NuStar Energy LP's (NS) CEO Brad Barron on Q4 2015 Results - Earnings Call Transcript

| About: NuStar Energy (NS)

NuStar Energy L.P. (NYSE:NS)

Q4 2015 Results Earnings Conference Call

January 29, 2015, 10:00 AM ET

Executives

Chris Russell - IR

Brad Barron - President & CEO

Tom Shoaf - EVP and CFO

Danny Oliver - SVP, Marketing and Business Development

Analysts

Gabe Moreen - BofA, Merrill Lynch

Steve Sherowski - Goldman Sachs

Brian Zarahn - Barclays Capital

Selman Akyol - Stifel Nicolaus & Company

Shneur Gershuni - UBS

Justin Jenkins - Raymond James

Steven Schweitzer - Wells Fargo

Jeremy Tonet - JPMorgan

Brian Gamble - Simmons & Company

Operator

Good morning and thank you standing by and welcome to the NuStar Energy LP and NuStar GP Holdings LLC Fourth Quarter 2015 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, Chris Russell, Treasurer and VP Investor Relations. You may begin your conference.

Chris Russell

Thank you, Tony. Good morning everyone and welcome to today’s call. On the call today are Brad Barron, NuStar Energy LP and NuStar GP Holdings LLC's President and CEO; and Tom Shoaf, Executive Vice President and CFO, along with other members of our management team.

Before we get started, we'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. These statements are subject to the various risks, uncertainties and assumptions described in our filings with the Securities and Exchange Commission. Actual results may differ materially from those described in the forward-looking statements.

During the course of this call, we will also make reference to certain non-GAAP financial measures. This non-GAAP financial measures should not be considered as alternatives to GAAP measures. Reconciliations of certain of these non-GAAP financial measures to U.S. GAAP may be found in our earnings press release, with additional reconciliations located on the financials page of the investors section of our websites.

Now, I am going to turn the call over to Brad.

Brad Barron

Good morning and thanks for joining us today.

This morning I’m happy to report that we had a great quarter and we exceeded a one-to-one distribution coverage ratio for our second year in a row. Our 2015 coverage ratio of 1.11 times is our highest annual distribution coverage since 2009.

For a second consecutive year, we also generated our highest annual EBITDA and DCF in the partnership’s history. This was in the midst of a very challenging time in our industry, which I’ll touch on later in the call, but first let me recap a few highlights from 2015.

If you recall our 2015 got off to a great start when we purchased the remaining 50% interest in our Linden Terminal joint venture. Owning this terminal outright has provided synergies with our adjacent terminal and we are evaluating a potential storage expansion at the facility.

In late February, we completed an expansion of our South Texas crude system that increased the throughput capacity of the system and contributed to the record throughput volumes we experienced in the first half of the year.

In August, we completed construction of an addition 400,000 barrels of storage at our Corpus Christi North Beach terminal that supports our South Texas system and provides our customers with the flexibility to segregate and deliver crude oil and processed condensate.

And in October, we completed projects that connect our Oakville to Corpus Christi 16-inch crude oil pipeline to the major refineries in the Corpus Christi area, which has provided our customers additional options for marketing their crude oil.

In last half of 2015, we also completed four pipeline projects targeted at increasing distillate and propane supply throughout the upper Midwest. These projects included and 8-mile 8-inch pipeline at our Conway, Kansas facility and an expansion of our Rock Rapids Terminal for additional propane supply to CHS, one of our largest central east region customers. Two more projects are scheduled to be completed in the Upper Midwest later this year.

During 2015, we also started construction of two 360,000 barrel storage tanks at our St. James Louisiana terminal. These tanks are scheduled to be in service by mid-2016.

To wrap up the year, on December 31 shortly after the export ban was lifted we loaded the first U.S. cargo -- first U.S. export cargo for ConocoPhillips. This was the first U.S. crude oil to be exported to a country other than Canada in more than 40 years.

Before I turn the call over to Tom let me spend a few minutes discussing the current industry environment as well as our outlook and growth plans for 2016.

