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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 (Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______            
Commission File Number 1-16417
  _________________________________________

NuStar Energy L.P.
(Exact name of registrant as specified in its charter)
  _________________________________________
Delaware
 
74-2956831
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
19003 IH-10 West
San Antonio, Texas
(Address of principal executive offices)
78257
(Zip Code)
Registrant’s telephone number, including area code (210918-2000
 _______________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common units
 
NS
 
New York Stock Exchange
Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units
 
NSprA
 
New York Stock Exchange
Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units
 
NSprB
 
New York Stock Exchange
Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units
 
NSprC
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
 
x
Accelerated filer
 
 
 
 
 
 
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  x
The number of common units outstanding as of July 31, 2019 was 107,763,602.



Table of Contents

NUSTAR ENERGY L.P.
FORM 10-Q
TABLE OF CONTENTS
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
Item 6.
 
 

2


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.
Financial Statements
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Thousands of Dollars, Except Unit Data)
 
June 30,
2019
 
December 31,
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
15,299

 
$
11,529

Accounts receivable, net of allowance for doubtful accounts of $9,452
and $9,412 as of June 30, 2019 and December 31, 2018, respectively
117,688

 
110,417

Inventories
9,454

 
8,434

Prepaid and other current assets
29,591

 
17,374

Assets held for sale
301,529

 
599,347

Total current assets
473,561

 
747,101

Property, plant and equipment, at cost
5,981,860

 
5,627,805

Accumulated depreciation and amortization
(1,961,046
)
 
(1,853,003
)
Property, plant and equipment, net
4,020,814

 
3,774,802

Intangible assets, net
707,344

 
733,056

Goodwill
1,005,853

 
1,005,853

Other long-term assets, net
172,119

 
88,328

Total assets
$
6,379,691

 
$
6,349,140

Liabilities, Mezzanine Equity and Partners’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
128,547

 
$
103,122

Short-term debt and current portion of finance leases
10,087

 
18,500

Accrued interest payable
38,929

 
36,293

Accrued liabilities
69,970

 
74,418

Taxes other than income tax
14,060

 
16,823

Income tax payable
1,920

 
4,445

Liabilities held for sale
68,616

 
69,834

Total current liabilities
332,129

 
323,435

Long-term debt
3,456,461

 
3,111,996

Deferred income tax liability
12,250

 
12,428

Other long-term liabilities
176,951

 
79,558

Total liabilities
3,977,791

 
3,527,417

 
 
 
 
Commitments and contingencies (Note 6)

 

 
 
 
 
Series D preferred limited partners (23,246,650 preferred units outstanding as of
June 30, 2019 and December 31, 2018) (Note 9)
572,597

 
563,992

 
 
 
 
Partners’ equity (Note 10):
 
 
 
Preferred limited partners
 
 
 
Series A (9,060,000 units outstanding as of June 30, 2019 and December 31, 2018)
218,307

 
218,307

Series B (15,400,000 units outstanding as of June 30, 2019 and December 31, 2018)
371,476

 
371,476

Series C (6,900,000 units outstanding as of June 30, 2019 and December 31, 2018)
166,518

 
166,518

Common limited partners (107,763,033 and 107,225,156 common units outstanding
as of June 30, 2019 and December 31, 2018, respectively)
1,140,665

 
1,556,308

Accumulated other comprehensive loss
(67,663
)
 
(54,878
)
Total partners’ equity
1,829,303

 
2,257,731

Total liabilities, mezzanine equity and partners’ equity
$
6,379,691

 
$
6,349,140

See Condensed Notes to Consolidated Financial Statements.

