Bob Bondurant - CFO Ruben Martin - CEO Joe McCreery - VP, Finance and Head, IR Wes Martin - VP, Corporate Development.

Ethan Bellamy - Baird Gabe Moreen - Bank of America Merrill Lynch Selman Akyol - Stifel Charles Marshall - Capital One Mike Gyure - Janney.

Good day, ladies and gentlemen and welcome to the Martin Midstream Partners Fourth Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time.

[Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to CFO, Bob Bondurant. You may begin..

Thank you, Leanne, and to let everyone know who is on the call today, we have Ruben Martin, our CEO; Joe McCreery, VP of Finance and Head of Investor Relations; and Wes Martin, VP of Corporate Development. Before we get started with the financial and operational results for the fourth quarter and the year, I need to make this disclaimer.

Certain statements made during this conference call maybe forward-looking statements relating to financial forecast, future performance and our ability to make distributions to unitholders.

We report our financial results in accordance with Generally Accepted Accounting Principles and use certain non-GAAP financial measures within the meanings of SEC Regulation G, such as distributable cash flow or DCF and earnings before interest, tax, depreciation and amortization or EBITDA and we also use adjusted EBITDA.

We use these measures because we believe it provides users of our financial information with meaningful comparisons between current results and prior reported results and it can be a meaningful measure of the partnership's cash available to pay distributions.

We also included in our press release issued yesterday, a reconciliation of EBITDA, adjusted EBITDA and distributable cash flow to the most comparable GAAP financial measures. Also included is our annual adjusted EBITDA comparison to guidance.

Our earnings press release and our 10-K which was also filed yesterday are available at our website martinmidstream.com.

Before I speak on both our fourth quarter and on annual performance, I am going to turn the discussion over to Joe who will speak on our recently announced Hondo Asphalt Terminal drop-down acquisition and our related financing plan..

Thanks Bob, good morning everyone. We are going to slightly amend the call sequence this morning, as I will start with an overview of the Hondo Asphalt Terminal Acquisition we announced in yesterday's press release.

The partnership has entered into a definitive agreement to acquire the Terminal from Martin Resource Management for an all-in purchase price of $36 million including remaining capital expenditures of $8.6 million. For a long-term Asphalt throughput agreement with MRMC, we expect to generate approximately $5 million in annualized EBITDA.

This attractive drop down purchase price multiple allows the partnership to acquire the terminal on an accretive basis restoring modest growth. By way of background, Hondo Texas is located approximately 40 miles west of San Antonio. It is ideally situated to capture the growing demographics of South Central Texas.

Our facilities strategically located near multiple aggregate quarries, and numerous hot mix plants. With regards to the asset specifically, Hondo is approximately 70% constructed. Asphalt per facility will be supplied by rail from both pad 2 and pad 3 refineries.

Once completed, the facility will have storage capacity of approximately 178,000 barrels for 32,000 tons along with processing and blending capabilities. Final completion is expected in the late second quarter of 2017 and MRMC's long-term throughput agreement commences July 1.

Asphalt storage operations began earlier this month as MRMC is already able to utilize storage facility and capacity. The terminal will further benefit from MRMC and MMLP's extensive asphalt internally handling capabilities. To fund the acquisition, after market closed yesterday, we launched and priced an equity offering of 2.6 million common units.

Given the relative size of this offering, we believe this overall transaction will be both accretive and delevering in nature. The drop-down is to scheduled to close commensurate with the equity mid next week. I’ll pass to Bob..

Thanks Joe. Now I'd like to discuss our fourth quarter performance compared to the third quarter and also discuss our annual performance compared to our guidance. For the fourth quarter we had adjusted EBITDA of $52.3 million compared to $33.3 million in our seasonally weakest quarter the third quarter.

Our distributable cash flow for the fourth quarter was $35.8 million which provided a quarterly distribution coverage of 1.98 times. This distribution coverage ratio for the quarter was the strongest quarterly coverage in the 14 year history of MMLP.

