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NuStar Energy L.P. (NYSE:NS)

Q1 2011 Earnings Call

April 27, 2011 10:00 am ET

Executives

Chris Russell – VP, IR

Curt Anastasio – CEO and President

Steve Blank – CFO

Danny Oliver – VP, Marketing and Business Development

Paul Brattlof – SVP Marketing

Rick Bluntzer – SVP, Operations

Brad Barron – SVP, General Counsel and Secretary

Analysts

Darren Horowitz – Raymond James

Brian Zarahn – Barclays Capital

Stephen Maresca – Morgan Stanley

Joseph Siano – Morgan

Ross Payne – Wells Fargo

Michael Blum – Wells Fargo

Noah Lerner – Hartz Capital

John Tysseland – Citi Group

James Chapel – Height

Michael Cerasoli – Goldman Sachs

Selman Akyol – Stifel Nicolaus

Yves Siegel – Credit Suisse

Avi Feinberg – Morningstar

Operator

Good afternoon. My name is Stephanie [ph] 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 First Quarter 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Russell, you may begin the conference.

Chris Russell

Thank you. Good morning, everyone, and welcome to our conference call to discuss NuStar Energy L.P. and NuStar GP Holdings, LLC's first quarter 2011 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 as presented, please feel free to 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 31, 2010, 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 these statements 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 an 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 measure calculated and presented in accordance with the 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

Good morning and thanks for joining us today. I am happy to report that first quarter 2011 results were higher than first quarter 2010 results in all three of NuStar energies business segments. I am also pleased that we have been able to start the second quarter with an announcement regarding another internal growth project in the Eagle Ford Shale and an announcement regarding the acquisition of a small refinery located on the south side of San Antonio in close proximity to the Eagle Ford oil shale production.

Before I go into further details regarding those two second quarter announcements, I'll spend a few minutes talking about the first quarter results. NuStar Energy generated $93 million of EBITDA on the first quarter of 2011 higher than the $81 million earned in the first quarter of last year and well within our first quarter 2011 guidance range of 80 to 100 million.

Our storage segment earned $70 million of EBITDA on the first quarter approximately $8 million higher than the first quarter of 2010. Not only did the storage segment outperformed last year's first quarter, the $70 million earned during the first quarter of 2011 was the highest quarterly EBITDA ever for our storage segment. Higher storage rates on existing contracts and increased customer demand for storage services had a positive impact on first quarter storage segment EBITDA.

In addition, incremental EBITDA generated by the May 2010 Mobile Alabama terminal acquisition and the completion of our St. Eustatius terminal reconfiguration project in the fourth quarter of 2010 contributed to the storage segments increased EBITDA.

Transportation segment EBITDA of $47.1 million was slightly higher than the 46.5 million earned in the first quarter of last year. Increased shipments on higher-tariff pipelines and operating expense efficiencies more than offset lower pipeline throughputs.

Throughput volumes were down on both our crude and refine product pipelines. Turnaround maintenance activity of one of our customers’ refineries and the impact of competing supply economics affected throughputs on our crude oil pipeline system.

Market conditions admitted more favorable for some of our customers to export refine products especially diesel than to transport them to Houston on our corporate Corpus Christi to Houston Texas pipeline adversely impacted throughput on that line. However, we have identified project to significantly increase throughput on the Houston line whether or not shippers favor such marine exports.

The asphalt and fuels marketing segment generated $5 million of EBITDA during the first quarter approximately $8 million higher than the negative 3 million of the EBITDA in the first quarter of 2010. The asphalt refining and marketing portion of the asphalt and fuels marketing segment loss 8.6 million in EBITDA during the quarter, 2.4 million worst than the 6.2 million loss in the first quarter of 2010.

Lower sales volumes due mainly the wholesale customers opting not to build winter field inventory levels during the perceived high price environment that existed in the first quarter was the primary cost of the lower results. This part of our business is always weak in the first quarter and our outlook remains good.

Fuels marketing operations first quarter 2011 EBITDA increased to $13.6 million, $10.2 million higher in the same quarter of last year. Improved results in our crude oil trading and product trading businesses contributed to the higher results.

Our crude trading business benefited from the widespread between WTI and Brent during the quarter, while our products trading business benefited from the sale – diesel fuel inventory store in one of our Northeast terminal facilities.

Taking a look at our first quarter corporate expenses. G&A expenses were $26 million, down $1.3 million from last year's first quarter. This reduction was mainly due to lower stock based compensation expense. NuStar Energy unit price decreased by $50 per unit in the first quarter versus increasing $4.35 per unit in the first quarter of last year.

Interest expenses for the quarter was $20.5 million, up 1.9 million from last year mainly as a result of our issuance of $450 million of 4.8% senior notes in August 2010. First quarter earnings are $0.13 per unit were higher than first quarter 2010 earnings of $0.19 per unit.

The first quarter 2011 results include $5 million or $0.08 of expenses related to the early termination of a third quarter storage agreement at our Paulsboro, New Jersey asphalt refinery. This decision to terminate early was part of the economics of brining 10,000 barrels per day of Peregrino crude oil to our Paulsboro plan in accretive project that will start up at the end of the year. The lease buyout enabled us to avoid the capital expenditure required to build the new tank.

First quarter 2011 adjusted net income applicable to limited partners excluding the effect of the early termination cost and other smaller items would have been $0.40 per year, which was above our first quarter 2011 guidance of $0.15 to $0.35 per unit.

NuStar Energy’s distributable cash flow available to the limits [ph] of $45 million for the first quarter of 2011 was $22 million or 98% higher than the first quarter last year. The increase in first quarter 2011 distributable cash flow available to the limits was a result of our 12 million increase in EBITDA, reduced reliability CapEx and lower mark-to-market productions relating to hedging.

With regard to our first quarter 2011 distributions, NuStar Energy's Board declared a distribution of $1.075 per unit, which is $0.01 per unit or about 1% higher than the first quarter 2010 distribution of a $1.065 per unit. The distribution will be paid on May 13.

The board of NuStar GP holdings declared the first distribution of $0.48 per unit which is $0.03 or around 7% higher than the first quarter 2010 distribution. The NuStar GP Holdings distribution will be paid on May 18.

As I mentioned earlier, we already had a very busy start in the second quarter. On April 5, we announced that we signed a letter of intent with TexStar Midstream Services L.P. to develop a new pipeline system to transport Eagle Ford crude and condensate to Corpus Christi, Texas. This is the second Eagle Ford pipeline deal we have signed and announced.

