NuStar Energy L.P. (NS) CEO Discusses Q2 2013 Results - Earnings Call Transcript

Jul.26.13 | About: NuStar Energy (NS)

NuStar Energy L.P. (NYSE:NS)

Q2 2013 Results Earnings Call

July 26, 2013 10:00 AM ET

Executives

Chris Russell - Vice President, IR

Curt Anastasio - President and CEO, NuStar Energy L.P. and NuStar GP Holdings, LLC

Steve Blank - EVP and CFO

Danny Oliver - SVP, Business and Corporate Development

Analysts

Steve Sherowski - Goldman Sachs

Brian Zarahn - Barclays

Mark Reichman - Simmons

Cory Garcia - Raymond James

Connie Hsu - Morningstar

Lin Shen - HITE Hedge

Selman Akyol - Stifel

Operator

Good morning. My name is Holly, and I’ll be your conference operator today. At this time, I’d like to welcome everyone to the NuStar Energy L.P. and NuStar GP Holdings, LLC Second Quarter 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)

I’d now like to turn today’s conference over to Chris Russell. Please go ahead, sir.

Chris Russell

Thank you, Holly. Good morning, everyone, and welcome to today’s call. On the call today is Curt Anastasio, President and CEO of NuStar Energy L.P. and NuStar GP Holdings, LLC; Steve Blank, Executive Vice President and CFO, and other members of our management team.

Before we get started, we’d 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 the 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 maybe found either in our earnings press release or on our website.

Now, let me turn the call over to Curt.

Curt Anastasio

Good morning and thank you for joining us. As expected our pipeline segment performed well in the second quarter as throughputs continue to increase on our crude oil pipeline systems located in the Eagle Ford Shale region.

Earnings performance in our fuels marketing segment improved during the quarter, while results in the storage segment were lower than last year’s second quarter. EBITDA in our pipeline segment increased to $68 million, $23 million higher than the second quarter of 2012.

Higher volumes on our Eagle Ford pipeline assets and higher tariff producing pipelines, plus higher pipeline tariffs from the 2012 FERC tariff adjustment contributed to the improved results. In addition, the segment results include a $7 million benefit to operating expenses associated with the reduction of a liability recorded in conjunction with an acquisition.

Total pipeline segment throughputs of around 810,000 barrels per day were 8% higher than last year’s second quarter. Crude oil pipeline throughputs were 20% or 59,000 barrels per day, higher than the second quarter of 2012, due to the 2012 completion of two Eagle Ford Shale projects and the December 2012 crude oil asset acquisition from TexStar Midstream.

Throughputs on our Eagle Ford crude oil pipeline systems were 175,000 barrels per day during the quarter, about 90% higher or 85,000 barrels per day higher than the second quarter of 2012.

Those increased Eagle Ford throughputs were partially offset by a change in the tariff structure for the throughputs on our Ardmore, Oklahoma crude oil pipeline system. That change reduced second quarter 2013 throughputs by almost 29,000 barrels per day when compared to the same quarter last year, even though it did not affect revenues in the Ardmore system. Effective January 1, 2013, there is a new higher joint tariff that combines two NuStar pipeline segments that were previously reported separately.

Second quarter throughputs on our refined products pipeline system were essentially unchanged compared to last year.

Storage segment EBITDA for the quarter of $69 million, was $8 million lower than the $77 million earned last year. Increased earnings associated with the internal growth projects completed at our St. James and St. Eustatius terminals in 2012 and during the first quarter of 2013 were more than offset by reduced demand for storage and terminal services at several of our domestic and international locations.

We have been successful in renegotiating some of our storage contracts in the last few months as our contract renewals due within three years or less have dropped from 66% to 59%. However, reduced demand for storage in some of these markets is putting downward pressure on storage rates as the contracts come up for renewal.

Throughput volumes in the storage segment for the second quarter were actually up 9% or about 65,000 barrel compared to the second quarter of 2012. This throughput increase is primarily a result of changing our Corpus Christi North Beach crude oil terminal from storage fee-based terminal to a throughput-based terminal effective July 1, 2012. The terminal is now used to store Eagle Ford crude oil production shipped down our Three Rivers to Corpus 16-inch pipeline.

