NuStar Energy L.P.
Q4 2014 Earnings Call Transcript

Published: 30 Jan 2015

[Operator:]

Good morning. My name is Kelly, and I will be your conference operator today. At this time I would like to welcome everyone to the NuStar Energy LP and NuStar GP Holdings LLC's Fourth Quarter 2014 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Chris Russell, Treasurer and Vice President of Investor Relations, you may begin your conference.

[Chris Russell:]

Thank you, Kelly. Good morning, everyone, and welcome to today's call. On the call today are Brad Barron, NuStar Energy LP 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, 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 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 financial page of the Investor Section of our website. Now let me turn the call over to Brad Barron.

[Brad Barron:]

Good morning. Thanks for joining us today. This morning I'm happy to report that during 2014 we were able to achieve our primary goal of returning NuStar to a one-to-one distribution coverage, the 1.04 times cover for the year, our highest annual distribution coverage since 2011. During the year we also generated the highest annual EBITDA and DCF in the partnership's history. In the beginning of the year I laid out a series of goal that we needed to accomplish to get NuStar back to a one-to-one distribution coverage. With the dedication of our employees and the execution from our new management team, we were able to achieve each and every one of these goals during the year. Early in 2014 we divested our remaining 50% interest in the Asphalt joint venture. This sale significantly reduced our exposure to margin based operations and allowed us to renew our focus on growing our fee based storage and pipeline operations. In February we signed a long-term agreement with Occidental Petroleum to ship NGLs on NuStar's currently idled 200 mile 12-inch pipeline between Mont Belvieu and Corpus Christi, Texas. This pipeline is expected to go into NGL service early in the second quarter of 2015 and should meet full capacity requirements late in the second quarter or early in the third quarter of 2015. Also in February, we completed construction of our state-of-the-art dock at our Corpus Christi, North Beach Terminal, which more than doubled our capacity. Completing this project has allowed us to handle all the new volumes associated with our South Texas crude oil pipeline expansion with room to spare. Just this past December we loaded a 50 million barrel across our docks. In March we leased up 5 million barrels of previous idled tankage at our St. Eustatius Terminal, and in August we renewed leases on 3 million barrels of storage at our Point Tupper Terminal. In May 2014, we completed Phase 1 of our South Texas Crude Oil Pipeline expansion, which added 35,000 barrels per day to the system and approximately $20 million in annual EBITDA. This pipeline expansion, as well as the construction of the new dock at Corpus Christi, contributed to record throughput volumes in both our pipeline and storage segments during the year. As you can see we accomplished a great deal in 2014 in our effort to return to a one-time distribution coverage and to also position ourselves for future distribution growth. In fact 2015 is already off to a great start, as we recently purchased the remaining 50% interest in our Linden Terminal joint venture. Owning this terminal outright provides synergies with our adjacent wholly-owned terminal and provides opportunities for future expansion. This transaction was immediately accretive. In addition, Phase 2 of the South Texas Crude Oil Pipeline expansion remains on schedule to come online and start generating incremental EBITDA late in the first quarter of 2015. This project is expected to generate annual EBITDA up to approximately $40 million on throughput volumes from the expansion ramp up to 65,000 barrels per day. As I mentioned earlier, our currently idled 12-inch pipeline between Mont Belvieu and Corpus Christi, Texas, should be in NGL service early in the second quarter of 2015. Once the line reaches full capacity, requirements for Occidental Petroleum is expected to generate an incremental $23 million in annual EBITDA based only on committed volumes. With a strong 2014, recent acquisition of the Linden Terminal, and the completion of these two internal growth projects, we expect our 2015 coverage ratio to continue to exceed one times. We continue to remain focused on indentifying the next wave of internal growth projects and synergistic acquisitions that will provide the catalyst for future distribution growth. One of these potential internal growth projects was announced last fall, after we signed a binding -- non-binding letter of intent with PMI, an affiliate of Pemex, for a proposed joint venture in which the two companies will develop new pipeline infrastructure to transport liquefied petroleum gases, LPGs, and refined products from U.S. into Northern Mexico to meet the region's growing demand for these products. Both companies are working diligently to finalize the agreements associated with the joint venture transaction in the first quarter of 2015. If the agreements are finalized in the first quarter, we expect the assets and the joint venture to be completed and placed into service into service in the second half of 2016. Now, I'm going to turn the call over to Tom Shoaf, NuStar's Executive Vice President and CFO, so he can provide you with some additional details on our fourth quarter results and 2015 projections. Tom?

