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NuStar Energy Beats on Q1 Earnings, Revs

Zacks Equity Research

San Antonio-based publicly traded partnership NuStar Energy L.P. (NS) reported better-than-expected first-quarter results, owing to improved performance from the pipeline business unit. Decrease in total operating expenses also favored the results.  

The partnership’s first-quarter results were out before the opening bell on Apr 23, 2014. NuStar closed at $56.95 per unit on that day, reflecting a marginal increase from the previous day’s closing price, owing to the favorable results.

NuStar’s earnings per unit (EPU) – from continuing operations – came in at 40 cents, beating the Zacks Consensus Estimate of 37 cents. The bottom line also increased from the year-ago figure of 10 cents per unit.  

Revenues of $849.2 million surpassed the Zacks Consensus Estimate of $766.0 million. However, the top line was 14.9% below the year-ago level, mainly due to lower quarterly sales from the Storage segment.   

Quarterly Distribution

NuStar announced quarterly distribution of $1.095 per unit ($4.38 per unit annualized), which remains unchanged from the previous quarter’s distribution. The distribution is payable on May 12, 2014, to unitholders of record as on May 7, 2014.  

Distributable cash flow (DCF.TO) available to limited partners for the first quarter was $77.9 million or $1.00 per unit (providing 0.91x distribution coverage), compared with $57.1 million or 73 cents per unit in the year-earlier quarter.

Segmental Performance

Pipeline: Total quarterly throughput volumes in the Pipeline segment were 832,389 barrels per day (Bbl/d) representing a marginal increase of 1.2% from the year-ago period.

The throughput volumes in the crude oil pipelines increased 2.3% from the year-ago quarter to 359,418 Bbl/d. Moreover, throughput revenues rose 10.4% to $103.0 million. The segment’s operating income increased 32.9% year over year to $53.0 million on an increase in throughput volumes and a drop in operating expenses.  

Storage: Throughput volumes in the Storage segment improved 22.7% year over year to 821,338 Bbl/d.

However, quarterly revenues were down 6.4% to $132.6 million from the first quarter of the previous year. The segment reported profit of $42.0 million, indicating deterioration from $54.0 million in the year-ago quarter, owing to the segment’s higher operational costs.  

Fuels Marketing: The unit reported an income of $10.0 million, against the year-ago quarter loss of about $1.6 million. A decrease in operating expenses led to the improvement.

Operating Expense

The partnership recorded total operating costs of $106.1 million, down 6.6% year over year.

Balance Sheet

As of Mar 31, 2014, the partnership had total debt of $2,710.1 million, representing a debt-to-capitalization ratio of 59.5%.


NuStar expects its second-quarter 2014 EPU to come in ahead of the year-ago quarter’s profit. Moreover, the partnership continues to believe that 2014 operating profits from its pipeline business unit will register a $40.0 to $60.0 million increase from the 2013 level. Additionally, the adjusted 2014 operating profit from storage business is likely to be in line with 2013.

In 2014, NuStar plans to invest $350 million to $370 million in growth projects. The key focus of the investment will be on the pipeline segment.

Stocks to Consider

NuStar currently carries a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players from the same industry like Energy Transfer Equity LP (ETE), Boardwalk Pipeline Partners LP (BWP) and Enterprise Products Partners LP (EPD). Energy Transfer Equity sports a Zacks Rank #1 (Strong Buy), while Boardwalk Pipeline Partners and Enterprise Products Partners hold a Zacks Rank #2 (Buy).

Read the Full Research Report on EPD
Read the Full Research Report on NS
Read the Full Research Report on ETE
Read the Full Research Report on BWP

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