Martin Midstream Partners L.P.
Q1 2014 Earnings Call Transcript

Published: 1 May 2014

[Operator:]

Good day, ladies and gentlemen, and welcome to the Martin Midstream First Quarter 2014 Earnings Conference Call and Webcast Information. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to hand the call over to Bob Bondurant, Chief Financial Officer. Sir, the floor is yours.

[Robert D. Bondurant:]

Okay. Thank you, Nicholas. And to let everyone know who's on the call today, we have Ruben Martin, who's our President and Chief Executive Officer; Joe McCreery, who's our VP of Finance and Head of Investor Relations; and Wes Martin, VP of Corporate Development. Before we get started with financial and operational results for the first quarter, I need to make this disclaimer. Certain statements made during this conference call may be forward-looking statements relating to financial forecasts, future performance and our ability to make distributions to unitholders. We report our financial results in accordance with Generally Accepted Accounting Principles and use certain non-GAAP financial measures within the meanings of SEC Reg G, such as distributable cash flow or DCF; and earnings before interest, taxes, depreciation and amortization or EBITDA; and we also use adjusted EBITDA. We use these measures because we believe it provides users of our financial information with meaningful comparisons between current results and prior reported results, and it can be a meaningful measure of the partnership's cash available to pay distributions. We also included in our press release issued yesterday, a reconciliation of EBITDA, adjusted EBITDA and distributable cash flow to the most comparable GAAP financial measure. Our earnings press release is available at our website, www.martinmidstream.com. Now I would like to discuss our first quarter performance. For the first quarter, we had adjusted EBITDA of $38.8 million compared to the fourth quarter EBITDA of $38.6 million. Our distributable cash flow or DCF for the first quarter was $21.5 million, a distribution coverage of 1x. This coverage ratio does not include any IDR payments to the General Partner as we have suspended IDR payments until a cumulative suspension of $18 million is met. And at March 31, our cumulative suspension amount was $11.9 million. As we previously disclosed on our previous earnings call, our first quarter DCF was negatively impacted by heavy maintenance capital expenditures in the quarter as a result of our lubricant refinery turnaround and acquired coast guard offshore vessel dry dockings. Total first quarter maintenance capital expenditures and turnaround cost were $6.5 million, and we continue to forecast approximately $17 million to $18 million of maintenance capital expenditures in 2014, of which 2/3 should be spent in the first 6 months. Now I would like to discuss our first quarter cash flow by segment compared to the fourth quarter of 2013. In the Terminalling segment, our first quarter EBITDA, which is defined as operating income plus depreciation and amortization, but excluding any gain or loss on sale of assets, was $18.1 million in the first quarter compared to $15.9 million in the fourth quarter '13. Our specialty terminals cash flow was $13.4 million in the first quarter compared to $10.4 million in the fourth quarter of '13, an increase of $3 million. Between these quarters, we had an increase in cash flow in our lubricants packaging business of $1.4 million, an increase in cash flow at our Corpus Christi crude terminal of $0.7 million, and an increase in cash flow at the Smackover refinery of $0.6 million, and an increase in cash flow from our legacy specialty terminals of $0.3 million. Lubricant packaging business returned to a normal cash flow in the first quarter when compared to its weakest seasonal quarter, which is the fourth. The increase in cash flow at our Corpus Christi crude terminal was the result of having our dedicated marine dock operational for the entire first quarter. As a result, our throughput volume increased 20% to over 140,000 barrels per day. Although our Smackover refinery was down for 55 days in the first quarter due to our turnaround, cash flow was actually up due to required minimum throughput fees which were paid, and lower variable operating cost due to the turnaround downtime. This, of course, is offset by actual turnaround costs that were capitalized in the quarter, which negatively impacted our DCF. The refinery restarted in early April and achieved its capacity production of over 