As of May 3, 2024, Sunoco has successfully completed its acquisition of NuStar Energy L.P. Find out more here.
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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 March 31, 2023
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
_________________________________________
https://cdn.kscope.io/8bf1f9618cecbd0c125eca388be12e9d-nslogoa04.jpg
NuStar Energy L.P.
(Exact name of registrant as specified in its charter)
_________________________________________
Delaware74-2956831
(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 classTrading Symbol(s)Name of each exchange on which registered
Common UnitsNSNew York Stock Exchange
8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred UnitsNSprANew York Stock Exchange
7.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred UnitsNSprBNew York Stock Exchange
9.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred UnitsNSprCNew 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 þ    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 þ    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 filerþAccelerated filer
Non-accelerated filerSmaller 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 þ

The number of common units outstanding as of April 30, 2023 was 110,904,702.



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)
March 31,
2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents$5,151 $14,489 
Accounts receivable, net137,647 149,971 
Inventories15,518 15,397 
Prepaid and other current assets15,729 24,067 
Total current assets174,045 203,924 
Property, plant and equipment, at cost5,658,551 5,733,685 
Accumulated depreciation and amortization(2,344,543)(2,330,602)
Property, plant and equipment, net3,314,008 3,403,083 
Intangible assets, net504,288 513,696 
Goodwill732,356 732,356 
Other long-term assets, net199,017 120,627 
Total assets$4,923,714 $4,973,686 
Liabilities, Mezzanine Equity and Partners’ Equity
Current liabilities:
Accounts payable$69,435 $67,765 
Current portion of finance leases4,535 4,416 
Accrued interest payable76,112 37,607 
Accrued liabilities56,333 76,072 
Taxes other than income tax6,999 10,607 
Total current liabilities213,414 196,467 
Long-term debt, less current portion of finance leases3,113,074 3,293,415 
Deferred income tax liability3,246 3,219 
Other long-term liabilities211,275 131,299 
Total liabilities3,541,009 3,624,400 
Commitments and contingencies (Note 5)
Series D preferred limited partners (16,346,650 units outstanding as of
March 31, 2023 and December 31, 2022) (Note 6)
450,641 446,970 
Partners’ equity (Note 7):
 Preferred limited partners
Series A (9,060,000 units outstanding as of March 31, 2023 and December 31, 2022)
218,307 218,307 
Series B (15,400,000 units outstanding as of March 31, 2023 and December 31, 2022)
371,476 371,476 
Series C (6,900,000 units outstanding as of March 31, 2023 and December 31, 2022)
166,518 166,518 
Common limited partners (110,903,880 and 110,818,718 units outstanding
as of March 31, 2023 and December 31, 2022, respectively)
207,164 177,620 
Accumulated other comprehensive loss(31,401)(31,605)
Total partners’ equity932,064 902,316 
Total liabilities, mezzanine equity and partners’ equity$4,923,714 $4,973,686 
See Condensed Notes to Consolidated Financial Statements.
3


