NuStar Energy LP (NS) 2015 Q4 法說會逐字稿

Good morning. Thank you for standing by, and welcome to the NuStar Energy L.P. and NuStar GP Holdings, LLC, fourth-quarter 2015 conference call. (Operator Instructions)

Chris Russell, Treasurer and VP of Investor Relations, you may begin your conference.

Thank you, Toni. Good morning, everyone, and welcome to today's call. On the call today are Brad Barron, NuStar Energy L.P. and NuStar GP Holdings, LLC's President and CEO, and Tom Shoaf, Executive Vice President and CFO, along with other members of our management team.

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

During the course of this call, we will also make reference to certain non-GAAP financial measures. These non-GAAP financial measures should not be considered as alternatives to GAAP measures. Reconciliations of certain of these non-GAAP financial measures to US GAAP may be found in our earnings press release, with additional reconciliations located on the Financials page of the Investors sections of our websites.

Now I'm going to turn the call over to Brad.

Good morning and thanks for joining us today. This morning, I'm happy to report that we've had a great quarter, and we exceeded a 1-to-1 distribution coverage ratio for the second year in a row. Our 2015 coverage ratio of 1.11 times is our highest annual distribution coverage since 2009.

For a second consecutive year, we also generated our highest annual EBITDA and DCF in the Partnership's history. This was in the midst of a very challenging time in our industry, which I'll touch on later in the call. But first, let me recap a few highlights from 2015.

If you recall, 2015 got off to a great start when we purchased the remaining 50% interest in our Linden terminal joint venture. Owning this terminal outright has provided synergies with our adjacent terminal, and we are evaluating a potential storage expansion at the facility.

In late February, we completed an expansion of our South Texas Crude system that increased the throughput capacity of the system and contributed to the record throughput volumes we experienced in the first half of the year.

In August, we completed construction of an additional 400,000 barrels of storage at our Corpus Christi North Beach terminal that supports our South Texas system and provides our customers with the flexibility to segregate and deliver crude oil and processed condensate.

In October, we completed projects that connected our Oakville-to-Corpus-Christi 16-inch crude oil pipeline to the major refineries in the Corpus Christi area, which has provided our customers additional options for marketing their crude.

In the last half of 2015, we also completed four pipeline projects targeted at increasing distillate and propane supply throughout the upper Midwest. These projects included an 8-mile, 8-inch pipeline at our Conway, Kansas, facility and an expansion of our Rock Rapids terminal for additional propane supply to CHS, one of our largest Central East region customers. Two more projects are scheduled to be completed in the upper Midwest later this year.

During 2015, we also started construction of two 360,000-barrel storage tanks at our St. James, Louisiana, terminal. These tanks are scheduled to be in service by mid-2016.

To wrap up the year, on December 31, shortly after the export ban was lifted, we loaded the first US cargo -- first US export cargo -- for ConocoPhillips. This was the first US crude oil to be exported to a country other than Canada in more than 40 years.

Before I turn the call over to Tom, let me spend a few minutes discussing the current industry environment, as well as our outlook and growth plans for 2016.

Since the third-quarter 2015 earnings call, market fundamentals have continued to falter. Crude has continued its historic decline and has dipped to lows not seen in 13 years, and currently it's off about 75% from its recent high. At the same time, MLP valuations have disconnected from business fundamentals and appear instead to be tracking crude prices. As such, we do not believe NuStar's unit price reflects the solid financial results and the stability and diversity of NuStar's business.

Lost in all the hoopla over falling crude prices is any consideration of either NuStar's strong financial performance or any semblance of a rational assessment of NuStar's solid, balanced asset portfolio.

Almost half of our EBITDA comes from our storage segment, which had a record year in 2015 and is expected to have another good performance in 2016. Our storage assets are primarily in crude and refined products facilities, and they are effectively full. We expect our storage assets to continue to perform well this year, in 2017, and beyond.

On the pipeline side, NuStar has a strong demand pull asset base, which performs well regardless of crude prices. Many of our lines are the primary source of crude supply and refined product offtake for our refinery customers. So if the refinery runs, and we think they will in this crude price environment, they will continue to use our pipes.

