NuStar Energy LP (NS) 2016 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the NuStar Energy L.P. and NuStar Energy GP Holdings first-quarter 2016 earnings conference call.

(Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Chris Russell, Treasurer and VP of Investor Relations. Sir, you may begin.

Thank you, Eric. 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 would like to remind you that during the course 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 can be found in our earnings press release, with additional reconciliations located on the financials page of the investors sections of our websites. Now, I am going to turn the call over to Brad.

Good morning, and thanks for joining us so early today. I know this is early for some of our West Coast investors and analysts, but we had to move our call up to accommodate GP Holdings' annual meeting a little bit later this morning, so we do appreciate you being here.

This morning, I am happy to report that this quarter, once again, we've exceeded one-to-one distribution coverage. Our strong first quarter 2016 distribution coverage of 1.14 times demonstrates the strength of our diverse asset base, which continues to deliver robust, steady results, even in the midst of a very challenging time in our industry. We are also proud that NuStar's strong, stable business has allowed us to deliver uninterrupted distributions to our unit holders for the 60th consecutive quarter.

As you recall, in January, I mentioned MLP valuations had disconnected from business fundamentals and were simply tracking crude prices. NuStar's strong results, particularly during a quarter in which crude prices hovered around $35, demonstrates the resiliency and strength of our base business, which has performed, and we believe will continue to perform, steadily and well, no matter the price of a barrel of crude oil.

While valuations of some midstream MLPs seem to have decoupled from crude prices to some extent, including NuStar, which has generated a total unit holder return of 81% since our recent low on January 20, we believe that our valuation still does not yet reflect our solid financial results, stable cash flow, and the overall stability and strength of our business.

Our assets are located strategic locations across the country and around the world. We're well balanced between storage and pipelines, and our business operations are insulated from the impact of crude price volatility as all of our crude pipelines are either demand-full pipelines or are supported by minimum volume commitments. Robust utilization and higher renewal rates in the storage segment, as well strong throughput volumes from our refined products pipelines, were the main drivers of our solid first quarter earnings.

Despite the volatility of the commodity and stock markets in the first quarter, we exceeded our earnings guidance expectations and earned $0.57 per limited partner unit, which equates to a 1.14 times distribution coverage. As you can see, we remain on track to cover our distribution once again in 2016, and we believe our strategy and execution will continue to deliver positive and stable results. NuStar is particularly well-positioned to continue to deliver through the market challenges because we have a diversified business, a healthy balance sheet, no debt maturity until 2018, and very manageable capital requirements.

We remain focused on disciplined capital spending. While our 2016 strategic capital spending has been reduced by approximately 50%, to $180 million to $280 million, we're moving forward with our best projects with the highest rates of return. These projects are key to our long-term growth and success and are being financed with excess cash on our balance sheet and borrowings under our $1.5-billion credit facility.

Our 2016 strategic capital spending program includes spending to complete construction on approximately 1 million barrels of storage, which is scheduled to be brought online during the year. These projects comprise about $35 million of our planned strategic capital spend for this year and will benefit both our East Pipeline systems, and our St. James, Louisiana storage facility. In addition, we plan to expand our ammonia pipeline system and a couple of our West Coast terminal facilities.

During last quarter's call, I mentioned we plan to spend at $125 million in 2016 on a project to develop new pipeline infrastructure to transport LPGs and refined products into Northern Mexico. Since January, as has been reported widely in the US press, PEMEX has undergone a large number of changes, including the appointment of a new Director General, Jose Antonio Gonzalez. As we all understand, organizational change, particularly in a company as large and critical to its nation's economy as PEMEX, takes time, and due to that recognition, we now expect we should see this project in service in late 2017.

Across our assets around the world, we are focused on developing smaller to midsize high-return projects that provide synergistic solutions for our customers' logistical needs. As we optimize our asset base to satisfy our customers' needs and meet local market demand, our central focus will continue to be managing our business prudently to ensure consistent and solid distribution coverage.

Before I hand off to Tom, I want to emphasize what should be evident. NuStar's continued strong distribution coverage demonstrates our sound strategic direction and our commitment to fiscal responsibility, and it's clear we are addressing market conditions effectively. We will stay on course, and we remain committed to efficient project execution, operational excellence, and disciplined financial management.