Table of Contents

NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 Three Months Ended March 31,
 20232022
Revenues:
Service revenues$285,266 $265,305 
Product sales108,601 144,558 
Total revenues393,867 409,863 
Costs and expenses:
Costs associated with service revenues:
Operating expenses (excluding depreciation and amortization expense)
89,162 86,402 
Depreciation and amortization expense62,054 63,303 
Total costs associated with service revenues151,216 149,705 
Costs associated with product sales93,461 126,715 
Impairment loss  46,122 
General and administrative expenses (excluding depreciation and amortization expense)
28,725 27,071 
Other depreciation and amortization expense1,555 1,824 
Total costs and expenses274,957 351,437 
Gain on sale of assets41,075  
Operating income159,985 58,426 
Interest expense, net(57,371)(49,818)
Other income, net4,509 3,671 
Income before income tax expense (benefit)107,123 12,279 
Income tax expense (benefit)1,187 (33)
Net income$105,936 $12,312 
Basic and diluted net income (loss) per common unit (Note 8)
$0.61 $(0.22)
Basic and diluted weighted-average common units outstanding110,880,981 110,177,045 
Comprehensive income$106,140 $13,244 
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)
 Three Months Ended March 31,
 20232022
Cash flows from operating activities:
Net income$105,936 $12,312 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense63,609 65,127 
Amortization of unit-based compensation3,628 3,412 
Amortization of debt related items2,607 2,532 
Gain on sale of assets(41,075) 
Impairment loss 46,122 
Changes in current assets and current liabilities (Note 9)
32,614 17,512 
Decrease in other long-term assets, net3,294 3,644 
Decrease in other long-term liabilities(1,729)(662)
Other, net(4,300)(4,169)
Net cash provided by operating activities164,584 145,830 
Cash flows from investing activities:
Capital expenditures(22,083)(32,750)
Change in accounts payable related to capital expenditures(4,308)(14,498)
Proceeds from insurance recoveries12,395 5,805 
Proceeds from sale or disposition of assets, net of transaction costs102,670 341 
Net cash provided by (used in) investing activities88,674 (41,102)
Cash flows from financing activities:
Proceeds from long-term debt borrowings120,300 253,000 
Long-term debt repayments(301,600)(268,800)
Distributions to preferred unitholders(32,661)(31,025)
Distributions to common unitholders(44,362)(44,041)
Other, net(4,365)(8,848)
Net cash used in financing activities(262,688)(99,714)
Effect of foreign exchange rate changes on cash170 176 
Net (decrease) increase in cash, cash equivalents and restricted cash(9,260)5,190 
Cash, cash equivalents and restricted cash as of the beginning of the period23,377 14,439 
Cash, cash equivalents and restricted cash as of the end of the period$14,117 $19,629 
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 March 31, 2023 and 2022
(Unaudited, Thousands of Dollars, Except Per Unit Data)
Limited PartnersMezzanine Equity
 PreferredCommonAccumulated
Other
Comprehensive
Loss
Total Partners’ Equity
(Note 7)
Series D Preferred Limited Partners (Note 6)
Total
Balance as of January 1, 2023$756,301 $177,620 $(31,605)$902,316 $446,970 $1,349,286 
Net income21,584 73,203  94,787 11,149 105,936 
Other comprehensive income— — 204 204 — 204 
Distributions to partners:
Series A, B and C preferred
(21,584)— — (21,584)— (21,584)
Common ($0.40 per unit)
— (44,362)— (44,362)— (44,362)
Series D preferred
— — — — (11,149)(11,149)
Unit-based compensation
— 4,384 — 4,384 — 4,384 
Series D Preferred Unit accretion— (3,671)— (3,671)3,671  
Other (10) (10) (10)
Balance as of March 31, 2023$756,301 $207,164 $(31,401)$932,064 $450,641 $1,382,705 

Balance as of January 1, 2022$756,301 $299,502 $(73,978)$981,825 $616,439 $1,598,264 
Net income (loss)15,238 (18,780) (3,542)15,854 12,312 
Other comprehensive income— — 932 932 — 932 
Distributions to partners:
Series A, B and C preferred
(15,238)— — (15,238)— (15,238)
Common ($0.40 per unit)
— (44,041)— (44,041)— (44,041)
Series D preferred
— — — — (15,854)(15,854)
Unit-based compensation
— 6,910 — 6,910 — 6,910 
Series D Preferred Unit accretion
— (4,581)— (4,581)4,581  
Other    (2)(2)
Balance as of March 31, 2022$756,301 $239,010 $(73,046)$922,265 $621,018 $1,543,283 
See Condensed Notes to Consolidated Financial Statements.













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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 Delaware limited partnership primarily engaged in the transportation, terminalling and storage of petroleum products and renewable fuels and the transportation of anhydrous ammonia. 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. Our business is managed under the direction of the board of directors of NuStar GP, LLC, the general partner of our general partner, Riverwalk Logistics, L.P., both of which are indirectly wholly owned subsidiaries of ours.

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.

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 months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. 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, 2022.

2. DISPOSITIONS

Sale-Leaseback Transaction
On March 21, 2023, we sold our corporate headquarters facility and approximately 24 acres of underlying land located in San Antonio, Texas (the Corporate Headquarters) for an aggregate cash sales price of approximately $103.0 million and immediately leased back the Corporate Headquarters for an initial term of twenty years, with two renewal options of ten years each (the Sale-Leaseback Transaction). Upon closing of the sale in the first quarter of 2023, the Sale-Leaseback Transaction qualified as a completed sale, and we recognized a gain of $41.1 million, which is presented in “Gain on sale of assets” on the condensed consolidated statements of comprehensive income. We entered into the Sale-leaseback Transaction in order to monetize the Corporate Headquarters and used the proceeds to repay borrowings on our revolving credit agreement.

