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): November 5, 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 November 5, 2018, NuStar Energy L.P., a Delaware limited partnership, issued a press release announcing financial results for the quarter ended September 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 November 5, 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: November 5, 2018
 
 
By:
/s/ Amy L. Perry
 
 
 
Name:
Amy L. Perry
 
 
 
Title:
Executive Vice President-Mergers & Acquisitions, Strategic Direction and Investor Relations and Corporate Secretary



Exhibit 99.01



NuStar Energy L.P. Reports 25% Increase in Net Income

Third Quarter 2018 Distributable Cash Flow Available to Common Limited Partners Increases 32%

Pending Sale of European Assets to Accelerate Improvement of Debt Metrics

2018 Permian Crude System Exit Rate Remains on Pace for 360,000 to 380,000 Barrels Per Day

Long-Term Agreement with Trafigura to Transport WTI on NuStar’s South Texas Crude System to NuStar’s Corpus Christi North Beach Export Terminal for Storage and Dock Services

SAN ANTONIO, November 5, 2018 - NuStar Energy L.P. (NYSE: NS) today announced net income of $48 million for the third quarter of 2018, up 25% from $39 million in the third quarter of 2017. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $172 million, up $16 million or 10% from $156 million for the third quarter 2017.

The earnings per unit (EPU) for the third quarter were a net loss of $3.49 per common unit, due to a one-time, non-cash charge of $377.1 million related to the recent completion of the simplification transaction, which merged NuStar GP Holdings, LLC and NuStar Energy. This non-cash charge did not impact net income, EBITDA or distributable cash flow (DCF). Excluding this charge from the calculation of EPU, third quarter adjusted earnings per common unit were $0.13.

DCF available to common limited partners was $88 million for the third quarter of 2018, up $22 million or 32% compared to $67 million in the third quarter of 2017. The distribution coverage ratio to the common limited partners was 1.38 times for the third quarter and 1.42 times for the nine months ended September 30, 2018.

“Our strong third quarter 2018 results were primarily driven by continued volume ramp on our Permian Crude System, as well as a significant contribution from our East Pipeline System due to our acquisition of the assets in Council Bluffs, Iowa from CHS earlier this year,” said Brad Barron, President and Chief Executive Officer of NuStar Energy L.P.

Pending Sale of European Assets to Accelerate Improvement of Debt Metrics
“As we announced last week, we have signed an agreement to sell our UK/European assets for $270 million, for a multiple well in excess of our 10 times multiple target. It is important to note that while the sale of these assets will significantly reduce our debt coverage ratio, it will have almost no impact on our DCF and it will also allow us to utilize the proceeds from the sale of a 10 times plus asset to invest in high-return projects, in many cases at less than a 5 times multiple,” Barron said.

“We expect to close on that sale this quarter, and by using these sales proceeds to pay down debt, we expect to improve our projected year-end 2018 debt leverage metric from the 4.7 times we projected earlier this year, down to around 4.2 times.”

2018 Permian Crude System Exit Rate Remains on Pace for 360,000 to 380,000 Barrels Per Day
“We continue to be pleased with the performance and growth of our Permian Crude System,” Barron said.

“Our November nominations are 355,000 BPD, and we continue to expect to exit 2018 with throughput of approximately 360,000 to 380,000 BPD, an impressive increase over our 2017 exit rate of 200,000 BPD.”

Long-Term Agreement with Trafigura to Connect South Texas Crude System to Cactus II Pipeline
We also recently reached an agreement with Trafigura on a project to:
 
Connect NuStar’s South Texas Crude System with the Cactus II Pipeline near Oakville to transport WTI barrels on NuStar’s existing 16” pipeline to NuStar’s Corpus Christi North Beach terminal (CCNB).
Construct a new 8-mile 30” pipeline to transport WTI barrels from a new connection in Taft, Texas to the CCNB terminal.
Construct 600,000 barrels of storage at the CCNB terminal, bringing total capacity from 3.3 MM to 3.9 MM barrels, 1.6 MM barrels of which Trafigura has agreed to lease.

