EQT Corporation (EQT) Q3 2011 Earnings Report, Transcript and Summary

Good morning and welcome to the EQT Third Quarter 2011 Earnings Conference Call. All participants will be in listen-only mode (Operator Instructions). After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Patrick Kane, Chief Investor Relations Officer. Please go ahead, sir.

Thank you Denise [ph]. Good morning everyone and thank you for participating in EQT Corp third quarter 2011 conference call. With me today are Dave Porges, President and CEO; Phil Conti, Senior Vice President and CFO; Randy Crawford, Senior Vice President and President of Midstream, Distribution and Commercial, and Steve Schlotterbeck, Senior Vice President and President of Exploration and Production. In just a moment, Phil will summarize our operational and financial results for the third quarter, which we released this morning. Then Dave will provide an update on our development programs and strategic operational matters. Following Dave’s remarks, Dave, Phil, Randy and Steve will all be available to answer your questions. The call will be available for replay for seven-day period beginning at 1:30 PM ET today, that phone number for the replay is 412-317-0088; you will need a confirmation code which is 447032. The call will also be replayed for seven days on our website. But, first, I’d like to remind you that today’s call may contain forward-looking statements related to the future events and expectations. You can find these factors that could cause the company’s results to differ materially from these forward-looking statements listed in today’s press release under risk factors in the company’s Form 10-K for the year ending December 31st, 2010 which was filed with the SEC and updated in our subsequent Form 10-Qs which are also filed with the SEC. Today’s call may also contain certain non-GAAP financial measures. Please, refer to the morning’s press release for important disclosures regarding such measures including reconciliations to the most comparable GAAP financial measure. So, with that I’d turn the call over to Phil Conti.

Thanks, Pat, and good morning everyone. As you read in the press release this morning, EQT announced third quarter 2011 earnings of $1.19 per diluted share. Adjusting for the gain on the sale of the Big Sandy Pipeline which closed as expected on July 1st EPS was $0.45 or an 88% increase over EPS in the third quarter of 2010. The Big Sandy transaction resulted in a $111 million after tax gain. Operating cash flow, excluding the impact of the Big Sandy Pipeline sale, increased to a $190 million for the 2011 quarter, or by 44% compared to the same quarter last year. The increase in cash flow comes as the result of another outstanding operational quarter including record production and midstream volumes and continued low per unit operating cost. As a result of the Big Sandy gain, the gain on the sale of our Langley natural gas processing complex earlier in the year and our growth in volumes and organic operating income, we have become subject to the alternative minimum tax or AMT in 2011 and because of that we have started to pay some cash taxes again in 2011, about $36 million through the first three quarters. Next year, assuming no additional transactions, we would expect to be back to be following the vast majority of our book income taxes. Other than that, the operating results this quarter are pretty straight forward and therefore my comments would be relatively brief. EQT production operating results. At EQT production, sales volumes continue to grow at a record pace, the growth rate in the recently completed quarter was 51% over the third quarter of 2010. That growth rate was driven by sales from our Marcellus play, which contributed approximately 44% of the volumes in the quarter, up from only 19% in…

Thank you Phil. Our team put up another great quarter. 50% growth in sales of produced natural gas versus last year is quite a feat. My congratulations to our production team, our midstream team, and our commercial team for producing these volumes, getting them to market, and selling them. These growth rates, we have experienced slightly, also played strengths on various of our functional group, everything from procurement, human resources, IT, in the front-end, to accounting, land administration and yes, legal as we move through the process of getting this gas to market and selling it. They are performing admirably and I am proud to be associated with this company as we execute against this growth strategy. Since Phil reviewed the quarter, I will dive right into an update on our midstream structure review, the only topic of my prepared remarks. Last quarter, I laid out a framework for our midstream strategy, in which we discussed three main options. The first was to sell our midstream assets and outsource our midstream needs. The second was to stay with the current model of building needed midstream systems and occasionally selling seasoned assets, most like to MLPs. We call this build, fill, sell and it did work this year. Our third option was to create our own MLP, with or without a partner. Since the last call we have been more clearly defining the midstream growth opportunity built around our extensive gathering and transmission assets in the Marcellus region. As a result of this and further study of our alternatives, we are currently focusing most of our efforts on two alternatives. We have concluded that the operational benefits of controlling the timing location and size of incremental gathering and Equitrans expansions provide value to EQT Corporation beyond the direct returns made from…

This concludes the comments portion of the call. Denise, can we please open the call for questions.