For the year we had adjusted EBITDA of $176.6 million compared to the beginning of the year guidance of $183.6 million, a shortfall of $7 million.

However giving effect to the previously disclosed tariff reduction and correspondingly reduced forecasted distribution from West Texas LPG, our beginning of the year guidance would have been reduced by approximately $7 million, the amount of our shortfall.

Now by segment I would like to discuss our fourth quarter operating performance and also our annual performance compared to guidance. In our natural gas services segment, our fourth quarter adjusted EBITDA was $28.1 million compared to $14.6 million in the third quarter.

Included in our natural gas services segment was an adjustment of $3.8 million in unrealized mark-to-market losses in the fourth quarter and $0.7 million in unrealized mark-to-market gains in the third quarter. These derivative instruments are used to hedge our NGL inventory.

Also included in adjusted EBITDA was $1.4 million in distributions from West Texas LPG in the fourth quarter and $1.8 million in distributions from West Texas LPG in the third quarter. The significant seasonal increase in cash flow between quarters of $13.5 million for natural gas services segment was primarily from our butane logistics business.

As a reminder, we build butane inventory for refinery customers in the second and third quarters and then sell these customers butane in the fourth and first quarters of the year. We primarily utilize our North Louisiana underground storage facility which is serviced by truck and rail to facilitate our logistic services for these refinery customers.

Now for the year our natural gas services adjusted EBITDA was $78.7 million compared to the beginning of the year guidance of $84.2 million, a shortfall of $5.5 million. This shortfall is primarily attributable to our reduced distributions from West Texas LPG.

We had forecasted to receive approximate $14.4 million but warned midyear that EBITDA would be reduced by approximately $7 million. As we have discussed in previous earnings calls, the Railroad Commission of Texas issued an order in March 2016 to have West Texas LPG revert back to lower tariff rates in place at June 30, 2015.

This was in response to complaints regarding new tariff rates from certain shippers on the pipeline. A hearing on the merits is scheduled in front of the hearings examiner for the week of March 27, 2017. So in giving effect to the tariff reductions, the segment actually outperformed full-year guidance by $1.4 million.

Now looking towards the first quarter of 2017 we should have another exceptional quarter in our natural gas services segment. Based on our inventory levels and related carrying costs, we expect we will have another strong performance from our refinery butane logistics business in the first quarter.

Refiners are continuing to demand butane for blending into gasoline as vapor pressure rules remain relaxed until April 1. We also expect consistent cash flow performance from Cardinal Gas Storage through its firm storage contracts and from continued incremental revenue generated by its interruptible services.

Now in our Terminalling and Storage segment, our fourth quarter adjusted EBITDA was $16.7 million compared to $17.1 million in the third quarter. The primary cost of the reduction of cash flow between periods was from our packaged lubricant business as we experienced a 20% decline in volumes sold and a 10% decline in margins.

However the fourth quarter is always the weakest quarter in our packaged lubricant business and we expect improvement in cash flow from this business in the first quarter relative to the fourth quarter.

Also in our Terminalling and Storage segment in the fourth quarter, we took a non-cash impairment charge of $15.3 million primarily for refinery projects that are no longer economically viable.

However, some of the equipment related to these projects have value to interested parties and we have recorded the estimated remaining value on the balance sheet as assets held for sale. The ultimate cash collected for these assets held for sale will be used to pay down our revolving credit facility.

Offsetting these impairment charges was a gain of $35 million primarily from the previously reported sale of our Corpus Christi Terminalling assets. This gain is recorded in other operating income in the Terminalling and Storage segment.

Now for the year our Terminalling and Storage segment had adjusted EBITDA of $69.5 million compared to our guidance of $72 million. The primary miss to guidance was from our lubricant packaging business which miss to forecast by $3.6 million as a result of reduced volume sales and reduced margins as a result of weaker customer demand.

We have recently seen this trend continue for packaged lubricants so we've expanded our region to the packaged grease market until we can grow the cash flow of this business as a result of our expansion into these new grease markets.

