NuStar Energy L.P. Reports Solid Third Quarter of 2022 Earnings Results
11.14.2022 By TankTerminals.com - NEWS

November 14, 2022 [MarketScreener] – Permian Crude System Volumes Hit Record-Breaking Average of 580,000 Barrels Per Day/Expect to Exit 2022 at Approximately 600,000 Barrels Per Day

 

NuStar Energy L.P. (NYSE: NS) today announced solid results for the third quarter of 2022 fueled by record-breaking volumes in its Permian Crude System.

NuStar reported net income of $60 million for the third quarter of 2022, or $0.20 per unit, compared to a net loss of $125 million, or $1.48 per unit, for the third quarter of 2021.

NuStar also reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $178 million for the third quarter of 2022, compared to third quarter of 2021 adjusted EBITDA of $177 million.

“On an ‘apples-to-apples’ basis, excluding the contribution of the Eastern U.S. terminals we sold in October of 2021, and the Point Tupper terminal we sold in April of this year, our third quarter 2022 EBITDA increased $9.3 million, a 6 percent increase compared to adjusted EBITDA in the third quarter of 2021,” said NuStar Chairman and CEO Brad Barron.

Distributable cash flow (DCF) available to common limited partners was $93 million for the third quarter of 2022, compared to DCF of $92 million in the third quarter of 2021. The distribution coverage ratio to common limited partners was a strong 2.12 times for the third quarter of 2022.

Permian Crude System Hits Record-Breaking Volumes

NuStar’s Permian Crude System’s volumes hit another high in the third quarter of 2022 with a record-breaking average of 580,000 barrels per day (BPD), an increase of 15 percent over third quarter of 2021 volumes and an increase of 11 percent over the second quarter of 2022.

“The steady, strong volume growth we have seen in 2022 is a testament to our producers and to the quality and strength of our acreage,” said Barron. “We now expect to exit 2022 at around 600,000 BPD, or about 15 percent above our 2021 exit.”

Refined Product Volumes Still Tracking at Pre-Pandemic Levels

Barron stated that while a planned turnaround at a customer refinery reduced NuStar’s third quarter of 2022 volumes compared to the third quarter of 2021, its refined product volumes continue to track at pre-pandemic levels, which he said reflects the strength of its assets and the stability of demand in the markets NuStar serves across the mid-Continent and throughout Texas.

Barron added, “In addition, our Northern Mexico refined products supply system continues to perform well, with third quarter of 2022 throughput up 26 percent compared to the third quarter of 2021. And our Valley refined product pipeline throughputs were also up, with third quarter of 2022 throughput 14 percent above the third quarter of 2021.”

Corpus Christi Crude System Averaging Above Minimum Volume Commitments/Fuels Marketing Segment Performing Well

Barron commented that throughputs on NuStar’s Corpus Christi Crude System averaged over 341,000 BPD in the third quarter of 2022, which is above its minimum volume commitments for the system.

“We are encouraged by the continued growth in October, as our average volumes rose to almost 390,000 BPD for the month,” said Barron.

Barron also noted that operating income and EBITDA in NuStar’s Fuels Marketing Segment were $9 million in the third quarter of 2022, an $8 million increase compared to the third quarter of 2021, largely due to stronger margins.

West Coast Renewable Fuels Network Continues to Grow with Two Renewable Fuel Projects

Barron once again highlighted the growth of NuStar’s West Coast Renewable Fuels Network, which plays an integral role in facilitating the low-carbon renewable fuels that significantly reduce emissions from transportation.

“Our West Coast region’s revenues were up 20 percent in the third quarter of 2022 compared to the third quarter of 2021. And we are pleased to report that two new renewable fuel projects were brought into service at the end of the last quarter, which increased our renewable diesel storage capacity and augmented our ethanol transportation logistics capabilities at our Stockton, California terminal.

“Those two projects should further solidify the significant role that NuStar plays in facilitating California’s transition to low-carbon renewable fuels, where we already handle 77 percent of California’s sustainable aviation fuel; 19 percent of the state’s renewable diesel volumes; 9 percent of its ethanol; and 5 percent of its biodiesel,” said Barron.

