Nustar today announced record net income applicable to limited partners of $141.5 million, or $2.60 per unit, for the third quarter of 2008, almost three times higher than the $45.4 million, or $0.97 per unit, earned in the third quarter of 2007. The third quarter 2008 results represent the highest quarterly earnings in the partnership’s history — up $1.59 per unit over the previous quarterly record of $1.01 per unit earned in the first quarter of 2008. For the nine months ended September 30, 2008, net income applicable to limited partners was significantly higher at $199.3 million, or $3.78 per unit, compared to $106.6 million, or $2.28 per unit, for the nine months ended September 30, 2007.
With respect to the quarterly distribution to unitholders for the third quarter of 2008, NuStar Energy L.P. previously announced that its board of directors had increased the quarterly distribution rate to $1.0575 per unit, which would equate to $4.23 per unit on an annual basis. This quarterly distribution represents an increase of $0.0725 per unit, or 7.4 percent, over the $0.985 distribution for the second quarter of 2008 and third quarter of 2007 and will be paid on November 12, 2008, to holders of record as of November 5, 2008.
NuStar Energy L.P. also reported record quarterly distributable cash flow available to limited partners for the third quarter of 2008 of $156.4 million, or $2.87 per unit, or nearly 115 percent higher than the $62.7 million, or $1.34 per unit, for the third quarter of 2007. For the nine months ended September 30, 2008, distributable cash flow available to limited partners was also significantly higher at $259.9 million, or $4.91 per unit, compared to $163.7 million, or $3.50 per unit for the nine months ended September 30, 2007. Distributable cash flow available to limited partners covers the third quarter distribution to the limited partners by a strong 2.72 times.
“This was an outstanding quarter with earnings reaching an all-time quarterly high of $2.60 per unit, up over 165 percent versus the same period last year,” said Curt Anastasio, Chief Executive Officer and President of NuStar Energy L.P. and NuStar GP Holdings, LLC. “Our strong financial performance was primarily due to excellent margins and robust sales volumes on our asphalt operations, which were acquired in March. Within our asphalt and fuels marketing segment, our asphalt operations generated $122.5 million of operating income in the third quarter, or 63 percent of total segment operating income. With wide sour crude discounts and strong asphalt and intermediate product prices, our product margins averaged $16.05 per barrel.
“As a result of our strong financial results, we were able to provide a solid increase in the quarterly distribution of over seven percent to $1.0575 per unit. In addition, largely due to the excess cash flows generated from the asphalt operations and lower working capital needs, we reduced our debt balances during the third quarter by around $130 million. We currently have ample capacity under our $1.25 billion revolving credit facility with approximately $500 million available to us.
“Although we sustained property damage at our Texas City, Texas Terminal as a result of Hurricane Ike, estimated to be around $18 million, I am pleased to report that substantial repairs have already been made at this facility and we are making excellent progress toward a full recovery soon. The financial impact to us from Hurricane Ike is expected to be limited to our insurance deductible of $1 million.
“We continue to finish multiple projects on our $400 million construction program and expect to be complete with this program by May 2009. We only have around $40 million more in capital expenditures left under this program, which primarily includes storage expansion projects at Texas City, Texas; St. James, Louisiana and Amsterdam in the Netherlands. We completed around $150 million of projects in the third quarter of 2008, including storage expansion and pipeline optimization projects at St. James, Louisiana; Jacksonville, Florida; Linden, New Jersey (i.e. New York Harbor); Amsterdam and Texas City. When completed, we expect all of the projects under our $400 million construction program will contribute approximately $45 million of annual operating income.
“While we expect earnings for the fourth quarter of 2008 to be down significantly from the third quarter primarily due to the seasonality of the asphalt operations, the full year of 2008 should be a record year with the highest annual earnings in the partnership’s history. Longer-term, we expect that asphalt supply markets will continue to tighten and margins will increase as the refinery coker units come online. And, although we have identified approximately $500 million of high-return internal growth projects that could be completed over the next two to three years, we have scaled back our budgeted strategic and reliability capital expenditures in 2009 to approximately $150 million in light of the current capital markets environment,” said Anastasio.
A conference call with management is scheduled for 11:00 a.m. ET (10:00 a.m. CT) today, October 23, 2008, to discuss the financial and operational results for the third quarter of 2008. Investors interested in listening to the presentation may call 800-622-7620, passcode 67543575. International callers may access the presentation by dialing 706-645-0327, passcode 67543575. The company intends to have a playback available following the presentation, which may be accessed by calling 800-642-1687, passcode 67543575. A live broadcast of the conference call will also be available on the company’s Web site at www.nustarenergy.com.