Only a relatively narrow proportion of our pipeline and storage operations that are devoted to the Eagle Ford shale volumes are exposed to any significant impact from current commodity prices and market volatility. That exposure is mitigated substantially through our long-term contracts and minimum volume commitments with creditworthy customers. NuStar's Eagle Ford shippers are solid household names, not small producers with strained balance sheets.

I want to emphasize: The Eagle Ford portion of our business is a narrow slice of our operation and comprises less than 20% of our total 2015 segment EBITDA. Throughputs in these Eagle Ford pipeline and storage assets were down only 18% in the fourth quarter of 2015 compared to the record throughput levels we reached the first quarter of the year.

So to put that in perspective, we are talking about an 18% reduction from an all-time high on less than 20% of our business. That's 3% of our segment EBITDA. Given the T&D floor on our Eagle Ford pipelines and the strength of the other 80% of our business, you can easily see why I believe our current unit price does not reflect NuStar's performance or outlook.

Turning back to our thoughts on 2016, our other pipeline assets should continue to perform well this year. In fact, our pipeline segment should benefit from the upper Midwest pipeline projects I mentioned earlier, as well as a project to increase the capacity and flexibility of our ammonia pipeline system.

We are forecasting Eagle Ford throughputs slightly above our minimum volume commitments for all of 2016, which is consistent with the volumes we've seen so far in January. The impact of this change will be included in the 2016 segment guidance that Tom will give you in a few minutes.

Obviously, if throughputs were to increase during the year, we could see upside in these projections.

We also expect our storage segment to perform well in 2016. 2015 was an extraordinary year for our storage segment, distinguished by record Eagle Ford throughputs at our Corpus Christi North Beach terminal, higher-than-projected throughput activity and renewal rates at several of our terminals, along with higher-than-expected throughput revenue at some of our foreign terminals.

In 2016, as the segment returns to a more normalized run rate, we expect the storage segment to be slightly lower than 2015's banner results, but still to remain strong.

Now let me spend a few minutes talking about our strategic capital spending and financing plans for 2016. We have budgeted $360 million to $380 million this year. This is down significantly from the $471 million we spent on internal growth and acquisitions in 2015. The decrease is not from a lack of good projects. Rather, it reflects our resolve to prioritize and modify or defer our capital projects in order to meaningfully reduce spending in order to avoid having to access the capital markets.

As you are well aware, MLP yields and credit spreads, including NuStar's, are currently at very high levels, which makes the equity capital markets a very expensive financing alternative. As a result, we are exploring all options to avoid the need to access the equity capital markets in 2016, and we have no plans to cut our distribution now or in the foreseeable future.

Our list of capital projects for 2016 are projects to complete construction -- on our list of 2016 is to complete construction on 1.2 million barrels of storage scheduled to be brought online during the year. These projects will benefit both our pipeline and storage segments and are associated with our upper Midwest pipeline project and our St. James storage expansion. Together with our planned ammonia expansion, these projects will comprise $75 million of our planned strategic capital spend for the year.

We have planned to spend around $125 million on our project to develop new pipeline infrastructure to transport LPG and refined products into northern Mexico. As you know, we had been working with PMI on a joint venture to do this. But in late 2015, we agreed with PMI and Pemex that the project would be better for all three companies if we structured it as a straightforward T&D contract directly with Pemex.

Last week, I traveled to Mexico to meet with the Director General of Pemex, Emilio Lozoya, and at that meeting we agreed on all major terms of the transaction. We expect to execute the final agreement in February, and we expect to spend much of the capital for this project in 2016.

So the storage projects, along with our Pemex project, total about $200 million. Our slate of other potential projects includes discretionary spending on various storage projects that we would like to do if the projects have adequate returns. These are projects that we have the option to defer if we believe that our access to capital markets is restricted.

The projects we select in 2016 will be financed in part with approximately $100 million of excess cash on our balance sheet. Last year, we worked to lower our repatriation costs significantly so that we can repatriate cash from some of our foreign entities later this year. You can think of this as a cheap equity alternative.

We also have room under our $1.5 billion credit facility to help fund these projects. And, although less likely, we can access the convertible preferred market if needed.

So you can see we have good projects in our capital budget, but we also have flexibility in the projects we choose to do and the way we will finance them.

With that, I am going to turn the call over to Tom Shoaf, NuStar's Executive Vice President and CFO, to provide you with some additional detail on our fourth-quarter results and 2016 projections. Tom?

