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| 8-K - 2017 01 10 NS 8-K [REG FD UBS] - NuStar Energy L.P. | a20170110ns8-kregfdubs.htm |
UBS 2017 MLP One-on-One Conference
January 10 and 11, 2017
Exhibit 99.1
Forward-Looking Statements
2
Statements contained in this presentation that state management’s expectations or predictions of the
future are forward-looking statements. While these forward-looking statements, and any assumptions
upon which they are based, are made in good faith and reflect our current judgment regarding the
direction of our business, actual results will almost always vary, sometimes materially, from any
estimates, predictions, projections, assumptions or other future performance suggested in this
presentation. These forward-looking statements can generally be identified by the words "anticipates,"
"believes," "expects," "plans," "intends," "estimates," "forecasts," "budgets," "projects," "could," "should,"
"may" and similar expressions. These statements reflect our current views with regard to future events
and are subject to various risks, uncertainties and assumptions.
We undertake no duty to update any forward-looking statement to conform the statement to actual
results or changes in the company’s expectations. For more information concerning factors that could
cause actual results to differ from those expressed or forecasted, see NuStar Energy L.P.’s annual report
on Form 10-K and quarterly reports on Form 10-Q, filed with the SEC and available on NuStar’s website at
www.nustarenergy.com.
We use financial measures in this presentation that are not calculated in accordance with generally
accepted accounting principles (“non-GAAP”) and our reconciliations of non-GAAP financial measures to
GAAP financial measures are located in the appendix to this presentation. These non-GAAP financial
measures should not be considered an alternative to GAAP financial measures.
NuStar Overview
Two Publicly Traded Companies
4
G.P. Interest in NS IPO Date: 4/16/2001
~13% Common L.P. Interest in NS Common Unit Price (1/5/17): $52.43
Incentive Distribution Rights in NS (IDR) Annualized Distribution/Common Unit: $4.38
~13% NS Distribution Take Yield (1/5/17): 8.4%
IPO Date: 7/19/2006 Market Capitalization: $4.1 billion
Unit Price (1/5/17): $29.75 Enterprise Value: $7.2 billion
Annualized Distribution/Unit: $2.18 Credit Ratings
Yield (1/5/17): 7.3% Moody's: Ba1/Stable
Market Capitalization: $1.3 billion S&P: BB+/Stable
Enterprise Value: $1.3 billion Fitch: BB/Stable
NYSE: NSH
NYSE: NS
William E. Greehey
9.0 million NSH Units
21.0% Membership Interest
Public Unitholders
68.3 million Common
9.1 million Preferred
Other
Public Unitholders
33.9 million NSH Units
79.0% Membership Interest
Large and Diverse Geographic Footprint
with Assets in Key Locations
Assets:
79 terminals
~95 million barrels of storage capacity
~8,700 miles of crude oil and refined product pipelines
Corpus Christi, TX –
Destination for South Texas
Crude Oil Pipeline System
St. James, LA – 9.9MM bbls
Pt. Tupper, Nova Scotia – 7.8MM bbls
Linden, NJ – 4.6MM bbls
St. Eustatius –
14.4MM bbls
3.8MM bbls
5
… and in 2016 (through 12/31/16)
Returns
NuStar Energy L.P. 37.6%
NuStar GP Holdings, LLC 51.2%
Alerian MLP Index 18.3%
S&P 500 12.0%
NuStar Has Outperformed the Alerian Since the
Beginning of the Crude Downturn…
6
(% change)
Total Return as of 1/5/17
-80.0%
-60.0%
-40.0%
-20.0%
0.0%
20.0%
NS AMZ Crude
