NuStar Energy L.P.
Q2 2017 Earnings Call Transcript

Published: 28 Jul 2017

[Operator:]

Good day, ladies and gentlemen and welcome to the Q2 2017 NuStar Energy L.P. and NuStar GP Holdings, LLC Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the call over to Chris Russell. You may begin.

[Chris Russell:]

Thanks, Michelle. Good morning, everybody and welcome to today's call. On the call this morning are Brad Barron, NuStar Energy L.P. and NuStar GP Holdings, LLC's President and CEO; and Tom Shoaf, Executive Vice President and CFO, along with other members of our management team. Before we get started this morning, we'd 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 make reference 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 sections of our websites at nustarenergy.com and nustargpholdings.com. And I am going to turn the call over to Brad.

[Bradley Barron:]

Good morning. Thanks for joining us today. You have been following NuStar for the last several months, you know that we had one of the busiest quarters in our history. Before I turn the call over to Tom to discuss this quarter's results. I would like to briefly review some of our accomplishments during the second quarter as well as provide few updates on our Permian Crude System. On May 4, we closed on the purchase of Navigator Energy Services, LLC which we now call our Permian Crude System for approximately $1.5 billion. With this acquisition, we now own the leading crude oil gathering transportation and storage system in the core of the core of the Midland Basin. To finance this acquisition, we closed on multiple transactions during April. On April 18, we issued 14.4 million common units with gross proceeds of approximately $665 million. On April 28, we raised $550 million by issuing 5.625% 10-year senior notes and we also issued $15.4 million Series B perpetual preferred units for gross proceeds of $385 million. Our general partner NuStar GP Holdings, LLC also demonstrated its strong support for the transaction by agreeing to temporarily forgo the incentive distribution rights or IDRs which otherwise be entitled for any NuStar Energy LP common equity that we issued from the date we signed the acquisition agreement and through the 10 quarters thereafter which begins with the distribution for the second quarter of 2017. The waiver is capped at $22 million. In terms of performance of the systems since the deal was announced in early April. So far our Permian Crude System has far exceeded our initial drilling projections. In terms of rig counts, currently 39 rigs running on dedicated and interconnected acreage. This compares to 29 we forecasted will be running at the end of 2017. In fact, back in April, when we're evaluating system we weren’t projecting 39 rigs until the end of 2018. Throughputs on the system have grown substantially from around 115,000 barrels a day in April, when we announced the acquisition to an average of around 150,000 barrels per day in July, that’s about 30% growth in 3 months. Our throughputs are growing at an impressive pace. They are ramping up a bit slower than we would expect based on a significant amount of rigs being added on the system. We believe this lower-than-expected ramp up is due to slow well completion rates. Even though many producers have dedicated frac crews, the lack of additional crews, has caused an increase in drill but uncompleted wells or DUCs. With that being said, based on our conversations with our customers and due to the amount of drilling currently taking place, we expect our throughput volumes on our Permian Crude System to continue to ramp up significantly in the back half of this year. Due this anticipated significant increase in volume, we have accelerated several system expansion projects on our Permian Crude System. We currently plan to invest around $123 million in strategic capital in 2017 on these West Texas expansion project. In addition, we continue to look at potential bolt on acquisitions to our Permian Crude System, as well as continue to pursue the possibility of developing a larger Takeaway capacity project including a solution, that would link our Permian Crude System all the way to our docks in Corpus Christi, Texas. With regard to dedicated acreage, for our Permian crude system dedicated acreage has grown from about 500,000 acres of tons of acquisition to about 514,000 acres a day. And we're working with several producers on additional dedications that we expect to be completed in the near term. In November, we have about 500,000 undedicated acreage that are immediately adjacent to the system as well as nearly $5 million acres areas of mutual interest or AMI. Additionally, our ship to pay volume commitments have increased to 92,000 barrels per day, up from 74,000 barrels a day when we announced the deal. Shifting away from our Permian activities for a moment, during the quarter, we began to set in motion an exit from the last of our commodity trading operations with the shutdown on our heavy fuel crude trading businesses. Changes in these markets largely due to the proliferation of shale plays have made it increasingly difficult to generate profit from more than fields marketing segment in recent years. For example, success we experience in the early years of our fuels marketing operations was centered around cheap rail supply of heavy oil from inland refineries. That source of supply has been reduced significantly as lighter crude slates from shale plays are now being run through those refineries resulting in reduced production of fuel oil blending components. Based on our analysis, a closure of these commodity trading operations will significantly lower top line revenue, which should be EBITDA neutral to NuStar. Furthermore, the decision is in line with what we've been doing in the past 3 years, de-risking our business and focusing on our fee base storage of and pipeline operations. Going forward, the only operations remaining in our fields marketing segment will be our bunkering operation at our Texas City, St. Eustatius terminal locations as well as our Butane blending operations on our Central East pipeline system. And lastly, as you may have seen recently report in major news outlets on June 29, we received approvals on 3 presidential permits to move LPGs and other refined products across the Mexico border. These permits relate to our pending pipeline project with Temex to supply northern Mexico with refined products. Although the project is currently delayed as we await signed contracts, receiving approval on these permits was not only a major milestone for the pending construction of this project, but also a major milestone for the energy industry as a whole. We're proud to be part of that story. So you can see, this is a transformative, an exciting time for NuStar. After covering our distribution for 3 full years, we made the strategic decision to exchange short term coverage for long term distribution growth while moving forward with the Permian Crude System acquisition in the core of the core Permian shale play. As we said at that time, as a result of this strategic decision, we do not expect to cover our distribution until the back half of 2018. We also noted that the second quarter will be disproportionally impacted by the transaction costs associated with the acquisition. And, of course, you can issue 14 million new units without negatively impacting earnings per unit. And finally, we're further de-risking our business by exiting our heavy fuels, crude oil trading operations which as I said before will be EBITDA neutral. Of course, this will have the effect of lowering top-line revenues. So that's an adjustment you want to make your models quarter-over quarter comparisons going forward. So we're on track with our forward looking plans and that are paving the way for strong future growth in our earnings, assets and distributions. And we're very pleased with the progress we made to date. This progress would not be possible without the short term impacts we're experiencing in summer 2017 earnings results. Give you more color from all of these items and to provide you with some additional detail on our second quarter results, with 2017 projections, I'm going to turn the call over to Tom Shoaf, NuStar's Executive Vice President and CFO. Tom?

