History of NuStar Energy L.P.
NuStar Energy L.P.’s history has been filled with dramatic growth and success, rising from humble beginnings in 2001 to become the rising star of the energy industry today.
The partnership made its successful initial public offering (IPO) on April 16, 2001, with one of the best one-day performances of any master limited partnership IPO ever. On its first day, the partnership, then known as Shamrock Logistics L.P. and part of the former Ultramar Diamond Shamrock Corp., sold 5.175 million partnership units at $24.50, nearly twice the expected price range for this IPO. The partnership was soon renamed Valero L.P. after Valero Energy Corp. acquired UDS later in 2001. And since that time, the partnership has had outstanding results and demonstrated how a limited partnership can have unlimited potential.
“One of the best bonuses of the UDS acquisition was its limited partnership,” NuStar Chairman Bill Greehey said in 2002, who at the time was also Chairman and CEO of Valero Energy. “We plan to aggressively grow the L.P. to benefit the shareholders of both companies.”
Initially, Valero Energy Corporation owned about 74 percent of the partnership. In its first year, the L.P.’s network included 2,800 miles of refined product pipelines, 11 refined product terminals, 800 miles of crude oil pipelines and crude oil storage facilities with a capacity of 3.3 million barrels.
With a strong financial base of about $92 million in annual revenues in its first year, the partnership’s steady financial and asset growth began with several acquisitions that helped to strengthen the network and build synergies within the L.P.’s system.
The first acquisitions, in 2001, included the Southlake, Texas refined product terminal, which has connections to pipelines that move refined product produced at several refineries, and crude oil storage tanks in Ringgold, Texas.
The growth continued in early 2002, when the partnership purchased the Wichita Falls, Texas crude oil storage facility and a 272-mile crude oil pipeline that extends from Wichita Falls to the Texas Panhandle. As a result of these early acquisitions, throughput volumes at the partnership’s refined product terminals increased 23,000 barrels per day (BPD) and throughput volumes transported through the L.P.’s crude oil pipelines increased by 9,000 BPD.
The growth continued to flow in 2003. The partnership expanded to the West Coast with the purchase of an asphalt terminal and storage facility from Telfer Oil Company. Located in Pittsburg, California, the 350,000-barrel-capacity storage facility served the fast-growing Northern California asphalt market.
But the L.P.’s most exciting project for 2003 was its move into Mexico, through the Dos Laredos project in which NuStar agreed to transport propane into Mexico. It was the partnership’s first international project. The partnership acquired and built pipeline connections to move the propane from refineries in Corpus Christi and Three Rivers, Texas, to Nuevo Laredo, Mexico. The partnership also constructed a terminal in Nuevo Laredo that was completed in June 2004.
Another major turning point for the L.P. occurred in 2003 when it acquired several key assets from Valero. The partnership purchased 58 crude oil and intermediate storage tanks, which had a storage capacity of 11 million barrels, plus a 468-mile South Texas pipeline system, five product terminals and one asphalt terminal from Valero Energy. The L.P. also redeemed 3.8 million common units from Valero Energy to reduce Valero’s ownership interest in the partnership from nearly 74 percent to about 49 percent. This move deconsolidated Valero L.P. from Valero Energy’s financial statements, providing greater growth opportunities for both companies.
With its continued successful expansions, the partnership decided to “go global.” In 2005, the partnership became one of the largest petroleum liquids pipeline and terminal operators in the United States. With the nearly $2.8 billion acquisition of Kaneb Pipe Line Partners, L.P., The partnership now had pipelines, terminals and bulk storage facilities located in most of the U.S., as well as Canada, Mexico, the Netherlands Antilles, the United Kingdom and the Netherlands. “The L.P.’s growth strategy is based upon our mission statement, which is to solve the logistical needs of our customers by moving products where and when they want them better than anyone else. To do that requires us to offer a safe, reliable operation that meets or exceeds customer expectations,” said Curt Anastasio, NuStar Energy L.P. President and CEO.
By 2006, it became clear that complete separation of Valero Energy and the L.P. would be advantageous to both. “It is necessary to continue the process of separating Valero Energy and Valero L.P. to allow both companies to pursue their own strategic initiatives,” Greehey said at the time. “We expect that the complete separation of the L.P. from Valero Energy will better position the partnership for future growth."
A new organization, Valero GP Holdings, LLC, which was subsequently renamed NuStar GP Holdings, LLC, was formed to assume Valero Energy’s ownership in the L.P. In July 2006 the GP had its IPO that consisted of approximately 41 percent of the units previously owned by subsidiaries of Valero Energy. A follow-on offering in December 2006 consisted of the remaining 59 percent, reducing Valero Energy’s ownership in the L.P. to zero. Both offerings were tremendously successful, and within eight months of the IPO, the GP had achieved 25 percent unitholder return, nearly double the S&P 500 Index’s 13 percent return over the same period.
Also in December 2006, the L.P. completed the purchase of the St. James Crude Oil facility located in Louisiana from Koch Supply and Trading, L.P. The acquisition included 17 crude oil tanks and three heated refined product tanks with a total capacity of approximately 3.3 million barrels. Additionally, the facility has a rail-loading facility and three docks with barge and ship access.
Throughout most of its history, the L.P. had grown and succeeded as Valero L.P., but with its separation from Valero Energy, it was time for the L.P. to forge a new path. And one important part of that path was a “Nu” name. The NuStar Energy L.P. name and eye-catching, blue-and-yellow logo, which features a shooting star, were unveiled in February 2007, and became official in April 2007 when the L.P. began trading as NuStar, with the NYSE ticker symbol, “NS.” And NuStar GP Holdings, LLC began trading under the symbol, “NSH.”
