Feb 19, 2014
Executives
Noel Ryan - Director - IR Jennifer Straumins - President and COO Pat Murray - SVP and CFO
Analyst
Theresa Chen - Barclays Capital TJ Schultz - RBC Capital Markets Anna Kohler - Imperial Capital Cory Garcia - Raymond James
Operator
Good day ladies and gentlemen and welcome to the Fourth Quarter 2013 Calumet Specialty Products Partners L.P earnings conference call. My name is Phillip and I will be your operator for today.
At this time all participants are in listen-only mode. Later we will be conducting a question-and-answer session.
[Operator Instructions] As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Mr.
Noel Ryan, Director of Investor Relations. Please proceed.
Noel Ryan
Thank you Phillip. Good afternoon and welcome to the Calumet Specialty Products Partners fourth quarter and full-year 2013 results conference call.
Thank you for joining us today. Leading today’s call is Jennifer Straumins, our President and COO who will provide an update on our business during the fourth quarter and the opportunities for growth as we look ahead to 2014.
Next Pat Murray, our CFO will provide detail on our financial performance during the fourth quarter. At the conclusion of our prepared remarks, we will open the call for questions.
Before we proceed, allow me to remind everyone that during the course of this call, we may provide various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Such statements are based on the beliefs of our management, as well as assumptions made by them and in each case based on the information currently available to them.
Although our management believes that the expectations reflected in such forward-looking statements are reasonable, neither in the partnership, its general partner nor our management team can provide any assurances that the expectations will prove to be correct. Please refer to the Partnership’s press release that was issued this morning, as well as our latest filings with the Securities and Exchange Commission for a list of factors that may affect our actual results and could cause them to differ from our forward-looking statements made on this call.
As a reminder, you may download a PDF of the presentation slides that will accompany the remarks made on today’s conference call as indicated in the press release we issued early today. You can access these slides in the Investor Relations section of our website at www.calumetspeciality.com.
And with that, I’d like to hand the call over to Jennifer.
Jennifer Straumins
Thank you Noel and good afternoon to all of you joining us on today’s call. If you’re following along in the presentation will start on Page 4 with a high level overview of our fourth quarter results.
We reported a net loss for the fourth quarter 2013 of $15.5 million, versus net income of $45.7 million in the prior year period. Adjusted EBITDA as defined under our financing instruments declined to $53.2 million in the fourth quarter, down from $91.3 in the same quarter of 2012.
Net income for the fourth quarter of 2013 includes $14.6 million in one-time debt extinguishment costs related to the partial redemption of our 2019 notes, with proceeds from the issuance of the 2022 notes offering during November 2013. As we indicated in the press release issued this morning, our fourth-quarter results were impacted by a significant year-over-year decline in gross profit contribution from both the Specialty Products and Fuel Products segments.
Within the Specialty Products segment, gross profit margins returned to normalized levels when compared to the elevated margins achieved during the prior-year period. Performance within the Fuel Products segment was impacted by a combination of factors, including a year-over-year decline in benchmark refined product margins, partially offset by improvements on derivative instrument settlements; and two, lower plant utilization of the Shreveport refinery; and third, a year-over-year increase in costs related to compliance with the U.S.
renewable fuel standards. During 2013, our full-year results were muted by several headwinds, including extended plant maintenance at several of our large fuels refineries in addition to an escalation in RFS compliance cost versus the prior-year period.
Despite these challenges, we still generated full-year adjusted EBITDA of $242 million, which equates the second highest level of adjusted EBITDA we had in company history behind the record year we had in 2012. Despite some variability in our quarterly results during the past year, we stayed the course in our commitment to pay a robust quarterly cash distribution given our continued confidence in the long-term growth prospects of the business.
In fact, during 2013, we paid more than $200 million in cash distributions to our unit holders, an increase of 52% from the prior year end, and just recently paid our 32nd consecutive cash distribution to our limited partners. The past year can best be described as transitional.