Debt Metrics Continue to Improve Significantly

NuStar Executive Vice President and Chief Financial Officer Tom Shoaf gave an update on the company’s continued progress in reducing its debt and building its financial strength and flexibility.

“At the end of the third quarter of 2022, our total debt balance was $3.1 billion, and by continuing to pay down our revolving credit facility balance last quarter, we increased our facility availability to $993 million of the facility’s $1.0 billion capacity,” said Shoaf.

Shoaf continued, “Thanks to the progress we have made in reducing our debt balance, our interest expense in the third quarter of 2022 was $1 million lower than in the third quarter of 2021, despite higher interest rates on our variable rate debt.

“We ended the third quarter of 2022 with a debt-to-EBITDA ratio of 3.79 times, which is substantially improved from our ratio of above 4 times in the third quarter of 2021, and also improved from our ratio of 3.93 times in the second quarter of 2022.”

Full-Year Guidance/Positive Update on Optimization Initiative

NuStar Energy L.P. (NYSE: NS) today announced solid results for the third quarter of 2022 fueled by record-breaking volumes in its Permian Crude System.

NuStar reported net income of $60 million for the third quarter of 2022, or $0.20 per unit, compared to a net loss of $125 million, or $1.48 per unit, for the third quarter of 2021.

NuStar also reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $178 million for the third quarter of 2022, compared to third quarter of 2021 adjusted EBITDA of $177 million.

“On an ‘apples-to-apples’ basis, excluding the contribution of the Eastern U.S. terminals we sold in October of 2021, and the Point Tupper terminal we sold in April of this year, our third quarter 2022 EBITDA increased $9.3 million, a 6 percent increase compared to adjusted EBITDA in the third quarter of 2021,” said NuStar Chairman and CEO Brad Barron.

Distributable cash flow (DCF) available to common limited partners was $93 million for the third quarter of 2022, compared to DCF of $92 million in the third quarter of 2021. The distribution coverage ratio to common limited partners was a strong 2.12 times for the third quarter of 2022.

Permian Crude System Hits Record-Breaking Volumes

NuStar’s Permian Crude System’s volumes hit another high in the third quarter of 2022 with a record-breaking average of 580,000 barrels per day (BPD), an increase of 15 percent over third quarter of 2021 volumes and an increase of 11 percent over the second quarter of 2022.

“The steady, strong volume growth we have seen in 2022 is a testament to our producers and to the quality and strength of our acreage,” said Barron. “We now expect to exit 2022 at around 600,000 BPD, or about 15 percent above our 2021 exit.”

Refined Product Volumes Still Tracking at Pre-Pandemic Levels

Barron stated that while a planned turnaround at a customer refinery reduced NuStar’s third quarter of 2022 volumes compared to the third quarter of 2021, its refined product volumes continue to track at pre-pandemic levels, which he said reflects the strength of its assets and the stability of demand in the markets NuStar serves across the mid-Continent and throughout Texas.

Barron added, “In addition, our Northern Mexico refined products supply system continues to perform well, with third quarter of 2022 throughput up 26 percent compared to the third quarter of 2021. And our Valley refined product pipeline throughputs were also up, with third quarter of 2022 throughput 14 percent above the third quarter of 2021.”

Corpus Christi Crude System Averaging Above Minimum Volume Commitments/Fuels Marketing Segment Performing Well

Barron commented that throughputs on NuStar’s Corpus Christi Crude System averaged over 341,000 BPD in the third quarter of 2022, which is above its minimum volume commitments for the system.

“We are encouraged by the continued growth in October, as our average volumes rose to almost 390,000 BPD for the month,” said Barron.

Barron also noted that operating income and EBITDA in NuStar’s Fuels Marketing Segment were $9 million in the third quarter of 2022, an $8 million increase compared to the third quarter of 2021, largely due to stronger margins.

West Coast Renewable Fuels Network Continues to Grow with Two Renewable Fuel Projects

Barron once again highlighted the growth of NuStar’s West Coast Renewable Fuels Network, which plays an integral role in facilitating the low-carbon renewable fuels that significantly reduce emissions from transportation.

