February 8th, 2021 [San Antonio Express News] – Despite COVID-19’s crushing blow to the oil and gas industry over the last year, San Antonio pipeline operator NuStar Energy posted strong results in 2020 and is seeing demand return to pre-pandemic levels, the master limited partnership said Thursday.
NuStar moved more crude oil and refined products through its pipelines and storage terminals last year than in 2019, and posted adjusted earnings of $723 million last year — excluding one-time costs related to the pandemic — on $1.48 billion in revenue.
“Last year, even though the pandemic depressed activity for much of the globe, we actually increased the number of barrels per day we throughput in both our pipeline and our storage segments,” said Bradley Barron, president and CEO of NuStar Energy. “NuStar accomplished all of this in a year that was anything but normal.”
Over the final three months of 2020, NuStar recorded a $16 million profit on $386 million in revenue.
While the company’s fourth-quarter figures were down significantly compared with the last three months of 2019 — a record quarter for the quarter — NuStar’s earnings beat Wall Street analysts’ expectations.
In 2020, NuStar took nearly $400 million in non-cash and impairment charges, including a charge related to refinancing debt at a lower interest rate.
Excluding the one-time charges, NuStar’s adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — in the fourth quarter was $181 million, above analysts’ projection of $174 million.
“NuStar exceeded expectations for the 4th quarter,” analysts at UBS, the Swiss investment bank, said in a note to investors.
Including the non-cash and impairment charges, NuStar posted a $198 million loss in 2020 on $1.48 billion in revenue.
Wells Fargo analysts attributed the better-than-expected figures to a strong year for NuStar’s pipeline business.
Last year, NuStar transported 1.76 million barrels per day of crude oil and refined products through its pipelines, up a tick from 1.75 million barrels per day in 2019. Revenue from the company’s pipeline segment topped $718 million last year, up 2.4 percent from 2019.
The company’s storage business also was up last year.
As restrictions were enacted to slow spread of the coronavirus, demand for oil and gas was wiped out last spring. Producers sought to store their product until oil prices recovered, which threatened to max out U.S. oil storage capacity.
The so-called market contango last spring benefited NuStar, which saw revenue from its storage segment reach $494 million. That was up nearly 9 percent from a year earlier.
A contango is when the price of a futures oil contract is higher than the present-day price of oil. NuStar signed futures contracts to store oil last year that carried through much of 2021, which boosted the company’s storage revenue last year.
NuStar, which carried $3.6 billion in debt as of Dec. 31, is projecting that its 2021 earnings will be similar to last year’s.
“We are starting this year encouraged by the rebound we have seen, and continue to see, across our footprint,” Barron said.
UBS issued a “Buy” rating on NuStar Energy, and set the target for the company’s unit price at $20.
Stewart Glickman, an analyst with New York-based CFRA, downgraded NuStar, saying the recent surge of COVID-19 variants “could blunt” the company’s recovery. Glickman set a price target for NuStar at $17 per share.
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