Redemption of Series D Preferred Units
Completed Two Years Ahead of Original Schedule
Pipeline Segment’s Operating Income Up 14
Percent Quarter-Over-Quarter
Fuels Marketing Segment Reports Another
Near-Record Quarter
NuStar Receives Credit Rating Upgrade Due to
Strengthened Balance Sheet
Positive Outlook for Remainder of
2023
NuStar Energy L.P. (NYSE: NS) today announced solid
results for the third quarter of 2023 fueled by strong volumes in
its refined products pipelines.
“I am pleased to report that we have delivered another quarter
of solid earnings results and made significant progress on all of
our strategic initiatives this year,” said NuStar Chairman and CEO
Brad Barron.
“One of our top stated priorities for 2023 has been to continue
to strengthen our balance sheet, and I am very proud to say that we
made a huge step forward in that regard,” Barron said. “In August,
we successfully issued common equity and raised $222 million, which
we applied toward the redemption of the remaining 8.3 million
Series D preferred units. Although our third quarter earnings per
unit were impacted by the premium paid to redeem these units,
totaling $0.27 per unit, we are pleased to have significantly
strengthened our balance sheet by redeeming these units two years
ahead of our original schedule and one year ahead of our previously
announced target.
“NuStar reported net income of $51 million for the third quarter
of 2023, and largely as a result of the $0.27 per unit premium
charge, a $0.07 net loss per unit, compared to net income of $60
million, or $0.20 per unit, for the third 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 $180 million
for the third quarter of 2023 – up compared to third quarter of
2022 EBITDA of $178 million.”
Operations Continue to Perform
Well
NuStar’s Pipeline Segment generated operating income of $126
million and EBITDA of $170 million in the third quarter of 2023,
compared to operating income of $110 million and EBITDA of $155
million in the third quarter of 2022.
“Our refined products systems along with our Ammonia System
continued to generate solid, dependable revenue in the third
quarter of 2023 as total throughputs were up around seven percent
compared to the same period in 2022, reflecting the strength of
these assets and our strong position in the markets we serve in the
mid-Continent and throughout Texas,” said Barron. “Our McKee System
performed very well this quarter, with higher revenues and
throughputs versus the same period last year. And our Three Rivers
refined products system saw increased revenues and throughputs this
quarter, driven by higher demand across various pipelines on the
system.”
NuStar’s Storage Segment generated operating income of $17
million and EBITDA of $36 million in the third quarter of 2023,
compared to operating income of $23 million and EBITDA of $41
million in the third quarter of 2022.
“The decrease in our Storage Segment was mostly due to an
amendment and extension of a customer contract at our Corpus
Christi North Beach terminal and customer transitions and required
tank maintenance at our St. James terminal,” said Barron.
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 turned in another strong quarter, generating operating income
and EBITDA of $8 million in the third quarter of 2023, which is
comparable to the segment’s strong third 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 16 percent higher compared to the third
quarter of 2022.”
NuStar’s Permian Crude System volumes averaged 523,000 barrels
per day (BPD), down from the third quarter volumes of 2022 but up
compared to the 508,000 BPD in the second quarter of 2023.
“As we have said on prior calls, our Permian volumes so far in
2023 have reflected some producer-specific operational issues and
delays, but as some of those issues have been resolved, volumes
have averaged 533,000 BPD in October,” said Barron. “As a result,
we now expect our fourth quarter volumes to average around 540,000
BPD and we are expecting the system’s full-year 2023 revenue to
come in comparable to 2022’s.”
Balance Sheet Continues to
Strengthen/NuStar Receives Credit Rating Upgrade
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 ended the third quarter of 2023 with a healthy
debt-to-EBITDA ratio of 3.83 times with $665 million available on
our $1.0 billion unsecured revolving credit facility,” said Shoaf.
“We believe the elimination of the Series D preferred units from
the capital structure gives us the flexibility to focus on
strategic investments, such as organic growth projects related to
our renewable fuels and Ammonia assets, and further
de-levering.”
Shoaf also commented that the credit rating agencies have taken
notice of NuStar’s strengthened balance sheet.
“We are pleased that after the redemption of the Series D
preferred units in September, Fitch Ratings upgraded our credit
rating by one notch to ‘BB’ while S&P Global upgraded their
outlook from ‘stable’ to ‘positive,’” Shoaf noted.
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
$261 to $273 million and full-year 2023 adjusted EBITDA in the
range of $720 to $740 million,” said Shoaf.
He also noted that NuStar plans to spend $120 to $130 million in
strategic capital in 2023.
