NuStar Energy L.P.

Good day, and thank you for standing by. Welcome to the new STAR Energy LP second quarter 2021 conference call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Pam Schmidt, Vice President of Investor Relations. Thank you. Please go ahead.

Good morning, and welcome to today's call. On the call today are Brad Barron, New Start Energy LP's President and CEO, and Tom Schoaf, 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 of NewSTAR that are forward-looking statements. These statements are subject to various risk, uncertainties, and assumptions described in our filings with the Security 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 refer 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 section of our website at NewStarEnergy.com. With that, I will turn the call over to Brad.

Good morning. Thank you all for joining us. We have a lot of positive things to talk about today. The sale of non-core assets and a strong second quarter as well as our outlook for the rest of the year and beyond. First, starting with the sale. On Monday, we announced that we've signed an agreement to sell nine terminal facilities in eight locations in the Northeast, Illinois, and Florida to Sunoco LP for $250 million, and we expect to close on that sale early in the fourth quarter. As we previously discussed, we plan to deploy the proceeds from this sale to further improve our debt metrics. While selling assets is never easy, this transaction is a win-win for all parties, as we're exiting non-core assets at an attractive valuation, which allows NuStar to lower leverage, and Sunoco is adding high-quality infrastructure assets and great employees to its portfolio. With this sale, we're positioned to strengthen our balance sheet further and focus 100% on our core strategic asset footprint. Our refined product systems across the mid-continent, Texas and northern Mexico, Our crude assets, including our Corpus Christi crude system with our North Beach export facility, our flagship St. James crude oil terminal, and our core of the core Permian gathering system. And our renewable fuels business, current and future. Currently, the focus is on the West Coast Renewable Fuels Network, where we are already the leading logistics service provider. And in the future, we plan to focus on our ammonia system, which spans more than 2,000 miles from Louisiana north across much of the Midwest. Now to turn for a few minutes to our strong second quarter results. This quarter, we generated $189 million of EBITDA, which is 17% higher than 2Q 2020's results, and also a 12% improvement over the first quarter of 2021. That strong improvement in EBITDA was driven by outperformance across our core strategic asset footprint, our refined product systems, our crude assets, and our West Coast renewable fuels network. Starting with our refined product systems, refined product demand has continued to improve as more and more Americans have returned to normal day-to-day activities. After dipping to an average of 95% in the first quarter due to the winter storm, our second quarter average rebounded back to 105% of pre-pandemic demand, and we're now forecasting 100% for the full year. Our second quarter refined product throughputs are up 34% over 2Q 2020, and also up 19% over the first quarter of 21. As vaccination efforts progress, we expect to continue to see sustained recovery in refined product demand in the U.S. and in Mexico, and we continue to expect our refined product systems to perform at around 100% of our pre-pandemic run rate for the remainder of 2021. Strengthening refined product demand has also increased U.S. refiner's demand for crude, which has contributed to higher throughputs for our crude pipelines in the second quarter, up 17% over 2Q of 2020 and up 13% over 1Q of 2021. Rebounding crude demand along with tempered global supply has contributed to higher crude prices and improved expectations for U.S. shale production, particularly in the Permian Basin. Thanks to our Permian's core of the core premier location, lowest producer cost and highest product quality, we saw our Permian systems volumes grow in the second quarter to an average of 450,000 barrels per day, up 12% over 2Q of 2020. also up 12% over the first quarter of 2021, and comparable to the record-breaking peak we saw in that system in the first quarter of 20, which, as you know, was pre-COVID. In July, we saw our Permian volumes increase to an average of 481,000 barrels per day, and we're on track to exit 2021 at around 500,000 barrels a day, again, one-third of our pre-COVID volumes. We continue to expect to see Eagle Ford and WTI volumes in our Corpus Christi crude system at our MVC levels for the rest of the year, but we've seen an increase in recent weeks in the number of WTI long-haul barrels we're receiving from the Permian, and we're hopeful that we'll see that trend continue as vaccinations continue to proliferate and global demand improves. Sustained, healthy U.S. shale production growth combined with improving global demand will drive U.S. export growth over time, which we expect to be positive for crude volumes on our Corpus Christi crude system. as well as for our St. James Terminal, where we expect to benefit from our connection to CapLine as that reversal is completed in 2022. Now turning to our renewable fuels business, our West Coast Renewable Fuels Network is already playing an integral role in significant reductions in carbon emissions and offers us a great platform for growth across that region. Newstore already handles an impressive share of California's renewable fuels. According to the latest available data from the state of California for the first quarter of 2021, NuSTAR handled about 5% of California's total biodiesel, close to 20% of California's ethanol, and close to 30% of the state's renewable diesel volumes. We expect NuSTAR's presence to continue to grow as we complete our planned tank conversion projects, and we will continue to transition existing tankage over to a renewable service as customer demand increases. We're also looking at some exciting renewables opportunities for our ammonia system. Our ammonia system has always been a steady, important EBITDA contributor for NuSTAR, but we haven't talked about it much in the past. So for a little context, it's the longest ammonia pipeline in the country, spanning more than 2,000 miles from Louisiana north up through the mid-continent, along the Mississippi, and beyond, where the ammonia we transport is primarily used for fertilizing crops by farmers in the nation's breadbasket. This critical chemical is now experiencing renaissance as an energy source capable of powering zero-carbon heavy-duty engines and marine vessels, as well as for ammonia's ability to offer the safest and most efficient transportation and storage medium for hydrogen. While we all hear about the future of hydrogen as it has emerged as a promising low-emissions energy source, We're excited that there are actionable opportunities for hydrogen for use now, including utilization of hydrogen to generate sustainable electricity for grid stabilization, not to mention as a zero-emission transportation fuel for heavy vehicle fleets. We believe the steps our customers and other ammonia producers are taking toward green ammonia production, as well as increasing demand for renewable alternatives and carbon emission reductions, will drive concurrent demand for growth on our ammonia system, with little or no additional strategic spending. We're developing a number of near and long-term actionable, low multiple, modest spend, high return organic projects for connections and other enhancements to our system to maximize its role in a renewable fuels future. On that note, before I turn the call over to Tom to discuss our second quarter results and full year outlook in more detail, I want to point you to our newly issued sustainability presentation, which you can find on our website. In that presentation, you'll learn more about New Star's culture of responsibility, which has distinguished us throughout our 20-year history. We've always been committed to protecting and caring for our employees, our communities, and the environment. You will see our track record of excellence in health, safety, and giving back, as well as our commitment to sustainability now and in the future. With that, I'll turn it over to Tom to give you more details on New Star's quarterly results.