News Release
NuStar Energy L.P. Reports Earnings Results for the Third Quarter of 2017
Net Hurricane Financial Impact for Full-Year 2017 Estimated to be
Quarterly Distributions Announced Previously
“The disconnect between our third quarter net income and EBITDA was
expected, as net income was burdened by the higher interest and
depreciation expense and the additional units issued to finance the
Permian Acquisition,” said
“In addition to the significant market headwinds that the MLP sector has
faced for some time now, a spate of hurricanes in September caused
damage in the Gulf and substantial destruction in the
“Hurricanes Harvey and Irma affected six of our facilities in
“Unfortunately, while our planning and preparation for Hurricane Irma at our St. Eustatius terminal mitigated the effect of rising water there, virtually no advanced planning can buffer the impact of 146-mph winds and 30-foot seas. The sheer force of Irma’s high winds and waves inflicted substantial damage to our facility, as the storm battered our tanks, marine facilities and terminal buildings, eroded the shoreline and deposited debris throughout the facility.
“We are grateful that all of our tanks at the facility, other than those under construction, were largely spared and determined safe to stay in-service. We were able to resume operations there within a matter of weeks, and we expect the facility to be fully operational by mid-December.
“Importantly, we expect our insurance to fully cover the cost of
repairing the property damage at our St. Eustatius facility, over our
insurance deductible. In total, across our seven affected facilities, we
currently expect the financial impact of the hurricanes to be a net loss
of approximately
“Planning and preparation are critical, whether you’re talking about inclement weather or business cycles. And it’s due to the planning effort that we launched in 2014, at the outset of this historic low crude price cycle, that we successfully returned to 1.0 times cover of our distribution, maintained full coverage for three years, de-risked our business and optimized our base business assets.
“Perhaps most importantly, the groundwork we laid positioned us to
establish a significant platform for growth in what’s proven to be the
strongest, most resilient U.S. shale play, the
“As we projected at the time of the acquisition, our distribution
coverage ratio for third quarter 2017 was below 1.0 times. Due to the
anticipated higher financing costs, along with unanticipated higher
reliability costs, in the third quarter 2017, our DCF available to
common limited partners was
“Our Permian Crude System has been growing, and we believe it will continue to grow, on pace with our forecast. While we continue to execute on our growth plan for our Permian Crude System, we will continue to work efficiently, safely and responsibly, to return to 1.0 times cover, reduce our leverage and build long-term unitholder value,” said Barron.
As previously announced on
Third Quarter 2017 Earnings Conference Call Details
A conference call with management is scheduled for
Investors interested in listening to the live discussion or a replay via the internet may access the discussion directly at https://edge.media-server.com/m6/p/ounvkpgz or by logging on to NuStar Energy L.P.’s website at www.nustarenergy.com.
The discussion 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
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
Cautionary Statement Regarding Forward-Looking Statements
This press release includes, and the related conference call will
include, 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. and Subsidiaries | ||||||||||||||||||||
Consolidated Financial Information | ||||||||||||||||||||
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data) | ||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Statement of Income Data: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Service revenues | $ | 295,102 | $ | 277,758 | $ | 845,264 | $ | 814,727 | ||||||||||||
Product sales | 145,464 | 163,660 | 518,220 | 470,198 | ||||||||||||||||
Total revenues | 440,566 | 441,418 | 1,363,484 | 1,284,925 | ||||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of product sales | 138,078 | 155,129 | 490,363 | 441,736 | ||||||||||||||||
Operating expenses | 116,590 | 117,432 | 334,016 | 335,315 | ||||||||||||||||
