Good day, ladies and gentlemen, and welcome to the Third Quarter 2011 Regency Energy Partners LP Earnings Conference Call. My name is Erin and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I will now turn the presentation over to your host for today's conference, Ms. Shannon Ming, Senior Vice President of Finance and Investor Relations. Please proceed, ma'am. Shannon A. Ming: Good morning, everyone, and welcome to today's call. Today, we will cover Regency's performance for the third quarter of 2011. Presenting on today's call will be Mike Bradley, President and Chief Executive Officer; and Tom Long, our Chief Financial Officer. Following our prepared remarks, Regency will open the call to participants for question. You may access the earnings release and presentation news on today's call through Regency's website at regencyenergy.com. Our call is being recorded and is also being broadcast live over the Internet on the Regency corporate website. An archive of the webcast and presentation will be available on the corporate website following today's call. Slide 2 of the presentation describes our use of forward-looking statements and lists some of the risk factors that may affect actual results. Also included in the presentation today are various non-GAAP measures that have been reconciled back to GAAP. I would also like to note that we will be filing our Form 10-Q on Monday, November 7. With that, I will turn the call over to Mike Bradley, our President and CEO. Michael J. Bradley: Thanks, Shannon, and good morning. And thanks everyone for joining us today. I'm pleased to say that Regency had a strong quarter, during which we continue to grow our adjusted EBITDA, had a significant increase in volumes in our Gathering and Processing segment, and for the second quarter in a row, announced $0.05 increased to our cash distribution for outstanding common unit. Taking a closer look at Regency's highlights from the third quarter on Slide 3, we delivered solid financial results in the third quarter of 2011 with our adjusted EBITDA increasing to $112 million, which represents a 25% increase over the third quarter of 2010 and a 9% increase from the second quarter of 2011. For the third quarter, Regency generated $73 million in cash available for distribution and this represents a coverage ratio of 0.98x. If you exclude 11.5 million units of equity issued in October of 2011, the coverage ratio would have been 1.06x. And very importantly, we continue to grow our business organically, investing $134 million in the third quarter. Now I'd like to provide you with an update on some of our growth projects. On Slide 4, you will find an update for our Eagle Ford expansion project. Construction on the $450 million project is underway, and an average of 128 million MMbtus per day flowed on a portion of the system in the third quarter. Additional volumes will be phased in as the project is completed, with all capital expected to deployed by early 2014. Upon completion, we expect our entire South Texas system to gather, compress, treat and transport up to 1 Bcf a day of natural gas. Moving on to Lone Star on Slide 5. We are very pleased with this acquisition and are very excited with the opportunities we see going forward. On the Lone Star fractionator, planning and construction is underway for the new 100,000 barrel per day fractionator at Mont Belvieu, which will be in service in early 2013. Capacity on the fractionator is currently full, and Regency's portion of the estimated capital expenditures for this fractionator is approximately $118 million. For the new gateway NGL pipeline, Lone Star has increased the size of the pipe from 14 inches to 16 inches and secured additional capacity on ETP's pipeline from Jackson County to Mont Belvieu, increasing the total capacity from 130,000 barrels per day to 209,000 barrels per day. Construction is underway and approximately 60% of the capacity is currently under long-term contracts. And we expect to have between 75% and [indiscernible] contracted by the first quarter of 2012. Regency's estimated capital expenditures for the NGL pipeline are around $275 million. Lone Star is also looking at opportunities for transporting liquid barrels from the tailgate of other plants in the Eagle Ford Shale to the fractionators of their choice. In addition to these large scale growth projects, we continue to see significant opportunities for further growth in South and West Texas. Also, we're seeing potential opportunities to develop in emerging shale plays that are located near our existing assets and are just beginning to require Gathering and Processing infrastructure, including the Tuscaloosa Shale in Louisiana, the Brown Dense formation in Northern Louisiana, Southern Arkansas and the Mississippian Shale in the Midcontinent. In 2012, we expect total gathering and processing throughput to increase 25% to 30% over year end 2011. More specifically, we are currently adding an incremental 100 GPM of treating capacity to our Tilden Treating Facility in South Texas, and we expect continued volume growth in our Gathering and Processing segment where we have additional opportunities to provide gathering, processing, condensate stabilization and treating services to producers in the Eagle Ford Shale. Currently in West Texas, we are capitalizing on opportunities to increase our gathering and processing capabilities around our Waha gathering system. We've been expanding our geographic footprint in the West Texas area by adding additional CDM compression on our existing system and extending additional gathering into dedicated liquid-rich Bone Springs production. This has enabled us to increase our margins by bringing new Bone Springs volumes to our facilities while backing