Absolutely, we will now begin the question and answer session. (Operator instructions). And our first question will come from Neal Dingmann of SunTrust. Please go ahead, sir. Neal Dingmann – SunTrust: Good Morning gentlemen. Say, just a bit of color on – maybe if you could drill down a little bit on – you have mentioned that your increases in the Marcellus cost just a bit to basically extend the laterals etcetera. Could you give us an idea of, you know, in terms of those cost breakdown and then on the Marcellus plans for next year? Well, most all those be with the longer laterals, additional fracs stages etcetera?

Neal, this is Steve. Specifically on the cost increases, I think what we're seeing mostly is a lot of for contracts that we put in place a year or two ago, I think we were able to get it below market prices. Some of those are rolling off and we're currently in the process now of putting in place new contracts with our suppliers and we're seeing some cost increases. The biggest one we're seeing is in our pumping services, which is looking at about 14% increase over what we have been seeing. Most of the other services are a little bit less than that, but still look like there's going to be an increase. So that's what's driving the cost increase for us. One thing that I do want to stress about the cost that we quote for our wells, the cost that the quote include the cost of building, the locations, to drill and complete the wells obviously as well as to install the production facilities and well lines. So that cost is inclusive of all the on-site activities that we do. So that's pretty much what's driving it.

Okay. And Steve are these the type of wells you mentioned, I think on prior calls about doing then a bit more of the –, I guess the new technique for lack of better word that you are really going to start doing a number of these wells. Is that the case for most of these more expensive wells?

Well, the 6.7 million per 5300 foot lateral is for our standard frac design, so not with the new frac design. I think as we put our capital budgets together in December, we will be –, well at that point we will disclose how many of the new frac design versus the standard we're likely to do next year.

Okay. And then just the last question, maybe over for David, you gave your commentary on sort of midstream strategic alternatives around that. Again, it does sound like, I guess, in opinion David has timing has or has not changed, I guess, around that is still just as probable of something you could get done?

The timing has not changed. The only thing I added on timing was the urgency for us in making a decision is to make sure that we were able to implement, by the time we get into next year.

Got it, got it. Thank you all.

I mean with these things you have to with all of them you have to make a decision and then there is a certain amount of time involved with implementing them and actually getting the from our perspective of course implementing meaning, getting the cash in the door.

Absolutely, absolutely. Okay.

And our next question will come from Scott Hanold of RBC Capital Markets. Please go ahead.

Good morning.

Good morning Scott.

Phil, you give a lot of color on the midstream options there. Just so I understand, right now you have got to two leading options, you know, one; you are obviously, you're potentially looking for a partner to help you develop that but EQT would still control and own a certain percent. The other option is still, I mean, do you still leave the door open for potentially looking at you are an EQT owned MLP to –

Absolutely. Those are the two that we are focused on.

Okay. And if you were to go sort of the EQT MLP routes, you know, how much control do you really need over that? I mean, is that a – you would be a 50% owner or how much do you think you would need to maintain that control?

Well, you folks can probably look at the existing circumstances where companies have MLPs and JVs and reaches reasonable conclusion about how those things work. And I wouldn't say anything that we would do and that type of area would be any different from what you normally observe.

Okay. Fair enough. And then moving on to the Marcellus well that you are drilling. When you talked last period about the (inaudible) for accessing, you indicated that you needs a little bit more time at the end of the year to really get the full evaluation of this. And I think, the first ones are now are probably just about a year old, I mean, can you get us sort of an update on how those are performing relative to sort of your standard frac type wells?

