News Release

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NuStar Energy L.P. Reports Strong Second Quarter of 2021 Earnings Results

Earnings and EBITDA Beats Consensus Estimates

Sustainability Presentation Released

Refined Product Systems Exceed 100 Percent of Pre-Pandemic Run Rate

Permian Crude System Volumes Average 481,000 Barrels Per Day in July/On Track to Exit 2021 at Around 500,000

West Coast Renewable Fuels Distribution System Continues to Handle Roughly 30 Percent of California’s Renewable Diesel Volumes

Announces Sale of Nine Terminals to Sunoco LP which will Improve Debt Metrics/Lower Leverage

SAN ANTONIO--(BUSINESS WIRE)--Aug. 5, 2021-- NuStar Energy L.P. (NYSE: NS) today reported net income of $63 million for the second quarter of 2021, or $0.25 per unit, compared to net income of $30 million, or a $0.06 net loss per unit for the second quarter of 2020. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $189 million for the second quarter of 2021, up $27 million or 17 percent from $162 million for the second quarter of 2020.

Distributable cash flow (DCF) available to common limited partners was $97 million for the second quarter of 2021, up $35 million or 56 percent compared to $62 million in the second quarter of 2020. The distribution coverage ratio to common limited partners was 2.22 times for the second quarter of 2021 and 2.03 times for the six months ended June 30, 2021.

“Strong improvement in our EBITDA was driven by outperformance across our core strategic asset footprint: our refined products systems, our crude assets and our West Coast Renewable Fuels Network,” said NuStar president and CEO Brad Barron.

Refined Product Systems Back to 100 Percent of Pre-Pandemic Run Rate

“Refined product demand has continued to improve as more and more Americans have returned to normal day-to-day activities,” said Barron. “After dipping to an average of 95 percent in the first quarter due to Winter Storm Uri, our second quarter average rebounded back up to 105 percent of pre-pandemic demand, and we are now forecasting 100 percent for the full year.

“Our second quarter refined product throughputs are up 34 percent over the second quarter of 2020, and also up 19 percent over first quarter 2021. And as vaccination efforts progress, we expect to continue to see sustained recovery in refined product demand in the U.S. and in Mexico, and we continue to expect our refined products systems to perform at around 100 percent of our pre-pandemic run-rate for the remainder of 2021.”

Crude Asset Demand Continues to Strengthen

Barron continued, “The strengthening refined product demand we have seen has also increased U.S. refiners’ demand for crude, contributing to higher throughputs for our crude pipelines in the second quarter, which are up 17 percent over the second quarter of 2020 and 13 percent over the first quarter of 2021.

“Rebounding crude demand, along with tempered global supply, has contributed to higher crude prices and improved expectations for U.S. shale production, particularly in the Permian Basin. And thanks to our Permian Crude System’s ‘core of the core’ premier location, lowest producer costs and highest product quality, we saw our Permian system’s volumes grow in the second quarter to an average 450,000 barrels per day, up 12 percent over the second quarter of 2020, up 12 percent over the first quarter of 2021 and comparable to our record-breaking first quarter 2020 pre-COVID quarterly average.

“In July, we saw our Permian volumes increase to an average of 481,000 barrels per day and we are on track to exit 2021 at around 500,000 barrels per day,” said Barron.

West Coast Renewable Fuels Network Handles Impressive Share of California’s Market

Barron also said NuStar’s West Coast Renewable Fuels Network is already playing an integral role in significant reductions in carbon emissions and offering a great growth platform across that region.

“NuStar already handles an impressive share of California’s renewable fuels. According to the latest available data from the state of California, for the first quarter of 2021 NuStar handled about 5 percent of California’s total biodiesel volumes; close to 20 percent of the state’s ethanol; and close to 30 percent of its renewable diesel volumes.

“We expect NuStar’s presence to continue to grow as we complete our planned tank conversion projects, and we will continue to transition existing tankage over to renewables service as our customer demand increases,” said Barron.

Additional Renewable Opportunities

Barron then discussed additional opportunities for renewable fuels service in the company’s mid-continent operations.

“We are also looking at some exciting renewables opportunities for our Ammonia System as it has always been a steady and important EBITDA contributor for NuStar.

“Currently, the ammonia we transport is used primarily for fertilizing crops by farmers in our nation’s ‘breadbasket.’ However, this critical chemical is now experiencing a renaissance as an energy source capable of powering zero-carbon, heavy-duty engines and marine vessels, as well as for ammonia’s ability to offer the safest and most efficient transportation and storage medium for hydrogen.

