![]() 1 NuStar Analyst Day June 24, 2009 Philadelphia, PA and Paulsboro, NJ Exhibit 99.1 |
![]() This presentation contains certain estimates, predictions, projections, assumptions and other forward-looking statements that involve various risks and uncertainties. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. These forward-looking statements can generally be identified by the words "anticipates," "believes," "expects," "plans," "intends," "estimates," "forecasts," "budgets," "projects," "will," "could," "should," "may" and similar expressions. These statements reflect our current views with regard to future events and are subject to various risks, uncertainties and assumptions. For a discussion of certain of those risks, please read "Risk Factors" in Item 1A of NuStar Energy L.P's and NuStar GP Holdings, LLC's respective annual reports on Form 10-K for the year ended December 31, 2008 and subsequent quarterly reports as filed with the Securities and Exchange Commission. Forward Looking Statements 2 |
![]() Agenda Topic Presenter* Page Number Opening Remarks (10 minutes) Curt Anastasio 4 Financial Overview (10 minutes) Steve Blank 16 Operational Overview (5 minutes) Rick Bluntzer 25 Asphalt & Fuels Marketing (40 minutes) Asphalt Supply & Demand Fundamentals Steve Hays 31 Impact on Asphalt Supply from Coker Steve Hays 36 Expansions and U.S. Refinery Outlook Impact on Asphalt Demand from U.S. Mike Stone 41 Highway Funding and Stimulus Package Warm-Mix Asphalt Overview Ron Corun 48 Fuels Marketing Paul Brattlof 53 Asphalt Refining & Plant Overviews Mike Pesch 57 Transportation (10 minutes) Danny Oliver 69 Storage (10 minutes) Danny Oliver 82 Closing Remarks Curt Anastasio 89 Q&A (30 minutes) Break/Board Buses for Paulsboro Asphalt Tour * Bios of management team can be found in the appendix starting on page 92 3 |
![]() NuStar Overview Curt Anastasio CEO & President 4 |
![]() Expect 2009 to be another record year primarily due to the contribution from internal growth projects and asphalt operations Every year has been a record year since the IPO in terms of EBITDA, net income and distributable cash flows Expansion into the asphalt business in 2008 was the right business at the right time – “The Golden Age of Asphalt” Single largest contributor to earnings in 2008 Our current outlook for the asphalt business through 2013 is even more bullish than we expected due to tight asphalt markets Completion of the majority of the $400 million construction program on-time and on-budget also expected to benefit 2009 results NuStar continues to excel in safety and environmental performance and has received numerous awards Tremendous strides have been made in becoming one of the best companies to work for in America Fortune 100 Best Companies to Work For – No. 44 Best Large Company to Work for in Texas – No. 1 Best Large Company to Work for in San Antonio – No. 1 (2008) and No. 2 (2009) NuStar has a solid balance sheet, investment grade credit rating and is emphasizing financial discipline in a period of weak economic times, however…. …We continue to evaluate a significant amount of internal growth opportunities and acquisitions for the next several years focused on all three of our business segments (i.e. transportation, storage and asphalt & fuels marketing) Expect 2009 to be Another Record Year – Asphalt Acquisition the Right Business at the Right Time …The Best Is Yet To Come 5 |
![]() High quality, large and diverse asset footprint with operations in eight different countries including the U.S., Mexico, Netherlands, Netherland Antilles (i.e. Caribbean), England, Ireland, Scotland and Canada Third largest independent liquids terminal operator in the world and second largest in the U.S. that provides significant growth opportunities No. 1 asphalt producer on the East Coast and No. 3 asphalt producer in the U.S. Expect asphalt operations to provide further upside to financial results as asphalt markets continue to tighten What Sets NuStar Apart from its Peers 6 Investment grade credit rating with demonstrated access to capital markets in difficult conditions Do not anticipate need to access capital markets in 2009 except for acquisitions Lower cost of capital versus majority of peers Top Incentive Distribution Rights (IDRs) capped at 25% vs. 50% for most MLPs Strong corporate culture of taking care of employees, making safety a top priority, achieving operational excellence and contributing time and money to our communities Recognized in 2008 as one of the best places to work for in America and for our strong safety record Experienced and proven management team with substantial equity ownership and industry experience |
![]() NuStar Energy L.P. is a leading publicly traded growth-oriented partnership (NYSE: NS) with a market capitalization of approximately $2.8 billion and an enterprise value of approximately $4.7 billion One of the largest independent petroleum pipeline and terminal operators in the U.S. and one of the largest asphalt refiners and marketers in the U.S. Ranked #485 on the Fortune 500 Listing for the first time ever based on 2008 results NuStar GP Holdings, LLC (NYSE: NSH) holds the 2% general partner interest, 18.4% of the common units and incentive distribution rights in NuStar Energy L.P. Unitholders should benefit from potentially higher growth in distributions from ownership of incentive distribution rights NuStar Overview – Two Publicly Traded Companies NS NSH IPO Date: 4/16/2001 7/19/2006 Unit Price (6/18/09): $51.84 $22.87 Annual Distribution/Unit: $4.23 $1.72 Yield (6/18/09): 8.16% 7.52% Market Equity Capitalization: $2,823 million $973 million Enterprise Value: $4,747 million $975 million Total Assets (3/31/09): $4,505 million $570 million Debt/Capitalization (3/31/09): 46.9% n/a Fortune 500 Ranking: 485 n/a 7 83.2% Membership Interest 79.6% L.P. Interest 16.8% Membership Interest 2.0% G.P. Interest 18.4% L.P. Interest Incentive Distribution Rights William E. Greehey 7,138,920 NSH Units NYSE: NSH NYSE: NS |
![]() Asset Stats: Operations in eight different countries including the U.S., Mexico, Netherlands, Netherlands Antilles (i.e. Caribbean), England, Ireland, Scotland and Canada 8,407 miles of crude oil and refined product pipelines 82 terminal facilities and four crude oil storage tank facilities Nearly 91 million barrels of storage capacity 2 asphalt refineries capable of processing 104,000 bpd of crude oil Large and Diverse Geographic Footprint with Assets in Key Locations 8 |
![]() 37% 35% 28% Percent of 2008 Segment Operating Income Diversification of operations provides various earnings streams and reduces risk Approximately 72% of NuStar Energy’s segment operating income in 2008 resulted from stable, fee-based operations Remainder of segment operating income related to margin-based asphalt and fuels marketing segment Storage (~37%) Transportation (~35%) Refined Product Terminals Crude Oil Storage Refined Product Pipelines* Crude Oil Pipelines Asphalt & Fuels Marketing (~28%) Asphalt Fuels Marketing Product Supply, Wholesale and Fuel Oil Marketing Bunkering/Other Diversified Operations 9 * Includes primarily distillates, gasoline, propane, jet fuel, ammonia and other light ends. Does not include natural gas. |
![]() $68 $86 $102 $154 $214 $221 $319 2002 2003 2004 2005 2006 2007 2008 Distributable Cash Flow ($ in Millions) EBITDA ($ in Millions) Record Growth Every Year, Has Translated Into… 10 $77 $112 $133 $219 $322 $353 $492 2002 2003 2004 2005 2006 2007 2008 2008 was a record year financially primarily due to contribution from asphalt operations and growth projects Despite challenging conditions in the first quarter of 2009, earnings were better than expected and beat analyst estimates Reported adjusted first quarter 2009 earnings of $0.47* per unit versus $0.35 per unit consensus estimate NuStar is well-positioned for another record year in 2009 due to higher results from all three of our business segments: Transportation, Storage and Asphalt and Fuels Marketing Expect record second quarter 2009 earnings Note: 2005 and 2006 distributable cash flow and EBITDA are from continuing operations * Please refer to the NuStar Energy L.P. first quarter 2009 earnings release for the reconciliation to GAAP earnings |
![]() $4.085 $3.835 $3.60 $3.365 $3.20 $2.95 $2.75 $2.40 2001 2002 2003 2004 2005 2006 2007 2008 NS Annual Distribution Since IPO * * Based on NS annualized distribution of $0.60 per unit in 2001 ** Based on NSH annualized distribution of $0.32 per unit in 2006 NSH Annual Distribution Since IPO $1.28 $1.38 $1.58 2006 2007 2008 ** 11 ~8.0% CAGR ~11% CAGR NS Distribution Coverage Applicable to LPs Targeting distribution increases at NS and NSH in 2009 – increases dependent on NuStar Energy L.P.’s performance, growth opportunities and global economic, financial and capital market conditions 1.20x 1.25x 1.28x 1.30x 1.19x 1.16x 1.10x 1.33 2001 2002 2003 2004 2005 2006 2007 2008 …Consistent Distribution Growth While Maintaining a Solid Distribution Coverage |
![]() -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 6/18/08 8/17/08 10/17/08 12/17/08 2/16/09 4/18/09 6/18/09 Total Return - Last Twelve Months (LTM) Despite the market turmoil, both NuStar companies have weathered the storm well, significantly beating their respective peer groups and market indices Outperformance suggests Wall Street’s bullish view on asphalt business, solid 2009 outlook and defensive nature of business Source: Barclay’s Capital 12 Note: NSH GP Peers Total Return Index is weighted on market capitalization of each company and includes the following companies: AHD, AHGP, BGH, EPE, ETE, HPGP, MGG, and NRGP. The Alerian MLP Index is a composite of the 50 most prominent energy master limited partnerships NuStar Companies Outperforming During Difficult Economic Times NS 18% S&P 500 (30)% Alerian MLP Index (18)% NSH Peers (13)% NSH 1% |
![]() Growth Strategies – Transportation & Storag BUILD : Evaluate domestic and international grass-roots pipeline and storage opportunities, including joint-ventures, in new market areas OPTIMIZE: Optimize NuStar’s existing pipeline and terminal assets Maximize asset utilization Evaluate low performance pipeline systems and terminals for divestiture Evaluate expansion of NuStar’s logistics network with wholesale and exchange opportunities Evaluate asset swap opportunity with other companies BUY: Evaluate purchase of domestic and international third party storage assets, including joint-ventures, in growth markets Focus on the best locations for terminal storage within a region Look for projects with immediate cash flow opportunities 13 e |
![]() Growth Strategies – Asphalt NuStar’s goal is to continue to expand its asphalt business through production and logistics opportunities Acquisition of CITGO Asphalt Refining Company in 2008 gave NuStar a strong position on the East Coast Market forces continue to point to strong outlook for asphalt business for the foreseeable future Expand production capabilities into other U.S. asphalt markets beyond the East Coast Effective April 1, 2009, NuStar entered a marketing agreement with BTB Refining, LLC to sell the refinery's asphalt production over the rack at Corpus Christi, Texas – Expect incremental $4 to $5 million operating income contribution annually Expand asphalt facilities to extend supply and reduce costs Increase production of higher value Polymer Modified Asphalt Increase rack asphalt sales by acquiring/leasing new terminals or negotiating new leases on existing terminals Successfully entered into leases for three of SemGroup’s asphalt terminals located in New Jersey, Virginia and Texas – Plan to see incremental rack sales volumes of 1 to 1.2 million barrels and incremental operating income of $3 to $4 million annually Implement energy efficiency projects Implement projects and programs to reduce seasonality of operations Increase market share of warm-mix asphalt Evaluate optional markets for winter asphalt production 14 |
