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NuStar Energy L.P. Reports Higher EBITDA Results in the Second Quarter of 2015

Net Income and DCF in 2015 YTD Surpass 2014 YTD

SAN ANTONIO--(BUSINESS WIRE)--Jul. 24, 2015-- NuStar Energy L.P. (NYSE: NS) today announced second quarter 2015 earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were $143.0 million, compared to second quarter 2014 EBITDA from continuing operations of $140.1 million. For the six months ended June 30, 2015, the partnership reported $357.0 million of EBITDA from continuing operations, compared to $266.8 million for the six months ended June 30, 2014.

Second quarter 2015 distributable cash flow (DCF) from continuing operations available to limited partners was $92.2 million, or $1.18 per unit, compared to 2014 second quarter DCF from continuing operations available to limited partners of $93.6 million, or $1.20 per unit. For the six months ended June 30, 2015, DCF from continuing operations available to limited partners was $198.9 million, or $2.55 per unit, compared to $171.5 million, or $2.20 per unit, for the six months ended June 30, 2014.

The partnership reported second quarter 2015 net income applicable to limited partners of $42.4 million, or $0.54 per unit, compared to $43.6 million, or $0.56 per unit, earned in the second quarter of 2014. For the six months ended June 30, 2015, net income applicable to limited partners was $157.0 million, or $2.01 per unit, compared to net income applicable to limited partners of $71.7 million, or $0.92 per unit, for the six months ended June 30, 2014.

Absent a gain related to our January 2, 2015 acquisition of the remaining 50% ownership in the Linden terminal, adjusted EBITDA from continuing operations for the six months ended June 30, 2015 would have been $300.7 million, while adjusted net income applicable to limited partners would have been $101.8 million, or $1.30 per unit.

The partnership also announced that its board of directors has declared a second quarter 2015 distribution of $1.095 per unit. The second quarter 2015 distribution will be paid on August 13, 2015 to holders of record as of August 7, 2015.

“Despite an unprecedented amount of rainfall in the South Texas area and operational issues at third party gas processing plants during the second quarter, we averaged a record of 193,000 barrels per day of Eagle Ford throughput volumes into our Corpus Christi North Beach facility and ultimately across our docks,” said Brad Barron, President and Chief Executive Officer of NuStar Energy L.P. and NuStar GP Holdings, LLC. “These volumes, which benefitted both our pipeline and storage segments, helped us achieve a strong quarterly distribution coverage ratio of 1.08 times."

2015 Earnings Guidance

“Due to reduced volume projections for the remainder of the year on pipelines that serve our Gulf Coast markets, we now expect our pipeline segment EBITDA to be $25 to $45 million higher than 2014. With higher storage throughputs and favorable renewals at several of our terminals, we now expect storage segment EBITDA to be $20 to $40 million higher than 2014. Our fuels marketing segment EBITDA is still projected to be in the range of $20 to $30 million,” said Barron.

Barron continued, “We have updated our capital spending projections for 2015. Our 2015 strategic capital spending is now expected to be $430 to $450 million, while our 2015 reliability capital spending is expected to be $35 to $45 million.”

Second Quarter 2015 Earnings Conference Call Details

A conference call with management is scheduled for 9:00 a.m. CT today, July 24, 2015, to discuss the financial and operational results for the second quarter of 2015. Investors interested in listening to the presentation may call 800/622-7620, passcode 77225295. International callers may access the presentation by dialing 706/645-0327, passcode 77225295. The partnership intends to have a playback available following the presentation, which may be accessed by calling 800/585-8367, passcode 77225295. International callers may access the playback by calling 404/537-3406, passcode 77225295. The playback will be available until 10:59 p.m. CT on August 21, 2015.

Investors interested in listening to the live presentation or a replay via the internet may access the presentation directly by clicking here or by logging on to NuStar Energy L.P.’s Web site at www.nustarenergy.com.

The presentation will disclose certain non-GAAP financial measures. Reconciliations of certain of these non-GAAP financial measures to U.S. GAAP may be found in this press release, with additional reconciliations located on the Financials page of the Investors section of NuStar Energy L.P.’s Web site at www.nustarenergy.com.

NuStar Energy L.P., a publicly traded master limited partnership based in San Antonio, is one of the largest independent liquids terminal and pipeline operators in the nation. NuStar currently has 8,651 miles of pipeline and 80 terminal and storage facilities that store and distribute crude oil, refined products and specialty liquids. The partnership’s combined system has approximately 93 million barrels of storage capacity, and NuStar has operations in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, and the United Kingdom. For more information, visit NuStar Energy L.P.'s Web site at www.nustarenergy.com.

This release serves as qualified notice to nominees under Treasury Regulation Sections 1.1446-4(b)(4) and (d). Please note that 100% of NuStar Energy L.P.’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of NuStar Energy L.P.’s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate for individuals and corporations, as applicable. Nominees, and not NuStar Energy L.P., are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes forward-looking statements regarding future events, such as the partnership’s future performance. All forward-looking statements are based on the partnership’s beliefs as well as assumptions made by and information currently available to the partnership. These statements reflect the partnership’s current views with respect to future events and are subject to various risks, uncertainties and assumptions. These risks, uncertainties and assumptions are discussed in NuStar Energy L.P.’s and NuStar GP Holdings, LLC’s 2014 annual reports on Form 10-K and subsequent filings with the Securities and Exchange Commission. Actual results may differ materially from those described in the forward-looking statements.