“We believe the steps our customers and other ammonia producers are taking toward ‘green’ ammonia production, as well as increasing demand for renewable alternatives and carbon emission reductions, will drive concurrent demand growth for our Ammonia System, with little or no additional strategic spending. We are developing a number of near and long-term actionable low-multiple, modest-spend, high-return organic projects for connections and other enhancements to our system to maximize its role in a renewable fuels future.” 

Announces Sale of Nine Terminals to Sunoco LP

Barron reviewed the announcement from earlier this week that NuStar has signed an agreement to sell nine terminal facilities in eight locations in the Northeast, Illinois and Florida to Sunoco LP for $250 million, noting that NuStar expects to close on that sale early in the fourth quarter.

“While these terminals are solid assets with great operations and employees, these facilities are no longer synergistic with NuStar’s core assets, which, in the current competitive climate is critical to their long-term success.

“We plan to deploy the proceeds from this sale to further improve our debt metrics. In fact, by year-end we expect our debt-to-EBITDA ratio to be comparable to the lower level we achieved in the second quarter of 2020. While selling assets is never easy, this transaction is a ‘win-win’ for all parties as we are exiting non-core assets at an attractive valuation, which allows us to lower leverage, and Sunoco is adding high-quality, synergistic assets and great employees to its portfolio.

“With this sale, we are positioned to strengthen our balance sheet further and focus 100 percent on our core strategic asset footprint,” Barron added.

Sustainability Presentation Released

Barron closed by discussing NuStar’s newly issued sustainability presentation, which can be found on the company’s website.

“In our recently published sustainability presentation, you will learn more about NuStar’s culture of responsibility, which has distinguished us throughout our 20-year history as we have always been committed to protecting and caring for our employees, our communities and the environment.

“You will see our track record of excellence in health, safety and giving back to our communities, as well as our commitment to sustainability, now and in the future,” said Barron.

Conference Call Details

A conference call with management is scheduled for 9:00 a.m. CT today, August 5, 2021. The partnership plans to discuss the second quarter 2021 earnings results, which will be released earlier that day. Investors interested in listening to the discussion may dial toll-free 844/889-7787, passcode 5176327. International callers may access the discussion by dialing 661/378-9931, passcode 5176327. The partnership intends to have a playback available following the discussion, which may be accessed by dialing toll-free 855/859-2056, passcode 5176327. International callers may access the playback by dialing 404/537-3406, passcode 5176327. The playback will be available until 12:00 p.m. CT on September 4, 2021.

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/mmc/p/8d35675z or by logging on to NuStar Energy L.P.’s website at www.nustarenergy.com.

NuStar Energy L.P., a publicly traded master limited partnership based in San Antonio, Texas, is one of the largest independent liquids terminal and pipeline operators in the nation. NuStar currently has approximately 10,000 miles of pipeline and 73 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels and specialty liquids. The partnership’s combined system has approximately 72 million barrels of storage capacity, and NuStar has operations in the United States, Canada and Mexico. For more information, visit NuStar Energy L.P.’s website at www.nustarenergy.com and its Sustainability page at www.nustarenergy.com/Sustainability.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes, and the related conference call will include, forward-looking statements regarding future events and expectations, such as NuStar’s future performance, plans and expenditures and the timing of, expected use of proceeds from and the other anticipated benefits from the announced asset sale. All forward-looking statements are based on NuStar’s beliefs as well as assumptions made by and information currently available to NuStar. These statements reflect NuStar’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 2020 annual report 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. Except as required by law, NuStar does not intend, or undertake any obligation, to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

 

NuStar Energy L.P. and Subsidiaries

Consolidated Financial Information

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

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Statement of Income Data:

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

Service revenues

$

300,788

 

 

$

284,151

 

 

$

572,671

 

 

$

600,897

 

Product sales

126,305

 

 

55,389

 

 

216,068

 

 

131,434

 

Total revenues

427,093

 

 

339,540

 

 

788,739

 

 

732,331

 

Costs and expenses:

 

 

 

 

 

 

 

Costs associated with service revenues:

 

 

 

 

 

 

 

Operating expenses

100,493

 

 

101,078

 

 

187,780

 

 

201,260

 

Depreciation and amortization expense

68,964

 

 

69,214

 

 

137,382

 

 

137,275

 

Total costs associated with service revenues

169,457

 

 