7,600 barrels per day on April 8. On the shore-based side of the terminal business, EBITDA was $4.7 million in the first quarter compared to $5.5 million in the fourth quarter of 2013. This decrease in cash flow was a result of normal repair and maintenance costs in the first quarter when compared to minimal repairs and maintenance costs in the fourth quarter of 2013. Looking towards the second quarter, overall terminal cash flow performance should be slightly improved when compared to the first quarter. In our Sulfur Services segment, our cash flow was $11.2 million in the first quarter compared to $8.4 million in the fourth quarter of '13, an increase of $2.8 million. Our fertilizer cash flow was $7.4 million in the first quarter when compared to $3.4 million in the fourth quarter of '13. This increase was anticipated as the first and second quarters are the highest seasonal demand periods in the fertilizer business due to the timing of farmers planting crops. Buy-ins between the first and fourth quarters increased 71%, and margins improved 17%. Generally speaking, farmers have had to delay planting in the Midsouth and Midwest due to this year's colder and wetter weather patterns. Because of this factor, we believe that additional cash flow we were anticipating in the first quarter will transition into the second quarter. As a result, we anticipate a strong second quarter in the fertilizer business. On the pure sulfur side of the business, cash flow was $3.8 million in the first quarter compared to $4.9 million in the fourth quarter of '13. Our cash flow in the first quarter was down when compared to the fourth, as we had our molten sulfur offshore tow-in drydock for the month of March. This tow came out of drydock in early April. Looking forward, the second quarter should reflect our cash flow performance in the first quarter on the pure sulfur side of the business. In the Natural Gas Services segment, we had cash flow of $9.1 million in the first quarter compared to $12.7 million in the fourth quarter of '13. The decrease in cash flow was primarily in our refinery-grade butane business, as refineries began to transition away from butane demand in March due to regulatory blending requirements that begin every year on April 1. This drove our overall NGL volume down approximately 5%, and our overall NGL margins down 16% when compared to the previous fourth quarter. Looking forward in the second quarter, our Natural Gas Services segment will face a seasonal decrease in cash flow as the demand for refinery-grade butanes will end and not pick up again until late September. During this period, we will be purchasing refinery-grade butane supply and transporting a significant portion of it to storage. As a result of this process, we will see inventory and working capital building this segment through the second and third quarters. In our Marine Transportation segment, we had cash flow of $4.5 million in the first quarter compared to $6.3 million in the fourth quarter of '13. The decrease in marine cash flow was primarily attributable to the offshore side of the business as we had our offshore NGL tow going to drydock in late February. This tow came out of drydock on April 22. We also had a crude oil offshore tow going to drydock in late March. We anticipate this still will come out of the shipyard in mid-May. Now looking forward to the second quarter, we anticipate Marine cash flow to be slightly less in the first quarter due to our crude oil offshore tow being out of service for half of the second quarter. Our unallocated SG&A cost were $4.7 million in the first quarter compared to $5.6 million in the fourth quarter. In the fourth quarter, we expensed the acquisition due diligence costs on 2 failed acquisition opportunities. Looking forward, our unallocated SG&A cost should average between $4 million and $5 million on a quarterly basis. In addition to our 4 business segments, we own a 100% of Redbird Gas Storage, which now owns a 42.2% interest in Cardinal Gas Storage. And for the first quarter, we had distributions from Cardinal of $0.2 million, the same as the fourth quarter. Also, our $15 million preferred stock investment in Martin Energy Trading, an affiliate of our general partner, yielded a distribution of $0.6 million for both the first and fourth quarters. We anticipate receiving distributions from this investment of $2.3 million in total in 2014. Now I would like to turn the call over to Joe McCreery, who will speak about liquidity, capital resources and recent partnership activities.