Yes, I can't give you much additional data because we are still gathering data and studying it and as I've said all along it is going to take quite some time to be definitive on this. I think as we mentioned before, we generally are seeing higher initial rates. The decline curves we have seen so far for the most part are encouraging and along the lines of what we expected to see. Maybe the one bit of color I can provide at this point is and it still even preliminary for this but –. Our current thinking is it's likely that we are going to find areas where the new technique is clearly beneficial from an economic standpoint, I think we're going to find some areas where it just doesn't meet our economic thresholds, certainly at current prices and obviously that threshold moves as gas prices move. And then I think there's going to be some areas where it's going to take quite a bit more time for us to really define where it falls on the economic spectrum. So that is sort of our current thinking on that but I really can't give you any more data right now.

Okay. I think last time you said they are performing 60% better initially or something that affects – still seeing that kind of rates?

Yes, that's correct.

Okay. And then lastly, when I look at the number of wells that you have drilled and if not yet completed, the backlog is built a little bit from the prior quarters. Is that just due to higher level of activities, are there some constraints on the frac crews[ph] in the base and, if you could provide me how many frac crews do have right now, and is that capable keeping up your satisfactory program.

Yes, actually, I think our backlog in terms of frac stages has been pretty levelled from prior quarters to this quarter. So we're not seeing much movement, I think that sort of – that's what we expect to see. It's pretty lumpy with multiple well pads. We are drilling. We currently have two frac crews working currently. And that is sufficient for us to be able to keep up with our needs for now. We do have plans to bring a third crew in, probably mid next year at some point when we need them, but we are not building a backlog for back of pumping services.

Okay. Great. Thanks guys.

And our next question will come from Amir Arif of Stifel Nicolaus. Please go ahead.

Thanks, good morning guys.

Good morning.

Just a question on the 2012, I know you haven’t firmed up your budget, but you are talking about was the 250 Bcfe, just curious, how many – is that a similar number of wells, about a 100 Marcellus wells next year?

The issue that we have got in providing updated guidance if you will on third-quarter is that our normal approach which we are sticking with this year is to go to our board for capital budget in early December. So at this point we're really just talking about the stuff we have looked at. The reason we haven't really given an update is we don’t really have a budget yet. So I think it's a little – I mean, (inaudible) rough idea of what that would involve as far as how many well we drill. But do bear in mind that in the Marcellus there is quite a lag involved. And the 2012 budget, capital budget, has a rather muted effect on 2012 volumes. But I'm happy to really comment –

I think that's exactly right. The thing to keep in mind with – especially with the timing related to the multi-well pads we drilled, 24 volumes will be driven probably more so by 2011 drilling than it will be by 2012 drilling. So you have to be careful about connecting the two too closely.

Okay. Sounds good. Just on the new frac designs that you are doing, I know just you mentioned that IP rates are higher, you're not in a position to sort of quantify yet, will you be at a position year-end (inaudible) on the new approach?

I'm not sure – but again you know our target was to make sure by the time we are actually making decisions on the budget, that we would have – we have reached the firmer position on that and not trying to put you off, but you know we’re – that's again that something that we spent most in November pulling that stuff together. From our perspective, we are still on that same schedule.

Okay. And then so are the initial rates 50% to 60% higher, can you tell us 6 to 12 months out, how much higher the rates are on the new wells versus the old type curve?

I think we're going to pass on that for now, mostly because we don't have sufficient number of wells with 12 month worth of production yet. So most of the data we're working with is still pretty early in the wells life. So, I think, we're not going to not comment on that right now.

Okay. Could you just may be let us know are all of these wells in Green County or in the Southeast portion or it is split across rig which in terms of the percentage improvements you are seeing?

:

Sounds good. Thanks you.

And our next question comes will come from Hsulin Peng of Robert Baird. Please go ahead.

Good morning. Dave, I just want to make sure that I understand, just the options that’s on the table, one you are saying it’s a JV structure, where you work with a partner and most likely a financial partner and the second one is your own MLP, correct?