TexStar will be constructing a 65 mile, 120,000 barrel per day pipeline that will be interconnected with a new storage facility to be constructed by NuStar at Three Rivers, Texas. This storage facility will connect a NuStar’s 200,000 barrel per day pipeline that will have the ability to transport Crude and Condensate from Three Rivers to storage tanks at NuStar’s Corpus Christi, North Beach Terminal.

We expect this transaction to improve earnings in both our transportation and storage segments beginning in the second quarter of 2012. Currently, we are still working with TexStar to finalize the definitive agreement for the transaction. Once that definitive agreement is done, we should be able to provide capital spending and EBITDA guidance regarding the transaction.

As we move through the remainder of 2011, we expect to announce more deals related to shale development opportunities. As we mentioned before, NuStar has transportation and storage assets located in areas within Texas and Colorado that can serve as effective means to transport or store shale production.

On April 19, we closed on the $41 million acquisition of certain refining assets of the former AGE or AGE Refining, now the NuStar San Antonio Refinery. Refinery is a 14,500 barrel per day, name plate capacity refinery, located on the south side of San Antonio in proximity to the Eagle Ford crude production.

The plant is currently operating at around 11,800 barrels per day, with plans to increase the run rate. The acquisition also includes 200,000 barrels of storage tanks in Elmendorf, Texas about 12 miles from the refinery.

The refinery purchases and processes crude oil and condensates across South Texas including the rapidly developing Eagle Ford Shale. The producers in sales high value refine products including jet fuels, ultra-low sulfur diesel or ULSD that reformates liquefied petroleum, gas, specialty solvents and other highly specialized fuels to commercial and retail customers as well as the United States military.

Estimated product yield from the refinery are 40% jet fuel and ultra-low sulfur diesel. 30% refinery feedstocks mostly naptha and cat-feed [ph], 20% gasoline blending components mostly light and heavy reformates and 10% LPG and specialty solvents.

Unlike in asphalt refinery, the margin on these products can be hedged and we haven’t in fact already hedged our margins on approximately 70% for the refinery’s current production level of around 11,800 barrels per day through the future markets for crude, distillates and gasoline related products for the next three to four years depending on the product.

Based on those margins, we expect to add $15 million to $20 million of EBITDA and $5 million to $10 million of distributable cash flow for the balance of 2011. Over the remaining life of these hedges, the refinery should generate $30 million or $40 million of EBITDA and $20 million to $30 million of distributable cash flow annually.

Based on those projections, we expect this acquisition to pay out in approximately two years. Working capital requirements for the refinery will be minimum. Industry payment terms for domestic crude purchase usually average 30 to 35 days which exceeds the payment terms associated with the refinery sales. This should allow us to keep our working capital balances related to this refinery very low.

Capital spending at the refinery should be around $35 million over the next five years. About $10 million should be spend in 2011. The majority of this capital will be reliability CapEx and will include but not be limited to improvements to drainage of the plant, environmental cleanup and the modernization of the refinery's control systems.

We're currently evaluating the possibility of constructing a pipeline from the Elmendorf storage tanks, I mentioned, to the San Antonio refinery. This pipeline were significantly reduced if not totally eliminate the need for trucks to deliver crude to the plant. The pipeline project would significantly reduce traffic congestion in the refinery's neighborhood and also reduced truck transportation cost.

Preliminary cost estimates on this strategic capital project range from $10 million to $15 million. Taking a look at NuStar's projected result for the second quarter, we expect our EBITDA to be in the range of $132 million to $150 million.

Our storage segment EBITDA should be slightly higher than it was in the second quarter of 2010. Increased EBITDA from our recent terminal acquisitions and some completed internal growth projects will be mostly offset by increased maintenance expense of several terminals.

EBITDA in our transportation segment should be down $5 million to $10 million compared to last year's second quarter lower tariffs as a result of the July 1, 2010 negative tariff adjustment, reduced throughputs and increased maintenance will contribute to the decrease.

Late in June of this year, we expect to complete the work associated with the pipeline connection and capacity lease agreement, we entered into its co pipeline company in October of 2010. Under that agreement, NuStar will reactivate a previously idle pipeline in South Texas that will then be – now be utilized to transport Eagle Ford Crude oil shale production to Corpus Christi refineries and terminals. That project should provide a transportation segment with incremental EBITDA in the last half of this year.

As far as fuels marketing segment, second quarter EBITDA should be $10 million to $15 million higher. As for our refining and marketing operation should be comparable to last year's second quarter, margin should remain fairly strong in the $11 to $13 per barrel range supported by the strong six oil [ph] market and higher (inaudible) unit run rate. However second quarter sales volume should be comparable to down slightly from last year.

Our new fuels refining operation or the San Antoni refinery acquisition should contribute 3 million to 5 million in the second quarter of EBITDA. We expect that amount to increase as the year progresses.

Fuels marketing operating should see an increase of $5 million to $8 million in EBITDA in the second quarter. Increased earnings from our growing heavy fuels and bunker marketing businesses should contribute to this increase.

Earnings per unit applicable to limited partners for the second quarter are expected to be in the range of $0.90 to a $1.10. Second quarter 2011 operating expense is expected to be around $140 million to $145 million, G&A in the range of $28 million to $29 million, depreciation and amortization around $40 million to $41 million and interest expense $20 million to $21 million.

For the full year 2011, we expect EBITDA to be $35 million to $45 million higher in 2010. Storage segment full year 2011 EBITDA should increase by $25 million to $35 million. This segment should realize a full year of EBITDA from the Mobile, Alabama acquisition and St. Eustatius terminal internal growth project.

In addition, EBITDA from the February 2011 Turkey terminal acquisition and third quarter 2011 completion of the 3.2 million barrel tank expansion project at St. James, Louisiana should contribute to the segments increase in EBITDA.

This storage segments guidance is lower than the full year guidance provided on January 31, the fourth quarter 2010 earnings call. Lower than expected unit train activity at some of our West Coast terminals unplanned tank maintenance calling some of our tanks to be taken out of service and lower vessel car projections at one of our terminals are the main causes for the reduced guidance.

In regard to Turkey, we already have two expansion projects plan totaling $20 million to $30 million. Spending on the projects is already begun. We expect one of the projects to be done by the end of 2012 and the other by the end of 2013.