“We expect to begin transporting barrels for Trafigura on the 16” pipeline as soon as next summer, and we are very excited about this mutually beneficial opportunity to participate in the Permian Basin’s growth,” Barron said.


-More-



“I am very pleased with our third quarter results, as they reflect the positive impact of the hard work we have done this year to create a more simplified corporate structure, which provides even greater transparency in our governance, eliminate the Incentive Distribution Rights, strengthen our coverage, minimize equity needs and lower leverage.

“Because of these efforts, NuStar is positioned to participate in the burgeoning opportunities that the Permian Basin’s production growth is driving, within the basin and further afield, for MLPs with world-class assets in the right locations. Our new export project for Trafigura exemplifies this strength,” Barron concluded.

Conference Call Details
A conference call with management is scheduled for 9:00 a.m. CT today, November 5, 2018, to discuss the financial and operational results for the third quarter of 2018. The conference call may be accessed by dialing toll-free 844/889-7787, reservation passcode 8547677. International callers may access the conference call by dialing 661/378-9931, reservation passcode 8547677. 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 8547677. International callers may access the playback by dialing 404/537-3406, reservation passcode 8547677. The playback will be available until 11:30 a.m. CT on December 5, 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/mc9n88de 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.

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.

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.




NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Statement of Income Data:
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Service revenues
$
314,512

 
$
295,102

 
$
908,056

 
$
845,264

Product sales
175,851

 
145,464

 
544,392

 
518,220

Total revenues
490,363

 
440,566

 
1,452,448

 
1,363,484

Costs and expenses:
 
 
 
 
 
 
 
Costs associated with service revenues:
 
 
 
 
 
 
 
Operating expenses (excluding depreciation and amortization expense)
124,451

 
116,590

 
365,007

 
334,016

Depreciation and amortization expense
73,424

 
66,989

 
216,934

 
187,062

Total costs associated with service revenues
197,875

 
183,579

 
581,941

 
521,078

Cost of product sales
167,118

 
138,078

 
514,695

 
490,363

General and administrative expenses
27,817

 
25,003

 
75,572

 
83,202

Other depreciation and amortization expense
2,276

 
2,189

 
6,645

 
6,581

Total costs and expenses
395,086


348,849


1,178,853


1,101,224

Operating income
95,277

 
91,717

 
273,595

 
262,260

Interest expense, net
(44,825
)
 
(45,256
)
 
(141,533
)
 
(127,282
)
Other income (expense), net
920

 
(5,126
)
 
82,084

 
(4,898
)
Income before income tax expense
51,372

 
41,335

 
214,146

 
130,080

Income tax expense
3,236

 
2,743

 
10,478

 
7,298

Net income
$
48,136

 
$
38,592

 
$
203,668

 
$
122,782

 
 
 
 
 
 
 
 
Basic net (loss) income per common unit (Note 2)
$
(3.49
)
 
$
0.15

 
$
(2.50
)
 
$
0.65

Basic weighted-average common units outstanding
104,264,796

 
93,031,320

 
96,920,202

 
87,392,597

 
 
 
 
 
 
 
 
Other Data (Note 1):
 
 
 
 
 
 
 
EBITDA
$
171,897

 
$
155,769

 
$
579,258

 
$
451,005

DCF available to common limited partners
$
88,486

 
$
66,974

 
$
262,275

 
$
216,183

 
September 30,
 
December 31,
 
2018
 
2017
 
2017
Balance Sheet Data:
 
 
 
 
 
 Total debt
$
3,387,352

 
$
3,650,606

 
$
3,648,059

 Partners’ equity and series D preferred units
$
2,906,726

 
$
2,419,862

 
$
2,480,089






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

2017
 
2018
 
2017
Pipeline:
 
 
 
 
 
 
 