“We continue to expect spending for our Permian System to be in
the range of $35 to $45 million,” said Shoaf. “And we continue to
expect to spend around $25 million to expand our West Coast
Renewable Fuels Network, as well as around $25 million on projects
for our Ammonia Pipeline.
“In addition, we expect to spend between $25 and $30 million on
reliability this year.”
Shoaf also noted that in 2023 NuStar once again expects to
self-fund all of its operational expenses, growth capital and
distributions. And he stated that even with the accelerated
redemption of the Series D units, NuStar continues to target a
healthy year-end debt-to-EBITDA ratio below four times.
Ammonia System Provides Tremendous New
Growth Platform
Barron closed by highlighting potential growth opportunities on
NuStar’s Ammonia Pipeline System and at its St. James facility in
Louisiana.
“As we have discussed previously, ammonia is an incredibly
important chemical,” said Barron. “Ammonia is the basis for
nitrogen fertilizers, which support about 50 percent of global food
production and is also vital to a long, diverse list of other
industries.
“Currently, since about 99 percent of global ammonia is produced
using fossil fuels, there has been and continues to be growing
interest in de-carbonizing ammonia production to reduce the
industry’s contribution to global emissions, either through
capturing the emissions associated with traditional production,
also referred to as ‘blue’ ammonia, or by utilizing electrolysis
powered by sun and wind to produce ‘green’ ammonia.”
Barron continued, “Around the world, governments, as well as the
private sector, are developing new uses for low-carbon ammonia and
global demand for low-carbon ammonia is expected to grow
significantly, starting as early as 2025. In fact, projects have
been announced for construction in the U.S. for low-carbon ammonia
production totaling about 38 million tons per year that will be
in-service between 2025 and 2030. Because NuStar’s Ammonia System
runs through the Midwest and down to the Gulf Coast, where the vast
majority of the announced production capacity will reside, and
because of NuStar’s decades of experience with efficiently and
safely transporting ammonia, we are ideally positioned to become
the premier low-carbon ammonia logistics provider in the U.S. and
to provide export service for low-carbon ammonia to Asia, Europe
and other markets.
“In addition to the connection on our Ammonia System to OCI’s
state-of-the-art ammonia products facility in Iowa, which is on
track to be in service in January, we expect to announce a project
for a large global ammonia producer early next year. And we are
continuing to advance a number of other promising projects to
provide transportation, storage and export for low-carbon ammonia.
Similar to our Renewable Fuels strategy on the West Coast, where we
have built and continue to augment a Renewable Fuels Logistics
Network that has made us a leader in the region, we expect these
low-multiple, high-return low-carbon projects will position NuStar
as the premier low-carbon ammonia logistics provider in the U.S.
and provide a significant platform for strong, organic growth over
the next five years,” said Barron.
NuStar Remains Committed to its Core
Strategic Priorities
In closing, Barron noted that NuStar remains committed to its
core strategic priorities of maximizing cash flow, maintaining a
healthy debt metric and providing the safest and most reliable
transportation and storage of the essential energy that fuels our
nation’s quality of life.
Conference Call Details
A conference call with management is scheduled for 9:00 a.m. CT
on Thursday, November 2, 2023, to discuss the financial and
operational results for the third quarter of 2023. Persons
interested in listen-only participation may access the conference
call directly at https://edge.media-server.com/mmc/p/3v3uhf8c.
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/BI746f2c67e6c944c4a6e919ede872ff79.
A recorded version will be available two hours after the conclusion
of the conference call at
https://edge.media-server.com/mmc/p/3v3uhf8c.
