UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
 
 
 
  FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2018
NuStar Energy L.P.
(Exact name of registrant as specified in its charter)
Delaware
001-16417
74-2956831
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
 
 
 
19003 IH-10 West
San Antonio, Texas 78257
 
 
(Address of principal executive offices)
 
 
 
 
 
(210) 918-2000
 
 
(Registrant’s telephone number, including area code)
 
 
 
 
 
Not applicable
 
 
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).    
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
 
 
 
 



Item 2.02    Results of Operations and Financial Condition.

On August 7, 2018, NuStar Energy L.P., a Delaware limited partnership, issued a press release announcing financial results for the quarter ended June 30, 2018. A copy of the press release announcing the financial results is furnished with this report as Exhibit 99.01 and is incorporated herein by reference.


Item 9.01    Financial Statements and Exhibits.

(d)     Exhibits.

Exhibit Number
 
Exhibit
 
 
 
 
Press Release dated August 7, 2018.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
NUSTAR ENERGY L.P.
 
 
 
 
 
 
 
By:
Riverwalk Logistics, L.P.
 
 
its general partner
 
 
 
 
 
 
 
By:
NuStar GP, LLC
 
 
 
its general partner
 
 
 
 
 
Date: August 7, 2018
 
 
By:
/s/ Amy L. Perry
 
 
 
Name:
Amy L. Perry
 
 
 
Title:
Senior Vice President, General Counsel-Corporate & Commercial Law and Corporate Secretary



Exhibit 99.01



NuStar Energy L.P. Announces 12% Increase in Second Quarter 2018 Net Income

Second Quarter 2018 Distributable Cash Flow Increases 36%

Permian Crude System Throughput Volumes Exit July at Over 300,000 Barrels Per Day

$600 Million Equity Financing and Merger of General Partner Completed


SAN ANTONIO, August 7, 2018 – For the second quarter of 2018, NuStar Energy L.P. (NYSE: NS) reported net income applicable to common limited partners of $13.7 million, or $0.15 per unit, up $9.3 million from $4.4 million in the second quarter 2017, while earnings before interest, taxes, depreciation and amortization (EBITDA) were $157.1 million, up 11% from $141.1 million for the second quarter 2017.

Distributable Cash Flow (DCF) available to common limited partners was $82.1 million for the second quarter of 2018, up $21.8 million or 36% compared to $60.3 million in the second quarter of 2017. The distribution coverage ratio to the common limited partners for the second quarter of 2018 was 1.28 times, and 1.45 times for the six months ended June 30, 2018.

“Our Permian Crude System continues to grow and perform and was the primary contributor to a strong second quarter for NuStar. During the second quarter of 2018, the Permian Crude System averaged pipeline receipts of over 266,000 barrels per day (BPD) and exited July at over 300,000 BPD. Since our acquisition of the Permian Crude System in May of 2017 volumes are up 140%, significantly higher than the overall growth in the Permian basin of 46% during the same period. Based on our producers’ expectations, we expect our Permian Crude System to continue to drive our partnership’s growth and exit 2018 between approximately 360,000 and 380,000 BPD,” said Brad Barron, President and Chief Executive Officer of NuStar Energy L.P.
 
Completed Merger with General Partner

“On July 20, 2018, we completed the merger with our general partner. By simplifying our corporate structure and eliminating the incentive distribution rights, we immediately lowered our cost of capital, which will allow us to build on the strength of our superior asset base with less dependence on the capital markets,” said Barron. “We also created a more efficient and transparent structure, which was a key component of our comprehensive plan to position NuStar for long-term financial strength and allow us to successfully de-lever and deliver strong, sustainable distribution coverage in the future.”

Completed $600 million of Equity Financing
 
“In two separate closings, one in late June and the second in early July, we closed on the private placement of $590 million of Series D cumulative convertible preferred units. In late June, we also closed on the issuance of $10 million of common units to Bill Greehey, our chairman. We used the net proceeds from these transactions to pay down borrowings under our revolver, which allowed us to significantly improve our leverage metrics,” said Barron.
 
Conference Call Details

A conference call with management is scheduled for 10:00 a.m. CT today, August 7, 2018, to discuss the financial and operational results for the second quarter of 2018. The conference call may be accessed by dialing toll-free 844/889-7787, reservation passcode 6187415. International callers may access the conference call by dialing 661/378-9931, reservation passcode 6187415. The Partnership intends to have a playback available following the conference call, which may be accessed by dialing toll-free 855/859-2056, reservation passcode 6187415. International callers may access the playback by dialing 404/537-3406, reservation passcode 6187415. The playback will be available until 1:00 p.m. CT on September 6, 2018.
 
