Net Income, EPU, EBITDA and DCF All Up
Quarter-Over-Quarter as Operations Continue to Perform Well
Pipeline Segment Operating Income Up 25
Percent
West Coast Region’s Revenues Up 33 Percent
Compared to 1Q 2022
Balance Sheet Continues to Strengthen as
Planned Redemption of Series D Preferred Units is Two Years Ahead
of Schedule
Positive Outlook for Remainder of
2023
Highlights New Ammonia Contract/Outlines
Emerging Ammonia Market Opportunities
NuStar Energy L.P. (NYSE: NS) today announced strong
results for the first quarter of 2023 fueled by strong volumes in
its refined products and crude oil pipelines.
“I am pleased to report another strong quarter of financial
results where net income, earnings per unit (EPU), earnings before
interest, taxes, depreciation and amortization (EBITDA) and
distributable cash flow (DCF) were all up quarter-over-quarter and
once again demonstrated the stability and strength of NuStar’s
assets,” said NuStar Chairman and CEO Brad Barron.
NuStar reported net income of $106 million for the first quarter
of 2023, or $0.61 per unit, compared to net income of $12 million,
or a $0.22 net loss per unit, for the first quarter of 2022.
Results for the first quarter of 2023 include a $41 million gain
related to a structured financing arrangement to monetize a portion
of the real estate at NuStar’s corporate headquarters. In addition,
results for the first quarter of 2022 included a non-cash charge
related to the divestiture of the Point Tupper terminal facility in
Canada last year. Excluding the effects of these items, adjusted
net income was $65 million for the first quarter of 2023, or $0.24
per unit, compared to adjusted net income of $57 million, or $0.19
per unit, for the first quarter of 2022.
NuStar also reported adjusted EBITDA of $187 million for the
first quarter of 2023, which is up eight percent compared to first
quarter of 2022 adjusted EBITDA of $173 million.
Adjusted DCF was $101 million for the first quarter of 2023, up
11 percent compared to first quarter of 2022 DCF of $91 million,
and the adjusted distribution coverage ratio was a strong 2.27
times.
Operations Continue to Perform
Well
NuStar’s Pipeline Segment generated operating income of $120
million and EBITDA of $163 million in the first quarter of 2023,
compared to operating income of $96 million and EBITDA of $141
million in the first quarter of 2022.
“Our refined products systems and our Ammonia System continued
to deliver solid, dependable revenue contributions, with throughput
up six percent in the first quarter of 2023 compared to the first
quarter of 2022, which reflects the strength of these assets and
our position in the markets we serve in the mid-Continent and
throughout Texas,” said Barron. “Our Central West Pipeline Systems,
particularly our McKee System, also performed well last quarter
with higher revenues and throughputs compared to the first quarter
of 2022, mainly due to increased demand into the Denver
market.”
Barron also noted that NuStar’s Permian Crude System volumes
averaged 543,000 barrels per day (BPD), up six percent over first
quarter of 2022 volumes, and its Corpus Christi Crude System
throughputs averaged 369,000 BPD, which is eight percent higher
than volumes in the first quarter of 2022.
“In addition, after a near record-breaking 2022, our Fuels
Marketing Segment kicked off 2023 with a strong first quarter by
generating operating income and EBITDA of $7 million, which is
comparable to the segment’s strong first quarter of 2022 results.
And, we are also pleased that our West Coast region delivered
another strong quarter, with revenues up about 33 percent compared
to the first quarter of 2022, driven in large part by our West
Coast renewable fuels strategy,” said Barron.
Balance Sheet Continues to
Strengthen
NuStar Executive Vice President and Chief Financial Officer Tom
Shoaf gave a positive update on the company’s continued progress in
reducing its debt and building its financial strength and
flexibility.
“In March, we entered into a structured financing arrangement to
monetize a portion of our real estate at our corporate
headquarters, which provided approximately $100 million of
lower-priced financing,” said Shoaf. “By doing so, we were able to
deploy the proceeds to reduce debt, which facilitates our
redemption of another portion of the Series D preferred units later
this year. As we have mentioned on prior calls, we are planning to
redeem all of the remaining Series D units by the end of 2024, or
about two years ahead of our original schedule.