out the leaner incremental key coal volumes currently being processed. In addition to the Lone Star gateway pipeline, Lone Star is completing an interim expansion, which will increase the liquid takeaway volume from the Waha facility and allow further expansion of the Waha facility or installation of additional facilities to process increased volumes from dedicated acreage. In our Contract Compression segment, we have recently began our operations in California and anticipate placing additional horsepower there, the Marcellus Shale in West Texas by year end or early 2012. We plan to grow our external horsepower by approximately 15% to 20% by year-end 2012, primarily in some of the key plays including the Eagle Ford, the Marcellus Utica, Barnett and the Permian Basin. We also see additional growth opportunities in California, South Louisiana and the Brown Dense formation in 2012, and we expect there to be a need for more compression in the Haynesville Shale probably beginning in late 2012, early 2013. Finally, in our Contract and Treating business, we see some promising opportunities in South Texas, West Texas and the Northeast, and expect revenue generating GPM to grow by 25% to 35% in 2012. In the Eagle Ford in particular, there is an increased demand for treaters that can handle sour gas with high levels of H2S. Additionally, there will be significant opportunities for condensate stabilization services in the condensate and oil-rich areas of the Eagle Ford. So in summary, before I turn the call over to Tom, I believe Regency has significant potential for growth over the next several years that will position us to meet our goals of increasing distribution and achieving investment grade ratings. We have approximately $630 million to $680 million of capital that we expect to invest in 2012, the majority of which will be coming online in 2013. We expect to achieve returns in the mid-teens or higher in this project. With that, I will turn the call over to Tom, who will take you through a review of our financial and business unit performance. Thomas E. Long: Thanks, Mike, and good morning. First, looking at our performance for the third quarter. For the third quarter of 2010 to the third quarter of 2011, adjusted EBITDA increased by 25% from $90 million to $112 million. This increase was primarily driven by the acquisition of a 30% interest in the Lone Star Joint Venture, and increased volumes in South and West Texas. These were partially offset by lower hedge pricing in 2011 compared to 2010. Now looking at Slide 8, it shows our Gathering and Processing segment. Adjusted segment margin increased from $57 million for Q3 2010 to $65 million for Q3 of 2011. This increase was primarily due to additional volumes, which grew by approximately 36% from 1 million MMbtus per day in Q3 of 2010 to 1.3 million MMbtus per day in Q3 of 2011, partially offset by a $6 million impact from lower hedge pricing in 2011 compared to 2010. While total volumes increased overall, we saw the largest increase on our South Texas gathering system and from new volumes related to our Eagle Ford expansion, which contributed an additional 128,000 MMbtus per day. NGL production increased to 35,000 barrels a day for Q3 of 2011 compared to 27,000 barrels per day for Q3 of 2010, primarily due to increased production in South Texas. Now taking a closer look at our volumes by region. Starting with North Louisiana volumes, they increased by 28% comparing the third quarter of 2010 to the third quarter of 2011. This was primarily due to additional Haynesville Shale volumes at our Logansport facility. This was partially offset by Elm Grove field declines around our Elm Grove and Beverly refrigeration plants. For the remainder 2011, we expect total volumes in North Louisiana to remain relatively flat as producers have moved rigs from the lean Haynesville Shale to more oil- and liquid-rich plays. However, we expect strategic drilling in the fairway of the Haynesville Shale to continue in 2012. Now looking at West Texas. Third quarter of 2011 volumes increased 20% compared to third quarter of 2010, primarily due to additional Bone Springs production. Although West Texas producers are primarily targeting oil-rich plays, these wells produced associated gas, and we're seeing increased activity around our Waha system. We are currently increasing our NGL production capacity at our Waha plant to accommodate the richer gas stream associated with the Bone Springs production. And as a Mike mentioned, we continue to see additional growth opportunities around our system. In the Midcontinent region, once again comparing the third quarter of 2011 to the third quarter of 2010 volumes, excluding FrontStreet, increased by approximately 3%. FrontStreet volumes were down 8% compared to the third quarter of 2010. But just as a reminder, since the FrontStreet assets provides fixed rates of return and are not dependent upon throughput, there was no impact on margin. For the remainder of the year, we expect Midcontinent volumes to hold relatively flat. Now looking at the South Texas region. Including incremental volumes associated with the Eagle Ford expansion, volumes increased by approximately 100% from the third quarter of 2010 to the third quarter of 2011. Excluding Eagle Ford expansion, volumes in South Texas increased by 43% for the same quarters. The Eagle Ford expansion is expected to continue to ramp up through 2014 in conjunction with producers drilling program. For the remainder of the year, we expect volumes to continue to increase on both our South Texas gathering system and through our Edwards Lime JV. Now moving to the Joint Ventures segment. On Slide 9, our adjusted EBITDA was $56 million for the third quarter of 2011 compared to $43 