Which Segment Will Drive NuStar Energy’s 1Q16 Performance?
What to Expect from NuStar Energy’s 1Q16 Earnings Release
NuStar Energy’s Pipeline segment
The Pipeline segment is NuStar Energy’s (NS) largest business segment in terms of operating income. The segment accounted for 54% of the company’s total operating income in 4Q15. The Pipeline segment mainly provides crude oil, refined products, distillate, and natural gas liquid transportation services.
NuStar Energy’s Pipeline segment saw its 4Q15 operating income increase by 3% YoY (year-over-year). It was driven by lower operating expenses and expansion projects placed into service. However, the segment could experience a decline in operating income due to the fall in NuStar Energy’s Eagle Ford throughput volumes. According to the U.S. Energy Information Administration’s drilling productivity data, the Eagle Ford’s three-month average crude oil production fell by 23.6% YoY to 1.28 MMbpd (million barrels per day) in 1Q16—compared to 1.68 MMbpd in 1Q15. The above decline could be offset by higher throughput along the “demand pull pipelines” that support refining operations.
NuStar Energy’s Storage segment
NuStar Energy’s Storage segment provides crude oil and refined product terminaling and storage services. Its operating income rose by 34.6% in 4Q15. The trend is expected to continue in 1Q16. It’s driven by the Linder terminal acquisition, higher utilization, and higher renewal rates.
NuStar Energy’s Fuel Marketing segment
The Fuel Marketing segment mainly provides crude oil and refined product acquisition and marketing services. It could continue to see lower margins in 1Q16 due to the decline in commodity prices. NuStar’s peers, Buckeye Partners (BPL), Genesis Energy (GEL), and NGL Energy Partners (NGL) could experience a similar decline in their crude oil and refined products acquisition and marketing businesses in 1Q16. NuStar Energy forms 4.6% of the Global X MLP ETF (MLPA).
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