Balance Sheet Continues to Strengthen with
Repurchase of More Series D Preferred Units
Pipeline Segment’s Operating Income Up Seven
Percent Quarter-Over-Quarter
Fuels Marketing Segment Reports Another
Strong Quarter
West Coast Region’s Revenues Up
Approximately 30 Percent Quarter-Over-Quarter
Positive Outlook for Remainder of
2023
NuStar Energy L.P. (NYSE: NS) today announced solid
results for the second quarter of 2023 fueled by strong volumes in
its refined products and Ammonia pipelines.
“I am pleased to report that we have delivered another quarter
of positive results, and we are on track to achieve all of our
strategic priorities this year,” said NuStar Chairman and CEO Brad
Barron.
“One of our top stated priorities is to continue to strengthen
our balance sheet,” Barron said. “And in June and July, we took
another big step forward in that regard by repurchasing another 8.1
million Series D preferred units, leaving only about one-third of
the original issuance still outstanding. Although our second
quarter earnings per unit were impacted by the premium paid to
redeem these units, totaling $0.29 per unit, we are pleased to have
significantly strengthened our balance sheet and are on track to
redeem all of the remaining Series D units by the end of 2024,
which is two years ahead of our original schedule.”
“NuStar reported net income of $46 million for the second
quarter of 2023, and largely as a result of the $0.29 per unit
premium charge, a $0.20 net loss per unit, compared to net income
of $59 million, or $0.20 per unit, for the second quarter of 2022,”
said Barron. “It is important to note that earnings before
interest, taxes, depreciation and amortization (EBITDA) were not
impacted by the premium associated with the accelerated repurchase
of the Series D preferred units, and we reported EBITDA of $169
million for the second quarter of 2023, which is comparable to
second quarter of 2022 adjusted EBITDA of $174 million."
Operations Continue to Perform
Well
NuStar’s Pipeline Segment generated operating income of $108
million and EBITDA of $152 million in the second quarter of 2023,
compared to operating income of $101 million and EBITDA of $145
million in the second quarter of 2022.
“Our refined products systems and our Ammonia Pipeline System
continued to deliver solid, dependable revenue contributions, with
throughput up three percent in the second quarter of 2023 compared
to the second quarter of 2022, reflecting the strength of these
assets and our position in the markets we serve in the
mid-Continent and throughout Texas,” said Barron. “In addition, our
McKee System continued to perform well, with higher revenues and
throughputs versus the same period last year, due to increased
demand across the system, as well as a customer’s maintenance
issues in the second quarter of 2022.”
Barron highlighted the strong performances of NuStar’s Fuels
Marketing Segment and West Coast Renewable Fuels Strategy.
“After a near record-breaking 2022, our Fuels Marketing Segment
has reported another strong quarter in 2023, generating operating
income and EBITDA of $7 million, which is comparable to the
segment’s strong second quarter of 2022 results,” said Barron. “In
addition, thanks in large part to our West Coast Renewable Fuels
strategy, our West Coast region delivered another great quarter
with revenues approximately 30 percent higher compared to the
second quarter of 2022.”
NuStar’s Permian Crude System volumes averaged 508,000 barrels
per day (BPD), down slightly compared to second quarter of 2022
volumes.
“Our second quarter Permian volumes reflected some
producer-specific operational issues and delays in the first half
of the year that we expect to be resolved over the remainder of the
year,” said Barron. “As those issues are resolved and those
producers ramp up activity, we expect volumes to pick up. In fact,
we have already seen an uptick in July with volumes averaging
almost 530,000 barrels per day and we continue to expect to exit
2023 in the range of 570,000 to 600,000 barrels per day.”
Balance Sheet Continues to
Strengthen
NuStar Executive Vice President and Chief Financial Officer Tom
Shoaf gave a positive update on the company’s continued progress in
building its financial strength and flexibility.