Refined products and ammonia pipelines throughput
(barrels/day)
567,320

 
527,148

 
555,113

 
524,277

Crude oil pipelines throughput (barrels/day):
914,450

 
679,721

 
848,892

 
549,898

Total throughput (barrels/day)
1,481,770

 
1,206,869

 
1,404,005

 
1,074,175

Throughput and other revenues
$
162,843

 
$
137,426

 
$
449,909

 
$
385,406

Operating expenses
47,032

 
41,463

 
138,079

 
114,734

Depreciation and amortization expense
38,790

 
34,844

 
114,036

 
91,657

Segment operating income
$
77,021

 
$
61,119

 
$
197,794

 
$
179,015

Storage:
 
 
 
 
 
 
 
Throughput (barrels/day)
335,118

 
294,544

 
336,957

 
315,616

Throughput terminal revenues
$
21,143

 
$
21,120

 
$
61,300

 
$
63,932

Storage terminal revenues
132,987

 
136,951

 
405,608

 
400,129

Total revenues
154,130

 
158,071

 
466,908

 
464,061

Operating expenses
73,037

 
66,603

 
217,106

 
199,525

Depreciation and amortization expense
34,634

 
32,145

 
102,898

 
95,405

Segment operating income
$
46,459

 
$
59,323

 
$
146,904

 
$
169,131

Fuels Marketing:
 
 
 
 
 
 
 
Product sales and other revenue
$
175,109

 
$
147,463

 
$
541,430

 
$
524,083

Cost of product sales
168,710

 
140,110

 
520,111

 
497,722

Gross margin
6,399

 
7,353

 
21,319

 
26,361

Operating expenses
4,509

 
8,885

 
10,205

 
22,464

Segment operating income (loss)
$
1,890

 
$
(1,532
)
 
$
11,114

 
$
3,897

Consolidation and Intersegment Eliminations:
 
 
 
 
 
 
 
Revenues
$
(1,719
)
 
$
(2,394
)
 
$
(5,799
)
 
$
(10,066
)
Cost of product sales
(1,592
)
 
(2,032
)
 
(5,416
)
 
(7,359
)
Operating expenses
(127
)
 
(361
)
 
(383
)
 
(2,707
)
Total
$

 
$
(1
)
 
$

 
$

Consolidated Information:
 
 
 
 
 
 
 
Revenues
$
490,363

 
$
440,566

 
$
1,452,448

 
$
1,363,484

Costs associated with service revenues:
 
 
 
 
 
 
 
Operating expenses
124,451

 
116,590

 
365,007

 
334,016

Depreciation and amortization expense
73,424

 
66,989

 
216,934

 
187,062

Total costs associated with service revenues
197,875

 
183,579

 
581,941

 
521,078

Cost of product sales
167,118

 
138,078

 
514,695

 
490,363

Segment operating income
125,370

 
118,909

 
355,812

 
352,043

General and administrative expenses
27,817

 
25,003

 
75,572

 
83,202

Other depreciation and amortization expense
2,276

 
2,189

 
6,645

 
6,581

Consolidated operating income
$
95,277

 
$
91,717

 
$
273,595

 
$
262,260




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 September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
48,136

 
$
38,592

 
$
203,668

 
$
122,782

Interest expense, net
44,825

 
45,256

 
141,533

 
127,282

Income tax expense
3,236

 
2,743

 
10,478

 
7,298

Depreciation and amortization expense
75,700

 
69,178

 
223,579

 
193,643

EBITDA
171,897

 
155,769

 
579,258

 
451,005

Interest expense, net
(44,825
)
 
(45,256
)
 
(141,533
)
 
(127,282
)
Reliability capital expenditures
(17,268
)
 
(14,798
)
 
(59,063
)
 
(30,200
)
Income tax expense
(3,236
)
 
(2,743
)
 
(10,478
)
 
(7,298
)
Mark-to-market impact of hedge transactions (a)
(14
)
 
497

 
(245
)
 
