Dominion Energy, Inc. (D) Q4 2012 Earnings Report, Transcript and Summary

Thomas Hamlin Thomas F. Farrell - Executive Chairman, Chief Executive Officer, President, Chairman of Virginia Electric & Power Company, Chief Executive Officer of Dominion Energy and Chief Executive Officer of Virginia Electric Mark F. McGettrick - Chief Financial Officer and Executive Vice President Paul D. Koonce - Executive Vice President and Chief Executive Officer of Dominion Virginia Power Gary L. Sypolt - Executive Vice President and Chief Executive Officer of Dominion Energy David A. Christian - Executive Vice President and Chief Executive Officer of Dominion Generation G. Scott Hetzer - Senior Vice President of Tax and Treasurer

Greg Gordon - ISI Group Inc., Research Division Paul B. Fremont - Jefferies & Company, Inc., Research Division Dan Eggers - Crédit Suisse AG, Research Division Paul Patterson - Glenrock Associates LLC Paul T. Ridzon - KeyBanc Capital Markets Inc., Research Division Jonathan P. Arnold - Deutsche Bank AG, Research Division Stephen Byrd - Morgan Stanley, Research Division Michael J. Lapides - Goldman Sachs Group Inc., Research Division

Good morning, and welcome to Dominion's fourth quarter earnings conference call. On the call today, we have Tom Farrell, CEO; Mark McGettrick, CFO; and other members of senior management. [Operator Instructions] I would now like to turn the call over to Tom Hamlin, Vice President of Investor Relations and Financial Analysis, for the Safe Harbor statement.

Good morning, and welcome to Dominion's fourth quarter 2012 earnings conference call. During this call, we will refer to certain schedules included in this morning's earnings release and pages from our earnings release kit. Schedules in the earnings release kit are intended to answer the more detailed questions pertaining to operating statistics and accounting. Investor Relations will be available after the call for any clarification on these schedules. If you have not done so, I encourage you to visit our website, register for e-mail alerts and view our fourth quarter 2012 earnings documents. Our website address is www.dom.com/investors. In addition to the earnings release kit, we have included a slide presentation on our website that will guide this morning's discussion. And now for the usual cautionary language. The earnings release and other matters that will be discussed on the call today may contain forward-looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings, including our most recent annual report on Form 10-K and our quarterly report on Form 10-Q for a discussion of factors that may cause results to differ from management's projections, forecasts, estimates and expectations. Also on this call, we will discuss some measures of our company's performance that differ from those recognized by GAAP. Those measures include our fourth quarter and full year 2012 operating earnings and our operating earnings guidance for the first quarter and full year 2013, as well as our operating earnings before interest and tax, commonly referred to as EBIT. Reconciliation of such measures to the most directly comparable GAAP financial measures we're able to calculate and report are contained on Schedules 2 and 3 in Pages 8 and 9 in our earnings release kit. Joining us on the call this morning are our CEO, Tom Farrell; our CFO, Mark McGettrick; and other members of our management team. Mark will discuss our earnings results as well as our guidance for the first quarter of 2013. Tom will review the progress we've made on our growth plan in 2012. As you may already know, we will host a meeting for analysts and investors at the Essex House in New York on March 4. At that time, we intend to provide a more detailed discussion of our growth plans and other items of interest to investors. Topics for this morning's call will be limited to our operating and financial results for 2012 and our earnings guidance for 2013. Our earnings guidance kit will be published later today and Investor Relations will be available afterwards to answer your questions. I will now turn the call over to Tom Farrell.