“Thanks to that transaction, along with our strong first quarter
EBITDA, we ended the first quarter of 2023 with a debt-to-EBITDA
ratio of 3.46 times,” said Shoaf. “Our total debt balance was $3.1
billion, and our revolver facility availability was $940 million of
the facility’s $1 billion capacity.”
Positive Outlook for Remainder of
2023
Shoaf also gave an update on full-year guidance for net income
and adjusted EBITDA, as well as strategic capital and reliability
capital for 2023.
“While high inflation and volatility that distinguished 2022
have persisted so far this year, we expect to generate full-year
2023 net income in the range of $257 to $295 million and full-year
2023 adjusted EBITDA in the range of $700 to $760 million,” said
Shoaf.
He also noted that NuStar still plans to spend $130 to $150
million in strategic capital in 2023.
“Depending on the activity of our Permian producers over the
course of the rest of the year, we expect to allocate between $45
and $60 million to growing our Permian system,” said Shoaf. “We
continue to expect to spend around $25 million to expand our West
Coast Renewable Fuels Network.
“In addition, we still expect to spend between $25 and $35
million on reliability this year.”
Barron stated that NuStar expects to once again self-fund all of
its cash requirements, including all of its growth capital spending
and its distributions.
“What’s more, even with our planned Series D redemption later
this year, we are still on track to finish 2023 with a healthy
debt-to-EBITDA ratio of below four times,” said Barron.
Barron closed by highlighting an agreement that was jointly
announced by NuStar and OCI Global yesterday that will involve
NuStar transporting ammonia on a new segment of its existing
2,000-mile anhydrous ammonia pipeline to OCI’s state-of-the-art
ammonia products facility in Iowa.
“We expect this healthy-return, low-capital project will
meaningfully increase utilization of our Ammonia System,” said
Barron. “And we expect this project to be just the first of
several, as we are actively working with a number of potential
customers interested in connections to our system, across our
footprint, for a variety of different opportunities.”
Barron continued, “As you may know, about 90 percent of ammonia
is used to support agricultural production and more than half of
the world’s food production is dependent on this key chemical.
Because of its importance, there is increasing focus on
de-carbonizing the process used to make ammonia, either by
capturing emissions or by utilizing electrolysis fueled by solar or
wind to lower emissions, referred to, respectively, as ‘blue’ and
‘green’ ammonia.
“We are seeing growing interest in lower carbon ammonia from
many different companies and potential customers. In addition to
the ‘greening’ of ammonia expanding the market domestically,
international demand is also driving interest in ammonia export,
which could drive additional utilization of not only our Ammonia
System but also, potentially, our St. James facility, which has
dock capacity that could support ammonia export. So as you can see,
this growing interest in ammonia – to reduce emissions and supply
the globe – is generating opportunities for attractive return,
low-spend projects that we are confident will increase our system
utilization significantly, across our footprint, over the next
several years,” Barron concluded.
Conference Call Details
A conference call with management is scheduled for 9:00 a.m. CT
on Thursday, May 4, 2023, to discuss the financial and operational
results for the first quarter of 2023. Persons interested in
listen-only participation may access the conference call directly
at https://edge.media-server.com/mmc/p/fnk2v7x2. Persons interested
in Q&A participation may pre-register for the conference call
and obtain a dial-in number and passcode at
https://register.vevent.com/register/BI3c790e56797c443d95909ed3a22b5f52.
A recorded version will be available two hours after the conclusion
of the conference call at
https://edge.media-server.com/mmc/p/fnk2v7x2.
The conference call may also be accessed through the “Investors”
section of NuStar Energy L.P.’s website at
https://investor.nustarenergy.com.