Thanks, Brad, and good morning, everyone. For the fourth quarter of 2015, we reported the DCF from continuing operations available to limited partners was $1.15 per unit, which covered the distribution to the limited partners by 1.05 times. EBITDA from continuing operations was $151 million compared to $136 million for the same period last year, while EPU for the fourth quarter of 2015 came in at $0.61 per unit, which was above the fourth-quarter guidance.

Turning to our segment performance, fourth-quarter 2015 EBITDA in our storage segment increased 24% to $85 million, $17 million higher than the fourth quarter of 2014. Storage lease revenues increased 11%, due mainly to the benefit of us now owning 100% of the Linden terminal, as well as higher overall system utilization and higher renewal rates at some of our terminals.

EBITDA in our pipeline segment increased to $90 million, which is $4 million higher than the fourth quarter of 2014. Although throughput revenues were mostly flat compared to the fourth quarter of 2014, the segment experienced a 10% decrease in operating expenses, due mainly to rent and power cost savings on our South Texas Crude Oil Pipeline system.

Throughputs on our refined product pipelines increased 3% to 551,000 barrels per day. Higher volumes on the Central East system in the fourth quarter were due large part to higher refining maintenance last year and our Mid-Continent propane expansion for CHS. These increases were mostly offset by maintenance and operational issues at Texas refineries that we serve.

Throughputs on our crude oil pipeline system decreased 11% to 435,000 barrels per day as the segment experienced a decrease in volumes, mostly as a result of decreased production coming out of the Eagle Ford. During the quarter, total Eagle Ford volumes averaged about 238,000 barrels per day, while South Texas volumes strictly into the Corpus Christi North Beach terminal averaged about 161,000 barrels per day.

Our fuels marketing segment earned $3 million of EBITDA during the quarter, comparable to the fourth quarter of 2014. For fourth quarter of 2015, our G&A expenses were $27 million, also comparable to the fourth quarter of 2014.

Interest expense, net of interest income, for the fourth quarter of 2015 was $34 million, up $2 million from last year's fourth quarter. Fourth-quarter 2015 income tax expenses of $5 million were higher, mainly to deferred taxes on our planned repatriation of foreign cash in 2016.

Our December 31 debt balance was $3.2 billion, while our debt-to-EBITDA ratio was 4.5 times.

On January 28, NuStar Energy Board of Directors declared a fourth-quarter distribution of $1.095 per unit, which will be paid on February 12. NuStar GP Holdings's Board also declared a fourth-quarter distribution of $0.545 per unit, which will be paid on February 16.

Now let me spend a few minutes talking about our projections for the first quarter and full year 2016. First-quarter 2016 EBITDA results for our storage segment should be slightly higher than the first quarter of 2015 EBITDA results, while first-quarter results in our pipeline segment should be slightly lower than the first quarter of 2015.

First-quarter 2016 EBITDA results for the fuels marketing segment should be lower than the first quarter of 2015. During the first quarter of 2016, we expect G&A expenses to be in the range of $26 million to $28 million, depreciation and amortization to be $54 million, income taxes to be around $4 million, and interest expense to be $36 million.

Based on these projections, first-quarter 2016 earnings per unit should be $0.40 to $0.50 per unit, while distributable cash flow from continuing operations per limited partner unit should be in the range of $1 to $1.10 per unit.

With regard to segment EBITDA guidance for the full year 2016, our overall expectations are essentially unchanged from what we previously provided. However, we have adjusted our EBITDA for the storage and pipeline segments. We now expect our storage 2016 EBITDA to be $310 million to $330 million, up approximately $15 million from our previous guidance. We now expect an increase in storage rates and throughput activity at several of our terminals compared to our initial guidance. However, we expect these increases to be countered by lower expected South Texas crude throughput volumes moving into our Corpus Christi North Beach terminal and lower expected revenue from our foreign terminals.

Pipeline segment 2016 EBITDA is now expected to be in the range of $335 million to $355 million, lower than previous guidance, due to the reduced Eagle Ford throughput projections for 2016. We still expect 2016 EBITDA results in our fuels marketing segment to be in the range of $15 million to $35 million.