[Thomas Shoaf:]

Thanks Brad, good morning, everyone. As Brad noted, on our first quarter call, we stated that we expected our overall, 2017 results will be negatively impacted by the large amount of debt and equity rate and the transaction cost incurred in the second quarter related to the navigator acquisition. As expected, we incurred approximately $14 million of transaction cost in conjunction with the acquisition that had a disproportionate impact on the second quarter results. Distributions and interest expense associated with the financings of the acquisition combined with a turnaround and unplanned operational issues that one of the refineries we serve, with the primary causes for the quarterly results that we experience. For the second quarter, of 2017 we reported net income of $0.05 per unit, EBITDA of $141 million and DCF available to limited partners of $60 million which resulted in a distribution coverage ratio of 0.59x. As Brad noted earlier you can't issue $14 million of new units-- without impacting EPU. And the short term drop and distribution coverage is necessary part of our long term growth plan. However, with further impacted by the turnaround and unplanned operational issues at one of the refineries which we serve. Second Quarter 2017, EBITDA in our pipeline segment was $87 million, $1 million higher than the second quarter of 2016. Mainly as a result, of two months of benefit from the Permian Crude System acquisition which was partially offset by the impact of turnaround and operational issue that the customer refinery I've spoken about earlier. Second quarter, 2017 EBITDA in our storage segment, was $88 million, up $7 million compared to the second quarter of 2016. Due mainly to higher renewal storage rates, increased fees at our St. Eustatius terminal and our recent Martin terminal acquisition. When the impact of converting the refinery storage agreements to lease is excluded, our storage throughputs actually increased approximately 29,000 barrels per day or 3% which is mainly attributable to the Martin acquisition. You may recall from the first quarter call starting on January 1, our agreements provide refinery storage at Corpus Christi, Texas and Vanetia changed from throughput arrangement to a lease which means the associated revenue is now characterized as storage terminal revenue on our financial statement. So while the second quarter storage throughput volumes were down 54% our 390,000 barrels per day compared to the second quarter of 2016 that decline reflects an apples-to-oranges comparison. I'd also like to note that this will continue to be a reconciling item for the remainder of the year but one of the benefits of making this change is that we will minimize our cash flow risk by eliminating our exposure to future refinery turnaround and cutbacks during the contract term. Our June 30 debt balance was $3.5 billion while our debt-to-EBITDA ratio was 4.6x. This morning, NuStar energy announced the second quarter Series A preferred unit distribution of approximately $0.531 per unit and its initial Series B preferred unit distribution of approximately $0.725 per unit. Both of which, will be paid on September 15. In addition, NuStar Energy announced the second quarter common unit distribution of $1.905 per unit which will be paid on August 11. NuStar GP Holdings, also announced the second quarter distribution of $0.545 per unit which will be paid on August 15. Now let me spend a few minutes talking about the projections for 2017. Now we expect our 2017 total EBITDA to be $600 million to $650 million. This EBITDA estimate as assumes $110 million to $120 million of general administrative expenses in 2017. They're not allocated to our segment results. Our EBITDA guidance, has been reduced to lower than expected Permian Crude System throughputs, reduced vessel activity at St. Eustatius and lower throughputs on some of our other pipelines due to refinery operating issues and extended turnarounds at some of our customer refineries. Our 2017 internal growth spending is now estimated to be in the range of $380 million to $420 million, due to reduction in spending on our northern Mexico supply project, partially offset by additional expansion projects on our Permian Crude System. We continue to expect 2017 reliability spending to be in the range of $35 million to $55 million. And with that, as in the call back over to Brad for any closing remarks.