[Tom Shoaf:]

Thanks, Brad, and good morning everyone. As Brad just mentioned 2014 DCF from continuing operations available to limited partners cover the distribution to the limited partners by 1.04 times, our highest annual distribution coverage since 2011. To obtain this coverage ratio, we increased our 2014 DCF from continuing operations by $97 million or 31% compared to 2013, which led to our highest DCF in the partnerships history. During the fourth quarter, DCF from continuing operations available to limited partners covered the distribution to the limited partners by 1.12 times. Our third consecutive quarter of a one times cover and our highest quarterly distribution coverage since the third quarter of 2011. EPU for the fourth quarter of 2014 improved 157% over the fourth quarter 2013 adjusted EBIT EUP to $0.54 per unit from $0.21 per unit last year and exceeded our guidance range of $0.40 per unit to $0.50 per unit. DCF from continuing operations available to limited partners for the quarter was $1.23 per unit, 27% higher than the $0.97 per unit generated in the fourth quarter of 2013, which again exceeded our guidance range of $1.05 to $1.15 per unit. EBITDA in our pipeline segment increased to $86 million, which is $8 million higher than the fourth quarter of 2013. Within the segment, we experienced a 15% increase in total throughputs and a 19% increase in total revenue. Throughputs on our crude oil pipeline systems increased 30% to record 491,000 barrels per day, as the segment continue to benefit from increased Eagle Ford throughputs, which increased 60% from about 168,000 barrels per day in the fourth quarter of 2013, to around 270,000 barrels per day in the fourth quarter of 2014. Throughputs on our refined product pipelines increased 4% to 534,000 barrels per day, primarily due to increased production at one of our customer's refineries and a lighter overall turnaround schedule compared to 2013. For the fourth quarter, the storage segment generated $68 million of EBITDA, up $6 million from last year's adjusted EBITDA. Throughput volumes increased 14%, while throughput revenues were up 15%, due to increased activity at our Corpus Christi North Beach Terminal, which continues to benefit from the increased Eagle Ford crude volumes shipped on our pipeline system. The segment also benefited from the second unit train at our St. James Terminal that came online in mid fourth quarter of 2013, as well as an increased vessel activity at our St. Eustatius Terminal. The fuels marketing segment earned $3 million of EBITDA during the quarter, down $4 million from the fourth quarter of 2013. Higher gross margins in our bunkering business during the quarter were offset by lower margins in our other fuels marketing operation and an increase in our accounts receivable bad debt allowance. NuStar's G&A expenses were $27 million, $2 million higher than the fourth of 2013, primarily due to the expiration of the Asphalt JV services agreement on June 30, 2014. Our interest expense, net of interest income, was $32 million down $1 million from last year's fourth quarter due to lower interest rates on our new revolving credit facility, which closed in October 2014, and higher capitalized interest due to an increase in internal growth capital spending. Our December 31 debt balance was $2.8 billion, while our debt-to-EBITDA ratio was 4.0 times our lowest year-end ratio since 2008. On January 29, NuStar Energy's Board of Directors declared a fourth quarter distribution of $1.095 per unit which will be paid on February 13. NuStar GP Holdings board also declared a fourth quarter distribution of $0.545 per unit which will be paid on February 17. Now let me spend a few minutes talking about our projections for the first quarter and full year 2015. Our first quarter EBITDA results in the pipeline segment should be higher than the first quarter 2014 and comparable to the fourth quarter of 2014. Increased throughput volumes from Phase 1 of our South Texas Crude Oil Pipeline system which came online in the second quarter of 2014 should continue to benefit the segment. Storage segment EBITDA results in the first quarter should be higher than the first quarter of 2014, as well as the fourth quarter of 2014. Higher Corpus Christi North Beach storage throughput as a result of Phase 1 of the South Texas Crude Oil expansion and incremental EBITDA associated with our recent acquisition of the Linden Terminal should benefit the segment. First quarter EBITDA results in our fuels and marketing segment should be comparable to the first quarter of 2014 but higher than the fourth quarter. During the first quarter of 2015, we expect G&A expense to be in the range of $23 million to $25 million; depreciation and amortization expense to be around $51 million; and interest expense to come in at approximately $32 million. Based on these projection first quarter 2015 earnings per unit should be $0.50 per unit to $0.60 per unit while distributable cash flow from continuing operations per limited partner unit should be in the range of $1.15 to $1.25 per unit. With regard to the segment EBITDA guidance for the full year 2015 we continue to expect our pipeline segment EBITDA to be $25 million to $45 million higher than 2014 and our storage segment EBITDA to be $10 million to $30 million higher in 2014 mainly due to incremental EBITDA associated with the Linden Terminal acquisition. We expect 2015 EBITDA results and our fuels marketing segment to be in the range of $20 million to $30 million. We project our 2015 strategic capital spending which includes internal growth and acquisition spending to be in the range of $400 million to $420 million and our reliability capital spending to be in the range of $40 million to $50 million. And now let me turn it back over to Brad, for any final remarks.

[Brad Barron:]

Thanks, Tom. As you heard today 2014 was a very good year for NuStar. The year ended with a very strong fourth quarter and full year coverage ratio in excess of one times. In 2015 we will continue to focus on growing our core fee based storage and pipeline operations through executing our internal growth capital program and identifying synergistic acquisitions. This positions us to cover our distribution again in 2015 and also continue building a foundation for distribution growth in the future. This time I will turn it over to the operator, so we can open it up to Q&A.