![]() Optimize Financial Position Continue to Grow Distribution at NS and NSH NuStar’s Strategies for Maximizing Unitholder Value Margin-Related Business Maintain proportion of operating income from fee-based to margin- based businesses ~70% to 75% Fee-Based ~25% to 30% Margin-Based Reduce seasonality of asphalt operations Continue to maintain a higher coverage ratio (2:1 ratio) on asphalt cash flows Acquisitions Promote Training Provide Employee Recognition Internal Growth Manage Margin- Related Businesses Continue To Strengthen Corporate Culture Community Involvement Create World Class Environment Operational Excellence 15 Capital Discipline and Project Execution Maintain Investment Grade Rating & Eliminate Negative Outlook |
![]() Financial Overview Steve Blank Senior VP - CFO & Treasurer 16 |
![]() Prudently Managed Capital Structure $1.2 billion Credit Facility $590.3 NuStar Logistics Notes (7.65%) 349.4 NuStar Logistics Notes (6.875%) 104.5 NuStar Logistics Notes (6.05%) 239.0 Kaneb Ops. Notes (5.875%) 258.5 Kaneb Ops. Notes (7.75%) 271.0 Other Debt 111.5 Total Debt $1,924.2 Total Partners’ Equity 2,174.5 Total Capitalization $4,098.7 (Dollars in Millions) NS Capital Structure (3/31/09) Do not anticipate need to access capital markets to fund current operations, distributions and capital requirements in 2009 Expect to use cash flows from operations and $1.2 billion revolver for financing purposes Plan to access capital markets only for acquisitions and internal growth projects beyond the $95 million targeted for 2009 NuStar’s Investment Grade Credit Rating important during these uncertain times NuStar is one of 13 MLPs out of around 80 MLPs that have an investment grade rating – important for efficient access to capital markets Fitch revised its outlook to stable from negative on February 20, 2009 Will continue to work with other rating agencies to have negative outlook removed Standard & Poor’s: BBB- (Negative Outlook) Moody’s: Baa3 (Negative Outlook) Fitch: BBB- (Stable Outlook) Credit Summary 17 |
![]() Maintaining Sufficient Liquidity with Disciplined Financial Strategy NS Current Revolver Availability Rates on NS and NSH revolvers based on LIBOR plus 50 bps, currently just under 1% Currently renegotiating NSH revolver, which expires July 19, 2009 Financial Covenant Tests: Debt-to-EBITDA cannot exceed 5.0 to 1.0 times Following an acquisition of $100 million or more, NuStar may increase Debt-to-EBITDA to 5.5 times for two consecutive quarters Total Bank Credit $1,223 Less: Borrowings (742) Letters of Credit (69) Revolver Liquidity $412 (Dollars in Millions) NSH Current Revolver Availability Total Bank Credit $20 Less: Borrowings (6.5) Letters of Credit - Revolver Liquidity $13.5 (Dollars in Millions) 2009 $0.7 2010 $0.8 2011 $0.8 2012 $971* 2013 $481 2014 $0.6 * Primarily includes maturity of revolver, which expires December 2012, and $350 million of senior notes NS Long-Term Debt Maturities (3/31/09) NSH Long-Term Debt Maturities (3/31/09) 2009 2010 2011 2012 2013 2014 ** 3-year revolving credit facility expires on July 19, 2009 18 $6.5** $- $- $- $- $- |
![]() 19 Continue to Target Holdback of Cash Flows from Asphalt Operations In 2008, NuStar Energy L.P. held back 100% of the cash flows, with and without the hedging loss, from the asphalt operations to pay down debt All of the 2008 distribution payment was funded with cash flows from non-asphalt operations Assumed a 1.07 times distribution coverage on the non-asphalt operations 100% holdback of cash flows from the asphalt operations allowed NuStar Energy L.P. to have a higher than expected distribution coverage ratio for 2008, or 1.33 times Continue to target 50%, or higher, holdback of cash flows from asphalt operations in 2009 Asphalt Operations Non-Asphalt Operations Total $47,532 $271,547 $319,079 - (253,782) (252,822) $47,532 $17,765 $66,257 N/A 1.07x 1.26x 100% 2008 - With $61 million Hedging Loss Asphalt Operations Non-Asphalt Operations Total $108,236 $271,547 $379,783 - (253,782) (252,822) $108,236 $17,765 $126,961 N/A 1.07x 1.50x 100% 2008 - Without $61 million Hedging Loss Distributable Cash Flow Including Hedging Loss Distribution Excess (Shortfall) Coverage Holdback Distributable Cash Flow Excluding Hedging Loss Distribution Excess (Shortfall) Coverage Holdback |
![]() Expect Improved Credit Metrics in 2009 20 Marked improvement in debt metrics since the CITGO Asphalt Refining Acquisition in March 2008, both with and without the $61 million hedging loss incurred in 2Q08 Currently there are no hedges in place for asphalt operations and do not anticipate any hedging activity going forward First quarter 2009 Debt-to-EBITDA was higher at 4.3x primarily due to the seasonality of the asphalt operations, but well below revolver financial covenant of less than 5.0 times Communicated to the rating agencies we are targeting a Debt-to-EBITDA ratio of 3.5 to 4.0 times for 2009 Debt-to-EBITDA & Debt-to-Capitalization Ratios Adjusted for April 2008 Equity Offering and Acquisition Related Adjustments Adjusted for $61 million hedging loss 4.6x 4.9x 3.9x 4.0x 4.3x 4.4x 4.1x 3.4x 3.4x 3.7x 52.5% 49.9% 47.5% 46.2% 46.9% 3 3.5 4 4.5 5 1Q08 2Q08 3Q08 4Q08 1Q09 40.0% 50.0% 60.0% |
![]() 21 2009 Forecast Capital Spending Now targeting around $95 million of strategic growth capital spending for 2009 Additional $10 million primarily related to new scope of Texas City terminal project Major strategic projects include: Approximately $23 million of pipeline projects on NuStar’s East pipeline, ammonia pipeline and at our St. James, LA facility to increase the capacity and flexibility of our two pipelines and to accommodate new and existing customers Approximately $13 million to finish up tank expansion projects at NuStar’s Texas City, TX as part of our $400 million construction program Approximately $25 million at our Texas City , TX facility to improve and upgrade it to make it a world class heavy oil terminal Approximately $12 million at our Paulsboro and Savannah asphalt facilities to improve crude flexibility and rates, improve the energy efficiency of the refineries and increase the production of polymer modified and warm-mix asphalt Expected to provide around $11 of incremental operating income in 2009, $30 million of incremental operating income in 2010 and $1 million of incremental operating income in 2011 (Dollars in Millions) Reliability Other Strategic Total Forecast by Segment Transportation 11,372 - 16,157 27,529 Storage 40,097 - 66,536 106,633 Corporate - IS 7,910 1,607 900 10,417 Refining & Marketing 11,483 - 10,823 22,306 Total Forecast 70,862 $ 1,607 $ 94,416 $ 166,885 $ 2009 Forecast |
![]() Significant Long-Term Acquisition and Internal Growth Opportunities Acquisition Criteria Accretive to distributable cash flows Strong internal growth potential Synergistic with existing operations (i.e. ties in with strategy) 22 Storage – Continue to evaluate domestic and international storage opportunities in strategic hub locations Amsterdam/Rotterdam/Antwerp – Evaluating opportunities to acquire storage facilities to meeting growing demand Asphalt – Continue to evaluate production and logistics opportunities to expand markets Acquisitions Internal Growth Storage: Black Oil Strategy – Continue to implement strategy of building crude oil and heavy fuel oil storage at Texas City, TX and St. James, LA facilities St. Eustatius – Evaluating opportunities to expand or acquire nearby terminals to increase presence in the Caribbean market Amsterdam/Rotterdam/Antwerp – Evaluating opportunities to build storage facilities to meeting growing demand United Kingdom – Build-out existing terminals Pipelines: Ammonia Pipeline – Evaluating additional pipeline laterals to industrial end users Central/South Texas – Evaluating opportunities to increase utilization of assets to meet demand in these growing markets Asphalt: Additional projects to address crude flexibility, improve quality of light products, produce roofing flux and blend crude to optimize operations Evaluating around $500 million of acquisition and internal growth opportunities over the next few years |
![]() Project Development & Execution Process (PDEP) Concept Phase Opportunity Definition Phase I Opportunity Evaluation & Selection Phase II Lead Case Development Phase III Refinement Phase IV Execution Phase V Start-Up & Evaluation Phase Objectives • Identify Opportunities or Problems Gate Decisions • Develop Alternatives • Select Lead Case • Define the Project • Develop Business Case • Refine the Project • Finalize Project Economics • Construct the Project • Start-Up • Evaluate Performance 1 Pursue Opportunity? Process is intended to help the company build a competitive advantage in the industry by assuming control of the selection, development, execution, and control of projects, and aligning these projects to the company's strategic objectives and goals Use point system to rank and prioritize all major projects, taking into account: Project returns Project risk (capital cost, operating cost and margin volatility) Project size and timing 2 Pursue Lead Case? 3 Authorize Engineering? 4 Authorize Construction? 5 Ready to Operate? 23 |
![]() 44.5% 36.6% 27.2% 24.8% 21.5% 18.8% 16.9% 14.5% 12.5% 11.5% 5.9% 3.7% KMP ETP SXL PAA BPL OKS TPP EPD NS EEP BWP RGNC Peer Average = 18.3% Source: Barclays Capital NuStar Energy L.P. has one of the lowest “GP takes” in its peer group Due to extraordinary action taken by NuStar Energy L.P.’s GP in March 2004 to cap IDRs at 25% for no financial consideration One of only a few publicly traded partnerships to have lower splits Enhances NuStar Energy L.P.’s ability to retain cash flow for debt retirement, capital investments and distribution increases that is expected to benefit both NS and NSH unitholders Significantly lowers cost of capital compared to other partnerships at 50% splits General Partner’s Take of Distribution* * GP% take is based on the annualized most recent quarterly distribution to L.P. unitholders Elimination of 50% High Splits Provides Cost of Capital Advantage 24 |
![]() Operational Overview Rick Bluntzer Senior VP Operations 25 |
![]() 26 Regional Operations System Map |
![]() Centralized along specific disciplines for consistency Strategic Planning Corporate Objectives and Policies HS&E (PSM / Emergency Response / Spill Prevention and Control / Training) Human Resources / Corporate Communications Loss Control (Inventory Control / Product Control / Training) Engineering Standards and Processes (Best Business Practices / Equipment Standards / PDEP) Transportation Optimization Financial Accounting and Reporting Policies and Procedures Decentralized along implementation accountabilities and business stewardship Operational Excellence Health Safety and Environmental Mechanical Reliability Engineering and Integrity Management Profit and Loss Administration Human Resources and Corporate Communications Inventory Management / Quantity and Quality Loss Control 27 Continuous Improvement in Operations |
![]() 2009 YTD 2008 NuStar prides itself on a strong safety and environmental commitment Has received many national safety honors over the last several years with our TRIR and LTIR far better than industry averages Recently presented with the Independent Liquid Terminal Association’s Platinum Safety Award – The Highest Safety Award in the Terminal Industry Adopted Process Safety management as our prime HS&E program Entering into OSHA’s VPP program with goal of achieving “Star” status in our pipeline and refinery operations Continuous Improvement – Health, Safety & Environmental NuStar Injury Incident Frequency Rates Employee TRIR Employee LTIR 2005 2006 4.06 TRIR – Total Recordable Incidents Rate LTIR – Lost Time Incidents Rate 1.49 2.24 0.14 2007 1.36 0.19 * Through May 2009 0.76 0.16 28 * 0.13 0 No LTIR Incidents |
