Permian Crude System Volumes Hit
Record-Breaking Average of 522,000 Barrels Per Day/Expect to Exit
2022 between 560,000 to 570,000 Barrels Per Day
Refined Product Volumes Continue to Track at
Pre-Pandemic Levels
West Coast Renewable Fuels Network Continues
to Grow with Two More Projects in Service
Contract with Trafigura for Services on
Corpus Christi Crude System Extended to December 2024
Lower Debt Balances Result in Significant
Improvement to Debt Metrics
NuStar Energy L.P. (NYSE: NS) today announced solid
results for the second quarter of 2022 fueled by strong volumes in
its Permian Crude System.
NuStar reported net income of $59 million for the second quarter
of 2022, or $0.20 per unit, compared to net income of $63 million,
or $0.25 per unit, for the second quarter of 2021.
NuStar also reported earnings before interest, taxes,
depreciation and amortization (EBITDA) of $175 million for the
second quarter of 2022, compared to second quarter of 2021 EBITDA
of $189 million.
“On an ‘apples-to-apples’ basis, excluding the contribution of
the Eastern U.S. terminals we sold in October, and the Point Tupper
terminal we sold in April, our second quarter 2022 EBITDA was
comparable to the second quarter of 2021 despite customer
transitions and related tank maintenance at our St. James terminal,
and the timing of minimum volume commitment settlements at our
Corpus Christi North Beach terminal,” said NuStar President and CEO
Brad Barron.
Debt Metrics Improve
Significantly
“We are pleased that our recent divestitures have enabled us to
continue to move toward our stated goal of significantly improving
our debt metrics and building our financial strength and
flexibility,” said Barron.
“Thanks to the progress we have made in lowering our debt
balance, our interest expense in the second quarter of 2022 was $3
million lower than in the second quarter of 2021, and we had over
$900 million available on our $1.0 billion unsecured revolving
credit facility.
“We also ended the second quarter of 2022 with a debt-to-EBITDA
ratio of 3.93 times, which is substantially better than our ratio
of 4.27 times at the end of the second quarter of 2021, and we
expect to continue to improve that ratio through the end of the
year.
“And our distribution coverage ratio to common limited partners
was a strong 1.88 times for the second quarter of 2022,” said
Barron.
Distributable cash flow (DCF) available to common limited
partners was $83 million for the second quarter of 2022, compared
to DCF of $97 million in the second quarter of 2021. Barron noted
that the decline in DCF was also largely a result of NuStar’s
recent divestitures, which helped NuStar strengthen its balance
sheet.
Permian Crude System Hits
Record-Breaking Volumes
NuStar’s Permian Crude System’s volumes grew to a
record-breaking average of 522,000 barrels per day (BPD) in the
second quarter of 2022, an increase of 16 percent over second
quarter 2021 volumes and an increase of 2 percent over the first
quarter of 2022.
“While overall U.S. oil production has faced supply chain and
other challenges this year, our top-tier Permian producers have
continued to successfully execute on their drilling plans,” said
Barron. “The steady, strong volume growth we saw in the first half
of 2022 and continue to see ramping up this quarter is a testament
to our producers and the quality and strength of our acreage.”
Barron mentioned that the Permian Crude System’s monthly average
in June was up to nearly 535,000 BPD, and in July, its volumes
continued to grow, rising to an average of 555,000 BPD.
“Because of the growth we have seen so far this year, and what
we expect for the rest of the year, we continue to expect to exit
2022 between 560,000 to 570,000 BPD, or about 10 percent above our
2021 exit, based on our producers’ drilling plans,” Barron
added.
Refined Product Volumes Continue to
Track at Pre-Pandemic Levels
Barron stated that while some short-term operational issues at
customer refineries reduced NuStar’s second quarter of 2022 volumes
compared to the second quarter of 2021, its refined product volumes
this past quarter were up compared to the first quarter of
2022.
“Our volumes continue to track at pre-pandemic levels,
reflecting the strength of our assets and the stability of demand
in the markets we serve across the mid-Continent and throughout
Texas,” said Barron. “In addition, our Northern Mexico refined
products supply system continues to perform well, with volumes
above our average for 2021, and second quarter 2022 throughput up
20 percent compared to the second quarter of 2021.”
West Coast Renewable Fuels Network
Continues to Grow
Barron once again highlighted the growth of NuStar’s West Coast
Renewable Fuels Network, which plays an integral role in
facilitating the low-carbon renewable fuels that significantly
reduce emissions from transportation.
“We expect our West Coast region’s contribution to continue to
grow in the second half of 2022 from two more renewable fuel
projects we recently brought into service, which increase our
renewable diesel storage capacity and augment our ethanol
transportation logistics capabilities at our Stockton, California
facility.