Our 2016 Accomplishments in the Face of
Challenges
We succeeded during the year by leveraging our strengths
Diverse assets: type (pipelines and terminals), market (refined products and crude) and
geography
Disciplined financial management
Operational excellence
Efficient project management
In 2016, we:
Expect to deploy $253 to $273 million of strategic capital
Re-contracted 9.5MMBbls in St. Eustatius at higher rates
Reactivated 2.5MMBbls of products storage in Piney Point
Implemented new At-the-Market (ATM) unit issuance program
Issued $226.5 million of 8.50% Series A fixed-to-floating rate cumulative redeemable perpetual
preferred units
Closed on the purchase of terminals with 1.2MMBbls of storage and associated dock assets
Continued to be ranked as one of the best places to work by Fortune magazine
Our continued strong distribution coverage and solid earnings, even in the face of an
industry downturn of historic proportions, demonstrates the resiliency and strength of
our business model and our strategic direction
7
Resilient and Strong Core Operations,
No Matter the Price of a Barrel of Crude
8
20
30
40
50
60
70
80
90
100
110
0.7
0.8
0.9
1
1.1
1.2
1.3
7/1/2014 2/1/2015 9/1/2015 4/1/2016
C
ru
d
e
P
ri
c
e
C
o
v
e
ra
g
e
R
a
ti
o
NS Coverage Ratio Price of Crude One-Times
Although valuations of some MLPs have de-coupled from crude prices – we still believe that our
valuation does not yet reflect our solid financial results, stable cash flow and overall stability and
strength of our business
Total unitholder return since recent low on January 20, 2016 +119%2, however still down -8%2 from
the 2015 high on April 30, 2015.
Coverage Ratio1 (Trailing Twelve Months) vs Price of Crude
(July 2014 – September 2016)
2 – Total unitholder returns as of January 5, 2017.
1.07x
0.98x
1.04x
1.12x 1.12x 1.11x
1.08x
1.12x
1.08x
3Q-16 3Q-14 4Q-14 1Q-15 2Q-15 3Q-15 4Q-15 1Q-16 2Q-16
1 – Please see slides 33-35 for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measure
Percentage of Expected
2016 Annual Segment EBITDA
Refined Product Pipelines
Crude Oil Pipelines
Ammonia Pipeline
Refined Product Terminals
Crude Oil Storage
Fuels Marketing: 2%
Refined Products Marketing, Bunkering
and Crude & Fuel Oil Trading
Majority of Segment EBITDA Generated by
Fee-Based Pipeline and Storage Segments
Pipeline and Storage segments expected
to account for about 98% of 2016 annual
segment EBITDA
Storage: 49%
Pipeline: 49%
9
49%
49%
Guidance Summary
10
2016 Annual Guidance
4th Quarter 2016 Guidance
2017 Annual Guidance
Pipeline Segment EBITDA1 $325 - $345 million Lower than 4Q 2015
Storage Segment EBITDA1 $330 - $350 million Lower than 4Q 2015
Fuels Marketing Segment
EBITDA1
$5 - $10 million Slightly higher than 4Q15
Annual EBITDA1 $600 - $650 million
General and Administrative
Expenses
$100 - $110 million
Reliability Capital Spending $35 - $45 million $35 - $55 million
Strategic Capital Spending $160 - $180 million
internal growth plus net
$93 million for Martin
Acquisition
$530 - $550 million
Earnings Per Unit2 ($0.30) – ($0.40) per unit
1 - Please see slides 33-35 for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures
2 - NuStar expects to record a non-cash charge of approximately $60 million during the 4th quarter of 2016 to adjust the carrying value of the
Axeon term loan. As a result of this charge, we expect to report a loss for the 4th quarter. See slide 16 for further discussion.