Our fuels marketing segment generated $3 million of EBITDA during the quarter, higher than last year’s second quarter amount of a negative $6 million of EBITDA. Heavy fuel oil operations generated most of the EBITDA for the segment during the quarter. However, heavy fuel oil margins are lower than margin levels we’ve seen in the last several years.

Reduced worldwide demand for bunker fuels plus increase supply in the U.S. Gulf Coast and the Caribbean caused our bunker operations to continue to generate negative EBITDA during the quarter.

As a result of profit improvement initiatives, we’re in the process of implementing, bunker operations should break-even in the third quarter and start generating positive EBITDA in the fourth quarter of this year.

In the second quarter, our G&A expenses were $20 million, $3 million less than the G&A incurred during the second quarter of 2012. The reduction in our expenses is primarily due to our sale of 50% of the asphalt business, while we continue to provide some of the same administrative services for that business as we did pre-sale, now instead of incurring expense for those services were paid a fee under the services agreement with the joint venture.

Interest expense for the quarter was $30 million, up $7 million from last year. Higher borrowing costs associated with the January 2013 issuance of about $400 million of junior subordinated notes increased borrowing costs associated with the May 2012 renewal of our credit facility and the impact of downgrades by the rating agencies were the main reasons for the increased interest expense.

NuStar’s June 30, 2013 debt balance was $2.5 billion, approximately $100 million lower than June 30, 2012. In June, we paid off $250 million of senior notes with the borrowing under our $1.5 million revolving credit agreement. As of June 30, 2013, our debt-to-EBITDA ratio was 4.3 times.

Our equity earnings and joint ventures for the quarter were $10 million loss. The majority of those losses related to the asphalt joint venture. As you will recall, as a result of selling 50% of the asphalt business to Lindsay Goldberg in September of 2012, financial results of the asphalt joint venture are now deconsolidated from NuStar’s financials and no longer impact our distributable cash flow or our bank covenant.

With regard to first quarter distribution, NuStar Energy’s Board of Directors declared a distribution of $1.095 per unit. The distribution will be paid on August 9th. The Board of NuStar GP Holdings declared a fourth quarter distribution of -- quarterly distribution of $0.545 per unit. The GP Holdings distribution will be paid on August 14th.

Taking a look at projections for the balance of 2013, the pipeline segment should continue to benefit from additional crude oil throughput in the Eagle Ford, as a result of the completion of the construction of additional crude oil gathering lines that will supply crude to the 12-inch line acquired from TexStar and then on to our 16-inch Three Rivers to Corpus Christi pipeline.

In addition, the segment will see increased throughputs and EBITDA from the third quarter of 2013 completion of 100,000-barrel terminal facility and associated pipeline connection to our existing 12-inch Pettus, Texas line for ConocoPhillips. After flowing through the 12-inch Pettus line those barrels will also connect to our 16-inch Three Rivers to Corpus Christi line.

After these 2013 projects are completed, we expect total throughputs on our Eagle Ford pipeline assets to increase from second quarter levels of about 175,000 barrels per day to about 200,000 barrels per day by the end of 2013.

As a result, third and fourth quarter EBITDA results for the pipeline segment will continue to increase. Full year EBITDA for the pipeline segment is expected to be $50 million to $70 million higher than last year.

On July 17th we launched an Open Season to assess shipper interest in committed space to transport Eagle Ford Shale region crude oil from several terminal locations on our South Texas crude oil pipeline system to our Corpus Christi North Beach terminal facility. This proposed project would include pipeline capacity upgrades to segments of the system and would be constructed in two phases.

First phase will add incremental throughput capacity of approximately 35,000 barrels per day and the second phase will add incremental throughput capacity of around 65,000 barrels per day for a total aggregate incremental capacity of 100,000 barrels per day of which 90,000 will be available to committed shipper. The first phase should be available for service to committed shippers in the third quarter of 2014, while the second phase should be available during the first quarter of 2015.