Full year 2011 EBITDA in our transportation segment should benefit from the estimated second quarter 2011 completion of the Eagle Ford Shale project for Koch Pipeline company and a July 1, 2011 FERC tariff increase close to 7%.

However, this projected benefit should be more than offset by lower throughputs in 2011. Increased cuts for refinery turnaround activity and changing market conditions would cause our transportation segments throughput volumes to be down around 4% in 2011.

As a result, our transportation segment EBITDA is projected to be $5 million to $10 million lower in 2011. 2011 EBITDA in Asphalt and fuels marketing should be $35 million to $45 million higher than the $111 million earned in 2010.

Asphalt refining and marketing operations 2011 EBITDA should be slightly higher than 2010. We believe gross margin should be slightly higher than 2010 and in the range of $7 to $9 per barrel.

Strong demand and high prices in six oil [ph] markets, high coke utilization rate as crash beds [ph] remain strong and increased coking capacity due to coking unit coming online in the mid – late in the year should all contribute to the higher gross margin. However, we expect 2011 Asphalt demand to continue to be capped by historical standards.

We expect the rack asphalt demand to be comparable to slightly higher to last year. Demand in the other classes of trade projected to be down year-over-year so long as wholesale customers are reluctant to build inventory levels.

Fuels refining operation that is to say the San Antonio refinery are expected to contribute $15 million to $20 million of EBITDA in 2011. Our fuels marketing operation should benefit from the full years worth of EBITDA from the new U.S. heavy fuels and bunker fuels market that we entered last year.

We expect these fuels marketing operations to contribute an additional $15 million to $20 million of EBITDA in 2011. It should be noted that our 2010 results included about $15 million related to property insurance proceeds we see the damage costs to our Texas City terminal by Hurricane Ike in the third quarter of 2008. We do not expect to benefit from any type of insurance proceed settlements this year.

Reliability capital spend for 2011 should total $65 million to $70 million up from our prior guidance of $50 million to $55 million due mainly reliability CapEx associated with the San Antonio refining assets. 2011 strategic capital spending should fall in the range of $350 million to $370 million again higher than our previous guidance of $330 million to $350 million.

The addition of a couple of attractive terminal expensing projects causes the increases in strategic spending. Of the $350 million to $370 million we expect to spend this year, around 165 million relates to projects that would be placed in service this year.

The majority of the remaining spending relates to projects at St. James, Louisiana and St. Eustatius terminals that will not begin generating EBITDA until next year. If you include the February 2011, Turkey acquisition and the recent San Antonio refinery acquisitions, our estimated 2011 total capital spending related to strategic capital and to acquisitions should be around $450 million.

With regard to 2011 distribution growth, we still feel 2011 distribution should exceed the distribution growth rate of last year. The immediately accretive distributable cash flow we expect to generate from the recent San Antonio refining asset acquisition provides a potential for greater 2011 distribution growth than we would have had absent the acquisition until some of our large internal growth projects come on line in 2012.

So let me close by saying, I'm very existing about the two acquisitions we completed in the first four months of 2011, the recent signing of the letter of intent with TexStar Midstream, the additional opportunities were pursuing in South Texas and the ongoing expansion projects in the storage segment.

As these acquisitions, opportunities and expansion projects are fully integrated and completed, they begin to generate the incremental EBITDA and distributable cash flow that allows NuStar Energy to increased distribution to that level significantly in excess of the increase you've seen in 2010.

So at this time, let me turn it over to the operator, so we can open up the call to Q&A. Thank you. Are you there operator?

Question-and-Answer Session

Operator

I do apologize. (Operator Instructions) Your first question comes from Darren Horowitz with Raymond James.

Darren Horowitz – Raymond James

Hey, good morning, guys. How are you?

Steve Blank

Good morning, good.

Darren Horowitz – Raymond James

Hey, Curt regarding the new Eagle Ford pipeline system that you guys are talking about with TexStar, of course that realizes to work and finalize a few things, but can you give us a little bit more color on the throughput and the storage agreements, I’m just trying to get a feel for the volume commitments and the contract duration there?

Curt Anastasio

Yeah, sure. We can give you some color, ask Danny to – Danny Oliver, go ahead Danny.

Danny Oliver

Well, let me start off with the pipeline itself, it’s a 200,000 barrel per day pipeline. This TexStar agreement they are basically in that pipeline that they will be filling at, talking about this 40 to 100,000 barrels per day of that pipeline space, but then we’ve – we’re already well in the conversations with other shippers that we believe will fill that line ultimately. It should start off receiving product in second quarter of 2012 and we expect the line could be fall by about that time 2013.

Darren Horowitz – Raymond James

Okay. Danny, is it still too early to tell what kind of contract duration on a blended basis you’re looking to achieve?

Danny Oliver

I think there will be good five plus years.

Darren Horowitz – Raymond James

Okay. And then just thinking about the approved lease option that you have for the adjoining 15 acres in Corpus, how are you guys thinking about incremental capacity at that North Beach terminal?

Danny Oliver

Well, we’re not entirely sure we’re going to need that land that we may have enough space as to handle it. It depends on how much of this crude is going to be delivered locally to refiners versus loaded out over our dock, but we’re working through those issues right now.

Darren Horowitz – Raymond James

Okay. And then last question from me, just from a bigger picture perspective and you guys have done a good job touching on this before, but when you think about all the opportunity that you could have across our Texas moving a lot of that product east with those five or six lines that you have going through touch Eagle Ford and Nibera. Has your thought process changed as it relates to maximizing efficiency on those lines or further expanding a lot of those opportunities?

Danny Oliver

No, in fact it’s a little better than what we had originally anticipated. You know about two other projects the Coke pipeline Projects and we announced this projects there is two others that we’re working on that are little too early to get into specifics, but I think across four different pipeline projects we’re looking at increasing capacity from or throughput from about 80,000 barrels a day to about 365,000 barrels a day ones those lines are full and that will take a year or so to get there ones they start flowing, but that’s what we think.

Darren Horowitz – Raymond James

Okay I appreciate the colors. Thank you.

Danny Oliver

You’re welcome.

Operator

Your next question comes from Brian Zarahn with Barclays Capital.

Brian Zarahn – Barclays Capital

Good morning.

Curt Anastasio

Good morning.

Brian Zarahn – Barclays Capital

Can you discuss – do you expect how much production do you expect to hedge with your Santonio refinery you expect to hedge the non-remaining unhedge volumes or you’re comfortable with this level?

