NS - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen, and welcome to the NuStar Energy L.P.

Third Quarter 2019 Earnings Conference Call. [Operator Instructions] Please be advised, that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Pam Schmidt, Vice President of Investor Relations. Thank you. Madame. ahead, go Please

Pam Schmidt

welcome call. and to morning, today's Good

our On L.P.'s Shoaf, President today are members Executive NuStar Energy Brad Barron, of other and with President CFO, the team. and call Vice along management CEO; and Tom

forward-looking to the Before during our filings you statements. NuStar future NuStar will materially performance the would are our about in are call, and that to make assumptions Commission. various this Exchange the of remind statements from we of in current we get the management started, differ like uncertainties the These course views forward-looking risks, with that Actual statements. statements subject described may and Securities described results those concerning

measures. These financial not nustarenergy.com. Investors course additional alternatives GAAP be our considered reconciliations located to should of to press the non-GAAP as the call, our of be page may GAAP with the measures Reconciliation found these at also non-GAAP this in website of of section financial earnings Financials of refer U.S. certain measures. will measures During non-GAAP we to on certain release

I that, turn With Brad?. over the to will call

Brad Barron

Good Thank you joining all today. morning. us for

I for I to NuStar's the you to over want and of turn expectations results some details, highlights for our it give and XXXX Before Tom XXXX.

year were this the NuStar I second third quarter. call, over last that's demonstrating the the NuStar produced told and again report happy last once up quarter, plan. I'm up you in strong our and NuStar On strength over was our results true board. again third quarter quarter of business to our that is XXXX. across assets

X%. and pipeline storage are total segment up Our revenues

XX%. from income is continuing Our operations up

which ops, partners And EPU charge is ratio our our continuing available XX%. times, DCF significantly up Eustatius continuing times. in up EPU part QX resulting XXXX's July XX%, to from from quarter our the common third debt-to-EBITDA from limited EBITDA our from for is in operations facility XXXX. up than in simplification was July, X.XX St. in of Due XX%. adjusting ops, sale our X.XX to facility Our lower continuing

year, This executing starting on program. results. our XXXX we This three areas: Mexico, already and between and continued of expanding million, that see products we're our of in connecting benefits Northern to we'll existing supply of total past primary focus export $XXX the Permian completing $XXX our assets also and our spending Crude our project. in now deploying quarter, Christi first to We're Corpus million System XXXX capital phase and the projecting spending refined on spending capital

all We've our the double our pipeline Rio Valley capacity products made of from to of third completed Valley quarter. substantial in Northern Mexico on and progress to September. the supply the of during Grande refined expand these Corpus Christi to project the fronts We

earlier open also We so year, this fully that a successful concluded expansion is season subscribed.

the us Mexico. our Laredo of Christi phase which project Additionally, diesel complex Nuevo Nuevo Laredo we completed first terminal Corpus the to September, transport refining our in from to in allows

Permian additional February. us. tankage to phase schedule truck-loading at project, area which in and the Laredo to of installation of for We're on focus Basin that an base second of The complete Nuevo includes be continues

System most outside America. largest in midstream is Crude And and the opportunities know, play the the outperformed Permian the itself shale logistics North driver acquired we in has resilient XXXX. fastest-growing and NuStar's you North basin proven As since consistently Permian of the and it's it American basin, in

And We the of that Over rock commentary Basin. heard expressing best and acquired producers. on proved in our attract several turn, rate highest-quality quality, growth some believe, the any sits seen in correct. That decreasing, system atop most of would, of it basin's efficient but the production Midland is that not because hypotheses we've the we system. past has the we've concern evidence months, our our

diverse, additional from day public has And which commitment acquired to barrels up has XX% shippers' are barrels and aggregate grown we've over in to this that strength well our XXXX, a day E&Ps from far This system per expanded call connections the May well their customers last near- our August. the grown added Since XX%. capacity by Midland united of our system amazing We companies, year, creditworthy we've XXX,XXX of year, of plans. in a Permian in accommodate now respectable by our to total Basin system's throughput per throughput, XXX,XXX to private overall XX we our the an majors Basin. outpacing have quarterly are and connections to long-term XXX%,

facilities We've connections in a and Midland require, pipelines to to including completed we've in the shippers our put EPIC third-party connection pipeline service provide August. to flexibility that the into also

were high nominations too. as our Our barrels bit moved And some XXX,XXX last quite October, barrels. per XXX,XXX impressively, of It's volumes have November barrels average In we grow continued with day, day. to XXX,XXX. a per higher an than XXX,XXX of as for days quarter average