Since the third quarter of 2015 earnings call, market fundamentals have continued to falter. Crude has continued its historic decline and has dipped to lows not seen in 13 years and currently is off about 75% from its recent high.

At the same time, MLP evaluations have disconnected from business fundamentals and appear instead to be tracking crude prices. As such so we do not believe NuStar’s unit price reflects the solid financial results and the stability and diversity of NuStar’s business.

Lost in all the hoopla over falling crude prices is any consideration of either NuStar’s strong financial performance or any semblance of a rational assessment of NuStar's solid balanced asset portfolio.

Almost half of our EBITDA comes from our Storage segment, which had a record year in 2015 and is expected to have another good performance in 2016. Our storage assets are primarily crude and refined products facilities and they are effectively full. We expect our storage assets to continue to perform well this year, 2017 and beyond.

On the pipeline side, NuStar has a strong demand pool asset base, which performs well regardless of crude prices. Many of our lines are the primary source of crude supply and refined product off-take for our refinery customers. So the refinery runs and we think they will in this crude price environment, they will continue to use our pipes.

On the relatively narrow proportion of our pipeline and storage operations that are devoted to the Eagle Ford shale volumes are exposed to any significant impact from current commodity prices and market volatility.

That exposure is mitigated substantially through our long-term contract and minimum volume commitments with creditworthy customers. NuStar’s Eagle Ford shippers are solid household names, not small producers with strained balance sheets.

I want to emphasize the Eagle Ford portion of our business is a narrow slice of our operations and comprises less than 20% of our total 2015 segment EBITDA. Throughputs in these Eagle Ford pipeline and storage assets were down only 18% in the fourth quarter of 2015 compared to the record throughput levels we reached in the first quarter of the year.

So to put that in perspective we're talking about an 18% reduction from an all-time high on less than 20% of our business. That is 3% of our segment’s EBITDA.

Given the T&D floor on our Eagle Ford pipelines and the strength of the other 80% of our business you can easily see why I believe our current unit price does not reflect NuStar’s performance or outlook.

Turning back to our thoughts on 2016, our other pipeline assets should continue to perform well this year. In fact our Pipeline segment should benefit from the Upper Midwest Pipeline projects I mentioned earlier as well as our project to increase the capacity and flexibility of our ammonia pipeline system.

We're forecasting Eagle Ford throughput slightly above our minimum volume commitments for all of 2016, which is consistent with the volumes we've seen so far in January.

The impact of this change will be included in the 2016 segment guided Tom -- segment guidance that Tom will give you in a few minutes. Obviously if throughput were to increase during the year, we could see upside in these projections.

We also expect our storage segment to perform well in 2016. 2015 was an extraordinary year for our storage segment distinguished by record Eagle Ford throughputs at our Corpus Christi North Beach terminal, higher than projected throughput activity and renewal rates at several of our terminals along with higher than expected throughput revenue similar to foreign terminals.

In 2016, as the segment returns to a more normalized run rate, we expect the storage segment to be slightly lower than 2015's banner results, but still to remain strong. So let me spend a few minutes talking about our strategic capital spending and financing plans for 2016.

We've budgeted $360 million to $380 million this year. This is down significantly from the $471 million we spent on internal growth and acquisitions in 2015. The decrease is now from a lack of good projects. Rather it reflects our results, prioritize and modify or defer our capital projects in order to meaningfully reduce spending in order to avoid having to access the capital markets.

As you are well aware, MLP yields and credit spreads including NuStars are currently at very high levels, which make the equity capital markets a very expensive financing alternative. As a result, we're exploring all options to avoid the need, access the equity capital markets in 2016 and we have no plans to cut our distribution now in the foreseeable future.

Our list of capital projects for '16 are project to complete construction on our list of '16 is to complete construction of 1.2 million barrels of storage scheduled to be brought online during the year. These projects will benefit both our pipeline and storage segments and are associated with our upper Midwest pipeline project in our St. James storage expansion.

Together with our planned ammonia expansion, these projects will comprise $75 million of our planned strategic capital spend for the year. We've planned to spend around $125 million on our project to develop new pipeline infrastructure to transport LPG and refined products in the northern Mexico.