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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Statement of Income Data:
Revenues:
Service revenues
$
289,945
$
277,380
$
850,578
$
820,752
Product sales
120,355
135,863
331,923
432,511
Total revenues
410,300
413,243
1,182,501
1,253,263
Costs and expenses:
Costs associated with service
revenues:
Operating expenses
94,052
91,286
276,577
272,636
Depreciation and amortization expense
63,215
63,140
187,799
188,683
Total costs associated with service
revenues
157,267
154,426
464,376
461,319
Costs associated with product sales
101,572
117,324
281,947
378,217
Impairment loss
—
—
—
46,122
General and administrative expenses
35,083
27,676
95,428
82,656
Other depreciation and amortization
expense
1,080
1,935
3,672
5,582
Total costs and expenses
295,002
301,361
845,423
973,896
Gain on sale of assets
—
—
41,075
—
Operating income
115,298
111,882
378,153
279,367
Interest expense, net
(63,125
)
(52,294
)
(178,666
)
(153,053
)
Other income, net
156
1,475
7,298
7,158
Income before income tax expense
52,329
61,063
206,785
133,472
Income tax expense
1,134
1,430
3,513
2,328
Net income
$
51,195
$
59,633
$
203,272
$
131,144
Basic and diluted net (loss) income per
common unit
$
(0.07
)
$
0.20
$
0.34
$
0.18
Basic and diluted weighted-average common
units outstanding
119,218,622
110,310,921
113,698,898
110,265,359
Other Data (Note 1):
Adjusted net income
$
51,195
$
59,633
$
162,197
$
174,558
Adjusted net income per common unit
$
0.20
$
0.20
$
0.54
$
0.58
EBITDA
$
179,749
$
178,432
$
576,922
$
480,790
Adjusted EBITDA
$
179,749
$
178,432
$
535,847
$
525,348
DCF
$
21,322
$
93,485
$
199,724
$
267,545
Adjusted DCF
$
92,760
$
93,485
$
266,419
$
267,545
Distribution coverage ratio
0.42x
2.12x
1.44x
2.02x
Adjusted distribution coverage ratio
1.84x
2.12x
1.92x
2.02x
For the Four Quarters Ended
September 30,
2023
2022
Consolidated Debt Coverage Ratio
3.83x
3.79x
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,
2023
2022
2023
2022
Pipeline:
Crude oil pipelines throughput
(barrels/day)
1,200,582
1,335,336
1,211,871
1,288,489
Refined products and ammonia pipelines
throughput (barrels/day)
600,740
560,202
597,860
568,533
Total throughput (barrels/day)
1,801,322
1,895,538
1,809,731
1,857,022
Throughput and other revenues
$
225,364
$
209,008
$
645,248
$
598,256
Operating expenses
55,180
53,837
159,997
157,110
Depreciation and amortization expense
44,231
44,806
131,636
134,076
Segment operating income
$
125,953
$
110,365
$
353,615
$
307,070
Storage:
Throughput (barrels/day) (a)
410,472
479,110
434,557
469,219
Throughput terminal revenues
$
21,868
$
26,933
$
73,022
$
84,303
Storage terminal revenues
53,336
51,459
161,048
170,793
Total revenues
75,204
78,392
234,070
255,096
Operating expenses
38,872
37,449
116,580
115,526
Depreciation and amortization expense
18,984
18,334
56,163
54,607
Impairment loss
—
—
—
46,122
Segment operating income
$
17,348
$
22,609
$
61,327
$
38,841
Fuels Marketing:
Product sales
$
109,732
$
125,843
$
303,185
$
399,912
Cost of goods
101,056
116,763
280,591
376,627
Gross margin
8,676
9,080
22,594
23,285
Operating expenses
516
561
1,358
1,591
Segment operating income
$
8,160
$
8,519
$
21,236
$
21,694
Consolidation and Intersegment
Eliminations:
Revenues
$
—
$
—
$
(2
)
$
(1
)
Cost of goods
—
—
(2
)
(1
)
Total
$
—
$
—
$
—
$
—
Consolidated Information:
Revenues
$
410,300
$
413,243
$
1,182,501
$
1,253,263
Costs associated with service
revenues:
Operating expenses
94,052
91,286
276,577
272,636
Depreciation and amortization expense
63,215
63,140
187,799
188,683
Total costs associated with service
revenues
157,267
154,426
464,376
461,319
Costs associated with product sales
101,572
117,324
281,947
378,217
Impairment loss
—
—
—
46,122
Segment operating income
151,461
141,493
436,178
367,605
Gain on sale of assets
—
—
41,075
—
General and administrative expenses
35,083
27,676
95,428
82,656
Other depreciation and amortization
expense
1,080
1,935
3,672
5,582
Consolidated operating income
$
115,298
$
111,882
$
378,153
$
279,367
(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. (the Partnership) 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 present segment EBITDA to facilitate
period-over-period comparisons of the operational performance of
our business segments and to understand our business segments’
relative contributions to our consolidated performance. 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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net income
$
51,195
$
59,633
$
203,272
$
131,144
Interest expense, net
63,125
52,294
178,666
153,053