Well, I didn’t say a financial partner. And I also want to make clear that those are not necessarily distinct approaches. You could conceivably combine our joint venture and MLP. The real thing that we focused on is that we do want to pursue this opportunity, we want to reach a specific decision on it quickly so that we can implement, meaning not just close but get cash in the door, you know, by mid-2012 or there about, which means, that we do need to be reaching closure on it pretty quick. And frankly in laying out some of the stuff that we are interested in, you know, that hopefully gives the market a better idea of the kind of characteristics that we are looking for as we look through this, which is the certain amount of control. But we also need low cost of capital. You know, that’s a big, it’s not just availability of capital that we like through a separate entity, it’s lower cost of capital.

Right. I mean, I understand the objectives, can you just repeat what are the options on the table then?

Well, separate entity. And at this point all we know about the possibility to separate entity, if you look around, and I am talking about specific to midstream are joint ventures and MLPs. So those when we focus on studying these, those are the things that we are focused on. But we are aware that there is other, you know, these clever folks out there in the marketplace and if one of them hears about the objectives that we have and says, “We got a way to give you a lot of inexpensive money and meet your objectives” in some other way then that’s fine for us too.

Okay. The overall objective of the evaluation you are still hoping to make a decision by year end and what’s the implementation plan sometime in 2012?

Well, the only emphasis that I was putting, kind of new emphasis on timing is that we have to make a decision around year end, so that we can actually start getting money in the door to pursue some of this and to make sure that we are not diverting money, as we have been frankly, from development into midstream. So it isn’t just a magic number, I am making a decision. I mean, around here the real goal is get the cash in the door. We need to get the cash in the door and the only way that’s going to happen is to make a decision quickly.

Okay. And so this is not different, probably you have previously outlined really? It’s the same.

Yes, it’s basically the same. It’s just that we are recognizing that it’s possible that if you look at MLPs or joint ventures, they could either be distinct or they could be together. What we have really talked about before, the two changes that we have made is, we intend to (inaudible) MLP and JV together before and now we are saying they could be together, they could be separable. And the other thing is we have said the other two alternatives that we have looked for instance, particularly build, fill, sell – that doesn’t look to be as suitable for what we are trying to accomplish as a separate entity would be.

Okay. And just to clarify –

So, that’s I guess – so as we dive down into one alternative you windup seeing the different aspects of that alternative if you will.

Right. And really to maintain and giving that control is what you are looking for, I mean, as long as you have the general partner in that MLP structure that is control.

Yes, I agree.

Correct.

Yes.

Okay. Solid. And the second question, on your additional low cost –

It’s a sufficient amount of control, I don’t want to presume what – there is LP unit holders have rights of course, but it’s enough control for us. And actually that’s the only reason I had mentioned kind of stopped you as far as just a financial partner. I could easily imagine working with a strategic partner where we have a sufficient amount of control over the stuff that matters to us, which is the timing, location and size of the facilities. So, yes, it’s certainly conceivable but we would operate, we would be with strategic who would say we will bend towards your control concerns sufficiently to meet EQTs needs.

Okay.

So, at the end of course it’s like the best value and it’s very hard to speculate you know what’s the best value until, at the time we announced a decision you can be confident that that’s what we think is the best value for us all in.

Okay. And that (inaudible)

Yes.

Okay. And then my second set of questions regarding the service cost, I know you mentioned that some of your current (inaudible), but can you just be more specific actually in terms of which component in service cost is driving the – is it pressure pump or what other key component is driving the cost?

Yes, the big mover is the pumping services, which is the biggest cost we have in drilling and completing a well. It is also the area that is seeing the biggest percentage cost increase. So, it’s really driven by the fracing cost.

Okay. And can you talk about what this does to your economics?

Well, obviously it has a negative impact on our economics.

We will be updating our slides in our presentation after the call.

Yes, I know you will, I am just trying to get a magnitude of interest of the IRR, but I can wait for the slides.

Yes, thank you.

Okay. Thank you.

And our next question will come from Joe Allman of J.P. Morgan. Please go ahead.

Thank you. Good morning everybody.

Hi Joe.

Hi Dave, just to clarify again on the restructuring area. In terms of the cash in the door that you speak of, you don’t necessarily have any cash in the door today. I think, if I understand correctly, you need cash in the door on an ongoing basis?

Yes. Yes, we would rather have cash in the door on an ongoing basis but if somebody at J. P. Morgan just wants to write us a really big cheque and then we have to swear house it, I am sure we can make that work too.

