San Antonio-based publicly traded partnership NuStar Energy L.P NS reported strong first-quarter 2015 earnings attributable to improved performance at all the business units.
The partnership’s first-quarter results were out before the opening bell on Apr 22. NuStar closed at $65.49 per unit on that day, reflecting an increase of nearly 3% from the previous day’s closing price, owing to the favorable results.
NuStar’s earnings per unit (EPU) – adjusting one-time items – came in at 76 cents, which beat the Zacks Consensus Estimate of 60 cents. The bottom line also increased from the year-ago figure – from continuing operations − of 40 cents per unit.
Revenues of $554.9 million missed the Zacks Consensus Estimate of $789 million. Moreover, the top line was nearly 35% below the year-ago level, mainly due to significantly lower product sales.
Quarterly Distribution
NuStar announced quarterly distribution of $1.095 per unit ($4.38 per unit annualized), which remains unchanged from the previous quarter’s distribution. The distribution is payable on May 14, to unitholders of record as on May 8.
Distributable cash flow (DCF) available to limited partners for the first quarter – from continuing operations − was $106.8 million or $1.37 per unit (providing 1.25x distribution coverage), compared with $77.9 million or $1.00 per unit in the year-earlier quarter. This is the highest first quarter DCF in the history of the partnership.
Segmental Performance
Pipeline: Total quarterly throughput volumes in the Pipeline segment were 1,012,653 barrels per day (Bbl/d), representing an increase of almost 22% from the year-ago period.
Throughput volumes in the crude oil pipelines jumped 41% from the year-ago quarter to 506,272 Bbl/d. Moreover, throughput revenues rose 21% to $124.5 million. The segment’s operating income increased 29.5% year over year to $68.6 million on an increase in throughput volumes.
Storage: Throughput volumes in the Storage segment improved 7.2% year over year to 880,271 Bbl/d.
Moreover, quarterly revenues were up 13.4% to $150.3 million from the first quarter of the previous year. The segment reported profits of $47.9 million, indicating an improvement from $42 million in the year-ago quarter, owing to the segment’s higher throughput volumes.
Fuels Marketing: The unit reported income of $9.9 million; slightly up from year-ago quarter profit of about $9.6 million. A decrease in operating expenses led to the improvement.
Operating Expense
The partnership recorded total operating cost of $115.7 million, reflecting an increase of 9% year over year.
Balance Sheet
As of Mar 31, 2015, the partnership had total debt of $3,033.4 million, representing a debt-to-capitalization ratio of 63.7%.
2015 Projection
NuStar affirmed its 2015 strategic capital investment at $400−$420 million.
Moreover, the partnership increased its projection for the Pipeline segment's operating income at $35–$55 million − higher than the 2014 level. NuStar continues to expect Storage segment’s operating income of $10–$30 million − higher than last year. Also, operating earnings from the Fuels Marketing segment is still expected between $20 million and $30 million.
Stocks to Consider
NuStar currently carries a Zacks Rank #3 (Hold), implying that to the stock will perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, some better-ranked players in the oil/gas production pipeline MLP (master limited partnership) sector are Shell Midstream Partners, L.P. SHLX, Valero Energy Partners LP VLP and Regency Energy Partners LP RGP. Shell Midstream and Valero Energy sport a Zacks Rank #1 (Strong Buy), while Regency Energy carries a Zacks Rank #2 (Buy).
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