“We are pleased that we ended the second quarter of 2023 with a
debt-to-EBITDA ratio of 3.73 times,” said Shoaf. “By accelerating
the repayment of the Series D units over the course of this past
year, while at the same time taking the necessary steps to protect
our healthy debt-to-EBITDA metric, we have demonstrated our
commitment to continuing to improve our balance sheet."
“We ended the second quarter of 2023 with $750 million available
on our $1 billion unsecured revolving credit facility. And on June
30, we announced that we renewed our unsecured revolving credit
agreement, maintaining the facility’s $1 billion capacity and
extending the maturity of the facility an additional 21 months to
January 2027.”
Shoaf stated that even with the accelerated repayment of the
Series D units, NuStar is still on track to finish the year with a
healthy debt-to-EBITDA ratio below four times.
Positive Outlook for Remainder of
2023
Shoaf also gave an update on full-year guidance for net income
and adjusted EBITDA, as well as strategic capital and reliability
capital for 2023.
“We expect to generate full-year 2023 net income in the range of
$252 to $290 million and full-year 2023 adjusted EBITDA in the
range of $700 to $760 million,” said Shoaf.
He also noted that NuStar plans to spend $125 to $145 million in
strategic capital in 2023.
“While we continue to expect to exit the year with our Permian
Crude System’s volumes between 570,000 to 600,000 barrels per day,
we are now forecasting lower spending for our Permian System in the
range of $35 to $45 million,” said Shoaf. “We continue to expect to
spend around $25 million to expand our West Coast Renewable Fuels
Network.
“In addition, we still expect to spend between $25 and $35
million on reliability this year.”
Bright Outlook for Ammonia
System
Barron closed by highlighting a project that was announced last
quarter, which will connect NuStar’s Ammonia Pipeline System to OCI
Global’s state-of-the-art ammonia products facility in Iowa. This
project, which is supported by a long-term revenue commitment, is
on track to be in service next year.
“We expect this healthy-return, low-capital project will
meaningfully increase utilization of our Ammonia Pipeline System,”
said Barron. “And we expect this project to be just the first of
several, as we are actively working with a number of potential
customers interested in connections to our system, across our
footprint, for a variety of different opportunities.”
Barron continued, “As we have mentioned in past calls, we are
seeing burgeoning interest in lower carbon ammonia. Interest from
the companies developing “blue” and “green” ammonia production
facilities that need market access, as well as from companies
interested in the supply of lower carbon ammonia to make
fertilizer, Diesel Exhaust Fluid (DEF) and other important
products. We are also talking to a number of potential customers
who are looking at new uses for lower carbon ammonia, including as
a low-cost, safe way to transport hydrogen for fuel.
“In addition to the “greening” of ammonia increasing demand in
the domestic ammonia market, international ammonia demand is also
driving interest in building or converting logistics to export
ammonia produced here in the U.S. Our Ammonia Pipeline System
currently supplies the U.S.’ breadbasket in the Midwest primarily
with domestically produced ammonia, but growing interest in export
capabilities could drive additional utilization of not only our
Ammonia Pipeline System but also potentially our St. James
facility, which has dock capacity and a footprint to support
ammonia storage and export. We are excited about this growing
interest in ammonia, and the actionable opportunities that interest
is generating, for our Ammonia Pipeline System and beyond, in the
near-term and over the next several years,” Barron concluded.
Conference Call Details
A conference call with management is scheduled for 9:00 a.m. CT
on Thursday, August 3, 2023, to discuss the financial and
operational results for the second quarter of 2023. Persons
interested in listen-only participation may access the conference
call directly at https://edge.media-server.com/mmc/p/hu7hrnep.
Persons interested in Q&A participation may pre-register for
the conference call and obtain a dial-in number and passcode at
https://register.vevent.com/register/BI2ecc56df0e114ea58ced5740b23a1940.
A recorded version will be available two hours after the conclusion
of the conference call at
https://edge.media-server.com/mmc/p/hu7hrnep.