Our 2016 strategic capital spending currently remains unchanged for now at $360 million to $380 million for strategic capital and approximately $35 million to $45 million for reliability capital. However, as Brad mentioned earlier, we are still in the process of reviewing our capital projects to ensure the project have adequate returns before we make the final decision to move forward, because we want to avoid accessing the public debt and equity markets.

Based on these 2016 projections, we expect to once again cover our current distribution for this year.

And now let me turn it back over to Brad for any final remarks.

Thanks, Tom. 2015 was another excellent year for NuStar. During the year, we increased our profitability, acquired and constructed some outstanding assets, and achieved a coverage ratio in excess of 1 times for the second year in a row.

I'm particularly proud that NuStar finished the year with a 1.11 times coverage ratio while at the same time earning the highest EBITDA and DCF in the Company's history. And while we expect oil markets to remain volatile for the foreseeable future, NuStar is particularly well positioned to weather the storm due to the strength of our diversified asset base.

While much of our growth in recent years has centered around our assets in the Eagle Ford, I want to remind you again that these pipeline and storage assets comprise less than 20% of our total 2015 segment EBITDA. And of that 20%, approximately 73% of our Eagle Ford revenues are committed under long-term take-or-pay contracts with strong, creditworthy customers.

A significant proportion of our other pipeline throughput volumes are demand pull pipelines that support robust refining operations. And, of course, we benefit from our stable fee-based storage operations, which are at a 99% utilization rate when you factor out our mothballed Piney Point facility.

So as we go through 2016, we will continue to focus on growing our core fee-based storage and pipeline operations, as well as our distributable cash flow, through organic internal growth projects and synergistic acquisitions.

So at this time, I will turn it back over to Chris or the operator.

Yes, we are going to go back to Q&A with you, Toni. Toni, you out there? Hello?

(Operator Instructions) Gabe Moreen.

Thank you for the update. Appreciate it. Couple of quick questions -- I guess a several-part question for Tom just on the 4.5 times leverage. Can you just talk about how high you'd feel comfortable taking that up relative to where your current, I guess, limits are on those metrics?

And then also, a second part to that: In terms of preferred sort of being a last option, is that a market you've actually actively been exploring thus far? Or is that something you have yet to sort of dip your toe in to see where pricing might be?

That's a good question. So in terms of where I am comfortable, you know, we have always been saying in the past that my comfort range was more in the 4 to 4.5 range, and that's kind of where we had been operating before. And as I mentioned on the call, we went up to about 4.5 times at the end of the fourth quarter.

Comfortable? I'm comfortable at 4.5, but I think given the current equity markets and where things are, I think we have to get a little bit less comfortable with those type of ratios. And if need be, I could see that running up, maybe, a couple of bps -- you know, maybe to the 4.7 mark. But I don't really feel comfortable taking it up too much further than that.

And so with that, about the preferred market, no, we are not actively seeking a preferred issuance right now at all. I think that's just something we deem that's in our toolbox if we needed it. We are obviously trying to avoid any entrance into any equity markets whatsoever, whether it's the preferred market or the common market. So we just want to reiterate that that's something in our toolbox. We have several things we can use to avoid the equity markets, and that's one of them; but it is a last-resort type item is kind of how we view it.

Understood. Thanks, Tom. And then kind of as a follow-up, I don't know if you covered this on the call, but the opening remarks about a potential expansion at Linden, just to be clear, that's not in the 2016 budget? And can you talk just bigger picture what that expansion would entail and then timing on that?

Yes, I think it is in the 2016 budget. Do you want to talk a little bit, Danny, about that expansion?

Yes. We do have some money in there for the 2016 budget. We have a lot of interest in it. That's one of those discretionary projects that Brad mentioned that we are evaluating the returns on that project, given our current cost of capital. And we have yet to make a decision if that's something we will move on this year or defer.

Yes, it's really important, because some of these projects like that, you know, we obviously are in the process of reviewing our capital program, and we have to decide what's in and what's out. And that's going to be an ongoing process for us.

Understood. Thanks, guys.

Steve Sherowski.

I believe on your opening comments, you said that your forecast for the pipeline segment for 2016 is just slightly above your NVCs. Is there any way you could quantify if throughputs fell to NVCs, what the financial impact would be on EBITDA?

Yes, Steve. This is Danny Oliver. If we took them all the way down to minimums for the entire year, you're looking at about $6 million of revenue. $6 million.

