streamline the partnership to be more efficient and competitive in the areas that we operate and significantly simplify our capital structure and our balance sheet through the simplification merger that we completed in September of last year. In 2016 we continued to execute on important parts of that plan. Let me touch on a few of those so far this year. First, showing the resilience of our portfolio in a very tough market, we delivered another solid quarter, through this time strong gathering and processing performance, offsetting reduced downstream service contribution due to the historically weak winter demand that we had for gas and gas liquids as well as continued tight crude oil spreads. Seems like every quarter one of our three segments really picks this up and G&P did it this quarter. Secondly, we further de-risked our commercial portfolio with the new BlueStone contact putting an end finally to the Quicksilver Bankruptcy. Third, we announced a new joint venture with Consolidated Edison, which provides us we think a real strategic advantage to compete for new growth projects coming out of the Marcellus Shale and the expanding Northeast gas markets. Fourth, we're going to take the proceeds from that joint venture and reduce our debt to a leverage ratio of about 3.9 by yearend 2016 and I'll remind you that that’s well under our debt covenant of 5.5. So, really repositioning the company with a lot of dry powder going forward from a financial leverage standpoint. And fifth, we reduced our quarterly distribution to $0.60 per common unit or $2.40 annually, which takes our distribution coverage to about 1.9 times in the first quarter of 2016 or 1.6 times on a fully diluted basis taking into account the PIK preferred that convert in late '17. Underlining these headline achievements our operations team continues to cut cost, improve safety and compliance and promote efficiency and customer service across all of our assets and we did complete some important bolt-on or expansion capital projects in the Barnett and the Delaware Permian during the first quarter. As well, our commercial and business development teams continue to make very good progress on extending contracts across the entire portfolio adding services in certain areas and developing new long term growth opportunities particularly in the Marcellus, the Bakken and the Delaware Permian where we're focused for growth. Now before I turn it over to Robert I want to give you some color on the recent events, which should reset the bar for Crestwood’s long term valuation going forward. First and foremost, the Bluestone contract was a big win for Crestwood. We got a long term contract with a quality Barnett operator that’s well financed by a large experienced private equity firm. The contract gives us downside protection on volumes over the next three years and upside potential on margins as commodity prices improve going forward. As a result, we have substantially de-risked our Barnett assets relative to the Quicksilver bankruptcy, a big win for Crestwood. Number two on the Con Edison deal, if you haven't reviewed our strategy slight deck, which we posted to our website on April 21, I would encourage you to do that. There is a lot of good detail describing the joint venture and the merits of the transaction. But in summary, we will contribute our Northeast pipeline and storage assets at an implied value of about $2 billion and Con Ed will indirectly purchase a 50% equity interest in the new joint ventures stage coach gas services for $975 million. We anticipate a quick closing during the second quarter. We did complete our HSR filing yesterday. So we got that out the door. So, we're on the clock and both parties are optimistic and very bullish about the opportunity to grow this critical infrastructure business in the Northeast, particularly in light of Kinder Morgan's recent pullback on the NED project and delays announced last week on William's constitution project affecting more than 2 Bcf a day of takeaway capacity for the Marcellus Basin. We see a real opening here and we’re excited about working with our new partner who shares our desire to grow these assets safely and responsibly in a region that absolutely needs more natural gas infrastructure. Con Edison is a strong investment grade and strategic partner and will be a great complement to Crestwood’s commercial and operating expertise. Now on the deal, the tax implications have been a question from a lot of our investors particularly regarding the potential $600 million taxable gain. So as a part of our evaluation of the joint venture transaction, we received significant input from our tax and our legal advisors who helped us take a hard look at this issue. Based on Crestwood’s internal projections and assumptions we anticipate that unit holders who purchased CEQP units at any time in 2016 will generally not incur any tax liability with respect to the transaction or the eventual use of proceeds such as the buying back of debt. For unit holders can purchase the stock prior to 2016, we believe that many of you will be able to utilize your 2016 allocated deductions and previously allocated passive losses, which we think total more than $900 million in the aggregate for Crestwood Equity Partners and Crestwood Midstream Partners dating back to 2013. While we're not prepared to offer any specific tax advice and we would encourage all of our unit holders and investors to consult your own tax advisor, we certainly hope that this statement provides greater clarity around the tax issues that many of you have asked about and further Steven Dougherty, our Chief Accounting Officer is here with us today and he is going to be available to answer any additional questions that you have about potential tax liabilities from the transaction during our Q&A period. Concurrently with the Con Edison, we also announced a revision to our quarterly distribution, which is something that I can tell you Crestwood Management First Reserve our controlling unit holder and the Board of Directors takes very seriously. We've done a lot of work around distributions over the last year as you know and since the middle of 2015, we've been absolutely clear that any adjustment to the distribution should be part of an overall comprehensive solution to reposition Crestwood and materially change the investment profile of