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NuStar Energy L.P. Reports Fourth Quarter and Full-Year 2018 Earnings Results

January 31, 2019

SAN ANTONIO--(BUSINESS WIRE)--Jan 31, 2019--NuStar Energy L.P.(NYSE: NS) today announced its fourth quarter and full-year 2018 earnings results.

“Our 2018 unadjusted net income, earnings per unit (EPU) and earnings before interest, taxes, depreciation and amortization (EBITDA) all include a $79 million gain from the hurricane insurance proceeds in the first quarter of 2018 for the cost of repairing property damage at our St. Eustatius terminal, and a non-cash charge of $43 million from the sale of our European operations in the fourth quarter,” said Tom Shoaf, NuStar Energy L.P.’s Executive Vice President and Chief Financial Officer.

“Further, our unadjusted EPU for the full year 2018 include a non-cash charge of $377 million in the third quarter related to the recent completion of the simplification transaction for the merger of NuStar GP Holdings, LLC and NuStar Energy,” said Shoaf.

“Without adjusting for those non-operational items, NuStar generated net income of $2 million for the fourth quarter of 2018 and $206 million for the year ended December 31, 2018,” said Shoaf. “NuStar’s unadjusted EBITDA was $122 million for the fourth quarter of 2018 and $701 million for the year ended December 31, 2018, and NuStar’s EPU was ($0.31) and ($2.77) for the fourth quarter and year ended December 31, 2018, respectively.

Adjusted Results, Which Exclude Non-Operational Items, Ease Comparison Between Periods

“We believe that excluding these non-operational items from the calculation of net income, EBITDA and EPU allows for an ‘apples-to-apples,’ year-over-year and quarter-over-quarter comparison,” said Shoaf. “We are pleased to report that our adjusted net income, adjusted EPU and adjusted EBITDA for the fourth quarter and for the full-year 2018 were all higher than the prior comparable periods.”

Excluding the non-operational items noted above from the calculation of EPU, NuStar’s adjusted EPU for the fourth quarter and year ended December 31, 2018 were $0.09 and $0.67 per unit, respectively.

Excluding the non-cash charge related to the sale of the European assets for the fourth quarter of 2018 and year ended December 31, 2018, as well as the gain related to hurricane proceeds for the year ended December 31, 2018, adjusted net income for the fourth quarter and year ended December 31, 2018 were $45 million and $170 million, respectively.

Adjusted EBITDA for the fourth quarter of 2018 was $165 million, up 15% compared to the fourth quarter 2017 EBITDA of $144 million. Adjusted EBITDA for the year ended December 31, 2018 was $666 million, up 12% compared to $595 million for the year ended December 31, 2017.

DCF Also Significantly Higher Than Prior Comparable Periods

Fourth quarter 2018 Distributable Cash Flow (DCF) available to common limited partners was $91 million, up 119% compared to fourth quarter 2017 DCF available to common limited partners of $42 million. DCF available to common limited partners was $354 million for the year ended December 31, 2018, up 37% compared to $258 million for the year ended December 31, 2017. The distribution coverage ratios to the common limited partners were 1.42 times for the fourth quarter of 2018 and for the year ended December 31, 2018.

Comprehensive Plan to Reposition NuStar For Continued Strength Successfully Completed

“This time last year, we presented our comprehensive plan to reposition NuStar during 2018,” said Brad Barron, President and Chief Executive Officer of NuStar Energy L.P. “We recognized at the time that, in order to continue to build on the strength of our superior asset base, we would need to take the steps necessary for NuStar to achieve strong distribution coverage and low leverage, while at the same time, simplifying our structure, eliminating our Incentive Distribution Rights (IDRs) to lower our cost of capital, and minimizing our need to access the equity capital markets.

“I am happy to say that we did all that and more. We finished 2018 with a 1.42 times coverage ratio, far better than the 1.1 to 1.2 times we projected when we filed our Form S-4 for the simplification last March,” Barron said. “And, due in part to our successful divestiture of our UK/European assets, we were able to lower our debt ratio to 4.05 times, which allowed us to achieve our three-year deleveraging target in a single year. Thanks to our simplification transaction, we are now a single publicly traded company with no IDRs. And due to the combined impact of all of these self-help measures, we do not anticipate the need to access the equity markets prior to 2022.

“We took all these steps to ensure that NuStar has the healthy balance sheet needed to execute on our organic expansion opportunities and produce strong, stable growth. This proved to be a solid strategic decision because today we are poised to take advantage of more high-return organic growth projects than at any other time in our history, while remaining laser- focused on capital efficiency.