* see yellow highlight for revision
11
Building on Our Strengths - Stable, Diversified
Business Foundation for Future Growth
Contracted fee-based storage and pipeline assets provide stable cash flows
Storage terminals effectively full
~75% of pipeline revenues are demand-pull - based on refinery/fertilizer plant feedstock supply or
refinery production delivery
~25% of pipeline revenues are Eagle Ford volumes to area refineries or Corpus Christi, TX docks
~95% of tariffs are FERC-based, which are adjusted annually for inflation
Diverse and high-quality customer base composed of large integrated oil companies,
national oil companies and refiners
1 – ~95% committed through take or pay contracts or through structural exclusivity (uncommitted lines serving refinery customers with no competition)
Storage Lease Utilization
~95% of
Leasable
Storage
Effectively
Full
Pipeline Revenue – Contract1 %
~95%
Committe
d1
TexStar
Acquisition
On Track for $253 to $273 Million of Strategic Spending in
2016 and Expect $530 to $550 Million of Strategic Spending
in 2017 (Dollars in Millions)
$374
$302 $328 $288 $160
to
$180
$530
to
$550
$316
$143
$93
$0
$100
$200
$300
$400
$500
$600
$700
$800
2012 2013 2014 2015 2016
Forecast
2017
Forecast
Internal Growth and Other Acquisitions
$253
to
$273
2016 Total Capital Spending, which includes Reliability Capital, is expected to be
in the range of $288 to $318 million
2017 Total Capital Spending, which includes Reliability Capital, is expected to be
in the range of $565 to $605 million
12
2012 to 2017
Average Internal Growth
Spend $334 Million per Year
Linden JV
Acquisition
Martin
Terminal
Acquisition
$690
$431
Pursuing Pipeline and Storage
Opportunities
3.8MM bbls
13
Expansion of Ammonia
Pipeline System
Included in 2016 &
2017 Spending
Guidance
Currently Evaluating
West Coast Terminal
Expansions
Construction of ~750M bbls
of New Storage at St. James
Linden Terminal
Expansion
Project to Transport
LPGs and Refined
Products from the
U.S. into Northern
Mexico
Expansion of our South
Texas Crude Oil & Refined
Product Pipeline Systems
Strategic Growth
Opportunities:
- $1.0 to $1.5 billion1
- Focused on developing
synergistic, high-return
projects
1 – capital spending time horizon is next one to three years.
Construction of ~260M
bbls of New Storage in
the Central East
Further Expansion of our St.
James Terminal
Terminal Expansion
Opportunities in the Northeast
St. Eustatius
Optimization Project
No Debt Maturities until 2018
(LTD Maturity Profile as of September 30, 2016, Dollars in Millions)
Long-term Debt structure 55% fixed rate – 45% variable rate
Callable in 2018, but
final maturity in 2043
14
$992
$350
$450
$300 $250
$365
$403
$43
$0
$250
$500
$750
$1,000
$1,250
2015 2016 2017 2018 2019 2020 2021 2022 2038-
2041
Receivables Financing
Sub Notes
GO Zone Financing
Senior Unsecured Notes
Revolver
$796
NuStar Energy Recently Issued $226.5 Million
of Perpetual Preferred Equity
15
On November 25, 2016, NuStar Energy issued 8 million 8.50% Series A Fixed-to-Floating Rate
Cumulative Redeemable Perpetual Preferred Units (“Preferred Units”) at a price of $25 per unit
Net proceeds of approximately $193 million were received
Underwriters were granted a 30-day option to purchase up to an additional 1.2 million units
On December 9, 2016, the underwriters exercised their option and purchased an additional 1.1
million Preferred Units
Net proceeds of approximately $26 million were received
Units are callable at $25 par value on or after December 15, 2021
During non-call period the coupon on units is fixed at 8.50%
On December 15, 2021 the coupon converts to a floating rate of three-month LIBOR plus 6.766%
Issuance recorded as equity on NuStar’s balance sheet
Receives 100% equity credit from Moody’s and 50% equity credit from S&P and Fitch
Coupon/cost associated with preferred equity was significantly lower than the cost of issuing
NuStar common equity
All-in cost associated with NuStar common equity on November 17, 2016 was around 12%
Annual savings of approximately $8 million realized by issuing preferred versus common equity
Axeon Term Loan Update
16
The owners of Axeon have informed us that they have entered into an agreement to sell
Axeon’s retail asphalt sales and distribution business
Axeon expects to close its transaction by the end of the 2nd quarter of 2017
At such time as the Axeon transaction is closed, we expect to receive a $110 million cash
payment to settle and terminate the Axeon Term Loan, which has a current outstanding
principal balance of $190 million and would otherwise have matured in September 2019
After closing of Axeon’s transaction, we will no longer be obligated to provide credit support to
Axeon
NuStar is currently obligated to provide credit support up to $125 million via guarantees, letters of credit
and cash collateral as applicable
Under the current agreement, our credit support obligation will be reduced to $100 million on February 26,
2017
NuStar intends to use the cash received from Axeon for general partnership purposes,
including the funding of future capital expenditures and to repay amounts outstanding under
its revolving credit agreement
The carrying value of the term loan on NuStar’s balance sheet is approximately $170 million
During the 4th quarter, NuStar expects to record a charge of approximately $60 million to reduce the
carrying value of the Axeon term loan to $110 million as of December 31, 2016
Pipeline Segment
18
2016 segment EBITDA should be lower than 2015 as we expect increased volumes on our
refined product pipelines to be offset by lower projected Eagle Ford crude volumes.