170,292

 

 

325,162

 

 

338,535

 

Costs associated with product sales

112,641

 

 

50,676

 

 

193,754

 

 

118,126

 

Goodwill impairment loss

 

 

 

 

 

 

225,000

 

General and administrative expenses

27,477

 

 

23,700

 

 

51,969

 

 

46,671

 

Other depreciation and amortization expense

1,913

 

 

2,171

 

 

3,960

 

 

4,357

 

Total costs and expenses

311,488

 

 

246,839

 

 

574,845

 

 

732,689

 

Operating income (loss)

115,605

 

 

92,701

 

 

213,894

 

 

(358

)

Interest expense, net

(53,780

)

 

(59,499

)

 

(108,698

)

 

(106,993

)

Loss on extinguishment of debt

 

 

(3,842

)

 

 

 

(3,842

)

Other income (expense), net

2,896

 

 

2,216

 

 

3,294

 

 

(4,273

)

Income (loss) before income tax expense

64,721

 

 

31,576

 

 

108,490

 

 

(115,466

)

Income tax expense

1,338

 

 

1,810

 

 

2,850

 

 

2,409

 

Net income (loss)

$

63,383

 

 

$

29,766

 

 

$

105,640

 

 

$

(117,875

)

 

 

 

 

 

 

 

 

Basic and diluted net income (loss) per common unit

$

0.25

 

 

$

(0.06

)

 

$

0.30

 

 

$

(1.74

)

Basic and diluted weighted-average common units outstanding

109,529,658

 

 

109,194,722

 

 

109,518,004

 

 

109,046,061

 

Other Data (Note 1):

 

 

 

 

 

 

 

Adjusted net income

$

63,383

 

 

$

33,608

 

 

$

105,640

 

 

$

110,967

 

Adjusted net income (loss) per common unit

$

0.25

 

 

$

(0.02

 

$

0.30

 

 

$

0.36

 

EBITDA

$

189,378

 

 

$

162,460

 

 

$

358,530

 

 

$

133,159

 

Adjusted EBITDA

$

189,378

 

 

$

166,302

 

 

$

358,530

 

 

$

362,001

 

DCF

$

97,375

 

 

$

62,491

 

 

$

177,920

 

 

$

184,810

 

Adjusted DCF

$

97,375

 

 

$

66,333

 

 

$

177,920

 

 

$

188,652

 

Distribution coverage ratio

 

2.22x

 

 

 

1.43x

 

 

 

2.03x

 

 

 

2.11x

 

Adjusted distribution coverage ratio

 

2.22x

 

 

 

1.52x

 

 

 

2.03x

 

 

 

2.16x

 

 

For the Four Quarters Ended June 30,

 

2021

 

2020

Consolidated Debt Coverage Ratio

4.27x

 

3.94x

 

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,

 

2021

 

2020

 

2021

 

2020

Pipeline:

 

 

 

 

 

 

 

Crude oil pipelines throughput (barrels/day)

1,244,215

 

1,063,739

 

1,173,166

 

 

1,297,892

 

Refined products and ammonia pipelines throughput (barrels/day)

606,973

 

452,678

 

558,121

 

 

523,555

 

Total throughput (barrels/day)

1,851,188

 

1,516,417

 

1,731,287

 

 

1,821,447

 

 

 

 

 

 

 

 

 

Throughput and other revenues

$

192,906

 

$

166,108

 

$

362,134

 

 

$

361,789

 

Operating expenses

51,404

 

50,099

 

96,459

 

 

100,345

 

Depreciation and amortization expense

44,990

 

44,028

 

89,784

 

 

87,387

 

Goodwill impairment loss

 

 

 

 

225,000

 

Segment operating income (loss)

$

96,512

 

$

71,981

 

$

175,891

 

 

$

(50,943

)

Storage:

 

 

 

 

 

 

 

Throughput (barrels/day)

385,790

 

348,189

 

393,006

 

 

513,510

 

 

 

 

 

 

 

 

 

Throughput terminal revenues

$

35,143

 

$

32,199

 

$

59,937

 

 

$

70,922

 

Storage terminal revenues

84,105

 

87,208

 

167,885

 

 

171,702

 

Total revenues

119,248

 

119,407

 

227,822

 

 

242,624

 

Operating expenses

49,089

 

50,979

 

91,321

 

 

100,915

 

Depreciation and amortization expense

23,974

 

25,186

 

47,598

 

 

49,888

 

Segment operating income

$

46,185

 