Pursuant to the lease agreement, rent for the initial term starts at $6.4 million per year and increases annually by 2.5%. As of March 31, 2023, right-of-use assets and lease liabilities associated with the Sale-Leaseback Transaction assumed a reasonably certain term of 20 years and were included in our consolidated balance sheet as follows:
March 31, 2023
(Thousands of Dollars)
Operating lease right-of-use assets:
Other long-term assets, net$82,230 
Operating lease liabilities:
Accrued liabilities$710 
Other long-term liabilities81,498 
Total operating lease liabilities$82,208 

As of March 31, 2023, the weighted-average discount rate for our operating leases was 6.1%.
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Point Tupper Terminal Disposition
On April 29, 2022, we sold the equity interests in our wholly owned subsidiaries that owned our Point Tupper terminal facility in Nova Scotia, Canada (the Point Tupper Terminal Operations) to EverWind Fuels for $60.0 million. The terminal facility had a storage capacity of 7.8 million barrels and was included in the storage segment. We used the sales proceeds to reduce debt and improve our debt metrics.

During the first quarter of 2022, we determined the Point Tupper Terminal Operations met the criteria to be classified as held for sale. We compared the carrying value of the Point Tupper Terminal Operations, which included $42.2 million in cumulative foreign currency translation losses accumulated since our acquisition of the Point Tupper terminal facility in 2005, to its fair value less costs to sell, and we recognized a pre-tax impairment loss of $46.1 million in the first quarter of 2022, which is presented in "Impairment loss" on the condensed consolidated statements of comprehensive income. We believe that the sales price of $60.0 million provided a reasonable indication of the fair value of the Point Tupper Terminal Operations as it represented an exit price in an orderly transaction between market participants. The sales price was a quoted price for identical assets and liabilities in a market that was not active and, thus, our fair value estimate fell within Level 2 of the fair value hierarchy. Upon closing in the second quarter of 2022, we released $39.6 million of foreign currency translation losses from accumulated other comprehensive loss and finalized our sales price, resulting in a gain of $1.6 million, which was presented in “Other income, net” on the condensed consolidated statement of comprehensive income for the period.

3. 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:
20232022
Contract AssetsContract LiabilitiesContract AssetsContract Liabilities
(Thousands of Dollars)
Balances as of January 1:
Current portion$2,612 $(17,647)$2,336 $(15,443)
Noncurrent portion304 (41,405)504 (46,027)
Total 2,916 (59,052)2,840 (61,470)
Activity:
Additions125 (16,829)71 (9,645)
Transfer to accounts receivable(2,388)— (2,037)— 
Transfer to revenues 14,008 (83)12,117 
Total (2,263)(2,821)(2,049)2,472 
Balances as of March 31:
Current portion406 (21,065)277 (13,454)
Noncurrent portion247 (40,808)448 (45,544)
Held for sale  66  
Total $653 $(61,873)$791 $(58,998)

Current contract assets are included in “Prepaid and other current assets” and noncurrent contract assets are included in “Other long-term assets, net” on the consolidated balance sheets. The current portion of contract liabilities are included in “Accrued liabilities” and the noncurrent portion of contract liabilities are included in “Other long-term liabilities” on the consolidated balance sheets.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Remaining Performance Obligations
The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenue as of March 31, 2023:
Remaining Performance Obligations
(Thousands of Dollars)
2023 (remaining)$278,253 
2024286,825 
2025189,473 
2026128,358 
202758,971 
Thereafter78,451 
Total$1,020,331 

Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to customer contracts that have fixed pricing and fixed volume terms and conditions, including contracts with payment obligations for minimum volume commitments.

Disaggregation of Revenues
The following table disaggregates our revenues:
Three Months Ended March 31,
20232022
(Thousands of Dollars)
Pipeline segment:
Crude oil pipelines $96,603 $86,124 
Refined products and ammonia pipelines116,580 102,559 
Total pipeline segment revenues from contracts with customers213,183 188,683 
Storage segment:
Throughput terminals27,315 26,441 
Storage terminals (excluding lessor revenues)42,016 50,719 
Total storage segment revenues from contracts with customers
69,331 77,160 
Lessor revenues11,326 10,761 
Total storage segment revenues80,657 87,921 
Fuels marketing segment:
Revenues from contracts with customers
100,027 133,260 
Consolidation and intersegment eliminations (1)
Total revenues$393,867 $409,863 

4. DEBT

Revolving Credit Agreement
As of March 31, 2023, NuStar Logistics’ $1.0 billion unsecured revolving credit agreement (the Revolving Credit Agreement), due April 27, 2025, had $940.4 million available for borrowing and $55.0 million of borrowings outstanding. Letters of credit issued under the Revolving Credit Agreement totaled $4.6 million as of March 31, 2023 and limit the amount we can borrow under the Revolving Credit Agreement. Obligations under the Revolving Credit Agreement are guaranteed by NuStar Energy
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and NuPOP. The Revolving Credit Agreement provides for U.S. dollar borrowings, which bear interest, at our option, based on an alternative base rate or a SOFR-based rate. The Revolving Credit Agreement and certain fees under our $100.0 million receivables financing agreement are the only debt arrangements with interest rates that are subject to adjustment if our debt rating is downgraded (or upgraded) by certain credit rating agencies. As of March 31, 2023, our weighted-average interest rate related to borrowings under the Revolving Credit Agreement was 7.6%.