I am encouraged that the market seems to begun de-linking the price of crude from MLP valuations. As we have proven through the volatile market conditions, last year, and particularly this last quarter, our base business performs consistently, even though market turbulence has been at historic proportions. We've delivered strong, predictable earnings and cash flow despite the price of crude. Our valuation should no more move in lockstep with crude prices than should any other commodity, whether it is cotton, copper, or corn.

With that, I'm 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 first-quarter results and 2016 projections.

Thanks, Brad, and good morning, everyone. As Brad said, we had another excellent quarter that reflects the strength and diversity of our stable asset base, especially given the current industry headwinds.

EBITDA from continuing operations was $148 million, while DCF from continuing operations available to limited partners was $1.25 per unit, which covered the distribution to limited partners by 1.14 times. For the first quarter of 2016, we reported that EPU came in at $0.57 per unit, which was above the first-quarter earnings guidance.

Turning to our segment performance, first-quarter 2016 EBITDA in our storage segment was $86 million, $9 million higher than the first quarter of 2015. A combination of increased storage rates, increased throughput and handling fees, and lower operating expenses at several of our terminals more than offset the impact of lower Eagle Ford crude oil throughput volumes at our Corpus Christi North Beach Terminal facility.

First-quarter 2016 EBITDA on our pipeline segment was $86 million, down $3 million from the first quarter of 2015. Throughputs on our refined product pipelines increased 3%, to 521,000 barrels per day, mainly due to increased volumes on several lines that serve our refinery customers in the Central West and Central East regions, as well as higher throughputs on our Burgos-Valley pipeline system and the result of expanding naphtha service for PMI at our Edinburg, Texas terminal.

While Eagle Ford's shale production has continued to fall, the crude oil throughput volumes on the South Texas Crude Oil Pipeline system are insulated by long-term T&D agreements with large, credit-worthy customers that are contractually committed to an aggregate minimum throughput. During the quarter, our total South Texas Crude Oil Pipeline system's physical volumes averaged slightly below contract minimums of 133,500 barrels per day. However, due to the fact that some of our customers shipped above their respective contract minimums, we recorded revenue equivalent to approximately 143,000 barrels per day, down from 190,000 barrels per day a year ago in the first quarter of 2015.

Now, I would like to take a moment to talk about our customers and how we mitigate credit risk. The majority of our pipeline customers and all of our Eagle Ford Pipeline customers are financially sound, investment-grade companies. On the storage side of the business, we have liens on the products that we store for our customers, and we have credit insurance in place for our bunkering and heavy fuels trading operations in our fuels marketing segment. In addition to these various forms of protection, we continue to monitor the financial conditions of our counterparties to further mitigate our credit risks.

Now, I will return to the results of the first quarter. Our fuels marketing segment lost approximately $1 million of EBITDA during the first quarter of 2016, mainly due to buffering margins. Our March 31 debt balance was $3.2 billion, while our debt-to- EBITDA ratio was 4.6 times. On April 26, the NuStar Energy Board of Directors declared a first-quarter distribution of $1.095 per unit, which will be paid on May 13. NuStar GP Holdings' Board also declared a first-quarter distribution of $0.545 per unit, which will be paid on May 17.

Our first-quarter results and our current guidance do not reflect any revenue on our Mont Belvieu propane pipeline. You will recall that we placed our Mont Belvieu pipeline into service in 2015 and that the pipeline experienced a pressure loss last June. We shut down the pipeline, completed repairs and assessments, and the pipeline was again ready for service in December 2015. Despite this, our primary committed shipper has not nominated volumes for shipment and purported to terminate the throughput and deficiency agreement.

We believe their failure to ship is a breach of the throughput and deficiency agreement and related agreements, and we are currently in litigation to collect damages arising out of the breach. Because this matter is an active litigation, we are not able to provide further details regarding the dispute. However, we are talking to several other companies regarding potential shipping opportunities for the pipeline. And once again, our first-quarter results and our current guidance do not reflect any revenues in the Mont Belvieu pipeline.