(2,652
)
Long-term incentive equity awards (b)
2,638

 
1,622

 
5,758

 
5,328

Preferred unit distributions
(29,881
)
 
(12,153
)
 
(62,116
)
 
(26,916
)
Insurance gain adjustment (c)
6,289

 

 
(49,464
)
 

Other items
2,886

 
(2,750
)
 
1,299

 
(4,119
)
DCF
$
88,486

 
$
80,188

 
$
263,416

 
$
257,866

Less DCF available to general partner

 
13,214

 
1,141

 
41,683

DCF available to common limited partners
$
88,486

 
$
66,974

 
$
262,275

 
$
216,183

 
 
 
 
 
 
 
 
Distributions applicable to common limited partners
$
64,248

 
$
101,870

 
$
184,369

 
$
305,652

Distribution coverage ratio (d)
1.38x

 
0.66x

 
1.42x

 
0.71x

(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 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.
(c)
For the three and nine months ended September 30, 2018, DCF includes an adjustment for insurance proceeds received in the first quarter related to hurricane damage at our St. Eustatius terminal. Each quarter, we add an amount to DCF to offset the amount of reliability capital expenditures incurred related to hurricane damage.
(d)
Distribution coverage ratio is calculated by dividing DCF available to common limited partners by distributions applicable to common limited partners.




NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Unit, Per Unit and Ratio Data)


Note 2 : For the three and nine months ended September 30, 2018, basic net loss per common unit includes a one-time, non-cash charge of $377.1 million associated with our July 2018 merger with our general partner. This charge does not affect net income, EBITDA or DCF. The following table details our calculation of basic and adjusted basic net (loss) income per common unit:
 
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
 
 
Net income
 
$
48,136

 
$
203,668

Less: net income applicable to preferred limited partners and general partner
 
33,912

 
67,310

Less: non-cash charge associated with the merger with our general partner
 
377,079

 
377,079

Less: other
 
473

 
1,398

Net loss applicable to common limited partners
 
$
(363,328
)
 
$
(242,119
)
 
 
 
 
 
Basic weighted-average common units outstanding
 
104,264,796

 
96,920,202

 
 
 
 
 
Basic net loss per common unit
 
$
(3.49
)
 
$
(2.50
)
Plus: non-cash charge associated with the merger with our general partner
 
3.62

 
3.89

Adjusted basic net income per common unit
 
$
0.13

 
$
1.39


Note 3: 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):
 
Projected for the Year Ended December 31, 2018
Net income
$ 180,000 - 215,000

Interest expense, net
185,000 - 190,000

Income tax expense
10,000 - 15,000

Depreciation and amortization expense
295,000 - 300,000

EBITDA
670,000 - 720,000

Other income (a)
(30,000) - (40,000)

Equity awards (b)
5,000 - 10,000

Pro forma effect of dispositions (c)
(20,000) - (25,000)

Material project adjustments and other items (d)
10,000 - 20,000

Consolidated EBITDA, as defined in the Revolving Credit Agreement
$ 635,000 - 685,000

 
 
Total consolidated debt
$ 3,100,000 - 3,300,000

NuStar Logistics' floating rate subordinated notes
(402,500
)
Proceeds held in escrow associated with the Gulf Opportunity Zone Revenue Bonds
(41,500
)
Consolidated Debt, as defined in the Revolving Credit Agreement
$ 2,656,000 - 2,856,000

 
 
Consolidated Debt Coverage Ratio (Consolidated Debt to Consolidated EBITDA)
4.2x

(a) Other income is excluded for purposes of calculating Consolidated EBITDA, as defined in the Revolving Credit Agreement.
(b) This adjustment represents the non-cash expense related to the vestings of equity-based awards with the issuance of our common units.
(c)
This adjustment represents the pro forma effects of the expected sale of our European assets as if we had completed the sale on January 1, 2018.
(d) This adjustment represents the percentage of the projected Consolidated EBITDA attributable to any Material Project and other noncash items, as defined in the Revolving Credit Agreement.