3


Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Service revenues
$
282,472

 
$
259,599

 
$
541,499

 
$
507,668

Product sales
89,973

 
129,657

 
178,772

 
258,315

Total revenues
372,445

 
389,256

 
720,271

 
765,983

Costs and expenses:
 
 
 
 
 
 
 
Costs associated with service revenues:
 
 
 
 
 
 
 
Operating expenses (excluding depreciation and amortization expense)
101,095

 
102,241

 
196,506

 
190,320

Depreciation and amortization expense
64,991


61,777

 
129,809

 
121,601

Total costs associated with service revenues
166,086

 
164,018


326,315


311,921

Cost of product sales
86,389


119,939

 
172,571

 
245,089

General and administrative expenses (excluding depreciation and amortization expense)
24,868

 
26,754

 
50,559

 
44,896

Other depreciation and amortization expense
1,819

 
2,158

 
3,938

 
4,197

Total costs and expenses
279,162

 
312,869


553,383


606,103

Operating income
93,283

 
76,387

 
166,888

 
159,880

Interest expense, net
(45,693
)
 
(48,389
)
 
(89,984
)
 
(95,777
)
Other income, net
621

 
1,607

 
1,412

 
2,623

Income from continuing operations before income
tax expense
48,211

 
29,605

 
78,316

 
66,726

Income tax expense
1,296

 
2,696

 
2,478

 
6,584

Income from continuing operations, net of tax
46,915

 
26,909

 
75,838

 
60,142

(Loss) income from discontinued operations, net of tax
(964
)
 
2,490

 
(307,750
)
 
95,390

Net income (loss)
$
45,951

 
$
29,399

 
$
(231,912
)
 
$
155,532

 
 
 
 
 
 
 
 
Basic net income (loss) per common unit (Note 11):
 
 
 
 
 
 
 
Continuing operations
$
0.11

 
$
0.12

 
$
0.05

 
$
0.30

Discontinued operations
(0.01
)
 
0.03

 
(2.86
)
 
1.00

Total net income (loss) per common unit
$
0.10

 
$
0.15

 
$
(2.81
)
 
$
1.30

 
 
 
 
 
 
 
 
Basic weighted-average common units outstanding
107,763,016

 
93,192,238

 
107,647,957

 
93,187,038

 
 
 
 
 
 
 
 
Comprehensive income (loss)
$
37,992

 
$
26,778

 
$
(244,697
)
 
$
173,835

See Condensed Notes to Consolidated Financial Statements.

4


Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, Thousands of Dollars)
 
Six Months Ended June 30,
 
2019
 
2018
Cash Flows from Operating Activities:
 
 
 
Net (loss) income
$
(231,912
)
 
$
155,532

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization expense
142,283

 
147,879

Unit-based compensation expense
5,774

 
4,277

Amortization of debt related items
2,643

 
3,965

Gain from sale or disposition of assets
(1,300
)
 
(1,218
)
Asset impairment losses
305,715

 

Goodwill impairment loss
31,123

 

Gain from insurance recoveries

 
(78,756
)
Deferred income tax (benefit) expense
(575
)
 
1,142

Changes in current assets and current liabilities (Note 12)
(36,229
)
 
42,733

Decrease (increase) in other long-term assets
15,190

 
(11,224
)
Increase (decrease) in other long-term liabilities
9,157

 
(20,073
)
Other, net
(975
)
 
(407
)
Net cash provided by operating activities
240,894

 
243,850

Cash Flows from Investing Activities:
 
 
 
Capital expenditures
(319,961
)
 
(248,521
)
Change in accounts payable related to capital expenditures
16,144

 
(19,320
)
Proceeds from sale or disposition of assets
143

 
2,097

Proceeds from insurance recoveries

 
78,419

Acquisitions

 
(37,502
)
Net cash used in investing activities
(303,674
)
 
(224,827
)
Cash Flows from Financing Activities:
 
 
 
Proceeds from long-term debt borrowings
415,800

 
677,272

Proceeds from short-term debt borrowings
178,500

 
456,000

Proceeds from note offering, net of issuance costs
491,665

 

Long-term debt repayments
(616,800
)
 
(905,521
)
Short-term debt repayments
(191,000
)
 
(428,000
)
Proceeds from issuance of Series D preferred units

 
400,000

Payment of issuance costs for Series D preferred units

 
(29,289
)
Proceeds from issuance of common units

 
10,000

Distributions to preferred unitholders
(60,846
)
 
(32,713
)
Distributions to common unitholders and general partner
(129,025
)
 