The conference call may also be accessed through the “Investors”
section of NuStar Energy L.P.’s website at
https://investor.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 9,500 miles of pipeline and 63 terminal
and storage facilities that store and distribute crude oil, refined
products, renewable fuels, ammonia and specialty liquids. The
partnership’s combined system has approximately 49 million barrels
of storage capacity, and NuStar has operations in the United States
and Mexico. For more information, visit NuStar Energy L.P.’s
website at www.nustarenergy.com and its Sustainability page at
https://sustainability.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
and expectations, such as NuStar’s future performance, plans and
expenditures. 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 2022 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,
2023
2022
2023
2022
Statement of Income Data:
Revenues:
Service revenues
$
275,367
$
278,067
$
560,633
$
543,372
Product sales
102,967
152,090
211,568
296,648
Total revenues
378,334
430,157
772,201
840,020
Costs and expenses:
Costs associated with service
revenues:
Operating expenses
93,363
94,948
182,525
181,350
Depreciation and amortization expense
62,530
62,240
124,584
125,543
Total costs associated with service
revenues
155,893
157,188
307,109
306,893
Costs associated with product sales
86,914
134,178
180,375
260,893
Impairment loss
—
—
—
46,122
General and administrative expenses
31,620
27,909
60,345
54,980
Other depreciation and amortization
expense
1,037
1,823
2,592
3,647
Total costs and expenses
275,464
321,098
550,421
672,535
Gain on sale of assets
—
—
41,075
—
Operating income
102,870
109,059
262,855
167,485
Interest expense, net
(58,170
)
(50,941
)
(115,541
)
(100,759
)
Other income, net
2,633
2,012
7,142
5,683
Income before income tax expense
47,333
60,130
154,456
72,409
Income tax expense
1,192
931
2,379
898
Net income
$
46,141
$
59,199
$
152,077
$
71,511
Basic and diluted net (loss) income per
common unit
$
(0.20
)
$
0.20
$
0.42
$
(0.02
)
Basic and diluted weighted-average common
units outstanding
110,905,471
110,306,641
110,893,293
110,242,201
Other Data (Note 1):
Adjusted net income
$
46,141
$
57,635
$
111,002
$
114,925
Adjusted net income per common unit
$
0.09
$
0.19
$
0.34
$
0.38
EBITDA
$
169,070
$
175,134
$
397,173
$
302,358
Adjusted EBITDA
$
169,070
$
173,570
$
356,098
$
346,916
DCF
$
36,592
$
83,002
$
178,402
$
174,060
Adjusted DCF
$
72,924
$
83,002
$
173,659
$
174,060
Distribution coverage ratio
0.82x
1.88x
2.01x
1.97x
Adjusted distribution coverage ratio
1.64x
1.88x
1.96x
1.97x
For the Four Quarters Ended
June 30,
2023
2022
Consolidated Debt Coverage Ratio
3.73x
3.93x
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,
2023
2022
2023
2022
Pipeline:
Crude oil pipelines throughput
(barrels/day)
1,111,120
1,220,758
1,217,610
1,264,678
Refined products and ammonia pipelines
throughput (barrels/day)
597,162
582,182
596,396
572,767
Total throughput (barrels/day)
1,708,282
1,802,940
1,814,006
1,837,445
Throughput and other revenues
$
206,701
$
200,565
$
419,884
$
389,248
Operating expenses
55,042
55,170
104,817
103,273
Depreciation and amortization expense
43,855
44,442
87,405
89,270
Segment operating income
$
107,804
$
100,953
$
227,662
$
196,705
Storage:
Throughput (barrels/day) (a)
391,495
446,057
446,798
464,191
Throughput terminal revenues
$
23,839
$
30,929
$
51,154
$
57,370
Storage terminal revenues
54,370
57,854
107,712
119,334
Total revenues
78,209
88,783
158,866
176,704
Operating expenses
38,321
39,778
77,708
78,077
Depreciation and amortization expense
18,675
17,798
37,179
36,273
Impairment loss
—
—
—
46,122
Segment operating income
$
21,213
$
31,207
$
43,979
$
16,232
Fuels Marketing:
Product sales
$
93,426
$
140,809
$