Investors interested in listening to the live presentation or a replay via the internet may access the presentation directly at https://edge.media-server.com/m6/p/rtc4vkz9 or by logging on to NuStar Energy L.P.’s website at www.nustarenergy.com.
 
The discussion will disclose certain non-GAAP financial measures. Reconciliations of certain of these non-GAAP financial measures to U.S. GAAP may be found in this press release, with additional reconciliations located on the Financials page of the Investors section of NuStar Energy L.P.’s website at www.nustarenergy.com.
 

-More-


NuStar Energy L.P., a publicly traded master limited partnership based in San Antonio, is one of the largest independent liquids terminal and pipeline operators in the nation. NuStar currently has more than 9,700 miles of pipeline and 82 terminal and storage facilities that store and distribute crude oil, refined products and specialty liquids. The partnership’s combined system has more than 97 million barrels of storage capacity, and NuStar has operations in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, and the United Kingdom. For more information, visit NuStar Energy L.P.’s website at www.nustarenergy.com.

This release serves as qualified notice to nominees under Treasury Regulation Sections 1.1446-4(b)(4) and (d). Please note that 100% of NuStar Energy L.P.’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of NuStar Energy L.P.’s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate for individuals and corporations, as applicable. Nominees, and not NuStar Energy L.P., are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes, and the related conference call will include, forward-looking statements regarding future events, such as the partnership’s future performance. 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 2017 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.


-More-


NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Statement of Income Data:
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Service revenues
$
302,131

 
$
283,700

 
$
593,544

 
$
550,162

Product sales
184,073

 
151,788

 
368,541

 
372,756

Total revenues
486,204

 
435,488

 
962,085

 
922,918

Costs and expenses:
 
 
 
 
 
 
 
Costs associated with service revenues:
 
 
 
 
 
 
 
Operating expenses (excluding depreciation and amortization expense)
131,672

 
116,400

 
240,556

 
217,426

Depreciation and amortization expense
73,613

 
65,402

 
143,510

 
120,073

Total costs associated with service revenues
205,285

 
181,802

 
384,066

 
337,499

Cost of product sales
170,849

 
144,479

 
347,577

 
352,285

General and administrative expenses
27,981

 
33,604

 
47,755

 
58,199

Other depreciation and amortization expense
2,251

 
2,199

 
4,369

 
4,392

Total costs and expenses
406,366


362,084


783,767


752,375

Operating income
79,838

 
73,404

 
178,318

 
170,543

Interest expense, net
(48,936
)
 
(45,612
)
 
(96,708
)
 
(82,026
)
Other income, net
1,412

 
88

 
81,164

 
228

Income before income tax expense
32,314

 
27,880

 
162,774

 
88,745

Income tax expense
2,915

 
1,630

 
7,242

 
4,555

Net income
$
29,399

 
$
26,250

 
$
155,532

 
$
84,190

 
 
 
 
 
 
 
 
Net income applicable to common limited partners
$
13,705

 
$
4,364

 
$
121,200

 
$
42,816

Basic net income per common unit
$
0.15

 
$
0.05

 
$
1.30

 
$
0.51

Basic weighted-average common units outstanding
93,192,238

 
90,345,469

 
93,187,038

 
84,526,506

 
 
 
 
 
 
 
 
Other Data (Note 1):
 
 
 
 
 
 
 
EBITDA
$
157,114

 
$
141,093

 
$
407,361

 
$
295,236

DCF available to common limited partners
$
82,057

 
$
60,267

 
$
173,789

 
$
149,209

 
June 30,
 
December 31,
 
2018
 
2017
 
2017
Balance Sheet Data:
 
 
 
 
 
 Total debt
$
3,443,366

 
$
3,521,939

 
$
3,648,059

 Partners’ equity and series D preferred units
$
2,827,188

 
$
2,501,049

 
$
2,480,089




NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Barrel Data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018

2017
 
2018
 
2017
Pipeline:
 
 
 
 
 
 
 
Refined products pipelines throughput (barrels/day)
565,740

 
531,529

 
548,910

 
522,820

Crude oil pipelines throughput (barrels/day):
839,574

 
558,182

 
815,568

 
483,909

Total throughput (barrels/day)
1,405,314

 
1,089,711

 
1,364,478

 
1,006,729

Throughput and other revenues
$
150,276

 
$
126,740

 
$
287,066

 
$
247,980

Operating expenses
48,706

 
40,197

 
91,047

 
73,271

Depreciation and amortization expense
38,591

 
33,675

 
75,246

 
56,813

Segment operating income
$
62,979

 
$
52,868

 
$
120,773

 
$
117,896

Storage:
 
 
 
 
 
 
 