As you know, we've been working with PMI on a joint venture to do this and in the late 2015, we agree with PMI and PEMEX with the project we better for all three companies if we structured it as a straightforward T&B contract directly with PEMEX.

Last week, I traveled to Mexico to meet with the Director General of PEMEX, Emilio Lozoya. At that meeting, we agreed on all major terms of the transaction. We expect to execute the final agreement in February and we expect to spend much of the capital for this project in 2016.

So the storage projects along our PAMEX project total about $200 million. Our slate of other potential projects includes discretionary spending on various storage projects that we would like to do if the projects have adequate returns. These are projects that we have the option to refer if we believe that our access to capital market is restricted.

The projects we select in 2016 will be financed in part with approximately $100 million of excess cash on our balance sheet. Last year we worked to lower our repatriation cost significantly so that we can repatriate cash from some of our foreign entities later this year. We can think of this as a cheap equity alternative.

We also have room under our $1.5 billion credit facility to help fund these projects and although less likely, we can access the convertible preferred market if needed. So you can see, we have good projects in our capital budget, but we also have flexibility in the projects we choose to do and the way we will finance them.

With that, I'm going to turn the call over to Tom Shoaf, NuStar's Executive Vice President and CFO to provide you with some additional detail on our third quarter results and 2016 projections. Tom?

Tom Shoaf

Thanks Brad and good morning, everyone.

For the fourth quarter of 2015, we reported the DCF from continuing operations available to limited partners with $1.15 per unit, which covered the distribution to the limited partners by 1.05 times.

EBITDA from continuing operations was $151 million compared to $136 million for the same period last year, while EPU for the fourth quarter of 2015 came in at $0.61 per unit, which was above the fourth quarter guidance.

Turning to our segment performance, fourth quarter 2015 EBITDA in our storage segment increased 24% to $85 million, $17 million higher than the fourth quarter of 2014. Storage lease revenues increased 11% due mainly to the benefit of us now owning a 100% of the Linden terminal, as well as higher overall system utilization and higher renewal rates at some of our terminals.

EBITDA in our pipeline segment increased to $90 million, which is $4 million higher than the fourth quarter of 2014. Although, throughput revenues were mostly flat compared to the fourth quarter of 2014, the segment experienced a 10% decrease in operating expenses due mainly to ramp and power cost savings on our South Texas crude oil pipeline system.

Throughputs on our refined product pipelines increased 3% to 551,000 barrels per day. Higher volumes on the central east system in the fourth quarter were due large part to higher refining maintenance last year and our midcontinent propane expansion for CHS. These increases were mostly offset by maintenance and operational issues at our Texas refineries that we serve.

Throughputs on our crude oil pipeline system decreased 11% to 435,000 barrels per day as the segment experienced a decrease in volumes, mostly as a result of decreased production coming out of the Eagle Ford.

During the quarter, total Eagle Ford volumes average about 238,000 barrels per day while South Texas volume strictly into the Corpus Christi North Beach terminal averaged about 161,000 barrels per day.

Our fuels marketing segment earned $3 million of EBITDA during the quarter comparable to the fourth quarter of 2014.

For fourth quarter of 2015, our G&A expenses were $27 million, also comparable to the fourth quarter of 2014. Interest expense net of interest income for the fourth quarter of 2015 was $34 million, up $2 million from last year's fourth quarter.

Fourth quarter 2015, income tax expenses of $5 million were higher mainly due to deferred taxes on our planned repatriation of foreign cash in 2016. Our December 31, debt balance was $3.2 billion, while our debt to EBITDA ratio was 4.5 times.

On January 28, NuStar Energy's Board of Directors declared a fourth quarter distribution of $1.095 per unit, which will be paid on February 12. NuStar GP Holdings Board also declared a fourth quarter distribution of $0.545 per unit, which will be paid February 16.