Now, let me spend a few minutes talking about our projections for the second quarter and full year 2016. Second-quarter 2016 EBITDA results for our storage segment should be lower than the second-quarter 2015 EBITDA results. We are happy to report that we recently signed a one-year 850,000 barrel storage contract at our formerly moth-balled Piney Point, Maryland facility. This should help mitigate the segment's heavy seasonal maintenance in both the second and third quarter, as well as continued impact of lower crude throughputs at our Corpus Christi North Beach facility.

We also expect second-quarter EBITDA results on our pipeline segment to be lower than the second quarter of 2015 due to the decrease in Eagle Ford throughputs on our South Texas Crude Oil Pipeline system, as well as increased spending on heavy seasonal maintenance. As such, we expect second-quarter 2016 EBITDA results for our pipeline segment to be lower than second-quarter 2015 EBITDA results.

Second-quarter 2016 EBITDA results for the fuels marketing segment should be higher than the second quarter of 2015 results due to expected margin improvements across the segment. Based on these projections, second-quarter 2016 earnings per unit should be $0.35 to $0.45 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. Again, these projections are impacted by the expected increase in spending for heavy seasonal maintenance and reliability capital.

Now, turning to the full-year 2016 EBITDA guidance. Even after reducing expected crude oil throughputs on our South Texas Crude Oil Pipeline system to contractual minimums and projecting no volumes on our Mont Belvieu pipeline, lower-than-expected operating expenses in the first quarter allowed our 2016 pipeline segment EBITDA guidance to remain unchanged at $335 million to $355 million. Since we have forecasted T&D minimums for the remainder of 2016 on our South Texas Crude Oil Pipeline system, any barrels in excess of that floor would serve to improve our actual results.

Our 2016 storage segment EBITDA guidance also remains unchanged and it is projected to stay in the range of $310 million to $330 million, as we continue to expect that the benefit from higher renewal rates and increased utilization across the segment should be more than enough to offset lower expected South Texas Crude Oil volumes moving into the Corpus Christi North Beach Terminal. 2016 segment EBITDA guidance for our fuels marketing segment almost also remains unchanged and is expected to remain in the range of $15 million to $35 million.

As Brad said earlier, we continuously evaluate and prioritize our spending, and in the first quarter, we have right sized the 2016 strategic plan spending program and reduced it by about half, to about $180 million to $200 million. Our estimated reliability capital spending guidance remains at $35 million to $45 million. Based on our expectations, we are confident we will cover our distribution this year for the third consecutive year. Now, I will turn it back over to Brad.

Thank you, Tom. NuStar had a great first quarter. We exceeded our own earnings expectations and covered our distribution by 1.14 times which marks our eighth consecutive quarter of covering in excess of 1 times.

To summarize our view on the rest of 2016, Q2 will be weaker than Q1 due to higher expected seasonal maintenance, but we expect to ramp back up through the second half of the year and to cover our distribution for the full year. Our strategy has been successful, and we plan to stay the course. We understand that this environment requires diligent focus and precise execution.

I believe that our dependable business model, diverse asset base, blue-chip customers, proven strategic direction, and fiscal discipline uniquely position NuStar to continue to achieve strong earnings despite the challenging market conditions. I know that I speak for every single one of us here at NuStar when I say that we are all 100% committed to covering our distribution and delivering long-term, stable value for our unit holders.

Tom, I will turn it over to the operator, and we can open up the call for Q&A.

(Operator Instructions)

Our first question comes from the line of Jeremy Tonet from JPMorgan. Your line is open.

Good morning.

Good morning.

I was just wondering, for the O&M coming in a bit lower, I was just wondering if you could talk a little bit more on some of the drivers and how sustainable that can be?

What do you mean by O&M, Jeremy?

I think the operations and maintenance for the different segments came in a little bit lower than expected.

Yes, it did. It was a little bit lower. We tend to have a little bit more seasonal maintenance. Usually, in the first and fourth quarters, we see less maintenance and reliability capital than we do in the second and the third. So that theme will continue on through 2016. As we said in our notes, first quarter was light, and then the second and third quarter should be heavier as far as maintenance goes.

Got you. And then I am wondering, on the CapEx side, if you could flush that out a little bit more as far as what's still in and what was taken out. I think you identified $35 million of terminal spend there. I'm just wondering if there's any other chunky items still in there and what was taken out. And is there any PEMEX spend in there at this point, or is that on hold for right now?

