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Press release from Business Wire

NuStar Energy L.P. Reports Higher than Anticipated Third Quarter 2010 Earnings and Increases Quarterly Distribution

<p class='bwalignc'> <i><b>2010 Fourth Quarter and Full Year results expected to be higher than 2009</b></i> </p>

Monday, October 25, 2010

NuStar Energy L.P. Reports Higher than Anticipated Third Quarter 2010 Earnings and Increases Quarterly Distribution08:39 EDT Monday, October 25, 2010 SAN ANTONIO (Business Wire) -- NuStar Energy L.P. (NYSE: NS) today announced distributable cash flow available to limited partners for the third quarter of $84.0 million, or $1.30 per unit, compared to 2009 third quarter distributable cash flow of $61.5 million, or $1.13 per unit. The partnership also announced that its board of directors has declared a third quarter 2010 distribution of $1.075 per unit, which is $0.01 per unit or approximately 1% higher than the second quarter 2010 and third quarter 2009 distributions of $1.065 per unit. The third quarter 2010 distribution will be paid on November 5, 2010, to holders of record as of November 1, 2010. Distributable cash flow available to limited partners covers the distribution to the limited partners by 1.21 times for the third quarter of 2010. NuStar Energy L.P. reported third quarter net income applicable to limited partners of $58.4 million, or $0.90 per unit, compared to $56.1 million, or $1.03 per unit, earned in the third quarter of 2009. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $131.0 million for the third quarter of 2010 compared to $124.4 million for the third quarter of 2009. “I am excited to announce that our third quarter results were better than we expected when earnings guidance was provided in early August,” said Curt Anastasio, Chief Executive Officer and President of NuStar Energy L.P. and NuStar GP Holdings, LLC. “Higher than projected throughputs on our crude, refined products and ammonia pipelines and improved asphalt margins in our asphalt and fuels marketing segment caused our results to be higher than anticipated.” “I am particularly pleased that, all three of our business segments generated higher operating income and EBITDA in the third quarter of 2010 and for the nine months ended September 30, 2010 when compared to the same periods in 2009. As a result of these strong results, we were able to increase our third quarter 2010 distribution,” said Anastasio. Fourth Quarter and Full-Year 2010 EBITDA Projected to be Higher than 2009 “For the fourth quarter of 2010, we are projecting EBITDA to be in the range of $110 to $130 million, which would be the highest fourth quarter in our history and $20 to $40 million higher than the fourth quarter of 2009. Incremental EBITDA from internal growth projects coming online in the storage segment, additional profits attributable to the Mobile County, Alabama storage terminal acquisition that was completed in May 2010, and increased earnings from our fuels marketing operations will contribute to increased EBITDA in the fourth quarter of 2010,” said Anastasio. Commenting on the full-year outlook for the fee-based storage and transportation business segments, Anastasio said, “We expect incremental EBITDA in our storage segment to be $14 to $18 million higher than 2009. This is lower than previous guidance largely because the start-up of one of our internal growth projects has been delayed by approximately 30 days and vessel activity at our St. Eustatius terminal has been negatively impacted by tropical storms during the third quarter. The good news is that EBITDA in our transportation segment is now projected to be $5 to $10 million higher than 2009 due to higher throughputs and a customer turnaround being delayed until 2011.” In regard to the margin-based asphalt and fuels marketing segment Anastasio added, “Improving asphalt margins in the third and fourth quarters of 2010 as well as continued strong earnings results in our fuels marketing operations should cause EBITDA in this segment to be $25 to $35 million higher than the $80 million of EBITDA earned last year.” Turkey Terminal Acquisition “We expect to close our previously announced $50 to $60 million acquisition of a 75% controlling interest in a joint venture in Mersin, Turkey in December 2010. The joint venture will own two terminals with a storage capacity of 1.3 million barrels, a two-thirds interest in an off-shore ship platform, and land that can be used for the construction of additional terminal operations. The transaction is expected to be immediately accretive to NuStar Energy's distributable cash flow per unit,” said Anastasio. Eagle Ford Shale Project “Last week NuStar and Koch Pipeline Company reached agreement on a pipeline connection and capacity lease agreement. Under this agreement, NuStar will reactivate a