Now, let me spend a few minutes talking about our projections for the first quarter and full year 2016. First quarter 2016 EBITDA results for our storage segment should be slightly higher than the first quarter of 2015 EBITDA results while first quarter results in our pipeline segment should be slightly lower than the first quarter of 2015. First quarter 2016 EBITDA results for the fuels marketing segment should be lower than the first quarter of 2015.

During the first quarter of 2016, we expect G&A expenses to be in the range of $26 million to $28 million, depreciation and amortization to be $54 million, income taxes to be around $4 million and interest expense to be $36 million.

Based on these projections, first quarter 2016 earnings per unit should be $0.40 to $0.50 per unit, while distributable cash flow from continuing operations per limited partner unit should be in the range of $1 to $1.10 per unit.

With regard to segment EBITDA guidance for the full year 2016, our overall expectations are essentially unchanged from what we previously provided. However, we have adjusted our EBITDA for the storage and pipeline segments. We now expect our storage 2016 EBITDA to be $310 million to $330 million, up approximately $15 million from our previous guidance.

We now expect an increase in storage rates and throughput activity at several of our terminals compared to our initial guidance. However, we expect these increases to be countered by lower expected South Texas crude throughput volumes moving into our Corpus Christi North Beach terminal and lower expected revenue from our foreign terminals.

Pipeline segment 2016 EBITDA is not expected to be in the range of $335 million to $355 million, lower than previous guidance due to reduced Eagle Ford throughput projections for 2016.

We still expect 2016 EBITDA results in our fuels marketing segment to be in the range of $15 million to $35 million. Our 2016 strategic capital spending currently remains unchanged for now at $360 million to $380 million for strategic capital and approximately $35 million to $45 million for reliability capital.

However, as Brad mentioned earlier, we're still in the process of reviewing our capital projects to ensure the projects have adequate returns before we make the final decision to move forward, because we want to avoid accessing the public debt and equity markets. Based on these 2016 projections, we expect to once again cover our current distribution for this year.

And now, let me turn it back over to Brad for any final remarks.

Brad Barron

Thanks Tom. 2015 was another excellent year for NuStar. During the year, we increased our profitability, acquiring and restricted some outstanding assets and achieved a coverage ratio in excess of one times for the second year in a row.

I am particularly proud that NuStar finished the year with a 1.11 times coverage ratio while at the same time earning the highest EBITDA and DCF in the company’s history. And while we expect oil markets to remain volatile for the foreseeable future, NuStar is particularly well positioned to whether the storm due to the strength of our diversified asset base.

While much of our growth in recent years, has been around our assets in Eagle Ford I want remind you again these pipeline of storage assets comprise less than 20% of our total 2015 segment EBITDA. And of that 20% approximately 73% of our Eagle Ford revenues are committed under long-term take-or-pay contracts with strong creditworthy customers.

A significant proportion of our other pipeline throughput volumes are demand pull pipelines that support robust refining operations and of course we benefit from our stable fee-based storage operations, which were at 99% utilization rate when you factor out our mothballed Piney Point facility.

So as we go through 2016 we will continue to focus on growing our core fee-based storage and pipeline operations while there is distributable cash flow to organic internal growth projects and synergistic acquisitions.

So at this time I will turn it back over to the operator.

Chris Russell

We can open up the call for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Gabe Moreen.

Gabe Moreen

Good morning everyone. Thank you for the update. Appreciate it, couple good questions I guess a several prior question for Tom just on the 4.5 times leverage can you just talk about how high you would feel comfortable taking that up relative to where you were current I guess, limits are on those metrics?

And then also second part to that in terms of preferred being a last option is that a market you've actually been exploring thus far or is that something you've yet to sort of dip your toe and to see where pricing might be?

Tom Shoaf

That’s a good question, so in terms of where I am comfortable, we’ve always been saying in the past that my comfort range was more in the 4 to 4.5 range and that’s kind of where we have been operating before.

And as I mentioned on the call we went up to about 4.5 times at the end of the fourth quarter. Comfortable, I am comfortable at 4.5, but I think given the current equity market and where things are, I think we have to get a little bit less comfortable with those type of ratios and if need be I could see that running up maybe a couple of bps maybe to the 4,7 mark, but I don’t really feel comfortable taking it up too much further than that.