million for the third quarter of 2010. The Haynesville Joint Venture contributed $17 million of that, the MEP Joint Venture contributed $26 million, and the Lone Star Joint Venture contributed $13 million. Looking at each one of the joint ventures starting with the Haynesville. Total throughput volumes decreased from 1.5 million MMbtus per day in the third quarter of 2010 to 1.2 million in MMbtus per day in the third quarter of 2011. This decrease was primarily due to one customer who has been offline since June 2011 due to an operational upset. However, we are still receiving the demand fee component of their rate and we expect some of these volumes to be back online by year end. The total financial impact to Regency for the third quarter of 2011 was approximately $1.5 million. Now looking at the MEP Joint Venture. Overall, total throughput volumes for MEP averaged 1.3 million MMbtus per day in the third quarter of 2011 compared to 1.4 million MMbtus per day in third quarter of 2010. Now moving to the Lone Star Joint Venture, we are pleased with the performance of the Lone Star assets. The third quarter 2011 total throughput volumes for the West Texas pipeline averaged 133,000 barrels per day, and for the NGL fractionation throughput volumes averaged 14,000 barrels per day. Lone Star results do include the impact of planned outages at the Gimer [ph], Chalmette [ph] and Motiva [ph] refineries, which negatively impacted gross margins by approximately $2 million. Moving to Slide 10 on our Contract Compression segment performance. For the third quarter of 2010 to the third quarter of 2011, segment margins including intercompany segment margins, increased from $33 million to $35 million, and I'm sorry that was excluding. And that was primarily -- that's excluding the intercompany segment. And this was primarily due to an increase in revenue generating horsepower, which grew from 754,000 to 769,000. Despite the increase in revenue generating horsepower, fleet utilization remained flat at approximately 87%, as new horsepower had to be purchased when either horsepower did not fit producers' need. Our superior value offering in addition to increasing compression demand in the Eagle Ford, Marcellus, Utica, West Texas and Barnett Shale plays should help maximize our fleet utilization. I would also mention that we have recently contracted an incremental 50,000 horsepower primarily in the Marcellus, Eagle Ford and Barnett Shales, which is expected to come online in the first half of 2012. A portion of this horsepower will come from our idle fleet. Now looking at Slide 11 on the Contract Treating segment. Segment margin was $7 million for the third quarter of 2011 compared to $8 million for the second quarter of 2011. During the third quarter of 2011, we had higher-than-anticipated installation expense that impacted our segment margin. Revenue generating gallons per minute increased to 3,468 compared to 3,368 at June 30, 2011. This increase in GPM from the second quarter to the third quarter was a result of higher plant utilization in the third quarter. However, due to the timing of when old contracts were released and new units were set, the higher utilization was not seen until later in the third quarter. We believe our treating asset continues to be well positioned for growth in 2012 driven by demand from producers in South and West Texas, as well as the Northeast. Now looking at Slide 12. You can see how Regency has increased its fee-based margins over time. Approximately 82% of full year 2011 gross margin is expected to come from fee-based activity. Turning to Slide 13. Our liquidity position, as Mike mentioned, following the third quarter Regency issued 11.5 million common units raising $232 million in proceeds, which were used to pay down our revolving credit facility. As of the end of October, we had approximately $630 million of available liquidity on our revolving credit facility. Now let's look at 2011 capital expenditures. Regency's $373 million of projected organic growth capital expenditures include $200 million for the Gathering and Processing segment, which is inclusive of the 2011 expenditures related to the Eagle Ford expansion. We have $95 million for the Contract Compression segment, and I would like to remind you that capital spending in the Compression segment typically has a 6-month lead time before it begins producing revenue. We have $65 million to fund Regency's proportionate share of growth associated with the Lone Star Joint Venture, and $9 million for the Contract Treating segment and $4 million related to Corporate and Others segment. Looking at the expenditures year-to-date as of September 30, 2011, we have spent $172 million in the Gathering and Processing segment, $68 million was for the Contract Compression, $10 million was related to the Lone Star Joint Venture, $5 million was for Contract Treating, and $3 million was for Corporate and Others. In addition, we expect capital expenditures for 2011 to be -- making capital expenditures for 2011 to be approximately $17 million. And in 2011, as Mike mentioned, Regency expects to invest between $630 million and $680 million in gross capital expenditures, which includes $290 million for the Gathering and Processing segment, including the Eagle Ford expansion; between $250 million to $300 million related to our portion of the Lone Star Joint Venture; $70 million for Contract Compression segment, primarily for new units and upgrades to existing units; $15 million for the Contract Treating segment; and $5 million in Corporate and Others segment. In 2012, we expect to make capital expenditures of approximately $24 million inclusive of the joint venture spend. And with that, we'll now open the call up for questions.

