NuStar Energy CEO Discusses Q3 2010 Results - Earnings Call Transcript

NuStar Energy CEO Discusses Q3 2010 Results - Earnings Call Transcript
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NuStar Energy L.P. (

NS

)

Q3 2010 Earnings Call Transcript

October 25, 2010 3:00 pm ET

Executives

Chris Russell – VP, IR

Curt Anastasio – CEO and President

Mike Hoeltzel – SVP, Corporate Development

Danny Oliver – SVP, Marketing and Business Development

Steve Blank – SVP, CFO and Treasurer

Rick Bluntzer – SVP, Operations

Paul Brattlof – SVP, Trading and Supply

Analysts

Michael Cerasoli – Goldman Sachs

Mark Reichman – Madison Williams

Joseph Siano – Credit Suisse

Brian Zarahn – Barclays Capital

Steve Maresca – Morgan Stanley

Xin Liu – J.P. Morgan

Darren Horowitz – Raymond James

John Tysseland – Citi

Ross Payne – Wells Fargo

Andrew Gundlach – ASB

Bradley Olsen – Eagle Global Advisors

Yves Siegel – Credit Suisse

Selman Akyol – Stifel Nicolaus

Presentation

Operator

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Previous Statements by NS
» NuStar Energy, L.P. Q2 2010 Earnings Call Transcript
» NuStar Energy L.P. Q1 2010 Earnings Call Transcript
» NuStar Energy L.P. Q4 2009 Earnings Call Transcript
» NuStar Energy L.P. Q3 2009 Earnings Call Transcript

Good afternoon. My name is Casey and I will be your conference operator today. At this time, I would like to welcome everyone to the NuStar Energy L.P. and NuStar GP Holdings, LLC Third Quarter 2010 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. I will now turn the call over to Chris Russell, Vice President of Investor Relations. Please go ahead, sir.

Chris Russell

Thank you. Good afternoon, everyone and welcome to our conference call to discuss NuStar Energy L.P. and NuStar GP Holdings, LLC third quarter 2010 earnings results. If you have not received the earnings releases and would like copies of each, you may obtain them from our website at nustarenergy.com and nustargpholdings.com. Attached to the earnings releases, we have provided additional financial information for both companies, including information on NuStar Energy L.P.'s business segments.

In addition, we have posted operating highlights and fundamental data for our asphalt operations under the Investors portion of the NuStar Energy L.P. website. If after reviewing the attached tables and operating highlights you have questions on the information that is presented, please feel free to call – contact us after the call.

With me today is Curt Anastasio, CEO and President of NuStar Energy L.P and NuStar GP Holdings, LLC; Steve Blank, our CFO; 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 certain statements concerning the future performance of NuStar and other statements that will be forward-looking statements as defined by securities laws. These statements reflect our current views with regard to future events and are subject to various risks, uncertainties and assumptions described in NuStar Energy, L.P. and NuStar GP Holdings' Annual Reports on Form 10-K for the year ended December 31st, 2009 and subsequent filings with the Securities and Exchange Commission.

Actual results may materially differ from those discussed in these forward-looking statements and we undertake no duty to update any forward-looking statements to conform the statement to actual results or changes in our expectations.

During the course of this call, we will also make reference to certain non-GAAP financial measures. We have provided some additional schedule under the Investors and Financial Reports and SEC Filings portion of the NuStar Energy, L.P. website reconciling these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with U.S. Generally Accepted Accounting Principles or GAAP.

Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, operating income, net cash flows provided by operating activities or any other GAAP measure of liquidity or financial performance.

Now, let me turn the call over to Curt.

Curt Anastasio

Thanks, Chris. NuStar Energy's third quarter results were stronger than expected when guidance was given on August 2nd. Third quarter 2010 EBITDA of $131 million was higher than our guidance of $100 million to $120 million and higher than the $124 million of EBITDA earned in the third quarter of 2009.

Third quarter 2010 earnings of $0.90 per unit were also higher than our third quarter guidance of $0.50 to $0.70 per unit, though less than the $1.03 per unit earned in the third quarter of 2009. The lower year-over-year third quarter earnings per unit is mainly attributable to about $0.20 per unit of dilution that occurred as a result of NuStar's November 2009 and May 2010 equity issuances.

Distributable cash flow available to limited partners for the third quarter was $84 million or $1.30 per unit, higher than the $61.5 million or $1.13 per unit generated in the third quarter of 2009. The $22.5 million increase in distributable cash flow available to limited partners was due to the quarter-over-quarter increase in the EBITDA, lower reliability capital spending, plus the fact that our mark-to-market hedging adjustment was $16.5 million better in the third quarter of 2010.

In the third quarter of last year, we reduced distributable cash flow available to limited by $15.3 million for an unrealized non-cash hedging gain. This quarter, we added back an unrealized non-cash hedging loss of $1.2 million.

As a result of our strong third quarter performance, the Board of Directors of both NuStar Energy and NuStar GP Holdings declared increases in the distributions of both companies.

NuStar Energy's Board of Directors declared a third quarter distribution of $1.075 per unit, which is $0.01 per unit or about 1% higher than the second quarter of 2010 and third quarter '09 distributions of $1.065 per unit. The NuStar Energy distribution will be paid on November 5. Distributable cash flow available to limited partners covered the distribution to the limited by 1.21 times for the third quarter of 2010.

For a third consecutive quarter, the Board of NuStar GP Holdings has approved an increase in the quarterly distribution. A third quarter distribution of $0.48 per unit payable November 10 [ph] represents a 4.3% increase over the $0.46 per unit paid for the second quarter of 2010 and a 10.3% increase over the $0.435 per unit for the third quarter of 2009.

Higher-than-expected third quarter EBITDA and earnings per unit results were mainly attributable to better-than-expected results in our transportation and asphalt and fuels marketing segments. Higher throughputs on our crude, refined products and ammonia pipelines boosted our transportation results. Increasing refined products demand, a customer deferring a refinery turnaround until 2011, and increased ammonia demand in anticipation of a strong fall crop planting season contributed to the higher throughputs.

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