Third Quarter 2018 Distributable Cash Flow
Available to Common Limited Partners Increases 32%
Pending Sale of European Assets to
Accelerate Improvement of Debt Metrics
2018 Permian Crude System Exit Rate Remains
on Pace for 360,000 to 380,000 Barrels Per Day
Long-Term Agreement with Trafigura to
Transport WTI on NuStar’s South Texas Crude System to NuStar’s
Corpus Christi North Beach Export Terminal for Storage and Dock
Services
NuStar Energy L.P. (NYSE: NS) today announced net
income of $48 million for the third quarter of 2018, up 25% from
$39 million in the third quarter of 2017. Earnings before interest,
taxes, depreciation and amortization (EBITDA) were $172 million, up
$16 million or 10% from $156 million for the third quarter
2017.
The earnings per unit (EPU) for the third quarter were a net
loss of $3.49 per common unit, due to a one-time, non-cash charge
of $377.1 million related to the recent completion of the
simplification transaction, which merged NuStar GP Holdings, LLC
and NuStar Energy. This non-cash charge did not impact net income,
EBITDA or distributable cash flow (DCF). Excluding this charge from
the calculation of EPU, third quarter adjusted earnings per common
unit were $0.13.
DCF available to common limited partners was $88 million for the
third quarter of 2018, up $22 million or 32% compared to $67
million in the third quarter of 2017. The distribution coverage
ratio to the common limited partners was 1.38 times for the third
quarter and 1.42 times for the nine months ended September 30,
2018.
“Our strong third quarter 2018 results were primarily driven by
continued volume ramp on our Permian Crude System, as well as a
significant contribution from our East Pipeline System due to our
acquisition of the assets in Council Bluffs, Iowa from CHS earlier
this year,” said Brad Barron, President and Chief Executive Officer
of NuStar Energy L.P.
Pending Sale of European Assets to
Accelerate Improvement of Debt Metrics
“As we announced last week, we have signed an agreement to sell
our UK/European assets for $270 million, for a multiple well in
excess of our 10 times multiple target. It is important to note
that while the sale of these assets will significantly reduce our
debt coverage ratio, it will have almost no impact on our DCF and
it will also allow us to utilize the proceeds from the sale of a 10
times plus asset to invest in high-return projects, in many cases
at less than a 5 times multiple,” Barron said.
“We expect to close on that sale this quarter, and by using
these sales proceeds to pay down debt, we expect to improve our
projected year-end 2018 debt leverage metric from the 4.7 times we
projected earlier this year, down to around 4.2 times.”
2018 Permian Crude System Exit Rate
Remains on Pace for 360,000 to 380,000 Barrels Per
Day
“We continue to be pleased with the performance and growth of
our Permian Crude System,” Barron said.
“Our November nominations are 355,000 BPD, and we continue to
expect to exit 2018 with throughput of approximately 360,000 to
380,000 BPD, an impressive increase over our 2017 exit rate of
200,000 BPD.”
Long-Term Agreement with Trafigura to
Connect South Texas Crude System to Cactus II
Pipeline
We also recently reached an agreement with Trafigura on a
project to:
- Connect NuStar’s South Texas Crude
System with the Cactus II Pipeline near Oakville to transport WTI
barrels on NuStar’s existing 16” pipeline to NuStar’s Corpus
Christi North Beach terminal (CCNB).
- Construct a new 8-mile 30” pipeline to
transport WTI barrels from a new connection in Taft, Texas to the
CCNB terminal.
- Construct 600,000 barrels of storage at
the CCNB terminal, bringing total capacity from 3.3 MM to 3.9 MM
barrels, 1.6 MM barrels of which Trafigura has agreed to
lease.
“We expect to begin transporting barrels for Trafigura on the
16” pipeline as soon as next summer, and we are very excited about
this mutually beneficial opportunity to participate in the Permian
Basin’s growth,” Barron said.
“I am very pleased with our third quarter results, as they
reflect the positive impact of the hard work we have done this year
to create a more simplified corporate structure, which provides
even greater transparency in our governance, eliminate the
Incentive Distribution Rights, strengthen our coverage, minimize
equity needs and lower leverage.
“Because of these efforts, NuStar is positioned to participate
in the burgeoning opportunities that the Permian Basin’s production
growth is driving, within the basin and further afield, for MLPs
with world-class assets in the right locations. Our new export
project for Trafigura exemplifies this strength,” Barron
concluded.
Conference Call Details
A conference call with management is scheduled for 9:00 a.m. CT
today, November 5, 2018, to discuss the financial and operational
results for the third quarter of 2018. The conference call may be
accessed by dialing toll-free 844/889-7787, reservation passcode
8547677. International callers may access the conference call by
dialing 661/378-9931, reservation passcode 8547677. The Partnership
intends to have a playback available following the conference call,
which may be accessed by dialing toll-free 855/859-2056,
reservation passcode 8547677. International callers may access the
playback by dialing 404/537-3406, reservation passcode 8547677. The
playback will be available until 11:30 a.m. CT on December 5,
2018.