NuStar Energy L.P., a publicly traded master limited partnership
based in San Antonio, Texas, is one of the largest independent
liquids terminal and pipeline operators in the nation. NuStar
currently has approximately 9,500 miles of pipeline and 63 terminal
and storage facilities that store and distribute crude oil, refined
products, renewable fuels, ammonia and specialty liquids. The
partnership’s combined system has approximately 49 million barrels
of storage capacity, and NuStar has operations in the United States
and Mexico. For more information, visit NuStar Energy L.P.’s
website at www.nustarenergy.com and its Sustainability page at
https://sustainability.nustarenergy.com/.
Cautionary Statement Regarding
Forward-Looking Statements
This press release includes, and the related conference call
will include, forward-looking statements regarding future events
and expectations, such as NuStar’s future performance, plans and
expenditures. All forward-looking statements are based on NuStar’s
beliefs as well as assumptions made by and information currently
available to NuStar. These statements reflect NuStar’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 2022 annual
report on Form 10-K and subsequent filings with the Securities and
Exchange Commission. Actual results may differ materially from
those described in the forward-looking statements. Except as
required by law, NuStar does not intend, or undertake any
obligation, to update or revise its forward-looking statements,
whether as a result of new information, future events or
otherwise.
NuStar Energy L.P. and
Subsidiaries
Consolidated Financial
Information
(Unaudited, Thousands of
Dollars, Except Unit, Per Unit and Ratio Data)
Three Months Ended March
31,
2023
2022
Statement of Income Data:
Revenues:
Service revenues
$
285,266
$
265,305
Product sales
108,601
144,558
Total revenues
393,867
409,863
Costs and expenses:
Costs associated with service
revenues:
Operating expenses
89,162
86,402
Depreciation and amortization expense
62,054
63,303
Total costs associated with service
revenues
151,216
149,705
Costs associated with product sales
93,461
126,715
Impairment loss
—
46,122
General and administrative expenses
28,725
27,071
Other depreciation and amortization
expense
1,555
1,824
Total costs and expenses
274,957
351,437
Gain on sale of assets
41,075
—
Operating income
159,985
58,426
Interest expense, net
(57,371
)
(49,818
)
Other income, net
4,509
3,671
Income before income tax expense
(benefit)
107,123
12,279
Income tax expense (benefit)
1,187
(33
)
Net income
$
105,936
$
12,312
Basic and diluted net income (loss) per
common unit
$
0.61
$
(0.22
)
Basic and diluted weighted-average common
units outstanding
110,880,981
110,177,045
Other Data (Note 1):
Adjusted net income
$
64,861
$
57,290
Adjusted net income per common unit
$
0.24
$
0.19
EBITDA
$
228,103
$
127,224
Adjusted EBITDA
$
187,028
$
173,346
DCF
$
141,810
$
91,058
Adjusted DCF
$
100,735
$
91,058
Distribution coverage ratio
3.19x
2.06x
Adjusted distribution coverage ratio
2.27x
2.06x
For the Four Quarters Ended
March 31,
2023
2022
Consolidated Debt Coverage Ratio
3.46x
3.92x
NuStar Energy L.P. and
Subsidiaries
Consolidated Financial
Information - Continued
(Unaudited, Thousands of
Dollars, Except Barrel Data)
Three Months Ended March
31,
2023
2022
Pipeline:
Crude oil pipelines throughput
(barrels/day)
1,325,282
1,309,085
Refined products and ammonia pipelines
throughput (barrels/day)
595,622
563,248
Total throughput (barrels/day)
1,920,904
1,872,333
Throughput and other revenues
$
213,183
$
188,683
Operating expenses
49,775
48,103
Depreciation and amortization expense
43,550
44,828
Segment operating income
$
119,858
$
95,752
Storage:
Throughput (barrels/day) (a)
502,717
482,526
Throughput terminal revenues
$
27,315
$
26,441
Storage terminal revenues
53,342
61,480
Total revenues
80,657
87,921
Operating expenses
39,387
38,299
Depreciation and amortization expense
18,504
18,475
Impairment loss
—
46,122
Segment operating income (loss)
$
22,766
$
(14,975
)
Fuels Marketing:
Product sales
$
100,027
$
133,260
Cost of goods
93,186
126,123
Gross margin
6,841
7,137
Operating expenses
275
593
Segment operating income
$
6,566
$
6,544
Consolidation and Intersegment
Eliminations:
Revenues
$
—
$
(1
)
Cost of goods
—
(1
)
Total
$
—
$
—
Consolidated Information:
Revenues
$
393,867
$
409,863
Costs associated with service
revenues:
Operating expenses
89,162
86,402
Depreciation and amortization expense
62,054
63,303
Total costs associated with service
revenues
151,216
149,705
Costs associated with product sales
93,461
126,715
Impairment loss
—
46,122
Segment operating income
149,190
87,321
Gain on sale of assets
41,075
—
General and administrative expenses
28,725
27,071
Other depreciation and amortization
expense
1,555
1,824
Consolidated operating income
$
159,985
$
58,426
(a)
Prior period throughputs for our Corpus
Christi North Beach terminal in the storage segment were restated
consistent with current period presentation.