Pipeline Segment Overview
Pipeline Segment EBITDA1
($ in millions)
Pipeline Receipts by Commodity
TTM as of 9/30/16
*Other includes ammonia, jet fuel, propane, naphtha
and light-end refined products
1 – Please see slides 33-35 for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures
$186 $190
$199 $198
$211
$277
$323
$355 $325 to
$345
2008 2009 2010 2011 2012 2013 2014 2015 2016
Forecast
Crude
42%
Gasoline
31%
Distillate
17%
Other
10%
Throughputs in NuStar’s South
Texas Crude Oil Pipeline System
19
South Texas Crude Oil Pipeline System:
2016 and 2017 guidance at contractual minimums (133.5 Mbpd), upside potential with a crude oil
price recovery
For 2016, we expect to receive revenues in excess of actual shipped throughput volumes
Throughput and deficiency agreements with strong, credit-worthy, investment grade customers
Earliest renewal in 3Q 2018 (2-7 years remaining on all contracts)
168
179
218
255
270
290
272
263
238
207
190 188
112
120
149
173 179
190 193
175
161
131 131 133
100
200
300
4Q 2013
Actual
1Q 2014
Actual
(Corpus
Dock)
2Q 2014
Actual
(Phase 1)
3Q 2014
Actual
4Q 2014
Actual
1Q 2015
Actual
(Phase 2)
2Q 2015
Actual
3Q 2015
Actual
4Q 2015
Actual
1Q 2016
Actual
2Q 2016
Actual
2016 and
2017
Estimates
Total Eagle Ford Throughputs - Avg. Daily Throughputs (MBPD), Includes South Texas Crude Oil Pipeline System Throughputs
South Texas Crude Oil Pipeline System Throughputs into our Corpus Christi North Beach Terminal - Avg. Daily Throughputs (MBPD)
2016 and 2017
aaEstimates
NuStar’s South Texas Crude Oil
Pipeline Presence
20
Choke Canyon PL – 12”
Pettus South – 10”
Pawnee to Oakville PL – 12”
Three Rivers Supply – 12”
Corpus-Odem-3R – 8”
Oakville to Corpus – 16”
Second Phase of
Expansion – 12”
Working with Pemex to Develop Project to Transport LPGs
and Refined Products from the U.S. Into Northern Mexico
21
Delays due to organizational changes within Pemex
Originally planned $125 million spend in 2016. Due to project delay, spending
expected to take place in 2017 and 2018
NuStar Expanding Mid-Continent Pipeline
and Terminal Network
Several projects have been completed or
are under development with a key
customer to increase distillate and propane
supply throughout the Upper Midwest for
an investment of approximately $80
million
Capital investments to be backed by long-
term agreements
Propane supply projects complete and in
service
Construction on remaining projects should
be completed by the fourth quarter of
2017
22
Storage Segment
2016 segment EBITDA expected to benefit from higher renewal rates and increased utilization, which may be
partially offset by lower expected Eagle Ford throughput volumes into our Corpus Christi North Beach Terminal as
a result of decreased Eagle Ford shale production
2017 storage results expected to benefit from higher renewal rates recently negotiated at some of our terminals
and the recent Martin terminal acquisition
1 – Please see slides 33-35 for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures
Storage Segment EBITDA1
($ in millions)
24
Storage Segment Overview
*
* adjusted
$208
$242
$256
$279 $287 $277
$287
$335
$330 to
$350
2008 2009 2010 2011 2012 2013 2014 2015 2016
Forecast
25
Building Our Strategic Alliances in Europe For
Future Growth
As the European market changes, we
continue to expand on strategic alliances
with our current customers to drive growth
through:
Working on a long-term agreement with customer
at Grays to provide terminaling for all of their
Southeast England throughput
The agreement will require facility upgrades
including enhanced jetty capabilities, a vapor
recovery unit and pipeline upgrades
Developing alliance with a customer for larger
throughput position at Eastham and Grays
Discussions continue to increase customer’s fuel
business in Grays
Exploring opportunities to take advantage of a
customer’s recent refinery acquisition in Southern