193,453
$
274,069
Cost of goods
86,349
133,741
179,535
259,864
Gross margin
7,077
7,068
13,918
14,205
Operating expenses
567
437
842
1,030
Segment operating income
$
6,510
$
6,631
$
13,076
$
13,175
Consolidation and Intersegment
Eliminations:
Revenues
$
(2
)
$
—
$
(2
)
$
(1
)
Cost of goods
(2
)
—
(2
)
(1
)
Total
$
—
$
—
$
—
$
—
Consolidated Information:
Revenues
$
378,334
$
430,157
$
772,201
$
840,020
Costs associated with service
revenues:
Operating expenses
93,363
94,948
182,525
181,350
Depreciation and amortization expense
62,530
62,240
124,584
125,543
Total costs associated with service
revenues
155,893
157,188
307,109
306,893
Costs associated with product sales
86,914
134,178
180,375
260,893
Impairment loss
—
—
—
46,122
Segment operating income
135,527
138,791
284,717
226,112
Gain on sale of assets
—
—
41,075
—
General and administrative expenses
31,620
27,909
60,345
54,980
Other depreciation and amortization
expense
1,037
1,823
2,592
3,647
Consolidated operating income
$
102,870
$
109,059
$
262,855
$
167,485
(a)
Prior period throughputs for our Corpus
Christi North Beach terminal in the storage segment were restated
consistent with current period presentation.
NuStar Energy L.P. and
Subsidiaries
Reconciliation of Non-GAAP
Financial Information
(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 to EBITDA, DCF
and distribution coverage ratio.
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net income
$
46,141
$
59,199
$
152,077
$
71,511
Interest expense, net
58,170
50,941
115,541
100,759
Income tax expense
1,192
931
2,379
898
Depreciation and amortization expense
63,567
64,063
127,176
129,190
EBITDA
169,070
175,134
397,173
302,358
Interest expense, net
(58,170
)
(50,941
)
(115,541
)
(100,759
)
Reliability capital expenditures
(7,379
)
(6,696
)
(10,735
)
(13,405
)
Income tax expense
(1,192
)
(931
)
(2,379
)
(898
)
Long-term incentive equity awards (a)
3,018
2,734
5,986
5,563
Preferred unit distributions
(32,126
)
(31,523
)
(64,859
)
(62,615
)
Impairment loss
—
—
—
46,122
Income tax benefit related to impairment
loss
—
—
—
(1,144
)
Premium on redemption of Series D
Cumulative Convertible Preferred Units
(36,332
)
—
(36,332
)
—
Other items
(297
)
(4,775
)
5,089
(1,162
)
DCF
$
36,592
$
83,002
$
178,402
$
174,060
Distributions applicable to common limited
partners
$
44,363
$
44,128
$
88,759
$
88,293
Distribution coverage ratio (b)
0.82x
1.88x
2.01x
1.97x
(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)
Distribution coverage ratio is calculated
by dividing DCF by distributions applicable to common limited
partners.
NuStar Energy L.P. and
Subsidiaries
Reconciliation of Non-GAAP
Financial Information - Continued
(Unaudited, Thousands of Dollars,
Except per Unit and Ratio 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,
2023
2022
Operating income
$
504,183
$
190,045
Depreciation and amortization expense
257,222
262,228
Goodwill impairment loss
—
34,060
Other impairment losses
—
201,030
Amortization expense of equity-based
awards
14,337
13,801
Pro forma effect of dispositions (a)
—
(10,077
)
Other
(2,199
)
481
Consolidated EBITDA, as defined in the
Revolving Credit Agreement
$
773,543
$
691,568
Long-term debt, less current portion of
finance leases
$
3,310,561
$
3,137,275
Finance leases (long-term)
(50,356
)
(51,959
)
Unamortized debt issuance costs
30,635
35,924
NuStar Logistics' floating rate
subordinated notes
(402,500
)
(402,500
)
Consolidated Debt, as defined in the
Revolving Credit Agreement
$
2,888,340
$
2,718,740
Consolidated Debt Coverage Ratio
(Consolidated Debt to Consolidated EBITDA)
3.73x
3.93x
(a)
This adjustment represents the pro forma
effects of the dispositions of the Point Tupper terminal, which was
sold in April 2022 and the Eastern U.S. terminals, which were sold
in October 2021.