Investors interested in listening to the live presentation or a
replay via the internet may access the presentation directly at
https://edge.media-server.com/m6/p/mc9n88de 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 NuStar Energy L.P.’s website at
www.nustarenergy.com.
NuStar Energy L.P., a publicly traded master limited partnership
based in San Antonio, is one of the largest independent liquids
terminal and pipeline operators in the nation. NuStar currently has
more than 9,700 miles of pipeline and 82 terminal and storage
facilities that store and distribute crude oil, refined products
and specialty liquids. The partnership’s combined system has more
than 97 million barrels of storage capacity, and NuStar has
operations in the United States, Canada, Mexico, the Netherlands,
including St. Eustatius in the Caribbean, and the United Kingdom.
For more information, visit NuStar Energy L.P.’s website at
www.nustarenergy.com.
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.’s 2017 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.
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, 2018 2017 2018
2017 Statement of Income Data:
Revenues: Service revenues $ 314,512 $ 295,102 $ 908,056 $ 845,264
Product sales 175,851 145,464 544,392 518,220
Total revenues 490,363 440,566 1,452,448
1,363,484 Costs and expenses: Costs associated with
service revenues: Operating expenses (excluding depreciation and
amortization expense) 124,451 116,590 365,007 334,016 Depreciation
and amortization expense 73,424 66,989 216,934
187,062 Total costs associated with service revenues 197,875
183,579 581,941 521,078 Cost of product sales 167,118 138,078
514,695 490,363 General and administrative expenses 27,817 25,003
75,572 83,202 Other depreciation and amortization expense 2,276
2,189 6,645 6,581 Total costs and
expenses 395,086 348,849 1,178,853 1,101,224
Operating income 95,277 91,717 273,595 262,260 Interest
expense, net (44,825 ) (45,256 ) (141,533 ) (127,282 ) Other income
(expense), net 920 (5,126 ) 82,084 (4,898 ) Income
before income tax expense 51,372 41,335 214,146 130,080 Income tax
expense 3,236 2,743 10,478 7,298 Net
income $ 48,136 $ 38,592 $ 203,668 $ 122,782
Basic net (loss) income per common unit (Note 2) $
(3.49 ) $ 0.15 $ (2.50 ) $ 0.65 Basic weighted-average common units
outstanding 104,264,796 93,031,320 96,920,202 87,392,597
Other Data (Note 1): EBITDA $ 171,897 $ 155,769 $ 579,258 $
451,005 DCF available to common limited partners $ 88,486 $ 66,974
$ 262,275 $ 216,183
September 30, December
31, 2018 2017 2017 Balance Sheet
Data: Total debt $ 3,387,352 $ 3,650,606 $ 3,648,059 Partners’
equity and series D preferred units $ 2,906,726 $ 2,419,862 $
2,480,089
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, 2018 2017 2018
2017 Pipeline:
Refined products and ammonia pipelines
throughput (barrels/day)
567,320 527,148 555,113 524,277 Crude oil pipelines throughput
(barrels/day): 914,450 679,721 848,892 549,898
Total throughput (barrels/day) 1,481,770 1,206,869
1,404,005 1,074,175 Throughput and other
revenues $ 162,843 $ 137,426 $ 449,909 $ 385,406 Operating expenses
47,032 41,463 138,079 114,734 Depreciation and amortization expense
38,790 34,844 114,036 91,657 Segment
operating income $ 77,021 $ 61,119 $ 197,794 $
179,015
Storage: Throughput (barrels/day) 335,118
294,544 336,957 315,616 Throughput terminal revenues $ 21,143 $
21,120 $ 61,300 $ 63,932 Storage terminal revenues 132,987
136,951 405,608 400,129 Total revenues 154,130
158,071 466,908 464,061 Operating expenses 73,037 66,603 217,106
199,525 Depreciation and amortization expense 34,634 32,145
102,898 95,405 Segment operating income $
46,459 $ 59,323 $ 146,904 $ 169,131
Fuels Marketing: Product sales and other revenue $ 175,109 $
147,463 $ 541,430 $ 524,083 Cost of product sales 168,710
140,110 520,111 497,722 Gross margin 6,399
7,353 21,319 26,361 Operating expenses 4,509 8,885
10,205 22,464 Segment operating income (loss) $ 1,890
$ (1,532 ) $ 11,114 $ 3,897
Consolidation
and Intersegment Eliminations: Revenues $ (1,719 ) $ (2,394 ) $
(5,799 ) $ (10,066 ) Cost of product sales (1,592 ) (2,032 ) (5,416
) (7,359 ) Operating expenses (127 ) (361 ) (383 ) (2,707 ) Total $
— $ (1 ) $ — $ —
Consolidated
Information: Revenues $ 490,363 $ 440,566 $ 1,452,448 $
1,363,484 Costs associated with service revenues: Operating
expenses 124,451 116,590 365,007 334,016 Depreciation and
amortization expense 73,424 66,989 216,934
187,062 Total costs associated with service revenues 197,875
183,579 581,941 521,078 Cost of product sales 167,118
138,078 514,695 490,363 Segment operating
income 125,370 118,909 355,812 352,043 General and administrative
expenses 27,817 25,003 75,572 83,202 Other depreciation and
amortization expense 2,276 2,189 6,645 6,581
Consolidated operating income $ 95,277 $ 91,717
$ 273,595 $ 262,260
NuStar Energy L.P. and
SubsidiariesConsolidated 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.
