Q4 2019 Earnings Call
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Smith, Vice President Investor Relations. Thank you. Please go ahead Madam.
Good morning, and welcome to today's call.
On the call today, our Brad there in new start energy LP, President and CEO and Tom shows 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 Newstar management will make statements about our current views concerning the future performance up Newstar that are forward looking statements.
These statements are subject to the various risks uncertainties and assumptions described in our filings with the security in Exchange Commission.
Actual results may differ materially from those described in the forward looking statements.
Also throughout the call today, when Brad and Tom talk about our quarterly and full year results.
We'll be describing our results from continuing operations in other words three so we will refer to in this call exclude the European assets, we divested in 28 team and the same station facility, we sold last July.
During the course of this call. We will also refer to certain non-GAAP financial measures.
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. got maybe down in our earnings press release with additional reconciliations located on the financial page.
Mr Section of our website at new start energy Dot com.
With that I will turn the call over to Brad.
Good morning, Thank you all for joining us today.
29 team was by all measures great year for Newstar as we generated strong results across the company.
It is often just happen.
When we developed our financial operational and capital project goals for 2019 to construct a roadmap for targets kind of plan to reach our goals.
Our results across the board demonstrate how well our employees executed on 2019 plant step by step day by day throughout the year.
And thanks to all that hard work and careful execution.
We have delivered results through strong are stronger than the guidance. We gave you last year.
Last year, we told you we expected to generate EBITDA for 2019 in the range of $625 million to $675 million. In fact, we generated $668 million EBITDA between 90, that's at the high end of our guidance, 12% higher there 2018 EBITDA.
Last year.
Also told you we would achieve 1.2 to 1.3 times coverage, we actually achieved 1.33 times distribution coverage between 19, but other than we initially projected even better than 20 eighteens 1.22 times.
Last year. We also said we expect it to finished 20 not team with a debt to EBITDA ratio 4.3 times.
Thanks in large part to our successful divestiture of the Caribbean terminal facility for net proceeds of 230 million in July. We finished 2019 debt to EBITDA ratio of 3.88 times, that's a significant improvement or what we expected getting between 19 prior to the sale.
Our strong financial showing between 19 has a direct result of restaurant operations across our asset footprint.
2019 pipeline throughput volumes grew by an impressive 23% to an average of 1.8 million barrels per day in the aggregate we transported a record 641 million barrels 2019.
In the Permian, We told you we would reach 450000 barrels per day and 20 my team we exited the year in over 460000 barrels per day.
The outstanding performance of our core core system.
The rig count to cross the Permian basin as a whole were down 17% during the year rig count on our acreage was up 7%.
I mean basins total throughput grew 18% between 19, our system grew nearly twice as much or 34% during the year.
We're all softer great start 2020.
30% of the rigs in the Midland basin residing on our Permian system, our throughput averaged 475000 barrels per day in January and February nominations continued increase come in well ahead of our forecast.
But our Permian crude systems is not the only part of our asset footprint that performed well during 2019.
You all had a record breaking 2019 across our central East refined products system, where we hit record numbers in December for butane blending propane transportation and refined products movements.
Our stores throughput volumes grew an impressive 36% in 2019.
We also saw solid contributions from our facility and same change.
We told you we expected activity at our unit train facility.
Ramp up 20000 barrels per day.
30000 barrels per day by the in between 19.
At year end, our unit train activity you could that target for we saw 43000 barrels per day for the month of December we expect even higher numbers throughout 2020.
We told you last January we will complete our project to provide a last mile export solution from a connection to cactus to our state of the our Corpus Christi export facility.
We successfully put that project into interim service last summer and into full service on September four.
And by the end between 19 with more than doubled the volumes were handling our corpus Christi facility, averaging 613000 barrels per day volumes on the system in December with over 70% going to the dock and the remaining 30% moving back into the Corpus Christi refining complex.
Even the only a partial year benefit from our Corpus Christi project.
During 2019, we handle a record number of barrels a total almost 150 million barrels at our Corpus Christi export facility, which includes 92 million barrels moved out across our dogs.
Our Corpus Christi project for Trafigura, just one of an impressive list of important projects and Newstar set up get done and that we successfully completed in 2019.
Last year, our employees were task for the most ambitious capital project program and our company's history looking back over what our teams accomplished.