Looking toward the first quarter of 2017, we will no longer have cash flow from our recently sold Corpus Christi Terminal assets which accounted for adjusted EBITDA of $2.2 million in the fourth quarter.

However we will see consistent cash flow from our specialty and shore-based terminals and should see stronger performance from our packaged lubricant business as we come out of it seasonally weakest fourth quarter.

Now moving to our Sulfur Services segment, our fourth quarter adjusted EBITDA was $8.7 million compared to $2.5 million in the third quarter. Our fertilizer business had an increase in adjusted EBITDA of $5.4 million and our pure sulfur byproduct business had an increase in adjusted EBITDA of 0.8 million.

As you may recall we had our ammonium sulfate plant down for turnaround the entire third quarter which negatively impacted third quarter performance. This plan was fully operational in the fourth quarter which positively impacted fourth quarter performance when compared to the third quarter.

Our pure sulfur byproduct business increasing cash flow was primarily a result reduced marine operating expenses which were unusually high in the third quarter. Now for the year, our Sulfur Services segment had adjusted EBITDA of $35.1 million compared to guidance of $29.3 million.

Our fertilizer business exceeded forecast by $3.7 million and our pure sulfur byproduct business exceeded forecast by 1.3 million. The recent maintenance capital investments we have made in our fertilizer business in the last few years translated to reduced maintenance costs in 2016 helping us to exceed our fertilizer guidance.

Our pure sulfur byproduct side of the business saw increased volume and reduced expenses in our prilling operations helping this business line to also exceed guidance.

Looking towards the first quarter we should see an increase in our fertilizer cash flow as demand for fertilizer will increase in the first quarter relative to the fourth quarter due to the start of the agricultural planning season. The first quarter performance of our pure sulfur byproduct business should be similar to the fourth quarter.

Now on marine transportation segment we had adjusted EBITDA in the fourth quarter of $2.5 million compared to $2.4 million in the third quarter. We maintained approximately 90% utilization of our inland equipment for both the third and fourth quarter and rates were consistent between periods as well.

Additionally we have continued to lay-up and sell our older offshore and inland marine equipment and as a result took an impairment charge of $11.7 million in this segment in the fourth quarter. After the impairment charge we have reclassified the remaining value of these impaired assets to assets held for sale on the balance sheet.

We will use the cash raised from these marine asset sales to pay down our revolving credit facility. During the first quarter of 2017, one inland tug and one offshore tow have been sold. Annual expense savings from the sale of these assets should be approximately $1 million.

Now for the year, our marine transportation segment had adjusted EBITDA of $8.1 million compared to guidance of $14.2 million. The primary reason for this guidance miss was the weak inland barge market which has been driven by the oversupply of tank barges.

This has led refiners shifting - to shifting from longer-term contracts to shorter-term contracts and also spot market contracts at reduced rates. Because of these market conditions we continue to shrink our fleet of older inland equipment to reduce our fixed cost and to position ourselves as a stronger marine carrier when the market rebounds.

Looking towards the first quarter we anticipate our marine transportation cash flow to be similar to the fourth quarter as we continue to navigate our way though this soft inland market conditions.

Finally, our partnership's unallocated SG&A cost, excluding non-cash unit compensation expense was $2.9 million in the fourth quarter compared to $4 million in the third quarter. our maintenance capital expenditures and turnaround costs for the fourth quarter was $4.8 million and were $19.2 million for the year in line with our range of guidance.

For the overall partnership looking towards the first quarter, we should see continued strong performance from our two primary seasonal business lines of butane logistics business and our fertilizer business. As a result, we should again have very strong DCF coverage in the first quarter and should see continue deleveraging of the business as well.

Now would like to turn the call back over to Joe to discuss our balance sheet and its related leverage ratios..

Thanks again, Bob. I'm going to walk through the debt components of our balance sheet and our bank ratios at year end. On December 31, 2016 the partnership's balance sheet reflected total long-term funded debt of approximately $808 million.