Good morning. For Dominion, 2012 was a year of significant accomplishments. To begin, it was the best safety year in the company's history. Our OSHA recordable incident rate was only 0.74, which is 20% below the rate for 2011 and a little more than half the rate in 2007. Safety is a core value at Dominion, and I commend our employees for their achievement. In 2012, we completed several major capital projects in our strategic growth plan and made significant progress in the construction of several others. We also work to advance the next round of projects that should sustain our growth plan through the rest of the decade. We delivered operating earnings which, when adjusted for the extraordinarily mild weather, were consistent with our 5% to 6% growth target despite a sluggish economy and the collapse of market power prices. 2012 was a year of progress for Dominion Generation. The Virginia City Hybrid Energy Center began commercial operations in July. That $1.8 billion project was completed on budget and on time, following 4 years of construction. Virginia City is one of the cleanest, if not the cleanest, coal burning plant in the United States and maybe one of the last built by our industry. Construction of the 1329-megawatt Warren County three-on-one combined cycle plant began in March of 2012. All of the major components have been delivered and 2 of the 3 combustion turbines have been installed on their foundations. The $1.1 billion project located near Front Royal, Virginia is scheduled to be online in late 2014. It is on time and on budget. We also made considerable progress on the development of the Brunswick County Power Station, another three-on-one combined cycle plant similar in size and design to Warren County. The gas and steam turbines have been procured, the agreements with the gas transportation supplier have been signed and permitting is underway. In July, we executed the EPC contract with Fluor and issued a limited notice to proceed. A CPCN and rider application was filed with the State Corporation Commission in November. A hearing date has been set for April 24 and a decision is expected sometime this summer. Commercial operation of the plant is scheduled for 2016. Conversion of the Altavista, Southampton and Hopewell power stations from coal to biomass began in 2012 and all 3 are progressing on schedule. Engineering and procurement of all major equipment have been completed. All of the projects are expected to reach commercial operations on budget by the end of this year. On August 31, the company filed a CPCN with the state corporate commission for our proposed conversion of Units 3 and 4 at Bremo Power Station from coal to natural gas. A minor air permit modification has been submitted to our Department of Environmental Quality and an EPC contract for this work was awarded. The commission staff has issued its report and if the project is approved, it is expected to begin commercial operations in 2014. 2012 was a year of repositioning our merchant generation portfolio. The State Line Power Station was shut down in March and sold in June. The Salem Harbor Power Station was also sold in June. In September, we announced our decision to exit the merchant coal business and PJM west with the sale of Brayton Point and Kincaid Power Stations, as well as our 50% interest in the Elwood Power Station. The sale process is on track and should be complete by mid-year. Finally, in October, we announced that we were unable to find a buyer for the Kewaunee Nuclear Power Station in Wisconsin and we will shut the plant down later this year. 2012 was also a very successful year at Dominion Virginia Power. During the year, about $400 million of new Electric Transmission assets were placed into service, including Phase 2 of the Mt. Storm-to-Doubs rebuild project. New connects were just under 31,000 in 2012, which is a 28% increase over 2011 and weather normalized kilowatt hour sales growth at Virginia Power was 1.5% over 2011. Service reliability continued to improve as Dominion Virginia Power set a record for the lowest number of minutes out for the year. The company was also honored by EEI for excellent storm response and for aiding utilities in the Northeast following Hurricane Sandy. 2012 was a very busy year for Dominion Energy, our natural gas infrastructure business. In September, the Appalachian Gateway project was completed, providing market access to conventional gas producers in the Appalachian region. In November, both the Northeast Expansion and the Ellisburg to Craigs Projects were completed. Construction of our Natrium Processing and Fractionation plant is nearly complete and the plant should be in operation this quarter. Last month, we announced that the formation of the Blue Racer Midstream joint venture with Cayman Energy. A portion of Dominion East Ohio's existing wet gas gathering system was contributed to the joint venture, and Dominion received $115 million in cash along with a 50% ownership interest in the venture. We will contribute additional assets including Natrium and the TL-404 pipeline over the next 2 years and Caiman Energy will contribute additional cash. The $1.5 billion joint venture will provide gathering and processing services to producers in the Utica Shale region. It provides greater visibility and certainty to our Utica Midstream business while also reducing our capital spending by about $450 million. We continue to work toward developing an LNG export business at our Cove Point facility. Earlier this month, the Calvert County Circuit Court agreed with our interpretation of an agreement we had made with the Sierra Club and the Maryland Conservation Council regarding permitted activity to the site. We are awaiting a license from the Department of Energy to export LNG to non-free trade agreement countries. Last month, the department released the results of their analysis of the economic benefits of LNG exports, strongly supporting projects like Cove Point. Advanced negotiations with multiple parties for terminal services agreements continue. We will provide more detailed updates of all aspects of our plans for Cove Point at our March 4 analyst meeting. To conclude, 2012 was quite a busy year at Dominion. We delivered on our commitments and advanced our growth plan. I will now turn the call over to Mark McGettrick.