Between 19, it turned out to be an incredibly productive year for nexstar.
We run through a couple of those things.
In March after completing a connection to our same James facility, we began receiving Bakken and Permian crude barrels from Bayou Bridge.
The second quarter, we completed two strategic low capital expansions of our Wichita falls crude pipeline, one to transport Permian barrels to local refineries and Sunrise pipeline expansion.
And another expansion project into humans to deliver barrels to planes for delivery into the Longview market.
August was big month for new stores, well, we completed our project to connect or 16 inch South Texas crude pipeline cactus two in mid August we received the first shipment Permian crude from Texas to the first of three long haul pipeline project to transport WT, a in the Permian basin to Corpus Christi.
At some of you will remember September 4th was truly a banner day from Newstar bought three of our key 2019 pipeline projects into service in a single day.
The second stage, our Corpus Christi WT export project that I mentioned, which is a new eight mile 30 inch pipeline from Taft to our Corpus Christi facility, our project to double the capacity of our valley pipeline to expand the supply refined products Corpus Christi, Rio Grande Valley in Northern Mexico.
In phase one of our projects transport diesel from the Corpus Christi refining complex torn Nuevo Laredo trends.
In the Permian.
Project teams completed projects throughout 2019 gathering projects capacity expansion and de bottlenecking.
As well as connections third party outlet.
And across our West coast terminals, our teams executed on projects to develop the renewable fuels logistics network necessary for regional markets to achieve low carbon fuel targets.
That's an impressive list.
It is important as what we got done as how well we did it.
Back in January 19th we told you we expected to spend between 500 550 million on our capital project plan.
We not only completed all those projects on time, we completed them under budget and total we spent 467 million or strategic projects, which is 11% below the midpoint of Capex guidance range, we announced at the beginning 2019.
He was a big year by all measures, which makes it even more proud that our employees that all this all those barrels transported store all those projects execute across our footprint and throughout this year. They did it safely.
Once again 2019.
Next our safety performance outpaced the industry.
Our dart rate, which is days away restrict your transfer we call that lost time between 19 was 22 times better than the terminal industry average two times better than the pipeline industry average.
We also completed the year with a total recordable incident rate for T., our IR. It was 21.5 times better.
On the terminal entry averaged in almost five times better than the pipelines industry average.
Our strong 2019 results from our stellar safety statistics, our operational outperformance to our solid project execution illustrate our employees are capable hardworking and committed.
Committed to protecting one of the safety as well as our community environment, our customers assets and our unitholders interests.
That turn it over to Tom to give you some more specifics on our strong fourth quarter.
Our year to 19 results in our 20.
Thanks, Brad good morning, everyone.
For the fourth quarter of 2019, we generated EBITDA from continuing operations, a 196 million of 42 million or 27% over fourth quarter 2018, EBITDA from continuing operations of 154 million.
For the full year 2019, we generated EBITDA from continuing operations of 666 million, which was a hot with the high end of our guidance range and up 71 million or 12% over 2018, EBITDA from continuing operations of 597 million.
Fourth quarter 2019, DCF from continuing operations available to the common limited partners was 107 million up 23 million or 28% compared to the DCF from continuing operations available to common to limited partners of $84 million for the fourth quarter of 2018.
And our distribution coverage ratio from continuing operations to the common limited partners was 1.64 times.
Full year 2019, DCF from continuing operations available to common limited partners was 345 million up 41 million or 14% compared to 2018 DCF from continuing operations available to common limited partners of 304 million.
And our 2019 distribution coverage ratio from continuing operations to the common limited partners was 1.33 times up from 1.22 times last year.
Fourth quarter 2019, EBITDA in our pipeline segment was 142 million up 27 million or 24% from the fourth quarter of 2018 due to continued throughput volume ramp on our Permian crude system.
And full years quarter contribution from the completion of our Taft 30 inch pipeline and our Corpus Christi crude system and our valley pipeline expansion.
Additionally, we continue to experience increased crude volumes on our ardmore system, resulting from our connection to the Sunrise pipeline Wichita Falls.
Our fourth quarter 2019, EBITDA from our storage segment.
71 million.
I'm, sorry, with 70, or 71 million up 13 million or 22% from the fourth quarter of 2018 EBITDA of 58 million.