(172,324
)
Proceeds from termination of interest rate swaps

 
8,048

Payment of tax withholding for unit-based compensation
(6,368
)
 
(69
)
Decrease in cash book overdrafts
(4,718
)
 
(436
)
Other, net
(3,451
)
 
(5,518
)
Net cash provided by (used in) financing activities
73,757

 
(22,550
)
Effect of foreign exchange rate changes on cash
261

 
(421
)
Net increase (decrease) in cash, cash equivalents and restricted cash
11,238

 
(3,948
)
Cash, cash equivalents and restricted cash as of the beginning of the period
13,644

 
24,292

Cash, cash equivalents and restricted cash as of the end of the period
$
24,882

 
$
20,344

See Condensed Notes to Consolidated Financial Statements.

5


Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY AND MEZZANINE EQUITY
Three Months Ended June 30, 2019 and 2018
(Unaudited, Thousands of Dollars)
 
Limited Partners
 
 
 
 
 
 
 
Mezzanine Equity
 
 
 
Preferred
 
Common
 
General
Partner
 
Accumulated
Other
Comprehensive
Loss
 
Total Partners’ Equity
(Note 10)
 
Series D Preferred Limited Partners (Note 9)
 
Total
Balance as of March 31, 2019
$
756,301

 
$
1,192,080

 
$

 
$
(59,704
)
 
$
1,888,677

 
$
568,293

 
$
2,456,970

Net income
16,033

 
15,528

 

 

 
31,561

 
14,390

 
45,951

Other comprehensive loss

 

 

 
(7,959
)
 
(7,959
)
 

 
(7,959
)
Distributions to partners:
 
 
 
 
 
 
 
 
 
 
 
 
 
Series A, B and C preferred
(16,033
)
 

 

 

 
(16,033
)
 

 
(16,033
)
Common ($0.60 per unit)

 
(64,658
)
 

 

 
(64,658
)
 

 
(64,658
)
Series D preferred

 

 

 

 

 
(14,390
)
 
(14,390
)
Unit-based compensation

 
2,146

 

 

 
2,146

 

 
2,146

Series D preferred unit accretion

 
(4,446
)
 

 

 
(4,446
)
 
4,446

 

Other

 
15

 

 

 
15

 
(142
)
 
(127
)
Balance as of June 30, 2019
$
756,301

 
$
1,140,665

 
$

 
$
(67,663
)
 
$
1,829,303

 
$
572,597

 
$
2,401,900

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of March 31, 2018
$
756,494

 
$
1,772,874

 
$
26,692

 
$
(64,003
)
 
$
2,492,057

 
$

 
$
2,492,057

Net income
16,033

 
12,891

 
263

 

 
29,187

 
212

 
29,399

Other comprehensive loss

 

 

 
(2,621
)
 
(2,621
)
 

 
(2,621
)
Distributions to partners:
 
 
 
 
 
 
 
 
 
 
 
 


Series A, B and C preferred
(16,033
)
 

 

 

 
(16,033
)
 

 
(16,033
)
Common ($0.60 per unit)
and general partner

 
(55,911
)
 
(1,141
)
 

 
(57,052
)
 

 
(57,052
)
Series D preferred

 

 

 

 

 
(212
)
 
(212
)
Issuance of common units, including contribution from general partner

 
10,000

 
204

 

 
10,204

 

 
10,204

Issuance of Series D preferred units

 

 

 

 

 
370,711

 
370,711

Unit-based compensation

 
1,765

 

 

 
1,765

 

 
1,765

Other
(160
)
 
(851
)
 
(19
)
 

 
(1,030
)
 

 
(1,030
)
Balance as of June 30, 2018
$
756,334

 
$
1,740,768

 
$
25,999

 
$
(66,624
)
 
$
2,456,477

 
$
370,711

 
$
2,827,188

See Condensed Notes to Consolidated Financial Statements.

