NuStar Energy in Long-Term Lease Contracts


San Antonio-based publicly traded partnership, NuStar Energy LP (NS) has entered into two long-term contracts to lease light crude oil storage at its St. Eustatius and Pt. Tupper terminals.

For its St. Eustatius terminal, in the Caribbean, the partnership inked a deal with a national oil company to lease storage space (5 million barrels of light crude oil). The agreement was finalized on Mar 1, and the first consignment is due this week.

For the Pt. Tupper terminal, in Nova Scotia, NuStar Energy has re-entered into a contract with a U.S. oil major. The contract, to provide storage space worth 3 million barrels of light crude oil, would commence from Aug 1, post the completion of the earlier contract.

NuStar management expects to reach a one-to-one distribution coverage ratio in 2014 following the recently completed transactions and projects. The partnership is engaged in the transportation and storage of crude oil as well as refined products in the U.S., the Netherlands Antilles, Canada, Mexico, and the U.K.

NuStar Energy owns a high quality, large and diverse asset portfolio and has a positive investment grade rating and strong track record for distribution growth that works in its favor. Moreover, during the last few years, NuStar Energy invested handsomely in several internal growth projects that are likely to add to the partnership’s future profitability.

NuStar Energy currently holds a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

In addition to NuStar Energy, one can consider other players from the same industry such as Magellan Midstream Partners LP (MMP) and Spectra Energy Partners, LP (SEP). Both these stocks carry a Zacks Rank #2. Meanwhile, from the broader energy sector, one can consider the Zacks Ranked #1 (Strong Buy) stock of Helmerich & Payne, Inc. (HP).

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