NuStar Energy's 1Q14 earnings release: Key takeaways (Part 7 of 9)
New growth projects and lease renewals
In the Eagle Ford region, the company has a number of projects completed on which it spent $220 million of growth capital. In South Texas, NuStar has planned or initiated capacity upgrades for its crude oil pipeline segment. The upgrades will occur in two phases: the first phase will add incremental throughput capacity of approximately 35,000 barrels per day and is expected to be available for service in 2Q14. The second phase will add incremental throughput capacity of approximately 65,000 barrels per day and is expected to be available for service in 1Q15.
The project is expected to add ~$60 million of annual EBITDA to NuStar. Total capital spending on various upgrades of Eagle Ford pipelines would turn out to be ~$700 million. The company has already signed up for around 10,000 thousand barrels a day of additional capacity from phase 2. Brad Barron, the president & CEO, said, “We’re still working on contracting the remaining balance of that open season which is about — we’ve got 10 of the 60,000 barrels a day available already booked up. But we are very close in signing some additional contracts for that space and are still very, very encouraged that we’re going to get all of that, all the gas filled up.”
NuStar expects to capitalize on its 200-mile, 12-inch pipeline between Mont Belvieu and Corpus Christi, which lay idle for some time during the end of 2013, following the long-term agreement with Occidental Petroleum (Oxy) in February 2014. A majority of the pipeline’s 110,000 barrels per day supply capacity would be utilized for supplying natural gas liquids (or NGLs). The pipeline projected to be in full service in the second quarter of 2015 and would require capital spending of $130 million to $150 million. It is expected to generate $23 million of annual EBITDA.
In February 2014, for the Pont Tupper storage facility, which would end the lease period from July, 2014, NuStar resigned a major U.S. oil company that will be leasing 3 million barrels of light crude oil storage from August 2014. So, the cash flow would remain stable from the operation.
NuStar Energy (NS) is a master limited partnerships 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).
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