[Joe McCreery:]

Thanks, Bob, and good morning, everyone. I'll start with our normal walk through the debt components of our balance sheet and our bank ratios, I will then highlight some of the partnership's financing growth and another activities during the quarter. I'll keep my remarks brief this morning so we can get to Q&A. On March 31, 2014, the partnership had total funded debt of approximately $644 million, this consisted of approximately $424 million of senior unsecured notes and $220 million drawn under our $637.5 million revolving credit facility. Thus, the partnership's available liquidity on March 31, 2014 was $417.5 million. For the second -- I'm sorry, for the first quarter ended 2014, our bank-compliant leverage ratios defined as senior secured indebtedness through adjusted EBITDA and total indebtedness through adjusted EBITDA were 1.85x and 4.63x, respectively. Additionally, our bank compliant interest coverage ratio as defined by adjusted EBITDA to consolidated interest expense was 3.24x. Looking at the balance sheet, our total debt to total capitalization at March 31 was 71.5%. Now looking at a comparable year-over-year balance sheet after adding back $54.1 million equity impairment related to the mineral gas storage write-down to partner's capital, which is taken on December 31, 2013, our debt to capital would have been 67.5%, which is slightly improved from year end 2013, as working capital associated with our NGL business fell during the quarter. In all, at March 31, 2014, the partnership was in full compliance with all banking covenants, financial or otherwise. Now reconciling our current outstanding indebtedness from quarter end March 31, 2014 to today, our current net revolver balance is $240 million borrowed and creating available liquidity of $397.5 million. This higher outstanding revolver balance reflects incremental borrowings associated with our debt retirement in early April, which I will describe momentarily. Next, let's discuss capital raises during the first quarter of 2014. As we mentioned during the last call, we added $100 million to revolving credit facility, increasing our total commitments to $637.5 million. We believe this incremental liquidity provides additional flexibility as we execute our payment finance. Likewise, we view the current bank market as a favorable source of capital for potential acquisition scenarios. That being said, it is likely we will continue to access that market by increasing the size of our revolving credit facility before year end 2014. On the equity side of the balance sheet, we officially commenced our aftermarket issuance program in early March. The Partnership successfully placed units on 12 trading days during the first quarter for total net proceeds of $5.3 million. Although the effectiveness of this program is largely dependent on the daily float of our MMLP units, we are pleased with the early results of the ATM, and continue to believe the program will be a helpful tool in the ongoing management of our balance sheet. Next, I'd like to discuss some of the debt refinancing activities that took place in the early second quarter. On April 1, we redeemed, at our option, all of the remaining $175 million of 8 and 7 senior unsecured notes due in 2018. We utilized our revolving credit facility to fund the redemption and the prepayment premiums required to complete this optional redemption. That amount was approximately $183 million. Associated with the early redemption of those notes, the partnership will be subject to noncash expense charges of approximately $3.9 million, which includes $2.7 million of deferred debt costs. These charges will not impact distributable cash flow in the second quarter. Now let's move to growth initiatives. First, I'd like to provide a brief update on the previously announced intention to construct a crude oil condensate splitter in the Corpus Christi market. Our project continues to move forward. We remain in substantial negotiations with our proposed partner, who is the sole customer of the project, to provide 50,000 barrels per day of splitting capacity for a minimum 5-year period. This contract will be take or pay and provide stable fee-based cash flow to MMLP. We remain optimistic that we'll be in position to announce a formal agreement with that customer in the next 90 days. On the corporate development side, we continue to be very active in our pursuit of multiple potential opportunities. Acquisition deal flow has remained robust in the first 4 months of 2014, continuing last year's trend. We continue to see potential opportunities in all segments and while some valuations have gone beyond our reach, we believe that we can meaningfully grow the partnership through continuous support from MRMC and Alinda. There are some unique opportunities out there that we like, and both MRMC and Alinda are aligned in supporting the growth of MMLP through transaction support, if and when necessary, or through potential drop-down scenarios. As we've said before, there's no timetable obligation for drop-downs and that continues to be the case, however, we have begun preliminary high-level discussions with Alinda regarding certain drop-down scenarios and we look forward to working with them to develop those potential opportunities. And finally, the Partnership was pleased to announce our 6th consecutive quarterly distribution increase last week. Again, modest in size, our Board of Directors approved a $0.0025 or $0.01 annualized distribution increase, reflecting our positive view of the business during the first quarter where we exceeded our projected level of DCF and our outlook going forward. Nicholas, that concludes our prepared remarks this morning. We'd now like to open the lines for Q&A.

[Operator:]

[Operator Instructions] And our first question comes from the line of Edward Rowe with Raymond James.

[Edward Rowe:]

At the Analyst Day, you guys discussed a little bit about the potential drop-down of Arcadia terminal, could you provide some updates around that?

