NuStar GP Holdings' (NSH) CEO Brad Barron on Q1 2016 Results - Earnings Call Transcript

| About: NuStar GP (NSH)

NuStar GP Holdings, LLC. (NYSE:NSH)

Q1 2016 Earnings Conference Call

April 27, 2016 09:30 AM ET

Executives

Chris Russell - Treasurer and Vice President Investor Relations Investor

Brad Barron - President and Chief Executive Officer

Tom Shoaf - Executive Vice President and Chief Financial Officer

Analysts

Jeremy Tonet - JPMorgan

Brian Gamble - Simmons & Company

Selman Akyol - Stifel

Steve Sherowski - Goldman Sachs

Shneur Gershuni - UBS

Gabe Moreen - Bank of America

John Edwards - Credit Suisse

Operator

Good day ladies and gentlemen, and welcome to the NuStar Energy LP and NuStar Energy GP Holdings First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen only mode. Later we will conduct the question and answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference Mr. Chris Russell, Treasurer and VP of Investor Relations. Sir, you may begin.

Chris Russell

Thank you, Eric. Good morning 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 would like to remind you that during the course of this call, NuStar management will make statements about our current views concerning the future performance of NuStar that are forward-looking statements.

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. These 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 sections of our websites.

Now, let me turn the call over to Brad.

Brad Barron

Good afternoon and thanks for joining us so earlier today, as it early for some of our West Coast investors and analysts, but we had to move our call up to accommodate GP Holdings Annually Meeting a little bit later this morning, so we do appreciate you're being here.

This morning I'm happy to report that this quarter once again we've exceeded one-to-one distribution coverage. Our strong first quarter 2016 distribution coverage of 1.14 times, demonstrates the strength of our diverse asset base, which continues to deliver robust, steady results even in the midst of a very challenging times in our industry.

We're also proud that NuStar strong stable business has allowed us to deliver uninterrupted distributions to our unitholders for this 60th consecutive quarter. As you recall, in January I mentioned MLP valuations had disconnected from business fundamentals and we're simply tracking crude prices.

NuStar's strong results particularly during a quarter in which crude price hovered around $35 demonstrates to resiliency and strength of our base business, which has performed and we believe we'll continue to perform steadily and well no matter the price of a barrel of crude oil.

Our valuations of some mid-stream MLPs seem to have decoupled from crude prices to some extend including NuStar, which has generated a total unitholder return of 81% since our recent low on January 20th.

We believe that our valuations still does not yet reflect our solid financial results, stable cash flow and the over stability and strength of our business. Our assets were located in a strategic location across the country and around the world.

We're well balanced between storage and pipelines and our business operations are insulated from the impact of crude price volatility as all of our crude pipelines are either demand pull pipelines or supported by minimum volume commitments.

Robust utilization and higher renewal rates in the storage segment as well as strong throughput volumes from our refined products pipelines were the main drivers of our solid first quarter earnings.

Despite the volatility of the commodity and stock markets during the first quarter, we exceed our earnings guidance expectations and earned $0.57 per limited unit which equates to a 1.14 times distribution coverage.

As you can see we remain on-track to cover our distribution once again in 2016 and we believe our strategy and execution will continue to deliver positive stable results. NuStar is particularly well-positioned to continue to deliver through the market challenges because we have a diversified business, a healthy balance sheet, no debt maturities until 2018 in very manageable capital requirements.

We remained focused on disciplined capital spending, while our 2016 strategic capital spending has been reduced by approximately 50% to $180 million to $200 million. We are moving forward with our best projects with the highest rates of return.

These projects are key to our long term growth and success and are being financed with excess cash on our balance sheet and borrowings under our $1.5 billion credit facility.

Our 2016 strategic capital spending program includes spending to complete construction on approximately 1 million barrels a storage which is schedule and will be brought on line during the year.

These projects comprised about 35 million of our planned strategic capital spend for this year and will benefit both our East Pipeline systems, our St. James and our St. James, Louisiana storage facility. In addition, we plan to expand our ammonia pipeline system and a couple of our West Coast terminal and storage.