[Bradley Barron:]

Thank you, Tom. As you will recall over the past 3 years, we made a conscious effort to improve our coverage while systematically de-risking our business. We were taught to optimize our operations and position the company for future growth. In our strategic plan, we targeted the Permian Basin as the fastest growing shale play in U.S. as a preferred location for that growth. We could not be more thrilled that we're able to find and acquire the premier gathering system in the Permian to execute on the strategy. As we said, at the time of the acquisition, future growth potential of these premier assets, in the core to core Midland Basin will be well versed sustaining it below 1x coverage ratio in the near term and we expect it to recover as early as back half of 2018. In the meantime, we're committed to maintain our distribution. Based on the projections we've seen from the Permian as a whole and drilling activity on our dedicated acres to date, I'm more convinced than ever. This is the right platform from NuStar’s future growth. This acquisition is a culmination of a transformative, three years for NuStar, but it's also just a beginning of what I along the rest of NuStar executive team and our Board of Directors believe will be a period of significant growth for the company. We expect Permian Crude System to be the base on which future years we will grow our cash flows, strengthen our coverage and ultimately, increase our distribution to our unitholders. With that, we will open up the call for Q&A.

[Operator:]

[Operator Instructions]. Our first question, comes from Gabriel Moreen of Bank of America Merrill Lynch.

[Gabriel Moreen:]

Brad, can you talk a little bit about, I think you mentioned the DUC count building behind Navigator, sort of where it stands right now, may be relative to expectations and then the second part of my question is around the completion activity by your estimates is that a function more of price? Is that a function more of crude availability? And I guess the confidence back half of the year ramp and visibility on that completion activity?

[Bradley Barron:]

I can tell you the DUCs are higher than anybody ever expected them to be out there much higher than we thought they would be. We looked into it extensively with our customers and with others. Initially I thought there might be a price component to it, but we're not hearing that from anybody. All we've heard is straight up lack of completion crews. And that's been pretty much across-the-board. I have seen -- we've heard from some people that they're expecting to get more crews in the second half of the year. So, we should expect to see that number start – the DUC number start to come down which would translate into increased volumes.

[Gabriel Moreen:]

And then in terms of accelerating the CapEx on the system in the $123 million, can just talk about interplay between accelerating the CapEx now versus, what you expect it to spend in the longer term on that navigator?

[Bradley Barron:]

Yes, I mean, all the CapEx we're spending this year was part of the $260 million that we said, that we needed to spend. As we went forward, there’s a very small amount attributable to new customer. But what we're seeing is some of the well pads are coming on and they are put in 8 to 10 well. And so you want to avoid any pinch points in the system and have everything up and running so you can capture the first flows. So we're making the strategic decision to complete some of the deep bottlenecking ahead when it might, when we might have ordinarily thought it would be needed.

[Gabriel Moreen:]

And then on the long haul pipeline sounds like there's discussions going on -- you know in terms of what you think is of the most sort of important next steps there is it really trying to find -- are you looking for a JV partner? Can you discuss sort of shipper interest and getting those commitments and I guess, any timeline you think in terms of maybe substance of update on open season or something like that the.