[Robert D. Bondurant:]

Yes. This is Bob. We are -- the plan -- the board has approved that drop-down. It's going to be executed sometime in May, I believe. Well, I can disclose the amount, I think, I can do that at this time, it's about $7.5 million. And then, we -- the rail rack is going to be developed, it's been approved by the board and that will be executed as well. So 1 year build out. And Ruben, would you like to make some make comments about it?

[Ruben S. Martin:]

Well, the 2 were drop-downed -- it was drop-downed conjunction with the approval of building up a rail unloading facility at Arcadia that will allow us to take different types of butanes from different parts of the country into that storage facility, unload them, retain them during the summer, ship them back out in the winter by both truck and rail. So it gives us a lot of flexibility on that system over there. We will have multiple wells that will be able to take in non-faradaic types of butanes, pure, high purity, low sulfur, normal butanes, propane that we've been doing for years over there. And anything we can mix and match that's going to help us in our butane optimization program that we have around the country. So it's really just an add-on to that system and it's all done in conjunction with rail -- building out our rail facility.

[Edward Rowe:]

Okay. And so you mentioned that the drop-down is $7.5 million, and then, how much would be the build out for the rail?

[Ruben S. Martin:]

It's probably around 15.

[Edward Rowe:]

15. Okay. All right. That's helpful. And just a couple of questions, modeling questions. In terms of the maintenance CapEx, and obviously, the marine segment, you targeted around $17 million to $18 million in maintenance CapEx for the year, is that inclusive of the $2.2 million in the turnaround expenses this quarter?

[Robert D. Bondurant:]

Yes, it is. And total turnaround expenses, that's $17 million to $18 million, total turnaround expenses are going to be about $4.5 million. So we had another $2.2 million that will roll through in the second quarter. So of the $18 million approximately, these are all top of my head, about $4.5 million is turnaround, and probably $5 million to $6 million is marine costs. And then, in the sulfur division, you had a marine turnaround that will probably be -- that was probably $1 million, which hit this quarter.

[Edward Rowe:]

Okay. That's helpful. And just noticing in the 10-K, there's some, like Doc 193 and a few contracts that may be reaching the end of its term, do you guys anticipate being able to recontract that or recontract that even at a higher rate given tightness in some of the markets?

[Ruben S. Martin:]

I'm not sure. Are you talking about like at Corpus Christi?

[Edward Rowe:]

Yes.

[Ruben S. Martin:]

Okay. No, that contract was extended, we added 3 new tanks, and then we added another dock to decongest our existing dock facility. So we've been able to put more throughput through there. But no, those contracts for that Corpus Christi terminal are long-term contracts.

[Joe McCreery:]

As I was understanding, you're referring to 1 of the fuel terminals, Doc 193 is one that we acquired in the Talen field. And relatively, I don't know what the status of that one is right now, but I know, in terms of the overall contributor of cash flow, it's a very, very, very small piece of the overall pie.

[Robert D. Bondurant:]

Really, just a substitute, we were substituting another facility to take care of that business. It was more of a merger, to consolidate.

[Operator:]

Our next question comes from the line of Ethan Bellamy with Baird.

[Ethan H. Bellamy:]

With respect to Redbird, do you guys -- where do you think Monroe Gas Storage will shake out in terms of recontracting? And how does the recontracting environment as a whole look right now?

[Wes Martin:]

Yes, this is Wes, I'll take that. We're -- obviously, I guess, April 1 is really sort of start of the season, if you will, and I think, we're in discussions on that. The only sort of comment that I can give you there is that, at least, I think, with the cold winter, people are actually interested in storage again. Does that mean that rates are going to go through the roof? No. I think, that's not what we're seeing per se. But I think there's a little bit more interest this year, if you will, in gas storage, in general, given the really cold winter and some concerns, I think, overall, with respect to the ability to inject over the summer to get back to where we were previously. So I think there's a little bit -- there's a slight undercurrent, if you will, of people that are interested in gas storage again. But overall, do we think that's going to materially change the picture there in the short run. Right now, we don't think so.

