Last Friday, San Antonio-based publicly traded partnership NuStar Energy LP (NS) and Petroleos de Venezuela SA (PDVSA) mutually agreed to conclude the crude oil supply deal on Jan 1, 2014. The deal is closing prior to its scheduled termination in Mar 2015.
Per the supply agreement signed in 2008, NuStar was to buy roughly 30,000 barrels per day of crude oil from oil and gas exploration and production firm PDVSA, located in Venezuela. NuStar intended to deliver the crude oil to its two asphalt refineries in the East Coast of U.S. On 2008, NuStar bought the two refineries from Citgo Petroleum Corporation.
Subsequent to that in 2012 the partnership spun off its asphalt refining operations forming a joint venture (JV), NuStar Asphalt LLC. The ownership of the JV is equally shared by the partnership and privately held investment firm, Lindsay Goldberg LLC. However owing to the pre-existing agreement NuStar still had to procure crude from PDVSA.
NuStar believes that the premature contract termination will help it to significantly reduce its financial liability.
With the release of the news on Nov 8, 2013, NuStar opened at $44.97 per unit on Nov 11, 2013, up 6.0% from $42.42 per unit closing price, the day before the news was released.
San Antonio, Texas-based NuStar Energy is a master limited partnership (MLP) that engages in the transportation and storage of crude oil as well as refined products in the U.S., the Netherlands Antilles, Canada, Mexico and the U.K. The partnership has interests in asphalt refining and marketing in the U.S. and is the nation’s second largest independent liquids terminal operator.
NuStar Energy currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at energy stocks like SM Energy Co. (SM), VOC Energy Trust (VOC) and TransGlobe Energy Corp. (TGA) that offer value. All the stocks sport a Zacks Rank #1 (Strong Buy).
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