Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from [Gabi Moeen] - Merrill Lynch.
[Gabi Moeen] - Merrill Lynch
In terms of the scaled back base capital expenditures I wonder if you could elaborate a little more on that. Does that $100 million versus the $300 million annually include contract compression? And maybe you could just give a little more color in terms of what you’re not going to be pursuing given that scaled back number?
Byron R. Kelley
Yes, we’ll add a little bit to that. Obviously if you take that $100 million a year, it can move around based on some priorities. We would see a substantially higher portion of that allocated to the compression business and then with some remaining in our gathering and processing business to do some smaller things that we may want to do over that timeframe.
[Gabi Moeen] - Merrill Lynch
You feel comfortable with the returns? Is that just because compression’s highest returning and least commodity sensitive in terms of your business mix?
Byron R. Kelley
Actually if we were doing fee based gathering, that wouldn’t be commodity sensitive and I think that at this point that’s what we would be looking at. We’re going to try to direct our capital to the highest return projects but I would remind you a little bit that when it comes to our compression segment we do buy equipment in advance. You have to. So we have some commitments for compression equipment out through next year and will be a big driver on how much is allocated to them next year for that segment.
Overall both these businesses give us very acceptable returns and you remember on the compression business those returns tend to get better over time the way their contracts are structured.
[Gabi Moeen] - Merrill Lynch
In terms of the new project financing on the resized Haynesville project, should we assume that the proportion of the financing you’re looking to get for the resized project is proportional to the old project capital? In other words, it was $600 million of $1.1 billion so approximately 2/3 in terms of lining up project finance for the resized project?
Stephen L. Arata
I think the way we think about it is we’re trying to keep our long-term debt-to-EBITDA ratio around 4 times so I think initially we’re looking at financing the project with debt and then we expect to issue equity some time later next year to get the overall amount of debt down to around the $400 million number you mentioned. We would expect to initially fund up to $600 million of the project with debt and then come back and issue equity in about a year or so.
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