Curt Anastasio

We’re comfortable where we are, we’re about 70% of the product yield we are able to lock in very favorable margins which give us that sort of pay out that I mentioned within two years. And then for Paul Brattlof is here who did the hedging, do you want to comment any further on that, we don’t plan to do any more at the moment.

Brad Barron

No, we only want to hedge the components that we thought we can get hedge accounts, we wouldn’t have any fluctuation in earning results, so I think this a conservative approach and really the upside is that we can just move further through the refineries that’s where we see, so I want some efficiency work down.

Curt Anastasio

Yes. We understand what he’s saying, what he hedge was highly correlated to the actual physical market, the balances of that was roughly 30% in the yield is product where we wouldn’t have that opportunity, we wouldn’t have that benefit for oil and some other things that come off the plan that are not highly correlated from a hedged standpoint.

Brian Zarahn – Barclays Capital

Okay. And in terms of this is a relative modest size acquisition, but it is diversifying your products late in the refining, are you in the market for more non asphalt refinery acquisition?

Curt Anastasio

No, we really aren’t and this was an opportunistic buy for us, because of all think Danny commented on that we’ve been very closely following what happens in the Eagle Ford Shale and where that oil is going and then it just so happen that the ownership of this plant went into bankruptcy really because they over expended themselves, they took on too much debt and so the bankruptcy trustee started a process and then started talking to us privately about buying the plant in a private cell prices which was – what we ended up dealing.

But no, I mean when you look at I kind of summarize where our growth capital is going and you see it’s all going in a storage and pipeline. And there is acquisitions that we done recently are all storage and one frankly that are most likely get done next are in the storage segment, so no this is not the start of a refinery acquisition program for a new start.

Brian Zarahn – Barclays Capital

And then looking at Bolero [ph] acquired some assets in U.K. from Chevron and included some pipeline in terms of assets, if you having any discussions with them about or have you look at them as a potential acquisition opportunity?

Curt Anastasio

No, we haven’t talk to them about that at all. We talk to them about lot of things, including things we can do more of together in South Texas, so it’s much more likely that we will do things with them right in our backyard and over in England.

Brian Zarahn – Barclays Capital

Okay. Finally, I appreciate the color in the CapEx, you have lot of new projects and some acquisitions. On the first quarter though can you provide what the total CapEx was?

Curt Anastasio

First quarter okay, I will dig it out for you right now. I just don’t have it now.

Steve Blank

Yeah, Brian. First quarter we spend a total of 66 on strategic and 8 on liability, so total of 74 million.

Brian Zarahn – Barclays Capital

Thank you.

Curt Anastasio

It’s going to be lot higher in the second to grow them in the third. First is probably the latest CapEx growth, yeah, that will be the latest CapEx quarter for us this year, excluding acquisition just organic growth capital and liability.

Steve Blank

Does that answer it.

Brian Zarahn – Barclays Capital

Yeah. Thank you.

Steve Blank

Okay.

Operator

Your next question comes from Stephen Maresca from Morgan Stanley.

Stephen Maresca – Morgan Stanley

Hi, good morning everybody.

Curt Anastasio

Good morning.

Stephen Maresca – Morgan Stanley

Curt, you mentioned competing supply for crude oil result on I guess in line to Houston and you were identifying – you are identifying some projects is that what you were talking about with the TexStar line?

Curt Anastasio

No, no. It's two different things going on. One on the – with regard to the Houston line, there have been less and a big chronically United Lines have been underutilized, not just this quarter, but for a number of quarters passed. And it's principally because refine is the Gulf Coast, refiner is a ship on that line are seeing a lot of better export opportunities particularly for distillates, to Latin America, to Europe (inaudible) putting it on a pipeline to Houston. So as a result and we think that it has continued for a while could continue for a while longer.

So as a result we are in the process of developing projects and it relate to what Danny was talking about on the oil and the liquids coming out of the Eagle Ford production that we think is going to fill up that line over the next one to two years. So it's really going to be a change in service of that line that have different shippers from the once that we're traditionally using a line at higher rates of utilization in the past that you know, because of that change in market conditions that I just mentioned the export market being favorite over Houston pipeline shipments. We are developing alternative shippers and uses for the line. So that was part of what Danny met when he said, yeah, we're going to fill up all these lines. The Houston line is included in that.

Stephen Maresca – Morgan Stanley

Okay. And then on the new Eagle Ford line, 200,000 barrels a day TexStar being possibly 40 to 100 are you waiting on gaining that remainder to 200 fill before we get from commitments standpoint before you come out with the – a more detailed announcement or more details in general?

Curt Anastasio

We’ll have more details when we have more definitive agreements, but the line is bill that exists.

Steve Blank

That 16A is talking about between three rails and core power, that’s already there.

Curt Anastasio

Our portion we have some tanks to build with the line exist.

Steve Blank

So by June, I guess is what we’re estimating will have…

Curt Anastasio

Yeah. Early summer we have the definitive agreement done and we’ll have with certainty we can give guidance on some of the principal financial highlight by that time.

Stephen Maresca – Morgan Stanley

Okay. And then finally, Curt, you touched upon just thinking of there is going to be more opportunities for you, more announcements possibly with this year opportunity, I mean where do you see the biggest opportunity for you guys whether it’s a region or a type of asset over the next 12 months?

Curt Anastasio

Yeah. For us it’s really been – on the pipeline side really been around the Eagle Ford and this Niobrara oil shale development more up towards Colorado and the Rocky’s because we have spare capacity in our pipeline and storage terminal assets that can be filled up by these developments. So that – those are the most likely announcements for us.

Stephen Maresca – Morgan Stanley

Okay. Thanks a lot everybody.

Curt Anastasio

Yep. Thank you.

Operator

Your next question from Joseph Siano with Morgan, I’m sorry, with Credit Suisse.

Joseph Siano – Morgan

Hi. Good morning.

Curt Anastasio

Good morning.

Joseph Siano – Morgan

So I guess first to just quickly follow-up on the refinery acquisition. How do you view? It seems like you’ve locked in some pretty attractive cash flows, but how do you view those cash flows in terms of how comfortable you are with paying that out? What kind of coverage ratio you thinking or feeling comfortable with among?

Curt Anastasio

Yes. It’s different from say buy an asphalt small refinery where you can’t lock in the margins the way you can hear. So, it’s actually our timing was very, very good on this for the strategy, parts here integrity because we bought the plan really at a very favorable crack spread compared to recent history. So we been able to lock those in, because of that we have a higher degree of confidence that the distributable cash flow from this asset that would be available for distribution to limited, so we've taken that.