Mostly as a result over the quarters full quarters contribution from the completion of our top 30 inch pipeline, which flows into North Beach terminal within our Corpus Christi crude system.
Fourth quarter 2019, EBITDA in our fuels marketing segment was 11 million 3 million higher than our fourth quarter 2018, EBITDA of 8 million due to stronger performance from our butane blending business and helping margins from our Bunkering operation.
Our 30, our December 30, Onest debt balance was 3.4 billion and our debt to EBITDA ratio was 3.88 times below our debt to EBITDA ratio of 4.05 times for the fourth quarter of 2018, which puts newstar under four times for the third consecutive quarter.
Turning to our full year 2020 projections, we continue to expect new starts 2020, EBITDA to be 715 to 765 million an increase of about 11% at the midpoint over 2019 results from continuing operations at about 24% higher than the mid point since 2018.
I mean.
With regard to 2020 capital spending estimates, we still plan to spend 300 to 350 million on strategic and other capital a 30% reduction year over year.
In addition, we continue to expect about $40 million to $50 million reliability capital spending in 2020.
Based on these projections, we still expect our common unit distribution coverage ratio for 2023 in the range of 1.4 to 1.6 times and we will continue to focus on Delevering, our balance sheet as one of our top priorities and with that I'll turn the call back over to Brad for his closing remarks.
So.
Between 19 now behind US 2020, we are focused.
Focused on a bottom line our employees continue to safeguard every dollar we spend in order to assure we fund, 40% or more or 2020 strategic capital from excess distributable cash flow.
And our position increased that cash flow in 2021 of beyond we're focused focused on a smaller capital program to remains targeted at our sweet spots, we plan to spend significantly less than 2020 between 300 350 million.
Just like in 2019.
And the spend those dollars on low multiple high return projects to build upon our existing growth platforms in the Permian Corpus Christi, St. James on the West Coast, and complete phase II or Nuevo Laredo project like this quarter.
We are focused.
I don't think flexible we've built flexibility in our plan for 2020, so as conditions require where the flexibility to scale down our capital program.
Devaluate sale of less core asset packages and take whatever ever other measures, we need to take to protect our strong coverage or continue to de lever.
And we're focused on continue to operate safely to protect our employees and our communities everyday every year just.
Just like last year, we have a plan to build unitholder value and improve our metrics in 2020, just like last year. We have all the resources, we need to execute 2019 was a great year, but even so looking out to 2020 and beyond I'm confident when I tell you the best as yet to come.
That open it up for today.
Thank you.
As a reminder to ask a question you need to press star one on your telephone to withdraw your question press the pound Keith Please standby only compiled the Q and a roster and again that is star. One if you would like to ask the question and our first question comes from should nor go Shomi from you BS. Your line is now open.
Hi, good morning, everyone warrant.
Yes.
Kind of wanted to start off with the.
Typically around your guidance.
So it's kind of listening to prepared remarks, you pretty much talked about a bunch of records that you've made and and hell lot of optimism there and so forth can you give us you know what the sensitivities are around you hitting the high end of your guidance range for for this year.
Do you have to exceed a 550 exit rate in the Permian.
Just any any color that you can give us in how you end up at the high end versus the low end at the range.
Yes, Shinier this Danny Oliver.
I think the key components, there would be yes, hitting the 550 in out of the Permian.
We do think that's a conservative view view at this point, especially given the way we started off the beginning of the year.
Also continuing to see volumes above our nvcs at out of the South Texas crude system, which were currently operating.
60, or so thousand barrels a day above those mbcs.
And we have much less than what we're seeing today forecasted so continuing on our current trend would be upside there.
Really when I look at zero and then also in sync James we talked a little bit about the.
Third unit trains coming in we have our nvcs forecasted throughout the year and think theres likely possibility that we do better than that those are the three probably biggest upsides and then really I think on the downside.
Unless we have some kind of unexpected refinery turnarounds.
We don't see a lot.
Out there that can that Ken.
Hurt us.
Okay that that makes perfect sense, maybe to ask a capex question.
Brad you noticed that you noted that Capex is down I think somewhere in the 30% this year.
I was just wondering if you can give us a little bit of color about around the types of returns.
In smaller ground for capital tends to have high returns.
Do you think you can achieve this sub four times EBITDA multiple on those types of projects and also you came in ahead of budget on some of the projects you didn't 2019 everyone's talking Capex down for 2020 is the pool of available labor.