In January, we acquired 14,500 barrels per day fuels refinery at San Antonio from NewStar in keeping with our strategy to own and operate inland refineries with direct access to cost-advantaged sources of crude oil such as that in Eagle Ford shale where the refinery sources its feedstock. In March, we broke ground on a 20,000 barrel per day refinery in North Dakota with our joint venture partner MDU Resources.
This refinery will help provide a local supply of diesel into a highly underserved regional market by the end of the year 2014. In June, we announced more than $500 million in high return organic growth projects slated for completion between now and the first quarter of 2016.
Collectively, these projects have the potential to nearly double our full-year adjusted EBITDA from 2013 levels. Further, during the second, third, and fourth quarters of 2013, we completed major turnarounds of Superior, Montana, and San Antonio respectively.
With these turnaround behind us, each of these refineries should not require extended multi-week outages until 2018. Overall, it was a year which we built for the future.
We invested more than $100 million in organic growth projects during 2013, and importantly the return on this investment didn’t show in our 2013 financial results given the multi-year nature of the projects. However, during the next 12 to 36 months, we expect to see considerable growth in our adjusted EBITDA as these projects reach completion.
Turning to Slide 5, in recent months, we've made progress in several key areas. We took the opportunity to increase our hedging both during the fourth quarter so as to help mitigate the risk associated with commodity price fluctuations in our Fuel segment.
This is a significant development that moves us closer to our goal of hedging between 50% and 75% of our forward fuels production. In December, we acquired the Bel-Ray Company, a manufacturer and distributor of high-performance synthetic lubricants and greases.
We really like the global presence enjoyed by Bel-Ray, a brand which is a nice complement to our Royal Purple brand of synthetic lubricants, albeit at a differentiated formulation with a diverse range of top tier customers. Also in December, we completed a 3000 barrels per day crude unit expansion of the San Antonio refinery in addition to finishing the gasoline blending project, which had been ongoing through 2013.
In January, this refinery ran at record rates following the completion of the crude unit expansion. Once TexStar completes the Karnes North Pipeline system later this year, San Antonio will enjoy a reduced transportation cost on the Eagle Ford crude that it receives from the field.
We see a lot of potential upside in this refinery over time. As you know, we make asphalt at Shreveport, Montana, and Superior.
With acquisition of Montana and Superior during the past three years, our asphalt production has increased as a percentage of our total mix. In an effort to improve net backs on our asphalt production, we've recently expanded our asphalt distribution to the East Coast as well as several midcontinent markets, which historically we've had no presence.
Late into the fourth quarter, we’ve raised $350 million through a heavily subscribed senior unsecured notes offering. The proceeds of this offering, net of the $111 million we used to redeem higher coupon debt was used to finance the Bel-Ray acquisition in addition to the forthcoming organic growth projects and general partnership purposes.
Importantly, this transaction helped to establish a new reference debt security for us. The 7.65% coupon on the $350 million tranche was 200 basis points better than we were able to secure on our early bond issues serving to lower our cost of capital and over time contributing positively to our DCF in future years.
Finally, we continue to make great progress in our North Dakota refinery construction and the Montana refinery expansion, both of which remain on schedule. I’ll discuss these projects in more detail shortly.
Now turning to Slide 6, Calumet will regularly utilize derivative instruments to help mitigate commodity price risk. Historically, the Fuel Products segment has been subject to significant fluctuations in fuel and refined product prices, while our Specialty Products segment has enjoyed higher, more stable gross profit margins.
Given our commitment to the fixed distribution MLP model, we’ve realized the importance of containing commodity price risks through the use of derivative instruments. As we’ve stated in the past, Calumet will seek to hedge up to 75% of its forward fuels production as far as four years out.
As of September 30, 2013, we had entered into hedges of approximately 6.5 million barrels for the full-year 2014. During the fourth quarter, we increased our forward gasoline hedges, and as of December 31, 2013, we had approximately 11.8 million barrels of products hedged for full year 2014 or just under half of our anticipated fuels production.
Turning to Slide 7, in December, we acquired the Bel-Ray company, a privately held manufacturer of high performance lubricants and greases. Over the years, the prior management team had done a fantastic job of growing into several high growth verticals with their portfolio of lubricants including mining, power sports, and industrial.