Our balance sheet funded debt is shown before unamortized debt issuance and unamortized issuance premiums, as actual funded debt outstanding was $817 million. Reconciling this amount at year-end our revolving credit facility balance was $443 million and the notional amount of our senior unsecured notes was $374 million.

Thus our total available liquidity on December 31 was $221 million based on our $664 million revolving credit facility. For the quarter and year ended December 31, 2016 our bank compliant leverage ratios defined as senior secured indebtedness to adjusted EBITDA and total indebtedness to adjusted EBITDA were 2.66 and 4.91 times respectively.

As mentioned in the earnings release, this represents an improvement of approximately 30 basis points compared to our September 30 third quarter ended level. Reduce working capital through NGL inventory reduction and improved quarter-to-quarter cash flow as Bob highlighted drove the leverage improvement.

As anticipated, we were able to achieve full year cash guidance from our butane business in calendar 2016. That said, our effective butane season continues and looking ahead to the first quarter we anticipate further inventory reduction in a favorable price environment thus further reducing working capital related debt and generating cash flow.

Our bank compliant interest coverage ratio as defined by adjusted EBITDA to consolidated interest expense was 4.16 times.

Looking at the balance sheet, total debt to total capitalization on December 31 was 72.4%, an improvement of approximately 2% from the third quarter again reflecting the working capital decreases in our business during the fourth quarter. On December 31, 2016 the partnership was in full compliance with all banking covenants, financial or otherwise.

And finally before I move to Q&A, I have one administrative note this morning. MMLP will host its Annual Analyst and Investor Day, the afternoon of Thursday, March 23 in Dallas, Texas. All those on the call are welcomed to attend and for further details and registration please visit our website. Leanne, this concludes our prepared remarks this morning.

We would now like to open the lines for question-and-answers. Thank you..

[Operator Instructions] Our first question comes from James Spitzer with Wells Fargo. Your line is open..

Good morning. This is Mark [indiscernible] calling in for James Spitzer. Couple of quick questions here. Given that your bonds are now trading above par and are callable, wondering what your thoughts are on refinancing..

Yes Mike, this is Joe, good morning. We have noticed certainly uptick in our bonds and the price behavior certainly as the markets tighten, we're also aware of a very, very frothy bond market currently and so there seems to be pretty receptive market.

That said I think our call date was yesterday to your point and so we continue to value those - evaluate those and look at from a long-term perspective the moving parts in our capital structure.

One of the luxuries I would say of having a robust coverage ratio is the ability to do things in the capital structure such as term out debt through the bond market. So we'll continue evaluating those and working with advisors to do so..

Okay. Thank you.

And second question, could you please provide some more detail on potential growth projects for 2017 and also 2017 CapEx?.

Yes, this is Wes. In terms of just amount of CapEx that we're looking at for 2017, we've got currently in the hopper if you will not necessarily budgeted at this point in time but let's call it up to $20 million of growth CapEx.

I think as it relates to specifics on that, I think we will be able to provide a little bit more color in late March but the focus of that investment as we sit here today is really on really two different segments, the natural gas storage piece - the natural gas services segment and then the Terminalling and Storage segment as well.

So I think and as it relates to funding of those CapEx issues, investments if you will, we don't see any need to access the equity market as we sit here today to do that we've got excess coverage, excess distributable cash flow that we can use to fund those investment.

But as we sit here today - that's where we sit and we will provide additional guidance or commentary on that at our Investor Day presentation..

Okay. Thank you very much..

And our next question comes from Ethan Bellamy with Baird. Your line is open..

Good morning guys. Nice quarter.

What was the volume on the West Texas LPG in the quarter? And what is your outlook for volumes for the rest of the year given the Permian mania?.

The volume West Texas LPG in the fourth quarter was 183 million a day, excuse me, 183,000 barrels a day. Outlook is - that's been stable, but we - there are customers talking just to add to the to the volume flow so we think it will strengthen as we move to the year.