As Paul mentioned we took the volatility out of it by using the future's markets to use hedges that are highly correlated to the actual physical sales of these product, like anything else you have to run the plans, you have to sell the products to capture the benefit. So I would say it's no risks because you locked in the margins, but it's have been substantially lower not just buying another refinery where you can take advantage of locking in those spreads.

Joseph Siano – Morgan

Right. Okay. And so, would that be something you try to keep rolling every year to keep that three to four year horizon kind of, hedged or is just opportunistic?

Curt Anastasio

I think we'll look at it all the time, yes, but right now we've got for – for this we got four years locked in for the gasoline, a close to 3, 2.5 we have balance in this year and then 2012 and 2013, so Paul and his guys will watch it all the time to see if there's something we can do extend or improve the economics that we have, so that is part of the whole process, but we're very happy with where it fits right now.

Joseph Siano – Morgan

Okay. Great. And in terms of incremental opportunities, I guess, you'd discussed all the opportunities around shale and but in terms of – on the international acquisition side, are you still pursuing anything there is – or you…?

Curt Anastasio

Yes. And those that we are and those are most likely to be in storage area, because there are still favorable locations both domestically and internationally, where big customers and traders, many of them already customers of ours we have a lot of interaction and feedback with them about where they want to be and where they would support with long-term commitments storage acquisitions by NuStar and so we do have some of those in Harper [ph]. And so if we do some internationally it’s most likely to be in the storage segment.

Steve Blank

And in addition to acquisitions, we’re still very active on the internal growth side in our storage segment, most notably the work going on at St. Eustatius and St. James.

Joseph Siano – Morgan

Right. All right. Thanks you, guys.

Steve Blank

Thank you.

Operator

Your next question is from Ross Payne with Wells Fargo.

Ross Payne – Wells Fargo

How are you doing guys?

Steve Blank

Hi, Ross, good. How are you?

Ross Payne – Wells Fargo

Hi, Curt if you could just comment a little more on which you were seeing out there in asphalt market from a demand standpoint? And secondarily, you’ve obviously, probably talked about the (inaudible) in this most recent purchase I have seen they are comfortable with the size of this refinery, where you guys are….

Curt Anastasio

Yes.

Ross Payne – Wells Fargo

Strategically in that…

Curt Anastasio

On the second one, yes and I’ll let you speak and chat more time in but basically, yeah, I mean it's a small deal we have locked in the margins and so we have talked about all that. With regard to where we are in the asphalt market, what we’ve been saying overall just in terms of the asphalt it would be – it should be slightly better than it was last year and we’re sticking to that for now, obviously in that segment we’ve really had a big pick up in the fuels marketing contribution to the bottom line of that segment just because it how well we’ve done on the crude trading and the fuel oil all those things that we invested in last year to do and start to come through at the bottom line. So that’s why like as I said we get big pick up.

But you know on the asphalt demand side I've got Mike still here. He’s a head of asphalt marketing (inaudible) too but overall I would say by historical standards and 2011 it’s still pretty tepid. The federal funding will be there you know they have the expansion for this year we still are pushing politically for a multi-year extension which would be better for everybody in the road repair, maintenance industry but the federal funding is there for this year there’s still stimulus dollars to be spent particularly in our main markets on the east coast where the stimulus spending lad last year compared to spending in other parts of the country.

Through the states are physically challenged but so far you know, all indications are the states are going to spend sort of their normal amounts of money on this area of their budgets and they have had up ticks in sales packs. You know, there is some modest economic recovery going on albeit not that great.

It’s probably the localities that are really being hurt to most right now because even though there is some signs of life in the housing market it's still very, very low compared to what it was and so you have locality that depend on property valuation for the revenue are struggling to do everything that they did in the eight day. But overall like I said we think demand sort of comparable to slightly better last year, you know, then you do have a little bit of you know the factor of how high pricing is going to go.

So far our guys have done a very good job keeping the asphalt prices up you know, outpacing the rise in the crude prices. You pay a little bit of a cost for that in the first quarter because you had I mentioned the wholesale customers kind of waiting to see if they can get better prices later so that hurts first quarter volumes on the other hand I think it’s a absolutely the right position for us to be in because now you have got very low asphalt inventory.

You know well below historic measures. You’ve got guys who didn’t went to fill, it will be there with the product when they finally cry out only when then need it. So I don’t know, you guys want to time in. There are also – it’s annoying, it helps us that there is an export market this year.

Steve Blank

I think, you said is exactly right. It’s the shift, we’re cautiously optimistic that the shift from most of our higher margin rack sales will happen this summer, so we’ve got a little bit expectation.

Curt Anastasio

I don’t think I would add that the whole industry has been very, very conservative to the net consumption because of the funding a lack there are, but now federal government has all for this year and you are going to get some activity, so we – even though the demand is also for the first quarter we expected to get exactly the number that occurs.

Ross Payne – Wells Fargo

Okay. Great. Thanks a lot guys.

Curt Anastasio

Thank you.

Operator

Your next question is from Michael Blum with Wells Fargo.

Michael Blum – Wells Fargo

History, good morning everyone.

Curt Anastasio

Hi.

Michael Blum – Wells Fargo

Maybe perhaps if you don’t mind a sort of dumb question, but just so I understand it, in terms of the latest asphalt acquisition, when you say you hedge your margins that means you hedge with the crack spreads, so you has both input cost mainly accrued and the product yield?

Curt Anastasio

Yes. It’s not a dumb question at all. It’s important to understand good people through around these terms and sometime, I spent 20 years trying to understand what people were saying in this business half the time, so it’s not a dumb question. But first of all, let me clarify one thing, the recent refining acquisition we did is not in asphalt acquisition. This plan does not make any asphalt at all and one of the disadvantages of running an asphalt play is you cannot lock in the margins in the futures markets the way you can with the plant that we just brought in San Antonio.

So that’s what we've done and what you do by locking in as you are basically selling a spread between a given crude oil price and a given product price and so that’s what we did, we said okay, the spread is – let's say $25 or something for the distilled, we've sold that to somebody else and we get paid for that overtime. Paul, you want to?

Paul Brattlof

That’s right. We brought crude in all the markets and we sold the products which is the spread Curt is talking about and so it’s really, it’s just how that spread goes over our plant, it should enjoy the benefit or make that extra money with the market as the spread go up even higher and we will find and make it and pay back those hedges.

Michael Blum – Wells Fargo

Okay. Thanks for that clarification. The second question just back to the transportation segment, you cited sort of changing “changing” market condition, you’ve already talked about the issues down Houston refining market. Are there any other sort of big picture conditions that are dynamics, that are effecting the transportation segment right now?

Curt Anastasio

No, no. I think we covered it there. It’s a little bit of a transition year for us to be honest in the transportation segment, because for many, many years and even in our first quarter results, you see that the throughputs were down but the financial results were a little bit better. This has been probably the steadiest segment that we've had in the 10 year since this company IPO and with really slow growth associated with it. And we’re going through sort of a transition year kind of like that again, we’re taking some hits on some of the lines because of the change market conditions, we mentioned.

But we finally have a lot of growth associated with the pipeline transportation segment, which we really have and had since the beginning of this company because of this oilshield development. And so over the next one to two years, that’s going to be a big growth area for us and you are going to see a lot of that benefit flow into the bottom line. So I hope that they’ll have full summary of where we are and where we are going in the near term.

Michael Blum – Wells Fargo

Great. Thank you very much, Curt.

Curt Anastasio

Thank you.

Operator

Your next question is from Noah Lerner from Hartz Capital.

Noah Lerner – Hartz Capital

Good morning, everyone.

Curt Anastasio

Good morning.

Noah Lerner – Hartz Capital

First question, just to beat to dead horse a little bit over the age acquisition. I was just curious, with the asphalt probably because you couldn’t doing any kind of hedging, you generally had a rule affirm that 50% of, you expect to cash flow you would build into the distribution projection or the cash flow for distribution and 50% you won’t. I’ll give you some downside that you wouldn’t find yourself for the big gap on your distribution.

I was curious if you think of the cash flow off of this refining asset similarly, because even though you have hedge for three or four years, nobody knows what the correct spreads might be a year from now, two years from now looking out for that period that you could end up with the whole kind of like a contract renew and you are not necessarily having a customer to fill up that gap. So just curious if you give any thought to how you are going to use that cash?

Curt Anastasio

Well, first of all, no, we are not doing the same thing like the 50% hold back on this plan because we have been able to lock in the margins for the periods that we have mentioned. But it’s a relatively small part of our overall company. So we’re going to manage our distributable cash flow, our coverage and our distribution not just depending on whether the refinery is cash flow, how much is cash flow in three to four years from now, but how the overall company is cash flow in three or four years from now.

And as you can tell from the comments, we've laid out in this call and in our recent calls, lot of our growth is in the stores and pipeline segment going forward, which further diminishes the significance of this $41 million acquisition going forward. So no, we are not going to have the same whole back at the asphalt because it’s different from a financial point of view.

We think this throws off cash flow that will be available for distribution more so, as I said in my remarks and we would have this year without the acquisition and I don’t really see it as an issue for our management of our distribution growth going forward, because it’s a relatively, it's quite a small part of our overall company, especially as our company grows in the storage and pipeline segments. When you start talking about three, four, five years out from now this is going to be substantially different company than it is today and this plan will be even the smaller part of the overall picture.

Noah Lerner – Hartz Capital

Great. Good point. I guess another question is really small, but just for clarification on the Paulsboro situation where you paid $5 million to terminate a contract earlier, so you didn’t have to build the new tank?

Curt Anastasio

Right.

Noah Lerner – Hartz Capital

Could you share with us what the approximate cost would have been to build the new tank?

Curt Anastasio

Yeah. It would have been more than we paid in the buyout for sure, but it’s not only really just the cost, to be honest with you it was also the timing. We had to be ready to take this a very highly accretive deal for us. Let me take one step back. This Pergrino crude deal with Statoil does a couple of things for us.

First of all, it’s a more – it’s a very valuable crude contract was better than our alternatives even from the Venezuelans. But secondly, we said when we bought the CITGO asphalt assets in 2008 then we would work over the next few years to diversify the source of crude supply to this plant. We run some iron.

We’ve run some other crude’s, so we’ve made some minor twist to the plant to be able do that on a spot basis, but this is our first term contract that moves us away from the Venezuelans over time. And so it had a lot of attractions to us because it’s accretive, it is a valuable crude to run, it’s an asphalted crude, but also it diversifies that crude supply which we liked about it too.

Now the – Rick wants to share, head of our operations. I remember the tank building cost, but it was higher than the 5 million.

Rick Bluntzer

It was actually up around 8 to 10 million.

Curt Anastasio

10 million.

Rick Bluntzer

And the timing we would have missed that window for this opportunity.

Steve Blank

Yeah, so when we consider the opportunity of being able to run the cheaper crude and the cost differential is like a one or two year payback on this decision. So as well we’re taking the cash, hidden the charge for the first quarter to be able to run this crude when the field comes online.

Curt Anastasio

We don’t like to lag in the first quarter, but it was definitely the right decision from the business standpoint.

Noah Lerner – Hartz Capital

I mean it’s a true – I was just trying to part expression, get inside your guys head and how you guys think this will approve because one could argue that that really is a $500 million cost to this tank because that what’s you are paying to free up the tank?

Curt Anastasio

Yes.

Noah Lerner – Hartz Capital

So I was just trying to….

Curt Anastasio

That’s true. As compared to spending, Rick just said 8 to 10 and then missing really more important.

Noah Lerner – Hartz Capital

It is your timing it seems like.

Curt Anastasio

The aide is missing the opportunity that we have Statoil.

Rick Bluntzer

Yeah. Obviously, the one to 2 year payback doesn’t come from difference between 5 and 8 to 10.

Noah Lerner – Hartz Capital

Right.

Curt Anastasio

It’s the savings on the crude cost and its payback.

Noah Lerner – Hartz Capital

Great. Thanks a lot. Really appreciate the information.

Curt Anastasio

Thank you.

Operator

Your next question comes from John Tysseland from Citi Group.

John Tysseland – Citi Group

Hi, guys. Good morning. I just had a couple of quick clarifying questions regarding around refinery hedges. Do you have any kind of contingency plan if the refinery goes down, I mean obviously you brought in multi-year spreads but what happens if the refinery goes down, how do you handle that?

Curt Anastasio

We get it back running again that’s why we got – that’s why we got whole bunch of people with refine experience in this company, but I don’t think if anybody wants to dive in….