$

43,242

 

$

88,903

 

 

$

91,821

 

Fuels Marketing:

 

 

 

 

 

 

 

Product sales

$

114,939

 

$

54,025

 

$

198,794

 

 

$

127,927

 

Cost of goods

112,063

 

50,115

 

194,466

 

 

117,069

 

Gross margin

2,876

 

3,910

 

4,328

 

 

10,858

 

Operating expenses

578

 

561

 

(701

)

 

1,066

 

Segment operating income

$

2,298

 

$

3,349

 

$

5,029

 

 

$

9,792

 

Consolidation and Intersegment Eliminations:

 

 

 

 

 

 

 

Revenues

$

 

$

 

$

(11

)

 

$

(9

)

Cost of goods

 

 

(11

)

 

(9

)

Total

$

 

$

 

$

 

 

$

 

Consolidated Information:

 

 

 

 

 

 

 

Revenues

$

427,093

 

$

339,540

 

$

788,739

 

 

$

732,331

 

Costs associated with service revenues:

 

 

 

 

 

 

 

Operating expenses

100,493

 

101,078

 

187,780

 

 

201,260

 

Depreciation and amortization expense

68,964

 

69,214

 

137,382

 

 

137,275

 

Total costs associated with service revenues

169,457

 

170,292

 

325,162

 

 

338,535

 

Cost of product sales

112,641

 

50,676

 

193,754

 

 

118,126

 

Goodwill impairment loss

 

 

 

 

225,000

 

Segment operating income

144,995

 

118,572

 

269,823

 

 

50,670

 

General and administrative expenses

27,477

 

23,700

 

51,969

 

 

46,671

 

Other depreciation and amortization expense

1,913

 

2,171

 

3,960

 

 

4,357

 

Consolidated operating income (loss)

$

115,605

 

$

92,701

 

$

213,894

 

 

$

(358

)

 

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

Note 1: NuStar Energy L.P. utilizes financial measures, such as earnings before interest, taxes, depreciation and amortization (EBITDA), distributable cash flow (DCF) and distribution coverage ratio, which are not defined in U.S. generally accepted accounting principles (GAAP). Management believes these financial measures provide useful information to investors and other external users of our financial information because (i) they provide additional information about the operating performance of the partnership’s assets and the cash the business is generating, (ii) investors and other external users of our financial statements benefit from having access to the same financial measures being utilized by management and our board of directors when making financial, operational, compensation and planning decisions and (iii) they highlight the impact of significant transactions. We may also adjust these measures to enhance the comparability of our performance across periods.

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 EBITDA, DCF and a distribution coverage ratio, which is calculated based on DCF, as some of the factors in its compensation determinations. DCF is a 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 net income (loss) to EBITDA, DCF and distribution coverage ratio.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2021

 

2020

 

2021

 

2020

Net income (loss)

$

63,383

 

 

$

29,766

 

 

$

105,640

 

 

$

(117,875

)

Interest expense, net

53,780

 

 

59,499

 

 

108,698

 

 

106,993

 

Income tax expense

1,338

 

 

1,810

 

 

2,850

 

 

2,409

 

Depreciation and amortization expense

70,877

 

 

71,385

 

 

141,342

 

 

141,632

 

EBITDA

189,378

 

 

162,460

 

 

358,530

 

 

133,159

 

Interest expense, net

(53,780

)

 

(59,499

)

 

(108,698

)

 

(106,993

)

Reliability capital expenditures

(8,943

)

 

(7,422

)

 

(17,432

)

 

(11,051

)

Income tax expense

(1,338

)

 

(1,810

)

 

(2,850

)

 

(2,409

)

Long-term incentive equity awards (a)

2,720

 

 

2,052

 

 

6,007

 

 

3,986

 

Preferred unit distributions

(31,887

)

 

(30,684

)

 

(63,774

)

 

(61,107

)

Goodwill impairment loss (b)

 

 

 

 

 

 

225,000

 

Other items

1,225

 

 

(2,606

)

 

6,137

 

 

4,225

 

DCF

$

97,375

 

 

$

62,491

 

 

$

177,920

 

 

$

184,810

 

 

 

 

 

 

 

 

 

Distributions applicable to common limited partners

$

43,814

 

 

$

43,678

 

 

$

87,648

 

 

$

87,408

 

Distribution coverage ratio (c)

2.22x

 

1.43x

 

2.03x

 

2.11x

(a)

We intend to satisfy the vestings of these 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.