Further reduction of that number down to 183 was a result of freezes, as cold weather hit. So first quarter is always our lowest volume quarter because of that reason..

And looking out let's say to 2018 or beyond, do you see a need for to expand capacity in the future just given how much fuel CapEx is going out there?.

This is Wes, I’ll comment on that and then turn it over to Ruben or Bob to have additional. I think as we sit here today, given the sort of location of our pipe and the total current capacity, I mean the pipe is essentially at 240,000 barrels a day pipe.

So we'd have to see pretty material improvements across that system particularly out of the west side of the system if you will to go and spend additional capital because we do have the capacity on the line. So as we sit here today, I don't see any large capital expenditure items.

We may have some connections and such to different plants that will roll through that investment, but as it relates to a large-scale expansion right here as we sit, it's kind of hard to say but right now, we’ve got to fill up the capacity that we’ve got on the pipe as it exist today..

Okay. That makes sense. Turning to gas storage, Cardinal looks pretty solid. I know that's termed out. Question is how - what’s the weighted average contract life there? And do you have any significant renewals coming up? And then sort of separately with the rally we saw in gas prices over the winter.

Did that change spot market demand rates at all, and how do you see rates on gas storage trending generally?.

Sure. So we recently - well, to answer your first question on the weighted average life of the contract, we’re looking at about plus or minus four year weighted average life on those contracts as we sit today, so still pretty strong on that from that standpoint.

We recently held open seasons that Arcadia and Monroe for about - I can’t remember the total capacity, but it was somewhere in the 8 to 9 DCF capacity range.

And I'd say on the whole, that process and the outcome of that process was as expected, I will comment that as it relates to term, link to the contracts that people were asking for I think we saw some interesting aspect to that and people wanting to extend terms and go out further which I think is positive for us in the long run.

We also just launched an open season for Perryville that will be going on over the next month or so. So as it gets to Investor Day, we’ll have a little bit more color on where we go there. I will comment on the current rate. If you look at spreads, spreads have come in.

So if you're just looking at intrinsic value on the storage basis, it’s not a great market, but I will say again that the feedback that we've got from customers, particularly as we’re looking into some of this new open season going forward, there is interesting extending contract and some improvements, just some overall improvement in rates on relative to just looking at intrinsic values.

So I think that's sort of slightly positive from our perspective. Again, the interruptible at our facilities continues to be strong. And so I think overall, as you commented, we’re still optimistic on that business, and have seen it be pretty strong here in the last 12 months..

Okay. That's helpful, Wes. And then with respect to the tariff on West Texas LPG, if I heard Joe correctly, we're going to have the Analyst Day four days before that hearing.

So I know that will be a question you guys just then, can you handicap expected outcome on that? If you like, you have a extremely solid case, has anything changed since the last time you talked about it?.

Well, we believe that the majority of our customers can basically switch to other pipelines if need to and most all of the other pipelines in the areas that they can switch to have a higher tariffs then we do at that time.

So, we feel that and in the State of Texas that market base type rates are going to continue to prevail and so we feel good about it but until you’ve actually been through the system and had the hearing there is no way we can comment..

All right, that’s helpful.

And then lastly, I am overstaying my welcome here but Ruben I want to ask him one old man on the mountain question which is - what's going to happen to the old market?.

It's going to go up, down or stay the same. So, as pretty much my wisdom from top of the mountain..

All right, thanks guys..

And our next question comes from Gabe Moreen with Bank of America Merrill Lynch. Your line is open..

Hi, good morning. Most of my questions you have hit on, just quick question in terms of just taking capacity out of the large market, I’m just wondering what you think we are think we are in that process and to what extend you've seen some competitors take capacity out and just take us broader picture thoughts.

In terms of how much longer that might be go there?.

I don't know the exact link. I think we got at least another year. We are seeing barges come out market, older vessels coming out of market.

It does feel like that the rates have lowered but we don’t really them increasing at this time but I think we got at least another year of weaker market rates and that’s generally kind of what we're forecasting when we do roll out our guidance..