Again, you said pipeline volumes, but that is only Eagle Ford.

No, that's Eagle Ford, yes.

Eagle Ford is slightly above minimums. If it were to drop down to minimums, it's like Danny just mentioned.

Okay. That's helpful. Thanks. And then how much revolver capacity do you have now? I think you had, like, $560 million as of last quarter.

About $580 million.

$580 million? Okay. Great. That's it for me. Thank you.

Brian Zarahn.

I know it seems pretty obvious now, but I just wanted to commend Brad and Tom for being conservative and building coverage over the years and resisting calls previously to raise the distributions. It gives you a lot more flexibility in this environment.

Thank you.

Appreciate the color on the CapEx. And everyone's looking at ways to reduce CapEx. If you do decide just to move forward on the $200 million of committed projects and defer the remaining roughly $170 million until next year, does that change your financing options?

Well, certainly it does, right? Well, I mean, it helps you, because you are not spending the money. And so we're really focused, again, on staying out of the equity markets in 2016. And that's one of our primary objectives. So, obviously, if we were to cut capital and not do all the projects, then that would impact our financing plans in that we would have less need for equity or any other type of financing in 2016.

And then on the topic of delevering, is there a role for potential noncore asset sales?

Well, you know, we are always looking at noncore assets. I mean, we've sold some smaller, noncore pipelines and terminals and all in the past. We've had those -- we have told you guys about those. And it's something we look at from time to time. But we don't have any specific plans right now to divest any assets.

And then turning to guidance on the pipeline segment, on your Eagle Ford contracts you do have good counterparties. Any on the margin -- any producer counterparty risk there, have any concern? Or how do you view counterparty risk in general on your contracts in the Eagle Ford?

Brian, this is Chris Russell. Of our 10 major -- of our 10 largest shippers in the pipeline segment, eight of those companies are investment-grade companies. And the other two are very strong. One company is one notch below investment grade, and the third is a small, private company that doesn't have a rating. So the short answer is we've got very, very solid customers.

Absolutely, yes. These guys are all -- these are household names that ship on our Eagle Ford line. So we do not, as a company, deem any -- very much risk at all in counterparty risk in terms of the Eagle Ford. It's a pretty solid group, and we are probably less worried about that than other things, quite frankly.

Okay. I appreciate that. Shifting to storage guidance, any particular markets worth noting on higher rates and volumes for this year?

You know, with contango back in the market, it's been just pretty solid across the board. I wouldn't single out any particular market. But as contracts come up for renewal, we've been able to get some slight increases in on rates and expect that to continue throughout 2016.

And the last one from me: Any further insurance proceeds expected in 2016? Or is the fourth quarter of 2015 the last --?

I think we are done with that.

Yes. We received everything already. So I don't expect any further insurance proceeds.

Thank you.

Selman Akyol.

Just a couple quick questions for me. In terms of your CapEx budget, and I guess on the $170 million that you could look at as sort of discretionary, is it all just subject to financing and where you see things? Or is there any uncertainty on your customers' part that would lead to a project being built or not built?

There's not any uncertainty under customers or anything. It's strictly -- we have good projects. We've got good projects with good returns, which makes up the $470 million. Actually, that actually includes some reliability as well. But anyway, they are good customers. Everything is fine. It's just -- you know, this is just a matter of really just trying to monitor our financing needs and make sure we don't overspend and that we can stay out of the equity markets as long as possible.

I got you. And then in terms of the $100 million in terms of repatriation, would you expect to bring all that back this year?

Yes. We expect to bring all of it back. Correct.

I got you. And then in your opening comments, you also made some commentary around lower revenues on foreign terminals. Can you provide any more guidance or any more specificity around that?

Specifically we were kind of referring to kind of a one-time event in some of our -- one of our foreign terminals in particular, where we had a customer essentially buy out early of a position. And we were able to re-lease those at the same time, so in effect kind of doubled up on the revenue on that terminal. That won't be repeatable in 2016.

All right. That does it for me. Thank you so much.

Shneur Gershuni.

A lot of my questions have been asked and answered, but maybe a couple of quick follow-ups. I was wondering if you can walk me through the CapEx decisions for a little bit here. First, how much true flexibility do you have?