And so with that about the preferred market, no, we’re not actively seeking a preferred issuance right now at all. I think that's just something we deem that’s in our toolbox if we needed it.

We're obviously trying to avoid any entrance into any equity markets whatsoever whether it’s the preferred market or the common market. So, we just want to reiterate that that’s something in our toolbox. We have several things we can use to avoid the equity markets and that’s one of them but it is a last resort type item is kind of how we view it.

Gabe Moreen

Understood thanks Tom and then as a follow-up, I don’t know if you covered this on the call but the opening remarks about a potential expansion at Linden just to be clear that’s not in the ‘16 budget and can you talk just bigger picture what that expansion would entail and then timing on that.

Tom Shoaf

Yeah, I think it is in the '16 budget, but you want to talk little bit Danny about that

Danny Oliver

Yeah, we do have some money in there for the '16 budget. We have a lot of interest in it that’s one of those discretionary projects that Brad mentioned that we’re evaluating the returns on that project given our current cost to capital and we have to make a decision if that's something we'll move on this year or defer.

Brad Barron

Yeah, it's really important because some of these projects, we obviously are in the process of reviewing our capital program and we have to stuff side what’s in and what’s out and that’s going to be an ongoing process for us.

Gabe Moreen

Understood. Thanks guys.

Brad Barron

Yes.

Operator

Your next question comes from the line of Steve Sherowski.

Steve Sherowski

Hi good morning. I believe on your opening comments you said that your forecast for the Pipeline segment for 2016 is just slightly above your NVCs, is there any way you could quantify if throughputs fell to NVCs what the financial impact would be on EBITDA?

Danny Oliver

Yes Steve, this is Danny Oliver, if we took them all the way down to minimums for the entire year, you’re looking at about $6 million of revenue.

Steve Sherowski

You said total -- you said pipeline volumes, but that is only Eagle Ford?

Brad Barron

That is Eagle Ford, yes. Eagle Ford is slightly above minimum if we were to get down minimum just like Danny just mentioned.

Steve Sherowski

Okay. No that’s helpful thanks. And then how much revolver capacity do you have now? I think you have like $560 million as of last quarter?

Brad Barron

$580 million.

Steve Sherowski

$580 million, okay. Great. That’s it for me. Thank you.

Operator

Your next question comes from the line of Brian Zarahn.

Brian Zarahn

Good morning.

Brad Barron

Good morning.

Tom Shoaf

Good morning.

Brian Zarahn

I know it sounds pretty obvious now, but I just wanted to commend Brad and Tom for being conservative and building coverage over the years and resisting calls previously to raise the distribution. So it gives you a lot more flexibility in this environment and…

Tom Shoaf

Thank you.

Brian Zarahn

And I appreciate the color on the CapEx and I was looking at ways to reduce CapEx. If you do decide just to move forward on the 200 of committed projects and defer the remaining roughly 170 till next year, does that change your financing options?

Tom Shoaf

Well certainly it does right, it helps you because you’re not spending the money and so we're really focused again on staying out of the equity markets in 2016 and that’s our -- that’s one of our primary objective.

So obviously if were to cut capital and not do all the projects then that would impact our financing plans and that we would have less need for equity or any other type of financing in 2016.

Brian Zarahn

And then on the topic of de-levering is there a role for potential non-core asset sales?

Tom Shoaf

Well we’re always looking at non-core assets sales. We sold some smaller non-core pipelines and terminals in all in the past. We had those -- we told you guys about those and it’s something we look at from time to time. But we don’t have any specific plans right now to divest any assets.

Brian Zarahn

Okay. And then turning to guidance from the pipeline of segment on your Eagle Ford contracts and you do have good counterparties, any on the margin, any producer or counterparty risk that have any concern or how do you view counterparty risk in general on your contracts in the Eagle Ford?

Chris Russell

Brian this is Chris Russell. Of our 10 major of our 10 largest shippers in the Pipeline segment, eight of those companies are investment grade companies and the other two are very strong, one company is one notable investment grade and the third is a small private companies operating. So short answer is we've got very, very solid customers.