The Open Season for this project is scheduled to continue until noon Central Time on August 30th of this year. If we go forward with these projects they will not impact 2013 EBITDA but would positively impact 2014 and ‘15 results.

With regard to the storage segment, as I mentioned earlier, the segment’s results continue to be impacted by reduced demand for storage at certain of our domestic and international terminals, which is also putting downward pressure on rate in certain markets as some of our storage contracts come up for renewal. This should cause third quarter results to be lower than both the second quarter of 2013 and the third quarter of 2012.

As we move into the fourth quarter, the completion of a second 70,000 barrel per day railcar offloading facility at St. James, Louisiana, and seasonally reduced maintenance expenses should more than offset the impacts of reduced demand at some of the terminals.

As a result, fourth quarter EBITDA should recover to levels we saw on the storage segment in the first quarter of this year. For the full year, we expect the storage segment EBITDA to be comparable to last year.

Improved performance in our bunker operations in the last half of this year combined with improved results in our heavy fuel oil operations and other operations within the fuels marketing segment should allow the segment to generate $20 million to $40 million of EBITDA in 2013.

Taking a look at corporate expense guidance for the third quarter, we expect G&A expenses to be in the range of $29 million to $30 million, depreciation and amortization expense around $46 million to $47 million and interest expense in the range of $32 million to $33 million.

Based on these projections, third quarter earnings per unit should be $0.20 to $0.30 per unit. Distributable cash flow from continuing operations for limited partner should be in the range of $0.55 to $0.65 per unit, largely impacted by projected third quarter reliability capital spending of around $20 million.

2013 full year reliability capital spending should total $35 million to $45 million, while our strategic capital is now projected to be in the range of $350 million to $400 million with around $165 million related to internal growth projects in the Eagle Ford Shale.

We plan to communicate updated earnings expectations for 2014 and initial expectations for 2015, once we complete our Eagle Ford Open Season and our 2014 to ‘18 planning process later in this year.

So, at this time, let me turn it over to our operator Halley, so we can open up the call to Q&A.

Question-and-Answer Session

Operator

Okay. (Operator Instructions) Your first question will come from the line of Steve Sherowski, Goldman Sachs.

Steve Sherowski - Goldman Sachs

Hi. Good morning. I was wondering do you have any update for your Houston 12-inch line?

Steve Blank

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.

Steve Sherowski - Goldman Sachs

Okay. And that’s going to be for products?

Steve Blank

We’re contemplating NGLs on that line.

Steve Sherowski - Goldman Sachs

Okay. And I was just wondering on the timing of your storage re-contracting, does that 40% over 12-month period still hold?

Steve Blank

It’s a little bit less now, I think…

Curt Anastasio

35%

Steve Blank

35%, 36%.

Steve Sherowski - Goldman Sachs

Okay. 35%, 36%. And 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 going to or that are up for re-contracting?

Steve Blank

I don’t have a lot more breakdown than just the one year. But I would tell you, some of the, 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 re-renting some tanks that have come off revenue that were cancelled.

Curt Anastasio

Yeah. I mean, 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 and just going to be a transition phase. We are still happy we were exited the business of marketing ourselves given the reduction in inventory that we’ve achieved.

Steve Sherowski - Goldman Sachs

Okay. Now I understood. And on your South Texas pipeline the proposal. Do you have any sense of cost yet?

Steve Blank

Yeah. 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.

Steve Sherowski - Goldman Sachs

$125 million to $150 million, okay.

Steve Blank

Right, and depending on the success of the Open Season we could do one or both of those phases but we remain confident we’ll be successful in getting into both phases.

Steve Sherowski - Goldman Sachs

Okay. And I know it is little bit early, but I would imagine that you are targeting returns within your historical range?

Steve Blank

Yeah.

Steve Sherowski - Goldman Sachs

Okay.