Importantly, a significant amount of the business Bel-Ray conducts is in global markets. Our global sales network is impressive.
With the prior owners indicating their interest of exiting the business last year, we acquired the business for cash using proceeds from the notes offering we completed in November. Strategically, this acquisition gives us a foothold in several new end markets and geographies.
It also provides us with a manufacturing facility in New Jersey; our first East Coast based manufacturing plant with export capability. Most of all, we’re really excited about the cross selling opportunities evident between our Royal Purple, Penreco, and Bel-Ray lines of products, particularly overseas.
Now turning to Slides 8 and 9, we’ll take a moment to discuss our on-going organic growth projects; the Montana refinery expansion, Dakota Prairie and the Missouri Esters Plant expansion. These projects all remain on track.
Later this year we expect the 20,000 barrels per day Dakota Prairie Refinery to come on stream. Although this new refinery may provide modest EBITDA contribution when it comes into service during the fourth quarter, the recently completed crude unit expansion and gasoline blending projects at San Antonio refinery, together with the feedstock transfer cost savings expected to our pipeline project should provide the bulk of the organic uplift of adjusted EBITDA in 2014.
Currently we estimate the growth projects completed between 2013 and 2016 will cost between $500 million and $550 million, in line with our prior guidance. During 2013 we spent approximately $100 million of the growth project budget.
Upon completion we anticipate these projects should yield approximately $200 million in annualized incremental adjusted EBITDA, based on our internal estimates. Now turning to Slides 10 to 13; asphalt and other products represented approximately 19% of our total production in 2013.
In recent years our asphalt production has increased following the acquisition of Superior and Montana refineries in 2011 and ‘12. Given the increased asphalt production within our system, we have been very active in our efforts to expand the number of geographies where we sell asphalt.
We believe these and future efforts will provide us more optionality with regard to where we sell products, allowing us to maximize our netbacks on barrels sold. In January we announced a multi-year asphalt supply marketing agreement with All-States Asphalt.
We believe this agreement represents a significant opportunity to expand the distribution of our premium asphalt products into New York State and surrounding markets through a third party terminal base in Albany, New York. Historically, asphalt sales from our Northern refineries have been routed to customers in Mid-Continent and Western markets.
Separately, in February we announced a multi-year agreement with Frontier Terminals, to lease a 348,000 barrel liquid asphalt distribution terminal in Muskogee, Oklahoma. Under this agreement Calumet will supply and market a wide range of premium asphalt products produced by its Northern refinery system through the Muskogee Terminal.
During the first quarter 2014, Calumet will begin marketing its asphalt products to customers in Arkansas, Missouri, Kansas and Oklahoma. Further as we indicated in our press release issued this morning, we are currently evaluating potential location in Idaho and the surrounding regions where we can potentially build one or more asset distribution terminals beginning in the first quarter 2016 would be used to see incremental asphalt production resulting from our Montana refinery expansion project.
Collectively we believe these efforts signal good progress as we seek to maximize residual product margins across the geographies in which we sell asphalt. Currently a decline in crude oil prices between the third quarter and fourth quarter of this year also help the asphalt margins exiting the year versus what we anticipated in early fall.
Now turning to Slide 14, during the fourth quarter of 2013 the Partnership reclassified the reporting of asphalt sold from its Shreveport, Superior and Montana refineries from its Specialty Products segment to its Fuel Products segment. This reporting change does not impact the Company's consolidated financial results from prior periods.
Historically prior to this reclassification Specialty Products gross profit per barrel was generally in the $18 to $22 per barrel range on a normalized basis. As illustrated by this slide, you can see that excluding asphalt, Specialty Products gross profit per barrel was significantly higher.
Equally important we believe this representation of the data illustrates the relative consistency of Specialty Products margins, an observation that previously would have been difficult to make, given the periodic volatility of the asphalt business. On Slide 15, we remain committed to maintaining a distribution policy that provides for consistent distributions to our unit holders.