“Those two projects should further solidify the significant role
that NuStar plays in facilitating California’s transition to
low-carbon renewable fuels, where we already handle 87 percent of
California’s sustainable aviation fuel; 21 percent of the state’s
renewable diesel volumes; 13 percent of its ethanol; and 5 percent
of its biodiesel,” said Barron.
Contract with Trafigura for Services on
Corpus Christi Crude System Extended to December
2024
Barron commented that throughputs on NuStar’s Corpus Christi
Crude System averaged around 290,000 BPD in the second quarter of
2022, which is slightly below its minimum volume commitments for
the system, but that average volumes rose to almost 340,000 BPD in
July, which is comparable with first quarter 2022 average
throughputs.
“We are also pleased to announce that we reached an agreement
with Trafigura to extend the term of our contract for
transportation, storage and export services on our Corpus Christi
Crude System from mid-2023 for an additional 18 months, to December
31, 2024, with two one-year extensions.
“As you will recall, in 2019 we completed projects that made
NuStar one of the early movers transporting Permian Basin WTI from
Cactus II and Grey Oak through our systems in South Texas for
Trafigura, for regional supply and for export from Corpus Christi.
By extending this contract, we are building on an established
relationship that facilitates production of the refined products on
the Gulf Coast and provides export of the U.S. crude oil to supply
locations around the globe,” said Barron.
Full-Year Guidance
NuStar Executive Vice President and Chief Financial Officer Tom
Shoaf also gave full-year net income and EBITDA guidance for
2022.
“We expect to generate full-year 2022 net income in the range of
$193 to $226 million and continue to expect to generate full-year
2022 adjusted EBITDA in the range of $700 to $750 million,” said
Shoaf.
Shoaf added that NuStar continues to plan to spend $115 to $145
million in strategic capital in 2022.
“We still expect to allocate about $60 million to growing our
Permian system and plan to spend about $10 million to expand our
West Coast Renewable Fuels Network,” said Shoaf. “In addition, we
continue to expect to spend between $35 and $45 million on
reliability in 2022.”
Barron then provided an update on NuStar’s optimization
initiative that was kicked off earlier this year with the goal of
making meaningful reductions in NuStar’s expenses and capital
spending to increase the company’s free cash flow in 2022 and
beyond.
“In May, we told you we had identified over $50 million in
reductions across 2022 and 2023,” said Barron. “And I am happy to
report that total is now up to almost $60 million. We have
successfully reduced our full-year 2022 capital spending and
expenses by almost $20 million and our 2023 spending by over $40
million. By focusing on our spending, we are mitigating the impact
of inflation and increasing our free cash flows, so that NuStar is
solidly positioned for the challenges and opportunities we see in
2023 and beyond,” Barron concluded.
Conference Call Details
A conference call with management is scheduled for 9:00 a.m. CT
on Thursday, August 4, 2022. The partnership plans to discuss the
second quarter 2022 earnings results, which will be released
earlier that day. 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/BI551c68c87b4e4d8db8b4cef5569668c5.
Persons interested in listen-only participation may access the
conference call directly at
https://edge.media-server.com/mmc/p/n66bhyhc. A recorded version
will be available under the same link two hours after the
conclusion of the conference call.