the partnership and we think that we've done that here. With the combination of the quick Quicksilver Barnett settlement, which de-risk our portfolio, the Con-Ed JV which positions us significantly for growth with a great partner in a great area and the proceeds from that transaction to substantially deleverage our balance sheet. This distribution level allows us to retain significant cash flow towards further balance sheet strength as well as high return investment opportunities while also very appropriately covering the dilution of our PIK preferred units, which will occur in 2017 and puts a floor around any potential risk that we face by the assets in our portfolio in this lower for longer environment. So we really think that this combination provides investors with much greater visibility and absolute confidence in our distribution going forward. Like I said in the press release, by yearend 2016, we think that all of these events will improve Crestwood's credit and coverage metrics to the point that it puts us in a leading position in our peer group and should drive substantially greater improvement in our valuation. So this is that comprehensive solution to reposition the partnership that we've been talking about for over a year now. With that, let me touch on the first quarter results. As I indicated earlier, our gathering and processing segment did a great job during the quarter with flat segment volumes compared to the fourth quarter of '15, but 12% higher adjusted EBITDA contribution based on a 19% decrease in O&M. Highlighting volumes on the Arrow system, they remained steady during the quarter with 30 new wells connected, seven more new wells connected in April, putting us on pace to meet our 2016 forecast for volumes and new well connects on the Arrow Bakken system. In the Delaware Permian, we completed the Willow Lake expansion project resulting in an almost 30% increase in gathering volumes since the fourth quarter of '15 and producers are still drilling out there in that part of the Delaware Permian due to solid net back economics. In the Barnett, Bluestone is already brining shut-in wells back online to the system and we completed the West Johnson County compression project for Devon Energy, which provides additional free services we charge Devon for lower wellhead pressures resulting in uplift volumes for them. And finally in the Marcellus for gathering and compression volumes, as you could see we were up 7% and 12% respectively for the fourth quarter of 2015 as Antero also brought back shut-in volumes back online due to improved netback pricing as a result of finally bid commissioning of Momentum’s Stonewall pipeline in December '15. We had been anticipating that for a while and those volumes did come back on. You could see that in the first quarter of this year. Now strong G&P performance offset softer marketing supply and logistics performance. Those results were negatively impacted by as you all know and you've heard from many other midstream companies and producers significantly lower heating degree days in the northeast during the winter of '15, '16. There just simply wasn't enough demand or basis for NGL products like there had been in previous years. The good news is we've retained all of our producer agreements and added an additional 25,000 barrels a day of new supply agreements from the Marcellus/Utica region and as far away as new Canadian volumes trying to break into our market. All of our traditional supply agreements with end users have been renewed for the customary April to March annual period and we anticipate basis spreads improving in the fourth quarter of this year due to a flattening supply curve that we can already see. Expected increased propane demand anticipated from a more normalized winter and higher exports, which we're already seeing putting a floor under propane demand across the U.S. as well as potentially increased butane and natural gas demand anticipated from increased blending in the fall as a result of higher demand for motor gasoline. Looking forward on the business development side, we continue to make good progress transitioning in the COLT Hub into what we think will become the Bachchan's leading supply interchange. We're already bringing on additional pipeline and storage customers in anticipation of a dapple connection sometime in the future. And we're already seeing increased standalone pipeline and storage volumes. We are still about one third of the Bakken crude by rail market and we still have 115,000 barrels a day of take or pay contracts to load by rail in 2016. So the COLT facility continues to make a meaningful contribution and our BD people are doing a good job there of expanding services. In the Northeast, we're also extending our gas storage and pipeline transportation contracts with key utility customers. We’re aggressively pursuing new independent power projects, service opportunities that are popping up in that region due to low gas prices and we're also looking forward to improve the Hub services as the market recovers from this past week winter and storage overhang. And as I said in the area of NGLs we have new Marcellus/Utica and Canadian supplies coming on in 2016. We commissioned a new propane terminal in North Carolina to serve that growing market and we expect our West Coast business to rebound further as local refineries get back to more stable operations after a disruptive 2015. In the Delaware Permian area, along with our partner First Reserve, we continue to pursue growth projects supported by long term producer development plans there and Heath Deneke, our Chief Operating Officer is available to answer any questions that you might have about our progress out there. And finally I want to congratulate our employees for continuing to persevere in a very difficult market environment while we put the partnership back on track financially with all of the transactions that I've just described. We think we have some of the best midstream employees in the industry. They have a tremendous amount of pride in what we do at Crestwood and they remain committed as we do to the operating principles of safety, compliance and customer service and that's how you make it through a downturn in the cycle. So with that background, I'm happy to turn it over to Robert to cover the first quarter results in more detail. Robert?