[Operator Instructions] Your first question comes from the line of Scott Fogleman from Morgan Keegan.

You mentioned the drop in throughput on the Haynesville Joint Venture was from one customer having some internal issues and mentioned that at least some of that would come back. Approximately how much of the revenue that you're generating from that asset is from firm capacity versus throughput?

This is Jim Holotik. On our total capacity of our system, it's about 2.1 Bcf. We currently have about 1.9 Bcf that has a demand fee. Of that, about 90% of our revenue is from that demand fee.

Okay, because I'm showing that just -- I appreciate you all put the 100% of the joint venture that the net income, it just really dropped off with the drop in the throughput from Q-over-Q and I was just curious on the breakdown of that. Switching gears with compression, I mean you mentioned you're at about 87% utilization.

Yes, we did have some contracts on our legacy system that rolled-off during the first period of the third quarter.

Okay. And I mean you had guided that you want to get back -- I mean, I think your historical has always been around 90%, 91%. Are you still comfortable with that sort of guidance looking forward? Michael J. Bradley: Our target is really in the 93% to 95% range, is where we'd like to be.

And then just one final question. The volumes growth in the Gathering and Processing, that's really -- I mean, you're attributing that to West and South Texas. Is this a good number looking forward, I mean what you reported this quarter? Or do you expect that to continue to escalate?

We would expect our West and South Texas, both areas to grow. Michael J. Bradley: I mentioned earlier that for 2012 we are anticipating a 25% to 30% increase in total volumes from year-end 2011.

Yes. I apologize, I've been unable to get your slides. I mean it's timing out on me or something. I'm having trouble getting the slides. I was unable to pull out the presentation. I think there's probably other folks that are trying the same thing, but I'll make sure to double check with that.

And your next question comes from the line of Louis Shamie from Zimmer Lucas. Unknown Analyst -: Wanted to talk a little bit about what's going on in South Texas and I know you guys announced a big gathering investments there. Can you talk a little bit about how you're building out that system, and what kind of the target ramp up of volumes is over the next couple of years?