Income tax expense
1,134
1,430
3,513
2,328
Depreciation and amortization expense
64,295
65,075
191,471
194,265
EBITDA
179,749
178,432
576,922
480,790
Interest expense, net
(63,125
)
(52,294
)
(178,666
)
(153,053
)
Reliability capital expenditures
(9,756
)
(11,252
)
(20,491
)
(24,657
)
Income tax expense
(1,134
)
(1,430
)
(3,513
)
(2,328
)
Long-term incentive equity awards (a)
3,691
2,534
9,677
8,097
Preferred unit distributions
(26,535
)
(32,463
)
(91,394
)
(95,078
)
Impairment loss
—
—
—
46,122
Income tax benefit related to impairment
loss
—
—
—
(1,144
)
Premium on redemption of Series D
Cumulative Convertible Preferred Units
(71,438
)
—
(107,770
)
—
Other items
9,870
9,958
14,959
8,796
DCF
$
21,322
$
93,485
$
199,724
$
267,545
Distributions applicable to common limited
partners
$
50,358
$
44,125
$
139,117
$
132,418
Distribution coverage ratio (b)
0.42x
2.12x
1.44x
2.02x
(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
September 30,
2023
2022
Operating income
$
507,599
$
381,112
Depreciation and amortization expense
256,442
259,296
Impairment loss
—
46,122
Amortization expense of equity-based
awards
15,572
13,607
Pro forma effect of dispositions (a)
—
(1,613
)
Other
(2,287
)
(15
)
Consolidated EBITDA, as defined in the
Revolving Credit Agreement
$
777,326
$
698,509
Long-term debt, less current portion of
finance leases
$
3,398,006
$
3,068,055
Finance leases (long-term)
(50,000
)
(51,619
)
Unamortized debt issuance costs
29,234
34,604
NuStar Logistics’ floating rate
subordinated notes
(402,500
)
(402,500
)
Consolidated Debt, as defined in the
Revolving Credit Agreement
$
2,974,740
$
2,648,540
Consolidated Debt Coverage Ratio
(Consolidated Debt to Consolidated EBITDA)
3.83x
3.79x
(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 September
30,
2023
2022
Net income / net (loss) income per common
unit
$
51,195
$
(0.07
)
$
59,633
$
0.20
Premium on redemption of Series D
Cumulative Convertible Preferred Units
—
0.27
—
—
Adjusted net income / adjusted net income
per common unit
$
51,195
$
0.20
$
59,633
$
0.20
Nine Months Ended September
30,
2023
2022
Net income / net income per common
unit
$
203,272
$
0.34
$
131,144
$
0.18
Premium on redemption of Series D
Cumulative Convertible Preferred Units
—
0.57
—
—
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
$
162,197
$
0.54
$
174,558
$
0.58
NuStar Energy L.P. and Subsidiaries
Reconciliation of Non-GAAP Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Ratio Data)
The following is a reconciliation of EBITDA to adjusted
EBITDA.
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
EBITDA
$
179,749
$
178,432
$
576,922
$
480,790
Gain on sale of assets
—
—
(41,075
)
(1,564
)
Impairment loss
—
—
—
46,122
Adjusted EBITDA
$
179,749
$
178,432
$
535,847
$
525,348
The following is a reconciliation of DCF to adjusted DCF and
adjusted distribution coverage ratio.
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
DCF
$
21,322
$
93,485
$
199,724
$
267,545
Premium on redemption of Series D
Cumulative Convertible Preferred Units
71,438
—
107,770
—
Gain on sale of assets
—
—
(41,075
)
—
Adjusted DCF
$
92,760
$
93,485
$
266,419
$
267,545
Distributions applicable to common limited
partners
$
50,358
$
44,125
$
139,117
$
132,418
Adjusted distribution coverage ratio
(a)
1.84x
2.12x
1.92x
2.02x
(a)
Adjusted distribution coverage ratio is
calculated by dividing adjusted DCF by distributions applicable to
common limited partners.
The following are reconciliations for our reported segments of
operating income to segment EBITDA.
Three Months Ended September
30, 2023
Pipeline
Storage
Fuels Marketing
Operating income
$
125,953
$
17,348
$
8,160
Depreciation and amortization expense
44,231
18,984
—
Segment EBITDA
$
170,184
$
36,332
$
8,160
Three Months Ended September
30, 2022
Pipeline
Storage
Fuels Marketing
Operating income
$
110,365
$
22,609
$
8,519
Depreciation and amortization expense
44,806
18,334
—
Segment EBITDA
$
155,171
$
40,943
$
8,519
The following is a reconciliation of projected net income to
EBITDA and adjusted EBITDA.
Projected for the Year Ended
December 31, 2023
Net income
$
261,000 - 273,000
Interest expense, net
242,000 - 245,000
Income tax expense
4,000 - 6,000
Depreciation and amortization expense
254,000 - 257,000
EBITDA
761,000 - 781,000
Gain on sale of assets
(41,000)
Adjusted EBITDA
$
720,000 - 740,000
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101430146/en/
Media: Mary Rose Brown 210-918-2314
maryrose.brown@nustarenergy.com
Investors: Pam Schmidt 210-918-2854
pam.schmidt@nustarenergy.com
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