During last quarter's call I mentioned we plan to spend $125 million in 2016 on project to develop new pipeline infrastructure to transport LPG's refined products in the Northern Mexico. Since January as has been reported widely in the U.S. press, Panamax is undergoing a large number of changes, including the appointment of a new Director General, José Antonio Gonçalves.

As we all understand organizational change particularly in a company as large and critical to it nation's economy as Panamax takes time and due to that recognition we now expect we should see this project in service in late 2017.

Across our assets around the world we are focused on developing smaller to mid-size high return projects to provide synergistic solutions for our customer's logistical needs. As we optimized our asset base to satisfy our customer's needs and meet local market demand, our central focus continue to be managing our business prudently to ensure consistent and solid distribution coverage.

Before I hand off to Tom, I'll emphasize what should be evident. NuStar's continued strong distribution coverage demonstrates our sound strategic direction and our commitment of fiscal responsibility, and it's clear we’re addressing market conditions effectively. We will stay on course and we will remain committed to efficient project execution, operational excellence and disciplined financial management.

I'm encouraged that the market seems to have begun delinking the price of crude from MLP valuations. As we proven through the volatility market conditions last year and particularly this last quarter our base business performs consistently even though market turbulence has been a historic proposition.

We delivered strong predictable earnings in cash flow despite the price of crude. Our valuation should no more move and lock step with crude prices and assure any other commodity, whether its cotton, copper or corn.

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 first quarter results and 2016 projections.

Tom Shoaf

Thanks, Brad, and good morning everyone. As Brad said, we had another excellent quarter that reflects the strength and diversity of our stable asset base especially given the current industry headwinds.

EBITDA from continuing operations was $148 million, while DCF from continuing operations available to limited partners was a $1.25 per unit, which covers the distribution to limited partners by 1.14 times.

For the first quarter of 2016 we've reported that EPU came in at $0.57 per unit which was above the first quarter of earnings guidance. Turning to second performance, first quarter 2016 EBITDA in our storage segment was $85 million, $9 million higher than the first quarter of 2015.

Accommodation of increased storage rates, increased throughput and handling fees and lower operating expenses at several of our terminals more than offset the impact of lower Eagle Ford crude oil throughput volumes at our Corpus Christi North Beach terminal facility.

First quarter 2016 EBITDA on our pipeline segment was $86 million, down $3 million for the first quarter of 2015. Throughputs on our refined product pipelines increased 3% to 521,000 barrels per day mainly due to increased volumes on several lines which serve our refinery customers in the Central West and Central East regions, as well as higher throughputs on our Burgos-Valley pipeline system and a result of expanding naphtha service for PMI at our Edinburg, Texas terminal.

While Eagle Ford shale production has continue to fall, the crude oil throughput volumes on the South Texas crude oil pipeline system are insulated by long term T&D agreements with large credit worthy customers that are contractually committed to an aggregate minimum throughput.

During the quarter our total South Texas crude oil pipeline systems physical volumes average slightly below contract minimums of 133,500 barrels per day. However, due to the fact that some of our customer shifted above their respective contract minimums we recorded revenue equivalent to approximately 143,000 barrels per day, down from 190,000 barrels per day a year ago in the first quarter of 2015.

Now, I'd like to take a moment to talk about our customers and how we mitigate credit risk. The majority of our pipeline customers in all of our Eagle Ford pipeline customers are financially sound investment grade companies.

On the storage side of the business we have [liens] on the products that we store for a customer and we have credit insurance in place for our bunkering and heavy fuels trading operations in our fuels marketing segment. In addition to these various forms of protection, we continue to monitor the financial condition of our counterparties to further mitigate our credit risk.

Now, returning to the results of the first quarter. A fuels marketing segment lost approximately $1 million of EBITDA during the first quarter of 2016 mainly due to bunkering margins.

Our March 31 debt balance was $3.2 billion while our debt to EBITDA ratio was 4.6 times. On April 26th, the NuStar Energy's Board of Directors declared a first quarter distribution of $1.95 per unit which will be paid on May 13th. NuStar GP Holding's Board also declared a first quarter distribution of $0.545 per unit, which will be paid on May 17th.