Thank you, and good morning. Dominion's operating earnings for the fourth quarter were $0.69 per share, just below the midpoint of our guidance range of $0.65 to $0.75 per share. Once again, milder-than-normal temperatures, particularly in December, were a significant factor, reducing earnings by about $0.05 per share. Additionally, Dominion Retail's results were below expectations as for Millstone's due to an extended outage at Unit 2. These negatives were offset by our Blue Racer Midstream joint venture, lower operating and maintenance expenses in a lower effective income tax rate. For the full year 2012, Dominion reported operating earnings of $3.05 per share, which was below the bottom of our guidance range of $3.10 to $3.35 per share. Milder-than-normal weather in all 4 quarters reduced full year operating earnings by $0.22 per share. With normal weather, our operating earnings would have been $3.27 per share or over 7% above operating earnings for 2011. In 2012, we did manage through a number of unexpected challenges as well. Sales growth was down from our original expectations. Ancillary service revenues at Virginia Power were down due to reduced loads and our merchant generation margins were below our original expectations. However, we offset all of these earnings challenges with our midstream joint venture, lower operating and maintenance expenses, lower interest in income tax expense and higher contributions from Dominion Retail. Earnings for GAAP purposes were a loss of $0.66 per share for the quarter and a positive $1.01 per share for the full year. The principal difference between fourth quarter GAAP and operating earnings was a $731 million impairment of our Brayton Point Power Station. For the year, the major differences were the impairment charges for Brayton Point and Kewaunee. A reconciliation of 2012 operating earnings to reported earnings can be found on Schedule 2 of the earnings release kit. Now moving to results by operating segment. At Dominion Virginia Power, EBIT for 2012 was $1.1 billion, which was above the upper end of its guidance range. A strong contribution from Dominion Retail, lower operating expenses and higher transmission rate base growth offset the impact of mild weather in our electric distribution business. EBIT for Dominion Energy was $950 million, which was below the midpoint of its guidance range. The overall weakness in the storage and gas transportation markets impact the results from both the Gas Transmission and Producer Services businesses. Offsetting these factors were the benefits from our Blue Racer joint venture. Dominion Generation produced EBIT of $1.58 billion for 2012, which was below the bottom of its guidance range. Mild weather at Virginia Power and lower ancillary service revenues at Virginia Power were the principal factors driving the results for the Regulated Generation business. Lower-than-expected power prices and the Millstone outage I referred to earlier were the principal drivers for lower merchant generation contributions. On a consolidated basis, both interest expenses and income taxes came in better than our estimates. Consistent with past practices, interest expenses associated with the merchant plants now being sold were excluded from operating earnings. State tax benefits, as well as the resolution of some IRS audit issues helped reduce our overall effective income tax rate to 35% for the year compared to our original guidance range of 36% to 37.5%. Moving to cash flow and treasury activities. Funds from operations were $3.7 billion for 2012. Regarding liquidity, we have $3.5 billion of credit facilities. Commercial paper and Letters of Credit outstanding at the end of the year were $2.4 billion and were netted against short-term cash investments resulted in available liquidity of $1.3 billion. For statements of cash flow and liquidity, please see pages 13 and 26 of the earnings release kit. Now moving to our financing plans. We have issued $750 million of Virginia Power debt earlier this month. We were pleased with the market's response to our offering and we thank those of you who participated. Now, I'd like to take a minute and talk about the bonus depreciation provision in legislation that was recently passed by Congress. Once again, Dominion will realize a significant cash benefit. We expect additional cash flows of about $600 million over the next 2 years due to this change. We will detail a total impact of bonus depreciation, as well as our financing plan for the balance of the year at our March 4 analyst meeting, but you should not expect any stock buybacks or changes to our 2013 earnings guidance due to this tax change. The financing and rate-based impacts resulting from bonus depreciation fall into our stated 5% to 6% growth range. Now to earnings guidance. We estimate operating earnings for the first quarter of 2013 within a range of $0.80 to $0.95 per share. This compares with original operating earnings of $0.85 per share for the first quarter of 2012. Compared to the first quarter of last year, positive drivers for the quarter include a return to normal weather, earnings from our newly completed growth projects at Dominion Energy, sales growth at Virginia Power and higher rider related revenues. Negative drivers for the quarter include higher operating and maintenance expenses, lower contributions from Dominion Retail and a higher effective tax rate. Let me spend a minute on the pension discount rate for 2013 and the impact on Dominion. Our discount rate for the year will be 4.4%, down from 5.5% last year. The incremental pretax expense impact from this after capitalization is approximately $52 million. However, please be advised that we anticipated a lower discount rate in our 2013 guidance and the final 4.4% rate is consistent with our guidance range. Our operating earnings guidance for 2013 is $3.20 to $3.50 per share. The middle of this range corresponds to a 5% to 6% increase over the middle of our guidance range for 2012. The growth drivers for 2013 are similar to those expected in the first quarter: higher revenues from a recently completed gas project, higher rider related revenues and sales growth at Virginia Power. Negative drivers will be higher depreciation, higher operation and maintenance expenses, higher financing cost and a higher effective income tax rate. As to hedging, you can find our hedge positions on Page 28 of the earnings release kit. Since our last earnings call, we have increased our hedge positions at Millstone from 80% to 82% for 2013, from 40% to 59% for 2014 and from 24% to 37% for 2015. Our sensitivity to a $5 move in New England power prices in 2013 is only about $0.02 per share. Locking in these positions reduces the risk associated with achieving our earnings growth targets. So let me summarize my financial review. Operating earnings for 2012 were $3.05 per share. Extraordinarily mild weather experienced throughout the year reduced earnings by $0.22 per share. With normal weather, our operating earnings would have been $3.27 per share, a 7% increase over operating earnings of $3.05 per share for 2011 and consistent with our growth targets. Our operating earnings guidance for the first quarter of 2013 is $0.80 to $0.95 per share. A return to normal weather, earnings from growth project and sales growth at Virginia Power should drive these results. And finally, our operating earnings guidance for 2013 remains $3.20 to $3.50 per share. The middle of this range assumes normal weather and corresponds to a 5% to 6% increase over the middle of our guidance range for 2012. Before we take your questions, I want to highlight a few topics we will discuss in more detail at our March 4 analyst meeting. These are, first, the Cove Point export project; second, the pending sale of our merchant generating plants; third, the Blue Racer joint venture; fourth, the upcoming biannual review and pending changes to the Virginia regulatory statute and; 5, our revised CapEx and financing plans including the impacts from bonus depreciation. I would request that questions today focus on 2012 results and first quarter 2013 earnings guidance. Thank you, and we're now ready for questions.

