San Antonio-based publicly traded partnership NuStar Energy L.P. (NS) reported weak fourth quarter results, impacted by non-cash charges and a decrease in throughput volumes in the pipeline segment.
NuStar’s adjusted earnings per unit (EPU) came in at 21 cents, failing to beat the Zacks Consensus Estimate of 36 cents and decreasing from the year-ago adjusted profit of 25 cents.
Revenues of $785.4 million were 20.1% below the year-ago level and also failed to beat the Zacks Consensus Estimate of $829.0 million. Lower contribution from the Storage segment hurt the top line.
For 2013, NuStar reported adjusted per unit profits of 75 cents, which missed the Zacks Consensus Estimate of $1.09 but improved from the 2012 earnings of 73 cents. Revenues of $3,463.7.0 million plunged 41.7% from the prior-year figure. However, revenues beat the Zacks Consensus Estimate of $3,371.0 million.
Quarterly Distribution
Last month, NuStar announced quarterly distribution of $1.095 per unit ($4.38 per unit annualized), which remains unchanged from the previous quarter’s distributions. The distribution is payable on Feb 14, to unitholders of record as on Feb 10.
Distributable cash flow (DCF) available to limited partners for the fourth quarter was $75.3 million or 97 cents per unit (providing 0.89x distribution coverage), compared with $60.5 million or 78 cents per unit in the year-earlier quarter.
Segmental Performance
Pipeline: Total quarterly throughput volumes in the Pipeline segment was 892,912 barrels per day (Bbl/d) representing a decrease of 3.3% from the year-ago period.
The throughput volumes in the crude oil pipelines decreased 6.2% from the year-ago quarter to 377,937 Bbl/d. However, throughput revenues increased 14.9% to $109.8 million. The segment’s operating income increased 23.4% year over year to $59.2 million on an increase in throughput revenues and a drop in operating expenses.
Storage: Throughput volumes in the Storage segment increased 1.6% year over year to 807,414 Bbl/d.
However, quarterly revenues were down 8.1% at $133.6 million from the fourth quarter of the previous year. The segment reported a loss of $266.9 million against an income of $36.3 million in the year-ago quarter. The segment’s results reflect the effects of an asset impairment loss of around $304.5 million.
Fuels Marketing: The unit reported an income of $7.1 million, up from the year-ago quarter profit of about $6.0 million. A decrease in operating expense was the reason for the improvement.
Operating Expense
The partnership recorded total operating cost at $112.5 million, down 17.8% year over year.
Balance Sheet
As of Dec 31, 2013, the partnership had total debt of $2,655.6 million, representing debt-to-capitalization ratio of 58.2% compared with 48.3% in the year-ago period.
Guidance
For first quarter 2014, NuStar expects the pipeline and fuel marketing segments to outperform the year-ago quarter results amid improved bunkering activities and positive results from the Eagle Ford growth projects. However, the storage segment may report results below the year-ago quarter level due to lower contribution from the terminal at St. James, Louisiana.
In 2014, NuStar plans to invest $370 million to $390 million in growth projects. The key focus of the investment will be on the pipeline segment. NuStar projects reliability capital spending in 2014 to be $35 million to $45 million.
Other News
Sale of Interest in Asphalt Joint Venture: NuStar announced that it has signed a deal with an affiliate of the private investment firm, Lindsay Goldberg LLC, to divest its remaining 50% of its voting interest in the asphalt joint venture (JV). The JV is the owner of a refinery in Paulsboro, New Jersey and a terminal in Savannah, Georgia. The transaction is expected to close by Feb 28.
NuStar Enters Deal with Occidental Petroleum: NuStar has entered into a long-term deal with Occidental Petroleum Corp. (OXY), allowing the latter to use the NuStar pipeline between Mont Belvieu and Corpus Christi, Texas to transport natural gas liquids.
Stocks to Consider
NuStar 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 consider other better-ranked players from the same industry like Energy Transfer Equity, L.P. (ETE) and Magellan Midstream Partners LP (MMP). Both these stocks currently sport a Zacks Rank #1 (Strong Buy).
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