[Ethan H. Bellamy:]

So not as poor as last year, but not great?

[Wes Martin:]

Yes.

[Ethan H. Bellamy:]

okay. With respect to Martin Energy Trading, could you talk about how that business is performing? And if there is any chance that the partnership will end up owning more of that?

[Joe McCreery:]

This is Joe, Ethan. Martin Trading is owned by MRMC or an affiliate of MRMC. There are no current plans or contemplated plans to drop that down. They do have their own capital structure, working capital inventory credit facility in place. And they've had a very good winter. As you might imagine, there's been a lot of volatility in the price dynamics. So from that perspective, I think, the partnership is very pleased with its investment. And what they're really doing is rolling up their retained earnings and trying to have a bigger capital base to continue to grow that platform. So currently, that's the initiative there, is growth at the MRMC level.

[Ethan H. Bellamy:]

Okay. One last one. With respect to what Alinda could bring to the table in terms of asset values for drop-downs, could you give us some benchmarks for what that asset value might be and duration of how long -- what does the window look like in terms of moving the assets in?

[Wes Martin:]

Yes, I'll answer your second question first. I think with respect to timing, I think this is the first time, I think, that we've really sort of begun any discussions with respect to, even big picture-wise, talking about drop-down. So we're in the early stages of that. I can see something happening probably, let's say, over the next 6 months. But again, don't want to bound ourselves by that timeframe. With respect to valuations, I think there's multiple assets at that level. Some of them, I guess, you can do some diligence and dig in to some filings and such with such things like the rig partnership to get a feel for what the size of those are. But there's other contractual provisions in place with respect to that. That, that asset may or may not ultimately be able to end up in our partnerships. So the size, on a collective basis, between the various assets, it is -- I don't want to get into specific numbers at this point, but it is substantial relative to our existing size and it would be a meaningful -- any transaction we do with them would be of meaningful size.

[Operator:]

Our next question comes from the line of TJ Schultz with RBC Capital.

[TJ Schultz:]

Joe, maybe just following up on that last point on kind of discussing, I guess, the first time preliminary discussions on the drop-downs. Just trying to get what the takeaway is here. I mean, is there any read through? You mentioned kind of increasing valuations on some of the acquisitions you're looking at. Is there something where we should look now at drop-downs kind of being the first opportunity to leverage the Alinda relationship? Or just still how active are you kind of on deal flow that's coming through?

[Wes Martin:]

Yes, this is Wes. I'll take that. In terms of that being the first, I think, the answer to that is no. I don't think that's something that would be the first work. As Joe mentioned, we continue to work various opportunities. We think that we've got a good shot at maybe 2 or 3 that might be strategic to us. And I think, we've generally had discussions at the board level on those acquisitions, as well as at management level. And we continue to be positive in terms of outcome of those. So I would say any sort of drop-down transaction would probably have to happen after sort of, well, let's just call it third-party asset transaction.

[TJ Schultz:]

Okay. Good. On the AGM, do you have any goals on leverage improvements to accomplish through that program? And if you just comment around the 4 6, I think, was the debt leverage now. Will you see that trending in '14? And then, if you look to improve leverage more meaningfully in conjunction with some type of transaction, where would you like to kind of shakeout following that?

[Joe McCreery:]

Yes. Sure. This is Joe. The program has been helpful. Obviously, we're realistic about our ability to use that, given our overall float in the 50,000 to 60,000 units a day kind of range. So we're range-bound there. But nonetheless, from a target perspective, I think we continue to want to work on our balance sheet and get below 4.5x. I think long term, sustainable target would be 4.25x, and that's kind of where we've been with the rating agencies from a corporate rating perspective. So we've got some work to do there. I still hold out for extra transaction, transaction that would take us to the equity market. And I think, given the success -- likely success, I think, of the corporate development team, that will be sooner rather than later. But nonetheless, from a long-term perspective, we're going to continue to manage the balance sheet and really try and achieve below 4.5x.

[Operator:]

Our next question comes from the line of Michael Blum with Wells Fargo.