Well, this is Jim Holotik again. Yes, we've got a very large system that we're building out in South Texas. One of the things that we are -- is going to benefit us down there is that we're able to more or less cookie-cutter what our gathering assets are down there, so we're reproducing the same assets over and over again within the dedicated acreage. And hopefully, one of the things that we've done is we've proven ourselves to be a very efficient gatherer in South Texas, and we plan to utilize this footprint or this blueprint with other customers in the future. As far as our ramp up is concerned, I think we should be somewhere -- we're anticipating to be somewhere around probably -- somewhere around double by the end of next year. Unknown Analyst -: Wow. And I mean it seems that the returns on that investment are probably higher than your norm?

We're probably a little bit higher than our normal returns, but I think you'll see them in line with most of what we've done in the past. Unknown Analyst -: Great. And then just the last question would be, is that all fee-based, that -- the returns on that investment?

Yes.

And your next question comes from the line of Avi Feinberg from Morningstar.

I had a question, on -- with some of the expansions at Lone Star, about the pipeline and the fractionation, I'm curious if that's helping to drive some of the Gathering and Processing volume expansions that you've also talked about either in West Texas or out of the Eagle Ford? And did you see that -- as you continue to invest in Lone Star down the road, I mean could you talk about how that will continue to drive some of those opportunities possibly? Michael J. Bradley: Yes. I think a couple of things there is one, as we mentioned earlier in our discussion about the Lone Star acquisition, I think one of the benefits is the ability to offer our customers a full array of services that includes, not only Gathering and Processing, but access to NGL pipeline and fractionation and storage. And we still believe that is a huge benefit and opportunity for the Lone Star acquisition. I think secondly, is the NGL capacity coming out of West Texas and South Texas has been constrained, and with the recent announcement of the new NGL pipeline, as well as the interim expansion on the existing pipeline, it's going to open up a lot of potential for additional processing volumes and NGLs to move out of both those regions of which we would expect to benefit from as well. So we're very excited about that and see this as a huge opportunity.

Great. And would you say also some of the treating expansions in South Texas would -- do those also factor into securing additional Gathering and Processing volumes across your systems? Michael J. Bradley: Absolutely. I mean, we're in an excellent position with regards to our treating capabilities, particularly in South Texas. And we continue to see a lot of potential opportunity to grow that business as well.

Is that both for volumes on your systems and for third-party volumes? And what does the mix look like there? Michael J. Bradley: The majority of the volumes that come in to our treating facilities are on our existing systems. We're currently looking or utilizing our system for mainly for dedicated acreage that comes into our existing system. We will entertain other systems or other volumes coming in, but primarily right now it's on our existing system.

And your next question comes from the line of Ethan Bellamy from Baird. Ethan H. Bellamy: There's a private contract treating business that's on the market right now. Would you guys be a bidder for that? Or would you expect all of your growth in treating to come from existing assets that you guys own? Michael J. Bradley: Well, I think number one is we would not comment typically on acquisition opportunities at this point. I think secondly is we're very pleased with our Treating business. We continue to invest in it, and we'd always look at opportunities to expand through additional capital or potential acquisitions. So we see our existing business having opportunity, as we mentioned, particularly with the sour gas that's showing up in South Texas and West Texas. Ethan H. Bellamy: Well, I'll go ahead and ask my next question. You probably won't answer it, but with the Kinder-El Paso deal potentially making them just score some assets from the FTC perspective, any chance you guys could pick up the other half of MEP? Michael J. Bradley: I would say that one would be difficult to comment on as well without knowing what else really happens. We're very happy with our investment in MEP, and we're happy with our partner. Would we like more? Sure, but I think that all depends on what happens down the road. Ethan H. Bellamy: And one last one. I missed your comments at the beginning about potential investment grade status. Can you give us what milestones, if any, see from the rating agencies about what you need to do to make that happen? Michael J. Bradley: Well, we did feel like that we'll continue to work on getting the size, which we feel like we're -- we'd like to -- we got to a pretty good size there. I think from a overall balance sheet standpoint, leverage ration, et cetera, we feel like we do have strong metrics. I think probably the most I can say is, we'll continue to talk to the rating agencies and work with them on that to see when we can get there. But we do feel good about all of our financial metrics right now from a rating standpoint.

[Operator Instructions] Your next question comes from the line of Bernie Colson from Oppenheimer.