NuStar Energy L.P. is a publicly traded, limited partnership based in San Antonio, with 9,063 miles of pipeline, 85 terminal facilities, four crude oil storage tank facilities and two asphalt refineries with a combined throughput capacity of 104,000 barrels per day. One of the largest asphalt refiners and marketers in the U.S. and the second largest independent liquids terminal operator in the nation, NuStar has operations in the United States, the Netherlands Antilles, Canada, Mexico, the Netherlands and the United Kingdom. The partnership’s combined system has over 90 million barrels of storage capacity, and includes two asphalt refineries, crude oil and refined product pipelines, refined product terminals, a petroleum and specialty liquids storage and terminaling business, as well as crude oil storage facilities. For more information, visit NuStar Energy L.P.’s Web site at www.nustarenergy.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes forward-looking statements regarding future events. All forward-looking statements are based on the partnership’s beliefs as well as assumptions made by and information currently available to the partnership. These statements reflect the partnership’s current views with respect to future events and are subject to various risks, uncertainties and assumptions. These risks, uncertainties and assumptions are discussed in NuStar Energy L.P.’s 2007 annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission.
NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information
(Unaudited, Thousands of Dollars, Except Unit Data and Per Unit
Data)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Statement of Income Data:
Revenues:
Services revenues $ 187,104 $ 188,677 $ 547,775 $ 511,970
Product sales 1,638,122 208,340 3,247,805 502,903
Total revenues 1,825,226 397,017 3,795,580 1,014,873
Costs and expenses:
Cost of product sales 1,467,152 199,023 3,036,077 475,011
Operating expenses 127,095 91,981 322,473 258,637
General and administrative expenses 20,358 16,118 55,985 48,607
Depreciation and amortization expense 35,143 29,534 100,019 84,736
Total costs and expenses 1,649,748 336,656 3,514,554 866,991
Operating income 175,478 60,361 281,026 147,882
Equity earnings from joint ventures 2,122 1,613 6,072 4,970
Interest expense, net (25,228 ) (19,381 ) (67,027 ) (57,687 )
Other income, net 1,696 12,191 12,236 35,914
Income before income tax expense 154,068 54,784 232,307 131,079
Income tax expense 2,791 3,571 11,071 9,046
Net income 151,277 51,213 221,236 122,033
Less net income applicable to general partner (Note 1) (9,817 ) (5,842 ) (21,904 ) (15,414 )
Net income applicable to limited partners $ 141,460 $ 45,371 $ 199,332 $ 106,619
Income per unit applicable to limited partners (Note 1): $ 2.60 $ 0.97 $ 3.78 $ 2.28
Weighted average number of basic units outstanding 54,460,549 46,809,749 52,753,696 46,809,749
EBITDA (Note 2) $ 214,439 $ 103,699 $ 399,353 $ 273,502
Distributable cash flow (Note 2) $ 164,649 $ 68,690 $ 282,007 $ 179,938
September 30, September 30, December 31,
2008 2007 2007
Balance Sheet Data:
Debt, including current portion (a) $ 2,051,486 $ 1,515,358 $ 1,446,289
Partners’ equity (b) 2,266,187 1,873,168 1,994,832
Debt-to-capitalization ratio (a) / (a)+(b) 47.5 % 44.7 % 42.0 %

NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information – Continued
(Unaudited, Thousands of Dollars, Except Barrel Data)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Segment Data: (Note 3)
Storage:
Throughput (barrels/day) 713,323 844,511 756,319 802,622
Throughput revenues $ 22,640 $ 26,069 $ 68,790 $ 71,771
Storage lease revenues 93,141 80,919 267,764 230,971
Total revenues 115,781 106,988 336,554 302,742
Operating expenses 68,699 58,214 183,818 167,019
Depreciation and amortization expense 16,900 15,886 49,548 46,322
Segment operating income $ 30,182 $ 32,888 $ 103,188 $ 89,401
Transportation:
Refined products pipelines throughput (barrels/day) 652,174 719,385 682,214 661,709
Crude oil pipelines throughput (barrels/day) 398,341 410,758 405,276 369,184
Total throughput (barrels/day) 1,050,515 1,130,143 1,087,490 1,030,893
Revenues $ 81,163 $ 83,900 $ 233,970 $ 214,928
Operating expenses 39,543 32,677 99,873 89,609
Depreciation and amortization expense 12,659 12,825 38,061 37,591
Segment operating income $ 28,961 $ 38,398 $ 96,036 $ 87,728
Asphalt and fuels marketing:
Product sales $ 1,638,122 $ 208,340 $ 3,247,834 $ 502,903
Cost of product sales 1,471,084 200,182 3,046,755 478,274
Operating expenses 24,770 2,142 50,848 4,446
Depreciation and amortization expense 4,664 68 9,872 68
Segment operating income $ 137,604 $ 5,948 $ 140,359 $ 20,115
Consolidation and intersegment eliminations:
Revenues $ (9,840 ) $ (2,211 ) $ (22,778 ) $ (5,700 )
Cost of product sales (3,932 ) (1,159 ) (10,678 ) (3,263 )
Operating expenses (5,917 ) (1,052 ) (12,066 ) (2,437 )