[Operator Instructions] Our first question will come from Greg Gordon with ISI Group.

I am curious on 2 things and if you -- I missed the very beginning of the call so I apologize if you answered this, but I'd like to know what you're seeing in terms of the underlying retail competitive dynamic, and I know it's a small business for you but we see similar commentary by others about just how competitive that market is and if there's anything you see that might reverse those trends? And second, can you comment on the distribution of earnings from the Blue Racer JV? You booked a significant amount of it in the fourth quarter there right on closing. So I'm just curious how that will look in the first quarter of this year and as we go through the rest of the year.

Let me have Paul Koonce talk about Retail first and then I'll answer the Blue Racer joint venture question.

This is Paul. The retail market remains very competitive, it's always been throughout the year. I think it was made more competitive really due to the mild weather. Texas market in the fourth quarter were probably 20% milder than normal. That, combined with low commodity prices, just produced a very competitive environment. The other thing that's driving this is the expansion of what I would call retail aggregation. That's certainly having an impact on the market and I'm pleased that the Ohio Public Utility Commission has started a proceeding to really look at whether aggregation is what I would call true retail choice. I think until we work through some of those dynamics, I think it's going to be a very competitive marketplace out there. Mark?

Greg, onto the joint venture. We posted, when we announced the joint venture, anticipated cash earnings from this venture for the incentive to drop down certain assets and that's on our website. But in terms of asset contribution, you should think about, on average, over the next 3 years, about $100 million of contribution to the joint venture given to Dominion to put these -- to bring some underperforming assets in. In addition to that, we will receive proceeds from the joint venture for assets that are in them as well based on a 50-50 sharing with Caiman and we will go over on March 4, the strategic value of this joint venture, which we think is significant and has been overmissed or overlooked by investors. It allows us to eliminate $250 million in capital. It provides very clear midstream earnings for us for at least 3 years and it provides us a foundation that we think should grow significantly in Utica region both in the South in the Central and in the North. So we'll talk about that on the 4th.

Our next question will come from Paul Fremont with Jefferies. Paul B. Fremont - Jefferies & Company, Inc., Research Division: Just following up on Blue Racer. When I look at the Dominion Energy income statement, where -- under which line items does Blue Racer fold in? Is it like an equity contribution line that's included in one of the numbers or how does it fit?