You know more fluid right now.
We actually see that type of thing continue just because theres more capacity in the labor market and in the contracting market.
Absolutely, we've seen that sort of across the cross country really.
So.
Yeah, well run towards the beginning your question direct multiples are we going to around four times yeah. So some of our projects will definitely be below four times I mean, as you mentioned the smaller projects tend to have higher multiples and we're always on the lookout for those two three time multiple projects.
But I would say.
Shortly we're looking for.
We have and looking for higher multiple projects, we've been trimming moving that number down.
Just out of necessity and so were high grading our projects really across the board also remember that since we opened since we fund about 40% of our Capex program with what we call that free we'll call. It free DCF that really helps us out in a way that.
You can you can fund these projects with these low low multiples with 100% debt and still be accretive on year on year de levering program. So.
On an average you know it might be a little higher than the four times, but these projects that we all have slated they're all these brownfield bolt on projects to our current system and we we expect those to be very low multiples.
Tom just to clarify, but you're saying you could theoretically funded 100% with leverage but you you are actually doing it with retain distributable cash flow for at least that's what I'm, saying 40, 40% is coming from retained cash flows the remainder would be debt and you can still do that and be accretive to your delevering.
Okay, and so just to just maybe I'm, putting words in your guys mouth, but basically returns are going to be going up on the capital that you're spending and there's the potential that the capex cost can actually come in below budget, just because of where things are the labor market right now.
I think the latter is true as far as is the returns getting higher I mean, we had some very high return projects in 2019 that were completed so I think we're going to be following that pattern going into 2020.
Perfect Alright. Thank you very much guys really appreciate the color today.
Q.
Thank you and our next question comes from gave marine from Mizuho.
Your line is now open.
Hi, good morning, everyone.
A couple of questions on sort of the unit train activity done it seem James I Wonder if you can just frame for us.
To what extent you mentioned that Fedex tribute expect to increase in 2020 are you able to converting it actually we did a longer term contracts at this point and also can you remind me how some of that may play into potentially expanding storage at St. James Yeah. Okay. So we've mentioned I think earlier in 2019 that we have one.
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One of the major Canadian oil producers that we have a three year contract with so we have about two and a half years left on that contract, which started off 20000 barrels a day. We're currently the minimums are at 30000 barrels a day, we're looking at increasing that.
Well there is actually some talk going on about extending that even beyond the initial three year contract.
Due to the nature of where some of these barrels are originating out of Western Canada.
We haven't talked about adding new storage, yes, we're going to be very careful with that.
Unless we get a long term commitment.
Either driven by that or driven by Kaplan reversal.
We're not considering that at the moment, but volumes will help to take that in the future.
Thanks, Dan.
Also ask maybe about some of the upper Midwest propane expansions that yonder took it seemed like the market in December November were still fairly tight in those regions on there were a lot of media reports about difficulties getting product into those markets are there other expansion opportunities that are other in your budget or you're considering for those assets I know thats not their final.
Huge expansions, but just curious I know nothing currently on the drawing board we are looking at it but as Brad mentioned in his comments that was one of the reasons, we had such a big fourth quarter in the central East but.
The CHS acquisition.
A little over a year ago that was a big part of.
The beach that we had in the fourth quarter up there.
We're getting everything out of the that acquisition in the projects that followed that we had hoped for.
Great and then lastly from me do you do butane blending hedging at all on this I knew that.
How much have you done for 2020, if you do so if you do any so well in a manner of speaking it's all back to back so when we buy butane we sell the gasoline. So it's a no risk back to back transaction.
Okay, and Danny can you talk about what margins you may have I know, it's backed by transaction, but have you actually locked in and sold on anything forward.
For 2002 week we.
A little bit a little bit that we had blended in the fourth quarter and we rolled it into 2020, because the gasoline contango as you go into the summer months.
Typically.
Most of the which we do as we bought butane in the summertime and store it when its cheapest and we'll sell gasoline in the fall during the blending season, along with those purchases.
Great. Thanks, everyone.
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Thank you.
And again, ladies and gentlemen, if you'd like to ask a question that is star one again, if you'd like to ask a question that a star one and our next question comes from Jeremy Tonet from JP Morgan. Your line is now open.
Hi, This is Joe on for Jeremy.