6


Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY AND MEZZANINE EQUITY
Six Months Ended June 30, 2019 and 2018
(Unaudited, Thousands of Dollars)
 
Limited Partners
 
 
 
 
 
 
 
Mezzanine Equity
 
 
 
Preferred
 
Common
 
General
Partner
 
Accumulated
Other
Comprehensive
Loss
 
Total Partners’ Equity
(Note 10)
 
Series D Preferred Limited Partners (Note 9)
 
Total
Balance as of January 1, 2019
$
756,301

 
$
1,556,308

 
$

 
$
(54,878
)
 
$
2,257,731

 
$
563,992

 
$
2,821,723

Net income (loss)
32,066

 
(292,758
)
 

 

 
(260,692
)
 
28,780

 
(231,912
)
Other comprehensive loss

 

 

 
(12,785
)
 
(12,785
)
 

 
(12,785
)
Distributions to partners:
 
 
 
 
 
 
 
 

 
 
 

Series A, B and C preferred
(32,066
)
 

 

 

 
(32,066
)
 

 
(32,066
)
Common ($1.20 per unit)

 
(129,025
)
 

 

 
(129,025
)
 

 
(129,025
)
Series D preferred

 

 

 

 

 
(28,780
)
 
(28,780
)
Unit-based compensation

 
15,686

 

 

 
15,686

 

 
15,686

Series D preferred unit accretion

 
(8,748
)
 

 

 
(8,748
)
 
8,748

 

Other

 
(798
)
 

 

 
(798
)
 
(143
)
 
(941
)
Balance as of June 30, 2019
$
756,301

 
$
1,140,665

 
$

 
$
(67,663
)
 
$
1,829,303

 
$
572,597

 
$
2,401,900

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of January 1, 2018
$
756,603

 
$
1,770,587

 
$
37,826

 
$
(84,927
)
 
$
2,480,089

 
$

 
$
2,480,089

Net income
32,023

 
120,831

 
2,466

 

 
155,320

 
212

 
155,532

Other comprehensive income

 

 

 
18,303

 
18,303

 

 
18,303

Distributions to partners:
 
 
 
 
 
 
 
 

 
 
 


Series A, B and C preferred
(32,023
)
 

 

 

 
(32,023
)
 

 
(32,023
)
Common ($1.695 per unit)
and general partner

 
(157,945
)
 
(14,379
)
 

 
(172,324
)
 

 
(172,324
)
Series D preferred

 

 

 

 

 
(212
)
 
(212
)
Issuance of common units, including contribution from general partner

 
10,000

 
204

 

 
10,204

 

 
10,204

Issuance of Series D preferred units

 

 

 

 

 
370,711

 
370,711

Unit-based compensation

 
3,051

 

 

 
3,051

 

 
3,051

Other
(269
)
 
(5,756
)
 
(118
)
 

 
(6,143
)
 

 
(6,143
)
Balance as of June 30, 2018
$
756,334

 
$
1,740,768

 
$
25,999

 
$
(66,624
)
 
$
2,456,477

 
$
370,711

 
$
2,827,188

See Condensed Notes to Consolidated Financial Statements.

7


Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization and Operations
NuStar Energy L.P. (NYSE: NS) is a publicly held Delaware limited partnership engaged in the transportation of petroleum products and anhydrous ammonia, and the terminalling, storage and marketing of petroleum products. Unless otherwise indicated, the terms “NuStar Energy,” “NS,” “the Partnership,” “we,” “our” and “us” are used in this report to refer to NuStar Energy L.P., to one or more of our consolidated subsidiaries or to all of them taken as a whole.

On July 20, 2018, we completed the merger of NuStar GP Holdings, LLC (NuStar GP Holdings or NSH) with a subsidiary of NS. Consequently, NSH, which indirectly owns our general partner, became a wholly owned subsidiary of ours. Under the terms of the merger agreement, NSH unitholders received 0.55 of a common unit representing a limited partner interest in NS in exchange for each NSH unit owned at the effective time of the merger, resulting in approximately 13.4 million incremental NS common units outstanding after the merger.

We conduct our operations through our subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP). We have three business segments: pipeline, storage and fuels marketing.