Just one follow-up to you about the ratings. I was wondering, the coverage ratio this quarter is about 1 and yet we still got a raise in the distribution, which is nice. But I'm kind of wondering if that signifies anything about your stance for achieving those investment grade ratings? Or you're just confident enough in 2012 that, that's not going to matter because clearly paying out more cash flows is probably not something that's strengthens your credit metrics? Michael J. Bradley: Yes. And that's a -- as you can a probably appreciate, Bernie, when we look at the overall distribution, it's obviously a decision that's made by the Board. But when we look at it, we look at it from various metrics. We look at it, not only from as we look out and we look at the growth, we look at the makeup of our earnings. And as we mentioned, we're 82% fee-based. So as we look at the stability, we look at the growth in the business, when we look out for next few years, we'll make those recommendations to the Board based upon all of those factors and that's what drives what we wanted to do here. We feel good with it, so.

Do you feel like -- I mean, because clearly just waiting for the rating agencies to do something is -- can be frustrating. I'm just wondering if you think you're already there as far as what you need? Or is there more to go? Michael J. Bradley: Well, that is always the tough one. Bernie, you're right. We do feel like -- we do feel very good about our metrics. We feel like we've got very strong metrics, like I say, from an overall leverage ratio to balance sheet to our mix of earnings. So we'll continue to work with them and talk with them. I don't -- we're not going to probably sit back and wait. We're going to probably more be very proactive in communicating with them, so.

Okay, okay. And I don't know if I missed this. There was a question about Haynesville and the margins. When you look at segment margin last quarter versus this quarter, I mean they fell about 10%. And so I'm not sure that, that question was answered. I wanted to figure out why the margin fell so much? Michael J. Bradley: The majority of the reason is that we have an operator that's had some operational difficulties and their volumes have been off since -- and that's what causing the majority of the drop there.

Okay, I just thought that -- that most it, I mean, if you're still getting your demand charges, I was just trying to figure out how you could lose 10% of the margin at that segment if you lose one customer and that one customer is, what did you say, 90% demand charges that's... Michael J. Bradley: That's 85%. Shannon A. Ming: We have 15% commodity charge, Bernie. And we also had a few contracts roll off from our legacy system in the third quarter as well that contributed to that margin decline.

Okay, okay. Because when you look back at the margins, it kind of range between $47 million and $50 million for the last, I don't know, year or so. And so are we looking -- are we expecting that to bounce back up to that kind of high 40 level? Or is this kind of a new base? Michael J. Bradley: No, in -- we're expecting our customer to get their operational problem fixed. We're looking forward to having those volumes coming back on beginning -- by the end of the year. So no, this would not be the new base.

Okay. And then I apologize, I think I probably missed this in your commentary earlier on. But did you address the segment margin if you look at dollars per revenue generating horsepower in the Compression business why you've seen a fall-off in that business to $45 from up in the kind of $50 range? Shannon A. Ming: If you look at the -- I should probably know which numbers we're referring to. But if you look at the second quarter to third quarter for revenue generating horsepower per segment margin, we went from $34 million to $35 million and this is third-party revenue generating horsepower. And our compression increased by roughly 11,000 horsepower.

Okay. [indiscernible] segment margin for $234 million [ph]. Shannon A. Ming: The segment margin for the third quarter of 2011 was $35 million.

And the previous quarter, Q2, I have in here $37 million number, is that not right? Shannon A. Ming: It's $34 million. You're including, in our segments, eliminations and that's the margin that is with our Gathering and Processing business.

I would now like to turn the call over to Mike Bradley, President and CEO, for closing remarks. Michael J. Bradley: Well, again, thanks everyone for joining us today. I think in conclusion, we are very excited about our second distribution increase in a row. We have approximately $630 million to $680 million of organic growth projects coming online by 2013, and our assets are positioned to capitalize on more growth in the Eagle Ford and Permian Basin. We believe Regency is in an excellent position to achieve additional growth and further expand our service offerings to our customers. And again, I want to reiterate, our focus is to increase unitholder value and grow our distributions going forward. With that, have a great day and look forward to talking to you next quarter. Thanks.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.