Yes, we could -- primarily, what we have in there is we have the CHS projects we had going on in the Central East. We also have the St. James tanks. You recall, we expanded a couple of tanks and had some tanks in St. James. We still have about approximately $14 million of spend for PEMEX in the 2016 capital budget. There's also various pipeline expansions and also storage expansions also in that $188 million.

And then, as far as what we took out, we took out a lot of the PEMEX capital spend and pushed it out into 2017. It is still there, but it's just been delayed, and it's been pushed out into 2017.

There was some also a few other projects that we had, and we are still evaluating the returns on those. As we said, we went through this whole process of evaluating the capital spend, and we prioritized based on returns and other things like, and so we pushed out some things.

We really haven't, like, stopped anything. Most of it is really -- I would really say it's more of a delay than it is anything else. And we continue to churn those projects. They could come in later in 2017 if the capital markets improve, other things improve, and the returns on these projects improve. So we are still working them.

Great. That makes sense. And then for Piney Point, I was just wondering if you could provide any detail to the size of that, what type of revenue you might be able to see from that facility. And it was a strong 1Q. Are there any thoughts to raising guidance on that, or you want to take a cautious look given some of the headwinds that you outlined there?

Well, we've got -- this is Danny Oliver. We've got our -- we just leased, as they mentioned, 850,000 barrels. That's of about 2.5 million barrels of product storage that's available there. We have that, of course, in the forecast, but we haven't forecasted any other contracts, although we are working several customers for some contango storage in that facility. We'll put them in the forecast as we get those deals done.

Okay, great. That is it for me. Thank you.

And our next question comes from the line of Brian Gamble from Simmons & Company. Your line is now open.

Good morning, guys.

Good morning.

Good morning.

The projects that you pushed out, just wanted to get a sense of how you were evaluating those. You talked about the over rates and talked about just mitigating towards getting a better rate on those as you go forward.

But over the short term were you -- did you set a hurdle rate that you were looking for? Or were you balancing that against your projected cash availability this year to eliminate the need to go to the preferred equity market for any funding for this year? Which one took precedence as you were walking through those plans?

Well, I don't think we had a concrete hurdle rate. We had a range in mind that would work, and a lot of this -- some of these projects were just delayed because of natural causes, we will call it, with negotiating with customers and things like that. So there were several of them that followed just the suit of, well, it takes a while to negotiate these things and we pushed them out.

Other than that, a lot of it was just the capital markets, the fact that capital has been much, much more expensive for us and other MLPs than it has been in the past, so it does your hurdle rate somewhat when you evaluate these projects. So I say it's a combination of just natural delays in the process and also the fact that the capital markets are more expensive.

Does the shifting of the capital forward eliminate any need to go back to the preferred market? You had talked about that at Q4. You had eliminated that from your commentary and the press release this time. Is that truncation of 2016 CapEx? Does that eliminate that need?

It does. If you look at what we have forecasted for the remainder of the year for capital, we don't have any real need to go into the markets right now for equity or for equity-like securities.

So right now, we are in pretty good shape in terms of our financing needs and whatnot. So we think all of our internal capital can be funded just on our bank revolver, and that is how we plan to do it right now.

Great. And then on that Piney Point contract, you mentioned you've got some additional capacity there and that the signing of the current contract was a contango-based deal, just some opportunity sought by a customer, and they are taking advantage of it. So much contango is needed over the course of the year to make that type of contract work?

You're -- of course, it depends on your customer's cost of capital and things like that. But Piney Point is a fairly expensive location to get in and out of, so you are looking at somewhere just south of $1 a barrel of contango. Probably something you need to have to pay all of those and make some money.

That's over -- what time period is that over? Are we talking about six to nine months or just the life of that annual contract? Is that --

Six months to a year.

Okay.

Six months to a year.

Okay. And then you talk about, obviously, their seasonality in the fuels marketing business, and you talked about it being up year over year in Q2. I know that we had expected most of that to be back-half related, but that should roll back to a positive EBITDA level in Q2, and then that trend should continue as we go through the year as far as the current opportunities that you guys are seeing?

Yes, I think so. Like we said, we had some stronger margins this year versus last year in the bunkering area, so we will see how that plays out the rest of the year. We still have a lot of year left, and right now, we're just leaving the guidance where it is, and we are not really raising or lowering expectations for that segment right now.