NuStar Energy L.P. and
Subsidiaries
Reconciliation of Non-GAAP
Financial Information
(Unaudited, Thousands of
Dollars, Except Ratio Data)
Note 1: NuStar Energy L.P. utilizes financial measures,
such as earnings before interest, taxes, depreciation and
amortization (EBITDA), distributable cash flow (DCF) and
distribution coverage ratio, which are not defined in U.S.
generally accepted accounting principles (GAAP). Management
believes these financial measures provide useful information to
investors and other external users of our financial information
because (i) they provide additional information about the operating
performance of the partnership’s assets and the cash the business
is generating, (ii) investors and other external users of our
financial statements benefit from having access to the same
financial measures being utilized by management and our board of
directors when making financial, operational, compensation and
planning decisions and (iii) they highlight the impact of
significant transactions. We may also adjust these measures to
enhance the comparability of our performance across periods.
Our board of directors and management use EBITDA and/or DCF when
assessing the following: (i) the performance of our assets, (ii)
the viability of potential projects, (iii) our ability to fund
distributions, (iv) our ability to fund capital expenditures and
(v) our ability to service debt. In addition, our board of
directors uses EBITDA, DCF and a distribution coverage ratio, which
is calculated based on DCF, as some of the factors in its
compensation determinations. DCF is a financial indicator used by
the master limited partnership (MLP) investment community to
compare partnership performance. DCF is used by the MLP investment
community, in part, because the value of a partnership unit is
partially based on its yield, and its yield is based on the cash
distributions a partnership can pay its unitholders.
None of these financial measures are 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 GAAP.
The following is a reconciliation of net income to EBITDA, DCF
and distribution coverage ratio.
Three Months Ended March
31,
2023
2022
Net income
$
105,936
$
12,312
Interest expense, net
57,371
49,818
Income tax expense (benefit)
1,187
(33
)
Depreciation and amortization expense
63,609
65,127
EBITDA
228,103
127,224
Interest expense, net
(57,371
)
(49,818
)
Reliability capital expenditures
(3,356
)
(6,709
)
Income tax (expense) benefit
(1,187
)
33
Long-term incentive equity awards (a)
2,968
2,829
Preferred unit distributions
(32,733
)
(31,092
)
Impairment loss
—
46,122
Income tax benefit related to impairment
loss
—
(1,144
)
Other items
5,386
3,613
DCF
$
141,810
$
91,058
Distributions applicable to common limited
partners
$
44,396
$
44,165
Distribution coverage ratio (b)
3.19x
2.06x
(a)
We intend to satisfy the vestings of these equity-based awards
with the issuance of our common units. As such, the expenses
related to these awards are considered non-cash and added back to
DCF. Certain awards include distribution equivalent rights (DERs).
Payments made in connection with DERs are deducted from DCF.
(b)
Distribution coverage ratio is calculated by dividing DCF by
distributions applicable to common limited partners.
NuStar Energy L.P. and
Subsidiaries
Reconciliation of Non-GAAP
Financial Information - Continued
(Unaudited, Thousands of
Dollars, Except per Unit and Ratio Data)
The following is the reconciliation for the calculation of our
Consolidated Debt Coverage Ratio, as defined in our revolving
credit agreement (the Revolving Credit Agreement).