(b)

Represents a non-cash goodwill impairment charge related to our crude oil pipelines reporting unit for the six months ended June 30, 2020.

(c)

Distribution coverage ratio is calculated by dividing DCF by distributions applicable to common limited partners.

NuStar Energy L.P. and Subsidiaries

Consolidated Financial Information - Continued

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

 

The following is the reconciliation for the calculation of our Consolidated Debt Coverage Ratio, as defined in our revolving credit agreement (the Revolving Credit Agreement).

 

For the Four Quarters Ended June 30,

 

2021

 

2020

Operating income

$

423,354

 

 

$

223,670

 

Depreciation and amortization expense

284,811

 

 

280,809

 

Goodwill impairment loss (a)

 

 

225,000

 

Equity awards (b)

13,438

 

 

13,175

 

Other (c)

244

 

 

26,148

 

Consolidated EBITDA, as defined in the Revolving Credit Agreement

$

721,847

 

 

$

768,802

 

 

 

 

 

Total consolidated debt

$

3,483,840

 

 

$

3,434,124

 

NuStar Logistics' floating rate subordinated notes

(402,500

)

 

(402,500

)

Consolidated Debt, as defined in the Revolving Credit Agreement

$

3,081,340

 

 

$

3,031,624

 

 

 

 

 

Consolidated Debt Coverage Ratio (Consolidated Debt to Consolidated EBITDA)

4.27x

 

3.94x

(a)

For the four quarters ended June 30, 2020, this adjustment represents a non-cash goodwill impairment charge related to our crude oil pipelines reporting unit.

(b)

This adjustment represents the non-cash expense related to the vestings of equity-based awards with the issuance of our common units.

(c)

This adjustment represents other noncash and pro forma items, as defined in the Revolving Credit Agreement. The four quarters ended June 30, 2020 also includes pro forma items attributable to Material Projects, as defined in the Revolving Credit Agreement.

The following is a reconciliation of net income (loss) / net loss per common unit to adjusted net income / adjusted net (loss) income per common unit.

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

 

2020

Net income (loss) / net loss per common unit

$

29,766

 

$

(0.06

)

 

$

(117,875

)

 

$

(1.74

)

Goodwill impairment loss (a)

 

 

 

225,000

 

 

2.06

 

Loss on extinguishment of debt

3,842

 

0.04

 

 

3,842

 

 

0.04

 

Adjusted net income / adjusted net (loss) income per common unit

$

33,608

 

$

(0.02

)

 

$

110,967

 

 

$

0.36

 

The following is a reconciliation of EBITDA to adjusted EBITDA.

 

Three Months Ended
June 30, 2020

 

Six Months Ended
June 30, 2020

EBITDA

$

162,460

 

 

$

133,159

 

Goodwill impairment loss (a)

 

 

225,000

 

Loss on extinguishment of debt

3,842

 

 

3,842

 

Adjusted EBITDA

$

166,302

 

 

$

362,001

 

 
(a) Represents a non-cash goodwill impairment charge related to our crude oil pipelines reporting unit.

NuStar Energy L.P. and Subsidiaries

Consolidated Financial Information - Continued

(Unaudited, Thousands of Dollars, Except Ratio Data)

 

The following is a reconciliation of DCF to adjusted DCF and adjusted distribution coverage ratio.

 

 

Three Months Ended

 

Six Months Ended

 

June 30, 2020

DCF

$

62,491

 

 

$

184,810

 

Loss on extinguishment of debt

3,842

 

 

3,842

 

Adjusted DCF

$

66,333

 

 

$

188,652

 

 

 

 

 

Distributions applicable to common limited partners

$

43,678

 

 

$

87,408

 

Adjusted distribution coverage ratio (a)

1.52x

 

2.16x

 

(a) Adjusted distribution coverage ratio is calculated by dividing adjusted DCF by distributions applicable to common limited partners.

 

NuStar Energy, L.P., San Antonio
Investors, Pam Schmidt, Vice President, Investor Relations
Investor Relations: 210-918-INVR (4687)
or
Media, Mary Rose Brown, Executive Vice President and Chief Administrative Officer,
Corporate Communications: 210-918-2314/210-410-8926

Source: NuStar Energy L.P.

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Computershare Investor Svcs, LLC
Shareholder Communications Team
 
P.O. Box 505000
Louisville, KY 40233-5000 USA
icon-phone 888-726-7784
http://www.computershare.com/investor