Curt Anastasio

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. Second phase, yeah, that statement would be true, it would be in that…

Steve Blank

Overall that’s true, yeah.

Curt Anastasio

4 to 5

Steve Blank

… times.

Steve Sherowski - Goldman Sachs

I’m sorry, you said 4 to 5 times.

Curt Anastasio

4 to 5 times.

Steve Sherowski - Goldman Sachs

Okay. Okay. Great. That’s it from me. Thank you.

Operator

Your next question comes from the line of Brian Zarahn, Barclays.

Brian Zarahn - Barclays

Good morning.

Curt Anastasio

Good morning.

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 that is not performing as well as you hoped?

Steve Blank

Well, domestically in our refined products terminals and our refinery crude terminals. They’re really unaffected by 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 -- since the market has changed and some of your marketing outlook has changed, any possibility of divesting some of these terminals?

Steve Blank

We don’t have any plans today to do that.

Curt Anastasio

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 then 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

Then on the troubled terminals that Curt is referencing are really contango facilities. So when the market went backwardated, we lost the customers and there is just a couple of those.

Brian Zarahn - Barclays

I appreciate the color on the terminal side. Switching to 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 last -- second half of last year?

Steve Blank

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

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

I think it’s -- the answer is probably same for both unless we have…

Steve Blank

I don’t have that broken out Brian between products and crude, call me back later…

Brian Zarahn - Barclays

We’ll talk offline on that.

Steve Blank

It should be comparable to both of those, what I would expect.

Brian Zarahn - Barclays

Okay. Then on any impact from the narrowing crude differentials on rail terminal?

Danny Oliver

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

Also both projects are backed by long-term contracts.

Danny Oliver

Absolutely.

Curt Anastasio

The current market doesn’t affect those deals.

Brian Zarahn - Barclays

In terms of the -- I understand that they are leased but I thought there was some type of profit-sharing arrangement?

Curt Anastasio

Yeah. 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

Okay. 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

Probably, it would be a little bit lower. But that being said, that’s based on the projects we’ve identified to-date. And so as we identify more projects that number could grow, say, maybe slightly lower.

Curt Anastasio

But let me just make a comment on it. 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.

Brian Zarahn - Barclays

Okay. Thanks Curt.

Curt Anastasio

Yeah.

Operator

Your next question comes from the line of Mark Reichman, Simmons.

Mark Reichman - Simmons

Just wanted to clarify few things, I think in the past you had said that you expected total throughputs on the Eagle Ford pipeline to increase to 225,000 barrels per day by year end 2013 and that would be up from 155,000 barrels per day during the first quarter. Is that still your expectation?

Danny Oliver

I think we are expecting by the end of this year to be between 175 and 200. Right now our bottleneck, we’ll have the pipeline capacity. Our bottleneck right now is the completion of our second dot facility in Corpus which should be completed about April 1 of next year. We expect by -- then we can start filling up this expansion and by the end of next year, we expect to be up near 325,000…

Steve Blank

375.

Danny Oliver

I’m sorry. 375 a day on April 4.

Mark Reichman - Simmons

Okay. Because I think in the past you had kind of expected the pipeline transportation segment to generate an additional $60 million to $80 million of EBITDA relative to 2012. And more recently that number was adjusted to $50 million to $70 million. Is that part of the reason for the delta?

Steve Blank

That’s part of it. We had a little bit of a slower ramp up on the Eagle Ford pipeline system than we anticipated when we first guided. So, little bit of a timing effect in 2013. The total benefit eventually gets there by year end. But you do have some timing, some things went a little slower on the ramp up than we wanted them to.

Mark Reichman - Simmons

Okay. And so, 2014, your expectations there would probably be unchanged. Just like about the second quarter quite frankly, really the results came in higher than the top end of your guidance. And it looks like partly better than expected fuels marketing results and some of the contributions from the asset acquisitions. But just relative to your guidance where did you perceive kind of the big surprise?

Steve Blank

The big surprise, I think, $7 million adjustment Curt alluded to. Plus I think to your point we did make a little bit of money in the fuels marketing segment that was run probably guided to initially.

