NuStar Energy L.P.
Q3 2018 Earnings Call Transcript

Published: 5 Nov 2018

[Operator:]

Good day, ladies and gentlemen and welcome to the Third Quarter 2018 NuStar Energy L.P 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 follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference Mr. Chris Russell, Vice President and Treasurer. Sir, you may begin.

[Chris Russell:]

Thank you, Chenille. Good morning everyone and thanks for joining us on the call today. Before we get started, I want to take moment to introduce Pam Schmidt, our new Vice President of Investor Relations. Pam has more than 25 years experience in key financial positions of NuStar, including leadership positions and risk compliance, accounting and internal audit. So, she has a thorough understanding of the Company and will be a great fit for running the investor relations department going forward. I'll be working with Pam over the coming months to help make the transition smooth one, so I'll still be talking with some of you during this transition period. With that, let me turn the call over to Pam.

[Pam Schmidt:]

Thanks, Chris, and good morning everyone. To kick the call, Brad Barron, NuStar's President and CEO; and Tom Shoaf, Executive Vice President and CFO, will go through their prepared remarks. Upon completion of their remarks Brad, Tom and other members of management in attendance will take your questions. Before we get started we would like to remind you that during the course of this call, NuStar management will make statements about our current views concerning the future performance of NuStar that are forward-looking statements. These statements are subject to the various risks, uncertainties and assumptions described in our filings with the Securities and Exchange Commission. Actual results may differ materially from those described in the forward-looking statements. During the course of this call, we will also refer to certain non-GAAP financial measures. These non-GAAP financial measures should not be considered as alternatives to GAAP measures. Reconciliations of certain of these non-GAAP financial measures to U.S. GAAP may be found in our earnings press release, with additional reconciliations located on the Financials page of the Investors website of our websites at nustarenergy.com. With that, I will turn the call over to Brad.

[Brad Barron:]