Wanted to ask first on how you see leverage progressing including the perhaps throughout 2020, and then maybe kind of what level.
Of leverage reduction you see by the end of the year and then also longer term.
Yes, so as we've said we made a lot of progress over the last couple of years de levering and we've actually beat in our leverage guidance for the last year. So.
We finished the year as we said at 3.88 times and that's three consecutive quarters under four zero going forward Delevering. We will continue to be our main focus focus as we said and we will spend capital wisely in 2020.
Capital spend guidance is about 30% less than 2019.
We have room for further capital cuts if needed and.
As I said, we're funding about 40% of our capital growth with excess DCF. So we'll continue to grow the EBITDA will tend to use.
It would take advantage of any upsides, we have in our forecast and we'll continue to evaluate also noncore asset sales you'll smaller stuff.
As the year goes by so that's kind of our plan for de levering and 2020.
Okay. That's helpful.
And then I also wanted to talk a bit about the corpus Christi export dynamics.
Wanted to see how you see.
Hi, Yumes out your facility trending throughout 2020 growing a bit but at but theres kind of Theres also some growing competition in that area. While there is also growing high crude volumes and some anything you can say, how how volumes should continue to progress there.
Joe This is Danny Oliver again.
We Brad mentioned some of the results we had in in December I can tell you that in January our volumes continue to grow we we did about 670 little over 670000 barrels through our corpus system. Most of those barrels coming in there are committed to us either.
Eagle Ford Nvcs or.
Commitments that we have off of cactus and some other lines come into us from the Permian.
I will tell you that what we have in our forecast.
In relation to those.
Permian barrels is our NBC levels. So we do think that theres some upside there and we're really not concerned about losing those any of those barrels to any kind of competition, there kind of committed to us.
That's helpful. Thank you that's all for me.
Thank you and our next question comes from a Ryan Levine from Citi. Your line is now open.
Good morning.
We would you be able to provide some color as to what the drivers where for the 2019 capex being below guidance.
Is it mostly labor or are there any other components that helped drive that.
In general we had projects coming in under budget.
Certainly probably some of that is labor, but it's really just a mix of a bunch of things.
Some of labor somewhere scope changes so we reduced the scope of a couple of projects and that helped quite a bit.
Okay.
And then in terms of the 60000 barrels per day above NBC.
On your South Texas system what.
Can you kind of provide a little color as to what that number refers to is that an average that you're seeing over third most recent quarter or is that where you're anticipating in near 2020 guide.
Any color would be helpful. Yeah, absolutely so on the South Texas crude system. Our Mbcs are one of six we've been running 165 170.
And we have forecasted in the mid one thirtys.
Throughout the year and I don't see any reason.
From here I know, it's just January February, but I don't see any reason, we would see volumes going below of 151 60 level going forward.
To your forecasting 130 abate.
If I heard you Craig you don't see it going below 150 right.
Okay very conservative on the budget.
Okay. Thank you.
Thank you.
And we have a follow up question from gave marine from uses.
Your line is now open.
Hi, just one follow up for me I know Theres clearly a competitor that's sold some storage assets for a pretty good multiple out there recently it seems like your focus is still.
On de levering, but at the same time it sounds like asset sales are only going to happen. This year. If needed can you just maybe talk about.
What's your thoughts are following that transaction about seeing.
What value some of your storage my my assets might corner.
How that might fit in the context of de levering further.
I think we've already taken care of most of the low hanging fruit we had on asset sales. We have identified some smaller one often less core assets that we could do if needed.
To continue de levering or for whatever else, we need but you know multiple it's like you know it's all about the multiple in price and what you can get for these assets that we have seen multiples coming down over time on some of these asset sales that we've seen out there a lot of that is driven by just people's ability to be able to buy those assets and finance them in the capital.
Markets. So we'll continue to look at things but.
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Nothing is imminent at this point in terms of asset sales for us.
Thanks, Tom.
And thank you and now I would like to turn the call back over to Pam Schmidt Vice President Investor Relations for further remarks.
Thank you Justin we would once again like to thank everyone for joining us on the call today. If anyone has any additional questions. Please feel free to contact Newstar Investor Relations.
Thanks, again and have a great day.
Ladies and gentlemen, this concludes todays conference call. Thank you participating you may now disconnect.
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