And then last one for me, back to the contango side of things. How does contango, in general, affect -- or the shifting of the curve as we potentially get some more uplift on the front end of it, any expectations that would flow through the overall storage segment in terms of what other customers might have to do based on changes to that curve?

I know you've taken volumes down, essentially, to minimum levels there, but is there any risk as the curve starts to move around, or are we pretty locked in for the rest of the year?

No, we have -- this includes what we've renewed in the first quarter, but we have about 15% of our storage revenues that are up for renewal throughout 2016 that are in, generally, marine terminals that are affected by the contango market structure. We have other renewals going on in the storage system, but more in column truck rack-type terminals that aren't as affected by the market structure. But you can think of, in terms of this year, about 15% of our storage revenues that will benefit from that market structure will renew, and we have seen those, so far, renew at higher rates and just generally higher utilization of the entire system.

Great. That is great color, and good quarter, guys.

Thank you.

Thank you.

And our next question comes from the line of Selman Akyol from Stifel. Your line is open.

A couple of quick ones just for me. Going back to the storage that's still up for renewal on the truck rack side, can you talk about how the pricing is going for that environment or for those barrels?

Yes, so, unlike the marine terminals where our the market structure generates more interest than prices are affected, most of our truck rack terminals, think of them as commingled storage where you have multiple customers in a facility that have literally maybe days, a few days of storage, not any long-term contango structure. They are just moving barrels from a supply source to a truck rack. So those typically are not affected by market structure either way, good or bad.

Okay. You guys have a [NATM] in place. Have you used it all, or do you anticipate using it all this quarter?

No, we've used hardly any of it really. It's still out there for us, and we don't really plan on using any of it this year, especially where unit prices are and all that. We don't need it. We absolutely -- like I said, we can fund our capital needs using the revolver, so we don't have any immediate plans to go out there and issue any equity.

And then previously, you guys had talked about bringing some cash back onshore. You still looking to do that as well?

Yes, we are. We've already started that process, and you may recall, I said we had probably $[90] million to $100 million worth of cash in overseas entities and that we could repatriate in, and we've already done about $25 million of that, and we'll do the remainder of it before the end of the year.

Great.

As we need the capital, we bring it down.

Got you. All right, that does it for me. Thanks.

And our next question comes from the line of Steve Sherowski from Goldman Sachs. Your line is now open.

Hi, good morning. The first question, were there any costs associated with bringing Piney Point back into service?

There were some, cleaning some tanks, but there were minimal.

Got you. And for the truck rack storage, what type of rate uplift can we expect there? Is this still low-single-digits renewal rate?

Well, on the truck rack side of things, I don't think we're expecting a lot of change in rates. It's more the marine terminals that are affected by the contango market structure, but we have seen anywhere from five and maybe one or two contracts that are double digit.

Got you. Okay. And then on the marine side, has customer interest been changing at all with the flattening of the forward curve?

A little bit. We still have the interest. The conversations are going on, but it's less compelling. The math is a little less compelling than it was before crude started to -- prices in general started to run up.

Got you. And then final question, marketing was a little bit lower on a year-over-year basis, but you maintained full-year guidance. Can you just outline maybe couple of your assumptions behind your full-year outlook?

Well, we obviously think that margins are going to hold pretty steady the rest of the year. And yes, we said it was down $1 million year over year, but that's why we give you guys a range, and we are still in that range.

Is there any way you can relate that to commodity prices, what commodity prices you are baking in to your full-year assumption?

I don't think it's as much to do with the commodity price level as it just is the margins, mostly in the fuel oil and bunkering side of the business. It was pretty competitive in the first quarter, and margins reflected that.

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

Thank you.

And our next question comes from the line of Shneur Gershuni from UBS. Your line is open.

Good morning, guys. Most of my questions have been asked and answered, but I just wanted to come back to a couple of them if you don't mind. Starting with the CapEx, you basically mentioned that PEMEX was taken out, a few other projects, evaluating returns, and so forth, but it sounded like nothing actually changed if I look at it on a two-year basis, that you're just shifting CapEx from this year to next year? Or was there an actual reduction in some of the capital?