[Robert Halpin:]

Thanks Bob. And thanks to everybody for joining us this morning. For the first quarter of 2016, adjusted EBITDA totaled $120 million, compared to $142 million in the first quarter of 2015. Distributable cash flow in the quarter was $79 million and distribution coverage for the quarter was 1.9 times or 1.6 times on a fully diluted basis. These results are in line with our expectations and the Q1 results that we included in our adjusted EBITDA guidance range of $435 million to $465 million for the full year 2016 that we provided on our April 21 Conference Call announcing the Con Edison joint venture. In our Gathering and Processing segment, segment EBITDA totaled $67 million in the first quarter of 2016 compared to $72 million in the first quarter of 2015. Natural gas gathering volumes and compression volumes decreased 23% and 25% respectively from the first quarter of 2015, but increased 1% and 12% respectively from the fourth quarter of 2015. Year-over-year declines in natural gas gathering and compression volumes were partially offset by a 5% increase in processing volumes, a 2% increase in crude oil gathering volumes and a 6% increase in produced water gathering volumes. In our Storage and Transportation segment, segment EBITDA totaled $51 million in the first quarter of 2016 compared to $56 million the first quarter of 2015. Lower results for the first quarter 2016 were primarily driven by a $4 million decline in EBITDA at our COLT Hub facility due to contract expirations and lower rail loading volumes as a result of compressed WTI rent spreads. In our marketing, supply and logistics segment, segment EBITDA totaled $19 million in the first quarter of 2016 compared to $26 million in the first quarter of 2015. As Bob highlighted in his prepared remarks, our marketing, supply and logistics segment was adversely impacted by unseasonably warm weather and the corresponding impact on propane and to a lesser extent butane demand over the quarter. Partially offsetting the impact of warmer weather on our NGL business was a very strong quarter from our U.S. salt operations which reported record quarterly EBITDA of over $5 million. Looking at expenses, I'm very pleased with our team's continued execution of driving down O&M and G&A expenses, while still maintaining safe and efficient operations as a top priority. In the first quarter 2016, we reduced total O&M and G&A net of unit-based compensation and other significant costs by 13% or $8.6 million compared to the first quarter of 2015 and by 12% or $7.7 million compared to the fourth quarter of 2015. Based upon execution to date, we expect we will be able to continue driving additional cost reductions in 2016 and should exceed our target of $10 million of cost reductions for full year 2016 compared to 2015 exclusive of the impact of the Con Edison joint venture. Now turning to the balance sheet, as of March 31, Crestwood had approximately $2.6 billion of debt outstanding, including $1.8 billion of fixed rate senior notes and $763 million in outstanding borrowings under our $1.5 billion revolving credit facility. As previously announced, we expect to close the Con Edison joint venture at some point in the second quarter and anticipate using the net cash proceeds generated by the transaction to reduce outstanding debt. Pro forma for the joint venture and anticipated use of proceeds, Crestwood’s leverage ratio would be approximately 3.8 times as of March 31, 2016. In closing, in the first four months of 2016, we have taken great steps towards executing our strategic plan to strengthen Crestwood’s financial profile. We've made strong efforts to mitigate counterparty risk in our portfolio. The entire organization has continued to cut substantial costs out of our business and with the combination of a reduced distribution and a strategic joint venture with Con Edison, we have substantially de-risked our partnership and position Crestwood to be a leader in our peer group going forward. I think with that operator, we're ready to open the line up for questions.

[Operator:]

Thank you. [Operator Instructions] The first question is from Andrew Bird of JPMorgan. Please go ahead.

[Andrew Bird:]

Good morning and congratulations on a series of wins this year so far. First question on the growth side, you mentioned a little bit in the press release on the Permian project, but is there any timing update for potential announcement there or a list of the criteria that you or the investor or customers waiting to see to move forward with that project?