[Daniel Oliver:]

Sure Gabe. This is Danny Oliver. Yes, we continue to develop that. We're open to partnerships with someone that might make some sense and add some value. We think it's still probably one pipeline that's going to get built. And it's a very competitive environment. There's as you know, probably half a dozen or so projects being touted up there but I think if you can get two of the right partners together that both have something to add other than capital, I think it can get you over the line. And that's we're still pursuing that I think something is likely to get done. Certainly, before the end of this year. I think we thought likely would have already been done. But many of the customers I think took a bit of a pause and relax a little bit. When prices came off and wanted to see how the market was going to react in general on the drilling site. But as Brad mentioned earlier, they are adding rigs more aggressively than we anticipated even before crude dipped for a little while under the low 40s.

[Operator:]

Our next question comes from Jeremy Tonet of JPMorgan.

[Unidentified Analyst:]

Hi, it’s Andy for Jeremy. First question, wondering if you can quantify the turnaround impact in the quarter and are you done with planned turn arounds for the rest of the year?

[Bradley Barron:]

I think the turnaround for the quarter was probably about $6 million, I think, for this quarter and the second part of your question. We're not done for the rest of the year. We've actually been informed that there's some unplanned turn arounds that hit the back half of the year. And that's part of the reasons why on the guidance we’ve drop the guidance on EBITDA down a little bit because of these unplanned turnarounds that our customers are hitting us with. So we expect to see more of that towards the back end of the year.

[Unidentified Analyst:]

And sticking to South Texas and crude system have you started talking with customers about re-contracting some of those contract roles next year? And maybe what was the South Texas crude oil volumes for the quarter?

[Daniel Oliver:]

Andy, this is Danny again. We're starting to have some conversations with those customers that are -- we've got about 50% of our MVCs coming up for renewal on August of next year. We're starting to have some conversations with them but the conversations they're not really engaging, we've got a full year. They wanted to see how things end up. We're obviously, still collecting on our MVCs, our actual volumes are below those MVC levels. We continue to see customers opting to ship on the higher tariff MVCs as opposed to ours as a relatively low tariff going to Corpus versus Houston. But at least the next year it won't affect revenues we're forecasting everything at the MVC level.

[Unidentified Analyst:]

Then final question, is there any opportunity created by some of the dislocations caused by Venezuela, that you see in your business or kind of completely remove from that.

[Bradley Barron:]

Not really, we've got -- we do some business with PDVSA and they continue to pay us, make payments on the business that we're doing. So hasn't really affect, we've seen some lower vessel calls and things out of Venezuela lately, but overall, not really affecting that business.

[Operator:]

Our next question comes from Ryan Levine of Citigroup.

[Ryan Levine:]

Just wanted to -- if you will be able to speak bit more around bolt-on on acquisitions that you highlighted in the prepared remarks. Is there any dollar amount associated with those -- kind of benchmark us towards.

[Bradley Barron:]

No, I mean, it depends on what comes on to the market, what’s available. So, we're out there looking for those acquisitions, but I can't give you an idea, of how much of those will go for?

[Ryan Levine:]

And if they were to be substantial how would you opt to finance those opportunities?

[Thomas Shoaf:]

You know combination debt equity and preferred like we've been doing. We’ve got a, it’s kind of what we tell everybody, we are about 50-50 on smaller acquisitions and CapEx programs and whatnot so. We've got access to capital markets and plenty of room on our bank loans. I think it would be a problem.

[Ryan Levine:]

Okay and then regarding the second half of your team’s coverage target, what are the key commodity prices assumptions and rig count assumptions that you’ve baked into that. And are there any assumed re-contracting on the south Texas system?

[Bradley Barron:]

Well, I mean, as far as the back half of '18, we pretty much have the same crude assumptions that we currently have and I think we've been running anything north of $40, on up to about $50 or so. So basically our crude has been landing over the last several months and where it is now is kind of what we’ve assumed going forward for the most part. In terms of re-contracting the South Texas, no, we still have small volumes assumed during that time. We don't expect any large significant ramp up in volumes in South Texas. So, it is pretty much status quo on that.

[Ryan Levine:]

Okay and then in Q2, this year, would you be able to provide the EBITDA contribution from the Navigator transaction realizing it's only a partial quarter contribution?

[Bradley Barron:]

No, I don't think we're really disclosing that right now, on the Navigator fee. There was a lot of cost associated , transaction cost and all that hit the second quarter. So not really disclosing EBIDTA.