[Operator:]

[Operator Instructions]. Your first question comes from the line of Mark Reichman. Your line is open.

[Mark Reichman:]

Good morning just a few questions. First is the -- is the joint venture on the project in Mexico is that in your, that's currently in your capital expenditure budget for 2015?

[Tom Shoaf:]

Yes, piece of it is. There is some of that $420 million guidance that we gave you does include what we expect to spend in 2015 on PMI at least our estimate right now. We're still continuing to churn those numbers. We don't have a final numbers yet on what we think the CapEx is going to be on that but we have put some in there for that project.

[Mark Reichman:]

Okay. And then on the -- in the storage segment, it looks like may be the rates were down just a tad bit, but the expenses were up in the fourth quarter. I think it was $75 million and they had been running kind of in the mid 60s for the first three quarters. I was just curious, is, what's behind that, I mean is the $75 million in operating expenses somewhat unusual or is there a way to kind of bring that number down if you might expect rates to continue erode a little bit?

[Brad Barron:]

I think the operating expense numbers in the fourth quarter, Mark, was a little bit higher than normal. We missed on the third quarter call that we're going to push the maintenance cost out of the third quarter into the fourth quarter. That's a little bit higher than usual. So probably the run rate going forward is probably somewhere between that $65 million and $75 million our number.

[Tom Shoaf:]

As far as rates go we're not seeing any deterioration in rates. In fact we're starting to see just the opposite with collapse of the Brent spreads and some contango come in back in the markets we're starting to see some rates improve across our system.

[Mark Reichman:]

But throughput revenues compared to third quarter were down a little bit, yet the throughput was up. So I mean just looking at a revenue per unit, it looks like it was down and storage lease revenues were somewhat flat, just compared to the third quarter?

[Brad Barron:]

I think that's a function of just where those throughputs occurred it's some, may be some lower rate terminals. I think the rates from terminal-to-terminal are not deteriorating any.

[Mark Reichman:]

Okay, great. Well that's helpful information. And then on the distributable cash flow calculation, I was just wondering if we could just talk a little bit about the other items somewhat. I mean I understand what that is right, I mean it's deferred -- it's the deferred revenue, so it's not getting recognized in your revenue so it's not flowing through but you're getting the payment. So you're highlighting the cash flow associated with that right. I was just wondering if you could just talk a little bit about how much of it was related to the deficiency payment and which path that is and how we should may be track those ins and outs on a going forward basis?

[Brad Barron:]

Yes, I think a lot of that was the deficiency payments. We have several of those that impact that other numbers. And so from a run rate perspective it's probably in the neighborhood of that. Now there were some other things that were in there as well and that are kind of one-time deals but I think for the most part its pretty good run rate for that.

[Mark Reichman:]

How much of -- okay. So how much of the $11.7 million would you consider kind of one-time?

[Brad Barron:]

Well I think very little really I mean I'm looking at this and probably about $3 million, I'd say about $3.7 million, $3.8 million of it is kind of a one-time and the rest of is kind of a run rate.

[Mark Reichman:]

Okay. Okay. And a very strong quarter in your crude oil transportation segment with the contributions from expansions. But I was just wondering on the outlook for capital spending, I think it was a $900 million to $1.1 billion over the next several years. I was just wondering where are your focus, I mean I think that you had talked about expanding your South Texas Crude Oil Pipeline system and acquiring crude oil gathering assets that might feed into that. But had you kind of admit with the current environment if you kind of narrowed your focus may be to not really looking outside to new shale plays? And then, I guess the last question would be if you could just comment on where you stand on liquidity and financing needs?

[Danny Oliver:]

This is Danny Oliver. Let me just first talk about what we're focusing on in terms of development projects. We continue to work development projects and other shale plays outside of the Eagle Ford and continue some expansion projects discussing with our customers in the Eagle Ford as well. We're certainly not limiting our discussions at all. I think we're realistic about the current price set in crude and how that may delay some of these developments. But we continue to work those diligently and it remains to be seen just how -- yes certainly some of the growth in the shale plays is slowing down but remains to be seen exactly how slow. But on the -- all I can tell you is that, in our current business we continue to set records on volumes every month.

[Brad Barron:]

Yes. And on the financing plans for 2015, we indicted we have a capital program; it's around $420 million. And right now we don't have immediate need to go out to the capital markets either on the debt or the equity side to finance that. We have plenty of liquidity under our revolver. We plan on utilizing that to the best of our ability to fund that capital program. So as long as we don't pop through that we don't anticipate really being in the capital market anytime soon. There could be maybe a need towards the back end of the year but right now it's kind of 50

[Mark Reichman:]

That's pretty helpful. Thank you for your comments.