Depreciation and amortization expense 920 755 2,538 755
Total $ (911 ) $ (755 ) $ (2,572 ) $ (755 )
Consolidated Information:
Revenues $ 1,825,226 $ 397,017 $ 3,795,580 $ 1,014,873
Cost of product sales 1,467,152 199,023 3,036,077 475,011
Operating expenses 127,095 91,981 322,473 258,637
Depreciation and amortization expense 35,143 29,534 100,019 84,736
Segment operating income 195,836 76,479 337,011 196,489
General and administrative expenses 20,358 16,118 55,985 48,607
Consolidated operating income $ 175,478 $ 60,361 $ 281,026 $ 147,882

NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information – Continued
(Unaudited, Thousands of Dollars, Except Unit Data and Per Unit
Data)
Notes:
1. Net income is allocated between limited partners and the general
partner’s interests based on provisions in the partnership
agreement. The net income applicable to limited partners is divided
by the weighted average number of limited partnership units
outstanding in computing the net income per unit applicable to
limited partners. The following table details the calculation of net
income applicable to the general partner:
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Net income applicable to general partner and limited partners’ $ 151,277 $ 51,213 $ 221,236 $ 122,033
interest
Less general partner incentive distribution 6,929 4,915 17,835 13,238
Net income after general partner incentive distribution 144,348 46,298 203,401 108,795
General partner interest 2 % 2 % 2 % 2 %
General partner allocation of net income after general partner 2,888 927 4,069 2,176
incentive distribution
General partner incentive distribution 6,929 4,915 17,835 13,238
Net income applicable to general partner $ 9,817 $ 5,842 $ 21,904 $ 15,414
2. NuStar Energy L.P. utilizes two financial measures, EBITDA and
distributable cash flow, which are not defined in United States
generally accepted accounting principles. Management uses these
financial measures because they are widely accepted financial
indicators used by investors to compare partnership performance. In
addition, management believes that these measures provide investors
an enhanced perspective of the operating performance of the
partnership’s assets and the cash that the business is generating.
Neither EBITDA nor distributable cash flow are intended to represent
cash flows for the period, nor are they presented as an alternative
to net income. They should not be considered in isolation or as
substitutes for a measure of performance prepared in accordance with
United States generally accepted accounting principles.
The following is a reconciliation of net income to EBITDA and
distributable cash flow:
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Net income $ 151,277 $ 51,213 $ 221,236 $ 122,033
Plus interest expense, net 25,228 19,381 67,027 57,687
Plus income tax expense 2,791 3,571 11,071 9,046
Plus depreciation and amortization expense 35,143 29,534 100,019 84,736
EBITDA 214,439 103,699 399,353 273,502
Less equity earnings from joint ventures (2,122 ) (1,613 ) (6,072 ) (4,970 )
Less interest expense, net (25,228 ) (19,381 ) (67,027 ) (57,687 )
Less reliability capital expenditures (11,083 ) (11,597 ) (28,001 ) (23,558 )
Less income tax expense (2,791 ) (3,571 ) (11,071 ) (9,046 )
Plus distributions from joint ventures – – 500 544
Mark-to-market impact on hedge transactions (a) (8,566 ) 1,153 (5,675 ) 1,153
Distributable cash flow 164,649 68,690 282,007 179,938
General partner’s interest in distributable cash flow (8,247 ) (5,956 ) (22,105 ) (16,230 )
Limited partners’ interest in distributable cash flow $ 156,402 $ 62,734 $ 259,902 $ 163,708
Distributable cash flow per limited partner unit $ 2.872 $ 1.340 $ 4.908 $ 3.497
(a) Distributable cash flow excludes the impact of mark-to-market
gains and losses which arise from valuing certain derivative
contracts.
3. Beginning in the second quarter of 2008, we changed the way we
report our segmental results. We combined the refined product
terminals and crude oil storage tanks segments into the storage
segment, and we combined the refined product pipelines and crude
oil pipelines segments into the transportation segment. Previous
periods have been restated to conform to this presentation. The
asphalt and fuels marketing segment includes all product sales and
related costs, including our two asphalt refineries, which we
acquired on March 20, 2008. Additional operational information
related to the asphalt and fuels marketing segment is available on
our website at www.nustarenergy.com
under the investors portion of the website.

SOURCE: NuStar Energy, L.P.
NuStar Energy, L.P., San Antonio
Investors, Mark Meador, Director,
Investor Relations: 210-918-2895
or
Media, Mary Rose Brown, Senior Vice President,
Corporate Communications: 210-918-2314
Web site: http://www.nustarenergy.com