[Michael J. Blum:]

Just 1 more question on the drop-down. You guys did a really good job at the Analyst Meeting kind of outlining all the various assets at Alinda, and what could or could not likely make it and could MLP over time. Is this -- from what you're saying today, is that different from what you were saying at the Analyst Day or should we just still think of it in that way and maybe this is just more an indication that perhaps one of those could start moving in the next 6 months or later?

[Wes Martin:]

Yes, I don't think the outlook is any different, Michael. I think, we're just saying that those -- from a privatization or wish list, kind of desired list of assets we'd like to own. I don't think anything has changed there. I think, we're just saying now that those conversations have begun. And in the first quarter or 2 with Alinda we were so swamped with third-party acquisitions. As we mentioned, we continue to be busy with those. But I think, also, realistically, we're looking at some Alinda activities. So just a change of momentum, I would say.

[Operator:]

Our next question comes from the line of Andrew Burd with MLV & Co.

[Andrew Burd:]

Given the recent ramp up in Corpus Christi throughputs, how should we think about a run rate going forward for existing operations there? Should be there be a significant acceleration over the roughly 164,000 barrels that you released during the Analyst Day? Or are we kind of there right now?

[Robert D. Bondurant:]

I think the 140,000 was a little lower than what we're anticipating because there was a lot of fog, believe it or not, in January. So I think, a better run rate kind of 150,000 to 160,000 barrels a day on average kind of throughput.

[Andrew Burd:]

Okay. And back to Redbird, kind of timing aside, how should we think about post refinancing distribution levels that you received, especially given the write-down of Monroe? Is there kind of an indicative range you're thinking about? I realize there are a lot of variables at play.

[Wes Martin:]

This is Wes. Yes, it's exactly right. There are a lot of variables in play. I think the key thing that we've got to get a handle on with respect to any distributions coming out of that investment will ultimately be some sort of cardinal level refinancing. That's obviously not in the cards right now. There's some other things going on that we can't discuss that are happening that are partner level type issues that are -- not issues in the negative sense, just sort of things trying to take place that -- it will happen here probably over the next, call it, 3 to 6 months, that will help us set the course for timing. So right now, with respect to where we stand on that, I think, the assets are performing. If you guys will recall, in past conversations, there's a lot of -- substantial piece of that is under long-term contracts. You've got 50-plus BCF with the vast majority of them under long-term contracts. So they're performing and they're cash flowing and we continue to see that cash flow that's going to pay down the debt at those subsidiary levels right now. But I think, over the next 6 months, we'll have a better handle on the plan in terms of going forward and the timing with respect to refinancing and essentially unlocking those distributions to flow up.

[Operator:]

[Operator Instructions] Our next question comes from the line of James Spicer with Wells Fargo.

[James Spicer:]

Most of my questions have been answered, but just on CapEx here, I think that your guidance was, for organic spending this year, was $50 million to $60 million. In light of the Arcadia drop-down, the rail facility you just mentioned, the condensate splitter and other things out there, can you just review where you are today just in terms of what's been authorized and then really what the potential is for the rest of the year?

[Joe McCreery:]

Yes. James, this is Joe. I think, from an authorization perspective, we're still in that range in the kind of $60 million, plus or minus, included the completion of the Corpus Christi crude terminal tanks 7, 8, and 9, which are coming online now. So we've got that behind us. And there's been no further authorizations from the board really with respect to final spends on split or any other organic projects. We're kind of still in that same range. As we kind of mentioned, we thought -- at Analyst Day, we thought that by the second half of the year, we'd probably bring some more projects to the board but we haven't done that at this time.

[James Spicer:]

So just on the condensate splitter then, if you're able to announce the transaction over the next 90 days, as you indicated, along the same -- along those lines, what do you think the potential spend on that will be this year?

[Joe McCreery:]

Yes, it's in my understanding that's probably back-end loaded. And you're talking about a 2-year build on that project, is that fair, Ruben?

[Ruben S. Martin:]

It would basically be involved in some permitting of some land development and a lot of engineering. So it's probably in the $20 million range by the time you start the ball rolling for this year. And then, it ramp up, of course, in '15.