General and administrative expenses | 25,003 | 26,957 | 83,202 | 73,399 | ||||||||||||||||
Depreciation and amortization expense | 69,178 | 53,946 | 193,643 | 160,739 | ||||||||||||||||
Total costs and expenses | 348,849 | 353,464 | 1,101,224 | 1,011,189 | ||||||||||||||||
Operating income | 91,717 | 87,954 | 262,260 | 273,736 | ||||||||||||||||
Interest expense, net | (45,256 | ) | (35,022 | ) | (127,282 | ) | (103,374 | ) | ||||||||||||
Other (expense) income, net | (5,126 | ) | 362 | (4,898 | ) | (10 | ) | |||||||||||||
Income before income tax expense | 41,335 | 53,294 | 130,080 | 170,352 | ||||||||||||||||
Income tax expense | 2,743 | 2,153 | 7,298 | 9,293 | ||||||||||||||||
Net income | $ | 38,592 | $ | 51,141 | $ | 122,782 | $ | 161,059 | ||||||||||||
Net income applicable to common limited partners | $ | 14,305 | $ | 38,592 | $ | 57,121 | $ | 123,410 | ||||||||||||
Basic and diluted net income per common unit | $ | 0.15 | $ | 0.49 | $ | 0.65 | $ | 1.58 | ||||||||||||
Basic weighted-average common units outstanding | 93,031,320 | 78,031,053 | 87,392,597 | 77,934,802 | ||||||||||||||||
Other Data (Note 1): | ||||||||||||||||||||
EBITDA | $ | 155,769 | $ | 142,262 | $ | 451,005 | $ | 434,465 | ||||||||||||
DCF available to common limited partners | $ | 66,974 | $ | 87,613 | $ | 216,183 | $ | 277,460 | ||||||||||||
September 30, | December 31, | |||||||||||||||||||
2017 | 2016 | 2016 | ||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Total debt | $ | 3,650,606 | $ | 3,160,049 | $ | 3,068,364 | ||||||||||||||
Partners’ equity | $ | 2,419,862 | $ | 1,469,993 | $ | 1,611,617 | ||||||||||||||
NuStar Energy L.P. and Subsidiaries | |||||||||||||||||||||
Consolidated Financial Information - Continued | |||||||||||||||||||||
(Unaudited, Thousands of Dollars, Except Barrel Data) | |||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Pipeline: | |||||||||||||||||||||
Refined products pipelines throughput (barrels/day) | 527,148 | 536,509 | 524,277 | 532,275 | |||||||||||||||||
Crude oil pipelines throughput (barrels/day): | 679,721 | 384,359 | 549,898 | 398,229 | |||||||||||||||||
Total throughput (barrels/day) | 1,206,869 | 920,868 | 1,074,175 | 930,504 | |||||||||||||||||
Throughput revenues | $ | 137,426 | $ | 122,481 | $ | 385,406 | $ | 362,929 | |||||||||||||
Operating expenses | 41,463 | 41,331 | 114,734 | 110,494 | |||||||||||||||||
Depreciation and amortization expense | 34,844 | 22,228 | 91,657 | 65,696 | |||||||||||||||||
Segment operating income | $ | 61,119 | $ | 58,922 | $ | 179,015 | $ | 186,739 | |||||||||||||
Storage: | |||||||||||||||||||||
Throughput (barrels/day) (Note 2) | 294,544 | 810,470 | 315,616 | 788,963 | |||||||||||||||||
Throughput terminal revenues | $ | 21,120 | $ | 30,239 | $ | 63,932 | $ | 88,307 | |||||||||||||
Storage terminal revenues | 136,951 | 127,528 | 400,129 | 373,733 | |||||||||||||||||
Total revenues | 158,071 | 157,767 | 464,061 | 462,040 | |||||||||||||||||
Operating expenses | 66,603 | 69,722 | 199,525 | 206,883 | |||||||||||||||||
Depreciation and amortization expense | 32,145 | 29,625 | 95,405 | 88,661 | |||||||||||||||||
Segment operating income | $ | 59,323 | $ | 58,420 | $ | 169,131 | $ | 166,496 | |||||||||||||
Fuels Marketing: | |||||||||||||||||||||
Product sales and other revenue | $ | 147,463 | $ | 166,191 | $ | 524,083 | $ | 476,499 | |||||||||||||
Cost of product sales | 140,110 | 157,567 | 497,722 | 450,705 | |||||||||||||||||
Gross margin | 7,353 | 8,624 | 26,361 | 25,794 | |||||||||||||||||
Operating expenses | 8,885 | 8,961 | 22,464 | 25,512 | |||||||||||||||||
Segment operating income | $ | (1,532 | ) | $ | (337 | ) | $ | 3,897 | $ | 282 | |||||||||||
Consolidation and Intersegment Eliminations: | |||||||||||||||||||||
Revenues | $ | (2,394 | ) | $ | (5,021 | ) | $ | (10,066 | ) | $ | (16,543 | ) | |||||||||
Cost of product sales | (2,032 | ) | (2,438 | ) | (7,359 | ) | (8,969 | ) | |||||||||||||
Operating expenses | (361 | ) | (2,582 | ) | (2,707 | ) | (7,574 | ) | |||||||||||||
Total | $ | (1 | ) | $ | (1 | ) | $ | — | $ | — | |||||||||||
Consolidated Information: | |||||||||||||||||||||
Revenues | $ | 440,566 | $ | 441,418 | $ | 1,363,484 | $ | 1,284,925 | |||||||||||||
Cost of product sales | 138,078 | 155,129 | 490,363 | 441,736 | |||||||||||||||||
Operating expenses | 116,590 | 117,432 | 334,016 | 335,315 | |||||||||||||||||
