NuStar GP Holdings, LLC (NSH)

Q4 2012 Earnings Call

February 1, 2013 3:00 pm ET

Executives

Curt Anastasio – President and Chief Executive Officer

Steve Blank – Executive Vice President, Chief Financial Officer and Treasurer

Danny Oliver – Senior Vice President - Marketing and Business Development

Analysts

Brian Zarahn – Barclays Capital

Mark L. Reichman – Simmons & Company

Cory Garcia – Raymond James & Associates

James Jampel – HITE Hedge Asset Management LLC

Kevin Cashman – Assurant

Louis Shamie – Zimmer Partners

Presentation

Operator

Good afternoon. My name is McKenzie, and I will be your conference operator today. At this time, I would like to welcome everyone to the NuStar Energy LP and NuStar GP Holdings LLC Fourth Quarter 2012 Earnings Conference Call.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Chris Russell. You may begin your conference.

Chris Russell

Thank you, McKenzie. Good afternoon, everyone, and welcome to our conference call to discuss NuStar’s fourth quarter and full-year 2012 earnings results. We apologize for happening to delay the call by one day. Our management team was out of the office yesterday attending the funeral of a long time friend and business partner to NuStar. With me today is Curt Anastasio, CEO and President of NuStar Energy L.P. and NuStar GP Holdings, LLC; Steve Blank, Executive Vice President, CFO and Treasurer; and 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 within the meaning of the federal securities laws. These statements are subject to various uncertainties and assumptions described in our filings with the Securities and Exchange Commission and will not be updated to conform to actual results or revised expectations.

During the course of this call, we will also make reference to certain non-GAAP financial measures. Our non-GAAP financial measures should not be considered as alternatives to GAAP measures. Reconciliations of these non-GAAP financial measures to U.S. GAAP may be found either in our earnings press release or on our website.

Now, let me turn the call over to Curt.

Curt Anastasio

Good afternoon, and thanks for joining us. We at NuStar have been busy the last several months completing transactions to change the strategic direction of the partnership away from the volatile margin-based portions of our business and increasing the stable fee-based pipeline in Storage segments of our business, where we have more opportunities than ever before.

On September 28, we closed on the sale of a 50% interest in our Asphalt business to Lindsay Goldberg LLC and deconsolidated the resulting joint venture from NuStar’s financial. This brought in about $425 million of cash and freed up capital to invest in Eagle Ford pipeline.

Effective January 1, we sold the San Antonio refinery and related assets to Calumet Specialty Products Partners for $100 million, plus approximately $15 million for inventory. As a result of that sale, all financial results related to the San Antonio refinery have been reported as discontinued operations and NuStar’s financial statements included in the earnings statement.

At the same time, we’ve been expanding our fee-based pipeline in Storage businesses. In July, we completed another pipeline project in the Eagle Ford. By connecting our Corpus Christi to Three Rivers refinery, 16-inch crude oil pipeline to a 12-inch line constructed by TexStar, we’re able to transport Eagle Ford Shale crude oil from Frio County in South Texas to Corpus Christi.

In October, we completed another Eagle Ford Shale project with construction of a 55 mile, 12-inch line that will transport Eagle Ford crude to the Corpus Christi area. After completing that project, NuStar can now grew about 300,000 barrels a day of Eagle Ford crude to the Corpus Christi market.

During November, we entered into a long-term pipeline in terminal services agreement with ConocoPhillips, which will add another 100,000 barrels a day of Eagle Ford throughput capacity. In conjunction with the pipeline services agreement, NuStar will build a 100,000 barrel terminal, truck offloading facilities, and a pipeline connection to our existing 12-inch Pettus, Texas pipeline.

Construction should be done by the fourth quarter of 2013. Under the terminal services agreement with ConocoPhillips, we’ll be expanding the dock capacity at our Corpus Christi North Beach terminal. The dock expansion should be done in the first quarter of 2014.

Then on December 14, 2012, we took another major step towards growing the fee-based pipeline side of the business by closing on the acquisition of crude oil pipeline, gathering in storage assets in the Eagle Ford Shale from TexStar Midstream Services. Most of these assets have already been successfully integrated with our existing pipeline systems and have begun to produce EBITDA for NuStar.

In the last few weeks, we completed a 1 million barrel expansion project at our St. Eustatius terminal in the Caribbean and a 700,000 barrel storage expansion project at our St. James, Louisiana terminal.

Those projects will increase NuStar’s total storage capacity to around 96 million barrels. The next step in our strategic redirection should occur later in this first quarter of 2013 when we close on the acquisition of a natural gas liquids pipeline and two fractionation units from TexStar Midstream Services. Those assets should start generating fee-based EBITDA early in 2014.

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