X-mile, by brought work and North into II service our to that Corpus terminal. the for pipeline, on Corpus in around our Shifting barrels. extends keep of with facilitate to of we Beach customers Cactus to export Christi XX-inch pace to XXX,XXX brought forecasts their which closely We remainder XXXX, Christi, WTI of our Taft August, to to reach continue their in volumes We based from new, transportation barrels per we still year-end. with needs. And day expect

and Taft-to-Corpus to our service. double increase During of October, our volumes asset, per projects Taft export Texas new in Crude were our aggregate saw barrels before of our day. consists July in Corpus That's XXX,XXX the month System, receipts Christi Christi assets South which legacy our

storage pipeline increased Crude the in those of And utilization increased have also System. volumes Corpus our Christi dramatically dock facilities and

During October, into market. Christi XXX,XXX moved day a we Corpus refinery the barrels

the amount in XXX,XXX We Christi over docks, docks over over double more which barrels moved per also than moved day Corpus our July. is the

strong as this can we So delivered see, you quarter. results again

XXXX strong XXXX. year in full in to and for results results stronger even expect We hand

XXXX Looking $XX for that's than million increase at our XXXX we're XXXX. first of X% XXXX, full We're X.X reap cover growth this increase full year. to the DCF year, a year results year coverage the year we'll XXXX, full the expecting strong times, be executed and also by expecting over XXXX. guidance positioned more strong in for of this of midpoint our X.X to we've In rewards projects to of a

expect That's X.X stronger coverage. looking even expect even at X.X of our in the to XXXX of coverage guidance, by In the results XXXX We year and fact, range over XXXX be stronger now midpoint XXXX. DCF growth we XX% increase to the our times. times to full

we year. to ramp to XX% spending $XXX $XXX Additionally, million. next than this down plan capital to about less our year That's significantly million

ramp-down spending with proportion balance increasing cash stable that building Our order fund of will solid, capital flow. low-multiple in our priorities, we new the growth value our to financial internally spending while also projects fund generated

Permian, to to spending Permian the system System to and XXXX our and Crude on the on there. St. program flexibility Our Crude on Coast; our projects and increase West expansions System; our in demand beyond optionality Christi focused both is export handle growth James the inside growth to expansion business accommodate future opportunities biofuels the accommodate on in Corpus

for to on the over our our turn and results details outlook. Tom call I'll now So

Tom Shoaf

Brad, Thanks, good and morning, everyone.

this in U.K. reminder as St. presented Eustatius our results because Before of the for reported operations and that all sale now earnings periods of operations just European July of general are operations I in operations sale get started, the of those XXXX, discontinued tables. a

operations up $XXX quarter generated quarter from million, third $XX million $XXX of of continuing operations EBITDA XXXX, from of over continuing the third EBITDA million. we the or XX% For XXXX

DCF operations to limited common was continuing ratio for of Third of available partners And was X.XX or to our DCF common from limited continuing limited partners distribution XXXX $XX quarter up available million continuing operations million from third coverage to common $XX $XX from to compared the times. the operations XX% quarter partners XXXX. million,

Third third connection Sunrise EBITDA volume of volumes due at year. the to increased or to from System third system at Wichita throughput pipeline our the Falls our XXXX segment crude million, from one the our our Permian Ardmore a and quarter in XX% quarter on our turnaround $XX refineries of continued customers' on last resulting quarter and pipeline ramp XXXX, up million was $XXX in Crude

recently Additionally, portion reactivated saw our our and positive completed pipeline from LPG activated – Valley Mexico Houston system. of we contributions on our a project expansion

increases of in XXXX storage EBITDA $XX incremental million. well operations a quarter $XX and Coast million, EBITDA East from Taft strategy the were the system our markets as project by robust revenues quarterly volume on export as our third strength at healthy storage Coast Crude biofuels with as third segment on by Trafigura. West well project to as of comparable our from These System, result EBITDA Coast new our XXXX possible our soft continued Christi and continued from our our locations completed Our Gulf some as recently business fee dock storage Corpus was We made offset legacy some of of facilities. receipts quarter experienced

EBITDA quarter to segment $X quarter. million Gulf the million higher Marketing million, stronger was than our $X quarter experienced $X third margins Third in during of XXXX Fuels Coast the XXXX due bunkering

was we was X.XX year maturity of third by balance quarter October one for debt-to-EBITDA extended Our significantly times And revolver XXXX. in X.XX September below billion, our ratio and our September, ratio XXth our XXXX. $X.X debt-to-EBITDA debt the date times, to

included projections in our to press XXXX, as for year table our turning release. in the noted Now full

Our from unchanged noncash Eustatius $XXX sale XXXX those which at EBITDA excludes St. to related remains operations, results the range to million million, for charges operations. adjusted but includes $XXX impairment of

million, a is of provided expect comparability, in for also I’m compared the This EBITDA an projections X% million Eustatius Additionally, $XX be XXXX – our million midpoint an $XXX St. at over clearer from and both to to increase European $XXX continuing expected operations which ongoing excludes increase we XXXX of EBITDA and for of range the continuing which or expected when $XXX the from million. operation. to it’s view operations of for for business sorry, EBITDA we over improved

lowered as North in $XXX targets on spending, reductions for and up into our to Northern This the some well Corpus of Mexico capital million reduction for made the refined our of million $XXX Permian $XXX Beach terminal products of XXXX Crude System, XXXX, XXXX. permanent supply a is project. capital as which of strategic $XXX spend $XXX export strategic have projects – to regard and combination With primarily to deferring result million million range about approximately million we Christi was a other in for spending

for distribution be to be XXXX and to X.X times X.X continue of our around to common range ratio unit our X coverage times. XXXX, the $XX we expect our Regarding our projections, we for million, at of midpoint $XX which these previous unchanged the the capital on range to guidance. spending Based have reliability narrowed to to is times debt-to-EBITDA ratio in year-end million

further to Looking guidance. full year out XXXX

We spending With midpoint expect reduction million, about a to be $XXX NuStar's an increase strategic at midpoint at XXXX capital. $XXX million since $XXX to over regard estimates, XX% other of to above XXXX XXXX. XX% capital XXXX, to and and on $XXX the EBITDA plan million That's year-over-year. million we to spend the XX%

addition, to be of in Based spend reliability In $XX unit delever continue $XX on to X.X plan we our expect these ratio to work we common in million the we on to range XXXX. to times plan XXXX distribution million coverage X.X projections, times capital. and to to for

now his Brad turn to for will back the I that, with over call remarks. closing And

Brad Barron

had XXXX year. productive has We Tom. great a been quarter. a Thanks,

which and significantly our history XXXX come. existing our simplify benefit healthy-return efficiently, building optionality We're With improved that, about call. of low-multiple, it will in with forward ambitious in we safely NuStar's now NuStar more to Eustatius; and and for of to I'll completing program years and for we're to business news continue up the in Q&A. on asset footprint spending reporting and future ratio; open our We the derisk our many most expanding our and excited good look next projects debt-to-EBITDA sale capital across St.

Operator

our Instructions] ahead. from [Operator you. sir, Please Thank question comes first Gershuni UBS. go And from Shneur

Shneur Gershuni

everyone. morning good Hi,

Brad Barron

Good morning.