[Brad Barron:]

Thank you, Mark.

[Operator:]

Your next question comes from the line of Steve Sherowski. Your line is open.

[Steve Sherowski:]

Hey, good morning. Apologies, if I missed this. But your new storage segment guidance, does that just reflect your Linden facility acquisition or is there anything else baked into that?

[Brad Barron:]

I think that that's the bulk of it but. Most of it is related to the Linden acquisition.

[Steve Sherowski:]

Got you. And I would suspect though that since roughly 25% of your storage portfolio I think if I'm not mistaken is rolling over, over the next 12 months and given the structure of the forward curve that you should get some pricing power as these contracts re-prices, is that the right way to think about it?

[Brad Barron:]

I think so but that's a slow we have a lot of contracts that are further dated than just one year, but it's going to be slow I think rolling through there and plus when you look at the total storage segment that 25% roughly 25% is going to renew in the next year that's just our leased revenues. So we have another 25% or so of our storage based revenue that's really mostly exclusive throughput in other words its storage throughput that's related to refineries where we are the only way in or out of the refinery. Those contracts are -- we just roll those out, most of those out about 10 years. So they would fit that way out there in the long-term side of that aging.

[Steve Sherowski:]

Got you. Got you.

[Brad Barron:]

But we're -- we're starting to see some -- we did just renew some or just signed some storage up at Point Tupper some crude -- really our last bit of available crude storage. We just signed a Point Tupper for higher rates than what the prevailing rates where just a quarter ago.

[Steve Sherowski:]

Got you. Okay. So you currently don't have any idle storage capacity?

[Brad Barron:]

Really the only -- we're about 97% to 98% utilized if we back Piney Point out of that number because Piney Point has been -- it’s a contango facility. It’s been idle.

[Steve Sherowski:]

Right.

[Brad Barron:]

With that in our utilization we're down about 93%.

[Steve Sherowski:]

Okay.

[Brad Barron:]

That's the one place we have opportunity to lease some tanks that aren't currently drawing any revenue. And we are starting to fill a lot of conversations about that storage.

[Steve Sherowski:]

Got you. And is there any CapEx associated with bringing up storage back online and if you signed at that current market rates, what do you think the EBITDA contribution would be for that facility?

[Brad Barron:]

Well, there would be very little OpEx related to getting that up and going again, but that terminal is -- it’s primarily a products terminal, it's about half heavy fuel, we've got heated storage for that, it's about a quarter distillate and about 25% gasoline. There is some certainly some carry on the crude side of the business but on the products distillate still a backwardation. We're starting to see some carry and some desire to store some gasoline components -- some of our gasoline components like alkalite. So for the gasoline side of that terminal, I think if we get someone in there for that, you could be looking at a million or two may be uplift. But we are not seeing a lot of interest in the rest of the terminal yet.

[Steve Sherowski:]

Got you. Okay. And I guess how easy would it be to convert it to -- I don't know to store WTI, for example?

[Brad Barron:]

It's not the -- fuel tanks and the distillate tanks don't have floating roof within them. So that would be a major capital undertaking to convert those to crude. Technicality I guess you could store crude in the gasoline tanks. But we have gasoline interest right now and there is really not really suited for crude oil store this small tanks, it would be better suited for gasoline.

[Steve Sherowski:]

Understood. And I'm sorry then just jumping back to the Linden facility acquisition. So the $10 million to $30 million uplift is really driven by that 50% interest. Does that include any synergies at all?

[Brad Barron:]

Yes there are a few synergies associated with that. I wouldn't say it's a big number but there are some, yes.

[Steve Sherowski:]

Okay. All right. I mean can you -- are we talking about like a $1 million or $1 million to $2 million or $5 million to $10 million?

[Brad Barron:]

$1 million to $2 million.

[Steve Sherowski:]

$1 million to $2 million. Okay, okay that's it from me. Thank you.

[Operator:]

Your next question comes from the line of Brian Zarahn. Your line is open.

[Brian Zarahn:]

I appreciate the commentary on the in the low commodity price environment and on your organic projects. I guess can you talk a bit about puts and take on your base business and do you see any headwinds from low oil prices on your pipes and terminals and then conversely any uplift on you refined product assets from low prices?