[Heath Deneke:]

Yeah. This is Heath Deneke. I'll take that. Unfortunately, we don't really have a whole lot of specific information to put out at this time. I will tell you that a lot of our efforts are on re-scoping the project in a lower for longer environment, potentially moving some of the infrastructure build out as opposed to how we originally scope the project. So I think a lot of our ongoing discussions with the customer's center around that.

[Andrew Bird:]

Okay. So more phasing and potentially I think there are three specific projects doing them not necessarily all at the same time, but that's the way to think about it.

[Heath Deneke:]

Correct.

[Andrew Bird:]

Great. And then also on growth, any indication or just bringing Con Ed into the equation as a partner give you incremental optimism about future growth projects or opportunities in that segment?

[Heath Deneke:]

Yeah it absolutely does up in the Northeast, as Bob [indiscernible] in his earlier comments, there is a lot of -- still lot of continued delays and projects that are looking to take gas out the core Northeast Pennsylvania area and redistributed across the way just between the NED project and the uncertainly around the constitution project that’s over 2 Bcf a day of pipeline capacity that is going to be challenged to get in between now and 2020. As you know we have been after our Mark 2 project for a couple of years now and we think that both the route that we're taking as well as the connectivity to a fully sponsored utility backed project, really puts a little more wind under ourselves in terms of trying to get that project done. Also but more broadly with Con Ed as you know they're a largest utility up in the Northeast. They continue to have increased needs for storage and transportation service for the utility. But not only that, they bring a lot to the table as it relates to their insight into the market and really what infrastructure is needed in that area to serve the broader utility base. We are optimistic about the outlook up there and having Con Ed as a partners is really going to help us we think capture additional opportunities.

[Andrew Bird:]

And following up to both the Permian and Marcellus, should either of those probably very high quality growth projects move forward and be announced, thinking about financing, clearly a lot more visibility and flexibility after the recent actions. Would it -- would your estimation that you don’t need capital markets or equity capital markets issuance over the next number of years still hold true if you're able to move forward with a bigger ticket or medium ticket high quality project?

[Robert Halpin:]

Hey Andrew, this is Robert, and the answer that is yes. We still would believe that, I think a lot of our strategic plan here is to eliminate any potential need for capital markets access even in light of some of the growth opportunities we see around our portfolio. As you'll recall for the Delaware Permian specifically, we continue to work with our potential partner First Reserve there around the financial structure. They completely mitigate and structures towards bridging for the build-out stage for Crestwood until we get volumes up and running as we face that project in and then in the Northeast with our built-in partnership with Con Edison, obviously we’re in a 50-50 structure and based upon the position of our balance sheet the position of our retained cash flow etcetera, we still believe that we would not have any need for capital markets in light of those two opportunities.

[Andrew Bird:]

Great. And then final question doesn’t get talked about much anymore, but on Tres Palacious I wish to have a brief update on the outlook there into the summer with some of the changes in the Texas gas market and then how you see performance there into 2017 and maybe thereafter with LNG and Mexico exports really ramping up?

[Heath Deneke:]

Sure. This is Heath again. I will touch on that real quick and I think we have seen improving spreads at our Tres Palacious facility. Largely we have a seen a fairly steep decline in Eagle Ford gas production, which has kind of helped put the market in a little bit more of a scramble to access gas particularly for on peak burns. So, I think we're on track to our original underwriting and plans as it relates to what to expect in 2016 and 2017. When you get out to 2018 and beyond, we continue to be very optimistic about the LNG story. We have connections in place with or being developed now for the Free Port LNG terminal as we as we have some potential opportunities around the Corpus Christi area as well with LNG export facility. So I think we're on track. We're starting to have more meaningful discussions with the LNG off takers there as they start lock again or certainly developing their reach for gas supply to serve those facilities and certainly will need storage both injectivity as withdrawal capability to augment the LNG operation. As it relates to Mexico again, we continue to see projects getting done on the Mexico side of the boarder for the repowering across the country and again Tres Palacious is positioned as the Southernmost facility that has access to provide much needed balance and services as that power generation demand comes online. So, I think the kind of a continuation I think of the field as we looked back in 2014, 2015, we saw some improvement on the horizon and we're starting to see that materialize.

[Andrew Bird:]

Great. Thanks for the color and thanks for taking my questions.