Good morning. Thank you all for joining us. We have a lot of great news to report today. Before I turn it over to Tom, let me provide you the details on our strong financial results for the third quarter. I'll go with some good news and give you some positive updates on our business. As we embarked earlier this year on our step to plan to achieve the characteristics demanded by the changing MLP sector, we did so because we believe that recovery will bring opportunities for strong growth for healthy MLPs with great assets. By executing on our plan to simplify our governance, eliminate the IDRs, strengthen our coverage, minimize our equity capital needs and lower our leverage, NuStar is now solidly positioned to participate in these growth opportunities while maintaining a healthy financial position in a strong coverage ratio. And now as 2018 is drawing to a close, we're definitely seeing many more opportunities and the MLP sector seen in several years. By far the majority of the current significant opportunities for midstream MLPs, our capital projects to solve the logistical dislocation in or for eliminating from to Permian Basin. NuStar has assets uniquely situated to benefit from these Permian driven opportunities. Off course, we expected to grow along with the Permian Basin and our crude gathering system which is located in the heart of the Midland Basin, but we are now also seeing the positive spillover as far as 300 miles to the northeast on our crude oil system in Wichita Falls, 500 miles southeast at state-of-the-art storage and dark facility in Corpus Christi and 800 miles away at our world class terminal at St. James Louisiana. The breadth of the Permian's impact shouldn’t be surprising given that it comprises the lion share production growth that has catapulted of the U.S. to be the number one crude producer in the world this year, ahead of both Saudi Arabia and Russia. And the Permian is expected to continue to be the dominant play for the foreseeable future. By 2023, the Permian Basin is expected to concede over half at over our U.S. shale production. In short, the Permian Basin's production growth is made at the dominant shale play on the planet. Thanks for the quality of our dedicated acreage in the core of the core of the Midland Basin and the top tier producers and shippers that acreage attracts. We've been benefitting and expect to continue to benefit from that growth. During the third quarter, our throughputs continue to ramp up even given the historic rains falls and for those of who outside of Texas, historic is no exaggeration. We saw around 20 inches of rain in 60 days. In fact, the September and October were the two weathers months in Texas' history. Our November nominations are 355,000 barrels per day and we continue to expect to exit 2018 between approximately 362,000 to 380,000 barrels per day that's nearly 2 times or 2017 exit rats of 200,000 barrels per day. The Permian Basin's growth has in fact and so positive in 2018, that it has inspired concerns of production may temporarily outstrip the long-haul takeaway capacity out base. Worries about impending takeaway constraints have widen differentials and incentivized shippers and producers to find ways to get price advantage WTI midland barrels to the water before the differential narrows. I want to say a few things about those concerns. Number one by way of reassurance, on our system, we work closely with our producers and they do not seem to be pumping the brakes. In fact we're hearing them affirmed or in some cases even raised their production plans. We have solid shippers with firm commitments to at least 85% of their plant production. In the Midland Basin is advantaged in connectivity and in location. Number two, we need to keep the constraint origin perspective, as problems go growing too fast it's a pretty good problem to have. In fact, what has been characterized as a Permian's constraints problem can also create opportunities for the midstream MLPs for the right assets and create a solution. For example, we completed a construction on a 10 bay 30,000 barrel per day truck loading rack, had a terminal within our Permian Crude System, which is backed by customer commitments. Last week, we loaded an extraordinary 215 trucks in a single day out of that terminal. To put that in perspective, you assume the track and rack is loading 24 hours a day that's about 9 trucks an hour, which is pretty impressive. While this has been a high cost project, it is generating great return and epitomizes just one more positive spillover from Permian growth. Our South Texas Crude System in the Eagle Ford has also benefited in recent months from WTI volumes rising by truck. We're seeing about 15,000 barrels a day over and above our throughput minimums for the system. Also we mentioned in August that we had restarted our St. James terminal unit train offloading facilities. storage tanks and docks to serve customer commitments to 5 to 10 trains a month. These trains are currently bringing Permian as well as Western Canadian barrels that were also pursuing commitments for Bakken barrels at the terminal. Based on our conversations with customers and the wide differentials, we could see the number of trains as much as double over the coming months. In addition, we are working to expand our Wichita Falls crude pipeline to accommodate additional barrels from the Sunrise pipeline expansion from Colorado City to Wichita Falls. The Sunrise connection and our related expansion project, provides our customers additional access to Permian crude, which we expect to increase as throughput and produce a healthy return for a relatively small capital outlay. As the Permian Basin's production of light sweet crude exceeds U.S. refinery