Danny Oliver

Reliability which stands.

Curt Anastasio

You noticed like when I talked about third quarter I said we’re going to spend upwards of $20 million on reliability. I mean that’s not our total budget of we’ve guided to $35 to $45. So, you really have reliability spending concentrated in the third quarter. So that unduly, it just a timing thing. The total amount for the year is the same as we’ll always thought but it concentrates the spending in the third quarter. Therefore the second quarter kind of benefits from that. It wasn’t as evenly spread on reliability as we thought.

Mark Reichman - Simmons

Okay. Okay. I appreciate that. Okay. I think that’s all I had. Appreciate it.

Operator

Your next question comes from the line of Cory Garcia, Raymond James.

Cory Garcia - Raymond James

Good morning fellows. I have got couple quick questions here. First-off related to your CapEx reduction looks like you guys shaved about $50 million off the budget. Was that primarily just removal of some of the TexStar NGL type spending or is there some other moving parts in that?

Curt Anastasio

Go ahead, Steve.

Danny Oliver

It’s mostly just push back into next year because of the timing issues that…

Curt Anastasio

Like on the Houston line, which Danny just mentioned.

Cory Garcia - Raymond James

Okay. Okay. That’s perfect. Switching focus back to sort of the crude by rail, clearly, you guys built up a quite a bit of exposure at St. James. Any thoughts on maybe expanding out, sort of, branching into the East or West Coast, which seem to be obviously a little different markets than what we’re seeing out today.

Curt Anastasio

We got a project at our Vancouver, Washington terminal to move crude by rail there. There seems to be customer demand backed by commitment. And so we’re working on that. So, yeah I think there will, I think you still got to -- there is still scope for a crude by rail to the West and the East Coast and that will help our West Coast terminal operations.

Frankly, that’s one of the areas that’s been struggling on these renewal grades. West Coast terminal renewal rates are down from what we’ve seen historically. I mean, given a little perspective like Danny said, I mean, history is water under the bridge. So I hate to revisit it. But we’re about -- our storage profit, it’s about double what it was in 2006. And from 2006 through ‘11 and ‘12, those five, six years that’s when that happened.

So we have this shift starting in 2011 to putting more of our growth capital into the pipeline segment, mainly because of the shale. So that’s -- it’s true, the storage has leveled off, flattened out. But we had a tremendous run up the previous five, six years. And now it’s a pipeline that turned to carry that freight but anyway I got a little off track, just to say. Danny you want to chime in on it.

Danny Oliver

I just would say in addition the Vancouver project where we’re working project up in Point Tupper. We’ve got a lot of interest to bring Canadian crude into Point Tupper where we have access to VLCC dock. And we’re working that project right now as well.

Cory Garcia - Raymond James

Okay. Any idea on maybe the scope of those light focus, heavy focus or should I just sort of wait for the Analyst Day here?

Danny Oliver

Yeah. We’re still working through that. I mean, the Point Tupper project could be both. We have interest in both light and heavy crude and the West Coast, right now, we’re looking at a lighter flow. It may be heavy Canadian but dill bit.

Steve Blank

I’d say, it’s one of the advantages to the rail. You can be a little more flexible on that.

Danny Oliver

That’s right.

Steve Blank

In the pipelines.

Cory Garcia - Raymond James

Absolutely. And last one for me on the Corpus stock. I appreciate the update there and I realize it’s primarily crude focused, but is there anything that you guys have been looking at for opportunities to handle even lighter projects, whether it would be NGLs or field-level condensate or even at the sort of the refinery gate level in terms of getting LPGs under the water?

Steve Blank

Well, our Houston 12-inch project that we expect to go into an Open Season pretty soon, that will be involved in the NGLs but nothing from the storage side.

Cory Garcia - Raymond James

All right. Perfect. Appreciate the color guys.

Steve Blank

Welcome.

Operator

Your next question comes from the line of Connie Hsu, Morningstar.

Connie Hsu - Morningstar

Hi. Good morning, guys.