Our first quarter results and our current guidance do not reflect any revenues or Mont Belvieu propane pipeline. You will recall that we placed our Mont Belvieu pipeline into service in 2015 and that the pipeline experienced the pressure loss last June.

We shutdown the pipeline complete the repairs and assessments and the pipeline was again ready for service in December 2015. Despite this our primary committed shipper has not nominated volumes for shipment and purported to terminate throughput and deficiency agreement.

We believe their failure to ship is a breach of throughput and deficiency agreement and related agreements and we are currently in litigation to collect damages arising out of the breach. Because this matter is an active litigation we're not able to provide further details regarding the dispute.

However, we are talking to several other companies regarding potential shipping opportunities for the pipeline. And once again our first quarter result and our current guidance do not reflect any revenues in a Mont Belvieu pipeline.

Now let me spend a few minutes talking about our projections for the second quarter and full year 2016. Second quarter 2016 EBITDA results for our storage segment should be lower than the second quarter 2015 EBITDA results.

We are happy to report that we recently signed a one year 850,000 barrel storage contract at our formally mothballed Piney Point, Maryland facility. This should help mitigate the segments heavy seasonally maintenance in both the second and third quarter, as well as continued impact of lower crude throughputs at our Corpus Christi North Beach facility.

We also expect second quarter EBITDA results on our pipeline segment to be lower than the second quarter of 2015 due to decrease in the Eagle Ford throughputs on our South Texas crude oil pipeline system as well as increase spending on heavy seasonal maintenance, as such we expect second quarter 2016 EBITDA results for our pipeline segment to be lower than second quarter 2015 EBITDA results.

Second quarter 2016 EBITDA results for the fuels marketing segment should be higher than the second quarter of 2015 results due to expected margin improvements across the segment. Based on these projections second quarter 2016 earnings per unit should be $0.35 to $0.45 per unit, while distributable cash flow from continuing operations for the limited partner unit should be in the range of $1.00 to a $1.10 per unit. Again these projections are impacted by the expected increase in spending for heavy seasonal maintenance and reliability capital.

Now, turning to the full year 2016 EBITDA guidance. Even after reducing expected crude oil throughputs on our South Texas crude oil pipeline system to contractual minimums and projecting no volumes on our Mont Belvieu pipeline lower than expected operating expenses in the first quarter allowed our 2016 pipeline segment EBITDA guidance to remain unchanged at 335 million to 355 million.

Since we have forecasted T&D minimums for the remainder of 2016 on our South Texas crude oil pipeline system, any barrels in excess of that floor would serve to improve our actual results.

Our 2016 storage segment EBITDA guidance also remains unchanged and is projected to stay in the range of $310 million to $330 million, as we continue to expect that the benefit from higher renewal rates and increased utilization across the segment should be more than enough to offset lower expected South Texas crude oil volumes moving into the Corpus Christi North Beach terminal.

2016 segment EBITDA guidance for fuels marketing segment also remains unchanged and is expected to remain in the range of $15 million to $35 million. As Brad said earlier we continuously evaluate and prioritize our spending and in the first quarter we have right size the 2016 strategic plan spending program and reduce it by about half to about 180 million to 200 million.

Our estimated reliability capital spending guidance remained at $35 million to $45 million. Based on our -- distribution this year for the third consecutive year.

Now we'll turn it back to Brad.

Brad Barron

Thank you. Tom. We saw a great first quarter. We exceeded our own earnings expectations and covered our distribution by about 1.14 times which marks our 8th consecutive quarter of covering in excess of one-time.

To summarize our view on the rest of 2016, Q2 will be weaker than Q1 due to higher expected seasonal maintenance and we expect to ramp backup through the second half of year and to cover our distribution for the full year. Our strategy has been successful and we plan to stay the course.

We understand this environment acquires diligent focus and precise execution. I believe that our dependable business model, diverse asset base, blue-chip customers, proven strategic direction and fiscal disciplined uniquely positioned NuStar that continue to achieve strong earnings despite the challenging market conditions.

I know that I speak for every single one who shared NuStar, when I say that we are all 100% committed to covering our distribution and delivering long term stable value for our unitholders.