previously idled pipeline in South Texas that will now be utilized to transport Eagle Ford Shale crude oil production to Corpus Christi, Texas refineries and terminals. We expect this project to be completed and in service in the second quarter of 2011,” stated Anastasio. “With the EBITDA benefits from our large strategic capital spending program and our upcoming Turkey terminal acquisition, EBITDA and distributable cash flow growth should continue into 2011 and beyond,” said Anastasio. A conference call with management is scheduled for 3:00 p.m. ET (2:00 p.m. CT) today, October 25, 2010, to discuss the financial and operational results for the third quarter of 2010. Investors interested in listening to the presentation may call 800/622-7620, passcode 12873811. International callers may access the presentation by dialing 706/645-0327, passcode 12873811. The company intends to have a playback available following the presentation, which may be accessed by calling 800/642-1687, passcode 12873811. A live broadcast of the conference call will also be available on the company's Web site at www.nustarenergy.com. NuStar Energy L.P. is a publicly traded, limited partnership based in San Antonio, with 8,417 miles of pipeline; 88 terminal and storage facilities that store and distribute crude oil, refined products and specialty liquids; and two asphalt refineries with a combined throughput capacity of 104,000 barrels per day. The partnership's combined system has over 93 million barrels of storage capacity. One of the largest asphalt refiners and marketers in the U.S. and the second largest independent liquids terminal operator in the nation, NuStar has operations in the United States, the Netherlands Antilles, Canada, Mexico, the Netherlands and the United Kingdom. For more information, visit NuStar Energy L.P.'s Web site at www.nustarenergy.com. This release serves as qualified notice to nominees under Treasury Regulation Sections 1.1446-4(b)(4) and (d). Please note that 100% of NuStar's distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of NuStar's distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate for individuals and corporations, as applicable. Nominees, and not NuStar, are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors. Cautionary Statement Regarding Forward-Looking StatementsThis press release includes forward-looking statements regarding future events.All forward-looking statements are based on the partnership and company's beliefs as well as assumptions made by and information currently available to the partnership and company.These statements reflect the partnership and company'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. and NuStar GP Holdings, LLC's 2009 annual reports on Form 10-K and subsequent filings with the Securities and Exchange Commission.   NuStar Energy L.P. and SubsidiariesConsolidated Financial Information(Unaudited, Thousands of Dollars, Except Unit Data and Per Unit Data)         Three Months EndedNine Months EndedSeptember 30,September 30,2010200920102009   Statement of Income Data: Revenues: Services revenues $ 201,390 $ 190,439 $ 585,772 $ 549,133 Product sales   936,989     1,060,808     2,623,077     2,323,960   Total revenues 1,138,379 1,251,247 3,208,849 2,873,093   Costs and expenses: Cost of product sales 860,942 989,868 2,422,751 2,138,524 Operating expenses 121,748 118,190 363,028 332,017 General and administrative expenses 26,860 19,213 76,324 67,529 Depreciation and amortization expense   38,539     36,786     114,653     108,323   Total costs and expenses   1,048,089     1,164,057     2,976,756     2,646,393   Operating income 90,290 87,190 232,093 226,700 Equity earnings from joint venture 2,454 2,374 7,571 7,698 Interest expense, net (20,583 ) (19,791 ) (58,059 ) (60,526 ) Other (expense) income, net   (235 )   (1,961 )   14,882     25,883   Income before income tax expense 71,926 67,812 196,487 199,755 Income tax expense   3,616     3,372     9,052     12,225   Net income $ 68,310   $ 64,440   $ 187,435   $ 187,530     Net income applicable to limited partners $ 58,375   $ 56,097   $ 158,950   $ 162,865     Net income per unit applicable to limited partners $ 0.90   $ 1.03   $ 2.55   $ 2.99     Weighted average limited partner units outstanding 64,610,549 54,460,549 62,386,373 54,460,549   EBITDA (Note 1) $ 131,048 $ 124,389 $ 369,199 $ 368,604   Distributable cash flow (Note 1) $ 94,202 $ 69,920 $ 243,372 $ 279,292     September 30,September 30,December 31,201020092009Balance Sheet Data: Debt, including current portion (a) $ 1,990,507 $ 1,925,792 $ 1,849,763 Partners' equity (b) 2,690,235 2,217,240 2,484,968 Debt-to-capitalization ratio (a) / ((a)+(b)) 42.5 % 46.5 % 42.7 %     NuStar Energy L.P. and SubsidiariesConsolidated Financial Information - Continued(Unaudited, Thousands of Dollars, Except Barrel Data)           Three