And then secondly, when you think about your return hurdles on a go-forward basis, have you upped them for the current environment that we are in? Or does the fact that you don't plan to access the equity market mean you are not reflecting the current cost of equity when you decide to proceed with a project?

Yes, we have a lot of flexibility in the CapEx numbers that we gave you. I mean, to put it in perspective, technically only about $100 million or so of the CapEx that we gave you is actually committed, something that we're kind of locked into and have to do. Obviously, that number doesn't include the PMI project. As we said on the call, we are in the process of getting that signed up. We definitely want to do PMI, but we don't consider that committed right now. So that kind of gives you that perspective.

Also, you know, we still want to pursue high-return projects regardless of what the cost of capital is at the current moment. But we will still pursue high-return projects. That's why they're still on the list.

And so these would still be considered high return and an economic value add, even if you had to access the equity markets?

That's right. If we do any projects right now, they have to exceed our current cost of capital if we do them. So everything we have under consideration, if we were to go forward with it, would have an adequate return to it.

Okay. And then secondly, I was wondering if we can talk about contract lengths. You know, you are talking about storage projects and so forth. I'm kind of wondering what your minimum contract length is that you're targeting. And the basis for my question is some of your peers had good projects for a couple of years -- three years, four years, five years. And you were able to return the cost of the spend on the project. But as the contracts expired, suddenly there's no business there and so forth.

Given the current environment, are you trying to go for longer tenures than you typically would have? And is there some thought as to -- or some number that we should be thinking about as what you would be targeting?

Generally, when we sign a storage contract as part of some sort of expansion project, we will have usually something like five to seven years in the term because it's the initial contract supporting the expansion. And then from there, we kind of have a mixed bag. Some of them have multiyear renewals. Some of them go to year-by-year evergreen. But what we're not seeing is any kind of exit from any of our terminals where we are not able to re-lease those at some term.

To be honest with you, in the contango market, as prices are improving, we tend to like the shorter terms a little bit better than the longers, so you can react to the current market.

So you are not using the contango to try and say, hey, I will give you a deal, but we're going to take the term out quite a bit longer?

Well, we are using the contango in the market to improve prices. That doesn't always mean we are getting a longer term. Sometimes it does, but last time we experienced a long period of contango, we really looked forward to renewing contracts, not locking up long terms.

Okay. And then two small final questions. G&A was flat with fourth quarter. Any chance for this to go down a little bit more as the year unfolds?

And then secondly, have there been any discussions at the Board level about combining the two entities?

Well, as far as G&A goes, we've been in the process for a couple years now of lowering our G&A, and, quite frankly, all of our operating costs. We constantly look around the system and look for ways to improve and to improve efficiencies and whatnot.

So I wouldn't say there's a huge, significant opportunity to cut G&A. There might be some out there, but certainly our focus is way more on the revenue side and improving revenues than cutting costs. So that's just kind of where we are at with that.

In terms of combining the two entities of NS and NSH, it's something we look at periodically. We look at it all the time. We measure it; we evaluate it. But we currently don't have any plans to do that.

Okay. Perfect. Thank you very much, guys.

Justin Jenkins.

Appreciate all the color this morning. Just a couple bigger-picture ones for me, I guess. So the Eagle Ford guidance -- is there a price assumption involved in the forecast that you can share? Does that assume strip prices hold? Or anything more you can provide there?

We have assumed the current environment, basically, for the entire year.

Perfect. Appreciate that. And then, I guess, given your guys' view into US and somewhat worldwide storage markets, what's your take on where things shake out from an inventory perspective in the US in the coming months? Clearly lots of concern there, so I guess I'm just curious on your macro take for that view.

I think from a macro standpoint, we expect to see inventories remain high, at least through 2016. Was that your question?

Just more on how it's seemingly shaking out over the next few months. There's lots of concern about hitting tank tops, and given your guys' storage position, just curious on your view into some of those concerns.

Well, that's certainly the current trend. All the momentum is there, and we are setting records every week on crude oil inventories in the US and starting to see the same thing come around on the product side.

Right.

That kind of momentum just seems like it would create more contango in the market and more storage opportunities for us.

Yes, we fully expect to keep our storage full.

Perfect. Appreciate the color, guys. Thanks.

Steven Schweitzer.

