NuStar Energy L.P. Earnings Call Insights: Eagle Ford Crude Pipe Volumes and Weaker Storage Segment

NuStar Energy, L.P. (NYSE:NS) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Eagle Ford Crude Pipe Volumes

Brian Zarahn – Barclays: You don’t have the assets for little while, but can you talk about the performance maybe in terms of volumes of the Eagle Ford crude pipe?

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Curt Anastasio – CEO and President: Yes, it’s going even better than expected and I’ll turn it over to Danny Oliver, our Senior VP for Business Development to expand on that.

Danny Oliver – SVP, Marketing and Business Development: Sure. As you may remember this TexStar line and the lines that we’ve contributed to that project is really the third line that we have going into Eagle Ford service, but that one in particular running about 70,000 barrels a day on that line alone today, that’s just ahead of expectations. We expect to be near 100,000 barrels a day sometime here in the next month or two probably March.

Brian Zarahn – Barclays: On the NGL assets, can you give a little more color as to where discussions are with shippers on contracts?

Danny Oliver – SVP, Marketing and Business Development: Yeah, we are completing final negotiations on many of those agreements. It entails both the supply of the Y-grade also the off-take of the purity grades and then, of course, we have to finish constructing the fractionators. The two fractionators exist. They are being refurbished and reconstructed.

Curt Anastasio – CEO and President: I know you probably know this but just for the benefit of everybody on the call, we’re getting into this NGL transportation and fractionation solely on fee basis, these are deals backed by long-term contracts we never take ownership of the commodity. There’s no price risk. We’re not exposing ourself to any margin risk and so I’m sure you know that, but I just wanted to reiterate that when I had an opportunity to do so.

Brian Zarahn – Barclays: In terms of financing your $600 million or so of expansion CapEx. Can you talk a little bit about that? I know you’ve got the hybrid done for the acquisition, but on the organic side you can talk about your financing plans for the year?

Steve Blank – SVP, CFO and Treasurer: Yeah, pretty much what we budgeted is two hybrid deals totaling $700 million, one in the first quarter and one I think we slugged into the third quarter. The deal we just closed was very successful. We went out talking about 200 thinking we’d do three and we ultimately with the green shoe raised $402 million at a coupon that was below what we had budgeted. We came in at (7.58) against 8% I think that we put in the budget and the deal was announced at 7.75 to 7.8 so pricing it upsized at a lower coupon was a good outcome and the bonds have – hybrids have traded well in the aftermarket. We do have two bonds coming due, one in March and one in June. They total $480 million and we’re looking at doing probably a single bond deal sometime in the second quarter to take those out initially. We may finance the first one under the revolver. The revolver, as Curt mentioned in his comments, is $1.5 billion. Today we have just below $1.2 billion available to us under that revolver in terms of room to borrow. Then we’ll see about the second hybrid. We may not need the equity content from that. Much depends upon how much CapEx we spend this year. The budget presumes no common stock issuance this year. So, everything would be either hybrid or debt (indiscernible).

Brian Zarahn – Barclays: Last one from me can you – just on the housekeeping item provide the expansion CapEx and the cash balance for the fourth quarter?

Steve Blank – SVP, CFO and Treasurer: The cash balance was I think 105 million, and the CapEx was what for the 2012 or for…?

Chris Russell – VP, IR: 2012 fourth quarter liability, Brian, was 60 million.

Brian Zarahn – Barclays: And then expansion?

Chris Russell – VP, IR: Expansion was 74 million.

Weaker Storage Segment

Mark Reichman – Simmons & Company: Just a couple of questions. In terms of the adjusted earnings it looks like it came in kind of with the low end of your guidance you’ve been kind of $0.25 to $0.35 and it looked to me like it was really the Storage segment that came in a little weak and it was primarily due to the lower leased revenues. Could you talk a little bit about that on what you see over the course of the next couple of quarters in the Storage segment? Then the second question is on your call where you provided your ’13 and ’14 guidance in terms of your EBITDA ranges are those still any changes to that or are you still comfortable with those ranges?

Curt Anastasio – CEO and President: The second part first, maybe I’ll take is we’re still comfortable with the ranges we provided on that call and then I don’t think we had – we will talk a little bit more about the Storage, the weakness – relative weakness of the $0.25 to $0.35 range but I don’t think we had lower lease revenues for Storage it had more to do with, I mentioned, the canceled projects and those got charged to the Storage segment. For example, we had done some prep work in asphalt processing and marketing St. James terminal that we had suspend. The asphalt JV didn’t want to take that on, so we wrote-off that project and that was relocating some – it involve relocating some processing units from our Mobile Alabama terminal to St. James, that was like (indiscernible) of it and then in St. Eustatius, we’ve had what we would call an internally is the Cul de Sac project it was very large up to $12 million barrel expansion at St. Eustatius. We’ve now moved to a more modest project and so the balance maybe $3 million or so a little bit more of the write-off related to that and those got charged to Storage segment.

Mark Reichman – Simmons & Company: Right, but what I am saying is storage leased revenues were down 5% on year-over-year basis. Operating expenses were up and then of course your throughput revenues were up pretty significantly as well. But I mean if you add back those one-time items you expected it to be at a loss and you add back some of those one-time items that kind of puts you in the range of 25 to 35. So, you’re saying that some of those, other of those operational moves that you made impacted the quarter that really won’t yield and really throw in as kind of the one-time items.

Curt Anastasio – CEO and President: I think that’s right if I follow what you’re saying correctly.

Danny Oliver – SVP, Marketing and Business Development: Part of that, Mark, is the vessel that Curt mentioned in his remarks earlier.

Curt Anastasio – CEO and President: We had a couple of hurricanes come through that impacted and you specifically asked about the storage lease revenues, I think, in the fourth quarter, those are down about $6 million and what’s going on there as we changed the treatment of our Corpus Christi North Beach facility, we used to treat that as a storage lease facility now it’s a throughput based facility. So, that $6 million just flipped from storage lease revenues to throughput revenues.