The Revolving Credit Agreement is subject to maximum consolidated debt coverage ratio and minimum consolidated interest coverage ratio requirements, which may limit the amount we can borrow to an amount that is less than the total amount available for borrowing. For a rolling period of four quarters, the consolidated debt coverage ratio (as defined in the Revolving Credit Agreement) may not exceed 5.00-to-1.00, and the consolidated interest coverage ratio (as defined in the Revolving Credit Agreement) must not be less than 1.75-to-1.00. As of March 31, 2023, we believe that we are in compliance with the covenants in the Revolving Credit Agreement.

Fair Value of Long-Term Debt
The estimated fair values and carrying amounts of long-term debt, excluding finance leases, were as follows:
March 31, 2023December 31, 2022
 (Thousands of Dollars)
Fair value$3,045,683 $3,169,664 
Carrying amount$3,062,362 $3,242,289 

We have estimated the fair value of our publicly traded notes based upon quoted prices in active markets; therefore, we determined that the fair value of our publicly traded notes falls in Level 1 of the fair value hierarchy. With regard to our other debt, for which a quoted market price is not available, we have estimated the fair value using a discounted cash flow analysis using current incremental borrowing rates for similar types of borrowing arrangements and determined that the fair value falls in Level 2 of the fair value hierarchy. The carrying amount includes unamortized debt issuance costs.

5. COMMITMENTS AND CONTINGENCIES

We have contingent liabilities resulting from various litigation, claims and commitments. We record accruals for loss contingencies when losses are considered probable and can be reasonably estimated. Legal fees associated with defending the Partnership in legal matters are expensed as incurred. We accrued $0.6 million and $0.3 million for contingent losses as of March 31, 2023 and December 31, 2022, respectively. The amount that will ultimately be paid related to such matters may differ from the recorded accruals, and the timing of such payments is uncertain. We evaluate each contingent loss at least quarterly, and more frequently as each matter progresses and develops over time, and we do not believe that the resolution of any particular claim or proceeding, or all matters in the aggregate, would have a material adverse effect on our results of operations, financial position or liquidity.

6. SERIES D CUMULATIVE CONVERTIBLE PREFERRED UNITS

In November 2022, we repurchased an aggregate 6,900,000 of our Series D Cumulative Convertible Preferred Units (Series D Preferred Units). The following is a summary of our Series D Preferred Units issued and outstanding:
Price per UnitNumber of Units
June 29, 2018 issuance$25.38 15,760,441 
July 13, 2018 issuance$25.38 7,486,209 
Total units issued23,246,650 
November 22, 2022 repurchase$32.73 (6,900,000)
Units outstanding at March 31, 2023 and December 31, 2022
16,346,650 

We allocate net income to our Series D Preferred Units equal to the amount of distributions earned during the period. Distributions on the Series D Preferred Units are payable out of any legally available funds, accrue and are cumulative from the original issuance dates and are payable on the 15th day (or next business day) of each of March, June, September and December, beginning September 17, 2018, to holders of record on the first business day of each payment month. The distribution rates on the Series D Preferred Units are as follows: (i) 9.75% per annum ($0.619 per unit per distribution period) for the first two years; (ii) 10.75% per annum ($0.682 per unit per distribution period) for years three through five; and (iii) the
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greater of 13.75% per annum ($0.872 per unit per distribution period) or the distribution per common unit thereafter. While the Series D Preferred Units are outstanding, the Partnership will be prohibited from paying distributions on any junior securities, including the common units, unless full cumulative distributions on the Series D Preferred Units (and any parity securities) have been, or contemporaneously are being, paid or set aside for payment through the most recent Series D Preferred Unit distribution payment date. Any Series D Preferred Unit distributions in excess of $0.635 per unit may be paid, in the Partnership’s sole discretion, in additional Series D Preferred Units, with the remainder paid in cash.