![]() 29 Continuous Improvement - Mechanical Reliability $5,686 $16,000 $4,593 $0 $3,412 $15,058 $2,871 $0 $1,478 $2,807 $1,722 $0 $455 $3,208 $1,148 $0 $341 $3,024 $1,148 $7,910 $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 Pipeline Terminal Refining Corp-IS Spend Amount in $000 2009 Reliability Capital Spend by Segment and Category Misc Energy Rotating API 653 IMP Corp-IS $7,910 Refining $11,483 Terminal $40,097 Pipeline $11,372 Category Totals IMP $26,279 API 653 $21,340 Rotating $6,008 Energy $4,811 Misc $12,423 |
![]() Total 2009 Energy Forecast: $81.5MM Pipelines: $23.7MM ($3.6MM under budget) Terminals: $18.4MM ($1.5MM under budget) Refineries: $39.5MM ($10.8MM under budget) Real Time Power Optimization Pipeline SCADA system determines real time lowest cost solution to running pipelines based on: Power tariffs, pipeline hydraulics and pump curves, Drag Reducer injections, peak demand periods, and pipeline batch schedules. Currently live on Houston PL and Wichita Falls Crude PL. Valley PL, El Paso PL, and ATA PL scheduled to be live by 8/1/2009. Estimated $100K savings in Q1-2009 on Houston PL. Projected savings of 10% for each pipeline - $1.0MM in 2009, $2.0 - $3.0MM annually 2010+ Refinery Initiatives: Evaluating several energy projects including cogen at Paulsboro Boiler efficiency upgrades and insulation projects ongoing at Asphalt Terminals NG procurement and risk management managed by outside consultants led by internal optimization team Other Efforts: Drag reducer agent (DRA) – New contract negotiations completed in May reducing cost by $3/gallon. Projected annual savings of $450,000 annually. Third Party Utility Bill Processing – Advantage IQ processes initiated 4/1/09. Anticipate $75K - $100K savings. Also provides captured data to aid in energy reporting and analysis. Natural gas procurement and risk management – manage NG supply contracts and implement hedge strategies to mitigate NG price risk. Load management/curtailment programs – approximately ~$0.4MM annual power credit Terminal energy audits - Evaluate power tariffs, insulation opportunities, load pump VFDs, peak demand management at largest energy consumption terminals. Pipeline savings resulting from real-time power optimization, reduced throughputs, and reduced natural gas costs. Cost per bbl transported has dropped from just under 8 cents/bbl at the end of 2008 to less than 6 cents/bbl today. 30 Continuous Improvement - Power Optimization |
![]() Asphalt – Supply & Demand Fundamentals Steve Hays VP - Strategic Planning 31 |
![]() 32 U.S. Asphalt Fundamentals Point to Continued Tight Supply 2008 Year End : 20.3 mm bbls. 9% below 2007 levels and 11% below the 5-Year average 2009 March: 28.1mm bbls. Nearly 2% below March 2008 levels and over 14% below the 5-Year average Factors Impacting Inventories: Less asphalt imports and lower production due to low U.S. refinery utilization rates, coker projects and refiners running more lighter, sweeter crudes and less heavier, sour crudes While demand is lower, supply is down even more and is expected to get tighter due to lower production and imports. Demand is expected to improve supported by stimulus funds and an improving economy. U.S. Asphalt Inventories (000 barrels) Source: U.S. Energy Information Administration and Argus 2008 Asphalt Supply/Demand Balance by Region (thousands of barrels per day) (0.1) (1.0) (2.0) (1.0) (1.3) U.S. Net Short 5.4 mbpd, or 2 mm bbls. |
![]() 33 Decreasing Asphalt Imports to the U.S. One of the Reasons for Tight Asphalt Supply U.S. Asphalt Imports/Exports (mbpd) 2008 U.S. Asphalt Imports by Country Source: U.S. Energy Information Administration Venezuela: 3% Spain/India: 1% 2000 U.S. Asphalt Imports by Country Venezuela: 60% Canada: 24% Mexico: 11% Spain: 4% Netherlands: 2% 2008 Imports: 8.1 mm bbls., 44% below 2007 levels and 44% below the 5-Year average Biggest driver is the lack of imports from Venezuela 2009 YTD Imports: 2.6mm bbls. Nearly 3% higher than 2008 levels but 19% below the 5- Year average Factors Impacting Imports/Exports: Absence of Venezuelan asphalt production has opened opportunities for increased U.S. asphalt exports to the Caribbean and South American markets Canada: 96% |
![]() 34 Declining Utilization Rates Driving Less Asphalt Production, while Asphalt Demand is Lower U.S. Asphalt Demand (000 barrels) 2008 : 152.4 mm bbls., or around 418,000 bpd 15% below 2007 levels and 17% below the 5-Year average 2009 YTD: 25.1mm bbls. Nearly 9% below 2008 levels and over 15% below the 5- Year average Asphalt demand has been sluggish so far due to poor weather conditions on the U.S. East Coast - Expect demand to pick up as weather improves and stimulus projects start up (i.e. expected in the third quarter of 2009) Factors Impacting Demand: Federal highway funds, federal stimulus funds, economy, state and municipal budgets, private sector, price of asphalt, weather and seasonality U.S. Asphalt Production (000 barrels) 2008 : 150.9 mm bbls., or around 413,000 bpd; Over 9% below 2007 levels and 12% below the 4-Year average Biggest drop in asphalt production was in the Gulf Coast (PADD 3) and Rocky Mountain (PADD 4) regions 2009 YTD: 31.8mm bbls. Over 5% below 2008 levels and over 14% below the 4- Year average Factors Impacting Production: Low U.S. refinery utilization rates, coker projects, and refiners running more lighter crudes and less heavier crudes Source: U.S. Energy Information Administration |
![]() 35 Expect Comparable Margins in 2009 Despite Lower Rack Asphalt Prices NJ Asphalt Cement Price Index ($ per short ton) 2008 rack asphalt prices started off the season at around $350 per short ton, but climbed to record levels of over $800 per short ton during the peak asphalt season as a result of tight supply and record crude oil prices While 2009 rack asphalt prices have been trending lower than 2008 levels due to lower crude oil prices and sluggish demand, expect higher rack and wholesale prices in the coming months from improved asphalt demand and higher crude prices Source: New Jersey Department of Transportation NuStar’s Gross Margin per Barrel (a) Product margin per barrel is calculated by taking product sales less cost of product sales divided by total barrels sold (includes light products) (b) Adjusted product margin per barrel excludes the $61 million loss related to certain derivative contracts terminated in May 2008 Should see comparable margins in 2009 versus 2008, despite expectations of lower rack asphalt prices Targeting a margin per barrel for the second quarter of 2009 of $8.25 to $8.50, which is slightly lower than last year’s adjusted margin per barrel Expect a stronger margin per barrel in 4Q09 unlike 4Q08, which was hit by the sharp decline in product prices and higher costs of goods sold Expect slightly higher sales volumes in 2009 assuming the impact from the stimulus package kicks in by the second half of year Best case scenario for NuStar’s asphalt earnings is a strong margin supported by an affordable asphalt price 1Q08 2Q08 3Q08 4Q08 2008 1Q09 Product Margin per Barrel (a) $4.43 $1.37 $16.44 ($1.66) $6.22 $5.90 Adjusted Product Margin per Barrel (b) $8.89 $8.78 |
![]() Asphalt – Impact on Supply from Coker Expansions and U.S. Refinery Outlook Steve Hays VP Strategic Planning 36 |
![]() Announced U.S. Coker Projects: Despite Some Delays/Cancellations, Impact of Coker Projects on Asphalt Supply Still Intact Source: PIRA Refinery Database; Company Information 37 Approximately 85% of the announced coker projects listed are either complete or have a high likelihood of completion (i.e. firm projects) Most of the coker capacity is still expected to come on-line in 2011 and 2012, which should tighten asphalt supply even more No. Refinery PADD Announced Coker Capacity (Mbpd) Announced Crude Capacity (Mbpd) Start Up Date Status 1 Coffeyville Resources - Coffeyville, Kansas II 2.0 8.0 1Q 2007 Complete 2 BP - Toledo, Ohio II 2.0 10.0 1Q 2007 Complete 3 Valero - Port Arthur, Texas III 25.0 75.0 1Q 2007 Complete 4 Frontier - Cheyenne, Wyoming IV 4.3 - 3Q 2007 Complete 5 Chevron - El Segundo, California V 15.0 - 4Q 2007 Complete 6 Sinclair – Sinclair, Wyoming IV 20.0 11.0 4Q 2007 Complete 7 ConocoPhillips - Borger, Texas III 25.0 - 4Q 2007 Complete 8 Cenex - Laurel, Montana IV 15.0 - 1Q 2008 Complete 9 Frontier - El Dorado, Kansas II 3.0 11.0 2Q 2008 Complete 10 Tesoro - Martinez, California V 4.4 - 2Q 2008 Complete 11 ConocoPhillips - Los Angeles, California V 5.0 - 4Q 2008 Complete 12 Marathon - Garyville, Louisiana III 44.0 180.0 4Q 2009 Firm 13 Hunt - Tuscaloosa, Alabama III 18.5 15.0 3Q 2010 Firm 14 ConocoPhillips - Wood River, Illinois II 65.0 55.0 1Q 2011 Firm 15 Atofina Petrochemicals Inc.- Port Arthur, Texas III 50.0 - 1Q 2011 Firm 16 BP/Husky - Toledo, Ohio II 25.0 - 1Q 2011 Firm 17 Pasadena Refining System - Pasadena, Texas III 29.0 100.0 2Q 2011 Probable 18 BP - Whiting, Indiana II 95.0 30.0 1Q 2012 Firm 19 Motiva - Port Arthur, Texas III 40.0 325.0 1Q 2012 Firm 20 ConocoPhillips - Borger, Texas III 20.0 34.0 2Q 2012 Probable 21 Marathon - Detroit, Michigan II 28.0 13.0 2Q 2012 Probable Total US Expansion 535.2 867.0 Expansions Completed through 2008 120.7 115.0 Firm Expansions 2009-2012 337.5 605.0 Probable Expansions 2009-2012 77.0 147.0 |
![]() 38 Recent Refining Economics’ Impact on U.S. Coker Projects Have caused refiners to operate existing cokers at minimum throughputs Have not caused the cancellation of refinery coker projects tied to Canadian crude producers or required by environmental consent decrees Have caused coker projects to be delayed where possible Have caused refiners to cancel cokers that were not fully committed Are not expected to generate new coker projects Reconciliation of Coker Projects from June 2008 List: Refinery Added/Cancelled/Pushed Forward/Delayed Announced Coker Capacity (mbpd) Original Start Up Date New Start Up Date 1 BP - Toledo, Ohio Added 2.0 1Q 2007 1Q 2007 2 Valero - Port Arthur, Texas Added 25.0 1Q 2007 1Q 2007 3 Conoco Phillips - Borger, Texas Delayed 25.0 4Q 2007 2Q 2012 4 Chevron - El Sedundo, California Added 15.0 4Q 2007 4Q 2007 5 Sinclair - Sinclair, Wyoming Pushed Forward 20.0 4Q 2008 4Q 2007 6 Conoco Phillips - Los Angeles, California Added 5.0 4Q 2008 4Q 2008 7 Holly - Artesia, New Mexico Cancelled 25.0 1Q 2009 n/a 8 Sinclair - Tulsa, Oklahoma Cancelled 28.5 2Q 2009 n/a 9 Marathon - Cattlettsburg, Kentucky Cancelled 37.0 1Q 2010 n/a 10 Marathon - Garyville, Louisiana Pushed Forward 44.0 1Q 2010 4Q 2009 11 Valero - St. Charles, Louisiana Cancelled 10.0 4Q 2010 n/a 12 Conoco Phillips - Wood River, Illinois Delayed 65.0 3Q 2010 1Q 2011 13 BP - Whiting, Indiana Delayed 95.0 2Q 2011 1Q 2012 14 Motiva - Port Arthur, Texas Delayed 40.0 1Q 2011 1Q 2012 15 Marathon - Detroit, Michigan Delayed 28.0 4Q 2010 2Q 2012 16 Conoco Phillips - Borger, Texas Cancelled 20.0 2Q 2012 n/a 17 Conoco Phillips - Wood River, Illinois Cancelled 30.0 2Q 2013 n/a Coker Projects Cancelled (6 projects) (150.5) Coker Projects Added (4 projects) 47.0 (103.5) Coker Project Size Revisions from June 2008 Presentation (14.5) Total Change (118.0) Coker Capacity (June 2008 NuStar Presentation) 653.2 Coker Capacity (June 2009 NuStar Presentation) 535.2 Total Change (118.0) |
![]() Source of data for graphs: U.S. Energy Information Administration Monthly Stats, Weekly Petroleum Status Report and Company Data 39 U.S. Refinery Utilization Rate Weak Margins have also Impacted Utilization Rates and Asphalt Supply 2009 YTD average of 82.3% is significantly lower than last year (i.e. 85.3%) and the five-year average (i.e. 89.4%) U.S. refiners have cut crude oil runs to avoid driving weak margins lower As a result of this lower refinery utilization, all refinery production, including asphalt, is getting reduced 3-2-1 U.S. Gulf Coast Refining Margin ($ per Barrel) |