[Robert Phillips:]

Thanks Andrew.

[Operator:]

Thank you. The next question is from J.R. Weston of Raymond James. Please go ahead.

[J.R. Weston:]

Hi, good morning.

[Robert Phillips:]

Good morning.

[J.R. Weston:]

You mentioned historically weak demand this winner in the prepared commentary and just as we look to the 2016, 2017 winter, just wondering if there is anything more you could provide that kind of quantify the weather impact from last year, just some color on how it would impact both S&T and supply and logistics on a year-over-year basis.

[Robert Halpin:]

Well, let me let Heath handle the S&T because that’s really a function to lack of demand, low absolute pricing and low spreads across storage and transportation assets up in the Northeast and then Gautreaux, if you'll handle the NGL side and talk about the impact that lack of demand had on our propane, butane and our trucking transportation business Heath?

[Heath Deneke:]

Yeah, so a couple things real quick and I’ll keep it simple on my S&T front. As you know most of our contracts up there are firm take or pay style agreement, but we do have a nice optimization business that really is there to create a market in and around our storage and transportation assets. And I think what we saw with the combination of low basis as well as lack of weather, we didn’t see the typical demand upticks if you will that would have created little more volatility in that marketplace. So I think this was as everyone knows, we had a very low heating degree day when you look at both the fourth quarter of '15 as well as the first quarter of 2016. So a more normalized winner we think, we would continue to see the optimization book if you will continue to produce more favorable results. So, I think a normal weather again we would have seen probably a significant pick up. The other thing I would just touch on real quick is really on the throughput side. We do have some commodity charges that we get in addition to the firm demand charges that receive and I think our throughput on the pipeline systems were somewhat depressed as well again given that there wasn’t much of a market. So the combination of our Hub services if you will and the commodity charges on our pipeline systems were down as a result of the lower weather.

[J.R. Weston:]

Okay. Joe you want to tackle NGLs during the winter?

[William Gautreaux:]

Yeah, Bob. So we saw degree days down I think about 17% overall versus historical averages and some of those degree days are coming in the shoulder months, which really don’t impact heating demand. So I think the retail propane sector really experienced volume decline even greater than that degree day percentage number. When we look across our platform, different segments of it, but broadly speaking, we saw our volumes up 20% to 25%, but the other impact that low demand has on the spreads that the NGL basis environment is that you get lower volumes from lower demand, but you also get lower margins and you really get impacted margins across all your volumes, not just the reduced volumes. And so clearly, pretty mild winter by our standards really unlike something we’ve seen long, long time.

[J.R. Weston:]

Okay. That’s great. Thank you for all the helpful color there. Just another question switching gears, so the first quarter is a pretty good quarter for Marcellus volumes and one of your major customers has recently increased their 2016 production outlook and you talked even on the call today about the importance of the Stonewall line. So I just wondering as you're looking at the cadence of the trajectory of 2016 volumes and then into 2017 volumes would your customer duck backlog if there is any kind of update there?

[Robert Halpin:]

I guess you're specifically asking about the Marcellus?

[J.R. Weston:]

Yeah, that’s right.

[Robert Halpin:]

Yeah, I think frankly in our guidance we don’t have any new drilling or completion activity, largely due to an expectation that we're going to continue to have low gas prices in that particular area that Woods. So I think that’s pretty much what we have baked into the plan for 2016. I think when we get out to 2017 and 2018 with corresponding increases in gas prices as currently evident in the script, we’re optimistic that not only will Antero complete the 22 docks that are waiting -- already connected to the system just waiting on completions that we can start to see potentially some incremental rigs get allocated to the area.

[J.R. Weston:]

Okay. That’s great. And then I guess just a follow-up there, there has been a lot of chat around the first quarter conference call about an NGL price recovery and just wondering what geographies you think you would first see the opportunity for call it maybe upside to the currently expected volumes in the GMP segment, just anything as far as how you would address that topic?

[Robert Halpin:]

Will.

[Will Moore:]

Yeah, I think -- so I think part of the encouragement on NGL prices is what we’re seeing in the flattening of the supply curve and then the expected ramp up of petrochemical demand and PDH units both domestically and internationally. We're also starting to see some constraints on ethane getting where it needs to get in the Gulf Coast and then you’re starting to see increases in ethane imports. And so that also is driving the concept of maybe stronger liquids prices because that will cause propane and butane as alternatives to be looked at more closely. Where that happens I think it will start in the Hubs I think so that helps gas processing economics to some extent, but you really got to factor in the bases as well and what the gas takeaway is in that particular basin. And so I think it’s hard to predict exactly how higher NGL prices will impact gas processing in certain basins, but generally it should be constructive forward.