Thank you for all the transparency that you have provided on this call. My question surrounds your availability under your credit facility. You mentioned that -- it looks to me, if I take the midpoint of your guidance expectations for 2016, that you will be negative free cash flow to the tune of maybe $150 million, back of the envelope. I'm just wondering, how much revolver availability would you like to maintain as a minimum to have availability or dry powder for future acquisitions? And then if you could maybe tie that into the 2018 bond maturity that you have and just timetable for addressing that maturity?

Okay. Well, addressing the liquidity under the revolver, we think we have plenty of liquidity under the revolver. As I mentioned before, we have over $500 million of -- $580 million, I think, is what Chris said earlier -- of availability under the revolver. And if we need more, we've got an accordion feature in our revolver that we could use to upsize that. We don't think we need it.

In terms of comfort level, you know, we are obviously not going to take that thing to its limit. If we start ramping up, we may exercise the accordion. But we haven't started talking about that. We don't have any plans to do that right now. You know, $300 million of cushion is probably about as much as -- as low as I'd want to go on the revolver. So, yes, that's kind of where we stand on that.

And the size of the accordion --?

What was the second part of your question?

Yes, just if you'd give me the size of the accordion and maybe just give us your thoughts on timetable for addressing the 2018 bond maturity that you have in (multiple speakers) years?

Okay. Well, the accordion is $250 million. So we could ramp it up $250 million. And in terms of the 2018 bonds, I think we are pretty fortunate that we don't have any maturities coming up until then. That's a couple of years off. And right now, we think -- you know, we have hedged those interest rates on the treasury side. So we don't see any problem refinancing those a couple years from now. It's pretty far out.

And that would likely be in the high-yield market, would you think? Or how do you -- what's the most likely venue?

Yes, more or less. We are kind of in a mezzanine section as far as where they price us. We're not really investment grade; we're not really high yield. We are somewhere in the middle.

Right. Okay, great. Thanks so much.

(Operator Instructions) Jeremy Tonet.

Thanks for the color this morning. Just want to follow up a little bit on refined product volumes. And there's been some good results there, and was just wondering if you could expand on what you see going forward there, if you expect that to continue, or you see any changes in that?

We've seen some expansions on a couple of the refineries that serve our refined product systems. So we expect to continue to benefit from that in 2016. Otherwise, crack spreads in the refining industry are strong; refineries are all running well. We don't have a particularly high turnaround, any high turnaround activity in the year -- some, but not a high year. So we expect more of the same good news out of the refined products portion of our system.

Great. That's it for me. Thank you.

(Operator Instructions) Brian Gamble.

Quick one on the storage front. Bumping guidance up a little bit. You talk about both rate increases, throughput increases as being beneficial from the last time you chatted. Are you including future rate increases in that guidance bump? Or are those rate increases that you have already received, and theoretically, future bumps could be a benefit to that number as we walk through 2016?

It's rate increases we've already received, and the volumes -- some excess throughputs that we saw throughout the year in 2015 that are becoming more reliable in the current environment.

I think it's more about volume and already-committed price increases.

Future renewals are held flat right now. Isn't that right?

Yes, yes, yes.

Did you catch that, Brian?

Yes. No assumption of any rate increases that are upcoming. You are assuming flat rates for the renewals for this year?

Correct. But we tend to see some improvements as we go along. So we view that as some upside potential.

And then on the CapEx, we've got, let me say, a couple different buckets and project economics that you guys have walked through in detail that you are still working on. If you -- I guess just from a timing standpoint of completion of the projects, we call the discretionary number kind of that $160 million to $180 million. If you did put those off, when would that start to I guess necessitate you to find additional EBITDA through other means later on vis-a-vis -- you know, when were those projects slated to come on, and what sort of EBITDA impact could they have when they were completed?

Well, if you don't do projects, obviously it could impact you in the future. But let me say this: None of the projects that we currently have slated, whether we do them or not, doesn't impact our ability to pay our distribution. I mean, we are fine. We don't need those projects to sustain where we are at and to be able to cover and pay our distribution. That's really more about future growth in future years.

That's perfect. I appreciate it, guys.

And there are no further questions.

Okay. Thank you, Toni. We appreciate everybody calling in to the call today. If you have any questions, please don't hesitate to call NuStar's Investor Relations group. Thank you.

This concludes today's conference call. You may now disconnect your lines. Presenters, please stay on the line.