[Danny Oliver:]

Yes, I think on with the lower crude prices there is some negatives and some positives well, did make sense that growth rates in the shale plays might slow we haven't really seen exactly how that's going to affect us. Because I mentioned earlier we're setting records every month. We average -- in our South Texas Crude System we average just under 180,000 barrels a day in the fourth quarter of 2014. We're doing right out a 185,000 barrels a day in January and we were nominated just over 200,000 barrels a day for February. So we continue to see the crude come to us in the market here and now. On the negative side, St. James we have a couple of unit train facilities there. The collapse of the LLS and WTI spread recently has cut so the unit trains that were coming to St. James quite significantly. So we've actually adjusted our 2015 forecast and removed anything above any of kind of T&D committed volume from our forecast. Now of course -- now we're in a position where you can view that as upside because if the diff close out and we can -- we'll have some trains come back and that's actually been happening just in the last week we've seen that LLS spreads get back out to near $3. Again on the plus side, what's hurt us in the -- with the Brent and LLS collapse and low prices has helped us on the storage side and also the contango market structure we just -- just in the last couple of weeks signed $1 million barrels of crude storage a Point Tupper. Definitely I think the narrow Brent spreads and the contango in the market helped us get that done and as I mentioned earlier at higher rates that what the prevailing rates were just a quarter ago.

[Brad Barron:]

Right. And all of the pluses and minuses that Danny just mentioned are included in our guidance number that we just gave you.

[Brian Zarahn:]

Okay.

[Danny Oliver:]

And on the refined product side, the refineries that we serve continue to run very well in fact we've got one in particular that's looking an expansion this year. So we're not seeing any slowdown on the refined product side.

[Brian Zarahn:]

In terms of potential upside on higher end-market demand, you see any potential uplift there on your refined product types?

[Brad Barron:]

I don't think so other than the other than expansion Valero has announced an expansion at their McKee refinery and outside of that I think it will be pretty steady.

[Brian Zarahn:]

And then on housekeeping can you provide fourth quarter expansion CapEx and your cash balance?

[Tom Shoaf:]

Fourth quarter expansion capital was $117 million and our cash balance was around $90 million.

[Brian Zarahn:]

$90 million.

[Tom Shoaf:]

$90 million, yes.

[Brian Zarahn:]

And then last one Brad I know you haven't gotten this question before but what's your though process now on distribution growth given 2014 coverage is under your belt now at over one times?

[Brad Barron:]

I've been waiting for that that question all day. So nothing really changes there and we've told everyone we've got to walk for we run. So our primary goal is return to one-to-one distribution coverage. Next up is we absolutely we're focused on that. We secure our distribution for the years to come and then as our distribution coverage ratio continues to improve and we get up $1.05, $1.1 range and we have continued visibility into large screens of DCF coming our way that’s when we will look at increasing the distribution.

[Brian Zarahn:]

Thank you.

[Operator:]

Your next question comes from the line Gabe Moreen. Your line is open.

[Gabe Moreen:]

Hi good morning everyone. Given I guess the flux in a lot of producer budgets out there I'm just wondering if you can talk in more detail I know there is a volumetric component to the South Texas assets, but there is also a take or pay component. Can you just talk a bit more about the puts and takes on that?

[Brad Barron:]

Yes, we've got, on the current contracts that we have, they're basically all, they have a firm committed volume but the deficiencies kick in at 85% of that volume because they're all shipping well over those, their minimums today. But I think the type of customers that we have in our Eagle Ford System they're really the blue chip list of customers in the business majors that we really haven't seen slowing down. And in fact in the Eagle Ford obviously we hear a lot about CapEx cuts but and depending on which producer you talk to its slightly different stories but from a macro level most are cutting CapEx overall but tend to focus the money that they have left on the Eagle Ford because it's cheaper to drill, it's cheaper to get to market. So factually in a way sort of benefiting us since that's where our current business is focused.

[Gabe Moreen:]

Got it. And I guess as a follow-up to that, can you just talk about kind of how long those minimums run through, I mean I realized obviously you got those blue chip customers and all that but how long those minimums run?

[Brad Barron:]

They're all five year contracts. Some of the early once that we signed up have 2.5 or so years left on them. Some of our expansion projects still have four, five years left.

[Gabe Moreen:]

Got it. Got it. And then switching gears to PMI pending hopefully PMI deal. Can you just talk about kind of what the negotiations are like, are you guys talking size, contract length and then I guess also are there any special permits you would need to get that project executed given the cross border nature of the product being shipped?

[Danny Oliver:]

Right. Well we have, there are couple of border crossings that are preexisting crossings. We have pipelines already crossing the border near Reynosa and also near Nuevo Laredo. So we are working through some permits there, but it's nothing outstanding we need to do that we don't already have I place. In terms of the negotiations of that contract, size and commitments and thing like that have for the most part have been worked out. We've been working through narrowing our project cost down and improving the reliability of those numbers. So that's really what we've been working on over the past three months and now that we're getting that narrowed down we're both to the point that we're feeling pretty good about signing things up. So as Brad, mentioned we should have that done sometime in the first quarter.

[Gabe Moreen:]

Thanks and then I know everyone has asked about contango and maybe I'm beating a dead horse or it's already answered, but is fuels marketing itself contemplating engaging in contango trades itself and if so is that reflected in the guidance?

[Danny Oliver:]

No, they're really not. I think it helps our business out. But we're not looking at going out and taking out bunch of storage and we would rather lease that storage to third-party customers. I think if we, for some reason had a hard time finding a third-party customer, we might look at that but that hasn’t been the case so far.