demand. Those incremental barrels were likely bound for export which is projected the meaning of the U.S. will be exporting as much as 5 million barrels a day by 2023, largely from Gulf Coast exports facilities like our world class terminals in Corpus Christi and St. James Louisiana. Back in August, we talked about the preliminary development of projects to connect our South Texas system with long-haul pipeline projects in the Permian to bring barrels to our Corpus Christi North Beach Export Terminal, both for early service to allow customers to benefit from WTI midland discounts in addition of -- in advance of long-haul expansions coming into full service and long-term service for customers capitalizing on growth in U.S. exports. We’re very happy to announce that we have since reached agreement with Trafigura for a four year commitment to connect our South Texas system with a Cactus II pipeline near Oakville to transport WTI barrels on our existing 16-inch pipeline to our Corpus Christi North East Terminal. We’ll also construct a new eight mile 30-inch pipeline from a new connection in Taft, Texas to our Corpus Christi Terminal, and we will construct 600,000 barrels of storage at the terminal, bringing our total capacity from 3.3 million to 3.9 million barrels, 1.6 million barrels of which will be dedicated to Trafigura. We expect to begin providing service to Trafigura on the 16-inch pipeline as soon as next summer, and we’re very excited about this mutually beneficial opportunity to benefit from the Permian Basin’s growth. We’re also exploring additional connections of our existing South Texas system to other large pipeline projects as well as other ways to expand new NuStar's role and a projected growth in exports both in Corpus Christi and in St. James. Over the past few months, based on the projected significant growth in U.S. exports, there have been upwards of eight announcements of projects to construct offshore platforms capable of loading VLCCs, the preferred mode of transport for barrels bound for destinations like Asia. While we were skeptical of the viability of several of these projects, we’re excited about the port of Corpus Christi's recent announcement, that the port is developing a crude oil export terminal project, which will include VLCC loading capability on Harbor Island. Over the years, we've had the opportunity to work closely with the port on many occasions and appreciate their practical approach, finding commercial solutions. Because of our longstanding relationship, we have initiated discussions with port or port representatives to connect our facilities with its terminal to provide additional flexibility for our customers. While we see incremental Permian barrels as largely bound for the Texas Coast and Corpus Christi in particular, we also expect our St. James facility to benefit from the ripple effect of the Permian’s growth. As Permian barrels continue to find their way to water and major refining complexes, we’re working to make sure we participate in that opportunity at St. James as well. I want to update you on several projects beyond the extended reach of the Permian. Earlier this year, we announced project to facilitate the export of refined products in northern Mexico, backed by several long-term T&D contracts with strong creditworthy customers including Bolero. These projects are progressing on schedule and we’re forecasting incremental EBITDA from some of these projects as soon as next month. Over the past year or so, we have also been investing in our West Coast assets through a number of low cost, high return, biofuel projects to meet emerging demand in the region for biofuel storage, which commands a premium over other storage rates. While the total investment is only approximately $70 million, we expect these projects to deliver an EBITDA multiple of around 6 times. As you can see we have lot of good projects in progress, in fact we're excited about the fact that NuStar now has a deeper backlog of high-return capital projects to choose from than we’ve ever had in our history, having too many low multiple projects with high-returns much like the Permian’s production growth is another good problem to have. At the same time, we’re committed to maintain our strong fundamentals and living within our means, so we can continue to lower our leverage and ensure a strong coverage. In order to make sure we balance these competing needs properly, Tom and his team are high grading and scrubbing every project to ensure we’re efficient, strategic and judicious about every dollar. We have also been working on identifying and divesting a package of non-core assets to improve our debt metrics and last week we announced, we signed an agreement to sell our UK and European assets for $270 million, which is a multiple that well exceeds our 10 times multiple targets. It is important to note while the sale of these assets will significantly reduce our debt to EBITDA ratio, we will have almost no impact on our DCF coverage. We expect to close [indiscernible] sale this quarter. Using these sales proceed to pay down debt will improve our projected year end 2018 leverage metric from the 4.7 times we projected to around 4.2 times. And it will also allow us to utilize the proceeds from the sales of our 10 times plus asset to invest in high return projects in many cases as less than a five times multiple. Before I turn it over to Tom, let me say that I’m very pleased that the steps we’ve taken have positioned us to participate in exciting opportunities, reemerging in midstream logistics. And we’re truly excited that our 2018, 2019 capital projects and the growth we anticipate those would generate in 2019 and beyond. With that, let me turn the call over to Tom.