In January we announced a quarterly cash distribution of $0.685 per unit, or $2.74 per unit on an annualized basis for the quarter ended December 31, 2013 on all of our outstanding limited partner units, our 32nd consecutive quarter-on-quarter cash distribution. During year 2013 Calumet’s annualized distribution has grown at a compound annual rate of nearly 9%.
Once some of our larger organic growth projects come online during the next 24 months, we anticipate a corresponding step change in our adjusted EBITDA. Although the decision to increase or maintain or decrease distribution is a distinct decision made by our Board of Directors on a quarterly basis, we believe the anticipated increase in our adjusted EBITDA stemming from these growth projects could provide a strong base upon which to resume growth and distribution.
Turning to Slide 16, here we see some of the significant factors that impact distributable cash flow between 2012 and ‘13. The most significant cost for the variance was lower adjusted EBITDA stemming from a year-over-year decline in market crack spreads coupled with the opportunity cost of having three of our larger fuel refineries offline at various points between the second quarter and fourth quarter of 2013.
Replacement CapEx cash interest expense and terminal cost were all up year-over-year. On the plus side we anticipate turnaround related capital spending to decline by more than 70% in 2014 from 2013 levels.
Looking ahead, we think 2014 is shaping up to be a better year financially for Calumet. Operational execution and effective project management are as important to our continued success as they have ever been.
We continue to make progress in several large multiyear capital projects that provide very attractive returns for us upon their completion. The single, most impactful project slated for completion this year is the startup of Dakota Prairie Refinery during the fourth quarter of 2014.
During the middle of 2015, we will complete the Missouri Esters Plant expansion and soon thereafter we will complete the Montana Refinery expansion during the first quarter of 2016. Collectively, these organic growth projects have the potential to provide a meaningful step change in our adjusted EBITDA.
We continue to manage each of these projects to ensure that we stay on schedule and within our stated cost estimate. Within our Specialty Products segment, coming year will provide us an opportunity to push forward with an aggressive campaign to drive international sales growth.
We are currently in the process of evaluating countries where we might consider investing in sales offices. On the domestic front, we expect a solid year out of our packaged and synthetic products, as we begin selling Royal Purple, our brand of high performance synthetic lubricants into more than 2,400 Wal-Mart location during the second quarter of 2014.
Early into 2014 market conditions have been favorable as the first quarter fuels refining economics have improved versus fourth quarter levels with the Gulf Coast 211 crack spread averaging nearly $20 per barrel to mid-February. With several large Gulf Coast refineries currently in maintenance, those margins are holding up.
Starting to offset these tailwinds are higher RIN prices, coupled with a narrowing in crude oil differential. Assuming more normalized crude oil differentials, a decent crack spread in this plan maintenance at our Fuel refinery, Calumet is well positioned for profitable growth in the year ahead.
With that I will hand the call over to Pat Murray, our CFO.
Pat Murray
Thank you, Jennifer. Let’s all turn our attention to Slide 18 for a discussion of adjusted EBITDA.
We believe the non-GAAP measure of adjusted EBITDA is an important financial performance measure for the partnership. Adjusted EBITDA as defined under our financing instruments declined to $53.2 million in the fourth quarter of 2013, down from $91.3 million in the same quarter of 2012.
As illustrated in the chart on Slide 18, the bulk of the year-over-year decline in adjusted EBITDA was due primarily to higher operating expenses, driven in-part by higher RFS compliance costs, transportation and SG&A expense, coupled with lower contributions from our specialty products segment and the impact of acquisitions. We encourage our investors to review the section of our earnings press release found on our website entitled non-GAAP financial measures in the attached tables for discussion and definitions of EBITDA, adjusted EBITDA and distributable cash flow measures and reconciliation of these non-GAAP measures to the comparable GAAP measures.
Now I'm turning to slide 19. Fuels refining economics declined significantly on a year-over-year basis during the fourth quarter.
The benchmark Gulf Coast 211 crack spread averaged $16 per barrel during the three months ended December 31, 2013, compared to $30 a barrel in the same period of 2012. The year-over-year decline in the 211 crack spread was driven primarily by the a sharp drop in the gasoline crack, and to a lesser degree, the diesel crack.