Distribution information on our Series D Preferred Units is as follows:
 Distribution PeriodDistribution Rate per UnitTotal Distribution
(Thousands of Dollars)
March 15, 2023 - June 14, 2023$0.682 $11,148 
December 15, 2022 - March 14, 2023$0.682 $11,148 
March 15, 2022 - June 14, 2022$0.682 $15,854 
December 15, 2021 - March 14, 2022$0.682 $15,854 

In April 2023, our board of directors declared distributions with respect to the Series D Preferred Units to be paid on June 15, 2023.

7. PARTNERS' EQUITY

Series A, B and C Preferred Units
We allocate net income to our 8.50% Series A, 7.625% Series B and 9.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (collectively, the Series A, B and C Preferred Units) equal to the amount of distributions earned during the period. Distributions on our Series A, B and C Preferred Units are payable out of any legally available funds, accrue and are cumulative from the original issuance dates, and are payable on the 15th day (or next business day) of each of March, June, September and December of each year to holders of record on the first business day of each payment month.

Information on our Series A, B and C Preferred Units is shown below:
Units
Units Issued and Outstanding as of March 31, 2023
Optional Redemption Date/Date When Distribution Rate Became Floating
Floating Annual Rate (as a Percentage of the $25.00 Liquidation Preference per Unit)
Series A Preferred Units9,060,000December 15, 2021
Three-month LIBOR plus 6.766%
Series B Preferred Units15,400,000June 15, 2022
Three-month LIBOR plus 5.643%
Series C Preferred Units6,900,000December 15, 2022
Three-month LIBOR plus 6.88%

Distribution information on our Series A, B and C Preferred Units is as follows:
Series A Preferred UnitsSeries B Preferred UnitsSeries C Preferred Units
Distribution PeriodDistribution Rate per UnitTotal DistributionDistribution Rate per UnitTotal DistributionDistribution Rate per UnitTotal Distribution
(Thousands of Dollars)(Thousands of Dollars)(Thousands of Dollars)
March 15, 2023 - June 14, 2023$0.73169 $6,629 $0.66150 $10,187 $0.73881 $5,098 
December 15, 2022 - March 14, 2023$0.71889 $6,513 $0.64871 $9,990 $0.72602 $5,010 
March 15, 2022 - June 14, 2022$0.47817 $4,332 $0.47657 $7,339 $0.56250 $3,881 
December 15, 2021 - March 14, 2022$0.43606 $3,951 $0.47657 $7,339 $0.56250 $3,881 

In April 2023, our board of directors declared distributions with respect to the Series A, B and C Preferred Units to be paid on June 15, 2023.

Common Limited Partners
We make quarterly distributions to common unitholders of 100% of our “Available Cash,” generally defined as cash receipts less cash disbursements, including distributions to our preferred units, and cash reserves established by the general partner, in
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its sole discretion. These quarterly distributions are declared and paid within 45 days subsequent to each quarter-end. The common unitholders receive a distribution each quarter as determined by the board of directors, subject to limitation by the distributions in arrears, if any, on our preferred units. In April 2023, our board of directors declared distributions with respect to our common units for the quarter ended March 31, 2023.

The following table summarizes information about cash distributions to our common limited partners applicable to the period in which the distributions were earned:
Quarter EndedCash Distributions
Per Unit
Total Cash
Distributions
Record DatePayment Date
(Thousands of Dollars)
March 31, 2023$0.40 $44,396 May 8, 2023May 12, 2023
December 31, 2022$0.40 $44,328 February 8, 2023February 14, 2023

Accumulated Other Comprehensive Income (Loss) (AOCI)
The balance of and changes in the components included in AOCI were as follows:
Three Months Ended March 31,
20232022
Foreign Currency TranslationCash Flow HedgesPension and Other Postretirement BenefitsTotalForeign Currency TranslationCash Flow HedgesPension and Other Postretirement BenefitsTotal
(Thousands of Dollars)
Balance as of January 1$62 $(34,380)$2,713 $(31,605)$(41,761)$(36,486)$4,269 $(73,978)
Other comprehensive income before reclassification adjustments435   435 829   829 
Net gain on pension costs reclassified into other income, net
— — (737)(737)— — (420)(420)
Net loss on cash flow hedges reclassified into interest expense, net
— 515 — 515 — 529 — 529 
Other
  (9)(9)  (6)(6)
Other comprehensive income (loss)435 515 (746)204 829 529 (426)932 
Balance as of March 31$497 $(33,865)$1,967 $(31,401)$(40,932)$(35,957)$3,843 $(73,046)

As of March 31, 2023, we expect to reclassify a loss of $2.9 million to “Interest expense, net” within the next twelve months associated with unwound forward-starting interest rate swaps.