[Operator:]

Our next question comes from Shneur Gershuni of UBS. Your line is open.

[Shneur Gershuni:]

Just a couple of quick questions and some follow-ups. I guess, just kind of following up with the last question about your covering the distribution in the second half of 2018. Was that always your expectation? Is it higher or lower than where you were when you provided guidance I guess at MLP post Navigator?

[Bradley Barron:]

Yes, it's in line with what we have said before. When we first did the acquisition and even at MPLA, we were saying that we expect of course, you have all the financing cost and everything that you incur upfront and that with the expected ramp up in volumes and expected ramp up's in EBITDA associated with Navigator. That it would be towards the back half of 2018, before we would actually start seeing cover again .And so we've been saying that since we actually announced the acquisition.

[Shneur Gershuni:]

When I triangulate some of your prepared remarks about the rig count being significantly better than expected. Shouldn't that expectation improve or is it a DUC issue, I was just wondering like how we should think about your positive commentary about rigs being well ahead of schedule?

[Daniel Oliver:]

I mean I think it's a DUC issue, like we talked about earlier. Our expectation is those DUCs are going to be capitalized upon by their producers more toward the end of this year.

[Shneur Gershuni:]

So it's really more of a DUC completion crews issue getting in the way of having a better expectation.

[Daniel Oliver:]

Yeah. I think what we are trying to say is, as far as these rigs coming on and translating into volume this kind of a lumpy process for producers. And what we're saying is immediately like we're talking right now, the present, those DUCs have been an issue in getting up from duck to a completed well. We're expecting some of that alleviate towards the back end of the year as the year progresses and we do expect pretty significant volume ramp coming from that throughout the year. But as we said, at least currently the DUCs have been a slight issue.

[Bradley Barron:]

I think this is a double-edged sword you also can benefit from not only the completion of the built DUCs , but also you still have 39 rigs which as Brad mentioned, we weren’t expecting 39 rigs until the end of 2018. As long as those stay engaged we will be ahead on drilled wells next year as well.

[Shneur Gershuni:]

Right, which is really where my question is that why wouldn't your expectation improve given that the rigs are so ahead of schedule?

[Daniel Oliver:]

It likely could, you like to see some these wells getting completed.

[Bradley Barron:]

And I would say we're a very conservative management team. We don't get way out over our skis and want to have some more visibility in the 2018 before we began increasing our forecast for the back half of 2018. But right now, we have a very solid forecast for 2018 like we said, we plan to return to distribution coverage in the back of the year. And I don't think it's really appropriate to going any further than that at this point.

[Shneur Gershuni:]

Okay, that make sense. I just want to understand given the comments. Following up on that, you know obviously, 2017 G&A is impacted by transaction related costs with respect to Navigator. If I remember correctly, your guidance pre-Navigator was about $100 million to $110 million for G&A for this year. How does that change on a run-rate basis going forward? Should we be thinking $25 million a quarter, $30 million a quarter, just kind of want to understand what's the permanent step change as we think about it back half of this year than into next year?

[Chris Russell:]

The guidance Tom gave for this shows $110 million to $120 million, but again that included $10 million and again is portion of the cost, portion of the financing cost. So I think next year will be back on that $100 million to $110 million range and that should be a pretty good run rate for us going forward.

[Shneur Gershuni:]

Okay, great. Just two more follow-up questions. Gabe started asking about I think about how discussions were going I guess, Midland to Corpus do you need to wait for all those multiple open seasons to be completed before you have negotiation about a JV. Do you get involved in the process now before the open season close? We’re just wondering if you can sort of walk us through how to think about that role that works.

[Daniel Oliver:]

There's no reason to wait for open seasons to be completed to have those conversations. I think likely some of the more likely projects in my view, aren't even in an open season.

[Shneur Gershuni:]

And then finally, with some commentary on the Washington, about potentially not taken crude from Venezuela, would that have an impact on your – contracts potentially or because of how it slows it would not just wanted if you can give us a little commentary on that?

[Bradley Barron:]

That would depend entirely on what the sanction would be, but I do know way to comment on that.

[Daniel Oliver:]

We don't anticipate that will cause a problem in our St. Eustatius Facility. Is, that crude is not heading for the United States through there.

[Operator:]

Our next question comes from Selman Akyol from Stifel.

