SAN ANTONIO, August 3, 2009 – NuStar Energy L.P. (NYSE: NS) today announced record second quarter net income applicable to limited partners of $75.1 million, or $1.38 per unit, compared to $8.1 million, or $0.15 per unit, earned in the second quarter of 2008.  The second quarter 2009 results represent the second highest quarterly earnings of any quarter in the partnership’s history behind last year’s $2.60 per unit earned in the third quarter.  For the six months ended June 30, 2009, net income applicable to limited partners was $106.8 million, or $1.96 per unit, significantly higher than the $57.7 million, or $1.11 per unit, for the six months ended June 30, 2008. 

 

“We are very excited about these outstanding earnings as they exceeded both the high end of our guidance range and analysts’ projections,” said Curt Anastasio, Chief Executive Officer and President of NuStar Energy L.P. and NuStar GP Holdings, LLC.  “These results were the product of solid contributions from our asphalt and storage operations.”

 

Included in NuStar Energy L.P.’s earnings for the second quarter of 2009 is an $18.8 million, or $0.34 per unit, net gain resulting primarily from the sale of the Ardmore-Wynnewood pipeline in Oklahoma and the Trans-Texas pipeline.  The sale of these non-strategic pipelines, which was effective June 15, generated proceeds of $29 million, which were used to pay down debt.  Excluding the effect of the sale of the pipelines and other items, second quarter 2009 adjusted earnings would have been $56.7 million, or $1.04 per unit.  This not only represents a record for the second quarter and the second highest quarterly earnings in NuStar’s history, but also a nearly 600 percent increase over last year’s second quarter earnings.

 

With respect to the quarterly distribution to unitholders for the second quarter of 2009, NuStar Energy L.P. also announced that its board of directors has declared a distribution of $1.0575 per unit, which would equate to $4.23 per unit on an annual basis.  This quarterly distribution represents an increase of $0.0725 per unit, or 7.4 percent, over the $0.985 distribution for the second quarter of 2008.  The second quarter 2009 distribution will be paid on August 13, 2009, to holders of record as of August 6, 2009. 

 

Distributable cash flow available to limited partners of $123.4 million, or $2.27 per unit, was also a second quarter record and nearly four times higher than the $31.5 million, or $0.58 per unit, for the second quarter of 2008.  For the six months ended June 30, 2009, distributable cash flow available to limited partners was $192.9 million, or $3.54 per unit, compared to $103.5 million, or $2.04 per unit for the six months ended June 30, 2008.  Distributable cash flow available to limited partners covers the distribution to the limited partners by a strong 2.14 times for the second quarter of 2009. 

 

“Our asphalt operations were one of the principal drivers for our record second quarter 2009 results,” said Anastasio.  “During the quarter, we benefited from a significantly higher margin per barrel compared to last year, or $9.10 versus $1.37.  Our strategy of producing and storing asphalt inventories at lower costs during the winter months and selling these same inventories at higher prices during the asphalt season allowed us to capture a generous margin in the second quarter. 

 

“While our asphalt sales volumes were negatively impacted at the start of the second quarter as a result of unseasonably wet weather on the U.S. East Coast, we saw a marked improvement by the end of the quarter.  We believe the impact from the weather on asphalt paving projects has resulted in only a deferral and not a cancellation of projects.  As a result, asphalt sales volumes have essentially been postponed from the second quarter to now primarily the third quarter.  We should see sales volumes increase in the second half of this year now that the weather has improved, deferred projects have been starting up and stimulus funds are being put to work.     

 

“Our storage segment also contributed significantly to our strong second quarter 2009 results.  Operating income increased by nearly 20 percent compared to the second quarter of last year as we benefited largely from projects completed under the company’s previous $400 million construction program.  Renewals of lease contracts at higher rates due to strong demand for storage at key terminals also contributed to our strong results in this segment.  We should continue to see strong results from our storage segment for the second half of 2009. 

 

“Not surprising, earnings from our transportation segment were lower in the second quarter of 2009 compared to last year as volumes were primarily impacted by planned turnarounds and unplanned operational outages at several of the customer’s refineries we serve.  Since one of the planned turnarounds was extended and took longer than expected, and there were multiple unplanned operational outages at other refineries we serve, our volumes were slightly lower than what we had anticipated.  The sale of the Ardmore-Wynnewood and Trans-Texas pipelines also caused our volumes to be lower in the second quarter compared to last year.  The good news is that we have started benefiting from the 7.6 percent tariff increase, which was effective July 1, on approximately 95 percent of all our transportation segment revenues.  The benefit from this tariff increase should contribute to slightly higher results on our transportation segment in 2009 compared to 2008 despite lower throughputs.  

 

 “I am also pleased with our solid balance sheet and liquidity position.  At the end of the quarter, we had $363 million available under our revolving credit facility even with higher seasonal inventories and crude oil prices.  As inventories start to seasonally decline during the second half of the year, our working capital requirements should continue to fall as well, assuming the price of crude oil doesn’t increase significantly.  As a result, we are currently targeting our revolver availability to be in excess of $500 million by the end of the year.  With ample liquidity, improved capital markets and our disciplined financial strategy, NuStar is well-positioned to pursue additional acquisition and internal growth opportunities. 

 

“Since we do not expect to see the extreme volatility in commodity markets like last year, we do not anticipate the same scenario to unfold in our asphalt operations in the second half of 2009.  Last year, most of the contribution was compressed to the third quarter as asphalt and product prices ran up following the dramatic increase in crude oil in the second quarter.  The fourth quarter of 2008 was then negatively impacted by the subsequent steep decline in product prices and our higher costs of goods sold. 

 

“For the second half of 2009, we still expect a solid contribution from our asphalt operations as asphalt supply continues to be tight and demand should start improving.  However, the contribution should be spread out between the third and fourth quarters as margins will likely not be nearly as good in the third quarter compared to last year’s third quarter, but fourth quarter margins should be significantly better than last year’s fourth quarter. 

 

“The outlook for the remainder of the year continues to be strong primarily due to the contribution from our asphalt operations and internal growth projects in our storage segment.  As a result, we expect to be in a position to increase our distribution in 2009.  Based on our current forecast, we are projecting earnings to be in the range of $1.10 to $1.50 per unit for the third quarter of 2009,” said Anastasio.

 

A conference call with management is scheduled for 3:00 p.m. ET (2:00 p.m. CT) today, August 3, 2009, to discuss the financial and operational results for the second quarter of 2009.  Investors interested in listening to the presentation may call 800/622-7620, passcode 19298146.  International callers may access the presentation by dialing 706/645-0327, passcode 19298146.  The company intends to have a playback available following the presentation, which may be accessed by calling 800/642-1687, passcode 19298146.  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 8,407 miles of pipeline, 82 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 nearly 91 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.