Months EndedNine Months EndedSeptember 30,September 30,2010200920102009   Segment Data:Storage: Throughput (barrels/day) 673,121 708,281 666,635 667,005 Throughput revenues $ 19,139 $ 19,892 $ 56,085 $ 59,648 Storage lease revenues   111,998     105,341     330,493     300,700   Total revenues 131,137 125,233 386,578 360,348 Operating expenses 66,153 63,166 198,186 176,794 Depreciation and amortization expense   19,349     18,034     57,004     52,472   Segment operating income $ 45,635   $ 44,033   $ 131,388   $ 131,082     Transportation: Refined products pipelines throughput (barrels/day) 526,825 544,345 529,380 576,165 Crude oil pipelines throughput (barrels/day)   382,845     318,567     381,606     350,034   Total throughput (barrels/day) 909,670 862,912 910,986 926,199 Revenues $ 80,597 $ 78,015 $ 232,817 $ 221,151 Operating expenses 30,488 29,966 88,784 82,856 Depreciation and amortization expense   12,597     12,624     38,029     37,901   Segment operating income $ 37,512   $ 35,425   $ 106,004   $ 100,394     Asphalt and fuels marketing: Product sales $ 937,074 $ 1,060,808 $ 2,625,994 $ 2,323,960 Cost of product sales   864,904     993,648     2,438,703     2,150,450   Gross margin 72,170 67,160 187,291 173,510 Operating expenses 31,575 34,128 96,924 93,676 Depreciation and amortization expense   5,138     4,922     15,254     14,536   Segment operating income $ 35,457   $ 28,110   $ 75,113   $ 65,298     Consolidation and intersegment eliminations: Revenues $ (10,429 ) $ (12,809 ) $ (36,540 ) $ (32,366 ) Cost of product sales (3,962 ) (3,780 ) (15,952 ) (11,926 ) Operating expenses   (6,468 )   (9,070 )   (20,866 )   (21,309 ) Total $ 1   $ 41   $ 278   $ 869     Consolidated Information: Revenues $ 1,138,379 $ 1,251,247 $ 3,208,849 $ 2,873,093 Cost of product sales 860,942 989,868 2,422,751 2,138,524 Operating expenses 121,748 118,190 363,028 332,017 Depreciation and amortization expense   37,084     35,580     110,287     104,909   Segment operating income 118,605 107,609 312,783 297,643 General and administrative expenses 26,860 19,213 76,324 67,529 Other depreciation and amortization expense   1,455     1,206     4,366     3,414   Consolidated operating income $ 90,290   $ 87,190   $ 232,093   $ 226,700       NuStar Energy L.P. and SubsidiariesConsolidated Financial Information - Continued(Unaudited, Thousands of Dollars, Except Per Unit Data)           Notes: 1. NuStar Energy L.P. utilizes two financial measures, EBITDA and distributable cash flow, which are not defined in United States generally accepted accounting principles. Management uses these financial measures because they are widely accepted financial indicators used by investors to compare partnership performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the partnership's assets and the cash that the business is generating. Neither EBITDA nor distributable cash flow are intended to represent cash flows for the period, nor are they presented as an alternative to net income. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles.   The following is a reconciliation of net income to EBITDA and distributable cash flow:   Three Months EndedNine Months EndedSeptember 30,September 30,2010200920102009   Net income $ 68,310 $ 64,440 $ 187,435 $ 187,530 Plus interest expense, net 20,583 19,791 58,059 60,526 Plus income tax expense 3,616 3,372 9,052 12,225 Plus depreciation and amortization expense   38,539     36,786     114,653     108,323   EBITDA 131,048 124,389 369,199 368,604 Less equity earnings from joint ventures (2,454 ) (2,374 ) (7,571 ) (7,698 ) Less interest expense, net (20,583 ) (19,791 ) (58,059 ) (60,526 ) Less reliability capital expenditures (13,841 ) (16,424 ) (38,327 ) (32,915 ) Less income tax expense (3,616 ) (3,372 ) (9,052 ) (12,225 ) Plus distributions from joint venture 2,450 2,750 7,500 6,750 Mark-to-market impact on hedge transactions (a)   1,198     (15,258 )   (20,318 )   17,302   Distributable cash flow 94,202 69,920 243,372 279,292   General partner's interest in distributable cash flow   (10,160 )   (8,382 )   (29,371 )   (24,876 ) Limited partners' interest in distributable cash flow $ 84,042   $ 61,538   $ 214,001   $ 254,416     Distributable cash flow per limited partner unit $ 1.30 $ 1.13 $ 3.40 $ 4.67 (a) Distributable cash flow excludes the impact of unrealized mark-to-market gains and losses which arise from valuing certain derivative contracts that hedge a portion of our inventory but do not qualify for hedge accounting treatment. The gain or loss associated with these contracts is realized in distributable cash flow when the contracts are settled. NuStar Energy, L.P., San AntonioInvestors, Chris Russell, Vice PresidentInvestor Relations: 210-918-3507orMedia, Mary Rose Brown, Senior Vice President,Corporate Communications: 210-918-2314Web site: http://www.nustarenergy.com