[Tom Shoaf:]

Thanks, Brad, and good morning everyone. Starting with our third quarter 2018 results, we generated net income of 48 million up 10 million or 25% from the third quarter of 2017, and 172 million of EBITDA up 16 million or 10% from the third quarter of 2017. EPU for third quarter came in at a negative $3.49 per unit due to a one-time non-cash charge of 377 million related to our simplification transaction which merged NuStar GP Holdings, LLC and NuStar Energy. This non-cash charge only hit EPU and did not impact our net income or EBITDA or DCF. If we exclude this charge from the calculation of EPU, our third quarter adjusted EPU was $0.13. Third quarter 2018 DCF available to common limited partners was 88 million up 22 million or 32% from the third quarter of 2017. And our distribution coverage ratio to our common limited partners was 1.38 times for the third quarter and 1.42 times for the nine months ended September 30, 2018. Third quarter 2018 EBITDA and our pipeline segment was 116 million up 20 million or 21% from the third quarter of 2017, largely due to continued throughput volume ramp on our Permian Crude System as well as increased throughput volumes on our East Pipeline System associated with our CHS Council Bluffs, Iowa acquisition earlier this year. Third quarter 2018 EBITDA in our storage segment was 81 million down 10 million from the third quarter of 2017 due to a combination of factors including the impact of decreased storage rates in certain locations due to contract renewals in a backwardated market, which was offset in part by increased revenues from our West Coast region. Our September 30th debt balance was 3.4 billion while our debt to EBITDA ratio was 4.5 times, down from 4.7 times at the end of the second quarter and below our credit agreement covenant threshold of 5.25 times. Now let me spend a few minutes talking about our projections for the remainder of 2018 as well as 2019 and 2020. During the second quarter, it was widely reported that ConocoPhillips served our St. Eustatius terminal with an order, purporting to attach the oil owned by PDVSA that was stored there. During the third quarter, we entered into a settlement agreement with PDVSA and ConocoPhillips regarding oil stored at the terminal in which the parties agreed PDVSA would transfer ownership of 600,000 barrels of crude oil to us. We would then sell the oil and apply the proceeds as a non-refundable one-time payment of fee. PDVSA has also reduced its storage position at the facility by about half, opening that storage capacity for a lease to third parties. In October, we completed the sale and receive proceeds which will cover PDVSA's storage fees through August 2019. We now expect NuStar's 2018 EBITDA to be in the range of 670 million to 720 million which includes the first quarters gain associated with cash received of hurricane related insurance proceeds discussed on last quarter's call, offset by a non-cash charge of approximately 45 million related to the upcoming sale of our European assets. If we exclude these items, we expect our 2018 adjusted EBITDA to be in the range of 635 million to 685 million. This range is higher than our previous guidance primarily due to the settlement we reached with PDVSA. With regard to capital spending, we now plan to spend 400 million to 430 million on strategic capital in 2018, the majority of which relates to the Permian Crude System and the northern Mexico project. Our revised 2018 spending represents a $40 million increase primarily for the Corpus Christie North Beach export project and our Sunrise pipeline connection. Regarding our reliability capital spending for 2018, we plan to spend 80 million to 90 million, including approximately 36 million for hurricane repairs at St. Eustatius paid for with insurance proceeds. Based on these projections, we now expect our common unit distribution coverage ratio for 2018 to be in the range of 1.3 to 1.4 times, an improvement over our projections earlier this year, and given the effect of that divestiture of our European assets, we expect our debt to EBITDA ratio to be around 4.2 times by the end of 2018 also better than what we've projected earlier in this year. Looking further out to 2019 full-year guidance, we expect NuStar's 2019 total EBITDA to be 665 million to 715 million which takes into account the European sale. This estimate assumes approximately 105 million to 115 million of general and administrative expenses in 2019 that are not allocated to our segments EBITDA results. With regard to 2019 capital spending estimate, we plan to spend 450 million to 500 million on strategic and other capital of which approximately a 180 million relates to the Permian Crude System, a 135 million is for the Northern Mexico refined products supply projects and about 75 million will be spent for our Corpus Christie North Beach terminal export project. In 2019, we plan to spend 70 million to 90 million on reliability capital, including 30 million of hurricane repairs that will be paid with insurance proceeds. Net of hurricane proceeds reliability spending is slightly higher than our historic reliability capital run rate due to our ammonia system replacement project that we've begun work on this year. Based on these projections, we expect our common unit distribution coverage ratio for 2019 to be in the range of 1.2 to 1.3 times and our debt-to-EBITDA ratio to be around 4.3 by the end of 2019. In 2020, we expect to see our benefit from incremental EBITDA from our 2018 and 2019 capital project spending as well as the continued ramp in our Permian Crude System volume, and as a result, NuStar's 2020 total distribution and debt coverage metrics should improve compared to 2019 and be consistent with the guidance we provided back in February, when we laid out our step plan to reposition NuStar. And with that, I’ll turn the call back over to Brad, for his closing remarks.

[Brad Barron:]

Thanks, Tom. Heard this morning, it's a good time for NuStar. We have executed on our plan for 2018, and we’re repositioned for strength. We have achieved strong third quarter results and we expect to meet or exceed our projections for the full year. We have great assets in the right places to take full advantage of some of the most significant midstream opportunities this sector has ever seen, and we’re executing on growth projects to do just that. And of course, all this means that we expect to maintain a strong coverage ratio going forward. I speak for myself, my whole management team and all of our employees when I say that NuStar's future looks bright and the best is yet to come. With that, we’ll open up the call to Q&A.