At this time, I will turn it over to the operator, who can open up the call for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Jeremy Tonet from JPMorgan. Your line is now open.

Jeremy Tonet

Good morning.

Brad Barron

Good morning.

Jeremy Tonet

I was just wondering for the O&M coming in a bit lower, I was just wondering if could talk a little bit more on some of the drivers there and how sustainable that can be?

Brad Barron

Frame me that one, Jeremy.

Jeremy Tonet

I think the operations and maintenance for the different segments came in a little bit lower than expected.

Brad Barron

Yes, it did. It was a little bit lower. We tend to have a little bit more seasonal maintenance. Usually in the first and fourth quarters we see less maintenance and reliability capital than we do in the second and the third. So that theme will continue on through 2016 and as we said in our notes that first quarter was light and then second and third quarter should be heavier as far as maintenance goes.

Jeremy Tonet

Got you. And then I’m wondering on the CapEx side, if you could flush that out a little bit more as far as what still in and what was taken out. I think I identified $35 million of term loan spend there. I’m just wondering if there is any other chunky items still on there and what was taken out and if there is any Pemex spend in there at this point or is that kind of on hold for right now?

Brad Barron

Yes. Primarily, what we have in there is we have the CHS projects we had going on in the Central East. We also had the ST. James tanks we called, we expanded a couple of tanks and we added some tanks there in ST. James. We still have about approximately $14 million of spend for Pemex in the 2016 capital budget. There is also various pipeline expansions and also storage expenses also in that $188 million. And then as far as what we took out, we took out a lot of the Pemex capital spend and pushed it out into ’17. It’s still there but it’s just been delayed and it’s been pushed out into ’17. There was some also a few other projects that we had and we are still evaluating returns on those, as we said we went through this whole process of evaluating the capital spend and we prioritized based on returns and other things like that and so we pushed out some things.

We really haven’t like stopped anything. Most of it is really, I would really say it’s more of a delay than it is anything else and we continue to churn those projects. They could come in later in ’17, if the capital markets improve, other things improve and the returns on these projects improve. So, we are still working on.

Jeremy Tonet

Great. That makes sense. And then for Piney Point, I was just wondering if you could provide any detail to the size of that, what type of revenue you might be able to see from that facility? It was a strong 1Q, if there are any thoughts to raising guidance on that or kind of you want to take a cautious look given some of the headwinds that you outlined there?

Danny Oliver

This is Danny Oliver. We’ve got -- we just leased as I mentioned 850,000 barrels that’s about 2.5 million barrels of product storage that’s available there. We have that of course in the forecast but we haven’t forecasted any other contracts although we are working and serving that customers for some contango storage and that facility will put them in the forecast as we get those deals done.

Jeremy Tonet

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

Operator

Our next question comes from the line of Brian Gamble of Simmons & Company. Your line is now open.

Brian Gamble

Good morning, guys.

Brad Barron

Good morning.

Tom Shoaf

Good morning.

Brian Gamble

The projects that you pushed out, just wondered to get a sense of how you were evaluating those? You talked about hurdle rates and talked about just mitigating towards getting a better ray on those issues as you go forward. But over the short-term, did you set a hurdle rates that you were looking for or were you bouncing that against your projected I guess cash availability this year to eliminate the need to go to the preferred equity market for any funding for this year, which one kind of took precedence as you were walking through those plans?

Brad Barron

Well, I don’t think we had like a concrete hurdle rate. We had a range in mind that would work and a lot of this -- some of these projects we just -- they are delayed because of natural causes, we call it what negotiating with customers and things like that. So there was several elements that followed, just will suit well. It takes a while to negotiate these things and we pushed them out.

Other than that a lot of it was just the capital markets. The fact that capital has been much, much more expensive for us in other MLPs than it has been in the past so it does increase your hurdle rates somewhat to when you evaluate these projects. So, I’d say it’s kind of combination just kind of natural delays in the process and also the fact that the capital markets are more expensive.