Brad Barron

Absolutely yes. These guys are -- these are household names that ship on our Eagle Ford lines. So we do not as a company deem any -- very much risk at all in counterparty risk in terms of Eagle Ford. It’s a pretty solid group and we’re probably less worried about that another things quite frankly.

Brian Zarahn

Okay. And then -- I appreciate that, shifting to storage guidance any particular markets worth noting on higher rates and volumes for this year?

Brad Barron

With Contango back in the market it's been just pretty solid across the Board. I wouldn’t single out any particular market, but as contracts come up for renewal, we’ve been able to get some slight increase in on rates and expect that to continue throughout 2016.

Brian Zarahn

And the last one for me, any further insurance proceeds expected in 2016 or is the fourth quarter of 2015 the last?

Brad Barron

I think we’re done with that. We received everything already. So I don’t expect any further insurance proceeds.

Brian Zarahn

Thank you.

Operator

Your next question comes from the line of Selman Akyol.

Selman Akyol

Thank you. Good morning.

Tom Shoaf

Good morning.

Selman Akyol

Just a couple quick question for me. In terms of your CapEx budget and I guess on the $170 million that you could look at discretionary, is there any -- is it all just subject to financing and where you see things or is there any uncertainty on your customer's part that would lead to a project being built or not built?

Brad Barron

There is not any uncertainty under customers or anything -- its strictly we have good projects. We good projects with good returns, which makes up the $470 million and actually that include some reliabilities as well.

But anyway that’s -- the good customers everything is fine, its just -- this is just a matter of really just trying to monitor our financing needs and make sure we don’t overspend and that we can stay out of the equity markets as long as possible.

Selman Akyol

I got you and then in terms of the $100 million in terms of repatriation would you expect to bring all that back this year.

Brad Barron

Yeah we expect to bring all of it back, correct.

Selman Akyol

I got it and then in your opening comments you also made some commentary around lower revenues on foreign terminals. Can you provide more guidance or any more specificity around that?

Brad Barron

Specifically we're referring to a onetime event in some of our foreign -- one of our foreign terminals in particular where we had customer essentially buyout early of the position and we were able to release those at the same time. So in effect kind of doubled up on the revenue on that terminal, that won’t be repeatable in '16?

Selman Akyol

All right. That does it for me. Thank you so much.

Brad Barron

Thank you.

Tom Shoaf

Thank you.

Operator

Your next question comes from the line of Shneur Gershuni.

Shneur Gershuni

Hi, good morning guys, lot of my questions have been asked and answered, but maybe a couple of quick follow ups. I was wondering if you can walk me through the CapEx decisions for a little bit here.

First how much true flexibility do you have and then secondly, when you think about your return hurdles on a go-forward basis, have you up them for the current environment that we're in or does the fact that you don’t plant to access the equity market mean you're not reflecting the current cost of equity when you decide to proceed with the project?

Tom Shoaf

Yeah, we have a lot of flexibility in the CapEx numbers that we gave you. To put in perspective technically only about a $100 million or so of the CapEx that we gave you is actually committed something that we’re locked into and have to do.

Obviously that number does include the PMI project as we said on the call, we’re in the process of getting that signed up. We definitely want to do PMI, but we don’t consider that committed right now. So that kind of gives you that perspective.

Brad Barron

Also we still want to pursue high return projects regardless of what the cost of capital is at the current moment that we will still pursue high return projects. That's not they're still on the list.

Shneur Gershuni

And so these would still be considered high return and then economic value add even if you had to access the equity markets?

Brad Barron

That's right, if we do any projects right now, they have to exceed our current cost of capital if we do them. So everything we have under consideration, if we were to go forward with it, we have an adequate return to it.

Shneur Gershuni

Okay. And then secondly I was wondering if we can talk about contract lengths. You are talking about storage projects and so forth. I’m kind of wondering what your minimum contract length is that you’re targeting and the basis for my question is some of your peers had good projects for couple of years, three years, four years, five years and you were able to return the cost of the spend on the project.