[Gabe Moreen:]

Great. Thanks everyone.

[Brad Barron:]

There is a very soon possibility of that.

[Operator:]

Your next question comes from the line of Cory Garcia. Your line is open.

[Cory Garcia:]

Good morning fellows. Quick housekeeping item, I guess that $3.8 million sort of one-time write-down that you guys talked about. Is there a particular segment that is was slowing through so we can kind of at least true up our operating model whether it would be pipeline storage or the fuels marketing?

[Brad Barron:]

Yes, that was the lower cost of market adjustment we made and all of it hit our fuels marketing segment. It was a write-down of inventory to market. However we, that would have been basically, if we've been receiving a 100% hedge accounting during the quarter we would have been at that point anyway with our market value. So really the way to look at that, it was kind of categorized as a lower cost of market adjustment. But for the segment and for the year it really didn’t negatively impacted anymore than it would have had, we've been getting hedge accounting all the way on that 100% hedge accounting so.

[Cory Garcia:]

Got you okay that makes --

[Brad Barron:]

We got you to the same spot you would have been anyway.

[Cory Garcia:]

Right, on a full year basis. That makes perfect sense.

[Brad Barron:]

Yes, it wasn't incremental to anything else.

[Cory Garcia:]

Right okay now that's helpful and I guess I come back to sort of the contango storage question again. I know you guys did some re-contracting last spring at St. Eustatius and just curious if there is any open or available capacity that would be looking to switch into crude just given the broader macro crude backdrop or is sort of that contracts more operational focus and less sort of trading contango centric?

[Brad Barron:]

Eustatius, in particular, I mean all of our crude oil storage is leased up, we've got another two years left on that contract. The rest of our storage like our fuel storage there, we do have some interest certainly from customers and more crude storage there but that’s a big capital program converting fuel oil storage to crude. So we're not really there yet. And again, really all of our crude storage in our entire system is completely leased out. So we will have to wait for renewals to see where the market is at the time.

[Cory Garcia:]

Got you. All right. Thanks for the color guys.

[Operator:]

Your next question comes from the line of [indiscernible]. Your line is open.

[Unidentified Analyst:]

I guess a lot of my questions have been asked and answered. But maybe I want to address the guidance a little bit. Kind of a two part question. I think in your response to Brian, I just kind of wanted to clarify what's your puts and takes. When you think about the 2015 EBITDA guidance excluding the growth projects which you are currently working on, would you kind of classify it as like your current new baseline given the current commodity environment? You sort of talked about negatives, offsetting positives and so forth. Is that the way we should sort of think about 2015 guidance right now?

[Brad Barron:]

Well, I think you've got in 2015 -- I was about to say yes, but you've got some of our expansions in the Eagle Ford that are going to come online middle of the year. So certainly those beyond 2015 you'll have full-year benefit. Same with our 12-inch line from Mont Belvieu, the propane line that's going to come into service in the second quarter. So you won't yet see a full year of those two projects until 2016.

[Unidentified Analyst:]

Okay. And so if we think about them on a run rate basis that's kind of how you're thinking your baseline is right now?

[Brad Barron:]

I think so.

[Unidentified Analyst:]

Okay. And then, when we think directionally about 2016 outside of what you just pointed out we will be round tripping some projects coming into place. Are there anything else you're just kind of looking for as potential upside drivers from your current levels? I think you talked about Piney Point before is kind of a potential driver. Is there anything else that you're kind of focused on CapEx and so forth that could drive it incrementally higher?

[Brad Barron:]

Definitely. We've got several significant projects that we continue to develop in the shale plays and in other areas. And so like I said, they're in their early stages of development plus the PMI JV that we mentioned. But we'll continue working those and developing those, but we're trying to keep that bundle of projects full.

[Tom Shoaf:]

Right. That $420 million of capital we're spending this year on growth that will kick in at some point right the majority of that will probably kick in 2016. So you'll get a lift from that plus in the other projects that are currently undeveloped that are not included in $420 million.

[Brad Barron:]

And to the extent storage rates are covered, you've also got about 25% of our storage leases coming off each year.

[Unidentified Analyst:]

Right. So positive trend even on the re-contracting. That makes sense. And then, I think we've spent a quite a bit of time on the contango market. Is there any opportunity should the global contango market pickup a little bit that you can sort of take advantage of that as well too and can that present some additional upside?

[Brad Barron:]

I think the processed condensate issue here in the U.S. We're certainly working some projects with customers to segregate and keep the quality of processed condensate good all the way to a ship. We're working that with them. But right now, if we had any ability we have to segregate and ship processed condensate, we just come out of our common stream. I think the processed condensate from a more macro perspective, really starts to pay off when you have no other market to go to in the U.S. And right now all of that crude -- all the crude coming out of the shale plays is finding a home.