I think that's right, Gabe, this is Joe, further to Bob's point, not knowing with any certainty how long this is prolonged. We've been pretty aggressive on cost cutting as you can see.

So, that’s what we can control and I think that's what we need to focus as continue to divest of our non-commercial or less commercially viable assets and be very focused on SG&A and OpEx in our system..

Thanks. And then may be just turning to questions - couple of questions on the activities at the private company.

One is just an update may be on kind of the commodities marketing business there how that’s going whether you are expanding stay in the same or what not and then also just in terms of any other I guess asset development activities upstairs?.

Yes, so I'll start. It's been pretty much business as usual for 2016 let's call it with respect to some good markets in our byproduct lines which is our sulfuric acid in our asphalt businesses, those are somewhat cyclical in nature on the downstream side. So those had nice years.

Some of our other businesses were little more challenged but nonetheless we continue to move forward.

I think from a asset development perspective there are some ideas that are out there that could dealt to have some of the things that Wes was talking about perhaps we can get into little further detail at the Analyst Day but all in all we continue to move forward..

And I’ll just add is that, boy when you look at all of the ancillary businesses that we have even not in the MMLP like our trucking business and some of our truck types of businesses, we're seeing our increase, we do feel like it's forward, we're seeing slight increases in the business, we’re seeing it in truck sales through East Texas.

So, we've seen a lot of things that are positive so I believe like our marine business we probably seen the floor now whether or not it's not going to be a massive uptick anytime soon nowhere to answer but I do believe we’ve seen the floor and we are seeing some optimism in some of the volumes and some of the margins and so forth that we've seen out there but we still have a long way to go but it is at least only upright instead of continuing to decrease..

Got it. Thanks guys..

Our next question comes from Selman Akyol with Stifel. Your line is open..

Thank you. I've got almost everything, I guess just one quick question. In terms of the assets held for sale how long do you think that’s going to take actually be realized and how is that old process going in terms of managing the balance sheet..

Yes, I would say the assets held for sale in the Terminalling segment we are under contract - the company is looking at it, has to make a decision an option decision by the end of this month.

So I’m cautiously optimistic we will liquidate that in the first quarter and on marine asset side, like I said we sold one offshore tow and one inland tug we have, I believe four other inland tugs and two inland barges for sale really no visibility on that hopefully we'll sell those throughout the year this year..

All right, thanks very much..

[Operator Instructions] And we do have a question from Charles Marshall with Capital One. Your line is open..

Good morning guys, congrats on a strong quarter.

As I think about modeling out 2017 relative to 2016 and understandably there is a lot of moving parts here but and I'm sure you will give lot more color and official guidance in March but how do you think 2017 shapes out relative to 2016 on an adjusted EBITDA basis, I mean are you guys thinking slightly down to kind of flattish, I mean could you guys give us any sort of trajectory of how we should be thinking about 2017 with all these moving parts?.

Yes Chuck, this is Wes. I will give you a couple of comments, I think we had indicated to the markets back in October from a distributable cash flow coverage basis that we were looking at something in the 1.2 range that continues to be the case for 2017 even post this equity offering.

Again the dropdown multiple in economics have a pretty attractive for MMLP, so as we sit on a DCF coverage basis we are still looking at 1.2 times for 2017.

On an adjusted EBITDA basis I think if you look at what we did last year and adjust for pulling out the Corpus Christi Crude terminal assets for that business - yes asset for that EBITDA that was associated with that was about I think $11 million or $12 million plus or minus, so that would get you back to call it 160 to 165 range and somewhere in that general range I would say probably $150 million to $160 million - $155 million to $160 million is what we are going to ultimately come out with..

And then to that number that Wes described we believe there is some upside with the positive West Texas LPG ruling..

Hi Chuck, this is Joe, I don’t think the years are too dissimilar making the adjustments that Wes alluded to adding in Hondo, taking out Corpus and to Bob's comment with West Texas kind of in the 7, 8 run rate we're just nothing but upside pinning the railroad commission outcome..