It won’t be me, I guarantee that. But, so I guess in terms of it – so the monetization that you – so with the cash in the door that you would get upfront, mostly likely would be based on the existing midstream assets, is that correct? Or you are thinking that okay you might actually –

That’s true. It would most likely be in the existing midstream assets. It’s just that – from what we observed, these are just observations now. When the other MLPs you have periodic dropdowns and you get cash from that. In some of the joint venture approaches it seems like you could do the same thing or there is circumstances where somebody comes in low and winds up buying their way up. So, you don’t actually get cash in the door subsequently, but you no longer invest your own cash in the midstream. So, effectively it’s bringing up cash, but it’s because, perhaps the construction is going other side of the entity.

Got you. So, are you leaning more towards to the JV at this point than MLP, it seems to me that based on what you are describing that’s really what you need.

If I am leading you to believe that I am leaning either towards the JV or towards the MLP I did not mean to. I am open minded about those. To me it’s a big deal that we have said it’s got to be a separate entity. We need to make a decision quick because we want to be able to close this thing, no matter how complex it is and get cash on the door within a matter of months.

Got you. Okay. And you want to have its own credit facility, et cetera?

I am sorry.

And you want that entity to have its own credit facility?

I haven’t really focused. I mean, I guess the odds are that that would be the case because it’s – if it’s a separate entity it probably would.

Okay. Do you expect to make an announcement by year end?

I expect to make an announcement once we get – once it’s the appropriate time to make an announcement.

Got you, okay. Alright, very helpful. Thank you.

And our next question will come from Mark Crusoe of Millennium Partners. Please go ahead.

Hi guys. Dave, I think, I don’t want to drag it out like it’s been dragged out many times here. I guess two clarifications for me. The first is why, I guess is it crazy to assume that you probably want to have an idea of what you are doing by the time you get to formal decisions on the budget for next year?

No, not necessary because we are not going to spend money that we don’t have. We are not going to spend money we don’t have. So, we have to have contingence stuff in the budget that is fine. What I like to have a decision made sooner rather than late, by the time of the budget sure, but we need to go through the process in a kind of combined thoroughness and speed.

Gotcha. And then as far as once you’ve made decision, NLP are JV by the end of the year and you want to implement that early New Year, does that cover your thought process around splitting does that sort of effectively do that for you as you are moving that business around or is that –

No, I don’t believe so. What I meant to communicate with that is that, that type of structure would not be inconsistent with that. That, we would not want to enter into a transaction that took that off the table.

Gotcha.

The Swiss cheesing thing the concern was that if you just saw little pieces here and there, our stake of this system and the stake in that system, then you kind of taking that off the table. So, not only though have we – we have not as I mentioned before, we have not made any of those kinds of decisions but we don’t want to implicitly make the decision because of how we go about dealing with midstream time around. We just want to make sure that we are not unwillingly taking such structural alternatives off the table. And we will be mindful of that.

And you guys have – I think I heard you say earlier, already in discussions with or have had inbound interest from JV partners?

Yes, we have. And I wouldn’t be shocked if after this call we get more.

Okay, great. Thanks.

Thanks.

And our next question will come from John Abbott of Pritchard Capital Partners. Please go ahead.

Hey, thanks for taking my question

Hey John.

Just really quickly, looking at your guidance for 2011, I was somewhat surprised that you actually didn’t raised guidance for the year. Is there some sort of bottleneck that we should be looking at, for two, for the fourth quarter of 2011?

I wouldn’t say that there is a specific bottleneck. Now it just didn’t seem like the, obviously these growth rates always do put some stress on midstream as we mentioned before. It was more that it just didn’t feel like it was inappropriate. Well, it didn’t seem like it was that big a deal though to take a look at the guidance and we are getting pretty close to the end of the year. We gave a range; we basically just kind of tightened it.

All right. I appreciate it. Thank you.