Steve Blank

Good morning.

Connie Hsu - Morningstar

I just have a question on the balance sheet and keeping in mind your covenant requirements. Will the remaining CapEx for this year and I guess next year too, will it be financed from debt and the revolver or do you anticipate having to do another hybrid type subordinated security?

Curt Anastasio

Yeah. We don’t anticipate doing another hybrid security this year. And, of course, money is fungible but you could pretty simply draw the conclusion that the hybrid we did in January, the $400 million, could go to finance of the strategic capital of about $350 million to $400 million that we’ll spend this year, okay. We did sell the refinery in San Antonio for 115 million in January which provided some unusual source of funding too.

Connie Hsu - Morningstar

All right. Thanks

Operator

Your next question comes from the line of Lin Shen, HITE Hedge

Lin Shen - HITE Hedge

Hey. Good morning. Two questions. The first one is to follow up your Storage asset. You figure now is challenging to renew the contract. Can you talk about which area you see the most challenging to attract clients?

Danny Oliver

Right now, it’s the fuel oil storage. And we’ve got two locations on the West Coast, one location on the Gulf Coast and one on the East Coast. It was primarily fuel oil storage. That was a very challenging business last year for everyone in that business. That’s been our biggest challenge.

Lin Shen - HITE Hedge

Okay. Second question is in your previous guidance you issued before, you said that Q2 probably is at the lowest level for your coverage ratio you should see sequentially improving in the second half of the year. I am just wondering like can you talk about, now your full year 2013 guidance should be about same versus your previous guidance or little lower and also what’s the difference between -- among the different segments?

Steve Blank

Are you talking just on the coverage ratio?

Lin Shen - HITE Hedge

No, no. Just EBITDA guidance and also coverage?

Steve Blank

Okay. EBITDA guidance is based to the same. We’ve given -- we gave at the end of June for the full year, so that hasn’t changed. As far as coverage ratio goes, I think we said, the last conference we wouldn’t cover the distribution in the fourth quarter but we should be fairly close. I think that’s still well. So, just basically says that I think we had a $0.65 covering this.

Curt Anastasio

Yeah. So, it gets a lot better.

Steve Blank

It improves.

Curt Anastasio

It improves quite a lot by the fourth quarter.

Steve Blank

$0.65 in the second is right on our budget, the third maybe just for little weaker. I’m not sure. I don’t have it in front of me just because of that heavier reliability spend but that could shift as well. I think candidly, we may not spend $20 million in the third quarter, that’s half of the annual spend. So, that could -- that could slip into the fourth.

Danny Oliver

We were very confident that the distributable cash flow from the back half of the year is going to quite a bit higher in the first half.

Lin Shen - HITE Hedge

So, you think the weakness in the storage segment should be more than offset by the other segment?

Curt Anastasio

I’m sorry. I didn’t understand.

Danny Oliver

Say that again.

Lin Shen - HITE Hedge

No. I mean, you think the weakness of your storage segment should be offset by the other pipeline segment, other segment should be stronger?

Curt Anastasio

Yeah.

Danny Oliver

Yeah. Definitely.

Curt Anastasio

I think other segment is going to quite a bit stronger.

Lin Shen - HITE Hedge

Okay. Thank you very much. Appreciate it.

Operator

(Operator Instructions) Your next question comes from the line of Selman Akyol, Stifel.

Selman Akyol - Stifel

Good morning. Just one real quick question, what’s your availability on your credit facility right now?

Curt Anastasio

It’s about…

Danny Oliver

At the end of the quarter, about $730 million.

Curt Anastasio

Yeah.

Selman Akyol - Stifel

Okay. Thanks.

Operator

At this time, there are no further questions. I’d now like to turn the conference back over to management for closing remarks.

Chris Russell

Thank you, Alex. Once again I’d like to thank everybody for joining us on the call today. If anybody has any questions, please feel free to call NuStar’s Investor Relations. Thank you.

Operator

Thank you for your participation in today’s conference call. You may now disconnect.

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