NuStar GP Holdings, LLC (NYSE:NSH) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Houston 12-inch Line
Steven Sherwoski – Goldman Sachs: I was wondering, do you have any update for your Houston 12-inch line?
Danny Oliver – SVP, Marketing and Business Development: We do. We’ve been working on agreements there. We expect to go into an open season on that line soon, probably here in the month of August.
Steven Sherwoski – Goldman Sachs: And that’s going to be for products?
Danny Oliver – SVP, Marketing and Business Development: We’re contemplating NGLs on that line.
Steven Sherwoski – Goldman Sachs: I was just wondering on the timing of your storage re-contracting. Does that 40% over 12-month periods still hold?
Danny Oliver – SVP, Marketing and Business Development: It’s a little bit less now. I think 35%, 36%.
Steven Sherwoski – Goldman Sachs: What’s the timing over the next 12-months, is it back-end loaded or front-end loaded, how should I think about that and is there any particular concentration in the geographies of the storage that are up for re-contracting?
Steve Blank – EVP, CFO and Treasurer: I don’t have a lot more breakdown than just the one year, but I would tell you, while we have seen some pressure in certain locations on renewal rates our bigger issue I think on the storage side is just a few locations in the U.S. really in fuel oil storage where we had some difficulty reprinting some tanks that have come off revenue that were cancelled…
Curt Anastasio – CEO and President: Don’t forget, Steve, we are no longer marketing ourselves in a number of locations, so Danny who has given back those tanks to market just going to be a transition phase. We are still happy we exited the business of marketing ourselves given the reduction in inventory that we’ve achieved.
Steven Sherwoski – Goldman Sachs: And on your South Texas pipeline the proposal. Do you have any sense of cost yet?
Steve Blank – EVP, CFO and Treasurer: Yes, we went out in two phases. First phase for 35,000 barrels a day would cost between $10 million and $20 million; the second phase for 65,000 barrels a day would cost $125 million to $150 million. And depending on the success of the open season we could do one or both of those phases but we remain confident we will be successful in getting into both phases.
Steven Sherwoski – Goldman Sachs: And I know it is little bit early but I would imagine that you are targeting returns within your historical range?
Steve Blank – EVP, CFO and Treasurer: Yeah, I mean, the first phase is well above the historical range, because it’s very low capital and you get what 25,000 barrels. The second phase, yeah, that statement would be true, it would be in that…
Curt Anastasio – CEO and President: Overall that’s true.
Steve Blank – EVP, CFO and Treasurer: 4 to 5 times.
Steven Sherwoski – Goldman Sachs: I’m sorry, you said 4 to 5 times.
Steve Blank – EVP, CFO and Treasurer: 4 to 5 times.
Brian Zarahn – Barclays: On the storage segment, can you maybe elaborate a little more on the weakness you’re seeing in certain markets, you commented some of its fuel oil related and in terms of geographies or anything in Europe is non-performing as well as you hoped?
Steve Blank – EVP, CFO and Treasurer: Well, domestically in our refined products terminals and our refinery crude terminals, they’re really unaffected about this – it’s some of our coastal facilities here in the U.S. and abroad, some of these three to five year contracts that are coming up for renewal or signed in a period of contango and the markets backwardated now. And for the most part other than the fuel comment I made earlier here in the U.S. we’ve been successful in re-signing those contracts just at some slightly lower rates.
Brian Zarahn – Barclays: Is there – some market has changed and some of your marketing outlook has changed, any possibility of divesting some of these terminals?
Steve Blank – EVP, CFO and Treasurer: We don’t have any plans today to do that.
Curt Anastasio – CEO and President: We’re open to all alternatives, but really I think what Steve said is right. A lot of this is really, Danny is sort of paying some of the price of the benefit of reducing our working capital at some of these locations and in time they will get leased. The question is, at what rates, but we’re very focused on that and there are one or two problem terminals that we really have to take a hard look at, but we don’t have any planned sales at this time of anything other than very small ones that we do here and there.
Steve Blank – EVP, CFO and Treasurer: Then on the troubled terminals that Curt is referencing are contango facilities so when the market went backward Dave we lost the customers and there is just a couple of those.
Brian Zarahn – Barclays: Switching the pipelines, can you give you – you’re seeing nice growth obviously in the crude oil side of things, but on refined products where do you see volumes heading relative to second half of last year?
Steve Blank – EVP, CFO and Treasurer: Our refined products lines are comparable to last year.
Brian Zarahn – Barclays: So as you progress through the second half of the year, you think it will be similar?
Steve Blank – EVP, CFO and Treasurer: The same, the same we’re not seeing a lot of growth on refined products, but it’s been very, very steady…
Brian Zarahn – Barclays: Same relative to last year, relative to the first half of this year?
Curt Anastasio – CEO and President: I think it’s — the answer is probably same for both unless we have…
Steve Blank – EVP, CFO and Treasurer: I don’t have that broken out Brian between products and crudes coming back…
Curt Anastasio – CEO and President: It should be comparable to both of those what I would expect.
Brian Zarahn – Barclays: Then any impact from the narrowing crude differentials on rail terminal?
Danny Oliver – SVP, Marketing and Business Development: No, we predominantly deal with producers in the existing real terminal and also the new one that we are in the process of building right now and the producers have obviously different set of economics I think St. James, Louisiana is still a preferred location.
Curt Anastasio – CEO and President: Also both projects are backed by long-term contracts.
Danny Oliver – SVP, Marketing and Business Development: Absolutely.
Curt Anastasio – CEO and President: The current market doesn’t affect those deals.
Brian Zarahn – Barclays: In terms of the – I understand that’s really – I thought there was some type of profit sharing arrangement?
Curt Anastasio – CEO and President: Yes. Now, that is affected. We benefited from that on the EOG unit train project, and right now that benefit is much lower going forward and that’s factored into the guidance and the numbers that we’ve indicated here today.
Brian Zarahn – Barclays: Last one from me. I know it depends on the outcome of these Open Seasons, but any preliminary thoughts on 2014 CapEx relative to this year?
Steve Blank – EVP, CFO and Treasurer: Probably it would be a little bit lower. But that being said, that’s based on the projects we’ve identified to-date, so as we identify more projects that number could grow, say, maybe slightly lower.
Curt Anastasio – CEO and President: But let me just make a comment on it though, we haven’t really gotten very far to the planning process. But given that, we’re going to be very judicious on capital. We’re going to be staying very, very focused on Eagle Ford. We’re so well positioned there. We have such strong opportunities to invest further there. Expect – we continue to see most of our growth capital going into the pipeline and in particular in the Eagle Ford region. We have selected other projects and core assets, things we can do at St. Eustatius and St. James for example, to improve things and a few other projects. But we are really, I would not, given the position we’re in and the financial metrics we expect to hit going forward from here, we’re going to be very focused on where this capital goes, into high returns, things that have the best outlook for us like the Eagle Ford.