[Operator:]

[Operator instructions] Our first question comes from the line Jeremy Tonet of JP Morgan. Your line is now open.

[Jeremy Tonet:]

Just wanted to start off with the 2018 guidance, I was hoping if you could help me understand a little bit better versus what was provided on September 20. It seems like some of the reconciliation items a little bit different, the other income kind of came down a bunch there, and Tom I think you touched on few of the pieces, but I was just hoping you might be able reconcile that a little bit more this 635 to 695 before versus this 635 to 685 now?

[Tom Shoaf:]

Yes, as I said, our guidance when you look at that 635 to 685, I mean that actually came up about $15 million and that’s primarily due to the impact of the PDVSA settlement that I talked about earlier. And I think as far as that goes, I mean that’s kind of what we did. I think we had a little big different results on PDVSA than we had anticipated, but that’s the main driver for that increase.

[Jeremy Tonet:]

And then with PDVSA, how much did they add to this quarter I guess in the way you should think just kind of a one year contract, August-to-August and that’s kind of how we should be thinking about that?

[Tom Shoaf:]

For the quarter, I am not sure -- how much they added to the quarter, but I don’t know that we’re going to disclose that, but it definitely was a big benefit compared to the guidance we had out there before. And it's now one-year contract, the contract actually runs through March 1st of 2020, just lapping into that cargo we sold just covered us for the next -- covered us through August of 2019. We still have another like the six month after that, we expect more six months with the revenue from PDVSA after that August 2019 timeframe.

[Jeremy Tonet:]

And last one. With Sunrise, the opportunities it presents to you there, how much you currently pulling off the line at Wichita Falls? And how big could that be? How -- are we're trying to frame the opportunities set for you guys here.

[Brad Barron:]

Yes, we’re currently -- we'll be taking in November and December about 150,000 to 160,000 barrels a day off of that line into our Wichita Falls system. It's important to note not, that’s not going to be significant incremental barrels, but it will be incremental tariff because it's on a longer haul tariff. But there is a second part of this which we’re working on an expansion, which would bring an incremental 50,000 to 60,000 barrels a day into the system, but that won't be ready until about April or so of next year.

[Operator:]

Thank you. Our next question comes from the line of Shneur Gershuni of UBS. Your line is now open.

[Shneur Gershuni:]

I guess, sorry to go back to this guidance thing again. Tom, maybe you can walk us through what you're comparing your guidance to because when I look at the guidance table that was put out in September this looks like a $5 million reduction because it looks like you took down the top end by $10 million. So which one are we comparing it to? And is it the one at the beginning of the year where there was supposed to be no PDVSA in it whatsoever?

[Brad Barron:]

While I think like we said, I mean, we've increased the guidance by about $15 million for 2018. So that's over what we had out there previously that we reiterated on the last call. Yes, we're working on -- comparing that to the guidance we gave on the last call, Shneur which was 620 to 670. We're comparing midpoint to midpoint that what you get.

[Shneur Gershuni:]

Okay, that makes sense. Next, you made a comment about the sale of European business that it would be DCF neutral, I guess this is the term you said. You put out in your press release greater than 10 times and I think that was in your prepared remarks as well. The Company sold that you said it was 8.9 times. I gather that part of it looking forward versus trailing. Can you give us what the trailing fourth quarter number was for that segment? Or should we think of it is the DCF given up is equal to the interest savings benefit. I’m trying to understand how we end up being neutral?

[Chris Russell:]

Yes, Shneur, this is Chris Russell. How we get to be in neutral? It’s EBITDA, we do have some taxes we paid over there, we’ve saving those and we have quite a bit of liability capital that we're saving as well. So, it's not DCF accretive, but it's diluted to a very, very, very immaterial amount.

[Shneur Gershuni:]

And then finally just this project with Trafigura. When I think about you know everybody keeps talking about bringing barrels to Corpus and so forth. Are you guys effectively in a leadership position because of the positions that you have there? I mean there was a conference call on Friday when somebody basically, basically said the exact same thing. Are you going to be able to do more projects like this or take more barrels and so forth? I just wonder, if you can sort of talk about the color around the whole idea bringing barrels to Corpus and onto to Cactus so forth?