Recent Developments
On July 29, 2019, we closed on the sale of the equity interests in our wholly owned subsidiaries that own the St. Eustatius terminal and bunkering operations for approximately $250.0 million, subject to adjustment. Please refer to Note 3 for additional discussion.

Basis of Presentation
These unaudited condensed consolidated financial statements include the accounts of the Partnership and subsidiaries in which the Partnership has a controlling interest. Inter-partnership balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, and all disclosures are adequate. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018.

We have reclassified certain previously reported amounts in the consolidated financial statements and notes to conform to current-period presentation. As further discussed in Note 3, we reclassified certain balances to assets and liabilities held for sale and certain revenues and expenses to discontinued operations. The consolidated statements of cash flows have not been adjusted to separately disclose cash flows related to discontinued operations.

New Accounting Policy
As of June 30, 2019, we have restricted cash representing legally restricted funds that are unavailable for general use totaling $8.7 million, which is included in “Prepaid and other current assets” on the consolidated balance sheet.

2. NEW ACCOUNTING PRONOUNCEMENTS

Securities and Exchange Commission Disclosure Update and Simplification
In August 2018, the Securities and Exchange Commission (SEC) issued final rules regarding disclosure requirements that were redundant, duplicative, overlapping or superseded by other SEC requirements or GAAP. The final rules primarily eliminated or reduced certain disclosure requirements, although they also required some additional disclosures. The guidance became effective on November 5, 2018, with an exception for the new disclosure requirement to present changes in partners’ equity in interim periods, which permits entities to begin disclosing this information in the quarter that begins after the effective date of the final rules. We elected to utilize this exception, and began presenting statements of partners’ equity on an interim basis beginning with the quarter ending March 31, 2019. These final rules did not have an impact on our financial position or results of operations.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Cloud Computing Arrangements
In August 2018, the Financial Accounting Standards Board (FASB) issued guidance addressing a customer’s accounting for implementation costs incurred in a cloud computing arrangement (CCA) that is considered a service contract. Under the new guidance, implementation costs for a CCA should be evaluated for capitalization using the same approach as implementation costs associated with internal-use software and expensed over the term of the hosting arrangement. The guidance is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. Prospective adoption for eligible costs incurred on or after the date of adoption or retrospective adoption are permitted. We are currently evaluating whether we will adopt these provisions early and whether we will elect prospective or retrospective adoption, but we do not expect the guidance to have a material impact on our financial position, results of operations or disclosures.

Disclosures for Defined Benefit Plans
In August 2018, the FASB issued amended guidance that makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. The guidance is effective for annual periods beginning after December 15, 2020, with early adoption permitted, using a retrospective approach. We are currently evaluating whether we will adopt these provisions early, but we do not expect the guidance to have a material impact on our financial position, results of operations or disclosures.

Goodwill
In January 2017, the FASB issued amended guidance that simplifies the accounting for goodwill impairment by eliminating step 2 of the goodwill impairment test. Under the amended guidance, goodwill impairment will be measured as the excess of the reporting unit’s carrying value over its fair value, not to exceed the carrying amount of goodwill for that reporting unit. The changes are effective for annual and interim periods beginning after December 15, 2019, and amendments should be applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. We adopted the amended guidance during the first quarter of 2019 and applied the guidance to the goodwill impairment discussed in Note 3.

Credit Losses
In June 2016, the FASB issued amended guidance that requires the use of a “current expected loss” model for financial assets measured at amortized cost and certain off-balance sheet credit exposures. Under this model, entities will be required to estimate the lifetime expected credit losses on such instruments based on historical experience, current conditions, and reasonable and supportable forecasts. This amended guidance also expands the disclosure requirements to enable users of financial statements to understand an entity’s assumptions, models and methods for estimating expected credit losses. The changes are effective for annual and interim periods beginning after December 15, 2019, and amendments should be applied using a modified retrospective approach. We currently expect to adopt the amended guidance on January 1, 2020, and we are assessing the impact of this amended guidance on our financial position, results of operations and disclosures. We plan to provide additional information about the expected impact at a future date.