8. NET INCOME (LOSS) PER COMMON UNIT

Basic and diluted net income (loss) per common unit is determined pursuant to the two-class method. Under this method, all earnings are allocated to our limited partners and participating securities based on their respective rights to receive distributions earned during the period. Participating securities include restricted units awarded under our long-term incentive plans. We compute basic net income (loss) per common unit by dividing net income (loss) attributable to common units by the weighted-average number of common units outstanding during the period. We compute diluted net income (loss) per common unit by dividing net income (loss) attributable to common units by the sum of (i) the weighted average number of common units outstanding during the period and (ii) the effect of dilutive potential common units outstanding during the period. Dilutive potential common units include the Series D Preferred Units.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
The Series D Preferred Units contain certain unitholder conversion and redemption features, and we use the if-converted method to calculate the dilutive effect of the conversion or redemption feature that is most advantageous to our Series D preferred unitholders. The effect of the assumed conversion or redemption of the Series D Preferred Units outstanding was antidilutive for each of the three months ended March 31, 2023 and 2022; therefore, we did not include such conversion in the computation of diluted net income (loss) per common unit.

The following table details the calculation of basic and diluted net income (loss) per common unit:
 Three Months Ended March 31,
 20232022
 (Thousands of Dollars, Except Unit and Per Unit Data)
Net income$105,936 $12,312 
Distributions to preferred limited partners
(32,733)(31,092)
Distributions to common limited partners(44,396)(44,165)
Distribution equivalent rights to restricted units(672)(633)
Distributions less than (in excess of) income$28,135 $(63,578)
Distributions to common limited partners$44,396 $44,165 
Allocation of distributions less than (in excess of) income to common limited partners27,396 (63,578)
Series D Preferred Unit accretion(3,671)(4,581)
Net income (loss) attributable to common units$68,121 $(23,994)
Basic and diluted weighted-average common units outstanding110,880,981 110,177,045 
Basic and diluted net income (loss) per common unit$0.61 $(0.22)

9. SUPPLEMENTAL CASH FLOW INFORMATION

Changes in current assets and current liabilities were as follows:
 Three Months Ended March 31,
 20232022
 (Thousands of Dollars)
Decrease (increase) in current assets:
Accounts receivable$(131)$(13,704)
Inventories(121)(3,062)
Other current assets8,326 10,289 
Increase (decrease) in current liabilities:
Accounts payable7,413 4,284 
Accrued interest payable38,505 37,968 
Accrued liabilities(18,228)(14,178)
Taxes other than income tax(3,150)(4,085)
Changes in current assets and current liabilities$32,614 $17,512 

The above changes in current assets and current liabilities may differ from changes between amounts reflected in the applicable consolidated balance sheets due to:
the change in the amount accrued for capital expenditures;
the effect of accrued compensation expense paid with fully vested common unit awards; and
current assets and current liabilities disposed of during the period.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Other supplemental cash flow information is as follows:
 Three Months Ended March 31,
 20232022
 (Thousands of Dollars)
Cash paid for interest, net of amount capitalized$16,600 $9,320 
(Refunds received) cash paid for income taxes, net$(1,126)$185 
Right-of-use assets obtained in exchange for operating lease liabilities$82,364 $2,674 
Right-of-use assets obtained in exchange for finance lease liabilities$844 $731 

Restricted cash, representing legally restricted funds that are unavailable for general use, is included in "Other long-term assets, net" on the consolidated balance sheets. “Cash, cash equivalents and restricted cash” on the consolidated statements of cash flows is included in the consolidated balance sheets as follows:
March 31, 2023December 31, 2022
(Thousands of Dollars)
Cash and cash equivalents$5,151 $14,489 
Other long-term assets, net8,966 8,888 
Cash, cash equivalents and restricted cash$14,117 $23,377 

10. SEGMENT INFORMATION

Our reportable business segments consist of the pipeline, storage and fuels marketing segments. Our segments represent strategic business units that offer different services and products. We evaluate the performance of each segment based on its respective operating income (loss), before general and administrative expenses and certain non-segmental depreciation and amortization expense. General and administrative expenses are not allocated to the operating segments since those expenses relate primarily to the overall management at the entity level.
Results of operations for the reportable segments were as follows:
 Three Months Ended March 31,
 20232022
 (Thousands of Dollars)
Revenues:
Pipeline$213,183 $188,683 
Storage80,657 87,921 
Fuels marketing100,027 133,260 
Consolidation and intersegment eliminations (1)
Total revenues$393,867 $409,863 
Operating income (loss):
Pipeline$119,858 $95,752 
Storage22,766 (14,975)
Fuels marketing6,566 6,544 
Total segment operating income149,190 87,321 
Gain on sale of assets41,075  
General and administrative expenses28,725 27,071 
Other depreciation and amortization expense1,555 1,824 
Total operating income$159,985 $58,426 