Throughput (barrels/day)
331,917

 
337,518

 
337,892

 
326,327

Throughput terminal revenues
$
20,141

 
$
22,122

 
$
40,157

 
$
42,812

Storage terminal revenues
137,309

 
136,437

 
272,621

 
263,178

Total revenues
157,450

 
158,559

 
312,778

 
305,990

Operating expenses
78,244

 
70,783

 
144,069

 
132,922

Depreciation and amortization expense
35,022

 
31,727

 
68,264

 
63,260

Segment operating income
$
44,184

 
$
56,049

 
$
100,445

 
$
109,808

Fuels Marketing:
 
 
 
 
 
 
 
Product sales and other revenue
$
180,483

 
$
153,918

 
$
366,321

 
$
376,620

Cost of product sales
172,724

 
147,013

 
351,401

 
357,612

Gross margin
7,759

 
6,905

 
14,920

 
19,008

Operating expenses
4,855

 
6,616

 
5,696

 
13,579

Segment operating income
$
2,904

 
$
289

 
$
9,224

 
$
5,429

Consolidation and Intersegment Eliminations:
 
 
 
 
 
 
 
Revenues
$
(2,005
)
 
$
(3,729
)
 
$
(4,080
)
 
$
(7,672
)
Cost of product sales
(1,875
)
 
(2,534
)
 
(3,824
)
 
(5,327
)
Operating expenses
(133
)
 
(1,196
)
 
(256
)
 
(2,346
)
Total
$
3

 
$
1

 
$
—

 
$
1

Consolidated Information:
 
 
 
 
 
 
 
Revenues
$
486,204

 
$
435,488

 
$
962,085

 
$
922,918

Costs associated with service revenues:
 
 
 
 
 
 
 
Operating expenses
131,672

 
116,400

 
240,556

 
217,426

Depreciation and amortization expense
73,613

 
65,402

 
143,510

 
120,073

Total costs associated with service revenues
205,285

 
181,802

 
384,066

 
337,499

Cost of product sales
170,849

 
144,479

 
347,577

 
352,285

Segment operating income
110,070

 
109,207

 
230,442

 
233,134

General and administrative expenses
27,981

 
33,604

 
47,755

 
58,199

Other depreciation and amortization expense
2,251

 
2,199

 
4,369

 
4,392

Consolidated operating income
$
79,838

 
$
73,404

 
$
178,318

 
$
170,543



NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information - Continued
(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.
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 a distribution coverage ratio, which is calculated based on DCF, as one of the factors in its compensation determinations. DCF is a widely accepted 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 EBITDA, DCF and distribution coverage ratio:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
29,399

 
$
26,250

 
$
155,532

 
$
84,190

Interest expense, net
48,936

 
45,612

 
96,708

 
82,026

Income tax expense
2,915

 
1,630

 
7,242

 
4,555

Depreciation and amortization expense
75,864

 
67,601

 
147,879

 
124,465

EBITDA
157,114

 
141,093

 
407,361

 
295,236

Interest expense, net
(48,936
)
 
(45,612
)
 
(96,708
)
 
(82,026
)
Reliability capital expenditures
(21,913
)
 
(10,380
)
 
(41,795
)
 
(15,402
)
Income tax expense
(2,915
)
 
(1,630
)
 
(7,242
)
 
(4,555
)
Mark-to-market impact of hedge transactions (a)
(437
)
 
(563
)
 
(231
)
 
(3,149
)
Unit-based compensation (b)
1,783

 
1,618

 
3,120

 
3,706

Preferred unit distributions
(16,245
)
 
(9,950
)
 
(32,235
)
 
(14,763
)
Insurance gain adjustment (c)
10,609

 
—

 
(55,753
)
 
—

Other items
2,997

 
(1,095
)
 
(1,587
)
 
(1,369
)
DCF
$
82,057

 
$
73,481

 
$
174,930

 
$
177,678

Less DCF available to general partner
—

 
13,214

 
1,141

 
28,469

DCF available to common limited partners
$
82,057

 
$
60,267

 
$
173,789

 
$
149,209

 
 
 
 
 
 
 
 
Distributions applicable to common limited partners
$
64,205

 
$
101,869

 
$
120,121

 
$
203,782

Distribution coverage ratio (d)
1.28x

 
0.59x

 
1.45x

 
0.73x

(a)
DCF excludes the impact of unrealized mark-to-market gains and losses that arise from valuing certain derivative contracts, as well as the associated hedged inventory. The gain or loss associated with these contracts is realized in DCF when the contracts are settled.
(b)
We intend to satisfy the vestings of 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.
(c)
For the second quarter of 2018, DCF includes an adjustment for reliability capital expenditures incurred for hurricane repairs at our St. Eustatius terminal that were offset by insurance proceeds received in the first quarter.
(d)
Distribution coverage ratio is calculated by dividing DCF available to common limited partners by distributions applicable to common limited partners.