Both. As we said, there was a shift in some of these projects. For example, PEMEX. It's still out there. We have shifted most of the cost into 2017 at this point.

And there were some other capital projects that followed that same suit where we are still negotiating or whatnot, and there's reasons for delays and things like that. So some of it has shifted to 2017. There's also some projects that we've just put on hold because of return perspective, and so it's really just a combination of those two things.

In any instances, are you seeing the projected capital spend for any discreet project to be down, just given the fact that sale prices are down, E&Cs are under pressure as well, too? Are you seeing anything happening on that end that would allow returns to go higher as CapEx assumed per project comes down, or is that not the case yet?

Are you talking about savings that you would get from construction companies as we go forward?

Yes, exactly.

We are seeing some savings on steel and some other things like that. Those are being baked in to our returns.

So in other words, in theory, a project you've been talking about, could you technically have a higher return just due to the CapEx savings?

Certainly.

Okay there was a question about your OpEx before, but when I think about your OpEx and your SG&A, not maintenance CapEx, but specifically, the OpEx in SG&A, that's trended a little bit better. Is that a function of some steps that you've taken to try and trim costs out of the business? Is it something that we should see continuing for a few quarters as it cycles through? I was just wondering if you could talk about your cost trends in general?

Well, the SG&A, yes, I think it's a combination of things. One, yes, we are tending better on SG&A than we have in the past. We also had some compensation unit price help there when the stock price drove down a little bit in the first quarter, so that helped us out a little bit on our unit compensation expense as well. So that and trending has helped us out.

Okay. Cool. In terms of the effectively flat guidance, you added Piney Point with the contract that's been added to it. Is there a sense of the EBITDA that that contract is worth for this year? And what would have been the offset to basically maintain flat guidance, assuming that would have been incremental from a revenue and EBITDA perspective?

For the time being -- right now, it's one customer so we can't get very specific about EBITDA there. So as we get more in, maybe we can split that out and talk about it more specifically, but the way I think about it is that was a good positive, and the downside on the storage segment was just some lower volumes from our Eagle Ford system that some of that runs through our storage segment as well.

Okay. So, basically, we got [several more to offset] there. Speaking of which, with your Eagle Ford system, are volumes running below the [MVCs] and you're receiving deficiency payments, or are they running at your MVCs?

It's right on the line right now. We have some customers above and some just slightly below. Net-net, we have been billing, as Tom mentioned, higher than our actual volume shift because that reason.

Okay. And so from an accounting perspective, you would just continue to flow that as EBITDA through. It's not something that you would show separately, right?

Yes, it's EBITDA.

Okay. And they can't make up those volumes later on. If they miss a volume commitment, they can't then come back to you later in the year and say -- and deliver -- we missed you by 20,000, add 20,000, and I'll pay for that, correct?

That's correct.

Okay, perfect. Thank you very much, guys. Appreciating the clarification.

Our next question comes from the line of Gabe Moreen from Bank of America. Your line is now open.

Good morning, all. Just a question from the propane line, if you can answer it. Do you just talk about what you had expected that contract to contribute from an EBITDA bottom-line standpoint?

And then also, in terms of trying to replace that with other shippers while you are in this dispute, is that something where you can sign a long-term contract, or you'd be looking more at spot shipments?

Both. We are working on some long-term contracts right now. It's part of our PEMEX deal and several other customers that we are talking to over there. I wouldn't speak specifically about EBITDA, but the volume commitment on that line initially was 55,000 barrels a day, and that is roughly the volumes that we are having conversations with customers about right now.

Got it. Thank you. And then, can you remind us in terms of when the first commercial MVCs come up for renegotiation on the Eagle Ford assets?

In April of 2018.

April of 2018. Perfect. Thanks.

Thank you.

Our next question comes from the line of John Edwards from Credit Suisse. Your line is now open.

Yes, thanks, good morning, everybody. Just to come back on the CapEx spend, I think you indicated you are deferring some, some projects are on hold. Just any way just to give us an idea, splitting that out, and then are there actually any cancellations?

You want some details on what stayed in on the $188 million?

Yes. Out of the $188 million you are taking out, approximately, is it 50-50 between project deferrals and/or projects on hold?

It's just been pushed out.

