On Oct 31, 2014, NuStar Energy LP (NS), the San Antonio-based publicly traded partnership, reported strong third-quarter results backed by improved performances from all the three business segments.
NuStar’s earnings per unit (EPU) – from continuing operations – came in at 61 cents, beating the Zacks Consensus Estimate by a penny. The bottom line also increased from the year-ago quarter figure of 31 cents per unit.
Quarterly revenues of $794.4 million surpassed the Zacks Consensus Estimate of $757 million and were also ahead of the year-ago level of $778.2 million.
Quarterly Distribution
NuStar announced quarterly distribution of $1.095 per unit ($4.38 per unit annualized), which remained unchanged from the previous quarter’s distribution. The distribution is payable Nov 14, 2014, to unitholders of record as on Nov 10.
Distributable cash flow (DCF) available to limited partners for the third quarter was $87.9 million or $1.13 per unit (providing 1.03x distribution coverage) compared with $68.5 million or 88 cents per unit in the year-earlier quarter.
Segmental Performance
Pipeline: Total quarterly throughput volumes in the Pipeline segment were 986,059 barrels per day (Bbl/d), up almost 12% from the year-ago period.
Throughput volumes in crude oil pipelines increased 23% from the year-ago quarter to 471,698 Bbl/d. Moreover, throughput revenues rose 13% to $125.5 million. The segment’s operating income increased 13% year over year to $65.7 million on an increase in throughput volumes.
Storage: Throughput volumes in the Storage segment rose almost 10% year over year to 914,599 Bbl/d.
Quarterly revenues were up 4% year over year to about $143.9 million. The segment reported a profit of $49.4 million, marking an improvement from $41.1 million in the year-ago quarter, owing to higher throughput and lower operating expenses.
Fuels Marketing: The unit reported an income of $7.5 million, against the year-ago quarter loss of $9.1 million. Lower operating expenses led to the improvement.
Balance Sheet
As of Sep 30, 2014, the partnership had total debt of $2,753 million, representing a debt-to-capitalization ratio of almost 61%.
Guidance
NuStar expects fourth-quarter 2014 operating earnings for its Pipeline segment to be higher than the year-ago quarter’s profit. Moreover, the partnership continues to project that its Pipeline segment's 2014 operating income would be $40 million to $60 million higher than the previous year. The partnership affirmed its previous projection of operating earnings from the fuels marketing segment between $20 million and $30 million.
The partnership still plans to invest $330 million to $350 million in organic growth projects in 2014. The key focus of the investment remains on the Pipeline segment.
Stocks to Consider
NuStar currently carries a Zacks Rank #3 (Hold), implying that will perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Magellan Midstream Partners LP (MMP), Cobalt International Energy Inc. (CIE) and Murphy USA Inc. (MUSA). All these stocks sport a Zacks Rank #1 (Strong Buy).
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