![]() Source of data for graphs: U.S. Energy Information Administration Monthly Data and 2009 Annual Energy Outlook 40 U.S. Refinery Utilization Rate vs. U.S. Asphalt Production Low Utilization Rates Expected to Impact Asphalt Supply Going Forward The combination of lower refinery utilization and completed coker projects has dropped asphalt production by more than 100 mbpd since 2006 Post-2008, this same combination of factors should continue to provide downward pressure on asphalt production |
![]() Asphalt – Impact on Asphalt Demand from U.S. Highway Funding and Stimulus Package Mike Stone VP - Asphalt Marketing Supply & Trading 41 |
![]() Asphalt Paving Market More than 100 million tons of asphalt are consumed worldwide each year Approximately 32 million tons of asphalt paving products are sold each year in the U.S. Approximately 85% of asphalt consumed is used for road paving and approximately 10% used for roofing products Majority of roofing product consumption is repair work Public sector, depending on where you are in the U.S., can represent 40% to 60% of the total paving market Public work is typically around 10% to 15% new work and 85% to 90% repair and maintenance Public sector primarily builds highways and transportation infrastructure for various state Departments of Transportation Private sector represents the rest of the market and primarily builds residential roads, parking lots, asphalt paths and courts Private work is typically around 90% to 95% new work and 5% to 10% repair and maintenance Private sector is expected to be hit hard this year because of weak economy NuStar Markets Asphalt’s Position in Paving Market 42 Majority of NuStar’s asphalt customers are road and bridge construction companies who operate asphalt hot mix plants that combine rock aggregate with asphalt to make road pavements 50% of NuStar’s customers serve the private commercial sector and 50% serve the public sector Small number of NuStar’s customers manufacture residential asphalt roofing shingles and building materials |
![]() Poor Road Conditions in the U.S. Driving Need for Transportation Infrastructure Improvements Poor Road Conditions in the U.S. Driving Need for Transportation Infrastructure Improvements Significant infrastructure needs in the U.S. Major increase in road investment needed to accommodate growing demand on nation’s surface transportation system U.S. is only spending a fraction of what we should to maintain roads Approximately one-third of the nation’s major highways, including Interstates, freeways and major roads, are in poor or mediocre condition. Roads in urban areas, which carry 66 percent of the traffic, are in much worse shape Spending around $78 billion annually on highways U.S. Department of Transportation estimates that the current backlog of unfunded but needed road, highway and bridge repairs and improvements is $495 billion Source: American Association of State Highway and Transportation Officials (AASHTO) and TRIP, a national transportation research group 43 Vehicle travel on America’s highways increased by 41 percent from 1990 to 2007, while new road mileage increased by only four percent and the nation’s population grew by 22 percent from 1990 to 2008 Traffic congestion costs American motorists $78.2 billion a year in wasted time and fuel costs and Americans spend 4.2 billion hours a year stuck in traffic |
![]() U.S. Stimulus Package – Overview of Transportation Infrastructure Stimulus Funds Summary of Highway Provisions under The American Recovery and Revitalization Act (“ARRA”): $27.5 billon for highways – Funding available through September 30, 2010 After set asides, $26.8 billion , or 97% of the total, apportioned to U.S. States and D.C, using the SAFETEA-LU highway formula 120 days after apportionment of funds, or June 30, 2009, states must obligate 50% of their apportionment or the U.S. Department of Transportation (DOT) shall withdraw 50% of the funds, less the amount obligated, and redistribute to other states that have had no funds withdrawn One year after apportionments, or March 31, 2010, the U.S. DOT can withdraw any unobligated funds and redistribute to states that have not had funds withdrawn Priority will be given to projects that can be completed within three years $1.5 billion – Funding available through September 30, 2011 Awarded to states, local governments, or transit agencies through a new program called “Supplemental Discretionary Grants for A National Surface Transportation System” Grants will be competitively awarded and not less than $30 million nor more than $300 million will be geographically distributed across the country Priority will be given to projects that can be completed within three years 44 Source: National Asphalt Pavement Association (NAPA) |
![]() th th Total Apportionment Amount Required to be Obligated by June 30, 2009 Total Obligated as of May 31, 2009 Obligations as a % of June 30 Target California $2,569,568,320 $899,348,912 $1,182,999,790 132% Colorado 403,924,130 141,373,446 231,891,080 164% Delaware 121,828,650 42,640,028 38,549,174 90% Florida 1,346,735,003 471,357,251 801,322,857 170% Georgia 931,585,680 326,054,988 233,386,699 72% Maryland 431,034,777 150,862,172 220,330,301 146% North Carolina 735,526,684 257,434,340 450,909,494 175% New Jersey 651,774,480 228,121,068 338,393,834 148% New Mexico 252,644,377 88,425,532 127,793,729 145% New York 1,120,684,723 392,239,653 509,738,373 130% Oklahoma 464,655,225 162,629,329 375,515,975 231% Pennsylvania 1,026,429,012 359,250,154 553,867,982 154% South Carolina 465,118,683 162,078,519 188,440,330 116% Texas 2,250,015,146 787,505,301 895,778,285 114% Virginia 694,460,823 243,061,288 127,885,933 53% Total to States NuStar Markets $13,465,985,713 $4,712,381,981 $6,276,803,837 133% Total U.S. Apportionment $26,817,140,267 Percent States NuStar Markets 50% Large Portion of Stimulus Funds Apportioned to States NuStar Markets Rack Asphalt Of the states in which NuStar markets rack asphalt, all states have met the June 30 deadline to obligate at least 50% of the funds within 120 days or by June 30 Stimulus Funds Apportioned to States NuStar Markets Asphalt Over Its Rack Source: Data provided to ARTBA by the Federal Highway Administration 45 |
![]() Stimulus Plan Funds Expected to Drive Significantly Higher Asphalt Demand Stimulus funds expected to provide further upside to asphalt demand over the next three years Continue to expect stimulus package will positively impact asphalt demand in the second half of 2009 Larger impact to asphalt demand should be felt in 2010 and 2011 when most of the stimulus spending is expected to occur Additional 7.5% increase in rack asphalt throughputs is expected to generate an incremental $12 million of operating income annually, assuming NuStar’s $8.78 adjusted gross margin per barrel earned in 2008 46 Over the life of the stimulus package, or 2009 through 2011, expect to see asphalt demand increase by a weighted average of around 7.5% compared to without stimulus funds With Stimulus Package Without Stimulus Package Increase / (Decrease) 2009 2.3% -3.6% 5.9% 2010 6.8% -2.3% 9.1% 2011 9.4% 2.7% 6.7% Cumulative Impact to U.S. Asphalt Demand from Stimulus Funding |
![]() Proposed U.S. Highway Funding Expected to be Significantly Larger than Current Program Proposed U.S. Highway Funding Expected to be Significantly Larger than Current Program 47 * Media reports, Company estimates and ARTBA (American Road and Transportation Builders Association) Actual and Forecast* Federal Highway Funding ($ in billions) $37.1 $38.1 $40.4 $41.8 $44.5 Stimulus Funds SAFETEA-LU $63.7 $66.2 $68.0 $72.6 $74.5 “America’s transportation systems are the lifeblood of our economy and when properly maintained and supported can be a catalyst for economic growth. These systems allow people to get to jobs and allow businesses to access wider pools of labor, suppliers, and customers. The ability to efficiently move freight will be critical to our economic recovery. Without efficient transportation routes, economies stagnate.” Transportation Secretary Ray LaHood’s testimony to the House Transportation Appropriations Subcommittee June 4, 2009 Current Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) for 2005 through 2009 expires on September 30, 2009 Insufficient revenues will cause the Highway Trust Fund Account to reach a zero balance possibly as soon as the middle of summer of 2009 and will require an additional $5 to $7 billion to meet 2009 appropriations bill and $8 to $10 billion to get through 2010* Obama administration is working on a solution and will dedicate the funds necessary to continue infrastructure spending SAFETEA-LU will be authorized with what is expected to be a larger financial commitment than previous programs (~$400 to $450 billion) or around a 48% increase in highway investment Of the total spending that s being proposed, around 75% will be allocated to highways and 25% to mass transit Congress and every state legislature is considering alternative methods of revenue generation for purpose of transportation infrastructure including: (a) indexing gas tax to inflation; (b) private-public partnerships; (c) vehicle miles traveled tax; (d) tolling Jobs are of particular importance to Washington right now and transportation infrastructure = JOBS $3.5 $13 $13 $202 billion $345 billion (Fiscal Year Ended September 30) |
![]() Warm-Mix Asphalt Overview Ron Corun Manager Asphalt Technical Services 48 |
![]() As part of stated goal to become a leader in the asphalt industry, NuStar Energy L.P. is implementing a new technology at its asphalt terminals to allow it to blend and supply warm-mix asphalt to its customers System will add and blend a waterless asphalt binder called Evotherm 3G into conventional asphalt at its terminals Binder changes the properties of asphalt to make it usable at lower temperatures Customers will not have to make any investment in additional equipment and material can be applied to roads using standard paving equipment Technology is not proprietary - Others can produce warm-mix asphalt if they wish to invest in the additive system What is Warm-Mix Asphalt? What is Warm-Mix Asphalt? Warm-mix technology decreases the temperature that the asphalt must be mixed by 50 to 100 degrees providing financial, pavement quality and environmental benefits Traditional hot-mix asphalt must be heated between 300 and 350 degrees as it is mixed with rock material at hot- mix facilities 49 |
![]() Benefits of Warm-Mix Asphalt - Energy Savings and Environmental Benefits of Warm-Mix Asphalt - Energy Savings and Environmental Energy Savings Because less fuel is needed to heat the warm- mix asphalt, documented fuel savings for users generally range from 10 to 30 percent Environmental Benefits Decreased heat and fuel usage also provide air quality benefits – Every 10 degree reduction in asphalt mix cuts fumes in half Carbon Dioxide (CO2) reduced by 30-40% Sulfur Dioxide (SO2) reduced by 35% Volatile Organic Compounds (VOCs) reduced by 50% Nitrogen Oxide (NO) reduced by 60-70% Dust reduced by 20-25% Estimated that if all roadwork in the nation were done with warm-mix asphalt, it would be the equivalent of removing 1.5 million cars from the U.S. roads Hot-Mix Asphalt Warm-Mix Asphalt 50 |
![]() Benefits of Warm-Mix Asphalt - Pavement Construction and Quality Benefits Benefits of Warm-Mix Asphalt - Pavement Construction and Quality Benefits Pavement Construction Increased pavement life because lower-mix temperature results in reduced oxidation and aging Improved compaction resulting in a more dense and stable road surface Lower temperature results in less time required to cool before a road can be opened or reopened Lower temperature enables road construction and repair beyond the normal paving season typically from April through October Quality Benefits Improved working conditions with the virtual elimination of smoke and fumes, and, much cooler temperatures can improve productivity 2 ½ Year Old Warm-Mix Asphalt pavement in Charlotte, NC 51 |