Yes, most of (multiple speakers)

It's just been pushed out into 2017.

That's right. Most of it is deferrals and not -- yes, absolutely.

So you don't really have any cancellations?

No.

Okay. Okay and then just -- maybe you said this and I missed it. Can you remind us where you are on liquidity?

Liquidity, we are at about $550 million available on our revolver right now.

Okay. And then just coming back to volumes, you say you're skating right around MVCs at the moment. Are you seeing those -- do you think those volumes are going to hang in there right about what you are seeing, or do you think they'll grind a little bit lower? What are you seeing there?

That's the big question, but it appears to have bottomed out just in the last month or so. I don't know what that will continue, but we've actually -- in the last two or three weeks, we've seen volumes actually rebound and start to move up a little bit, which is the first time we have seen that in six months or more.

But the important thing is we have MVCs, and we have MVCs with credit-worthy customers, and that's why we have them.

Okay. And I think you addressed this, but you're really not seeing any counter-party risk or anything here?

No.

Okay. All right, that is it for me. Thank you.

Thank you.

Our next question comes from the line of Ryan Levine from Citigroup. Your line is now open.

Most of my questions have been asked and answered. Two quick follow-up. Regarding the PMI contracts, what is the cause of the delay? Is it mostly different people at PEMEX, that you are restarting the process? Or is there another dynamic?

I wouldn't say we are restarting the process, but there has been a change in management at PEMEX. Last January, I'd mentioned that I'd traveled to Mexico City. Danny and I went down there and met with the director general and shook hands.

And we are working, and we are very close to finalizing the deal. And about a week before we were due to sign, he ended up resigning from that position and a new director general has been appointed. And so we are now working with the new director general and his team to finalize the deal.

Okay. Okay. So how far into that process have you been? Has been just a few months and it could be a year-long-plus process to go through all of those details?

I don't expected to be a year-long process. Any time there's change in an organization as big as PEMEX and one that is as structurally important to the economy of Mexico as that, things are going to move slowly at the beginning, and so we wanted to be respectful of the change and give them time to settle in their new positions.

Although, we did meet with them last week. We had a very positive meeting. And so I don't think it will take a year to finalize this.

Okay. And then a follow-up. In terms of scope of the PEMEX opportunity, given the need for product and propane and LPG into Mexico, are there material expansion opportunities to what was originally slated?

Yes. That whole system had upside on both the Texas side as well as the Mexican side.

Okay. And then related to Piney Point, is that primarily fuel oil storage, or are there other components to the need for the 150,000?

It's about -- when I referred to 2.5 million barrels of storage available, that's on the product side so we can bring gasoline or distillate in there. The other half is fuel oil. But that was a part of the facility that was utilized when a neighboring power plant was utilizing fuel oil as a source of supply. They've switched to gas since then, so we're really focusing on the clean products, diesel -- mostly diesel but some possibly gasoline into that facility.

Okay. So just shy of the dollar contango average monthly for year that's referred to from a diesel standpoint?

Right.

Okay, great. Thank you.

Thank you. Our next question comes from the line of Lin Shen from HITE. Your line is now open.

Good morning. Thanks for taking my question. A couple of days ago, Bayou Bridge announced starting to operate from Nederland to Lake Charles. And also, in the press release, they said that when they connect with St. James, they will connect with your terminal there.

Just wondering, do you see more upside for your St. James terminal after Bayou will start next year? Or is already your (inaudible) pretty much just your existing storage?

Right now, we are just talking to them about existing storage. But we began talking to them when the Bayou Bridge project was in early stages of development because of our facility is so well connected to all of the local refiners in the area. So we have a connection agreement with them, and they'll bring product in. Right now, we are just talking about utilizing existing storage, but that's always an opportunity for a new build.

Your facility there, do you have room to expand, or --?

Yes. We have a lot of room to expand. And we just built about 750,000 barrels of storage that's going into service here in just a couple of months.

Okay, great. Thank you.

I am showing no further questions at this time. I would like to turn the call back over to Chris Russell for any closing remarks.

Okay. Thank you very much, Eric. We appreciate everybody for joining us on the call today. If anybody has any additional questions, please feel free to call NuStar's Investors Relations Group. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. That is conclude the program. You may all disconnect. Everyone, have a great day.