Depreciation and amortization expense | 66,989 | 51,853 | 187,062 | 154,357 | |||||||||||||||||
Segment operating income | 118,909 | 117,004 | 352,043 | 353,517 | |||||||||||||||||
General and administrative expenses | 25,003 | 26,957 | 83,202 | 73,399 | |||||||||||||||||
Other depreciation and amortization expense | 2,189 | 2,093 | 6,581 | 6,382 | |||||||||||||||||
Consolidated operating income | $ | 91,717 | $ | 87,954 | $ | 262,260 | $ | 273,736 | |||||||||||||
NuStar Energy L.P. and Subsidiaries |
Consolidated Financial Information - Continued |
(Unaudited, Thousands of Dollars, Except Ratio Data) |
Notes:
(1)
Our board of directors and management use EBITDA and/or DCF when assessing the following: (i) the performance of our assets, (ii) the viability of potential projects, (iii) our ability to fund distributions, (iv) our ability to fund capital expenditures and (v) our ability to service debt. In addition, our board of directors uses a distribution coverage ratio, which is calculated based on DCF, as one of the factors in its determination of the company-wide bonus and the vesting of performance units awarded to management. DCF is a widely accepted financial indicator used by the master limited partnership (MLP) investment community to compare partnership performance. DCF is used by the MLP investment community, in part, because the value of a partnership unit is partially based on its yield, and its yield is based on the cash distributions a partnership can pay its unitholders.
None of these financial measures are presented as an alternative to net income. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with GAAP. The following is a reconciliation of EBITDA, DCF and distribution coverage ratio:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Net income | $ | 38,592 | $ | 51,141 | $ | 122,782 | $ | 161,059 | |||||||||||||
Interest expense, net | 45,256 | 35,022 | 127,282 | 103,374 | |||||||||||||||||
Income tax expense | 2,743 | 2,153 | 7,298 | 9,293 | |||||||||||||||||
Depreciation and amortization expense | 69,178 | 53,946 | 193,643 | 160,739 | |||||||||||||||||
EBITDA | 155,769 | 142,262 | 451,005 | 434,465 | |||||||||||||||||
Interest expense, net | (45,256 | ) | (35,022 | ) | (127,282 | ) | (103,374 | ) | |||||||||||||
Reliability capital expenditures | (14,798 | ) | (8,512 | ) | (30,200 | ) | (25,834 | ) | |||||||||||||
Income tax expense | (2,743 | ) | (2,153 | ) | (7,298 | ) | (9,293 | ) | |||||||||||||
Mark-to-market impact of hedge transactions (a) | 497 | (3,954 | ) | (2,652 | ) | 6,492 | |||||||||||||||
Unit-based compensation (b) | 1,622 | 1,291 | 5,328 | 3,499 | |||||||||||||||||
Preferred unit distributions | (12,153 | ) | — | (26,916 | ) | — | |||||||||||||||
Other items (c) | (2,750 | ) | 6,567 | (4,119 | ) | 9,903 | |||||||||||||||
DCF | $ | 80,188 | $ | 100,479 | $ | 257,866 | $ | 315,858 | |||||||||||||
Less DCF available to general partner | 13,214 | 12,866 | 41,683 | 38,398 | |||||||||||||||||
DCF available to common limited partners | $ | 66,974 | $ | 87,613 | $ | 216,183 | $ | 277,460 | |||||||||||||
Distributions applicable to common limited partners | $ | 101,870 | $ | 85,943 | $ | 305,652 | $ | 256,513 | |||||||||||||
Distribution coverage ratio (d) | 0.66x | 1.02x | 0.71x | 1.08x | |||||||||||||||||
(a) | DCF 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 when the contracts are settled. | |
(b) | We intend to satisfy the vestings of equity-based awards with the issuance of our common units. As such, the expenses related to these awards are considered non-cash and added back to DCF. Certain awards include distribution equivalent rights (DERs). Payments made in connection with DERs are deducted from DCF. | |
(c) | Other items primarily consist of adjustments for throughput deficiency payments and construction reimbursements. | |
(d) | Distribution coverage ratio is calculated by dividing DCF available to common limited partners by distributions applicable to common limited partners. | |
(2) Throughputs for the three and nine months ended
View source version on businesswire.com: http://www.businesswire.com/news/home/20171107005652/en/
Source:
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 and Chief Administrative Officer,
Corporate
Communications: 210-918-2314
website: http://www.nustarenergy.com