![]() Timing and Implementation: The majority of NuStar’s warm-mix systems have been put in place and product has been sold or is expected to be sold at the following locations: Atlanta, GA market – Completed May 2009 Paulsboro, NJ market – Completed June 2009 Houston, TX market – Completed June 2009 Baltimore, MD market – Expected Completion September 2009 NuStar is looking at opportunities for installations at some of its other asphalt terminals Benefits to NuStar: While we don’t expect to capture a higher margin on warm-mix asphalt, we do expect to sell incremental volumes, primarily due to expectations that warm-mix can extend the asphalt season on both sides Total cost of implementing warm-mix asphalt systems over the locations above total around $750,000 Expected benefit Approximately $1.1 million of operating income in 2009 Approximately $1.4 million of operating income in 2010 Approximately $2.8 million of operating income in 2011 Timing of Implementation and Benefits to NuStar Timing of Implementation and Benefits to NuStar 52 |
![]() Fuels Marketing Paul Brattlof Senior VP Supply and Trading 53 |
![]() Bunkering Operations Bunkering Operations 54 Currently we sell bunker fuel to ship owners, including cruise line ships, from our terminal locations at St. Eustatius and Point Tupper where we also store bunker fuel for third parties Strategic location of these two facilities and their storage capabilities provide us with a reliable supply of product and ability to capture incremental bunker sales margin St. Eustatius facility has six mooring locations that can supply bunkers to vessels up to 520,000 dwt Point Tupper has two mooring locations that can supply bunkers to vessel up to 400,000 dwt Main drivers of our bunkering business include number of ship calls, seasonality, location and competition from bunkering fuel delivery locations around the world Targeting $10 to $15 million of operating income from NuStar’s bunkering operations in 2009 Goal is to continue to increase bunker sales at our St. Eustatius and Point Tupper facilities and certain niche markets in North America 1Q07 2Q07 3Q07 4Q07 2007 Barrels 2,704,374 2,648,874 2,527,240 2,451,330 10,331,818 Operating Income 6,816,443 $ 6,547,458 $ 6,947,000 $ 4,128,097 $ 24,438,998 $ 1Q08 2Q08 3Q08 4Q08 2008 Barrels 2,592,800 2,713,403 2,184,305 2,711,677 10,202,185 Operating Income 5,141,745 $ 7,617,343 $ 10,227,194 $ 10,348,853 $ 33,335,135 $ 1Q09 Barrels 2,930,163 Operating Income 1,446,327 $ |
![]() Fuels Marketing Operations - While not a Large Driver of Earnings, A Great Complement to Our Other Operations Fuels Marketing Operations - While not a Large Driver of Earnings, A Great Complement to Our Other Operations 55 As part of marketing operations, purchase gasoline, distillates and refinery feedstocks to take advantage of arbitrage opportunities and contango markets We do not speculate on commodity prices Contango Trades – During contango markets, utilize storage at strategically located terminals, including NuStar terminals, to deliver products at favorable prices Arbitrage Opportunities – Attempt to take advantage of geographic arbitrage opportunities by utilizing transportation and storage assets, including NuStar’s terminals and pipelines, to deliver products from one geographic region to another with favorable pricing Product/Wholesale Trading - Purchase gasoline and distillates in spot markets from refiners and traders, and offer for sale to wholesale customers through NuStar terminals and third-party terminals Currently leasing around 1 million barrels of NuStar’s 91 million barrels of storage capacity Trading personnel are a complement to NuStar’s other operations (i.e. transportation, storage and asphalt) In-house expertise provides market intelligence and solutions for optimizing assets and customers 1Q07 2Q07 3Q07 4Q07 2007 Barrels 379,049 226,168 549,514 1,285,963 2,440,694 Operating Income - $ 804,094 $ (931,538) $ (2,777,433) $ (2,904,877) $ 1Q08 2Q08 3Q08 4Q08 2008 Barrels 1,732,651 1,409,175 2,093,083 2,414,060 7,648,969 Operating Income 4,785,821 $ (5,800,057) $ 4,974,247 $ (503,188) $ 3,456,823 $ 1Q09 Barrels 3,416,476 Operating Income 691,033 $ |
![]() Fuels Marketing Operations – Strong Risk Mitigation Policy Fuels Marketing Operations – Strong Risk Mitigation Policy 56 Marketing employees are paid the same bonus, based on a DCF target, as all of our other employees NuStar has a risk management committee that oversees trading controls and procedures and certain aspects of commodity and trading risk management Strong mid-office support led by Risk Management Trade Compliance Officer At the end of March 31, 2009, NuStar’s asphalt refining inventories represented 87% of our total inventory and they remain unhedged Remaining total inventory consists of gasoline, distillates and bunkers, with a large majority of this inventory hedged Exposure to hedged inventory is limited to basis risk changes, or, the exposure to a change in price of the physical position as compared to the change in price of the paper position that is being utilized as a hedge Risk Mitigation |
![]() Asphalt Refining & Plant Overviews Mike Pesch VP Regional Operations 57 |
![]() Core Refining Process Core Refining Process Distillation Tower (Crude Unit) Vacuum Unit Propane, Butane and Lighter Intermediate Products Final Products Light Straight Run Gasoline Naphtha Kerosene Atmospheric Gas Oil Vacuum Gas Oil Residual <90 F 90-180 F 180-370 F 370-500 F 500-650 F 650-950 F >950+ F Further Processing Refinery Fuel Gas Propane NGLs Gasoline Gasoline Jet Fuel Kerosene Jet Fuel Diesel Fuel Oil Gasoline Diesel Fuel Oil Gasoline Diesel Fuel Oil Gasoline Diesel Heavy Fuel Oil Asphalt 58 |
![]() Crude oils are typically classified and priced by density and sulfur content Density of crude oil commonly measured by API gravity (Heavy vs. Light) Higher the API number, the lighter the compound Light crude oils are easier to process Heavy crude oils are more difficult to process Sulfur content of Crude Oil (Sweet vs. Sour) Sweet crudes typically have less than 0.5% sulfur Sour crudes have 1.0% or more sulfur Higher sulfur crudes typically require additional processing Classification of Crude Oils HEAVY API GRAVITY LIGHT (Less Expensive) (More Expensive) BOSCAN BCF-13 NAPO MAYA ARAB HEAVY ARAB MED. MARS ARAB LIGHT ALASKA NORTH SLOPE BRENT WTI Because the Boscan and BCF-13 crude oils are lower quality, they are more discounted to light, sweet crudes Discount to WTI is currently between $5 and $10 per barrel 59 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 5 10 15 20 25 30 35 40 45 Boscan and BCF-13 Crudes are some of the Lowest Quality Crudes, but have the Highest Yield of Asphalt |
![]() rd rd Simple Asphalt Refining – “On Purpose” Simple Asphalt Refining – “On Purpose” Atmospheric Distillation Tower Vacuum Unit Naphtha Vacuum Gas Oil Marine Diesel Oil Asphalt ~70% Yield ~3% Yield ~15% Yield ~12% Yield Intermediate Products Marketing Asphalt Marketing Governmental Agencies, Paving Contractors & Hot Mix Producers 100% Asphalt Cement Rail Truck Barge Ship Sold to 3 Party Refineries NuStar Owned & Network of 3 Party Terminals Rack Sales (~66%) Wholesale: ~25% Export: ~9% Venezuelan Crude Oil (BCF-13 & Boscan) 60 100% Asphalt Cement |
![]() High Complexity Refinery – Coker Unit Drives More Lighter End Production and Less Heavier End Production Like Asphalt High Complexity Refinery – Coker Unit Drives More Lighter End Production and Less Heavier End Production Like Asphalt Vacuum Unit Crude Unit Propane/Butane Low Octane Gasoline Medium/Heavy Sour Crude Oil Reformer Unit High Octane Gasoline Kerosene Distillate Desulfurizer Kerosene/Jet Fuel Diesel Diesel/Heating Oil Gas Oil Heavy Fuel Oil 7% Propane/Butane 58% Gasoline 28% Distillate Diesel Heating Oil Jet Fuel 15% Heavy Fuel Oil & Other Hydrocracker Light Cycle Oil (LCO) Alkylation Unit FCC Gasoline Alkylate Light Gas Oil Fluid Catalytic Cracker (FCC) Hydrocracker Gasoline Coker Unit Coke High complexity refineries typically run heavier and more sour crude oils and produce the highest yields of lighter/higher value products 61 |
![]() Total throughput capacity of 74,000 barrels per day Refinery consists of two petroleum refining units and a liquid storage terminal for petroleum and chemical products Total storage capacity of 3.5 million barrels Paulsboro refinery supplies various asphalt grades and intermediate products by ship, barge, railcar and tanker trucks to a network of 10 asphalt terminals in the Northeast NuStar’s Paulsboro Asphalt Refinery NuStar’s Paulsboro Asphalt Refinery Located in the middle of the major U.S. East Coast asphalt demand center right off the Delaware River Largest on-purpose asphalt refinery in the U.S. Primary competitors include Valero Energy and Irving Oil Terminal network stretches from New York to North Carolina Refinery constructed in two phases in 1978 and 1981 CITGO purchased Paulsboro refinery from Seaview Oil Company in 1991 Delaware River 62 |
![]() Paulsboro Crude Oil & Products Slate Paulsboro Crude Oil & Products Slate 2008 Product Yields Asphalt ~68% Marine Diesel Oil ~17% Vacuum Gas Oil ~12% Naphtha ~3% NuStar’s Paulsboro refinery runs both BCF-13 and Boscan crude oil, typically 50/50, with some opportunistic crudes NuStar’s Paulsboro Asphalt Refinery 63 2008 Crude Runs (mbpd) (74,000 bpd capacity) 1Q 2Q 3Q 4Q Total Boscan 27 27 33 23 28 BCF-13 26 31 29 20 27 M-100 HS FO - - 5 - 1 Total 53 58 67 43 56 MM barrels 0.6 5.3 6.2 3.9 16.0 Utilization 72% 78% 91% 59% 76% 2008 Product Yields (mbpd) 1Q 2Q 3Q 4Q Total Asphalt 35.0 39.0 45.6 30.1 38.1 Naphtha 1.6 1.4 1.6 1.2 1.4 MDO 8.8 10.3 10.9 7.2 9.4 VGO 6.9 6.6 8.9 4.6 6.7 Total 52.3 57.3 67.0 43.1 55.6 |
![]() NuStar’s Savannah Asphalt Refinery NuStar’s Savannah Asphalt Refinery Located on the U.S. Southeast seaboard, approximately 2.5 miles upstream from downtown Savannah adjacent to the Savannah River Center of the Southeast premium asphalt market Only refinery and asphalt producer on the Southeast seaboard 1,000 feet of frontage along Savannah River Built in 1929 by the Mexican Petroleum Corporation of Georgia and operations began in 1930 Later purchased by Amoco CITGO purchased refinery from Amoco in April 1993 Total throughput capacity of 30,000 barrels per day Source: Google Maps Savannah River Refinery includes two atmospheric towers, a tank farm, a marine dock, a PMA production facility, testing laboratory and processing areas Total storage capacity of 1.2 million barrels Savannah refinery supplies various asphalt grades by truck, rail and marine vessel to a network of 9 asphalt terminals in the Southeast 64 |
![]() Savannah Crude Oil & Products Slate Savannah Crude Oil & Products Slate NuStar’s Savannah Asphalt Refinery 65 2008 Crude Runs (mbpd) (30,000 bpd capacity) 1Q 2Q 3Q 4Q Total Boscan 22.9 27.9 25.3 22.4 25.1 MM barrels 0.3 2.5 2.3 2.1 7.2 Utilization 77% 93% 83% 73% 83% 2008 Product Yields Asphalt ~74% Light Marine Gas Oil ~22% Naphtha ~4% NuStar’s Savannah refinery runs Boscan crude oil 2008 Product Yields (mbpd) 1Q 2Q 3Q 4Q Total Asphalt 17.0 20.7 18.9 16.6 18.6 Naphtha 0.8 1.1 1.0 0.8 1.0 LMGO 5.0 6.1 5.4 5.0 5.5 Total 22.8 27.9 25.3 22.4 25.1 |
![]() Expansive network of 16 complementary third-party leased terminals with total asphalt storage capacity of 3 million barrels Includes new leases for three of SemGroup’s asphalt terminals located in New Jersey, Virginia and Texas Provides capability to market to diverse customer base 7.3 million barrels of net operational asphalt storage capacity Enables a proven “winter fill” strategy of storing production in low-demand winter months for sale during the summer paving season Extensive Asphalt Logistics Network Extensive Asphalt Logistics Network 66 |
![]() Near-term, have identified around $12 million of high return, quick pay-back projects at the Paulsboro and Savannah asphalt refineries and NuStar asphalt terminals Near-Term Capital Investment Opportunities Near-Term Capital Investment Opportunities Expected In-Service Expected Type of Project Opportunity Capex Dates IRR Improve Crude Oil Improve flexibility to run alternative crude oils ~3.4 million 1Q09 thru 4Q09 ~150% Flexibility and rates and improve ability to run higher volumes of crude oil at Paulsboro refinery resulting in higher product volumes Energy Efficiency Improve energy efficiency by implementing ~$1.9 million 1Q09 thru 4Q09 ~25% projects that reduce usage of natural gas at both Paulsboro and Savannah refineries and terminal facilities PMA Projects Increase production of high quality polymer ~$4 million Complete ~60% modified asphalt at Savannah and Paulsboro refineries by constructing new storage tanks Improve Product Increase yield of Marine Diesel Oil ~1.5 million Paulsboro - 1Q10 ~20% Yields recovery from gas oil at Paulsboro refinery Increase Product Install Warm Mix Asphalt supply ~1.2 million 2Q09 thru 4Q09 ~77% Offering capabilities at various terminal locations Total ~$12 million 67 |
![]() Longer term, continue to evaluate other opportunities at Paulsboro and Savannah refineries including: Significant modifications to crude units at Paulsboro and Savannah refineries to continue to increase crude oil and product flexibility Opportunities include: Crude flexibility projects at both facilities Improve quality of naphtha produced in Savannah Produce roofing flux at Paulsboro Blending crudes to maximize throughput rates Expected capital spending ranges from $50 to $60 million Expect to complete evaluation by third quarter 2009 with completion of projects targeted for third quarter 2011 Long-Term Capital Investment Opportunities Long-Term Capital Investment Opportunities 68 |
![]() Transportation Danny Oliver VP – Marketing & Business Development 69 |
![]() Stable Revenues on NuStar’s Transportation Segment Despite Demand Volatility Stable Revenues on NuStar’s Transportation Segment Despite Demand Volatility 70 NuStar’s transportation revenues have been stable and growing relative to throughput volumes |
![]() Overview of Central West Pipeline System (Crude Oil and Refined Products) Overview of Central West Pipeline System (Crude Oil and Refined Products) 71 Length 23 refined product pipelines with an aggregate length of 3,255 miles and 11 crude oil pipelines with an aggregate length of 812 miles Refineries Served Valero Energy - McKee, TX; Valero Energy - Three Rivers, TX Valero Energy - Corpus Christi, TX CITGO - Corpus Christi, TX Valero Energy - Ardmore, OK Products Crude oil, gasoline, distillates (including diesel and jet fuel), natural gas liquids, blendstocks and other products Regulating Body Federal Regulatory Energy Commission (FERC) / Texas / Colorado / Oklahoma Pipeline Capacity (2008) 1,465 mbpd BPD Transported (2008) 845 mbpd Average Utilization 58% 2008 Pipeline Receipts by Commodity Crude Oil 45% Gasoline 30% Distillates 16% Light Ends 4% Jet Fuel 3% Propane 2% |
![]() Central West Pipeline System - Steady Revenues Despite Recent Lower Throughput Volumes Central West Pipeline System - Steady Revenues Despite Recent Lower Throughput Volumes 72 6.15% Tariff Increase 4.32% Tariff Increase 5.17% Tariff Increase Valero McKee Refinery Outage Impact primarily from Valero Energy TAs and Sale of Skelly Belvieu p/l in Drivers Planned and unplanned turnarounds at refineries served Producer Price Index (PPI) +1.3% tariff increase effective July 1 every year Population Center Demand Focus - primarily gasoline and diesel that originate at Valero Energy refineries Serves growing markets primarily in South Texas, Dallas/Fort Worth, Houston, Texas Panhandle, West Texas, Denver and New Mexico Since the pipelines are physically integrated with Valero Energy refineries, not expected to face significant competition for transportation services Throughputs (Thousands of BPD) Revenues ($ in Thousands) 4Q08 |
![]() Overview of East Pipeline System Overview of East Pipeline System 73 Length 1,900 miles including 16 product terminals with a storage capacity of 3.3 million barrels Refineries Served NCRA – McPherson, KS ConocoPhillips – Ponca City, KS ConocoPhillips – Borger, TX Frontier – El Dorado, KS Coffeyville Resources – Coffeyville, KS Sunoco Inc. – Tulsa, OK Refined Products Distillates (including diesel and jet fuel), gasoline, natural gas liquids, blendstocks and other products Pipeline Related Terminals Terminalling fees and transportation rates are included in tariff Regulating Body Federal Regulatory Energy Commission (FERC) and Kansas Corporation Commission Pipeline Capacity (2008) 198 mbpd BPD Transported (2008) 140 mbpd bpd (excluding ethanol and biofulels) Average Utilization 70% 2008 Pipeline Receipts by Commodity Gasoline 38% Distillates 50% Nat. Gasoline 5% Propane 6% Naphtha 1% |
![]() East Pipeline System – Steady Revenues Despite Seasonal Throughput Swings East Pipeline System – Steady Revenues Despite Seasonal Throughput Swings 74 6.15% Tariff Increase 4.32% Tariff Increase 5.17% Tariff Increase Drivers Currently expanding southern end of East pipeline (Kansas) to increase the capacity and flexibility in that area Planned and unplanned turnarounds at the refineries served Producer Price Index (PPI) +1.3% tariff indexation effective July 1 every year Distillate Demand Focus – primarily diesel fuel ultimately used for agricultural and railroad operations Varies seasonally with gasoline demand peaking in early summer, diesel fuel demand peaking in late summer and propane demand in the fall Poor weather can also impact demand for products Long haul (higher tariff) versus short haul barrels (lower tariff) Competition with pipeline system owned by Magellan Midstream Partners, L.P. approximately 100 miles east of and parallel to the East Pipeline System, and in close proximity to the North Pipeline System Seasonal Impact Seasonal Impact Seasonal Impact Seasonal Impact Throughputs (Thousands of BPD) Revenues ($ in Thousands) |
![]() Overview of North Pipeline System Overview of North Pipeline System 75 Length 440 miles including 4 product terminals with a storage capacity of 1.3 million barrels Refineries Served Tesoro Petroleum Corp. – Mandan, ND Refined Products Gasoline and Diesel Fuel Pipeline Related Terminals Terminalling fees are portion of the transportation rate included in tariff Regulating Body Federal Regulatory Energy Commission (FERC) and North Dakota Public Utilities Commission Pipeline Capacity (2008) 51 mbpd BPD Transported (2008) 45 mbpd Average Utilization 88% 2008 Pipeline Receipts by Commodity Gasoline 69% Distillates 29% Jet Fuel 2% |
![]() North Pipeline System – Steady Revenues Despite Seasonal Throughput Swings North Pipeline System – Steady Revenues Despite Seasonal Throughput Swings 76 6.15% Tariff Increase 4.32% Tariff Increase 5.17% Tariff Increase Drivers Planned and unplanned turnarounds at the Tesoro Mandan refinery in North Dakota Producer Price Index (PPI) +1.3% tariff increase effective July 1 every year Demand for refined products, primarily gasoline and diesel, delivered to the Minneapolis, MN market Demand fluctuates based on general economic conditions and changes in weather as more people drive during warmer months Long haul versus short haul barrels Competition with pipeline system owned by Magellan Midstream Partners, L.P. approximately 100 miles east of and parallel to the East pipeline and in close proximity to the North pipeline Throughputs (Thousands of BPD) Revenues ($ in Thousands) |
![]() 77 Water-borne access to ammonia imports Overview of Ammonia Pipeline System Overview of Ammonia Pipeline System Length 2,000 mile pipeline – One of two major ammonia pipelines in the U.S. and only one capable of receiving foreign production directly into system and transporting into nation’s corn belt Product Supplied Domestic production and imports directly through three marine terminals in Louisiana Markets Served Multiple 3 -party owned terminals and industrial facility locations in Nebraska, Iowa, Illinois, Indiana and Missouri, Arkansas and Louisiana Pipeline Related Terminals Terminals owned by 3 parties or 3 party customers Regulating Body Surface Transportation Board (STB) and Louisiana Public Service Commission – FERC indexation applied to all tariff rates Pipeline Capacity (2008) 42 mbpd BPD Transported (2008) 37 mbpd Average Utilization 87% rd rd rd |
![]() Ammonia Pipeline System – Growing Revenues / 1Q09 Impacted by Poor Weather Ammonia Pipeline System – Growing Revenues / 1Q09 Impacted by Poor Weather 78 Drivers Producer Price Index (PPI) +1.3% tariff increase effective July 1 every year Price of natural gas, the primary component of ammonia Demand for direct application for crop production, which is dependent on the weather (not effective if ground is too wet or dry) Demand for nitrogen fertilizer use Fertilizer alternatives such as liquid or dry fertilizer (less sensitive to weather conditions but generally more costly) 6.15% Tariff Increase 5.17% Tariff Increase 4.32% Tariff Increase Primarily due to poor weather Throughputs (Thousands of BPD) Revenues ($ in Thousands) |
![]() $1.00 Increasing Rates from FERC’s PPI FG + 1.3% Rate – 2010 Rate Expected to be Higher Despite Potential Drop in Tariff Increasing Rates from FERC’s PPI FG + 1.3% Rate – 2010 Rate Expected to be Higher Despite Potential Drop in Tariff 79 3.63% 6.15% 4.32% 5.17% 7.60% (3.0)%* While 2010 is trending negative, NuStar should benefit from our July 2009 increase through Q1 and Q2 2010 Around 95% of NuStar’s pipeline revenues receive the PPI+1.3% tariff increase In addition, as PPI-FG falls, our operating expense dollars are expected to stretch further 1/1/2010 Effect of PPI Finished Goods + 1.3% Tariff Indexing on $1/bbl $1.02 $1.07 $1.13 $1.18 $1.26 $1.28 Index Value 2010 is the last year for the FERC’s 1.3% factor – Next 5-Year factor should be published in Spring of 2011 Even with the projected decrease in 2010, the projected indexed tariff rate is still expected to be higher than the 2009 calendar year 1/1/2005 1/1/2006 1/1/2007 1/1/2008 1/1/2009 1/1/2011 * Estimate includes four months of preliminary 2009 monthly PPI data and 8 months of finished goods pricing holding at April 2009 levels plus 1.3% |
![]() 80 Transportation Growth Opportunities Gulf Coast Market Major U.S. petroleum hub with multiple industrial needs Take advantage of demographic growth in Central and South Texas, by increasing utilization of existing assets Mid-Continent Market Provides solid earnings and logistical competitive advantage with connectivity to multiple refining and supply hubs East Pipeline System: Goal is to add incremental capacity to take advantage of seasonal peak demand and downtime from refinery turnarounds Ammonia Pipeline System: Goal is to build new pipeline connections to capture volumes from other modes of transportation |
![]() 81 Expect Higher Operating Income from Transportation Segment Despite Lower Throughputs A tariff increase of around 7.6% effective July 1, 2009 should contribute to higher operating income in 2009 over 2008 Tariff increase represents the highest increase since indexation began in 1993 Around 95% of NuStar’s transportation revenues should receive the tariff increase NuStar applies FERC indexation methodology to all tariff rates Total pipeline volumes expected to be 4% to 5% lower in 2009 versus 2008 primarily due to impact from turnarounds New pipeline business, an anticipated reduced refinery maintenance schedule and a new pipeline project expected to start-up in July should help mitigate the impact of weaker throughput volumes from lower demand 1Q09 2Q09 3Q09 4Q09 Valero Energy - McKee, TX FCCU, Alky & Crude Units Valero Energy - Ardmore, OK Hydrocracker Unit Hydrotreater Unit Valero Energy - Texas City, TX Coker, Black Oil Hydrotreater and Crude Units Valero Energy - Three Rivers, TX FCC & Crude Units Valero Energy - Corpus Christi, TX FCC Unit, Heavy Oil Cracker & Alky Units, Reformer Unit Frontier - El Dorado, KS FCC Unit 2009 Planned Refinery Turnarounds Impacting NuStar |