Leases
In February 2016, the FASB issued amended guidance that requires lessees to recognize the assets and liabilities that arise from most leases on the balance sheet. For lessors, this amended guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The changes are effective for annual and interim periods beginning after December 15, 2018, and amendments should be applied using one of two modified retrospective transition methods. We adopted these provisions on January 1, 2019 through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The transition adjustment related to the adoption was immaterial, and we do not expect the adoption of this guidance to impact the results of our operations going forward. Please refer to Note 7 for further discussion.

3. DISCONTINUED OPERATIONS AND IMPAIRMENTS

On May 9, 2019, we entered into a Share Purchase and Sale Agreement to sell the equity interests in our wholly owned subsidiaries that own the St. Eustatius terminal and bunkering operations (the St. Eustatius Operations), for approximately $250.0 million, subject to adjustment (the St. Eustatius Disposition). The St. Eustatius Disposition included a 14.3 million barrel storage and terminalling facility and related assets on the island of St. Eustatius in the Caribbean Netherlands. We closed the sale on July 29, 2019 and received net proceeds of approximately $234.0 million. We previously reported the terminal operations in our storage segment and the bunkering operations in our fuels marketing segment.

On November 30, 2018, we sold our European operations, which consisted of six liquids storage terminals in the United Kingdom and one facility in Amsterdam and related assets that were previously reported in our storage segment (the European Operations), for approximately $270.0 million (the European Disposition).

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NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

During the second quarter of 2019, we determined the assets and liabilities associated with the St. Eustatius Operations met the criteria to be classified as held for sale. We also determined the St. Eustatius Operations and the European Operations met the requirements to be reported as discontinued operations since the St. Eustatius Disposition and the European Disposition together represent a strategic shift that will have a major impact on our operations and financial results. These sales are part of our plan to improve our debt metrics and partially fund capital projects to grow our core business in North America. Accordingly, the consolidated balance sheets reflect the assets and liabilities associated with the St. Eustatius Operations as held for sale for all periods presented, and the condensed consolidated statements of comprehensive income reflect the St. Eustatius Operations and the European Operations as discontinued operations for all applicable periods presented.

Discontinued Operations
The following is a reconciliation of the major classes of line items included in “(Loss) income from discontinued operations, net of tax” on the condensed consolidated statements of comprehensive income (loss):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(Thousands of Dollars)
Revenues
$
92,837

 
$
96,948

 
$
231,480

 
$
196,102

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
86,278

 
92,177

 
202,880

 
174,633

Impairment losses
8,398

 

 
336,838

 

General and administrative expenses (excluding depreciation and amortization expense)
305

 
1,227

 
610

 
2,859

Other depreciation and amortization expense

 
93

 

 
172

Total costs and expenses
94,981

 
93,497

 
540,328

 
177,664

Operating (loss) income
(2,144
)

3,451


(308,848
)

18,438

Interest income (expense), net
9

 
(547
)
 
32

 
(931
)
Other income (expense), net
1,171

 
(195
)
 
1,167

 
78,541

(Loss) income from discontinued operations before income
tax expense
(964
)

2,709


(307,649
)

96,048

Income tax expense

 
219

 
101

 
658

(Loss) income from discontinued operations, net of tax
$
(964
)
 
$
2,490

 
$
(307,750
)
 
$
95,390



The following table presents selected cash flow information associated with our discontinued operations:
 
Six Months Ended June 30,
 
2019
 
2018
 
(Thousands of Dollars)
Capital expenditures
$
(23,635
)
 
$
(82,111
)
 
 
 
 
Significant noncash operating activities:
 
 
 
Depreciation and amortization expense
$
8,536

 
$
22,081

Asset impairment losses
$
305,715

 
$

Goodwill impairment loss
$
31,123

 
$

Gain from insurance recoveries
$

 
$
(78,756
)


Impairments
On January 28, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control added Petroleos de Venezuela, S.A. (PDVSA), at the time a customer at our St. Eustatius facility, to its List of Specially Designated Nationals and Blocked Persons (the SDN List). The inclusion of PDVSA on the SDN List required us to wind down our contracts with PDVSA. Prior to winding down such contracts, PDVSA was the St. Eustatius terminal’s largest customer.