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Total assets by reportable segment were as follows:
March 31, 2023December 31, 2022
 (Thousands of Dollars)
Pipeline$3,324,780 $3,360,685 
Storage1,409,926 1,438,609 
Fuels marketing44,620 37,763 
Total segment assets4,779,326 4,837,057 
Other partnership assets144,388 136,629 
Total consolidated assets$4,923,714 $4,973,686 
 
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
In this Form 10-Q, we make certain forward-looking statements, such as statements regarding our plans, strategies, objectives, expectations, estimates, predictions, projections, assumptions, intentions, resources and the future impact of economic activity and the actions by oil-producing nations on our business. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. These forward-looking statements can generally be identified by the words “anticipates,” “believes,” “expects,” “plans,” “intends,” “estimates,” “forecasts,” “budgets,” “projects,” “will,” “could,” “should,” “may” and similar expressions. These statements reflect our current views with regard to future events and are subject to various risks, uncertainties and assumptions, which may cause actual results to differ materially. Please read Item 1A. “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2022, as well as additional information provided from time to time in our subsequent filings with the Securities and Exchange Commission, for a discussion of certain of those risks, uncertainties and assumptions.

If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those described in any forward-looking statement. Other unknown or unpredictable factors could also have material adverse effects on our future results. Readers are cautioned not to place undue reliance on this forward-looking information, which is as of the date of this Form 10-Q. We do not intend to update these statements unless we are required by the securities laws to do so, and we undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented in four sections:
Overview, including Trends and Outlook
Results of Operations
Liquidity and Capital Resources
Critical Accounting Policies

OVERVIEW
NuStar Energy L.P. (NYSE: NS) is primarily engaged in the transportation, terminalling and storage of petroleum products and renewable fuels and the transportation of anhydrous ammonia. We also market petroleum products. Our business is managed under the direction of the board of directors of NuStar GP, LLC, the general partner of our general partner, Riverwalk Logistics, L.P., both of which are wholly owned subsidiaries of ours.

Our operations consist of three reportable business segments: pipeline, storage and fuels marketing. As of March 31, 2023, our assets included 9,465 miles of pipeline and 63 terminal and storage facilities, which provided approximately 49 million barrels of storage capacity. We conduct our operations through our wholly owned subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP). The term “throughput” as used in this document generally refers to barrels of crude oil, refined product or renewable fuels or tons of ammonia, as applicable, that pass through our pipelines, terminals or storage tanks. We generate revenue primarily from:
tariffs for transportation through our pipelines;
fees for the use of our terminal and storage facilities and related ancillary services; and
sales of petroleum products.

The following factors affect the results of our operations:
economic factors and price volatility;
industry factors, such as changes in the prices of petroleum products that affect demand or production, or regulatory changes that could increase costs or impose restrictions on operations;
factors that affect our customers and the markets they serve, such as utilization rates and maintenance turnaround schedules of our refining company customers and drilling activity by our crude oil production customers;


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company-specific factors, such as facility integrity issues, maintenance requirements and outages that impact the throughput rates of our assets; and
seasonal factors that affect the demand for products transported by and/or stored in our assets and the demand for products we sell.

Recent Development
Sale-leaseback. On March 21, 2023, we consummated a sale-leaseback transaction with respect to our corporate headquarters facility and approximately 24 acres of underlying land located in San Antonio, Texas (the Corporate Headquarters) for approximately $103.0 million and recognized a gain of $41.1 million. We entered into the sale-leaseback transaction in order to monetize the Corporate Headquarters and used the proceeds to repay borrowings on our revolving credit agreement. Please refer to Note 2 of the Condensed Notes to the Consolidated Financial Statements in Item 1. "Financial Statements" for additional information.