But as the contracts expired suddenly there is no business there and so forth. Given the current environment are you trying to go for longer tenures than you typically would have and is there some thought or some number that we should be thinking about is what you would be targeting?

Brad Barron

Generally when we sign a storage contract as part of some sort of expansion project, we will have usually something like five to seven years in the term because it’s the initial contract to supporting the expansion.

And then from there we kind of have a mixed bag. Some of them have multiyear renewals. Some of them go to year-by-year evergreen, but what we are not seeing is any kind of exit from any of our terminals where we're not able to release so that some term.

To be honest with you in the Contango market as prices are improving, we tend to like the shorter term -- shorter term is a little bit better than the longer. So you can react to the current market.

Shneur Gershuni

So you're not using the Contango or to try and say I’ll give you a deal, but we’re going to take the term out go in a bit longer.

Brad Barron

Well, we're using the Contango in the market to improve prices that doesn’t always mean we're getting a longer term. Sometimes it does but last time we experienced a long period of Contango we really looked forward to renewing contracts not locking up long terms.

Shneur Gershuni

Okay. And then two small final questions, G&A was flat with the fourth quarter any chance for this to go down a little bit more as the year unfolds? And then secondly, have there been any discussions at the Board level about the combining the two entities?

Brad Barron

Well I think as far as G&A goes, we've been in the process for a couple of years now of lowering our G&A and quite frankly all of our operating cost -- we constantly look around the system and look for ways to improve and to improve efficiencies and what not.

So I wouldn’t say there is a huge significant opportunity to cut G&A. There might be some out there, but certainly our focus is way more on the revenue side and improving revenues and then cutting cost. So, that’s just kind of where we are out with that.

In terms of combining the two entities of NS and NSH this is something we look at periodically. We look at it all the time. We measure it. We evaluate it, but we currently don’t have any plans to do that.

Shneur Gershuni

Okay. Perfect. Thank you very much guys.

Operator

Your next question comes from the line of Justin Jenkins.

Justin Jenkins

Hey, thanks guys appreciate all the color this morning just a couple bigger picture ones for me. I guess for the Eagle Ford guidance is there a price assumption involved in the forecast that you can share, does that assume as price fall or anything more you can provide there?

Brad Barron

We’ve assumed the current environment basically for the entire year.

Justin Jenkins

Perfect. Appreciate that, and then I guess give you guidance to be into U.S. and somewhat worldwide storage markets what's your take on where things shake out from an inventory perspective in the U.S. in the coming months? Clearly lots of concern there. So I’m just curious on your macro take for that deal.

Brad Barron

I think from a macro standpoint we expect to see inventories remain high at least through '16 was that your question?

Justin Jenkins

Just more on how its seemingly shaping out over the next few months. There is lots of concern about hitting tank tops and given your guys have storage position, just curious on maybe your view into some of those concerns?

Brad Barron

Well, that’s certainly the current trend. All the momentum is there and we’re setting records every week on crude oil inventories in the U.S. and starting to see the same thing come around on the product side and that kind of momentum just seems like it would create more Contango in the market and more storage opportunities for us.

Brad Barron

Yeah. We fully expect to keep our storage full.

Justin Jenkins

Perfect, appreciate the color guys. Thanks.

Operator

Your next question comes from the line of Steven Schweitzer.

Steven Schweitzer

Hi, good morning and thank you for all the transparency that you have provided on this call. My question surrounds your availability under your credit facility. You mentioned that -- it looks to me, if I take the midpoint of your guidance expectations for 2016, that you will be negative free cash flow to the tune of maybe $150 million, back of the envelope.

I'm just wondering, how much revolver availability would you like to maintain as a minimum to have availability or dry powder for future acquisitions? And then if you could maybe tie that into the 2018 bond maturity that you have and just timetable for addressing that maturity?

Brad Barron

Okay, well addressing the liquidity under the revolver we think we have plenty of liquidity under the revolver. As I mentioned before we have little over $500 million -- $580 million I think is what Chris said earlier of availability under the revolver.