The following are reconciliations of net income / net (loss)
income per common unit to adjusted net income / adjusted net income
per common unit.
Three Months Ended June
30,
2023
2022
Net income / net (loss) income per common
unit
$
46,141
$
(0.20
)
$
59,199
$
0.20
Premium on redemption of Series D
Cumulative Convertible Preferred Units
—
0.29
—
—
Gain on sale of assets
—
—
(1,564
)
(0.01
)
Adjusted net income / adjusted net income
per common unit
$
46,141
$
0.09
$
57,635
$
0.19
Six Months Ended June
30,
2023
2022
Net income / net income (loss) per common
unit
$
152,077
$
0.42
$
71,511
$
(0.02
)
Premium on redemption of Series D
Cumulative Convertible Preferred Units
—
0.29
—
—
Gain on sale of assets
(41,075
)
(0.37
)
(1,564
)
(0.01
)
Impairment loss
—
—
46,122
0.42
Income tax benefit related to impairment
loss
—
—
(1,144
)
(0.01
)
Adjusted net income / adjusted net income
per common unit
$
111,002
$
0.34
$
114,925
$
0.38
NuStar Energy L.P. and
Subsidiaries
Reconciliation of Non-GAAP Financial
Information - Continued
(Unaudited, Thousands of
Dollars, Except per Ratio Data)
The following is a reconciliation of EBITDA to adjusted
EBITDA.
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
EBITDA
$
169,070
$
175,134
$
397,173
$
302,358
Gain on sale of assets
—
(1,564
)
(41,075
)
(1,564
)
Impairment loss
—
—
—
46,122
Adjusted EBITDA
$
169,070
$
173,570
$
356,098
$
346,916
The following is a reconciliation of DCF to adjusted DCF and
adjusted distribution coverage ratio.
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
DCF
$
36,592
$
83,002
$
178,402
$
174,060
Premium on redemption of Series D
Cumulative Convertible Preferred Units
36,332
—
36,332
—
Gain on sale of assets
—
—
(41,075
)
—
Adjusted DCF
$
72,924
$
83,002
$
173,659
$
174,060
Distributions applicable to common limited
partners
$
44,363
$
44,128
$
88,759
$
88,293
Adjusted distribution coverage ratio
(a)
1.64x
1.88x
1.96x
1.97x
(a)
Adjusted distribution coverage ratio is
calculated by dividing adjusted DCF by distributions applicable to
common limited partners.
The following is a reconciliation of projected net income to
EBITDA and adjusted EBITDA.
Projected for the Year Ended
December 31, 2023
Net income
$
252,000 - 290,000
Interest expense, net
235,000 - 245,000
Income tax expense
4,000 - 6,000
Depreciation and amortization expense
250,000 - 260,000
EBITDA
741,000 - 801,000
Gain on sale of assets
(41,000)
Adjusted EBITDA
$
700,000 - 760,000
The following are reconciliations for our reported segments of
operating income to segment EBITDA.
Three Months Ended June 30,
2023
Pipeline
Storage
Fuels Marketing
Operating income
$
107,804
$
21,213
$
6,510
Depreciation and amortization expense
43,855
18,675
—
Segment EBITDA
$
151,659
$
39,888
$
6,510
Three Months Ended June 30,
2022
Pipeline
Storage
Fuels Marketing
Operating income
$
100,953
$
31,207
$
6,631
Depreciation and amortization expense
44,442
17,798
—
Segment EBITDA
$
145,395
$
49,005
$
6,631
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802230327/en/
Media: Mary Rose Brown 210-918-2314
maryrose.brown@nustarenergy.com
Investors: Pam Schmidt 210-918-2854
pam.schmidt@nustarenergy.com
NuStar Energy (NYSE:NS)
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