Brian Gamble

Does the shifting of the capital forward eliminate any need to go back to the preferred market? You talked about that at Q4. You eliminated that from your commentary and the press release this time. Is that some indication of 2016 CapEx, does that eliminate that need?

Brad Barron

It does. If you look at what we have forecasted for the remainder of the year for capital, we don’t have any real need to go into the markets right now for equity or equity like securities. So right now, we are in pretty good shape in terms of our financing needs and whatnot. So, we think all of our internal capital can be funded just on our bank revolver and that’s how we plan to do it right now.

Brian Gamble

Great. And then on that Piney Point contract you mentioned you’ve got some additional capacity there and the signing of the current contract was a contango based deal, just some opportunity saw by our customer and they are taking advantage of it. How much contango is needed over the course of the year to make that type of contract work?

Brad Barron

Of course it depends on your customers cost of capital and things like that. But Piney Point is fairly expensive location to get in and out of. So, you are looking at somewhere just off of a dollar a barrel of contango, probably something you need to have to pay all of those and make some money.

Brian Gamble

What sort of a timeframe is that? Are we talking six to nine months or just the life of that annual contract, is that….?

Brad Barron

Six months to a year.

Brian Gamble

Okay.

Brad Barron

Six months to a year.

Brian Gamble

Okay. And then you talked about -- obviously there is seasonality in the fuels marketing business and you talked about it being up year-over-year in Q2. So, I know that we had expected some of that to be back half related but that should roll back to kind of a positive EBITDA level in Q2 and then that trend should continue as we go through the year as far as the current opportunities that you guys were seeing?

Brad Barron

Yes, I think so. I mean like we said we had some stronger margins this year versus last year in the bunkering area. So, we will see how that plays out the rest of the year. We still have a lot of year left and right now we are just kind of leaving the guidance where it is and we are not really raising or lowering expectations for that segment right now.

Brian Gamble

And then last one for me. Kind of back to the contango side of things, how does contango in general effect the shifting of the curve as we potentially get some more uplift on the front end of it? Any expectations that would flow through the overall storage segment in terms of what other customers might have to do based on changes to that curve? I know you’ve taken volumes down essentially to minimum levels there but is there any risk as the curve starts to move around or we pretty locked in for the rest of the year?

Brad Barron

We have -- this includes what we renewed in the first quarter but we have about 15% of our storage revenues that are up for renewal throughout 2016 that are in generally marine terminals that are affected by the contango market structure. We have other renewals going on in the storage system but more in, call them truck rack type terminals that aren’t as affected by the market structure. But you can think of in terms of this year about 15% of our storage revenues that will benefit from that market structure we will renew and we’ve seen those so far we renew at higher rates and just generally higher utilization of the entire system.

Brian Gamble

Great. That’s great color and good quarter, guys.

Brad Barron

Thank you.

Tom Shoaf

Thank you.

Operator

And the next question comes from the line of Selman Akyol from Stifel. Your line is now open.

Selman Akyol

Thank you. Good morning.

Brad Barron

Good morning.

Selman Akyol

Couple quick ones just for me. Just going back to, I guess the storage that’s still up for renewal on truck rack side. Can you just talk about how the pricing is going for that environment or for those barrels?

Brad Barron

So, unlike the marine terminals where market structure generates more interest and prices are affected, most of our truck rack terminals think of them as comingled storage where you have multiple customers in a facility that have literally maybe days, a few days of storage, not any kind of long-term contango structure. They are just moving barrels from a supply source to a truck rack. So those typically are not affected by market structures either way, good or bad.

Selman Akyol

Okay. You guys have an ATM in place or you used it all or you anticipate using it all this quarter?

Brad Barron

No, we’ve used hardly any of it really. It’s still out there for us and we don’t really plan on using any of it this year, especially where unit prices are and all that. So, we don’t need it. We absolutely, like I said, we can fund our capital needs using the revolver. So, we don’t have any immediate plans to go out there and issue any equity.

Selman Akyol

All right. And then previously you guys have talked about bringing some cash back on shore. You are still looking to do that as well?

Brad Barron

Yes, we are. We’ve already started that process and you may recall I said, we have probably $90 million to $100 million worth of cash in overseas entities that we could repatriate in and we’ve already done about $25 million of that and we will do the remainder of it before the end of the year.