And our next question will come from Phil Jungwirth of BMO. Please go ahead. Phillip Jungwirth – BMO Capital Markets: Hey, good morning guys. Some of the large service companies indicated on their calls that they were seeing pressure on pumping rates in some of the gas basins. Is that something that you are seeing throughout the Marcellus Play and the reason you are increasing your well cost is just because you are contracted below market rates? Or could you help clarify that?

Well, I mean all I can really say is, I do believe that for the past couple years we have been contracted below market rates and now those contracts are opening back up. The service companies are trying to move us closer to market which I think makes perfect sense from their standpoint. We obviously don’t like it. But I think that’s life in this business, so, but I think that – I don’t think there is any more to it than that simple fact. Phillip Jungwirth – BMO Capital Markets: Okay and then, of the six Marcellus rigs that you are currently running, how many are drilling in kind of the 90CF type curve area versus the Tier-2 and the Tier-3 areas that you’ve laid out?

Honestly, don’t know exactly on any given day, but I think, pretty close would be two or three in the Tier-1 and the balance is Tier-3. I don’t think we have any in Tier-2 as I speak today. Phillip Jungwirth – BMO Capital Markets: Okay and are you – and then to the varied by timing of wells actually being brought on production such as the rigs in the Tier-3 area. Those wells take a lot longer to be brought on production, as not as much in most of the productions from Green County currently?

Could you repeat that question? Phillip Jungwirth – BMO Capital Markets: I was just asking that varies by wells being brought on production?

Still not sure, I quite understand, but there is a lot of factors that go into where we drill at any given time. A lot of it is driven by really two factors, one land. So we want to drill as many wells from a location as we can to get the economies of the multi-well pad drilling. So, we wait until a pad has got the bulk of its wells ready to go before we move a rig. So that dictates a little bit and we also strongly prefer to drill where we are going to move the gas immediately. So, targeting our rigs to go to the areas where the capacity is ready to go is probably the primary dictator where we put our rigs. And that changes over time. So, if you take a snapshot at any given time, we might have a lot of rigs in Tier-1 or we might have most of our rigs in Tiers 2 or 3. It’s what’s going to get us the most – the best return for our investment in any given time. Phillip Jungwirth – BMO Capital Markets: Okay, great. Thanks, guys.

And our next question will come from Gil Yang of Bank of America Merrill Lynch. Please go ahead.

Hi good morning. Just to beat the dead horse a little more. The auctions for the midstream restructuring, is it out of principle that the build, sell is not viable and others are related options? Or is it just a matter of the value and the prices cushions you are having with potential buyers were not positioned.

No, I say it is, the main reason that it is difficult is, in the Marcellus region there is so much interrelationship between these systems, technically. Certainly, as we talk with about South Western Pennsylvania and Northern West Virginia that to get the best out of build, fill, sell you have to be prepared to hold auctions on individual systems one at a time, even if they wind up being related to each other. And, then you wind up with a circumstance rather you are going to sacrifice on price, on a say a second asset, so that you can have the same entity owning a couple of related assets or you’ve got the risk of operational inefficiencies because you are dealing with so many different owners. It would be a lot easier we’ve concluded. And frankly, the value seems to be there to just have a separate a single separate entity.

Okay, and just selling everything just to one entity would not viable for what reasons?

Well if it’s related to us that’s fine, if it’s not related to us, we are going to run into more of the problems that from what we hear a lot other producers run into which is midstream companies operating completely independently, typically do not want to build the systems out until they know exactly how much volume is going to fill them.

Right.

And they will design those systems, so that they can maximize understandably maximized returns for themselves.

Right, so that would go back to the control issue?

Yeah, exactly.

But is there a price for that giving up of control that you would have taken?

I think that’s a combination of, you‘d have to a certain contractual relationship that travels along with the control. And if you are saying if there is a combination of contractual terms and price that would convince us, if that make sense absolutely.

Are you anywhere near that or it doesn’t sound like you are, it sounds like that the price is –

Look the most attractive pricing out there seems to be back. I have not yet seen that doing the whole thing results in a one-time sale or have a contract, actually results, and is good economics, as you see in those other alternatives. And I – guess that that’s probably the reason that you generally speaking seen companies in similar situations to us, either enter into joint ventures or enter into form of MLPs. And of course once you finish much of the build out, then that’s – that doesn’t matter anymore.