[Danny Oliver:]

Shneur, this is Danny Oliver. I do think we're in an advantage position because our facility exists. I know there is some talk of building some new facilities in the Corpus area, but ours is available for use now. So, we are pursuing other connections to the other pipelines above and beyond this Trafigura commitment. And I think I said before, I think we'll certainly end up with our fair share of those barrels that are coming to Corpus.

[Operator:]

Our next question comes from the line of Theresa Chen of Barclays. Your line is now open.

[Theresa Chen:]

First, related to the new Trafi projects announced. I understand that you’re expecting to spend about 70 next year and 40 in conjunction with some other projects on Sunrise this year. Can you talk about what’s your total CapEx estimate for bringing these new additions on line? And what timeframe and also what kind of EBITDA uplift you’re looking from these projects?

[Brad Barron:]

Yes, I mean. So, if you are looking at the -- so, I think we reiterated some of that stuff when we had our remarks, but we've got the Permian that I think we expect to spend about a 190 million this year, if we set an 180 million…

[Teresa Chen:]

Sorry, I'm asking specifically about the Trafi related projects.

[Brad Barron:]

Okay, the Trafi related projects I think we expect to spend about 15 million in 2018 and in 2019 we expect to spend about 75 million in 2019 on that.

[Teresa Chen:]

And nothing beyond 2019?

[Brad Barron:]

It's entire part, no, because the entire project is just shy about a $100 million.

[Teresa Chen:]

And what kind of EBITDA return do you look for that?

[Tom Shoaf:]

It's all a 5 multiple or better, it's Sunrise and Trafi.

[Teresa Chen:]

So, on the storage front given that PDVSA has reduced its exposure by half. Can you talk about the current environment for re-contracting that other half that they've left empty? And what you're seeing in recent in utilization in near term?

[Brad Barron:]

We've got a specific customer we are working with on coming in for the crude oil storage someone who is active in that region now. We don’t have them coming in until about midyear I think next year, but we're making headway.

[Teresa Chen:]

Can you just clarify that 15 million earlier in the comments about PDVSA's impact was that for the quarter or how should we think about that?

[Brad Barron:]

That's full-year.

[Teresa Chen:]

And lastly, could you just remind us how the insurance proceeds and reliability CapEx related to their hurricane repairs for St. Eustatius account for in EBITDA in DCF?

[Brad Barron:]

We recognize the insurance proceeds we received the insurance proceeds earlier this year. I think it was in the first quarter and what we do is, we don't recognize those in DCF, we do it as we spend the money and that's been, there was the spend this year it is going to be some next year. In fact, there will probably be some for the next couple of years on that. And so, we're recognizing those proceeds as we go forward. So that what you end up seeing is, no impact to DCF related to hurricane repair.

[Operator:]

Our next question comes from the line of Ryan Levine of Citi. Your line is now open.

[Ryan Levine:]

Would you kind of clarify in terms of the Sunrise projects? Are they included in your revised guidance? Or is that to be sanctioned so they're further excluding?

[Brad Barron:]

Yes, these projects are in our guidance that we just provided.

[Ryan Levine:]

And then secondly, what's the status of discussions around reengaging customer conversations for their historically disputed Oxy pipeline?

[Brad Barron:]

We have several conversations going on regarding that pipeline and nothing is firm yet to bring out, but we got multiple conversations going on in that line.

[Ryan Levine:]

And then lastly, what's the current status of the Valley pipeline open season?

[Brad Barron:]

Valley pipeline…

[Tom Shoaf:]

Yes, we're not in an open season. We may go into an open season, we may not.

[Ryan Levine:]

Are you able to provide some color as to the dynamics associated with that project?

[Brad Barron:]

We've got commitments that cover that project. We just don't know if we really need to go out for an open season.

[Operator:]

Thank you. Our next question comes from the line of Sunil Sibal of Seaport Global Securities. Your line is now open.

[Sunil Sibal:]

Couple of questions from me, I think you've talked about opening the rail facility at St. James for unloading crude. Could you talk about what are the kind of contract terms if you have any for that facility?