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 compensation
determinations. 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, 2018
2017 2018 2017 Net income $
48,136 $ 38,592 $ 203,668 $ 122,782 Interest expense, net 44,825
45,256 141,533 127,282 Income tax expense 3,236 2,743 10,478 7,298
Depreciation and amortization expense 75,700 69,178
223,579 193,643 EBITDA 171,897 155,769 579,258
451,005 Interest expense, net (44,825 ) (45,256 ) (141,533 )
(127,282 ) Reliability capital expenditures (17,268 ) (14,798 )
(59,063 ) (30,200 ) Income tax expense (3,236 ) (2,743 ) (10,478 )
(7,298 ) Mark-to-market impact of hedge transactions (a) (14 ) 497
(245 ) (2,652 ) Long-term incentive equity awards (b) 2,638 1,622
5,758 5,328 Preferred unit distributions (29,881 ) (12,153 )
(62,116 ) (26,916 ) Insurance gain adjustment (c) 6,289 — (49,464 )
— Other items 2,886 (2,750 ) 1,299 (4,119 ) DCF $
88,486 $ 80,188 $ 263,416 $ 257,866 Less DCF available to general
partner — 13,214 1,141 41,683 DCF
available to common limited partners $ 88,486 $ 66,974
$ 262,275 $ 216,183 Distributions
applicable to common limited partners $ 64,248 $ 101,870 $ 184,369
$ 305,652 Distribution coverage ratio (d) 1.38x 0.66x 1.42x 0.71x
(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
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. (c) For the three and nine months ended
September 30, 2018, DCF includes an adjustment for insurance
proceeds received in the first quarter related to hurricane damage
at our St. Eustatius terminal. Each quarter, we add an amount to
DCF to offset the amount of reliability capital expenditures
incurred related to hurricane damage. (d) Distribution coverage
ratio is calculated by dividing DCF available to common limited
partners by distributions applicable to common limited partners.
NuStar Energy L.P. and
SubsidiariesConsolidated Financial Information -
Continued(Unaudited, Thousands of Dollars, Except Unit, Per
Unit and Ratio Data)
Note 2: For the three and nine months ended September 30,
2018, basic net loss per common unit includes a one-time, non-cash
charge of $377.1 million associated with our July 2018 merger with
our general partner. This charge does not affect net income, EBITDA
or DCF. The following table details our calculation of basic and
adjusted basic net (loss) income per common unit:
Three Months EndedSeptember 30,
2018
Nine Months EndedSeptember 30,
2018
Net income $ 48,136 $ 203,668 Less: net income applicable to
preferred limited partners and general partner 33,912 67,310 Less:
non-cash charge associated with the merger with our general partner
377,079 377,079 Less: other 473 1,398 Net loss
applicable to common limited partners $ (363,328 ) $ (242,119 )
Basic weighted-average common units outstanding 104,264,796
96,920,202 Basic net loss per common unit $ (3.49 ) $ (2.50
) Plus: non-cash charge associated with the merger with our general
partner 3.62 3.89 Adjusted basic net income per
common unit $ 0.13 $ 1.39
Note 3: 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):
Projected for the YearEnded
December 31, 2018
Net income $ 180,000 - 215,000 Interest expense, net 185,000 -
190,000 Income tax expense 10,000 - 15,000 Depreciation and
amortization expense 295,000 - 300,000 EBITDA 670,000 - 720,000
Other income (a) (30,000) - (40,000) Equity awards (b) 5,000 -
10,000 Pro forma effect of dispositions (c) (20,000) - (25,000)
Material project adjustments and other items (d) 10,000 - 20,000
Consolidated EBITDA, as defined in the Revolving Credit Agreement $
635,000 - 685,000 Total consolidated debt $ 3,100,000 -
3,300,000 NuStar Logistics' floating rate subordinated notes
(402,500) Proceeds held in escrow associated with the Gulf
Opportunity Zone Revenue Bonds (41,500) Consolidated Debt, as
defined in the Revolving Credit Agreement $ 2,656,000 - 2,856,000
Consolidated Debt Coverage Ratio (Consolidated Debt to
Consolidated EBITDA) 4.2x (a)
Other income is excluded for purposes of calculating Consolidated
EBITDA, as defined in the Revolving Credit Agreement. (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 the pro forma effects of the expected
sale of our European assets as if we had completed the sale on
January 1, 2018. (d) This adjustment represents the percentage of
the projected Consolidated EBITDA attributable to any Material
Project and other noncash items, as defined in the Revolving Credit
Agreement.
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version on businesswire.com: https://www.businesswire.com/news/home/20181105005258/en/
NuStar Energy, L.P., San AntonioInvestors, Tim Delagarza,
Manager, Investor RelationsInvestor Relations: 210-918-INVR
(4687)orMedia, Mary Rose Brown, Executive Vice President and Chief
Administrative Officer,Corporate Communications:
210-918-2314website: http://www.nustarenergy.com
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