Ireland, which will increase the supply of gasoline
necessary to blend and distribute out of Amsterdam
We are working with a customer to manage their
gasoline blending program and throughputs
We should be able to solidify our customer’s
position in our terminal and allow us to use for a
growth platform
Clydebank
Belfast
Eastham
Runcorn
Grays
Amsterdam
Grangemouth
Netherlands
United Kingdom
26
Acquiring control of the Linden Terminal in 2015 has freed us to develop opportunities that will increase
our capability to serve the New York Harbor (NYH), which is one of the largest trading hubs of refined
product in the world
NYH storage demand continues to be strong and our terminal has been 100% utilized for over 12 years
with the exception of periods for inspections and maintenance
We continue to receive inquires for storage, but due to an approximately 18-month permitting and
construction process, it is difficult to secure customer commitments so far in advance
Currently, we plan to construct 500MBbls of new storage at a cost of about $50 million (included in 2017
spending guidance provided)
We Are Exploring Expansion in the
New York Harbor
Piney Point Terminal
5.4 million-barrel storage facility located in Piney Point, Maryland, along the Potomac River
Primary storage capabilities include gasoline, distillates and other clean products
Reactivated due to favorable market economics
Signed up storage commitments for 2.5 million barrels
Contract allows customer to take advantage of the contango market structure
First delivery of 189,000 barrels of ULSD arrived on April 21, 2016
2.5 million barrels (above) includes additional 650,000 barrels effective January 2017
27
Piney Point Terminal Back in Service
28
Majority of St. Eustatius Terminal Tankage
Recently Leased through 1st Quarter of 2020
St. Eustatius Terminal
14.4 million-barrel storage facility located on the island of St. Eustatius in the Caribbean
Primary storage capabilities include crude oil and fuel oil (as well as other refined products)
Can accommodate ULCCs (ultra large crude carriers)
Recently re-contracted 9.5 million barrels of storage
Contract renewal (and additional leased barrels) effective in first quarter 2017, with a three-year lease
term
Favorable renewal rates achieved due to current market conditions
Expect to spend approximately $100 million on facility enhancements; strategic capital spending to
take place in 2016 and 2017
28
We Are Adapting to Market Flows:
Renewables Opportunities on the West Coast
The West Coast: In a mature fuel supply market, biofuels provide opportunities for growth
Low carbon initiatives on the West Coast (e.g. California’s Low Carbon Fuel Standard) promote the
use of biofuels
We currently offer ethanol storage and blending at Selby, Stockton, Portland and Tacoma
We are pursuing projects to expand ethanol export capabilities at Stockton and add
ethanol blending in Vancouver
Projects in development to add or expand biodiesel and/or renewable diesel at Stockton, Selby,
Portland and Tacoma
29
30
Martin Midstream terminal assets
1.15 million barrels of storage (900,000 barrels of crude and 250,000 barrels of refined product storage), located in
Corpus Christi, Texas
Terminals have direct connectivity to Eagle Ford production through connection to the Harvest Pipeline, a six-bay
truck rack and access to two deep-water crude oil docks
Terminals located on 25 acres with expansion opportunities
Synergies and Economics
Terminals and docks located adjacent to our existing Corpus Christi North Beach Terminal
Minimum volume contract in place through November 2017
Expect a positive renewal outcome with existing customer, which is a current NuStar customer in Corpus
Christi
Construction on Port of Corpus Christi’s new state-of-the-art dock (which will be adjacent to our own existing docks