![]() 82 Storage Danny Oliver VP – Marketing & Business Development |
![]() Global Leader in Independent Liquids Storage NuStar is the third largest independent liquids terminal operator in the world and second largest in the U.S. Completed majority of expansion projects under our $400 million construction program, which contributed around 8.5 million barrels of incremental storage capacity Of the roughly 91 million barrels of storage capacity, approximately 50 million barrels is crude oil, 39 million barrels is refined products and 2.3 million barrels is biofuels Source: Company Websites & Management Presentations 83 Independent Liquids Storage Capacity (Millions of Barrels) 8 8 10 12 16 20 24 25 31 34 39 60 85 91 91 104 171 |
![]() Storage Lease Contracts Driving Higher Revenues Despite Lower Throughputs Storage Lease Contracts Driving Higher Revenues Despite Lower Throughputs 84 Primarily due to Valero TAs and changing from throughput to lease based contracts at seven terminals Despite recent lower storage throughput revenues, total storage revenues have been increasing over the last three years as NuStar has benefited from $400 million construction program Lower throughputs don’t necessarily translate into weaker earnings since the majority of the business is under lease contracts Approximately 90% of our revenues in the storage segment come from leased assets or assets connected to pipelines in our transportation segment Primarily due to changing from a throughput to lease based contract at seven terminals 775 758 790 775 781 782 845 794 795 761 713 702 652 596 * * Pro forma impact of changing from throughput to lease based contracts |
![]() 85 Numerous Opportunities in North America Northeast Market (~11.4mm bbls) NY Harbor storage demand continues to be strong with limited land and customers realizing Gulf Coast arbitrage and contango markets Southeast Market (~4.7mm bbls) SE market continues to show rate increases Gulf Coast Market (~18.7mm bbls) Major U.S. petroleum hub with multiple industrial needs Take advantage of demographic growth in South Texas by increasing utilization of existing assets and continue to implement black oil strategy (crude and fuel oil) at Texas City, TX Significant customer demand for tank projects at St. James, LA Caribbean Market (~13.0mm bbls) One of the primary shipping routes to the U.S. with a favorable operating environment and growing bunker opportunities Goal is to continue to build or acquire terminals to have an even bigger presence West Coast Market (~10.7mm bbls) Market of its own, where storage is limited, but rates are strong Point Tupper Market (~7.4mm bbls) Offers world class logistics with deep water access, optimum shipping routes, a favorable operating environment and growing bunker opportunities Goal is to become a major international hub for world product flows |
![]() Grangemouth Glasgow Belfast Runcorn Eastham Amsterdam Grays 86 UK and Amsterdam Opportunities UK Market (~5.6mm bbls) Stable market with opportunity to grow through acquisitions and the build-out of existing terminal assets Goal is to build and/or acquire large marine terminals to complement NuStar’s other major hubs Amsterdam/Rotterdam/Antwerp Market (~3.7mm bbls) Strategic European petroleum hub with growing demand for storage but limited land Goal is to become a major storage and bunker player by building and acquiring new storage facilities |
![]() 87 Contango Markets and Limited Storage Capacity Continue to Drive Strong Demand for Storage Demand for terminal storage in key markets is strong and growing primarily driven by: Contango markets Good fundamentals in the refining industry over the last decade with a significant increase in the amount of refining capacity increase but limited storage capacity increases Growth in petroleum demand despite cleaner burning fuels initiatives including ethanol blended gasoline, biodiesel and efficiency gains (CAFÉ standards) Concerns over security of supply (strategic reserves) Arbitrage opportunities (e.g. between the U.S. and Europe) Particularly strong demand at terminals having waterborne access WTI NYMEX Crude Oil Futures 12-Month Strip ($ per Barrel) 1/1/2008: $(6.08) Backwardated 6/17/2009: $5.74 Contango 1/1/2007: $5.89 Contango 1/1/2009: $14.71 Contango |
![]() 88 Expect higher results from storage segment in 2009 as we benefit from a full year’s contribution primarily from completed projects under our $400 million construction program Expect to benefit from contango markets to the extent that certain of our storage contract revenues are up for renewal: 29% - 1 Year or Less 28% - 1 to 3 Years 23% - 3 to 5 Years 19% - Greater than 5 Years Lower throughputs in our storage segment don’t necessarily translate into weaker earnings since the majority of our business is contracted Approximately 90% of our revenues in the storage segment come from leased assets or assets connected to pipelines in our transportation segment St. Eustatius Terminal – 13.0 mm bbls storage capacity Texas City, TX Terminal – 2.7 mm bbls storage capacity Expect Higher Operating Income from Storage Segment Despite Lower Throughputs |
![]() Closing Remarks Curt Anastasio CEO & President 89 |
![]() Execution of Game Plan 90 Financial Maintain sufficient liquidity with disciplined financial strategy near term Work towards having negative outlook removed from rating agencies Execute and deliver on capital projects Maintain higher coverage ratio on margin-related businesses Continue to grow the distribution at NuStar Energy L.P. and NuStar GP Holdings, LLC Operational Continue to excel in safety and environmental Improve bottom-line by implementing cost reductions and energy efficiency programs Continue to make NuStar one of the top workplaces in the nation by taking care of employees and giving back to the communities NuStar works in Corporate Culture Asphalt Pursue attractive production and logistics opportunities to take advantage of tight supply and demand fundamentals Implement projects to provide crude flexibility and reduce seasonality Maintain proportion of operating income from margin-based and fee- based assets Storage Pursue attractive opportunities to either build or acquire storage facilities both domestically and internationally Continue to sign up long-term contracts for new storage builds Continue to take advantage of strong demand for storage by leasing out facilities at attractive rates Evaluate attractive opportunities to add incremental capacity and increase utilization of assets in growing markets that NuStar serves Transportation |
![]() Questions & Answers |
![]() Appendix 92 |
![]() Experienced Management Team 93 |
![]() Management Bios Management Bios Curt Anastasio, CEO & President • President and CEO of NuStar Energy L. P. (NYSE: NS) and NuStar GP Holdings, LLC (NYSE: NSH) • Anastasio has been President of NuStar Energy L.P. and its predecessors since December 1999, and he assumed the position of CEO of NuStar GP Holdings, LLC in 2006. • Prior to becoming President of NuStar GP, LLC in 1999, Anastasio held various positions in supply, trading, transportation, marketing, development and legal. He has 20 years of industry experience. • Curt serves on the Board of the National Association of Publicly Traded Partnerships. • In addition to participating in various volunteer activities, Curt serves on the Board of Trustees of the United Way of San Antonio and Bexar County, the San Antonio Medical Foundation and Southwest Research Institute. He also serves on the Board of Directors of the Alamo Area Council of the Boy Scouts of America, and the Economic Development Foundation– all in San Antonio. In addition, Anastasio belongs to various professional organizations and has lectured and written on legal and business topics. • Curt received a Juris Doctorate degree from Harvard Law School in 1981 and a Bachelor of Arts degree, Magna cum Laude, from Cornell University in 1978. After graduation, he practiced law in New York City. 94 |
![]() Management Bios Management Bios Steve Blank, Senior VP - CFO & Treasurer • Chief Financial Officer, Senior Vice President and Treasurer of NuStar Energy L.P. In this position, he is responsible for corporate finance, external reporting, accounting, budgeting and forecasting, investor relations, risk management, tax, treasury and credit. • Before that, Steve held a variety of positions with UDS in New York, London and San Antonio, including Director, Planning and Development (1980-83); Assistant Treasurer – Corporate Finance (1983-90); Vice President of Investor Relations (1991-95); Vice President – Information Technology (1996); and Vice President – Finance and Treasurer (1996-01). • Before joining UDS in 1980, Steve worked for two years with National Westminster Bank in New York. • Steve received a BA in History from the State of University of New York in 1976. He went on to obtain a Master’s in International Affairs, with a specialization in Business, from Columbia University in 1978. 95 |
![]() Management Bios Management Bios Rick Bluntzer, Senior VP - Operations • Rick Bluntzer, Senior Vice President of Operations oversees NuStar Energy L.P.’s extensive pipeline, terminal, international and asphalt refining operations. Additionally he oversees NuStar’s engineering, information systems (operations) and procurement organizations. • Rick began his career with Valero Refining Company in 1976, serving in various operating and management systems until 1979, when he became a part of Valero’s refinery acquisition team. • Rick joined the Valero L.P. organization after the Valero/UDS merger and held various senior operating and management positions, contributing to the success and transition of today’s NuStar organization. 96 |
![]() Management Bios Management Bios Brad Barron, Senior VP - General Counsel 97 • Brad Barron serves as Senior Vice President and General Counsel of NuStar Energy L.P. and NuStar GP Holdings, LLC, both of which are headquartered in San Antonio, TX. As such, he provides legal counsel on all major transactions, assures compliance with securities laws, provides legal counsel to the boards of directors and principal officers, manages real estate and right-of-way issues, and oversees health, safety and environmental compliance. • Prior to joining the company, Mr. Barron was with Valero Energy Corporation. Mr. Barron began his legal career with Vinson & Elkins LLP and continued in private practice until he joined Valero in 2001. • A committed volunteer, Mr. Barron is also active in the San Antonio community. He serves on the boards of directors of the Alamo Bowl and Family Service Association, and he previously volunteered as a board member of the Boys and Girls Club of San Antonio. • Mr. Barron holds a B.B.A. from Texas Tech University and a J.D. from the University of Texas School of Law. In addition, Mr. Barron holds a M.L.A. from St. John’s College. |
![]() Management Bios Management Bios Paul Brattlof, Senior VP - Supply and Trading 98 • Paul Brattlof leads NuStar Energy L.P.’s Marketing, Supply and Trading organization, which includes product supply and trading, wholesale marketing, heavy fuels trading and asphalt marketing. • Under Mr. Brattlof’s leadership, this organization capitalizes on opportunities to optimize the use and profitability of the company’s worldwide portfolio of assets, manages risk as NuStar diversifies its business, and enhances the company’s competitive position when pursuing acquisitions. • Mr. Brattlof has more than two decades of experience in cash markets, futures markets and derivatives trading. Previously, he served as Vice President of Trading for Valero Energy Corporation, where he worked for 10 years. Prior to that, he spent 11 years with Kerr-McGee Refining and two years with Mieco, a Long Beach-based trading company. A graduate of Rice University, Mr. Brattlof holds a Bachelor of Arts degree in Managerial Studies. |