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NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The effect of the sanctions issued against PDVSA, combined with the progression in the sale negotiations that occurred during March 2019, resulted in triggering events that caused us to evaluate the long-lived assets and goodwill associated with the St. Eustatius terminal and bunkering operations for potential impairment.

With respect to the terminal operations long-lived assets, our estimates of future expected cash flows included the possibility of a near-term sale, as well as continuing to operate the terminal. The carrying value of the terminal’s long-lived assets exceeded our estimate of the total expected cash flows, indicating the long-lived assets were potentially impaired. To determine an impairment amount, we estimated the fair value of the long-lived assets for comparison to the carrying amount of those assets. Our estimate of the fair value considered the expected sales price as well as estimates generated from income and market approaches using a market participant’s assumptions. The estimated fair values resulting from the market and income approaches were consistent with the expected sales price. Therefore, we concluded that the estimated sales price, which was less than the carrying amount of the long-lived assets, represented the best estimate of fair value at March 31, 2019, and we recorded a long-lived asset impairment charge of $297.3 million in the first quarter of 2019 to reduce the carrying value of the assets to their estimated fair value. We recorded an additional impairment charge of $8.4 million in the second quarter of 2019, mainly due to additional capital expenditures incurred in the second quarter. Our estimate of the fair value is based on a transaction price in a market that is not active and thus falls within Level 2 of the fair value hierarchy.

With respect to the goodwill in the Statia Bunkering reporting unit, which consists of our bunkering operations at our St. Eustatius terminal facility, we estimated the fair value based on the expected sales price discussed above, which is inclusive of the bunkering operations. As a result, we concluded the goodwill was impaired. Consistent with FASB’s amended goodwill impairment guidance discussed in Note 2, which we adopted in the first quarter of 2019, we measured the goodwill impairment as the difference between the reporting unit’s carrying value and its fair value. Therefore, we recognized a goodwill impairment charge of $31.1 million in the first quarter of 2019 to reduce the goodwill to $0.

The impairment charges are included in “(Loss) income from discontinued operations, net of tax” on the condensed consolidated statements of comprehensive income (loss).

Assets and Liabilities Held for Sale
The following is a reconciliation of the carrying amounts of the major classes of assets and liabilities included in “Assets held for sale” and “Liabilities held for sale” on the consolidated balance sheets:
 
June 30,
2019
 
December 31,
2018
 
(Thousands of Dollars)
Total current assets
$
46,826

 
$
54,404

Property, plant and equipment, net
223,723

 
513,820

Goodwill

 
31,123

Other long-term assets, net
30,980

 

Assets held for sale
$
301,529

 
$
599,347

 
 
 
 
Total current liabilities
$
44,625

 
$
69,834

Total long-term liabilities
23,991

 

Liabilities held for sale
$
68,616

 
$
69,834




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NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

4. REVENUE FROM CONTRACTS WITH CUSTOMERS

Contract Assets and Contract Liabilities
The following table provides information about contract assets and contract liabilities from contracts with customers:
 
2019
 
2018
 
Contract Assets
 
Contract Liabilities
 
Contract Assets
 
Contract Liabilities
 
(Thousands of Dollars)
Balances as of January 1:
 
 
 
 
 
 
 
Current portion
$
2,066

 
$
(21,579
)
 
$
1,956

 
$
(13,801
)
Noncurrent portion
539

 
(38,945
)
 
171

 
(46,361
)
Held for sale

 
(25,357
)
 

 
(302
)
Total
2,605

 
(85,881
)
 
2,127

 
(60,464
)
 
 
 
 
 
 
 
 
Activity:
 
 
 
 
 
 
 
Additions
2,674

 
(24,537
)
 
879

 
(20,820
)
Transfer to accounts receivable
(2,638
)
 

 
(2,397
)
 

Transfer to revenues, including amounts
reported in discontinued operations

 
46,757

 

 
28,466

Total
36

 
22,220

 
(1,518
)
 
7,646

 
 
 
 
 
 
 
 
Balances as of June 30: