NS - Earnings call transcript Q2 2022

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Operator

Good day everyone, and thank you for standing by. Welcome to the NuStar Energy’s Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference call is being recorded. like Pam the Investor Schmidt, now to call Relations. would speaker, today’s Vice I to conference hand over And President of

Pam Schmidt

Good to welcome morning today’s and call.

Brad Energy call CFO, and team. as members President are the other Shoaf, our NuStar as our On and Vice today Tom CEO, of Barron; well President and Executive LP’s management

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

may on press US of at GAAP our call, non-GAAP I additional nustarenergy.com. to this non-GAAP of measures also Investors call to During With financial financials to will our as Brad. financial non-GAAP certain of the reconciliations section to the financial These not website over measures. we that, certain be earnings the should considered with these measures release the page GAAP alternatives turn of refer will be found of in measures. Reconciliations course located

Brad Barron

impact in some Tupper and a about us XXXX the Good Point results again, the to to we taking quarter sale and in late Tom XXXX was morning. in in After US the today. delivered of as minutes. will transition XQ timing Eastern the our for facilities despite April, comparable Thank terminal of few EBITDA issues EBITDA, you talk report all account second joining into solid pleased our I'm that, once second quarter.

year, happy over a up up up per that first our average quarter, quarter to of to report up last per was XXXX. to XXX,XXX EBITDA day. XX% and quarter large XQ. I to XXX,XXX to volumes a grew day Permian X% And rising July, in the Crude grow, segment We're nearly record-breaking that per of the strong day. System. pipeline thanks barrels in in same XXX,XXX part Permian average note second an average volumes our our That's want from barrels Permian Systems monthly continued performance for to was of Our June's the in barrels

While this quality and overall, year, strength US testament rest of producers to the supply XXXX Permian our and first to successfully the and drilling year, what have plans, we execute we a on expect the top-tier our the our the in chain XX% XXXX growth oil on per growth continued XXX,XXX quarter to XXX,XXX production to plans. or is day far between we've drilling to challenges other half barrels face so their strong and our of ramp producers year about up our based exit and producers' volume saw for acreage. we above continue continued Steady, Through, exit. seen expect this of this XXXX

customer refineries refined quarter Moving the XXXX, of product our volumes this our operational to though QX at past up reduced were even short-term refined from first systems, on XXXX. our some to issues QX volumes Permian quarter to compared compared pipeline the product

and markets strength of Our and of we track throughout reflecting the at volumes pre-pandemic continue levels, stability across demand Texas. serve to the in the our Mid-Continent assets the

year. above continued XXXX with same XX% Northern up perform average to system quarter volumes throughput last our with well, over quarter also product Our refined Mexico the for this

West Coast network. Moving to our renewable fuels on

California state's of recently further should the logistics renewable XX% from handled expect brought fuels the storage renewable Coast facility. XXXX. increased fuel of fuels, diesel We transportation and diesel our our in sustainable capacity plays to projects to which of continue of contributions aviation significant second service, mainly augment solidify we renewable its and Stockton, where two we ethanol low almost West sold grow the into the renewable region's our XX% our the Those half in to California's XX% already more capabilities That's that state. X% carbon role projects facilitating two biodiesel, in transition ethanol, NuStar of at

Moving our on Corpus to System. Crude Christi

rose for throughputs on term to We're mid-XXXX rebound the storage of quarter, but pleased XXX,XXX Corpus per by barrels we day to Trafigura our the month. one-year services per our day through and Crude for in averaged that contract average transportation, that Our export two the second announce July encouraged below for from system, end around Christi an as XXXX the the of been XXX,XXX in our reached barrels to we've slightly our MVCs extensions. extend also volumes with agreement with System almost

in supply Tom As the regional you in are Permian through oil the production locations around on completed turn transporting some supply export I'll South from and Trafigura, that US for early And movers refined an to from the of projects relationship more Gulf results. building of Coast Corpus details we extending Basin with crude II on that of established recall, that, the the and products NuStar systems our call this over facilitates for on provides and will the export Christi. to Grey Oak XXXX, for we Texas made one Cactus By for our WTI contract, globe.

Tom Shoaf

Thanks, Brad, everyone. and good morning,

As year. other basis, in EBITDA EBITDA those assets the Brad the assets earlier we from quarter sold mentioned, same XXXX backing out In XXXX with comparing XXXX. generated apples-to-apples on the in XQ words, an this of second and

to comparable of Our second quarter quarter was XXXX. the second EBITDA

Our $XX ratio was limited times. the common coverage available X.XX million partners for common second limited distribution DCF was our partners to and quarter XXXX

second earlier. quarter described million, our XXXX, to XXXX strong of million EBITDA second of of million the our quarter segment Pipeline up In from Permian over $XXX as the now $XXX X% segments. or Turning generated performance our System, largely $X EBITDA, of Crude Brad from

segment. Storage our to next Turning

St. improved terminal. XXXX Christi adjustment the for $X settlements times, our bunker increase EBITDA That million lower ratio XXXX, debt progress was Thanks million substantially at second XQ our margins. required our on reducing in million, which the balance debt when sales. James that debt-to-EBITDA XQ end that of of end building has we billion a debt interest million, quarter Beach Fuels billion, had times end largely asset available of to and variable $XX stronger the credit to facility. timing million our report the $X to ratio for XXXX, quarter made the strength revolving for rates was and at was about XQ in and Corpus financial lower terminal due is our despite balance, $X Marketing decrease second customer in XXXX rate on the in was interest lowering through EBITDA XXXX flexibility. $X.X we we to year. XXXX of continued second $X expect to and We our our also X.XX XXXX and in and pleased in of than the over of $XXX transitions expense improvement with on was MVC the X.XX which from compared XXXX tank of our debt. XQ up our our compared continue ended XQ the progress due to North $XX Our I'm maintenance And fuel our segment, At quarter on to our million our

to XXXX, we to expect For the $XXX full generate adjusted of year million. range to $XXX in continue EBITDA million

Moving to strategic capital.

our Permian plan our about to in and system continue $XX growing to about Coast $XXX West XXXX. network. to plan to expect to We fuels million million spend $XX spend to to allocate renewable $XXX expand million We million still we

Turning to capital. reliability

We spend between XXXX. continue to million expect on and in $XX to reliability $XX million

to Now Brad. I'll back turn call the over

Brad Barron

thing possible that to projects mention. and efficiently in calls flow total our business as reductions and that On that execute May, up Thanks, we Tom. In to we you and increase cash identified XXXX, our operate to ensure in February order over now assets about our initiative our and $XX XXXX to spending told our we had million. and beyond. One effectively million I'm to XXXX $XX happy across on across talked is want last we May, in optimize to report in and as our I free

happen spending taking $XX XXXX We believe safety, company of our yet. real we expenses have optimization, – which True XXXX full means as as That's excellence environmental over year has doesn't not successfully possible, million by distinguished making million. financially that in overnight. spending strong $XX the over efficient decades, by our while and two almost capital reduced progress, reliability done culture our NuStar and we're for and maintaining

free our of efficient NuStar continuing XXXX, on is We By so rest our flows, and mitigating is see and call spending, of strategic. for the cash that initiatives it to is beyond. are will optimization challenges to continue spending we our open impact and Q&A. necessary, here And that of for each to the NuStar in us through to committed at our with opportunities solidly the every of focusing scrub we make XXXX I'll that, up positioned sure and penny the every one and and inflation increasing advance

Operator

question question-and-answer Thank Instructions] time, Our with Chen will the session. line conduct you. [Operator comes the Barclays. we Theresa first of At this from

is line Your now open.

Theresa Chen

for questions. Thank team. you Morning taking my

potentially and amount to pre-pandemic to was higher resilient outlook of volumes your across it there -- related from on remaining And to your overwhelmingly product resisting I recession great to to pre-pandemic, outlook for are get be is risk, that system. your demand how levels the ask your still or consumer here? seems First, you about overwhelming back Since to the concern prices? love these wanted an see a take

Danny Oliver

is this Danny. Theresa, Yes.

at continue volumes pre-pandemic our see We levels. to

our XQ, not going pre-pandemic, refinery would system, have was was higher without the we were XX% on, on that with been refinery I think and maintenance maintenance. it which about -- in

it I just like not that of It coast. on days in be the like we're think that the seeing may system. So our middle of -- isn't country impacts the pandemic, seeing the they the it's of seeing this seems kind same back the in

Brad Barron

you, have And on earnings can interstates. traffic then big long cutback is trips made you either. Texas, seeing the customers of in in not are and just our I there that our can no reported across of it promise driving state us tell several I their anecdotally, They've calls.

Theresa Chen

related a to per XXXX, did detail Got rate that? you color And towards related you. to your the extension bit traffic it. MPCs off to assets, little us more shifting year-end and trade term to Thank for have giving with some your then crude

Brad Barron

We did.

we on call, and deal. talked blend As we a think I a bit little it about was extend -- this the last

expected did option options, of and end periods we a we And little give volumes volume to that XXXX. that a and beyond rates rate, up. and of through the couple have the then pick back bit So on we where

Theresa Chen

be you to would the how be? previous would to much magnitude, Got one contract, it. new impact of And an able existing share or order of baseline EBITDA the relative this

Brad Barron

I know, of guidance, customer's our is in can't as it's -- unchanged. just specifics contract. heard really was specific get a which, Tom But you say, into

Tom Shoaf

as able the opportunity towards to Yeah. the what this our in -- to We business well, and what improving contract. and work a see competitive see we rates with positive way been right see that to expect it of we conditions are market also development for particularly we've now, Corpus The end very the us that Christi is for Trafigura. gives

well to take positioned we're So both.

Theresa Chen

Corpus from Corpus season, discussion Corpus. a some to able takes your shifted believe evolving peers topic there Got view you about to and the the your on seems been what and outlook share forward? the directed be, Christi, pipeline towards Corpus to And the lot of on or Would going have utilization of and your heading there Understood. there, for dynamics from of this puts is commentary of earnings I Houston and volumes it. be

Brad Barron

going Yeah. see the believe barrels production that continue the Corpus. export said incremental see of We've is and and for export out to no go in prefer change always the and Permian that. We

Theresa Chen

you. Thank

Brad Barron

you. Thank

Tom Shoaf

you. Thank

Operator

right. All

Our next open. Michael the comes now with your question from Blum, Welcome line Blum is Wells Fargo. line Michael of

Michael Blum

you me? Can Hi. hear

Operator

can. we Yes,

Brad Barron

Yes, we can.

Michael Blum

great. Okay,

to expecting First was allow pipelines. question you're for adjuster rate would wondering index and had full your FERC XXXX through PPI I'm increase the pass the that XXXX? I on if both

Brad Barron

of there's the are FERC Yes, But by there's the FERC a are that based. our field, pipeline absolutely. have all some oil XX% assets we And limits. We'll the of where in full pipelines and indexes few large, a -- indexation are by -- getting full our contracts can, our indexation. way, few revenues, the them

Michael Blum

I at Great. And apologize the you leverage. if as a making appreciate the then, going like you're talk obviously, Got target? where think of year? take end overall that. progress to end just that. you it. you'd up lot Can leverage And a I to on of think I you then you're about of where kind missed

Brad Barron

said, we terms And second is we it is But quarter the this as I mean and to given on times. you on even we be guidance four in leverage in tell I leverage of haven't Yeah. delevering, out finished course we below can is stay we to year-end. plan below going really what of where think our that quarter.

we're -- and of the So lowering kind where so leverage think that, to we continue going are. I that's

Michael Blum

right. Thank All it. very much. Appreciate you

Operator

you. Thank

is Our at comes open. next Carreker US Advisors. your question James now from line James of Capital Carreker,

James Carreker

Can me? you hear guys Hi.

Operator

can. We

Brad Barron

Yeah.

James Carreker

Thank you. Okay.

following impact FERC Just that question. up on

to go volumes? into similar in baseline amount, July the in So reasonable Xst, I from it that effect we'll X% pipeline up level, changes, EBITDA mean, assume to I guess, by else changes a QX increase is nothing something if went excluding roughly see

Brad Barron

that exception Yes. Similar with the amount of to field. the oil

some and yeah. volumes, limits, is market-based the Ford contracts yeah, that, So But which deal. have other some than Eagle Permian a

James Carreker

You've take consideration inflation OpEx also goes up got into with as to well.

So be dollar-for-dollar it increase won't in EBITDA. a

Brad Barron

Revenues though, yeah.

Tom Shoaf

It is.

James Carreker

guess, that out it's this You quarter? you. generally willing And put nice after to filling to then, fact would Got be in disclose out always EBITDA you presentations have Permian the the for it when the model. I

Pam Schmidt

we'll out have deck in in weeks. a there couple Yeah, our of that

James Carreker

threw West And as of on you. this initial I if kind applies one could biofuels just it to Inflation Reduction in. I Thank your guess, thoughts, Okay. in the anything business Coast? more any Act

Brad Barron

our on business West for the general, regulatory are We've positive not trends In Coast. biofuels specific. anything seen

And of for the that legislation matter so is. no what a there's tailwinds really lot business

James Carreker

Okay. you. Thank

Operator

Thank question. you for that

from question the comes with next Jeffrey USA. Group Our line Christopher Securities, of Mizuho

Your line is now open.

Christopher Jeffrey

question. Hi. Thanks my everyone taking for

for one just think left I me.

talk some the were you kind maybe that XQ, half, of of if And constraints will happening on rates of half If second in in how were of some seeing the the that you in exit Permian, out play clearing cadence the could you about maybe PCFs. see and that first the up XQ? July

Tom Shoaf

Yeah.

running So million, July, about $XXX averaged $XXX as mentioned, Brad we exited we million. but

where of -- talked of we're see think that's sorry. So kind we starting in I’m month We I the similar August. here activity about,

Okay.

for forecast see activity same of in see I million half. we've of we level. hitting -- years, January continue months some our seen to lull $XXX the actually forecast, or we'll December, it's that are whether we've our above whatever we exit think reconfirmed second in five about type But kind for that of seen million, their activity reason, holidays a of actually a $XXX the early. guidance companies we CapEx budgets We see

we And from we're quite so match producer it kind customers. that though in lull doesn't production getting the of data our even forecast

Christopher Jeffrey

you. Thank Great.

Tom Shoaf

you. Thank bet. You

Operator

questions, Thank Schmidt further question. you remarks. Pam are that turn to back I'd for it like no If closing for to there

Pam Schmidt

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

Operator

the your for This today's conference. conclude you participation does program. in Thank

now disconnect. may You

NuStar Energy (NS) 4 Aug 222022 Q2 Earnings call transcript