"Our new name says it all," said Greehey. "We are the new star in the energy business, and because of our employees' contributions to our success, we are at a very important turning point in the history of our company. With our newfound independence, we are now in a better position to continue growing and achieving even greater success in the years ahead."
The name change also dovetails with the L.P.'s move to a new corporate office in north San Antonio. The 84,000-square-foot building is in a highly visible location in one of the fastest-growing areas of the city.
A big part of NuStar's strategy was to become a major player in the asphalt marketing business. This new strategy harkened back to Greehey’s contrarian view of the refining industry in the late ‘90s, which of course paid off handsomely for Valero’s shareholders. Now, NuStar’s leaders were taking a contrarian view of the asphalt refining business – a specialty that many companies didn’t see much of a future in. But with so many refiners now investing in coker units to make premium products from the bottom of the barrel, there would obviously be less of the bottom of the barrel available to make asphalt. And, of course, less supply typically translates into higher margins. NuStar executives had so much confidence in their vision that they began aggressively looking for asphalt assets to acquire. And on November 7, 2007, NuStar hit paydirt! The company announced an agreement to acquire CITGO Asphalt Refining Company (CARCO) for $450 million – propelling it into the major leagues of asphalt refining. The deal, which included two asphalt refineries and a network of asphalt terminals on the East Coast, would make NuStar the No. 1 asphalt producer on the U.S. East Coast and the No. 3 asphalt refiner in the nation. The Express-News announced the news under a banner headline that read, “NuStar Joining Big Guys.” Greehey was quoted as saying, “This is a new direction for NuStar, a new line of business. It separates us from our peer group.” Meanwhile, Anastasio promoted the deal to Wall Street, making live appearances on CNBC and Bloomberg TV, as employees cheered him on from a viewing party at corporate headquarters.
While NuStar executives planned to close on the acquisition at the end of 2007, officials with Petróleos de Venezuela, S.A., CITGO’s parent company, put up road blocks as the closing date approached. December 31, 2007 came and went without the agreements being signed. Political maneuvering ensued. More negotiations followed. Agreements were revised. And after many frustrated attempts to close the deal, it was finally completed on March 20, 2008. No one was more excited than Bill Greehey and Curt Anastasio. They started out the employee announcement by saying, “At long last, we are happy to tell all of you that we have finally closed on the CARCO acquisition. It took a lot of hard work, patience and persistence to complete this acquisition, so we want to take this opportunity to thank everyone who helped bring it to a successful close. It obviously took far longer than originally anticipated! But we made it!”
NuStar continued to search for ways to expand its footprint in the U.S. In May of 2010, the company acquired Denham Capital’s equity holdings in Asphalt Holdings Inc. for $44.1 million. NuStar added three new storage terminals in Mobile, Alabama, that included 24 storage tanks with a total capacity of approximately 1.8 million barrels. In addition, the facilities included rail and truck loading facilities and three docks with ship and barge access. Anastasio pointed out that, “Through this acquisition, we expanded our terminal presence into a new market in the U.S. Gulf Coast and have the opportunity to expand into a new asphalt market as well.”
NuStar officials were also looking to expand their international operations. And they accomplished this goal with the completion of a joint venture with Turkish companies S-Oil and Aves in February of 2010. NuStar gained majority ownership and operational control of two terminals located in Mersin, Turkey, which have 44 tanks with a combined storage capacity of over 1.3 million barrels. This transaction also presented NuStar with the opportunity to significantly expand these operations through internal growth projects and explore other opportunities for growth in Turkey.
In April of 2011, the company acquired key refining and terminal assets from AGE Refining for $41 million. This acquisition included a low-cost 14,500 BPD refinery on the South Side of San Antonio, and a 200,000-barrel terminal in Elmendorf, Texas. “This relatively small transaction is a great acquisition for our investors, employees and community,” said Anastasio. The acquisition of the AGE refinery was seen as a prudent business move on NuStar’s part. “The refinery’s proximity to the Eagle Ford Shale is a big plus, said Anastasio. “The light crude oil that is coming out of the Eagle Ford Shale is well suited to the refinery, and it is in our backyard, so our transportation costs are low. We expect this will provide a significant economic benefit because we’re able to take advantage of these lower costs, South Texas sweet crudes and realize transportation cost savings which will enhance the refinery’s profitability.”
As a result of its successful growth strategy, NuStar has grown from 160 employees at the time of its IPO in 2001 to over 1,900 today; from $387 million in assets to $5.2 billion; and from $99 million in revenues to an amazing $4.4 billion. Based on this growth, it’s no surprise that at the end of 2010 NuStar was ranked as the second fastest growing energy company in the Americas by Platts!
As NuStar has continued to grow, so have its investments in health, safety and environment, as well as staff, programs and systems. These investments resulted in one of the best safety and environmental track records in the industry. At NuStar, safety is the top priority and running a safe and ecologically sound operation is a core business value.
NuStar’s tremendous growth and success is the result of a strong corporate culture. “Our employees are NuStar’s biggest asset and the reason that the partnership has continuously achieved record-breaking results,” said Anastasio. “NuStar has the best and brightest employees who care about the company, their co-workers and the communities where we have operations. We are excited about working with them to continue expanding our presence, improving our assets, increasing our unitholder value, making the company an even greater place to work, and making a positive difference in our communities."