Shneur Gershuni

didn't in but as significantly, first of margin a this volumes all, the I sorts. on wanted the was color your off, noticed a of contribution It's there segment. segment I give that you on that of to seem sort if were of always going Can start what up Maybe us little quarter? that. bit match storage even just compression pretty with to was

Danny Oliver

actually this select – softness of Yes. the storage. had no in is some in have We're to off in our very for still, We markets. there's international backwardation, Shneur, – Oliver. markets, little still contract we renewal. some Danny on one that contracts up We is one contango

and rates, but guidance. factored QX we anticipating yet, at and in that coming We renewed haven't that we're that lower into QX our

Shneur Gershuni

enough. Fair

follow-ups. Just as a – I guess two

an do just you You available last EBITDA to understand wondering some leverage. preferreds high-coupon have along how do so, of your uplift. next target of of was want was debt order at retire in kind year with do you on your CapEx what like had the the or reduction of you order would of pretty priorities particular? I terms cash once priorities – in significantly coming of down debt to you the sort look some Just –

Tom Shoaf

mean, as prefs I prefs said and really until five from Well, years time time the Yes. as the do of about issuance. – go, you're this the far again, out the we date anything we with

obviously, in be anything won't based there done, the So with XXXX prefs. that on

priority we XXXX, we for things, a lot a to been how we've with prioritize We're of show that ourselves. just capital to going and of in progress pleased very focus make terms our delevering on continue discipline. In

see the for That can down put significantly. XXXX. we've that guidance is capital there in coming out You

but So looking that, terms debt of and I things in at be We're that improve a years that's coming lower of, there But mean, debt, definitely work of of the couple combination leverage priority. and years the refinancings least. and to a EBITDA a redeeming of we think for we'll take can to ramp. to got next couple continue on some going we those ratios, still out in so prefs up are our we've care our

Shneur Gershuni

to you the something can retire? find that open Is just market

Tom Shoaf

mean, that’s albeit an perspective, looking say you're pretty people cheap mean prefs, at cheap equity our a No. expensive, they're from When little some I they're I the pretty use think I capital. of don’t equity. equity. it best they're

don't of bringing find And any so we so out we those in. intentions very those have favorable there,

Shneur Gershuni

if, crude would And now I'm Okay. the exposure; that Eagle last in already wondering recontracting had some in MVCs or a, you with that if the follow-up be then Chesapeake one experiencing. you question. about rates step-down being talked capsulated b, some were the something Ford.

Just they of wondering out news to there talked sort that's if about you today. that

Danny Oliver

– much XXX,XXX on got XXX,XXX the Eagle Now Crude are our product But really XXX,XXX. a more pretty and our were shipping to MVCs MVCs Ford. had contracts – XXX,XXX. all MVCs, South when we're we're XXX,XXX Yes. Texas people. of We’ve most aware different We shipping you more our were we XXX,XXX, we've System now, XXX,XXX shipping with we of of like they of renewed But lot were as out sometimes

Tom Shoaf

Yes.

Shneur Gershuni

All very today. right. Perfect. appreciate Thank Really much. you color the Bye.

Tom Shoaf

you. Thank

Operator

you. Thank

Mizuho. next ahead. Our question go Please comes from Gabe Moreen from

Gabe Moreen

you the – of good from in Hey, or in Can discuss is that range kind outlook? what is growth of questions EBITDA variable morning XXXX everyone. that, related to XXXX? biggest level volume volume on lack me. And ramp Couple for embedded thereof that just your

Danny Oliver

Yes.

again. Danny Gabe, So

at the last below the this roughly Our we've ramp-up MVCs a the years. forecast done seen in our the Ford what slightly the are seeing volumes two growth Permian that continued in then we're Eagle we've in have that of we well year. today, below above And but rate

Gabe Moreen

Okay.

