NuStar Energy L.P. Reports Better-Than-Expected Second Quarter 2008 Earnings and Announces Quarterly Distribution
NuStar Energy L.P. (NYSE:NS) today announced net income applicable to limited partners of $8.2 million, or $0.15 per unit, for the second quarter of 2008, which is better than the break-even earnings estimate that was communicated in the interim second quarter guidance update. These results compare to $34.6 million, or $0.74 per unit, earned in the second quarter of 2007. For the six months ended June 30, 2008, net income applicable to limited partners was $57.9 million, or $1.12 per unit, compared to $61.2 million, or $1.31 per unit, for the six months ended June 30, 2007.
Excluding the impact of the cash hedging loss and other items, adjusted net income applicable to limited partners for the second quarter of 2008 would have been $68.1 million, or $1.25 per unit. For the six months ended June 30, 2008, net income applicable to limited partners would have been $108.5 million, or $2.09 per unit. As communicated on May 28 in NuStar Energy L.P.’s guidance update, the second quarter 2008 results include a $61.3 million, or $1.10 per unit, loss associated with crude oil and refined product hedges placed on approximately 30 percent of the total inventories acquired with the CITGO asphalt acquisition on March 20.
With respect to the quarterly distribution to unitholders for the second quarter of 2008, NuStar Energy L.P. also announced that its board of directors has declared a distribution of $0.985 per unit, which would equate to $3.94 per unit on an annualized basis. This quarterly distribution represents an increase of $0.035 per unit, or 3.7 percent, over the $0.95 per unit distribution for the second quarter of 2007 and will be paid on August 13, 2008, to holders of record as of August 6, 2008.
“We are pleased to announce that we delivered better-than-expected earnings primarily due to stronger asphalt margins and higher asphalt volumes sold,” said Curt Anastasio, Chief Executive Officer and President of NuStar Energy L.P. and NuStar GP Holdings, LLC. “Without the hedging loss, our earnings for the second quarter would have been the highest quarterly earnings ever reported by NuStar, which follows our record earnings in the first quarter of 2008. The operating income contribution from the asphalt business in the second quarter was $52.8 million before the hedging loss, which was even better than we expected and our base business continues to perform well.
“I am excited to announce that we have recently completed storage expansion projects at our facilities in Texas City, Texas and St. James, Louisiana. We expect that several other storage expansion projects will be complete by the end of the third quarter, including projects at St. James, Louisiana; Jacksonville, Florida; Amsterdam in the Netherlands and Linden, New Jersey (New York Harbor). When completed, these projects are expected to add approximately $20 million to operating income in 2008 over 2007. With our $400 million construction program drawing to an end, we are focusing on the next phase of growth primarily associated with storage expansion projects in the U.S. and internationally.
“Our employees have done a great job of integrating the asphalt assets into our system. We have identified around $35 million of high-return, quick pay-back projects at both the Paulsboro and Savannah asphalt plants and we continue to evaluate other opportunities at these facilities,” he said.
Distributable cash flow available to limited partners for the second quarter of 2008 was $31.5 million, or $0.58 per unit, compared to $53.6 million, or $1.15 per unit, for the second quarter of 2007. For the six months ended June 30, 2008, distributable cash flow available to limited partners was $103.5 million, or $2.04 per unit, compared to $101.0 million, or $2.16 per unit for the six months ended June 30, 2007. Distributable cash flow available to limited partners covers the distribution to the limited partners by 0.59 times for the second quarter of 2008.
Excluding the impact of the cash hedging loss and other items, distributable cash flow available to limited partners for the second quarter of 2008 would have also been the best in the partnership’s history at $92.7 million, or $1.70 per unit, and the coverage ratio available to limited partners would have been a strong 1.73 times. For the six months ended June 30, 2008, distributable cash flow available to limited partners would have been $155.2 million, or $2.97 per unit, and the coverage ratio available to limited partners would have been 1.51 times before the hedging loss and other items.
“We continue to believe third quarter 2008 earnings will be exceptionally strong and the contribution from the asphalt business for 2008, even with the hedging loss, to be in the EBITDA range previously communicated. The good news is that we expect to increase the distribution in the third quarter of 2008. Despite the recent drop in crude oil prices, asphalt prices have continued to increase dramatically due to tight supplies and are expected to be even higher in the third quarter of 2008 compared to the second quarter of 2008. Based on current fundamentals, we now expect asphalt prices of between $625 and $700 per short ton for the third quarter of 2008, which is significantly higher than $450 per short ton we averaged in the second quarter. As a result, third quarter 2008 margins for the asphalt business are also expected to be significantly better. While we expect refined product and crude oil pipeline volumes to decline slightly primarily due to high fuels prices, increases in transportation tariffs should offset the negative financial impact of lower volumes. In addition, we expect to see continued good results from our storage business since the majority of it is contracted from three to ten years,” said Anastasio.
A conference call with management is scheduled for 11:00 a.m. ET (10:00 a.m. CT) today, July 25, 2008, to discuss the financial and operational results for the second quarter of 2008. Investors interested in listening to the presentation may call 800/622-7620, passcode 54135570. International callers may access the presentation by dialing 706/645-0327, passcode 54135570. The company intends to have a playback available following the presentation, which may be accessed by calling 800/642-1687, passcode 54135570. 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 88 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.