[Unidentified Analyst:]

Right. Okay. That makes sense and wraps up my questions. Thank you.

[Brad Barron:]

Thank you.

[Operator:]

Your next question comes from the line of Jeremey Tonet. Your line is open.

[Jeremey Tonet:]

Thanks for all the color today in the Q&A it's been really helpful. I was just wondering and apologies if I missed it, as far as the 2015 CapEx spend, would you guys be able to identify what some of the chunkier elements of that spend is?

[Chris Russell:]

Yes, Jeremey, it's Chris Russell. Yes, it's the finishing up Phase 2 in the Eagle Ford, finishing up the Houston 12-inch project also included in that number is the acquisition we just made of the other 50% in Linden. Those are the three biggest pieces. And then, you'll have a little bit in there for PMI and several other projects we have gone on.

[Jeremey Tonet:]

Okay. Great. And then, looking at Linden it seems that was really nice tuck-in acquisition on good terms there. I am just wondering around your footprint, do you see other opportunities for nice little tuck-in acquisitions like that or any thoughts that you have on the broader M&A market right now given all these changes in the current environment?

[Brad Barron:]

Well, the M&A market remains hypercompetitive is what we're seeing but I would consider extreme multiple being paid for asset. So the company that buys them has to have a particular desire for that asset and for us, they need to tie in to something that we're doing, somehow further our strategy. So Linden obviously, did that. And so we're always looking for other things like Linden. Are there some others out there? Yes, there is probably a few and we're looking around diligently for those.

[Jeremey Tonet:]

Okay. Great. That's it for me. Thank you.

[Operator:]

Your next question comes from the line of Selman Akyol. Your line is open.

[Selman Akyol:]

Thank you. Just -- most of my questions have been answered, but just one quick thing. On the maintenance capital, you are up slightly for 2015 from the prior quarter. And I was wondering is that just deferral from 2014 into 2015, or was there just incremental dollars being spent on maintenance?

[Danny Oliver:]

No. Not really a deferral. I think we've got I know -- we've got some top-line integrity work it's just timing wise is popping up in 2015. But nothing deferred from 2014.

[Selman Akyol:]

Okay. Thank you very much.

[Brad Barron:]

I think we've indicated -- we've indicated earlier in the year that we thought that our reliability could be up in 2015. And so we just found some integrity pipeline work that we need to do there. So like Danny said that's what’s really driving that.

[Selman Akyol:]

Got it. Thank you.

[Operator:]

Your next question comes from the line of John Edwards. Your line is open.

[John Edwards:]

Yes. Good morning everybody. And yes thanks for all the commentary here. Just if I could come back to I think Mark was asking the earlier question on the deficiency payments. So as I understood your comment, is it about $8 million a quarter that you expect to be recurring or maybe you could clarify that?

[Brad Barron:]

Yes. We're looking at schedule now. I don’t know that we have -- we might need to get back with you on that to give you the specifics on it. But at least $8 million of it was -- we had about $4 million of it, $3.7 million, it's clearly a one-time deal, and the rest of it are deficiency payment amounts that could go forward. So it's probably about, I would say about $8 million or so. There is about -- I think there is about another $7 million, I’m sorry about $6 million, it is not a go forward either, so that was kind of a one-time net as well.

[Tom Shoaf:]

Probably going to be in the $2 million to $3 million number on a go forward basis, John.

[John Edwards:]

Okay. So excluding the one-time items, your coverage would have been more or less in line with your original expectations, correct?

[Brad Barron:]

Excluding the one-time item?

[John Edwards:]

Yes. I mean in other words, I mean your opening remarks were indicative you're above your guidance. So I'm must thinking excluding kind of these one-offs more or less you would have been about what you're expecting guidance wise, correct?

[Brad Barron:]

I think that’s about right. Just remember that the LCM we took that’s a one-time item; I mean that was really part of the overall business margin process. So it was a one-time deal, but it was really part of our operational issues.

[Danny Oliver:]

I think though what you're going to see, what he is talking about, some of these that won’t be repeated as a one-time item were associated with some capital reimbursements that certain custom projects that we're working on and customers were reimbursing development capital. And so it’s sliding into this one-time kind of DCF adjustment. But going forward that would be replaced with a contract that’s kicking off revenue. So it will be in a different pocket that you will see that that money continue to come through the door.

[John Edwards:]

Okay. And then maybe you could comment -- so you're guiding about 400-ish the 420 CapEx is that -- is that a pretty good run rate you think going forward or is it just too hard to tell given the sloppy commodity price environment we're in?

[Brad Barron:]

We hope that's low.

[Tom Shoaf:]

And we hope that it's on the low-end of the range. But I think it’s too early to tell what we're going to do. We haven't finalized the budget for 2016 or 2017. I would certainly like it to be at that level or higher.