slowdown XXXX So rates? to really relative growth no

Danny Oliver

the in Permian. not No,

of the As mentioned, little same the biggest it heart in the kind unique we're a the off coming we've some – we with a in our on public – a XXXX the though firm have the growth. growth majors the specific creditworthy – – in we people XXXX, Midland we and the they're got, giving us these of of working are have that in plans in XXXX are Brad And the Permian that the producers and Basin, in from and we've seen system. and throughout XXXX the And heart E&Ps we've of plans again, this seen bit, came XXXX. on customers even that and year of volume is generally report was their place lot rate we're

Gabe Moreen

Okay. Permian in you of how that, to that of $XXX Thanks, million be million Danny. then is of much And does get you're the to, on to year, to where related Sort capacity-wise, growth that $XXX next spending PCS? and? going

Tom Shoaf

talking the and yet. can we've than customers on tell we we nailed far, what we to you, we're what Permian in so we're less XXXX. I down. But to what get know, still tell can trying really I heard What mean you the be Permian breakdown I not disclosing will spending and did of that

$XXX So about we that those three in of we're terms yet that of that are projects big splitting out includes some talked well. just announced million, haven't we that currently also we up about. finishing the It have, already – on as the working projects we projects

So year. as in mid-XXXs. I'll point. the breakdown capacity next can't this We to about as get we somewhere I at probably the total – that's give around the you remember get much It's we've XXX,XXX on as that number. dictate. planning. system projects specific got eventually. we've we'll to execute get as That exact And those volumes that But far up identified projects as gone it's to the system

Gabe Moreen

from last Okay. takes there that gives smaller strictly and other base? guide. CapEx a and the are of one there? Is asset – any lower then Or is And maintenance function me just puts

Tom Shoaf

Yes. That’s Eustatius, St. mostly base. a No no lower Europe. asset

Gabe Moreen

it. Got

Okay. everyone. Thanks

Operator

you. Thank

Tonet question next JPMorgan. go comes Our from Jeremy Please ahead. from

Jeremy Tonet

Hi, good morning.

Just drive with end the if the able XXXX as could guidance to wondering some what I guidance you wanted upper lower be versus end follow assumptions was into as to here. of of the share far us EBITDA there. might

Tom Shoaf

today. I out than of as One lower thing this the to – we're experiencing forecasting on are we and the Ford Gabe, Eagle mentioned what upper end, we've volumes year

cautious. some that think we're being could I upside, be but

Brad Barron

can you the that the Right I now When within other our in economy. that the is movement this upper overdrive, some kicks with upward things economy. on that into see best global think range. look global think could drive do I have to

we unexpected an has there's build in lower the that a refraining we customer to case unforeseen that want downtime, in flexibility something on like happens, end, something that. have So always

A new those, lot volumes are assumptions lot on a there just from of projects committed run what – our we that tend we our committed of just to completed, customers.

So ship the commitment were more to then see the projects well the completed. extent we to as various just upside across we would their – system minimum is, they that than what on there that

Jeremy Tonet

sense. far that higher? is then makes as volumes color share that MVCs? the And could Any Or across there? That is at as docks, you something

Danny Oliver

MVCs. the at right That's

Jeremy Tonet

generation for the Got for the Permian to system share it. there? was And then housekeeping are EBITDA you quarter, a able item, the what

Tom Shoaf

$XX generated million Yes. about third We EBITDA quarter. the of in

Jeremy Tonet

helpful. Thanks. that’s Yes,

reports with, I There I I Just some maybe assets. revolving incident as think, some your if what's guess, one. wondering last any was could as an was color around, far media happening there. of California share you

Brad Barron

Sure.

So had a fire The we terminal. California back Selby, tanks was on October ethanol at at isolated to there fire XXth, our Selby.