upon completion) is expected to be completed in the second half of 2017
New dock will provide capability for larger vessels and increased volumes
Scheduling synergies with our existing docks
We paid $93 million, net for these assets, generating a seven-times EBITDA multiple based on an annual average
EBITDA1 estimate of ~$13.5 million
Closed on acquisition on December 21, 2016
Recently Closed Corpus Christi Terminal
Acquisition from Martin Midstream
1 – Please see slides 33-35 for explanation of non-GAAP financial measures
Appendix
Capital Structure after Perpetual Preferred
Equity Issuance ($ in Millions)
As of September 30, 2016 Actual As Adjusted
(Unaudited)
$1.5 billion Credit Facility $992 $773
NuStar Logistics Notes (4.75%) 250 250
NuStar Logistics Notes (4.80%) 450 450
NuStar Logistics Notes (6.75%) 300 300
NuStar Logistics Notes (7.65%) 350 350
NuStar Logistics Sub Notes (7.625%) 403 403
GO Zone Bonds 365 365
Receivables Financing 43 43
Short-term Debt 7 7
Total Debt $3,160 $2,941
Total Partners’ Equity 1,470 1,689
Total Capitalization $4,630 $4,630
Availability under $1.5 billion Credit Facility (as of September 30, 2016): ~$492 million
$992 million in borrowings and $16 million in Letters of Credit outstanding
Debt to EBITDA1 calculation per Credit Facility of 4.6x (as of September 30, 2016)
Net proceeds of $219 million from the perpetual preferred equity issuance were used to reduce the $1.5 billion
Credit Facility balance in the “As Adjusted” column
32 1 – Please see slides 33-35 for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures
Reconciliation of Non-GAAP
Financial Information
33
2008 2009 2010 2011 2012 2013 2014 2015
Operating income 135,086$ 139,869$ 148,571$ 146,403$ 158,590$ 208,293$ 245,233$ 270,349$
Plus depreciation and amortization expense 50,749 50,528 50,617 51,165 52,878 68,871 77,691 84,951
EBITDA 185,835$ 190,397$ 199,188$ 197,568$ 211,468$ 277,164$ 322,924$ 355,300$
2008 2009 2010 2011 2012 2013 2014 2015
Operating income (loss) 141,079$ 171,245$ 178,947$ 196,508$ 198,842$ (127,484)$ 183,104$ 217,818$
Plus depreciation and amortization expense 66,706 70,888 77,071 82,921 88,217 99,868 103,848 116,768
EBITDA 207,785$ 242,133$ 256,018$ 279,429$ 287,059$ (27,616)$ 286,952$ 334,586$
Impact from non-cash goodwill impairment charges 304,453
Adjusted EBITDA 276,837$
This presentation includes forecasted EBITDA for assets we acquired from Martin Midstream Partners L.P. This is a non-GAAP financial measure. Forecasted EBITDA is based on the
partnership’s projections for the assets acquired. Forecasted EBITDA is included to help facilitate comparisons of operating performance of the partnership with other companies in our industry,
as well as help facilitate an assessment of our assets' projected ability to generate sufficient cash flow to make distributions to our partners. We are unable to present a reconciliation of
forecasted EBITDA to net income because certain elements of net income, including interest, depreciation and taxes, are not available. Together, these items generally result in EBITDA being
significantly greater than net income.
None of these financial measures are presented as an alternative to net income, or for any period presented reflecting discontinued operations, income from continuing operations. They should
not be considered in isolation or as substitutes for a measure of performance prepared in accordance with GAAP. For purposes of segment reporting, we do not allocate general and
administrative expenses to our reported operating segments because those expenses relate primarily to the overall management at the entity level. Therefore, EBITDA reflected in the segment
reconciliations exclude any allocation of general and administrative expenses consistent with our policy for determining segmental operating income, the most directly comparable GAAP
measure.