Steve Blank

Well, if you look at our first year capital spend, the $10 million, most of that is going to go into mechanical reliability trying to improve the efficiencies of the refinery and then in outgoing years, we’ll spend an additional $20 to $25 million on the same type strategies.

Curt Anastasio

And the hedge levels that we use plant for two weeks of turnaround….

Steve Blank

Two next weeks.

Curt Anastasio

Upon plant, unidentified downtime. So we hope we’re conservative just in the level of the hedges we've done.

John Tysseland – Citi Group

And then also on – you mentioned that I think throughput was 11,800 barrels per day of time. Is that kind of a flat rate that you would assume over the next several years or….?

Curt Anastasio

Okay. That’s kind of sort of current average like – if you look at – we've own this thing for a couple of weeks, but if you look at the last week or so, it’s average above 11A. The problem they’ve had the way – they were very up and down because they had a lot operating inefficiencies and so forth that Ricks commenting on that we can solve. But overtime we'll get it up above 11A. We are using that for right now as pretty much what we based our economics on, when we talked about – thinking the press release we talked about an IRR about 70%. We used the 11A there with the downtime that Steve mentioned, its two weeks of plan. The two weeks of unplanned downtime every single year.

And we really think we have been conservative on that. So no over time we will get the plan up, we will see a high we can get it. We are thinking maybe 13,000 barrels a day is more of a normal run rate than 11A and with the margin environment we’re in right now, every barrel is money. So sooner we can get that rate up to better for everybody.

John Tysseland – Citi Group

And then lastly, I think you had mentioned what – it was 15 to 20 million of inventory that you purchase with the transaction, is that correct?

Curt Anastasio

I don’t think I mentioned there inventory. No, I said, the networking capital is going to be pretty much close to nothing then we are going through that adjustment right now and so we are finalizing that with the seller. But it will be minimal to zero, we think.

John Tysseland – Citi Group

Okay. And then do you plan on hedging any of that inventory, I know when you did the asphalt acquisition you chose to hedge some of the inventory? How do you handle that at this time?

Curt Anastasio

That was quite different, because there we did by a substantial amount of inventory. It’s like over $300 million towards its inventory. I mean here as I said the that working capital is going to be around zero…

Steve Blank

Curt, the only thing I would say, is the inventory levels are so minimal that we’ll turn the inventory level for every two or three day and so it’s not like something exposure to (inaudible).

Curt Anastasio

They don’t have a lot of storage. It’s much different than the asphalt where you've got periods, where you are not selling in your winter field and you are holding inventory and all that. Hear your pain 20 days the month following the crude purchase, so you got 15 to 20 days of credit but return to your product employee 4 days. So it’s really almost negative working capital actually.

Steve Blank

That's why I try to say in my remarks. So it’s quite different from when we took the decision to hedge a portion of the single asphalt inventory.

John Tysseland – Citi Group

Nasty color. I appreciate it and sorry, to hop on small addition but it’s….

Curt Anastasio

It’s an important point. I am glad you are helping us clarify, bring it out.

John Tysseland – Citi Group

Well, I appreciate the color. Thank you.

Curt Anastasio

Thank you.

Operator

Your next question is from James Chapel with Height.

James Chapel – Height

Hello, James you there? Not sure if we've James.

Operator

And James has actually withdrawn that question. Your next question is from William Maro. He is the Private Investor.

Curt Anastasio

Mr. Maro.

Operator

Mr. Maro your line is open. That question has been withdrawn. Your next is from Michael Cerasoli from Goldman Sachs.

Michael Cerasoli – Goldman Sachs

Good morning. I too have just a few questions on the AGE assets. I am just kind of curious to know, how much refining capacity exists in the San Antonio region and if you could talk a little bit about that market, that would be helpful?

Curt Anastasio

San Antonio proper this is it. Now that obviously we are in South Central Texas, there is a wire refining capacity in the region, a lot of which we serve like Valero’s plant and Three Rivers, but this is all there is in San Antonio proper.

Michael Cerasoli – Goldman Sachs

Okay. And then just on asphalt guidance, it sounds like your views haven’t change much from last quarter's conference call, is that the case when I’m trying to get at is the underlying change to your EBITDA guidance for the segment that you exclude the impact of AGE?

Curt Anastasio

Yeah. We did reduce it some, but for the reasons I tried to outlined in my notes with regard to the unit train projects that we’re not going to do on the west coast.

Steve Blank

You are talking total. No, I would say that asphalt that segment really hasn’t change since the first quarter call other than going up because of the AGE contribution.

Michael Cerasoli – Goldman Sachs

Okay. That’s what I was looking for and then…

Curt Anastasio

I think on overall, we are down a little bit from what we stock in January, really on the storage side due to the unit train on the west coast. It’s really just a few things, more turn around activity impacting us on tank farms and what not and other’s people refineries.

Michael Cerasoli – Goldman Sachs

Okay. And then just finally and separately on refine product throughput, do you guys get the sense if there is any demand destruction occurring as a result of the higher prices at the pump right now?

Curt Anastasio

Yeah, there hasn’t been much yet. But at least create prices, keep going up, my bet is there will be. You start to see a little bit of size of softening when you do like – look at four week average for gasoline demand and all that. You start to see consumers back off some on their purchases, but it’s really been immaterial to this point even with the run up to close to $4 a gallon.

Now if it goes higher than that, than I think we will be having a different conversation, but right now it’s really been, it’s really been minimal, if anything – or anybody have any comments on that?

Michael Cerasoli – Goldman Sachs

Okay. Thank you. That’s helpful. Thanks for taking my questions.

Operator

Your next question is from Selman Akyol with Stifel Nicolaus.

Selman Akyol – Stifel Nicolaus

Thank you, good morning.

Curt Anastasio

Good morning.

Selman Akyol – Stifel Nicolaus

Does it relates to the Turkey acquisition clearly you are putting more capital there, but I am just curious is this going in line with your expectations better than what you thought?

Steve Blank

It will be.

Curt Anastasio

Yeah. Turkey is like a miniature version of what we used to say about ST. James when we brought it based on what he done, historically, we paid a pretty high multiple for ST. James. But because we saw the potential level we knew on a go forward basis that after you’ve factored in the acquisition cost across the capital, we actually had a really, really good deal and turkey is a little bit like that.