For the Four Quarters Ended
March 31,
2023
2022
Operating income
$
510,372
$
196,591
Depreciation and amortization expense
257,718
269,042
Goodwill impairment loss
—
34,060
Other impairment losses
—
201,030
Amortization expense of equity-based
awards
13,997
13,750
Pro forma effect of disposition (a)
—
(14,688
)
Other
(3,230
)
2,081
Consolidated EBITDA, as defined in the
Revolving Credit Agreement
$
778,857
$
701,866
Long-term debt, less current portion of
finance leases
$
3,113,074
$
3,168,425
Finance leases (long-term)
(50,712
)
(52,510
)
Unamortized debt issuance costs
31,878
37,225
NuStar Logistics' floating rate
subordinated notes
(402,500
)
(402,500
)
Consolidated Debt, as defined in the
Revolving Credit Agreement
$
2,691,740
$
2,750,640
Consolidated Debt Coverage Ratio
(Consolidated Debt to Consolidated EBITDA)
3.46x
3.92x
(a)
This adjustment represents the pro forma effect of the
disposition of the Eastern U.S. terminals, which were sold in
October 2021.
The following is a reconciliation of net income / net income
(loss) per common unit to adjusted net income / adjusted net income
per common unit.
Three Months Ended March
31,
2023
2022
Net income / net income (loss) per common
unit
$
105,936
$
0.61
$
12,312
$
(0.22
)
Gain on sale of assets
(41,075
)
(0.37
)
—
—
Impairment loss
—
—
46,122
0.42
Income tax benefit related to impairment
loss
—
—
(1,144
)
(0.01
)
Adjusted net income / adjusted net income
per common unit
$
64,861
$
0.24
$
57,290
$
0.19
The following is a reconciliation of EBITDA to adjusted
EBITDA.
Three Months Ended March
31,
2023
2022
EBITDA
$
228,103
$
127,224
Gain on sale of assets
(41,075
)
—
Impairment loss
—
46,122
Adjusted EBITDA
$
187,028
$
173,346
NuStar Energy L.P. and
Subsidiaries
Reconciliation of Non-GAAP
Financial Information - Continued
(Unaudited, Thousands of
Dollars, Except Ratio Data)
The following is a reconciliation of DCF to adjusted DCF and
adjusted distribution coverage ratio.
Three Months Ended March
31,
2023
2022
DCF
$
141,810
$
91,058
Gain on sale of assets
(41,075
)
—
Adjusted DCF
$
100,735
$
91,058
Distributions applicable to common limited
partners
$
44,396
$
44,165
Adjusted distribution coverage ratio
(a)
2.27x
2.06x
(a)
Adjusted distribution coverage ratio is calculated by dividing
adjusted DCF by distributions applicable to common limited
partners.
The following is a reconciliation of projected net income to
EBITDA and adjusted EBITDA.
Projected for the Year Ended
December 31, 2023
Net income
$
257,000 - 295,000
Interest expense, net
230,000 - 240,000
Income tax expense
4,000 - 6,000
Depreciation and amortization expense
250,000 - 260,000
EBITDA
741,000 - 801,000
Gain on sale of assets
(41,000)
Adjusted EBITDA
$
700,000 - 760,000
The following are reconciliations for our reported segments of
operating income (loss) to segment EBITDA and adjusted segment
EBITDA.
Three Months Ended March 31,
2023
Pipeline
Storage
Fuels Marketing
Operating income
$
119,858
$
22,766
$
6,566
Depreciation and amortization expense
43,550
18,504
—
Segment EBITDA
$
163,408
$
41,270
$
6,566
Three Months Ended March 31,
2022
Pipeline
Storage
Fuels Marketing
Operating income (loss)
$
95,752
$
(14,975
)
$
6,544
Depreciation and amortization expense
44,828
18,475
—
Segment EBITDA
140,580
3,500
6,544
Impairment loss
—
46,122
—
Adjusted segment EBITDA
$
140,580
$
49,622
$
6,544
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