NuStar Energy L.P. utilizes financial measures, such as earnings before interest, taxes, depreciation and amortization (EBITDA), distributable cash flow (DCF) and distribution coverage ratio,
which are not defined in U.S. generally accepted accounting principles (GAAP). Management believes these financial measures provide useful information to investors and other external users
of our financial information because (i) they provide additional information about the operating performance of the partnership’s assets and the cash the business is generating and (ii) investors
and other external users of our financial statements benefit from having access to the same financial measures being utilized by management and our board of directors when making financial,
operational, compensation and planning decisions.
Our board of directors and management use EBITDA and/or DCF when assessing the following: (i) the performance of our assets, (ii) the viability of potential projects, (iii) our ability to fund
distributions, (iv) our ability to fund capital expenditures and (v) our ability to service debt. In addition, our board of directors uses a distribution coverage ratio, which is calculated based on DCF,
as the metric for determining the company-wide bonus and the vesting of performance units awarded to management as our board of directors believes DCF appropriately aligns management’s
interest with our unitholders’ interest in increasing distributions in a prudent manner. DCF is a widely accepted financial indicator used by the master limited partnership (MLP) investment
community to compare partnership performance. DCF is used by the MLP investment community, in part, because the value of a partnership unit is partially based on its yield, and its yield is
based on the cash distributions a partnership can pay its unitholders.
The following is a reconciliation of operating income to EBITDA for the pipeline segment (in thousands of dollars):
Year Ended December 31,
The following is a reconciliation of operating income (loss) to EBITDA for the storage segment (in thousands of dollars):
Year Ended December 31,
Reconciliation of Non-GAAP
Financial Information (continued)
34
Pipeline Segment Storage Segment
Fuels Marketing
Segment
Projected operating income $ 240,000 - 255,000 $ 215,000 - 230,000 $ 5,000 - 10,000
Plus projected depreciation and amortization expense 85,000 - 90,000 115,000 - 120,000 -
Projected EBITDA $ 325,000 - 345,000 $ 330,000 - 350,000 $ 5,000 - 10,000
The following is a reconciliation of projected net income to projected EBITDA (in thousands of dollars):
Year Ended
December 31, 2017
Projected net income $ 200,000 - 230,000
Projected interest expense, net 160,000 - 165,000
Projected income tax expense 10,000 - 15,000
Projected depreciation and amortization expense 230,000 - 240,000
Projected EBITDA $ 600,000 - 650,000
September 30, 2016
Net income 220,539$
Interest expense, net 136,933
Income tax expense 14,208
Depreciation and amortization expense 213,426
EBITDA 585,106
Other expense 80
Mark-to-market impact on hedge transactions (a) 5,372
Material project adjustments (b) 5,890
Consolidated EBITDA, as defined in the Revolving Credit Agreement 596,448$
Total consolidated debt 3,160,386$
NuStar Logistics' 7.625% fixed-to-floating rate subordinated notes (402,500)
Proceeds held in escrow associated with the Gulf Opportunity Zone Revenue Bonds (41,922)
Consolidated Debt, as defined in the Revolving Credit Agreement 2,715,964$
C nsolidated Debt Coverage Ratio (Consolidated Debt to Consolidated EBITDA) 4.6x
(a)
(b) This adjustment represents the percentage of the projected Consolidated EBITDA attributable to any Material Project, as defined in the Revolving Credit Agreement, based on the current completion
percentage.
The following is a reconciliation of projected operating income to projected EBITDA for the year ended December 31, 2016 (in thousands of dollars):
The following is the non-GAAP reconciliation for the calculation of our Consolidated Debt Coverage Ratio, as defined in our $1.5 billion five-year revolving credit agreement (the Revolving Credit Agreement) (in
thousands of dollars, except ratio data):
For the Four Quarters Ended
This adjustment represents the unrealized mark-to-market gains and losses that arise from valuing certain derivative contracts, as well as the associated hedged inventory. The gain or loss associated
with these contracts is realized in net income when the contracts are settled.