Selman Akyol

Great.

Brad Barron

As we need the capital, we bring it down.

Selman Akyol

Got you. All right. That does it for me. Thanks.

Operator

And our next question comes from the line of Steve Sherowski from Goldman Sachs. Your line is now open.

Steve Sherowski

Hi. Good morning. I guess first question, were there any costs associated with bringing Piney Point back into service?

Brad Barron

There were some, cleaning some tanks and they were minimal.

Steve Sherowski

Got you. And for the truck rack storage what type of rate uplift can we expect there? Obviously, there is still low single digit sort of renewal rate.

Brad Barron

On the truck rack side of things, I don’t think we are expecting a lot of change in rates. It’s more the marine terminals that are affected by the contango market structure but we’ve seen anywhere from five and maybe one or two contracts that are double digit.

Steve Sherowski

Got you. Okay. And just, I guess then on the marine side, has customer interests been changing at all with flattening of the forward curve?

Brad Barron

A little bit. We still have the interest. The conversations are going on but it’s less compelling. The math is a little less compelling than it was before crude started to run. Prices in general started to run.

Unidentified Analyst

Got you. And then final question. Marketing was a little bit lower on a year-over-year basis but you maintained full year guidance. Can you just outline maybe a couple of your assumptions behind your full year outlook?

Brad Barron

Well. We obviously think that margins are going to hold pretty steady the rest of the year. And yes, we said it was down a million year-over-year but we guess why we gave you guys a range and we are still within that range.

Unidentified Analyst

Is there any way you can relate that to commodity prices, what sort of commodity price you are baking into your full year assumption?

Brad Barron

I don’t think it’s as much to do with the commodity price level, as it’s just as the margins mostly in the fuel oil bunkering side of the business. It was pretty competitive in the first quarter and margins reflected that.

Unidentified Analyst

Okay. That’s it for me. Thank you.

Brad Barron

Thank you.

Operator

And the next question comes from the line of Shneur Gershuni from UBS. Your line is now open.

Shneur Gershuni

Hi. Good morning, guys. Most of my questions have been asked and answered but I just wanted to come back to a couple of them if you don’t mind. Starting with the CapEx, you basically mentioned that Pemex was taking down a few of their projects, evaluating returns and so forth. But it’s sort of sounded like nothing actually changed if I look at on a two-year basis that you are just shifting CapEx from this year to next year, was there an actual reduction in some of the capital?

Brad Barron

Both. As we said, there was a shift in some of these projects for example Pemex. It’s still out there. We’ve shifted most of the costs into 2017 at this point and there was some other capital projects that follow that same suit where we are still negotiating whatnot and there is reasons for delays and things like that. So, some of it has shifted to 2017. There is also some projects that we’ve just kind of put on hold because of return perspective and so it’s really just a combination of those two things.

Shneur Gershuni

In any instances are you seeing the projected capital spend for a discrete project to be down just given the fact fuel prices are down. E&Cs are all under pressures while too. Are you seeing anything happening on that end that you allow returns to go higher as CapEx, let’s assume for project comes down or is that not the case yet?

Brad Barron

Are you talking about savings that you would get from construction companies as we go forward?

Shneur Gershuni

Yes, exactly.

Brad Barron

No, we are seeing some savings on steel and some other things. Those are being baked in to our returns.

Shneur Gershuni

Okay. So in other words in theory of the project that you’ve been talking about you could in technically have higher returns just due to the CapEx savings?

Brad Barron

Certainly.

Shneur Gershuni

Okay. There was a question about your OpEx before but when I think about your OpEx and your SG&A, not maintenance CapEx but specifically the OpEx and SG&A. That’s trended a little bit better. Is that a function of some steps that you have taken to try and trim costs out of the business? Is it something that we should see continuing for a few quarters as it cycles through but just sort of wondering if you can talk about your costs trends in general?

Brad Barron

Well, the SG&A, yes, I think it’s a combination of things. One, yes, we are trending better on SG&A than we have in the past. We also had some compensation unit price of help there when the stock price drove down a little bit in the first quarter. So that helped us out a little bit on our unit compensation expense as well. So that end trending has helped us out.