So the And very the grateful to one also very proud and contractors thing was I'm had we're during local short order. No injured the also the aid the the believe to incident. responders one I under injured. including responded no our fire that first in control want the employees first is incident. I mutual were to pleased. I'm – They responders, association. say employees, very way of no

terminal came service for up So the but yesterday for everything ethanol.

diesel, it have financials. we're the on able now, terminal to don't move to expect So a material jet we so jet impact and renewable from renewable and our

Jeremy Tonet

it from That’s thanks. helpful. That’s me,

Operator

Thank you.

from from question Citi. Please ahead. go Ryan Levine next Our comes

Ryan Levine

that's What's if are CapEx your spending – this structure your do outlook what once morning. And capital or Good reduced achieved persists? you your optimal priorities today? how view

Tom Shoaf

we're structure, plan doing capital Well, as don't pretty prefs. we much our in on before, there said structure. as our anymore think I as don't I cap far we I mean – optimal

There's anytime that's And there's bring on I before, said, And is. for just that those. continue what or So said work to and it in no delever primary going prefs we're no – to any refinance that. soon a focus plans as us. to I like is

we're going that's to continue delever, much So debt and just to it. pretty pay down and

Ryan Levine

there increases? repurchases Once for targeting, you unit achieve distribution the is leverage that versus you're a preference

Tom Shoaf

come on would that year the next this cash free XXXX expect flow year, albeit in after for I off would have our to in the rate, us. Based years that, that I our think we're we think tremendously to year and do that as so. down curve what no, and don't spending we subsequent way well, mean, and I be expecting

– – of out to that targets – achieve we'll we're and think that's work and try there, our kind from that I just there. continue

Ryan Levine

there the Okay. quarter? impact What FERC in the in was for rate reindexation July

Tom Shoaf

amount. that dollar I get for the can – have don't We

Brad Barron

I was you to will the XX% And have know increase. of offline him the it don't was Pam, back in a maybe. dollar front about we but amount call? us, get give we right can you

Pam Schmidt

We'll Ryan. get back you that, on to

Ryan Levine

of Okay. or do the contracts credit improve any customers taken to – positioning gathering see any those across you the steps systems? any Permian then your on other your for counterparty you And concerns there side? And have on

Brad Barron

customers is some the blue-chip about you of imagine. names one can the That's system, best our things best our that are of

Ryan Levine

that’s from Thank you. me. Okay, it

Operator

you. Thank

go Our question next from Global ahead. Seaport Sibal Sunil Please from comes Securities.

Sunil Sibal

morning thanks on And bit that just guidance. range side? I of covered that contractual a EBITDA talk could to. good little kind clarity for on the get guys. the or MVCs was to guided more of call. How Hey, or wondering either your the you wanted if the requirements through I on storage side transportation the color the is in about much XXXX you

Brad Barron

comes a covered less that little – else well, of Permian, half maybe everything out that is than Yes. about, the Most by of of MVCs. And half.

covered but not the Permian by of all. is MVCs Some

Sunil Sibal

And could already remind leverage target? your you're seems It is you where Xx. like us, to close

X.X, are looking down? to you – is now know, even So I don't the go is further desired, it

Tom Shoaf

all Well, we've – Continue priorities, growth, got a delevering, of right? lot that. Our of the

and say, currently, that. putting a we where we we would but like be are than really and delever for ways short do So better a where that be have like better can do, And concrete We're a, list as as there, can we on do than things we'd find of to but out target that are. end focus we continue to to that. turn X.X that I a think we're getting – think where we to goes, far we we and not I'd –

Brad Barron

leverage, we're I'd to our way. of we think but balanced it do lower in way it won't to The going a is like

So it a us a of focus lot competing for is balance we're to forward. going trying priorities, but

Sunil Sibal

Okay, from thanks. me that’s it guys,

Brad Barron

Thank you.

Operator

Thank Instructions]. you. [Operator

Our next Blum Please comes from from Fargo. go ahead. Michael question Wells

Michael Blum

questions addressed. Hey, good actually My were morning guys.

So, thank you.

Operator

show to Vice in the call the turn I President Schmidt, closing over Investor you. this I'd Pam Thank of Relations questions queue. time, to no At further remarks. like for

Pam Schmidt

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

Operator

Ladies you and your gentlemen, this concludes today’s conference for participating. call. Thank

disconnect. You may now

NuStar Energy (NS) 5 Nov 192019 Q3 Earnings call transcript