Reconciliation of Non-GAAP
Financial Information (continued)
35
Sept. 30, 2014 Dec. 31, 2014 Mar. 31, 2015 Jun. 30, 2015 Sept. 30, 2015 Dec. 31, 2015 Mar. 31, 2016 Jun. 30, 2016 Sept. 30, 2016
Income from continuing operations (116,202)$ 214,169$ 298,298$ 295,436$ 301,335$ 305,946$ 236,222$ 234,414$ 220,539$
Interest expense, net 132,208 131,226 129,901 129,603 130,044 131,868 133,954 135,359 136,933
Income tax expense 14,983 10,801 9,071 10,310 10,281 14,712 15,195 16,361 14,208
Depreciation and amortization expense 188,570 191,708 197,935 202,764 206,466 210,210 210,895 211,781 213,426
EBITDA from continuing operations 219,559$ 547,904$ 635,205$ 638,113$ 648,126$ 662,736$ 596,266$ 597,915$ 585,106$
Equity in losses (earnings) of joint ventures 11,604 (4,796) (9,102) (5,808) (3,059) - - - -
Interest expense, net (132,208) (131,226) (129,901) (129,603) (130,044) (131,868) (133,954) (135,359) (136,933)
Reliability capital expenditures (29,862) (28,635) (30,674) (29,464) (32,439) (40,002) (39,221) (44,497) (43,770)
Income tax expense (14,983) (10,801) (9,071) (10,310) (10,281) (14,712) (15,195) (16,361) (14,208)
Distributions from joint venture 8,048 7,587 7,721 6,993 4,208 2,500 - - -
Mark-to-market impact of hedge transactions (a) (90) 6,125 4,991 (261) (132) (5,651) 152 4,474 5,372
Unit-based compensation (b) - - - - - - 1,086 2,208 3,499
Other items (c) 323,764 19,732 (34,471) (36,351) (41,628) (44,032) 10,110 11,518 19,185
DCF from continuing operations 385,832$ 405,890$ 434,698$ 433,309$ 434,751$ 428,971$ 419,244$ 419,898$ 418,251$
Less DCF from continuing operations available
to general partner 51,064 51,064 51,064 51,064 51,064 51,064 51,064 51,064 51,164
DCF from continuing operations available
to limited partners 334,768$ 354,826$ 383,634$ 382,245$ 383,687$ 377,907$ 368,180$ 368,834$ 367,087$
Distributions applicable to limited partners 341,140$ 341,140$ 341,140$ 341,140$ 341,140$ 341,140$ 341,140$ 341,140$ 341,798$
Distribution coverage ratio (d) 0.98x 1.04x 1.12x 1.12x 1.12x 1.11x 1.08x 1.08x 1.07x
(a)
(b)
(c)
(d) Distribution coverage ratio is calculated by dividing DCF from continuing operations available to limited partners by distributions applicable to limited partners.
The following is a reconciliation of income from continuing operations to EBITDA from continuing operations and DCF from continuing operations (in thousands of dollars, except ratio data):
For the Twelve Months Ended
DCF from continuing operations excludes the impact of unrealized mark-to-market gains and losses that arise from valuing certain derivative contracts, as well as the associated hedged inventory. The
gain or loss associated with these contracts is realized in DCF from continuing operations when the contracts are settled.
In connection with the employee transfer from NuStar GP, LLC on March 1, 2016, we assumed obligations related to awards issued under a long-term incentive plan, and we intend to satisfy the
vestings of equity-classified awards with the issuance of our units. As such, the expenses related to these awards are considered non-cash and added back to DCF. Certain awards include distribution
equivalent rights (DERs). Payments made in connection with DERs are deducted from DCF.
Other items mainly consist of (i) adjustments for throughput deficiency payments and construction reimbursements for all periods presented, (ii) a $56.3 million non-cash gain associated with the Linden
terminal acquisition on January 2, 2015 included in other income in our statements of income and (iii) a non-cash goodwill impairment charge totaling $304.5 million in the fourth quarter of 2013.