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 10,000 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 2021 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,
2022
2021
2022
2021
Statement of Income Data:
Revenues:
Service revenues
$
278,067
$
300,788
$
543,372
$
572,671
Product sales
152,090
126,305
296,648
216,068
Total revenues
430,157
427,093
840,020
788,739
Costs and expenses:
Costs associated with service
revenues:
Operating expenses
94,948
100,493
181,350
187,780
Depreciation and amortization expense
62,240
68,964
125,543
137,382
Total costs associated with service
revenues
157,188
169,457
306,893
325,162
Costs associated with product sales
134,178
112,641
260,893
193,754
Impairment loss
—
—
46,122
—
General and administrative expenses
27,909
27,477
54,980
51,969
Other depreciation and amortization
expense
1,823
1,913
3,647
3,960
Total costs and expenses
321,098
311,488
672,535
574,845
Operating income
109,059
115,605
167,485
213,894
Interest expense, net
(50,941
)
(53,780
)
(100,759
)
(108,698
)
Other income, net
2,012
2,896
5,683
3,294
Income before income tax expense
60,130
64,721
72,409
108,490
Income tax expense
931
1,338
898
2,850
Net income
$
59,199
$
63,383
$
71,511
$
105,640
Basic and diluted net income (loss) per
common unit
$
0.20
$
0.25
$
(0.02
)
$
0.30
Basic and diluted weighted-average common
units outstanding
110,306,641
109,529,658
110,242,201
109,518,004
Other Data (Note 1):
Adjusted net income
$
57,635
$
63,383
$
114,925
$
105,640
Adjusted net income per common unit
$
0.19
$
0.25
$
0.38
$
0.30
EBITDA
$
175,134
$
189,378
$
302,358
$
358,530
Adjusted EBITDA
$
173,570
$
189,378
$
346,916
$
358,530
DCF
$
83,002
$
97,375
$
174,060
$
177,920
Distribution coverage ratio
1.88x
2.22x
1.97x
2.03x
For the Four Quarters Ended
June 30,
2022
2021
Consolidated Debt Coverage Ratio
3.93x
4.27x
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,
2022
2021
2022
2021
Pipeline:
Crude oil pipelines throughput
(barrels/day)
1,220,758
1,244,215
1,264,678
1,173,166
Refined products and ammonia pipelines
throughput (barrels/day)
582,182
606,973
572,767
558,121
Total throughput (barrels/day)
1,802,940
1,851,188
1,837,445
1,731,287
Throughput and other revenues
$
200,565
$
192,906
$
389,248
$
362,134
Operating expenses
55,170
51,404
103,273
96,459
Depreciation and amortization expense
44,442
44,990
89,270
89,784
Segment operating income
$
100,953
$
96,512
$
196,705
$
175,891
Storage:
Throughput (barrels/day)
396,262
385,790
396,034
393,006
Throughput terminal revenues
$
30,929
$
35,143
$
57,370
$
59,937
Storage terminal revenues
57,854
84,105
119,334
167,885
Total revenues
88,783
119,248
176,704
227,822
Operating expenses
39,778
49,089
78,077
91,321
Depreciation and amortization expense
17,798
23,974
36,273
47,598
Impairment loss
—
—
46,122
—
Segment operating income
$
31,207
$
46,185
$
16,232
$
88,903
Fuels Marketing:
Product sales
$
140,809
$
114,939
$
274,069
$
198,794
Cost of goods
133,741
112,063
259,864
194,466
Gross margin
7,068
2,876
14,205
4,328
Operating expenses
437
578
1,030
(701
)
Segment operating income
$
6,631
$
2,298
$
13,175
$
5,029
Consolidation and Intersegment
Eliminations:
Revenues
$
—
$
—
$
(1
)
$
(11
)
Cost of goods
—
—
(1
)
(11
)
Total
$
—
$
—
$
—
$
—
Consolidated Information:
Revenues
$
430,157
$
427,093
$
840,020
$
788,739
Costs associated with service
revenues:
Operating expenses
94,948
100,493
181,350
187,780
Depreciation and amortization expense
62,240
68,964
125,543
137,382
Total costs associated with service
revenues
157,188
169,457
306,893
325,162
Costs associated with product sales
134,178
112,641
260,893
193,754
Impairment loss
—
—
46,122
—
Segment operating income
138,791
144,995
226,112
269,823
General and administrative expenses
27,909
27,477
54,980
51,969
Other depreciation and amortization
expense
1,823
1,913
3,647
3,960
Consolidated operating income
$
109,059
$
115,605
$
167,485
$
213,894
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,
2022
2021
2022
2021
Net income
$
59,199
$
63,383
$
71,511
$
105,640
Interest expense, net
50,941
53,780
100,759
108,698
Income tax expense
931
1,338
898
2,850
Depreciation and amortization expense
64,063
70,877
129,190
141,342
EBITDA
175,134
189,378
302,358
358,530
Interest expense, net
(50,941
)
(53,780
)
(100,759
)
(108,698
)
Reliability capital expenditures
(6,696
)
(8,943
)
(13,405
)
(17,432
)
Income tax expense
(931
)
(1,338
)
(898
)
(2,850
)
Long-term incentive equity awards (a)
2,734
2,720
5,563
6,007
Preferred unit distributions
(31,523
)
(31,887
)
(62,615
)
(63,774
)
Impairment loss
—
—
46,122
—
Income tax benefit related to impairment
loss
—
—
(1,144
)
—
Other items
(4,775
)
1,225
(1,162
)
6,137
DCF
$
83,002
$
97,375
$
174,060
$
177,920
Distributions applicable to common limited
partners
44,128
43,814
$
88,293
$
87,648
Distribution coverage ratio (b)
1.88x
2.22x
1.97x
2.03x
(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,
2022
2021
Operating income
$
190,045
$
423,354
Depreciation and amortization expense
262,228
284,811
Goodwill impairment loss
34,060
—
Other impairment losses
201,030
—
Equity awards (a)
13,801
13,438
Pro forma effects of dispositions (b)
(10,077
)
(4,063
)
Other
481
4,307
Consolidated EBITDA, as defined in the
Revolving Credit Agreement
$
691,568
$
721,847
Long-term debt, less current portion of
finance leases
$
3,137,275
$
3,496,933
Finance leases (long-term)
(51,959
)
(53,403
)
Net fair value adjustments, unamortized
discounts and unamortized debt issuance costs
35,924
40,310
NuStar Logistics' floating rate
subordinated notes
(402,500
)
(402,500
)
Consolidated Debt, as defined in the
Revolving Credit Agreement
$
2,718,740
$
3,081,340
Consolidated Debt Coverage Ratio
(Consolidated Debt to Consolidated EBITDA)
3.93x
4.27x
(a)
This adjustment represents the non-cash
expense related to the vestings of equity-based awards with the
issuance of our common units.