Crude oil price differentials remained volatile throughout the quarter, a factor which further impacted gross profit in the fuels segment. Now turning to Slide 20, during the fourth quarter we realized RINs expense of $7.5 million.
For the full year 2013, our net RINs expense was approximately $30 million. Although RINs prices have largely been manageable during the fourth quarter in the $0.30 range, we witnessed recently an upward spike in RINs to above $0.50 during February.
Currently there is a very liquid futures market for RINs. So our focus is primarily on buying RINs in the open market and on blending away our RFS obligations wherever possible.
The partnership currently expects its gross estimated RINs obligation which includes RINs that are required to be secured through either funding or through the purchase of RINs in the open market to be in the range of 90 million to 95 million RINs for the full year 2014. The Partnership records its outstanding RINs obligation as a balance sheet liability.
This liability is mark-to-market on a quarterly basis to reflect the market price of RINs on the last day of each quarter. Turning Slide 21, distributable cash flow for the fourth quarter of 2013 was $10.6 million, compared to $54.5 million in the same period last year.
We calculate distributable cash flow of adjusted EBITDA, less replacement in environmental capital expenditures, turnaround costs, cash interest expense, which is defined as consolidated interest expense less non-cash interest expense and income tax expense. Our fourth quarter DCF was negatively impacted by a decline in gross profit of $29.2 million, an increase of $4.9 million in turnaround costs primarily related to a planned turnaround at the San Antonio refinery and higher replacement capital expenditures of $2.6 million.
Now I'm turning to Slides 22 and 23; exiting the year we remain very well capitalized with overall leverage although elevated remains at manageable levels. Including both cash and availability under the revolver as of December 31, 2013 we had $594 million in available liquidity, up from $387 million at December 31, 2012.
And finally turning to Slide 24, we project that replacement, environmental, turnaround and growth related capital spending will be in a range of $340 million to $385 million in 2014, compared with $243 million in 2013. The bulk of the year-over-year increase in CapEx is attributable to work related to the North Dakota Refinery construction and the Montana Refinery expansion projects.
Outside of our growth CapEx which remains discretionary, we anticipate a 35% to 45% decline in replacement, environmental and turnaround capital expenditures in 2014 versus the prior year. With the heavy turnaround year now behind us, annualized turnaround CapEx is expected to be in the $20 million to $30 million range until our next major turnaround cycle in 2018.
And with that I’ll turn the call over to the operator so that we can begin our Q&A session. Operator?
Operator
[Operator Instructions] And your first question comes from the line of Theresa Chen with Barclays Capital. Please proceed.
Theresa Chen - Barclays Capital
I just had a question about the Bel-Ray acquisition, and I know you didn’t provide financial guidance; but can you just broadly talk about if you think this will move the needle in the near term or what kind of turns you look for in acquisitions like these? And more generally in the market, how many more opportunities are out there currently and what does the M&A environment for specialty products look like?
Jennifer Straumins
Sure. We do not -- the transaction was not large enough that we had to disclose the price, so that gives you some feeling that it was a smaller acquisition for Calumet.
From a financing perspective, it was not material. And as far as multiples go, for something like this, we would look at a 7x to 9x multiple from a valuation standpoint.
As far as the multiple goes, we paid less for Bel-Ray from a multiple standpoint than we did for Royal Purple, so that’s positive. I think overtime, this acquisition coupled with everything else we're doing in our branded and package division, it will certainly move the needle for Calumet.
It may not be this year, but it will certainly be within the next -- between now and the next 24 months. As we look forward to other Specialty Products acquisitions, we've got several that we are in the middle of pursuing right now.
The M&A market remains very robust for us, and with 7,000 customers currently on our books, we certainly have the opportunity to build relationships with family and businesses and pursue those acquisitions as the timing is right. Bel-Ray has been a customer of Calumet in the past just like Royal Purple was.
Theresa Chen - Barclays Capital
Thank you. And then on asphalt marketing, would you mind talking about if there are other regions that you currently don’t serve that you might be looking to expand towards?