[Operator:]

And we have a follow-up from the line of Ethan Bellamy.

[Ethan H. Bellamy:]

Ruben, I want to climb the mountain and ask my 1 question to the sage for the year with you, which is where do you see the chess match ending up with the condensate splitters at Corpus? And is there room for you and the Magellan project there? And then, does that put you in a position to potentially add another splitter down the road if they are there as well?

[Ruben S. Martin:]

Don't forget, the caveat was I'd get a big check whenever you ask those questions.

[Ethan H. Bellamy:]

All right. Maybe I should retract that question.

[Ruben S. Martin:]

I believe that, as we're seeing now, we're actually seeing a lot of crude oil hit in certain areas that we knew would be in an oversupply situation. And I think we're seeing that now as we've seen some of the builds in inventories, we've seen some of the relationships with Brent and LLS come to positions that show a build in inventory in all these locations. So the answer is that there's still, when you look at the announcements that are in Corpus, there's still more condensate that's available. It's been going some different directions but it's trying to make its way out of Corpus now and continue to make its way out by vessel. So I think you'll always have part of the lighter condensates go out. We're also seeing some really lighter -- we're seeing 55-plus gravity stuff that's out there right now that people are still having trouble moving into the markets that are most convenient for them. So the answer is yes. There seems to be plenty of room for -- what has been announced, there still doesn't seem to be enough capacity to handle the lighter products that we've -- lighter condensates that we've seen down there. And in the long run, I just don't know what's going to happen to that product, but it has to find a home somewhere.

[Ethan H. Bellamy:]

So to that end, we have this looming oversupply situation on the Gulf Coast for just about everything. How do you think that's going to shake out in the crude oil market? I mean, what -- from a big picture perspective, where do you think prices are going to head and is that going to push back on production at some point?

[Ruben S. Martin:]

I never make predictions on prices because you know who does is always wrong. But I think it's still going to be driven by the world. And so when you look at the local crudes, and when I say local, I mean, the U.S. crudes, they're going to gravitate towards the refineries that are best able to process that particular gravity of crude. It's still going to be driven by the world type pricing, and I think, that's where -- there's going to be a lot of talk about exporting crude oil in the next 2 to 3 years. I believe it's -- they're very difficult to get that through the current regime.

[Operator:]

I'm not showing any further questions in the queue. I would like to turn the call back over to the speakers for any closing remarks.

[Joe McCreery:]

Real quick. This is Joe. And I just want to give a little bit of modeling guidance of 1 subsequent event pertaining to our balance sheet. I think it's important from an interest expense perspective. One thing we did do, as you're all aware, we did a follow-on notes offering on April 1 to our $250 million senior unsecured notes due in 2021. So that effective offering or issuance now, is $400 million. And then, on the same day, we actually swapped $200 million of that $400 million back to floating to get a positive carry of about 2%. So we're expecting out of that swap or hedge about $2 million -- I'm sorry, about $4 million annually of net interest income that would offset interest expense. So I think that's important from a DCF perspective, I want to make that note.

[Ruben S. Martin:]

Okay. Well, thanks, Joe. I think as you look at what we did in the first quarter, we still feel like we had a good solid first quarter that exceeded our budgets in both the NGLs and in the marine. We're seeing the inland marine business is very, very strong. As I'm sure you're aware of the refinery utilization that's out there now, we're running at refinery rates that are getting close to historical highs and that's really helped the inland-type marine business be strong. We do have a lot of CapEx coming in that business. When you look at 2014, 2/3 in the first half of the year. So you'll see some differences there, but we're still on budget for CapEx for '14. We increased our distribution slightly again. I think it just shows that we're thinking about the future. We've got a lot of good acquisitions that we're working on in the hopper and even more importantly, to me, is we've got a lot of good organic growth in the hopper that we're starting to work on and working on permitting and everything. We all know what permitting has done to us in the last year or 2, it's massively slowed down our business. I think we've talked about it at the investors conference. But anyway, we're real happy with the way things are running, turning out and looking forward to the future. And with that, we thank you for your time.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day, everyone.