 

NuStar Energy L.P. and Subsidiaries

Consolidated Financial Information

(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)

         
Three Months Ended June 30, Six Months Ended June 30,
2015     2014 2015     2014
Statement of Income Data:
Revenues:
Service revenues $ 274,581 $ 259,562 $ 544,554 $ 488,900
Product sales 296,030   490,183   581,001   1,110,058  
Total revenues 570,611   749,745   1,125,555   1,598,958  
Costs and expenses:
Cost of product sales 281,610 473,755 544,116 1,068,714
Operating expenses 117,138 115,537 232,785 221,602
General and administrative expenses 26,693 23,163 51,746 44,019
Depreciation and amortization expense 52,765   47,936   105,222   94,166  
Total costs and expenses 478,206   660,391   933,869   1,428,501  
Operating income 92,405 89,354 191,686 170,457
Equity in earnings (loss) of joint ventures 3,294 (1,012 )
Interest expense, net (32,824 ) (33,122 ) (64,861 ) (67,539 )
Interest income from related party 1,055
Other (expense) income, net (2,152 ) (474 ) 60,116   3,204  
Income from continuing operations before income tax expense 57,429 59,052 186,941 106,165
Income tax expense 3,104   1,865   5,491   5,982  
Income from continuing operations 54,325 57,187 181,450 100,183
(Loss) income from discontinued operations, net of tax   (1,788 ) 774   (5,147 )
Net income $ 54,325   $ 55,399   $ 182,224   $ 95,036  
Net income applicable to limited partners $ 42,434   $ 43,599   $ 156,970   $ 71,743  
Net income (loss) per unit applicable to limited partners:
Continuing operations $ 0.54 $ 0.58 $ 2.00 $ 0.98
Discontinued operations   (0.02 ) 0.01   (0.06 )
Total $ 0.54   $ 0.56   $ 2.01   $ 0.92  
Weighted-average limited partner units outstanding 77,886,078   77,886,078   77,886,078   77,886,078  
 
EBITDA from continuing operations (Note 1) $ 143,018 $ 140,110 $ 357,024 $ 266,815
DCF from continuing operations (Note 1) $ 104,932 $ 106,321 $ 224,452 $ 197,033
 
June 30, December 31,
2015 2014 2014
Balance Sheet Data:
Total debt $ 3,120,616 $ 2,726,629 $ 2,826,452
Partners’ equity $ 1,713,073 $ 1,809,359 $ 1,716,210
Consolidated debt coverage ratio (Note 2) 4.3x 4.0x 4.0x
 
 

NuStar Energy L.P. and Subsidiaries

Consolidated Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Barrel Data)
 
      Three Months Ended June 30,     Six Months Ended June 30,
2015     2014 2015     2014
Pipeline:
Refined products pipelines throughput (barrels/day) 499,333 521,391 502,838 497,315
Crude oil pipelines throughput (barrels/day) 468,431   427,122   487,246   393,457  
Total throughput (barrels/day) 967,764 948,513 990,084 890,772
Throughput revenues $ 122,210 $ 117,798 $ 246,635 $ 220,757
Operating expenses 36,634 38,072 71,942 69,689
Depreciation and amortization expense 20,756   19,490   41,233   37,842  
Segment operating income $ 64,820   $ 60,236   $ 133,460   $ 113,226  
Storage:
Throughput (barrels/day) 957,452 894,194 919,075 857,967
Throughput revenues $ 34,623 $ 31,216 $ 66,314 $ 58,686
Storage lease revenues 123,019   113,770   241,662   218,866  
Total revenues 157,642 144,986 307,976 277,552
Operating expenses 74,004 69,091 146,632 134,358
Depreciation and amortization expense 29,887   25,888   59,615   51,180  
Segment operating income $ 53,751   $ 50,007   $ 101,729   $ 92,014  
Fuels Marketing:
Product sales and other revenue $ 297,589 $ 493,651 $ 584,023 $ 1,114,622
Cost of product sales 285,862   477,830   552,080   1,077,305  
Gross margin 11,727 15,821 31,943 37,317
Operating expenses 9,077 10,996 19,368 22,927
Depreciation and amortization expense   4     11  
Segment operating income $ 2,650   $ 4,821   $ 12,575   $ 14,379  
Consolidation and Intersegment Eliminations:
Revenues $ (6,830 ) $ (6,690 ) $ (13,079 ) $ (13,973 )
Cost of product sales (4,252 ) (4,075 ) (7,964 ) (8,591 )
Operating expenses (2,577 ) (2,622 ) (5,157 ) (5,372 )
Total $ (1 ) $ 7   $ 42   $ (10 )
Consolidated Information:
Revenues $ 570,611 $ 749,745 $ 1,125,555 $ 1,598,958
Cost of product sales 281,610 473,755 544,116 1,068,714
Operating expenses 117,138 115,537 232,785 221,602
Depreciation and amortization expense 50,643   45,382   100,848   89,033  
Segment operating income 121,220 115,071 247,806 219,609
General and administrative expenses 26,693 23,163 51,746 44,019
Other depreciation and amortization expense 2,122   2,554   4,374   5,133  
Consolidated operating income $ 92,405   $ 89,354   $ 191,686   $ 170,457  
 

NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Per Unit Data)

Notes:

(1) NuStar Energy L.P. utilizes financial measures such as earnings before interest, taxes, depreciation and amortization (EBITDA), distributable cash flow (DCF), adjusted net income and adjusted net income per unit (collectively, financial measures), which are not defined in U.S. generally accepted accounting principles (GAAP). Management uses these financial measures because they are widely accepted financial indicators used by investors to compare partnership performance. In addition, management believes that these financial measures provide investors an enhanced perspective of the operating performance of the partnership’s assets and/or the cash that the business is generating. None of these financial measures are presented as an alternative to net income or 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.

The following is a reconciliation of income from continuing operations to EBITDA from continuing operations and DCF from continuing operations:

         
Three Months Ended June 30, Six Months Ended June 30,
2015     2014 2015     2014
Income from continuing operations $ 54,325 $ 57,187 $ 181,450 $ 100,183

Plus interest expense, net and interest income from related party

32,824 33,122 64,861 66,484
Plus income tax expense 3,104 1,865 5,491 5,982

Plus depreciation and amortization expense

52,765   47,936   105,222   94,166  
EBITDA from continuing operations 143,018 140,110 357,024 266,815
Equity in (earnings) loss of joint ventures (3,294 ) 1,012

Interest expense, net and interest income from related party

(32,824 ) (33,122 ) (64,861 ) (66,484 )
Reliability capital expenditures (6,029 ) (7,239 ) (12,827 ) (11,998 )
Income tax expense (3,104 ) (1,865 ) (5,491 ) (5,982 )
Distributions from joint ventures 728 2,500 3,094
Other items (a) 2,431 4,311 (52,214 ) 3,869
Mark-to-market impact of hedge transactions (b) 1,440   6,692   321   6,707  
DCF from continuing operations $ 104,932 $ 106,321 $ 224,452 $ 197,033
 

Less DCF from continuing operations available to general partner

12,766   12,766   25,532   25,532  

DCF from continuing operations available to limited partners

$ 92,166   $ 93,555   $ 198,920   $ 171,501  
 

DCF from continuing operations per limited partner unit

$ 1.18 $ 1.20 $ 2.55 $ 2.20
 

(a) Other items consist of a net increase in deferred revenue associated with throughput deficiency payments and construction reimbursements. For the six months ended June 30, 2015, other items mainly consist of a $56.3 million non-cash gain associated with the Linden terminal acquisition.

(b) 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.

NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Per Unit Data)

Notes (continued):

The following is a reconciliation of net income and net income per unit to adjusted net income applicable to limited partners and adjusted net income per unit:

     

Six Months Ended June 30, 2015

Net income / net income per unit $ 182,224     $ 2.01
Gain on Linden terminal acquisition (56,277 ) (0.71 )
Adjusted net income 125,947
GP interest and incentive (24,129 )  
Adjusted net income applicable to limited partners / adjusted net income per unit $ 101,818   $ 1.30  
 

The following is a reconciliation of EBITDA from continuing operations to adjusted EBITDA from continuing operations:

     

Six Months Ended
June 30, 2015

EBITDA from continuing operations $ 357,024
Gain on Linden terminal acquisition (56,277 )
Adjusted EBITDA from continuing operations $ 300,747  
 

The following is a reconciliation of projected incremental operating income to projected incremental EBITDA for the year ended December 31, 2015:

         
Pipeline Segment Storage Segment
Projected incremental operating income $ 18,000 - 33,000 $ 10,000 - 25,000
Plus projected incremental depreciation and amortization expense   7,000 - 12,000   10,000 - 15,000
Projected incremental EBITDA $ 25,000 - 45,000 $ 20,000 - 40,000
 

The following is a reconciliation of projected operating income to projected EBITDA for the year ended December 31, 2015:

     

Fuels Marketing
Segment

Projected operating income $ 20,000 - 30,000
Plus projected depreciation and amortization expense
Projected EBITDA $ 20,000 - 30,000
 

(2) The consolidated debt coverage ratio is calculated as consolidated debt to consolidated EBITDA, each as defined in our $1.5 billion five-year revolving credit agreement.

Source: NuStar Energy L.P.

NuStar Energy, L.P., San Antonio
Investors, Chris Russell, Treasurer and Vice President Investor Relations
Investor Relations: 210-918-3507
or
Media, Mary Rose Brown, Executive Vice President,
Corporate Communications: 210-918-2314
Web site: http://www.nustarenergy.com

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