Jennifer Straumins
Asphalt is a very regional type of marketing opportunity. A lot of our northern barrels, it’s a very short paying season in Wisconsin and Minnesota.
That’s why you see us looking to broaden our geographic horizons. I think you’ll continue to see us look towards the south.
I've always wanted a terminal in the Dallas area, so we continue to pursue multiple opportunities.
Theresa Chen - Barclays Capital
Got it, and then lastly on the higher operating costs, can you just give some color on that for the Specialty segment and if you expect that to persist?
Jennifer Straumins
We don’t expect that to persist. It was some year-end maintenance type of expenditures.
Operator
Your next question comes from the line of TJ Schultz with RBC Capital Markets. Please proceed.
TJ Schultz - RBC Capital Markets
Maybe Pat, if you could discuss funding for 2014 and 2015, given you have a pretty good line of sight on cash flow growth as the refinery projects ramp, what type of leverage maybe you’re comfortable with this year during the funding part of the cycle?
Pat Murray
Right, I mean -- our leverage level at December 31 is elevated compared to where we think. We do certainly expect as we’ve described on this call, the earnings potential for 2014 is much better and we’re talking about taking very little turnaround time that wasn’t certainly a headline for us in 2013.
So our expectation is that the leverage improves over the course for the year. We built up a significant amount of liquidity.
We were opportunistic in our notes issuance in November. We have quite a bit of cash on the balance sheet at the end of the year.
And so as we look ahead to funding requirements over the next 24 months or so, and they’re fairly ratable -- we’ll rely on existing liquidity that we have. We can also remain opportunistic in terms of capital markets activities, but I think it's a combination of those items and a relatively lengthy period here of CapEx that we can try to time those things opportunistically and handle those costs going forward.
TJ Schultz - RBC Capital Markets
The growth projects; obviously the biggest needle movers are Dakota Prairie and the Montana expansion, about $170 million, $180 million of EBITDA. If you could just kind of touch on the comfort level there on timing and cost for those projects to be online -- how quickly you think cash flows can get to those run rates for EBITDA and maybe just touch on some of the underlying assumptions behind that cash flow range from a commodity price perspective?
Jennifer Straumins
Sure. I’ll touch on the last part of that first.
Certainly, we are comfortable with the forecast that we've put out from an EBITDA contribution standpoint, and that’s very easy to model based on forward crack spreads and forward crude prices in differentials. As far as timing and budget, we remain comfortable with the timing that we’ve outlined to the public as well as the budgets that we’ve outlined to the public.
These are – certainly, Montana is a very long-term project. We’ve got two years left in that project.
So it’s -- as of today everything is on time and on budget. We’re moving -- in the process of relocating that hydrocracker that we’ve bought from Alon from Baskerville, California to Great Falls, and we are in the process of negotiating with vendors and subcontractors for that project, and everything is going according to plan at this point in time.
Dakota Prairie, that work is continuing to progress as well. We've got equipment arriving at the sites.
The tank farm is almost complete. All the engineering work is done.
We are making great strides in hiring a management team there. As far as my level of priority -- finding the right operators and the right management team has been key to that since it is a grass root facility, and we’ve got our first round of operators going through operator training today during the period of time, and we’ve got the whole senior management team hired.
So I feel very good about that, and as of right now, it was a tough winner out there, but we remain on schedule for a late 2014 start-up. Does that hit all your points?
TJ Schultz - RBC Capital Markets
Yes, sorry it was a long question. The annual EBITDA guidance you gave, is there a ramp period to get to those numbers?
Jennifer Straumins
Yes, that was rest of your question. No, that’s a turn to switch, and you're more or less on.
TJ Schultz - RBC Capital Markets
Okay. Just on the fourth quarter, the asphalt has reclassified, what was the impact on the Fuel segment during fourth quarter from asphalt?
Pat Murray
It was in the range of probably $15 million or so.
TJ Schultz - RBC Capital Markets
Okay. Lastly, is it possible to quantify the cash flow impacts from the Wal-Mart Royal Purple opportunity?