It's going to show up in 2 places, Paul. The one in December showed up as a credit to O&M. So lower O&M expenses. In the future, you're going to see it show up in that line. You're also going to show it up in the Dominion Transmission and the Dominion East Ohio line depending on what assets are earning. So it'll show up in 3 different places and we'll highlight those each quarter for you. Paul B. Fremont - Jefferies & Company, Inc., Research Division: And in terms of the transmission in East Ohio, would that be in revenue or where?

It should show up in revenue, but it will be a separate line from regulated distribution contributions. Paul B. Fremont - Jefferies & Company, Inc., Research Division: My next question has to do with Hastings. It looks like -- well, the volumes for liquid sales in 2012, I think, are 165 to 175. That goes down in 2014 to 120 to 130. What's driving the declining volumes that you're putting through Hastings? Is there less drilling activity there?

It's not the volumes going through Hastings. The difference there are the volumes that are attributable to Natrium and since Natrium will be dropped into the JV in 2013 and beyond, we removed those move from the hedging volumes that are shown in that table. Paul B. Fremont - Jefferies & Company, Inc., Research Division: Right. But Hastings -- I mean, but Natrium wasn't in '12, right?

It was not online in '12. Paul B. Fremont - Jefferies & Company, Inc., Research Division: Okay. So but the -- and your numbers start at 165 to 175 without Natrium and assuming that all of Hastings were removed, you're still looking at much, much lower volume levels.

Let me let Gary Sypolt expand on that.

Actually, the other piece of that is there's some movement in 2012 from key poll volumes at Hastings to fee-for-service which basically reduces our exposure to commodity prices on liquids in the future. Paul B. Fremont - Jefferies & Company, Inc., Research Division: Got it. And can you give an idea on a percentage basis, how much shift there was in the total volume?

It's about 15%. Paul B. Fremont - Jefferies & Company, Inc., Research Division: And in terms of total fee versus the total output, should we assume roughly 15% then or is it greater in terms of fee-based?

No. That is the amount that would move to fee-based. Basically the fee-based replaces key poll type volumes. Paul B. Fremont - Jefferies & Company, Inc., Research Division: And then my last question is how much of the interest expense benefit is caused by the movement of the plants?

In 2012? Paul B. Fremont - Jefferies & Company, Inc., Research Division: Yes.

About $35 million.

Our next question comes from Dan Eggers with Credit Suisse. Dan Eggers - Crédit Suisse AG, Research Division: First question, I guess, just on where do you guys come out on the 2-year earned ROEs for VEPCO under the binary review process?

We are completing the calculations but it's below 10%. Dan Eggers - Crédit Suisse AG, Research Division: And you guys are going to file that the last week of March when you file the review in the rate case?

Yes. Dan Eggers - Crédit Suisse AG, Research Division: Okay. Can we talk a little bit about the generation fleet and kind of what you're seeing trend-wise between -- and at VEPCO between gas generation and coal generation from market share and are you shifting back to more coal from gases if gas prices come up?

This is Dave Christian. We're seeing and project continued use of gas. We're seeing gas burn is up and coal burn is down slightly. Although we may have reached close to the limits of what some people call gas switching because the gas is running close to 80% capacity factors. Some of them greater than 80% capacity factor. Dan Eggers - Crédit Suisse AG, Research Division: And I guess just to make sure. I know you guys kept referencing the 5% to 6% but we're still -- you're still comfortable with that as the long-term growth rate here forward?

Yes.

Our next question will come from Paul Patterson with Glenrock Associates.

Just a quick follow-up on Greg's question on the Retail business. You guys made some comments on aggregation, and I wasn't clear exactly what they were. I was wondering if you could just clarify a little bit what that had to do with Dominion Retail in terms of how you saw that impacting it.

Paul commented in that in the last quarter's call, and we'll go ahead and have him comment on it again.

The only observation I would make is, for example, when the city of Chicago takes 1 million customers and they put that into an aggregation business, that 1 million customers that really are not participating in retail choice. I view the aggregation business as a wholesale business with a retail load shape. It doesn't really -- the math doesn't work from a true retail perspective so what you end up with is the retail marketers really competing for the remaining market share, and that's where I commented about the Ohio PEC has initiated a proceeding to look at what role does aggregation play and what role does the provider of less resource play in either enhancing choice or frustrating choice. We think it frustrates choice.