[Selman Akyol:]

And this is a quick follow-up question in your press release you referenced taking $14 million in transaction charges this quarter. So exactly, how much of that is sitting in your G&A line?

[Thomas Shoaf:]

$10 million is sitting in G&A.

[Selman Akyol:]

For this quarter?

[Thomas Shoaf:]

Correct.

[Selman Akyol:]

And then also in terms of thinking about the fuels trading? Is there any charges to be taken there over the rest of the year as we go through?

[Thomas Shoaf:]

If fuels trading no.

[Selman Akyol:]

Okay.

[Chris Russell:]

I just want to clarify, the other $4 million for the financing cost that's buried in interest expense. So $4 million--

[Selman Akyol:]

So we should look at that as a one-time expense on a kind of on a go forward basis, coming out of interest.

[Operator:]

[Operator Instructions]. Our next question is a follow-up from Jeremy Tonet from JPMorgan.

[Jeremy Tonet:]

I want to follow up on the EBITDA guidance to make sure I have it straight. Did guidance decrease from $620 to $670 to $600 to $650 for EBITDA and if that's correct is just kind of like the DUCs you're talking about there or is there any other factors in play?

[Bradley Barron:]

A small piece of it is the DUCs, but the main driver we’ve got as I said, before we have some turnarounds that are expected in the back of the year, pretty significant turnaround by one of our customers. So that's the key driver and I think we had some St. Eustatius vessel activity with another one where we’re seeing a little bit less activity in St. Eustatius so that is contributing as well. And again, this is the DUC side part of it kind of a small part.

[Jeremy Tonet:]

And just want to follow up on the Transportation segment. The implied rate revenue moved a down a bit there. Just kind of a mixed shift with Navigator? Is it kind of a new run rate or how should we think about that?

[Chris Russell:]

You talk about average tariff rate Jeremy?.

[Jeremy Tonet:]

Yes.

[Chris Russell:]

It's probably driven by Navigator.

[Jeremy Tonet:]

And does that kind of a better run rate going away from here?

[Chris Russell:]

Yes.

[Bradley Barron:]

To be honest with you I am not really exactly sure what you are referring to, we may have to just get back with you.

[Jeremy Tonet:]

Yes. We will go back and talk about average tariff.

[Operator:]

Next question comes from Matt Niblack from Hite Hedge.

[Matt Niblack:]

First question, really could you provide more color on how you are planning to finance all of this given the deficit of retained cash and the relatively high unit price. I understand there was a big financing slug done earlier this year but it looks like there should be good chunk more that needs to be finance going forward?

[Bradley Barron:]

Yes, so we don't really have any more equity plan for the rest of the year. We’ve got our CapEx guidance we just put out there for you guys and based on that the CapEx spend that we have planned for the remainder of the year and going into 2018. We don't think we need any more equities so that's the good news there. With a lower unit price. We plan to finance most likely in the back of the year we may have another small bond issuance or preferred but mainly were going to -- we're going to be using our revolving credit facility so it’s going to be a combination of those things.

[Matt Niblack:]

And is the idea then to have leverage creep up a bit in the interim and then Navigator ramp , some other growth projects ramp that you know just naturally deliver through growing EBITDA and then the revolver can ultimately be financed with debt?

[Bradley Barron:]

Yes, we're still exactly as we plan back up the Navigator acquisition we said that we would be starting off around the 4.5 to 4.6 debt-to-EBITDA as I announced today. We closed the quarter at 4.6. We do expect that to ramp up closer to five over time as get to the back half of the year because some of the CapEx that we're talking about and then coming back down again and we expect to be back down to more normal levels by the mid-year 2018.

[Matt Niblack:]

And then second and my last question here, any thoughts on simplifying the GP, LP structure? It seems like the GP trades perpetually at a discount to where it probably should relative to the growth prospects. And I just wonder given the liquidity and given all the things going on would make more sense to somehow simplify that structure?

[Bradley Barron:]

Yes, we get that type of a question almost every day. We think we continuously look at it, it is certainly on our radar screen. We don't have any imminent plans to do that, but we understand the dynamics there and we constantly look at it.

[Operator:]

There are no further question. I'll turn call back over to Chris Russell for any closing remarks.

[Bradley Barron:]

Thank you, Michelle. Once again I like to thank everybody for joining us on the call today. If you have any further questions please feel free to reach out to NuStar's Investor Relations Department. Thank you.

[Operator:]

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