And if we need more, we’ve got an accordion feature in the revolver that we can use to upsize that. We don’t think we need it. In terms of comfort level, we're not going to take that thing to its limit.

We start wrapping up -- ramping up we may exercise the accordion, but we haven’t started talking about that. We don’t have any plans to do that right now. $300 million of cushion is probably about as much as low as I’d want to go on the revolver. So yeah, that’s kind of where we stand on that. What is the second part of your question?

Steven Schweitzer

Yes, just if you'd give me the size of the accordion and maybe just give us your thoughts on timetable for addressing the 2018 bond maturity that you have in years?

Brad Barron

Well the accordion is $250 million. So we could ramp it up $250 million and in terms of the 2018 bonds, I think we’re pretty fortunate that we don’t have any maturities coming up until then, that’s a couple of years and right now we think -- we’ve hedged those interest rates on the treasury side. So -- we’re not -- we don’t see any problem refinancing those couple of years from now. It's pretty far out.

Steven Schweitzer

And that would likely be in the high-yield market, would you think? Or how do you -- what's the most likely…

Brad Barron

Yeah, more or less -- we’re kind of in a measuring section as far as where they price as we’re not really investment grade, we’re not really high yield, we’re somewhere in the middle.

Steven Schweitzer

Right. Okay, great. Thanks so much.

Operator

[Operator Instructions] And your next question comes from the line of Jeremy Tonet.

Jeremy Tonet

Good morning.

Brad Barron

Good morning.

Jeremy Tonet

Thanks for the color this morning. Just want to follow up a little bit on refined product volumes. And there's been some good results there, and was just wondering if you could expand on what you see going forward there, if you expect that to continue, or you see any changes in that?

Brad Barron

We've seen some expansions on a couple of the refineries that serve our refined product systems. So we expect to continue to benefit from that in '16, otherwise crack spreads in the refining industry are strong. Refineries are all running well.

We don’t have a particularly high turnaround, any high turnaround activity in the years some, but not high year. So we expect more the same good news other refine products portion of our system.

Jeremy Tonet

Great, that’s it for me. Thank you.

Operator

[Operator Instructions] And your next question comes from the line of Brian Gamble.

Brian Gamble

Quick one on the storage front. Bumping guidance up a little bit. You talk about both rate increases, throughput increases as being beneficial from the last time you chatted. Are you including future rate increases in that guidance bump? Or are those rate increases that you have already received, and theoretically, future bumps could be a benefit to that number as we walk through 2016?

Brad Barron

Its rate increases we already received and the volumes some excess throughputs that we saw throughout the year in 2015 that are becoming more reliable in the current environment. I think more on volume and already committed price increases.

Tom Shoaf

Future renewals are held flat now.

Brad Barron

Yes, as you get that Bryan.

Brian Gamble

Yes. No assumption of any rate increases that are upcoming. You are assuming flat rates for the renewals for this year?

Brad Barron

Correct, we're seeing -- but we tend to see some improvements as we go along. So that we view that as some upside potential.

Brian Gamble

And then on the CapEx, we've got, let me say, a couple different buckets and project economics that you guys have walked through in detail that you are still working on.

If you -- I guess just from a timing standpoint of completion of the projects, we call the discretionary number kind of that $160 million to $180 million.

If you did put those off, when would that start to I guess necessitate you to find additional EBITDA through other means later on vis-à-vis -- you know, when were those projects slated to come on, and what sort of EBITDA impact could they have when they were completed?

Tom Shoaf

Well, we you don’t do projects. Obviously it could impact you in the future, but let me this. None of the projects that we currently have slated whether we do or not doesn’t impact our ability to pay our distribution.

We’re fine, we don’t need those projects to sustain where we are at and to be able to cover and pay our distribution that’s really more about future growth in future years.

Brian Gamble

That’s prefect. I appreciate it guys.

Operator

And there are no further questions.

Brad Barron

Okay. Thank you, Tony. We appreciate everybody calling into the call today. If you have any further questions, please don't hesitate to call NuStar's Investor Relations Group.

Operator

This concludes today's conference call. You may now disconnect your lines.

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