Shneur Gershuni

Okay. Cool. In terms of the effectively flat guidance you added Piney Point with the contract that’s been added to it. Is there a sense of the EBITDA that that contract is worth for this year and what would have been the offset to basically maintain flat guidance assuming that would have been incremental from a revenue and EBITDA perspective?

Brad Barron

For the time being, right now it’s one customer. So, we can’t get very specific about EBITDA there perhaps. As we get more in, maybe we can just kind of split that out and talk about it more specifically. But the way I think about it is that was a good positive and the downside on the storage segment was just some lower volumes from our Eagle Ford system that some of that runs through our storage segment as well.

Shneur Gershuni

Okay. So, basically, we’ve got sort of more of the offset there. Speaking of which, with Eagle Ford system, are volumes running below the NBCs and you are receiving deficiency payment NBCs?

Brad Barron

It’s kind of right on the line right now. We have some customers above and some just slightly below. Net-net, we have been building, as Tom mentioned, higher than our actual volume shipped because of that reason.

Shneur Gershuni

Okay. And so from accounting perspective you would just continue to flow that as EBITDA through, if not something that you would show kind of separately right?

Brad Barron

Yes. It’s EBITDA.

Tom Shoaf

It’s EBITDA.

Shneur Gershuni

Okay. And they can’t make up those volumes. If they missed the volume commitment, they can’t then come back to you later in the year and say we didn’t deliver -- we missed about 20,000, add 20,000 I will pay for that, correct?

Brad Barron

That’s correct.

Shneur Gershuni

Okay. Perfect. All right. Well, thank you very much, guys. Appreciating the clarification.

Brad Barron

Thank you.

Tom Shoaf

Thank you.

Operator

And our next question comes from the line of Gabe Moreen from Bank of America. Your line is now open.

Gabe Moreen

Good morning, all. Just a question on the propane line if you can answer it. Can you just talk about what you would expected that contract to contribute from an EBITDA bottom line standpoint? And then also in terms of trying to replace that with another shippers while you are in this dispute, is that something why you didn’t signed a long-term contract or you would be looking more at spot shipments?

Brad Barron

We are working on some long-term contracts right now. It’s part of our Pemex deal and several other customers that we are talking to over there. I wouldn’t speak specifically about EBITDA but the volume commitment on that line initially was 55,000 barrels a day and that’s roughly the volumes that we are having conversations with customers about right now.

Gabe Moreen

Got it. Thank you. And then just can you remind us in terms of when the first commercial NBCs kind of come up for renegotiation on the Eagle Ford assets?

Tom Shoaf

In April of '18.

Gabe Moreen

April of '18. Perfect. Thanks guys.

Brad Barron

You bet. Thank you.

Operator

And our next question comes from the line of John Edwards from Credit Suisse. Your line is now open.

John Edwards

Yes. Thanks. Good morning, everybody. Just to come back on the CapEx spend. So, I think you indicated you were deferring some projects that were on hold. And just anyway, just to give us an idea, splitting that out and then are there actually any cancellations?

Brad Barron

You want some details on what’s stayed in on the $188 million.

John Edwards

Yes. Out of the $180 million you’ve taken out just approximately -- is it 50-50 between project deferrals and are projects on hold?

Brad Barron

This has been pushed out. Most of it has been pushed out into 2017.

Tom Shoaf

That’s right. Most of it is deferrals and not -- absolutely.

John Edwards

So, you don’t really have any cancellations.

Tom Shoaf

No.

John Edwards

Okay. Okay. And then just -- just maybe you said this, I missed. Can you remind us where you are on liquidity?

Tom Shoaf

Liquidity, we are at about $550 million available on our revolver right now.

John Edwards

Okay. And then and just coming back to volumes you are seeing, you are sort of scaling right around NBCs at the moment. Are you seeing those – do you think those volumes are going to continue to – are going staying in there right above what you're seeing or do you think they'll kind of grind little bit lower. What are you seeing there?