[Tom Shoaf:]

In St. James?

[Sunil Sibal:]

Yes.

[Tom Shoaf:]

We have a lot of storage contracts there, obviously, everything is under contract. We have renewed a couple of contracts there recently. In a backwardated market, we have tried to keep those pretty short in term. So, we can get another bite of that apple on a better market and most of those have been done in 2 years. But I think what Brad mentioned is some of the new contracts we have added recently are, commitments to bring unit trains to the facility. We’ve got about half a dozen trains a month contracted, take or pay now, and we see that number of trains probably doubling and maybe even more than that as we get more interest out of Western Canada.

[Sunil Sibal:]

And then these contracts which you have signed so far, how far they run out?

[Tom Shoaf:]

The unit trains are most -- they are pretty short term about a year nine months to a year. Certainly in the Permian, I think that’s about the extent of the term that you’ll see people interested in, but we’re hearing some interest on the Western Canadian side that may go up two or three years.

[Sunil Sibal:]

And then, I think on those volumes you’re taking off Sunrise at Wichita Falls you said, incremental volumes that you’re pulling out currently. Could you talk about how much is that?

[Tom Shoaf:]

Yes, currently, the volumes that we’re shipping are not really incremental volumes. We’re already shipping those barrels on our system, but from different pipelines. But there’ll be incremental tariff, so to think as of it now we’re bringing barrels in on sunrise and they are moving on longer haul segments of that line, so we get incremental tariff.

[Sunil Sibal:]

And then this one last one for me, seems like next year you’ll have this fair bit of outspend, if that -- could you talk a little bit about the funding plans seems like you know, you will rely on the debt markets any preference between the normal debt or the prefs?

[Tom Shoaf:]

Yes, I mean the plan that we outlined, we have taken care most of our financing needs going forward. We did the pref, we did the Series D. We don’t think we need to do any more prefs. We don’t need any equity to fund our growth for the next couple of years. So, really the only thing of any significance we have out there is just, we still need to refinance our bonds that matured back in April 20 of this year. So, we plan to do that and that’s really about debt as far as what we need to do.

[Operator:]

Thank you. [Operator instructions] Our next question comes from the follow-up from the line of Jeremy Tonet of JP Morgan. Your line is now open.

[Jeremy Tonet:]

Thanks for taking my follow-up here. Just want to go over the navigator. And sorry, if I missed it, but what was the contribution during the quarter? How is EBITDA per barrel trending in during the quarter and where do you see that going?

[Tom Shoaf:]

EBITDA for the quarter was about $27 million for the Permian. Danny, you want to talk about?

[Danny Oliver:]

It was an average of about 314,000 barrels a day. I think it's pretty consistent with volumes and related EBITDA we reported in the past.

[Operator:]

Thank you. Our next question comes from the line of Spencer Brennan of HSBC. Your line is now open.

[Spencer Brennan:]

I'm just curious after their European asset sales and applying those to de-levering, are you still thinking you’re going to come with senior unsecured funds this year? Or is that something you’re going to wait to do until you're further along next share?

[Tom Shoaf:]

The sales of the European assets does a lot to de-lever us, it brings our leverage down like I said, we think we can exit this year about a 4.2 times debt to EBITDA and that was the main focus on why we wanted to do the sale of European assets. As far as the bonds go, the refinancing of the bond as I said earlier, we still plan on a refinancing those bonds and terming out some of our revolver debt. After we refinanced the bonds, and if you take into account the European sale that will give us around $1 billion of liquidity available on our revolver at year-end. So, all of that works towards freeing up liquidity and getting our debt to EBITDA metric down.

[Spencer Brennan:]

Okay, stole the follow up right out my mouth, thanks guys.

[Operator:]

Thank you. And I am showing no further questions at this time. I would now like to turn the call over to Pam Schmidt, Vice President of Investor Relations for closing remarks.

[Pam Schmidt:]

Thank you, Chenille. We would once again like to thank everyone for joining us on the call today. If anybody has any additional questions, please feel free to contact NuStar’s Investor Relations. Thanks again and have a great day.

[Operator:]

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