Other Event
Point Tupper Terminal Disposition. On April 29, 2022, we sold the equity interests in our wholly owned subsidiaries that owned our Point Tupper terminal facility in Nova Scotia, Canada (the Point Tupper Terminal Operations) to EverWind Fuels for $60.0 million (the Point Tupper Terminal Disposition). The terminal facility had a storage capacity of 7.8 million barrels and was included in the storage segment. We recognized a non-cash, pre-tax impairment loss of $46.1 million in the first quarter of 2022. Please refer to Note 2 of the Condensed Notes to the Consolidated Financial Statements in Item 1. "Financial Statements" for additional information.

Trends and Outlook
In 2023, we are continuing to execute our plan to strengthen our balance sheet, and in the first quarter of 2023, we completed the sale-leaseback of our Corporate Headquarters for about $103.0 million of cash, as described above. We deployed the proceeds to reduce our debt balance, which will facilitate our redemption of a portion of the Series D Cumulative Convertible Preferred Units (Series D Preferred Units) later this year. For the full-year 2023, we expect to fund all of our expenses, distribution requirements and capital expenditures using internally generated cash flows, as we did in 2022 and 2021. We will continue to evaluate sources of liquidity to facilitate the planned redemption of the remaining Series D Preferred Units in 2023 and 2024, which is several years ahead of the holders’ redemption option in 2028. We plan to continue to manage our operations with fiscal discipline in order to best maximize unitholder value.

In 2023, we expect most of our pipeline systems to benefit from the positive revenue impact of our tariff indexation increases effective in July 2022, as well as the increases we expect in July 2023, which is an important counterbalance to the impact of inflation on our business. We also expect throughputs and revenues to increase, year-over-year, across most of our pipeline systems.

While many terminals in our storage segment are somewhat insulated from demand volatility due to contracted rates for storage and minimum volume commitments, revenues at our St. James and Corpus Christi North Beach facilities continue to be negatively impacted by ongoing global economic uncertainty and continued crude oil price backwardation. Conversely, we expect our West Coast region to continue to benefit in 2023 from the completion of renewable fuel projects, which continue to expand the capacity of our renewable fuels distribution system and further solidify the significant role NuStar plays in facilitating California’s transition to low-carbon renewable fuels.

If we see a continuation or acceleration of 2022’s inflationary conditions, rising interest rates, supply chain disruptions and tight labor markets, then we may also see higher costs of operating our assets and executing on our capital projects in 2023. In an effort to curb inflation amidst the backdrop of the Russia-Ukraine conflict, existing supply chain constraints, and the global economic recovery, the U.S. Federal Reserve (the Fed) raised interest rates several times in 2022 and in early 2023. The Fed may implement additional increases in 2023, which will increase the cost of our variable-rate debt, as well as the cost of our 8.50% Series A, 7.625% Series B and 9.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units, which have distribution rates that increase or decrease along with current interest rates. On the other hand, our ability to pass along rate increases reflecting changes in producer and/or consumer price indices to our customers, under our tariffs and contracts, should help to counterbalance the impact of inflation on our costs. Additionally, we expect to further mitigate the impact of inflation in 2023 through our expense optimization initiative we began in early 2022.

Our outlook for the partnership, both overall and for any of our segments, may change, as we base our expectations on our continuing evaluation of several factors, many of which are outside our control. These factors include, but are not limited to, the lingering impact of the COVID-19 pandemic or other health crises; war and other armed conflicts; actions of oil-producing nations; the state of the economy and the capital markets; changes to our customers’ refinery maintenance schedules and
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unplanned refinery downtime; crude oil prices; the supply of and demand for petroleum products, renewable fuels and anhydrous ammonia; demand for our transportation and storage services; the availability and costs of personnel, equipment, supplies and services essential to our operations; the ability to obtain timely permitting approvals; and changes in laws and regulations affecting our operations.

RESULTS OF OPERATIONS
Consolidated Results of Operations

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
 Three Months Ended March 31,Change
 20232022
(Unaudited, Thousands of Dollars, Except Per Unit Data)
Statement of Income Data:
Revenues:
Service revenues$285,266 $265,305 $19,961 
Product sales108,601 144,558 (35,957)
Total revenues393,867 409,863 (15,996)
Costs and expenses:
Costs associated with service revenues151,216 149,705 1,511 
Costs associated with product sales93,461 126,715 (33,254)
Impairment loss— 46,122 (46,122)
General and administrative expenses28,725 27,071 1,654 
Other depreciation and amortization expense1,555 1,824 (269)
Total costs and expenses274,957 351,437 (76,480)
Gain on sale of assets41,075 — 41,075 
Operating income159,985 58,426 101,559 
Interest expense, net(57,371)(49,818)(7,553)
Other income, net4,509 3,671 838 
Income before income tax expense (benefit)