“So 2018 was a truly transformational year for NuStar. Not only did we reposition the company for long-term success, but we delivered significantly higher quarter-over-quarter and year-over-year financial results, with higher adjusted net income, EPU and EBITDA, while significantly improving our debt metrics and distribution coverage,” he concluded.

The Permian Basin Continues to Drive Growth Well Beyond Its Geographic Limits

“We exited 2018 with throughput volumes on our Permian Crude System up approximately 190% since we acquired the system in May 2017. By comparison, the volumes for the Permian Basin as a whole increased by only 60% during the same period,” said Barron. “We expect continued strong growth in our system, so suffice it to say that we are very happy with our system’s performance and outlook.

“In recent months we have also seen ripple effects from Permian Basin production on our South Texas Crude System in the Eagle Ford, which has been benefitting from WTI volumes arriving by truck. We are currently seeing throughput volumes averaging 192,000 BPD, significantly above our minimum volume throughput commitments of approximately 116,000 BPD for the system.

“Last quarter, we announced several projects we have in progress to capitalize on the midstream opportunities created by the Permian’s impressive growth, all of which are proceeding on schedule. These include projects to expand our Wichita Falls crude pipeline to accommodate additional barrels from the Sunrise Pipeline expansion, from Colorado City to Wichita Falls, which we expect to increase our throughput on that system and produce a healthy return for a relatively small capital outlay.

“We are also very excited about our progress on our Corpus Christi export projects, backed by long-term contracts with Trafigura, to transport Permian barrels to our Corpus Christi export terminal. Initially, this project will connect our South Texas Crude System to Cactus II at Oakville and utilize our existing 16” pipeline. In the longer-term, we will construct a new 8-mile, 30” pipeline from a new connection in Taft, Texas. Both projects are underway, and we expect to begin providing service to Trafigura on our 16” line as soon as this summer.

“The Corpus Christi export projects offer a great illustration of why we decided to sell the UK/Europe assets back in November. We sold those non-core assets for proceeds of $270 million, at a multiple well in excess of our targeted 10X multiple, and we are redeploying that capital into very low-multiple projects that are core to our business, like this project for Trafigura,” said Barron.

Executing on Opportunities to Optimize NuStar’s Existing Asset Base

“Outside of the Permian’s extended reach, we are also executing on projects to optimize and increase utilization of our existing assets across our footprint,” Barron said. “We have some great projects with healthy returns in progress, from our projects to facilitate exports of refined products to Northern Mexico, to our bio-fuel strategy projects on the West Coast.

“In addition to project execution, our acquisition last year of our Council Bluffs system offered us a small, bolt-on acquisition to our Central East Products system that, for a small amount of capital at a low multiple, allowed us to expand our footprint to reach new markets and to meet evolving market demands.”

Conference Call Details

A conference call with management is scheduled for 10:00 a.m. CT today, January 31, 2019, to discuss the financial and operational results for the fourth quarter of 2018. The conference call may be accessed by dialing toll-free 844/889-7787, reservation passcode 9041769. International callers may access the conference call by dialing 661/378-9931, reservation passcode 9041769. 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 9041769. International callers may access the playback by dialing 404/537-3406, reservation passcode 9041769. The playback will be available until 12:30 p.m. CT on March 2, 2019.

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/stkmhr9d 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 approximately 9,800 miles of pipeline and 75 terminal and storage facilities that store and distribute crude oil, refined products and specialty liquids. The partnership’s combined system has more than 88 million barrels of storage capacity, and NuStar has operations in the United States, Canada, Mexico and St. Eustatius in the Caribbean. 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.

View source version on businesswire.com:https://www.businesswire.com/news/home/20190131005285/en/

CONTACT: NuStar Energy, L.P., San Antonio

Investors, Tim Delagarza, Manager, Investor Relations

Investor Relations: 210-918-INVR (4687)

or

Media, Mary Rose Brown, Executive Vice President and Chief Administrative Officer,

Corporate Communications: 210-918-2314

website:http://www.nustarenergy.com

KEYWORD: UNITED STATES NORTH AMERICA TEXAS

INDUSTRY KEYWORD: ENERGY OIL/GAS

SOURCE: NuStar Energy L.P.

Copyright Business Wire 2019.

PUB: 01/31/2019 06:45 AM/DISC: 01/31/2019 06:45 AM

http://www.businesswire.com/news/home/20190131005285/en

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