Right, okay. Thank you.

And our next question will come from Josh Silverstein of Enerecap. Please go ahead.

Hey good morning guys. Just a last question on the midstream potential partnership. I was curious if it was, there were any specific assets or is it just a specific areas that might be targeted for that like would you rather have a pipelines or a processing asset into that joint venture versus having it at the C Corp level?

No, I would think that eventually we moved towards the bulk of the Marcellus operation midstream moving towards that separate entity.

Gotcha. Okay. And I was curious also if there are any other potential upstream financing options whether it would be selling off any of the assets you guys are not putting much capital into whether it be the Huron or the CBM assets?

We are constantly looking at those things. Eventually, we are going to have to do more. I mean, our attitude here back when we started looking at the processing plant at Big Sandy, of course lot of folks talked to us about midstream and we said we are focused on the processing plant in Big Sandy first and we’ll get to that. And that’s kind of the attitude that we have – I’ve got on the some of the other stuff you are talking about now is, you are absolutely right, we are going to have to do that too. And, we are doing as much as we think we can handle at any one time to sort through the various alternatives but absolutely we cannot let opportunities sit there and not take full advantage. We have to figure out ways to extract more value from others of those assets, it just happens that the midstream is the number one priority as we talk here on October 27th.

Gotcha, that’s helpful and then the comments before that you made about being able to take this capital and put it into the upstream business to grow that 30% in a five year growth rate, now how much faster do you think that could grow? Is it potentially 40 plus percent or is that something that’s less than that?

I don’t know that I want to put a number out, and I’ll just say faster than that.

Gotcha, and then lastly just kind of –

Unless you want a free economic, I mean we are not aiming for, we are trying to solve for the highest possible growth rate in volumes. We are aiming for the highest possible shareholder value.

Got it. And then lastly just a bit of a proximity question but, I was curious if you guys have seen some service equipment migrate over to Ohio for the Utica Shale and is that’s something that you think might cause some additional service inflation for the Marcellus producers?

Well, I think any additional demand certainly has the potential to drive our pricing up. We haven’t seen any issues with that in particular, I think the crews we have are dedicated to us. So they are not going anywhere. The rigs we have are under contract and are going to leave our service. So in terms of access to the services, I don’t see any problems in terms of whether that affects the market through pricing for those services. Obviously, more activity in a neighbouring play could have that.

Thanks.

And our next question will come from Kim Schneider of Citigroup. Please go ahead. Kim Schneider – Citigroup: Hey guys. Gil pretty much already asked my question I guess just to follow-up on that. Did you guys, if you can disclose it, get a bid yet on the entire Midstream assets?

We are not going to – actually part of the delicacy of course is, there is only a certain amount of detail that we really feel comfortable providing on any of that, that’s why we are focusing on the philosophical questions. So I just assume that. Kim Schneider – Citigroup: Okay, thanks.

I hope you can be pretty sure, and that’s going to be difficult it’s just – I don’t want to just bleed out the one piece of information and another piece of information. Kim Schneider – Citigroup: Yeah, no worries, I understand.

And our last question for the day will come from Sameer Esna[ph] of Decade Capital. Please go ahead. Reza Hatefi – Decade Capital Management: I just wanted to kind of get a couple of things clear in that – so hopefully by year-end, you’ll have a decision on whether to go with the MLP route, the JV route, or a combination thereof. That’s essentially what you said I think. And then does that precludes you to consider a split later on afterwards. So maybe, sometime later in 2012 or sometime later?

We would not want to do anything that would preclude any reasonable structural alternatives down the road. Reza Hatefi – Decade Capital Management: So, I guess, at this point, the reason to go with MLP and/or JV initially rather than the split is for what reason?

You actually get capital. Reza Hatefi – Decade Capital Management: Got it.

We don’t get any capital from a split. Reza Hatefi – Decade Capital Management: Got it. Got it, okay. So, okay, great. Thank you very much.

Thanks.

I’m showing no further questions in the queue. That will conclude our question and answer session today. I would like to turn the conference back over to Patrick Kane for any closing comments.