A must-know introduction to NuStar Energy and its assets

Avik Chowdhury

NuStar Energy's 1Q14 earnings release: Key takeaways (Part 1 of 9)

NuStar Energy

On April 24, 2014, NuStar Energy presented its earnings for the first quarter of 2014. NuStar Energy L.P. (NS) is a master limited partnership operating in the midstream energy space. It engages in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and the marketing of petroleum products. The company operates in three segments: Storage, Pipeline, and Fuels Marketing. As of December 31, 2013, the company had 60 terminal and storage facilities providing 84.8 million barrels of storage capacity; 5,463 miles of refined product pipelines with 21 associated terminals; and 1,180 miles of crude oil pipelines. NuStar GP Holdings, LLC (NSH) holds the 2% general partner interest, incentive distribution rights, and 12.9% of the common units in NuStar Energy L.P.

NuStar has three reportable segments. Its Storage segment includes terminal and storage facilities that provide terminalling and storage services for petroleum products, specialty chemicals, crude oil, and other liquids. As of December 31, 2013, it had 48 terminal and storage facilities in the U.S. with total storage capacity of 51.7 million barrels, two terminals located in St. Eustatius Island and Point Tupper, with tank capacity of 14.4 million barrels and 7.7 million barrels, respectively. The company also operates terminalling facilities in the international market. It has six terminals located in the United Kingdom and one terminal located in the Netherland with total storage capacity of approximately 9.5 million barrels; two terminals in Turkey with total storage capacity of 1.4 million barrels; and terminal located in Mexico.

NuStar’s Pipeline segment consists of the transportation of refined petroleum products, crude oil, and anhydrous ammonia. Refined product pipelines in Texas, Oklahoma, Colorado, New Mexico, Kansas, Nebraska, Iowa, South Dakota, North Dakota, and Minnesota cover approximately 5,463 miles. As of December 31, 2013, it owned and operated refined product pipelines in Texas, Oklahoma, Colorado, and New Mexico with an aggregate length of 3,113 miles originating at Valero Energy’s (VLO) McKee, Three Rivers, and Corpus Christi refineries and terminating at certain of NuStar Energy’s terminals, or connecting to third-party pipelines for further distribution; a 1,190-mile pipeline originating in southern Kansas and terminating at Jamestown, North Dakota with two extension to Nebraska and Iowa; a 440-mile refined product pipeline originating at Tesoro Corporation’s (TSO) North Dakota refinery and terminating in Minnesota; crude oil pipelines in Texas, Oklahoma, Kansas, Colorado, and Illinois with an aggregate length of 1,180 miles and crude oil storage facilities; and a 2,000-mile ammonia pipeline.

NuStar has a Fuels Marketing segment, which handles the purchase of crude oil, fuel oil, bunker fuel, fuel oil blending components, and other refined products for resale. The segment generates additional gross margin while complementing the activities of the storage and pipeline segments. NuStar utilizes transportation and storage assets, including its own terminals, pipelines and rail unloading facilities for the segment’s operations. In recent times, NuStar has divested a large portion of its Fuels Marketing assets. On January 1, 2013, it sold the San Antonio Refinery and related assets, which included an inventory, a terminal in Elmendorf, Texas, and a pipeline connecting the terminal and refinery. On September 28, 2012, NS sold a 50% ownership interest in its joint venture in NuStar Asphalt LLC to an affiliate of Lindsay Goldberg & Co., LLC, a private investment firm.

As of April 24, 2014, NS had a market capitalization of $4.5 billion and enterprise value of $6.8 billion. For the last 12 months ending March 31, 2014, NS recorded revenues of $3.4 billion and EBITDA of $469.7 million. Distribution per unit declared on April 24, 2014, was $1.095 per unit, or $4.38 annualized. This amounts to a distribution yield of 7.52% for a stock price of $58.14 as of April 28, 2014.

NuStar Energy (NS) is a master limited partnership operating in the midstream energy space. Other major companies operating in the same sector as NS include Boardwalk Energy Partners (BWP), Plains All American Pipeline (PAA), and Energy Products Partners (EPD). Most of these companies are components of the Alerian MLP ETF (AMLP) and MLP ETF (MLPA). NS is part of the Multi Asset Income ETF (CVY).

In our next section we will discuss the 1Q2014 earnings and also the key trends we have noticed in NS.

Continue to Part 2

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