“Our West Coast region’s revenues were up 20 percent in the third quarter of 2022 compared to the third quarter of 2021. And we are pleased to report that two new renewable fuel projects were brought into service at the end of the last quarter, which increased our renewable diesel storage capacity and augmented our ethanol transportation logistics capabilities at our Stockton, California terminal.

“Those two projects should further solidify the significant role that NuStar plays in facilitating California’s transition to low-carbon renewable fuels, where we already handle 77 percent of California’s sustainable aviation fuel; 19 percent of the state’s renewable diesel volumes; 9 percent of its ethanol; and 5 percent of its biodiesel,” said Barron.

Debt Metrics Continue to Improve Significantly

NuStar Executive Vice President and Chief Financial Officer Tom Shoaf gave an update on the company’s continued progress in reducing its debt and building its financial strength and flexibility.

“At the end of the third quarter of 2022, our total debt balance was $3.1 billion, and by continuing to pay down our revolving credit facility balance last quarter, we increased our facility availability to $993 million of the facility’s $1.0 billion capacity,” said Shoaf.

Shoaf continued, “Thanks to the progress we have made in reducing our debt balance, our interest expense in the third quarter of 2022 was $1 million lower than in the third quarter of 2021, despite higher interest rates on our variable rate debt.

“We ended the third quarter of 2022 with a debt-to-EBITDA ratio of 3.79 times, which is substantially improved from our ratio of above 4 times in the third quarter of 2021, and also improved from our ratio of 3.93 times in the second quarter of 2022.”

Full-Year Guidance/Positive Update on Optimization Initiative

Shoaf also gave full-year guidance for net income and EBITDA, as well as strategic capital and reliability capital for 2022.

“We expect to generate full-year 2022 net income in the range of $193 to $206 million and full-year 2022 adjusted EBITDA in the range of $700 to $730 million,” said Shoaf.

He also noted that NuStar now plans to spend $105 to $125 million in strategic capital in 2022.

“We still expect to allocate almost $60 million to growing our Permian system and plan to spend about $10 million to expand our West Coast Renewable Fuels Network,” said Shoaf. “In addition, we now expect to spend between $30 and $40 million on reliability in 2022.”

Barron then provided an update on NuStar’s optimization initiative that was kicked off earlier this year with the goal of making meaningful reductions in NuStar’s expenses and capital spending to increase the company’s free cash flow in 2022 and beyond.

“In August, we told you we had identified almost $60 million in reductions across 2022 and 2023,” said Barron. “And I am happy to report that total is now up to almost $100 million. We have successfully reduced our full-year 2022 capital spending and expenses by over $40 million and our total 2023 spending and expenses by over $50 million. Thanks to our optimization initiative, we have been able to mitigate the impact of 2022’s historic inflation rate and maximize our free cash flows.

“Because of the meaningful progress we have made, we are now positioned to accelerate our time frame for addressing the Series D preferred units by completing the redemption in 2024, which is several years ahead of our previously scheduled timeframe. We are currently in discussions with the holders to repurchase approximately one-third of the Series D preferred units by the end of this year. We then plan to redeem approximately another third of them in 2023, and complete the redemption in 2024, while continuing to target our debt metric at about 4 times. This redemption is another important step in our ongoing optimization and will meaningfully increase our cash flow over the next few years.”

Barron closed by mentioning his appreciation for Bill Greehey, who stepped down from his position as NuStar’s chairman of the board last week to become chairman emeritus.

“I have had the privilege of working for Bill for over 20 years, and I am deeply grateful for the opportunity to learn from him and bear witness to his vision and leadership,” said Barron. “Here at NuStar, we are thankful to be able to carry forward the strong corporate culture Bill established. Because of Bill, we have an ethical culture that prioritizes safety, environmental responsibility, fiscal stewardship and giving back to our communities.

“We are committed to working hard to demonstrate our gratitude to Bill by nourishing the corporate culture he built and by generating long-term, stable value for Bill and all of our unitholders.”

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