(b)
For the four quarters ended June 30, 2022,
this adjustment represents the pro forma effects of the
dispositions of the Point Tupper and Eastern U.S. terminals. For
the four quarters ended June 30, 2021, this adjustment represents
the pro forma effect of the disposition of the Texas City
terminals.
The following is a reconciliation of net income / net income
(loss) per common unit to adjusted net income / adjusted net income
per common unit.
Three Months Ended June 30,
2022
Six Months Ended June 30,
2022
Net income / net income (loss) per common
unit
$
59,199
$
0.20
$
71,511
$
(0.02
)
Gain on sale
(1,564
)
(0.01
)
(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
$
57,635
$
0.19
$
114,925
$
0.38
The following is a reconciliation of EBITDA to adjusted
EBITDA.
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
EBITDA
$
175,134
$
189,378
$
302,358
$
358,530
Gain on sale
(1,564
)
—
(1,564
)
—
Impairment loss
—
—
46,122
—
Adjusted EBITDA
$
173,570
$
189,378
$
346,916
$
358,530
NuStar Energy L.P. and Subsidiaries
Reconciliation of Non-GAAP Financial Information - Continued
(Unaudited, Thousands of Dollars)
The following is a reconciliation of EBITDA to EBITDA, excluding
the Point Tupper terminal and the Eastern U.S. terminals, which
were sold in April 2022 and October 2021, respectively.
Three Months Ended June
30,
2022
2021
EBITDA
$
175,134
$
189,378
Divested assets:
Operating (loss) income
$
(14
)
$
2,245
Depreciation and amortization expense
—
7,817
Other income, net
1,608
292
EBITDA of divested assets
$
1,594
$
10,354
EBITDA, excluding divested assets
$
173,540
$
179,024
The following is a reconciliation of net income to EBITDA and
adjusted EBITDA (projected).
Projected for the Year Ended
December 31, 2022
Net income
$ 193,000 - 226,000
Interest expense, net
205,000 - 215,000
Income tax expense
2,500 - 4,500
Depreciation and amortization expense
255,000 - 260,000
EBITDA
655,500 - 705,500
Gain on sale
(1,600)
Impairment loss
46,100
Adjusted EBITDA
$ 700,000 - 750,000
NuStar Energy L.P. and Subsidiaries
Reconciliation of Non-GAAP Financial Information - Continued
(Unaudited, Thousands of Dollars)
The following are reconciliations of operating income to segment
EBITDA for our pipeline and fuels marketing segments.
Three Months Ended June 30,
2022
Pipeline
Fuels Marketing
Operating income
$
100,953
$
6,631
Depreciation and amortization expense
44,442
—
Segment EBITDA
$
145,395
$
6,631
Three Months Ended June 30,
2021
Pipeline
Fuels Marketing
Operating income
$
96,512
$
2,298
Depreciation and amortization expense
44,990
—
Segment EBITDA
$
141,502
$
2,298
The following are reconciliations for our storage segment of
operating income to segment EBITDA and segment EBITDA, excluding
the Point Tupper terminal and the Eastern U.S. terminals, which
were sold in April 2022 and October 2021, respectively.
Storage
Three Months Ended June
30,
2022
2021
Operating income
$
31,207
$
46,185
Depreciation and amortization expense
17,798
23,974
Segment EBITDA
$
49,005
$
70,159
Divested assets:
Operating (loss) income
$
(4
)
$
2,277
Depreciation and amortization expense
—
7,817
Segment EBITDA of divested assets
$
(4
)
$
10,094
Segment EBITDA, excluding divested
assets
$
49,009
$
60,065
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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
NuStar Energy (NYSE:NS)
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NuStar Energy (NYSE:NS)
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Von Mär 2023 bis Mär 2024