![]() Management Bios Management Bios Mike Hoeltzel, Senior VP - Corporate Development • Senior Vice President of Corporate Development for NuStar Energy L.P. • Joined NuStar in February 2007 with 30 years refinery experience. • Valero Energy's Corporate Development Department from 2000 to 2007. Primary responsibility was valuation of refinery acquisitions during this period of growth from 6 to 19 refineries. Also supported growth of Valero L.P. during 2002-2006 when M&A opportunities for both companies were developed in a common department. • Worked in CITGO's Corpus Christi refinery from 1991-2000 in various Project Management, Planning & Economics, and Strategic Planning positions. • Worked in Kerr-McKee's Corpus Christi refinery from 1977-1991 in Project Management and Planning & Economics positions. • Worked for Exxon in Oil Production from 1971-1973 and Dupont from 1973-1977, project engineering assignments with both companies. • Graduated from Oklahoma State University in 1971 with BS and MS degrees in Mechanical Engineering. Also received MBA from Corpus Christi State University (now Texas A&M Corpus Christi) in 1983 99 |
![]() Management Bios Management Bios Danny Oliver, VP - Marketing and Business Development 100 • Danny Oliver, Vice President of Marketing & Business Development for NuStar Energy L.P., oversees the company’s commercial activities for its pipelines and terminals business. Previously, he served as Vice President of Product Supply & Trading for NuStar where he was instrumental in building the company’s successful trading operations from the ground up. He brings nearly 20 years of industry experience – the majority of which was spent trading energy commodities. • Prior to joining NuStar in 2007, Mr. Oliver spent 10 years at Valero Energy holding management positions in Product Supply & Trading where he helped to build a world- class refined product trading organization and played a key role in the company’s aggressive acquisition of refinery and logistics assets. He previously worked at Enron Corp. in the International Trading division where he was responsible for the company’s worldwide MTBE and Methanol trading activities, and also held several positions at Kerr-McGee Refining & Marketing in products scheduling and accounting, with an emphasis in reporting and analyzing trading activities. • Mr. Oliver graduated from Texas State University with a B.B.A. in Accounting. Committed to the community in which he works and lives, Mr. Oliver currently serves on the boards of directors of San Antonio Sports and the Harmony Ridge Association. He is also actively involved with his church and the United Way of Bexar County. |
![]() Management Bios Management Bios Steve Hays, VP - Strategic Planning 101 • Steve Hays serves as Vice President of Strategic Planning for NuStar Energy, L.P. In addition to guiding the strategic planning for the company’s margin-based businesses, his responsibilities include planning and economics management for NuStar’s asphalt business. • Mr. Hays has 34 years of industry experience, including 25 years in the refining industry. He recently retired from CITGO Petroleum after 19 years, including six years on the management team of CITGO Asphalt Refining Co. Mr. Hays is a graduate of the Georgia Institute of Technology with a bachelor’s degree in Chemical Engineering. |
![]() Management Bios Management Bios Mike Pesch, VP - Refining Operations • 26 years experience in oil industry across all segments: • 2 years at NuStar - Midstream and now Asphalt Refining • 18 years CITGO/Valero - Refining • 7 years Exxon - Exploration and Production • Assignments included Operations, Maintenance, Planning and Economics, Project Engineering, Best Technical Practice development and Strategic Sourcing. Positions ranged from staff engineering roles to management, including Refinery Manager at Valero's Paulsboro Refinery. • BS Chemical Engineering in 1982 from Rose Hulman Institute of Technology 102 |
![]() Management Bios Management Bios Mike Stone, VP - Asphalt Marketing • Vice President Asphalt Marketing, Supply & Trading of NuStar Energy LP. Responsible for all asphalt commercial activities involving asphalt sales, purchases, exchanges and import/export business. • Prior to his position at NuStar he was the Vice President of Asphalt Marketing at Valero Energy Corporation for 9 years and launched their national asphalt marketing operations from the U.S. East Coast through the Gulf Coast / Midcontinent regions to the West Coast California markets. • Before joining Valero, Mike was Vice President of Asphalt Marketing for CITGO for 6 years managing its East Coast asphalt operations. • Mike began his career in 1983 with CITGO Petroleum Corporation and spent 10 years in gasoline wholesale rack marketing responsible for establishing and implementing the unbranded rack sales business in Texas, Florida and southeastern states region. • Mike currently serves as a Director on the board of the Asphalt Institute and is a member of the organization's Executive Committee. He also serves as an Associate Member of the National Asphalt Pavement Association. • Received his B.B.A. in Finance from Texas State University in 1981. 103 |
![]() Management Bios Management Bios Michael Drager, General Manager - Paulsboro Refinery 104 • Michael Drager serves as the General Manager of the NuStar Asphalt Refining LLC’s Paulsboro Refinery, located in Paulsboro, NJ. As such, he manages all aspects of the refinery’s operations, maintenance, capital projects, safety and environmental compliance, quality assurance and security initiatives. • Mr. Drager has over 35 years of refining experience in Operations, Maintenance, Health, Safety and Environmental, Training and Development, and has served as the Refinery Manager for the past seven years. • A committed volunteer, Mr. Drager currently serves as the President of the NuStar Volunteer Council for the East Region, volunteers his time as a Paulsboro High School mentor, and plans an annual Veterans Day ceremony to honor refinery employees, retirees and community veterans. Mr. Drager serves on the board of directors for the United Way of Gloucester County and the Gloucester County College Foundation. He is also active in his hometown community, having served as past Chairman of Woodstown’s Planning and Zoning Board. • Mr. Drager received his undergraduate degree in Education from Rowan University and his Master’s degree in Business from Widener University. He also holds a certification in Professional Human Resources Management. |
![]() Management Bios Management Bios Ron Corun, Manager - Asphalt Technical Services • Worked in the HMA paving industry 42 years (started at age 13). • Performed virtually every task in paving construction: laborer, equipment operator, asphalt plant operator, quality control and mix design technician (both Marshall and Superpave), estimator, foreman, superintendent, general manager. Employment • 2008 – Present NuStar Asphalt Refining, LLC Asphalt Technical Support Manager Education • 1997– 2007 CITGO Asphalt Refining Company Technical Support Manager • 1974 – 1996 Corun & Gatch, Inc. Vice President & General Manager • 1971 - 1974 University of Maryland - College Park, MDB.S. in Civil Engineering 105 |
![]() Refined Product Demand Outlook Refined Product Demand Outlook 106 Key U.S. Demand Drivers Gasoline Price Economy and Employment Higher fuel economy standards for vehicles Ethanol Diesel and Jet Fuel Economy Source: Purvin & Gertz |
![]() 107 NuStar Energy L.P. utilizes two financial measures, EBITDA and distributable cash flow, which are not defined in United States generally accepted accounting principles. Management uses these financial measures because they are widely accepted financial indicators used by investors to compare partnership performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the partnership's assets and the cash that the business is generating. Neither EBITDA nor distributable cash flow are intended to represent cash flows for the period, nor are they presented as an alternative to net income. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles. (Dollars in Thousands) Reconciliation of Net Income to EBITDA to Distributable Cash Flow 2002 2003 2004 2005 2006 2007 2008 Income from continuing operations 55,143 $ 69,593 $ 78,418 $ 107,675 $ 149,906 $ 150,298 $ 254,018 $ Plus interest expense, net 4,880 15,860 20,950 41,388 66,266 76,516 90,818 Plus income tax expense 395 - - 4,713 5,861 11,448 11,006 Plus depreciation and amortization expense 16,440 26,267 33,149 64,895 100,266 114,293 135,709 EBITDA 76,858 111,720 132,517 218,671 322,299 352,555 491,551 Less equity earnings from joint ventures 3,188 2,416 1,344 2,319 5,882 6,833 8,030 Less interest expense, net 4,880 15,860 20,950 41,388 66,266 76,516 90,818 Less reliability capital expenditures 3,943 10,353 9,701 23,707 35,803 40,337 55,669 Less income tax expense - - - 4,713 5,861 11,448 11,006 Plus mark-to-market impact on hedge transactions - - - - - 3,131 (9,784) Plus charges reimbursed by general partner - - - - 575 - - Plus distributions from joint ventures 3,590 2,803 1,373 4,657 5,141 544 2,835 Plus other non-cash items - - - 2,672 - - - Distributable cash flow 68,437 $ 85,894 $ 101,895 $ 153,873 $ 214,203 $ 221,096 $ 319,079 $ Plus hedging loss in 2Q08 60,704 Distributable cash flow excluding hedging loss 379,783 $ Note: 2005 and 2006 distributable cash flow and EBITDA are from continuing operations. Year Ended December 31, |
![]() 108 NuStar Energy L.P. utilizes two financial measures, EBITDA and distributable cash flow, which are not defined in United States generally accepted accounting principles. Management uses these financial measures because they are widely accepted financial indicators used by investors to compare partnership performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the partnership's assets and the cash that the business is generating. Neither EBITDA nor distributable cash flow are intended to represent cash flows for the period, nor are they presented as an alternative to net income. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles. Debt-to-EBITDA Reconciliation March 31,2008 June 30, 2008 September 30, 2008 December 31, 2008 March 31,2009 Net income 175,044 $ 149,437 $ 249,501 $ 254,018 $ 237,504 $ Plus interest expense, net 74,527 80,009 85,856 90,818 94,423 Plus income tax expense 12,318 14,253 13,473 11,006 12,970 Plus depreciation and amortization expense 116,997 123,967 129,576 135,709 141,652 EBITDA 378,886 367,666 478,406 491,551 486,549 Less equity earnings from joint ventures (7,423) (7,426) (7,935) (8,030) (8,142) Less other income, net (42,116) (25,647) (15,152) (37,739) (36,434) Less mark-to-market impact on all derivative transactions 6,336 5,505 (3,811) (9,781) (4,005) Plus distributions from joint ventures 1,044 500 500 2,835 3,835 Other adjustments allowed under debt agreements 142,708 109,906 72,908 36,492 5,219 EBITDA per debt agreements 479,435 450,504 524,916 475,328 447,022 Plus hedging loss in 2Q08 60,704 60,704 60,704 60,704 Adjusted EBITDA per debt agreements 479,435 $ 511,208 $ 585,620 $ 536,032 $ 507,726 $ Total Consolidated Debt 2,203,298 $ 2,182,813 $ 2,051,486 $ 1,894,848 $ 1,924,210 $ Less hedging loss in 2Q08 (60,704) (60,704) (60,704) (60,704) Less equity offering proceeds, net of final CARCO payment (89,252) Total Adjusted Consolidated Debt 2,114,046 $ 2,122,109 $ 1,990,782 $ 1,834,144 $ 1,863,506 $ Debt Coverage Ratio 4.6x 4.8x 3.9x 4.0x 4.3x Adjusted Debt Coverage Ratio 4.4x 4.2x 3.4x 3.4x 3.7x Maximum Debt Coverage Ratio per debt agreements 5.5x 5.5x 5.0x 5.0x 5.0x For the Twelve Months Ended The following is a reconciliation of net income to EBITDA and Adjusted EBITDA, as defined in our debt agreements: (Unaudited, Thousands of Dollars, Except Ratio) |