Brad Barron

That's the big question, but it appears to have bottom down just in a last month or so, I don't know if that will continue, but we're actually in the last two or three weeks we've seen volumes actually rebound and start to move up a little bit which is the first time we've seen that in six months or more.

Tom Shoaf

Yes. But the important thing is we have the NBCs, we have NBCs with credit worthy customers and that's why we have them.

John Edwards

Okay. And then I think you've address this, but you're not, so, you're really not seeing any counterparty risk or anything here?

Brad Barron

No.

John Edwards

Okay. All right. That's it from me. Thank you.

Brad Barron

Thank you.

Operator

And our next question comes from the line [Ryan Navin] from Citigroup. Your line is now open.

Unidentified Analyst

Hey, guys. Most of my questions have been -- has been answered. Two quick follow-up, regarding the PMI contracts what's the causes that delay? Is it mostly different people at Panamax that you're restarting the process, or is there another dynamic?

Brad Barron

Yes. I wouldn't we're restarting the process, but there has been a change in management at Panamax. And last January I'd mentioned that I had travelled to Mexico City. [Daniel] and I were down there, and met with the Director of General. We shook hands. And we're working and we're close to finalizing the deal. And about a week before we were to sign, he ended up resigning from that position and a new Director General has been appointed. And so, we're now working with the new Director of General and his team to finalize the deal.

Unidentified Analyst

Okay. So how far into that process have you been, is it been just a few months and it could be year long process to go through all those features?

Brad Barron

I don't expected to be a year long process. I mean anytime there is change in the an organization as big as Panamax and one that is structurally important to the economy of Mexico is that things are going to move slowly at the beginning, and so we wanted to be respect about the change and give them time to settle in their new positions. Although, we did meet with them last week, we had very positive meeting and so I don't think it will take a year to finalize this.

Unidentified Analyst

Okay. And then I guess the follow-up, in terms of scope of Panamax opportunity, given the need for product in propane and LPG into Mexico, are there material expansion opportunities to low as originally exalted?

Brad Barron

Yes. That whole system had upside both on the Texas side as well the Mexican side.

Unidentified Analyst

Okay. And then relating to the Piney Point is that primarily few oil storage or there are other components to believe are they [Indiscernible]?

Tom Shoaf

It's about -- when I refer to 2.5 million barrels of storage available, that's on the product side. So we can bring gasoline or [Indiscernible] in there. The other half is fuel, but that was a part of the facility that was utilized when a neighbouring power plant was utilizing fuel as a source of supply and they've switch to gas since then. So, we're really focusing on the clean products, diesel, mostly diesel but some possibly gasoline into that slowly.

Unidentified Analyst

Okay. So the dollar, just shy of the dollar contango average monthly for year, that's referred to from a diesel standpoint?

Brad Barron

Right.

Unidentified Analyst

Okay, great. Thank you.

Operator

Thank you. Our next question comes from [Indiscernible]. Your line is open.

Unidentified Analyst

Good morning. Thanks for taking my question. A couple of days ago Bayou Bridge are now starting to operate from a Netherlands to Lake Charles. And also in the press release they said that when they connect towards St. James, they will connect to your terminal there. Just wondering do you see more upsides for your St. James terminal after Bayou Bridge start next year or is already CapEx or pretty much just your existing storage?

Brad Barron

Right now we're just talking to move out exiting storage. We began talking them when them when the Bayou Bridge project was in early stages of development because our facility is so well connected to all the local refiners in the area. So, we have connection agreement with them and doubling product, and right now we're just talking about utilizing existing storage, but that's always an opportunity for newbuild.

Unidentified Analyst

As over your facility there, do you have room to extend or…?

Brad Barron

Yes. We have a lot of room to expand. And we just build about 750,000 barrels of storage, its going into service here in just a couple of months.

Unidentified Analyst

Okay. Great. Thank you.

Operator

There are showing no further questions at this time. I would like to turn the call back over to Chris Russell for any closing remarks.

Chris Russell

Okay. Thank you very much Eric. We appreciate -- performance on the call today. If you have any additional questions, please feel free to call NuStar’s Investor Relations group. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may now disconnect

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