We brought an asset in a great location with a booming local economy that was run by a local entrepreneur that didn’t really have the business that we’re going to bring to it. You’ve got a lot of local little local customers. We’re going to bring big international customer to that site. So what you are going to see with Turkey over the next couple of years is substantial improvement.

It doesn’t do much for us this year, next year it starts to do noticeably better and then we think from 2013 forward this is like a 5 to 6 times multiple deal when you factor and the acquisition price plus the 20 million of capital that we’re going to spend on it and then so the EBITDA run rate from 2013 forward and it turns out to be an excellent deal.

But we are going to go through an adjustment period where they 2011, 2011 because we’re basically wiping out and changing over who they dealt with and the way did business. It’s kind of similar to what we did at St. James Louisiana. So short-term it doesn’t give us much, but over the next couple of years, it’s going to turning out to be a very attractive deal.

Selman Akyol – Stifel Nicolaus

Okay. And you also talked about you are saying other international opportunities, would that also involve a partner as well or would you…

Curt Anastasio

No necessarily, no. It’s – we tend to have a partnership deals on the negative side of the ledger because they will always springs complications, having to deal with the partner. We like to sort of do things our way if you will. But it's not – we won't rule it out. There are some jurisdictions where as to your advantage to have a local partner with local knowledge and local customer base. But not necessarily, we got deals in the hoper [ph] right now which would be 100% deals in international locations.

Selman Akyol – Stifel Nicolaus

Great. Last question. Just housekeeping here, can you remind us revolver capacity?

Curt Anastasio

It is 500 million at the end of March. That's 1.2 billion total size but 500 is available tools.

Selman Akyol – Stifel Nicolaus

Thank you. Appreciate it.

Curt Anastasio

Thank you.

Operator

Your next question is from Yves Siegel with Credit Suisse.

Yves Siegel – Credit Suisse

Thanks. Good morning.

Curt Anastasio

Good morning.

Yves Siegel – Credit Suisse

Just real quick ones, beyond the $35 million that you’ve spend over the next couple of years on that refinery acquisition, what – I am sorry?

Curt Anastasio

That was – five years.

Yves Siegel – Credit Suisse

Okay. Because my question was going to be what kind of run rate on maintenance CapEx do you think it have on the refinery?

Curt Anastasio

Well the 35 was the over the next five years. And we have some and when you got up beyond that we have ups and downs and Rick do you have any…?

Rick Bluntzer

Well, the run rate is…

Curt Anastasio

That said what I gave you a seven.

Rick Bluntzer

Right.

Curt Anastasio

And after that some years a little less, some years its little more.

Steve Blank

Some of it, I think as we get into the – like as Rick gets into it. We have a non deferred long, some of that what we currently are just labeling reliability up 70 years, let say on average five years may actually be strategic growth, because it's probably going to have a return.

Yves Siegel – Credit Suisse

Okay.

Steve Blank

Okay.

Yves Siegel – Credit Suisse

Yeah. I would just want to back into what the distributable cash flow – it’s actually going to be strong off?

Curt Anastasio

I think I gave you at Analyst 2011, right?

Yves Siegel – Credit Suisse

5 to 10.

Curt Anastasio

And that’s right?

Yves Siegel – Credit Suisse

Right.

Curt Anastasio

And that’s pretty representative of what we have and now if you increase it for a full year, that's pretty almost linearly, that's pretty representative what we have in our economics over the next several years.

Steve Blank

The reliability is probably a little heavier these years simply because we are going to get very decent stuff and the run rate goes down a little bit but seven on average for the five years is already they think of it.

Yves Siegel – Credit Suisse

Okay. And then when you look at the overall growth CapEx for the year, what's like the single largest project that is in that number?

Curt Anastasio

So it’s going to be St. James, (inaudible) stations and those two. They are competing for that top spot and that’s not just – tank expense, doors tank expansions.

Yves Siegel – Credit Suisse

It really St. James. St. James is really the big one and I think James what’s the number there in that?

Curt Anastasio

For 2011 its 90, about $100 million.

Yves Siegel – Credit Suisse

Okay. And then where I am going with that is just wanted to figure out how do you thing returns are going to be trending over the next several years?

Curt Anastasio

On those type of projects?

Yves Siegel – Credit Suisse

Yeah.

Curt Anastasio

What we've been building in our economics that are like six, six to seven time multiple.

Yves Siegel – Credit Suisse

Okay.

Steve Blank

But I don’t see it really changing.

Yves Siegel – Credit Suisse

Yeah.

Steve Blank

Its location dependent, but we have got some pretty good locations.

Yves Siegel – Credit Suisse

Well and the other aspect of that to is that you would think there will be lower execution risk as well because they are not that sizable, I mean?

Curt Anastasio

Yes. Well, for us they are but I hear you.

Yves Siegel – Credit Suisse

Thanks, guys.

Curt Anastasio

Okay.

Operator

Our next question comes from Avi Feinberg with Morningstar.

Avi Feinberg – Morningstar

Good morning, everybody. Thanks for all the detail around acquisition and the segment outlook. Just on the transportation outlook, you mentioned the roughly 4% decrease in the throughput asphalt based on some of the changing market dynamics and turnaround schedules. I am just wondering, is the base business going to be pretty flat, do you assume or is that factor in the 4% one way or another.

Curt Anastasio

Are you talking about refinery.

Steve Blank

Transportation?

Avi Feinberg – Morningstar

Transportation, yeah.

Rick Bluntzer

Yeah. I think the base business other than that Corpus that Houston line that Curt had mentioned that we’re looking for an alternative solution. I think the base business is pretty solid and what we’re seeing here in the first and second quarter is more turnaround related than demand related.

Avi Feinberg – Morningstar

Okay. Great. And are the impacts from the turnaround you mentioned particularly pronounced this year, I mean if you think relative to previous years, is that a specially a large impact this year?

Rick Bluntzer

I don’t know about year-on-year, but they are loaded in the first and second quarter. That’s where the real effective turnaround is for us, but year-on-year, I don’t know if I have.

Curt Anastasio

May be a little heavier this year, but not….

Rick Bluntzer

Maybe.

Avi Feinberg – Morningstar

Okay. I appreciate it.

Rick Bluntzer

Okay. Thank you.

Operator

There are no further questions in the queue at this time.

Chris Russell

Thank you operator. I would like to thank everyone for joining us on the call this morning. If anyone have any questions please call NuStar’s Investor Relations. Thanks. Have a great day.

Operator

This does conclude today’s conference call. You may all disconnect.

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