That's great guys, thanks for the color.

And as you guys continue to remove some of the older fleets within the marine business, can you talk about if you have any sort of - I guess planned to drydockings, scheduled for 2017 and where we should expect that to land in terms of what quarter?.

I think it's a wide year this year, I'm looking at trying to find the table here, $1.5 million is all this year and to be frank I'm not sure which quarter that is. I think it might be in the second quarter but I'm not for sure..

Got it.

And I guess switching over to gas storage, are you guys evaluating and I guess depending on how these open season shake out and recontracting efforts but is there any plans or at least you guys contemplating at all about possibly converting these drydown caverns over to NGL use, is that a math sort of on the table for discussions depending on - again where these open season shake out?.

This is Wes, I'll comment and then Ruben if you have additional commentary. At this point in time, we are not - if you think of our system and we got 50 plus DCF, two of those are reservoir and - two of those facilities are reservoir, two are [sell bond] [ph] and those sell bond storage caverns are pretty massive in terms of the payroll.

We got 8.5 DCF cavern there and in Arcadia we have 15 plus or minus DCF there. We do have some of those are smaller caverns and should the opportunity arise we would look at that but as it sits today I'm not aware of us making any decisions basis converting those at this point in time..

And some of the optimism in that business with some of the numbers that we are hearing going into the next year or so are a little bit better and right now it would be - it will not be economical to make those conversions especially in our locations we are not in the locations that would be conducive to owning wells that large for NGLs.

Now we have NGLs are associated with it at in North Louisiana we have lot of NGL storage there and we have planning in. So I do not see conversions at this time..

Last one from me and as it relates to potential recontracting rates as you are seeing maybe some improvements there, that's relative to call it $0.35 to $0.04 market rate at some of those facilities Arcadia, Monroe should we - is that right that sort of the baseline floor you would say for recontracting those..

Yes, right I won't comment on specific facilities but I think on the whole if you aggregated sort of that - those two capacities I think that’s roughly - that’s what where that the intrinsic value is plus little bit of extrinsic value. So I mean that’s a fair comparison, may not be exact but we....

We would recontract long term at those rates. We would keep that short term because we are seeing better, better things coming in for long term..

Got it, guys. Thank you..

And our next question comes from Mike Gyure with Janney. Your line is open..

Good morning. Could you guys touch may be a little bit more on the lubricants business. I know you take some impairment there and just maybe I guess how you see that business putting in sort of grand scheme of things over the next year or two..

Yes, the impairment charge was a real estate asset we have still in Kansas City was a significant, it really wasn’t from the business itself as more real estate value. It's been a competitive market on the package lubricant side. There is generally I would say over supply in that market where there is a niche for us though is in the Greece market.

Greece is basically lubricants and you add soap to make Greece and we have over the course of last two to three years, doubled the cash flow in that business roughly on the Greece side. So, that’s where we’re going to focus. The package lubricant was impacted by the fall in the energy markets.

We had a big customer base that was demanded from those markets. We are guardedly optimistic that that's going to improve as the energy space continues to strengthen as crude firms up at these levels. So, yes it's been disciplined in the last two or three years but we do see some visibility of some increase in cash flow going forward..

Okay. And then on the note receivables that you're going to collect, it looks like potentially here in the first or second quarter, have you seen the proceeds for that that can be used to pay down debt or may be if not..

Yes, that is pure debt pay down insurance..

It's spread out significantly. .

Great. Thank you very much..

And I'm not showing any further questions at this time. I'd now like to turn the call back over to Ruben Martin for any further remarks..

Thank you.

And we're pretty proud of our record EBITDA and our distributable cash flow coverage of 1.98 in that core and we've got Hondo drop-down which I think could go into some other areas that will further enhance that business, good capital rate, Joe and team did a great job on that and we're going into 2017 with strong momentum and we can follow the 2017 and we do feel like that we've seen the floor in a lot of different businesses all throughout our areas and we're looking forward to 2017.

And we thank everybody for being on the call..

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