[John Edwards:]

And then -- have you -- may be you could also comment a bit, are you seeing given the environmental win, how are you seeing it impact your backlog of projects. I mean I guess you don’t really talk too much about backlog, but can you give us any insight in that regard?

[Brad Barron:]

Quite frankly it’s not affected the projects that we're working on. I mean if anything it may -- there is a couple of things it may push out the timeline a little bit. But the projects remain viable. And we're going to continue to pursue them.

[Danny Oliver:]

I don't have the list in front of me but I know -- the projects -- that where a specific projects that we are working on developing are over $1 billion of capital. But there again as Brad mentioned how fast do those come to fruition, we don’t know yet.

[John Edwards:]

Okay. All right. And then can you -- have you given out, I apologize if you have given this out already, the sort of the range of investment you're expecting from your project with Pemex?

[Brad Barron:]

No. We haven’t given it out yet.

[John Edwards:]

Okay. Okay. And then just to follow-up Brian's question on your distribution growth, so is the current plan still too -- try to raise this year or is it really too early to comment on that?

[Brad Barron:]

I don’t think we said that the plan was to raise this year. I think we said in the – back half is the possibility. But, I mean right now I think what we're saying is that we need to get some of these projects that are in development into a project can actually become a project and has this ability into growth in the future before we start putting any distribution increase guidance out there for you. I don't think I've said that, I don't think what the rate of distribution in 2015.

[John Edwards:]

Okay. I'm not trying to put words in your mouth, just want to clarify in that so but yes that’s helpful. And then what's the actual liquidity number, where you guys stand on that or maybe you said it and I missed?

[Tom Shoaf:]

We've got $850 million available in our revolver today or at the end of the year.

[John Edwards:]

Okay that’s really helpful. Thank you that's all I had.

[Operator:]

Your next question comes from the line of James Jampel. Your line is open.

[James Jampel:]

Hi, thanks for taking the question. I'm wondering in your 2015 forecast, what is the average daily unit trend expected from the Bakken to St. James?

[Brad Barron:]

In our adjusted forecast against we took out pretty much everything over and above minimum commitments. I think we're in the neighborhood of 15 trains a month, have train every other day.

[James Jampel:]

That’s the minimum commitment?

[Brad Barron:]

Yes.

[James Jampel:]

And when do the minimum commitments expire?

[Brad Barron:]

We've got, I think about two years left on those.

[James Jampel:]

I see. And about what's the EBITDA associated with the minimum commitment?

[Tom Shoaf:]

$25 million, $30 million somewhere in that neighborhood.

[James Jampel:]

Okay. Thank you.

[Operator:]

[Operator Instructions]. Your next question comes from the line of Brett Riley. Your line is open.

[Louis Shamie:]

Hi, it's actually Louis Shamie. Just to follow-up on James's question. What's the current rate; your customers have the kind of sunk cost on that train every other day at the unit train facility at St. James. What's the current utilization say for December or January?

[Brad Barron:]

Well December and January its well above those minimums. We're taking out; it's just been there in the last month right that the LOS TI spreads came into near parity. So we received information from some of our customers that through the month of February we would start to see declines down to minimum. So March is really the first month that we're going to have all of the way down to those minimums. I'm sorry what was the second -- did you have a second part to that question?

[Louis Shamie:]

No, no, I actually want to ask something about Linden. So just thinking about the impact of Linden on the guidance, so prior to buying the other 50% of the facility, did that show up in your storage segment or is that on consolidated and flow through equity earnings?

[Tom Shoaf:]

We believe it's consolidated flowing through equity and earnings.

[Louis Shamie:]

Okay.

[Tom Shoaf:]

When I said about the whole thing, then we own a 100% so its consolidated and it pushes it up to the storage segment.

[Louis Shamie:]

I see. So the change in the storage segment is not just the part that you bought but the entire assets cash flow certainly for sure.

[Tom Shoaf:]

Spot on. Yes we --

[Louis Shamie:]

Okay that explains a lot. Okay, well thank you very much guys.

[Operator:]

Your next question comes from the line of Brian Lasky. Your line is open.

[Brian Lasky:]

Good morning. Just one quick follow-up, on the leasing contract that you signed there Danny, can you just tell us what the tenor on that was, and when you said it was higher, is there any way to quantify that in terms of order or magnitude?

[Danny Oliver:]

I really don’t want to get into the specifics on that. It’s a one-year contract.

[Brian Lasky:]

Okay.

[Danny Oliver:]

But it was a good bit higher than the prevailing rates.

[Brian Lasky:]

Okay. Thank you very much.

[Operator:]

And there are no further questions at this time. I turn the call back over to the presenters.

[Brad Barron:]

Thank you, Nancy. Well, once again I'd like to thank everybody for joining us on the call today. If you have any questions, any further questions please call NuStar's Investor Relations Group. Thanks and have a good day.

[Operator:]

This concludes today's conference call. You may now disconnect.