I see. So maybe a change -- are you guys looking for changes like what we're seeing in Pennsylvania and what have you, like that?

Yes. We think Pennsylvania is a very good choice market. Texas is very good choice market. There are examples out there but Pennsylvania is one that we're very active in and we've have had a lot of success.

Okay, got you. So then just if you could update us on what the asset value of the merchant plants are for sale?

We'll update you on where we are on that, Paul, on March 4.

And then just on the pension statement that you made. I noticed in the earnings kit on Page 27 there's other changes in comprehensive income and how that had flipped around pretty significantly in the quarter and I was wondering is that the reason why? I know that there's also nuclear decon, other things in there, is that -- could you just tell me what -- it's about $300 million plus move. I was wondering what might be happening there?

Sure, Paul. We'll ask Scott Hetzer to answer that.

Paul, you're exactly right. The biggest reason for the increase in the negative AOCI balance is due to pension, about $270 million worth.

And that's associated with the adjustment that was mentioned by Mark earlier, right?

That is correct, the discount rate.

Our next question will come from Paul Ridzon with KeyBanc.

It was answered.

Our next question will come from Jonathan Arnold with Deutsche Bank.

A couple of my things were answered already, but I just -- I'd like to ask on the DOE and exports and the study that you referenced. Do you consider that debate to be sort of effectively over or are you at all concerned about some of the noise coming out of the Senate committee and Senator White and his office in particular about that needing to do more analysis and just any perspective you can give us on that?

Well, sort of from a macro view, I think we've learned that no debates in Washington are ever over but I'll come out from this perspective. Let me answer for us. We're third in the queue at BOE. We're the only project on the East Coast, significant project. I know there was just another one announced at Elba. We're going to be the only one that exports Marcellus and Utica shale gas. We are moving right along. We have work to do. We'll give you a more comprehensive report in March, but there have been -- I don't know how many we're up to now, 20? There's lots and lots of projects that have been announced, which I compare to about 10 years ago on when about 40 LNG import facilities were announced, and I think we ended up with 5 or 6 or 7. And I expect we'll end up with that same number. My belief is that the market will end up determining how much gas is exported because it's not going to be anywhere near the amount of projects that have been announced.

Our next question will come from Stephen Byrd with Morgan Stanley.

I just wanted to look at the Retail business a little bit further. You had a good year overall in terms of margin improvement there. In the fourth quarter, it was down a bit and you referenced both Texas weather as well just overall competitive conditions. Was that -- the drop in the fourth quarter, was that primarily Texas weather or was it a fairly even mix between the weather impact, as well as just generally strong competition?

It's really 3 drivers. We'll ask Paul to answer that.

Well, yes, I would -- it's the weather, it's the strong competition and the combination of low gas prices, which has -- it wasn't just in Texas, the mild weather was really throughout the entire mid-Atlantic, Midwest and Northeast. So I'd say the 3 things: the mild weather, competition and enhanced by low prices.

And then just on, broadly, as we look at 2013 guidance, what was the underlying sales growth sort of range that you're factoring into your guidance?

Stephen, we're factoring about 2%.

Our next question will come from Michael Lapides with Goldman Sachs.

Just curious looking and following up on that question about demand, looking back at weather normalized domain in Virginia coming in below your expectation and when you think forward a little bit as well. How does that impact your view on potential pension capital spending levels in Virginia? Meaning, is it not a major impact because it's kind of a 1-year blip or a 1- or 2-year downtick or could it have a significant impact when you think about multiple years of potential CapEx levels there?

I think, Michael, we view it as a blip. We have stronger new connect issue than we had last year. We expect to have stronger new connects in '13 than we had in '12. We still grew 1.5% weather-normalized, our sales growth driven heavily by data centers, almost half of our growth. So we think on the CapEx side, we have a good handle on it for the next couple of years. You shouldn't expect a big pickup or a big drop-off.

Mark, one question on the bonus D&A, the $600 million referenced on that slide. Is that spread evenly over 2 years or is that $600 million per year?

I'll talk more on the 4th but generally, it's about $250 million or so in the first year and the balance in 2014.

This does conclude this morning's teleconference. You may disconnect your lines and enjoy your day.

Thank you.