Jennifer Straumins
We’ve got some internal estimates that I’m not going to share publically at this point in time.
Operator
And your next comes from the line of Anna Kohler from Imperial Capital. Please proceed.
Anna Kohler - Imperial Capital
First a follow-up on that regarding Wal-Mart. If I heard correctly, so that you’re looking for a rollout there in the second quarter?
What is the planned timing on the rollout and will it be in terms of getting into all 2400 sites?
Jennifer Straumins
We’re shipping product to Wal-Mart distribution centers as we speak where we’ll be selling up 10 products in 2400 Wal-Marts starting in late March.
Anna Kohler - Imperial Capital
And then in regards on the asphalt opportunity, is there any way that you can qualify or quantify in terms of the asphalt production that you have, what percentage you would like to -- do you have the ability to place into the two avenues that you announced agreements with and what your ultimate goal would be in terms of the amount of your asphalt production you would like to see in these other markets three years out or five years out?
Jennifer Straumins
Sure, if you look at the asphalt make out of our Superior Wisconsin refinery, it’s about 15,000 barrels a day and 2012, it was about 65% sold to the retail market, 35% wholesale. And those numbers really flip-flop during 2013.
State budgets continue to face pressure for funding projects and we saw a lot of competition from some of the other Midwestern refiners in asphalt space in 2013. So we’ve got 15,000 barrels a day to work with and depending on the profitability of the region having Muskogee and the facility in Albany, New York gives us flexibility to move barrels around and maximize the profitability of the asphalt barrels made out of Superior.
Anna Kohler - Imperial Capital
Great. And then just a follow-up in regard to the All-States Asphalt.
That seems like relatively large organization. Is there additional opportunity within that corporation or does the agreement that you signed basically cover whatever opportunities that they would have?
Jennifer Straumins
No, I would like to take such more opportunities for us to work with All-States. Their ownership and management team is very entrepreneurial and dynamic and fitted very well with the management team at Calumet.
So I’ve got hope for expanded opportunities with that company.
Operator
And you next question comes from the line of Cory Garcia from Raymond James. Please proceed.
Cory Garcia - Raymond James
Do you guys have any specific color surrounding some of the timing on the startup of that Karnes Pipeline System? I realized it’s a little bit out of your guys hands but just curious as to how you guys are seeing or how we should be really thinking about those volumes reaching the San Antonio gates as we move through the year?
Jennifer Straumins
It will be in the second half of ’14 early in the second half of 2014.
Cory Garcia - Raymond James
And it will be sort of a flip to switch have a run rate or is it going to be a gradual ramp to your sort of your 10,000 barrel per day number?
Jennifer Straumins
I think it’s more of a flip to switch, and we’re in the middle of negotiating with some crude suppliers at this point in time. So I’m not really at liberty to give very much information at all today.
Cory Garcia - Raymond James
Okay, no that’s perfect, and I guess sort of as a follow on to that; I guess maybe discuss how you guys are thinking about maybe your appetite to travel further towards the low end. I know you guys have discussed it in prior calls but given the amount of organic spending that you have sort of in place right now, how should we be thinking about your ability to sort of broaden your scope down towards the crude gathering element.
Jennifer Straumins
Well we bought the Murphy oil and crude gathering assets in North Dakota and Montana in August of 2013 and we kind of coined a phrase around Calumet -- Calumet, we want to be from the well head to Wal-Mart. So I think you’re going to continue to see us pursue the right opportunity in each of these areas.
I don’t have anything imminent but I certainly wouldn’t be opposed to pursuing gathering opportunities.
Operator
Ladies and gentlemen, that concludes the question and answer portion of today’s call. I would now like to turn the call back over to Jennifer Straumins for closing remarks.
Jennifer Straumins
Thank you and thank you all for joining us on today’s call. If you have any questions please feel free to contact our Director Investor Relations, Noel Ryan.
This now concludes our call.
Operator
Ladies and gentlemen that concludes today’s conference. Thank you for your participation.
You may all now disconnect. Have a wonderful day.