[J.R. Weston:]

Okay. Great. Thank you. That’s all I had.

[Will Moore:]

Thanks J.R.

[Operator:]

[Operator Instruction] And the next question is from Selman Akyol of Stifel. Please go ahead.

[Selman Akyol:]

Thank you, good morning. Just couple quick ones. In the Barnett can you guys talk about the uplift in volumes from the capital that you've invested as well as lower operating pressures that are at the well Hub and just what you see there in terms of flow through?

[Heath Deneke:]

Yeah, this is Heath. I will comment on that now. As it relates to the West Johnson County project that we mentioned, we’re continuing to lower field pressures down and we have seen some noticeable increases to the tune of $10 million a day plus, but we’ve got more room to go as we continue to bring volumes down. On the Bluestone side of the equation as we mentioned, there was significant amount of shut-ins that occurred over the course of 2015 and upwards of close to $60 million a day and we saw a good chunk of that come back online during the first quarter and expect I think we've had about 75 new well or 75 previously shut in wells that have been turned back on over the past few weeks. So ultimately we're expecting to see the lion's share of that volume that was shut in come back online by the second quarter.

[Selman Akyol:]

Got you. And then just really one another. In terms of just your CapEx, it seems like you've already done most of it for the year, but can you just talk about where the rest of it would be invested for?

[Heath Deneke:]

Yeah absolutely, we've got, as we've guided $50 million to $75 million of annual capital for the year and as you commented a lot of that was spend in the first quarter and I think your comments are correct and that is that we don’t have much more if any to go through the balance of the year. In terms of allocation, yes we commented on the Delaware Permian expansion project around Willow Lake that Heath mentioned too. That’s been the vast majority of what we spent to date and seeing good results there in the early stages of having that new processing capacity in service. In terms of incremental expansion we've got a couple items that we've talked to previously. We have some expansions to our water system in the Bakken assets that we'll be finalizing over the next couple of months. Really that’s the lion's share of what we'll spend for the balance of the year as we get some uptick in water volumes on that system through the balance of 2016.

[Selman Akyol:]

Alright. Thank you very much.

[Operator:]

Thank you. There are no further questions at this time. I would like to turn the conference back over to Mr. Phillips for closing remarks.

[Robert Phillips:]

Thanks operator and thanks to all of you for joining this morning. We got through pretty quickly on this. Again we’re very pleased with our quarter and pleased with all of the accomplishments that we have put on the Board since the first of the year. \ So let me say on behalf of the Management Team, First Reserve and the Board of Directors, we've really been fighting hard over the last several quarters to put a comprehensive plan in place that would deal with all of the issues facing Crestwood and the industry in general as opposed to incrementally trying to offer solutions from quarter to quarter as we as a industry deal with this lower for longer environment. We think we've absolutely done that here in the first quarter of '16. This is a real turning point for Crestwood. So as we finalize these steps to reposition the partnership over the next several months, we think we have largely removed the clouds over Crestwood and now we can finally get back to business, get back to work and execute on the numerous opportunities that are around the assets in the areas that we operate. We still believe we have a great portfolio. We're not getting a whole lot of credit for the long term growth potential, but we will as we kind of turnaround from playing defense, which we have for the last year and a half to finally getting a chance to play offence. Now importantly, we still have contracts in our portfolio that are rolling off that need to be extended or need to be renegotiated, but everybody in the industry has those type contracts and it's not unique to Crestwood. We've got good effective, aggressive business development and commercial teams and we are making progress with as we do every year with renegotiating contracts that are coming due or coming up for renewal. But most importantly, the management team finally gets to go back to work and focus on growing the partnership with the confidence in our ability to finance projects both on our balance sheet, but also with the help of First Reserve, our controlling partner and we're excited about the strategic importance that a great partner like Con Edison brings to our best asset and our best growth area been the northeast. So with that operator thank you for moderating today and thank all of our investors for joining in. We're very excited about the direction that we're headed with Crestwood and that we hope that many of you have resolved some of the issues that you've had with the company and happy to answer any questions offline if you want to give the Investor Relations team a call and plug in on additional information. So thanks again and hope everybody has a good day. Thank you.

[Operator:]

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.