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Press release from Business Wire

NuStar Energy L.P. First Quarter 2011 Distributable Cash Flows Increase 98%

<p class='bwalignc'> <i><b>First Quarter 2011 Results Higher than First Quarter 2010 in all Three Business Segments</b></i> </p> <p class='bwalignc'> <i><b>Internal Growth Projects and Recent Acquisition Expected to Lead to Increased Distributions and Improved Results in 2011</b></i> </p>

Wednesday, April 27, 2011

NuStar Energy L.P. First Quarter 2011 Distributable Cash Flows Increase 98%08:45 EDT Wednesday, April 27, 2011 SAN ANTONIO (Business Wire) -- NuStar Energy L.P. (NYSE: NS) today announced first quarter distributable cash flow available to limited partners of $45.1 million, or $0.70 per unit, compared to 2010 first quarter distributable cash flow of $22.8 million, or $0.38 per unit. First quarter earnings before interest, taxes, depreciation and amortization (EBITDA) were $92.8 million compared to first quarter 2010 EBITDA of $81.0 million. NuStar Energy L.P. reported first quarter net income applicable to limited partners of $19.4 million, or $0.30 per unit, compared to $11.5 million, or $0.19 per unit, earned in the first quarter of 2010. The first quarter 2011 results include $5.0 million, or $0.08 per unit, of expenses related to the early termination of a 3rd party storage agreement at NuStar's Paulsboro, New Jersey asphalt refinery. Excluding the effect of these early termination costs and other items, first quarter 2011 adjusted net income applicable to limited partners would have been $26.1 million, or $0.40 per unit, which was higher than the first quarter street consensus of $0.33 per unit. The partnership also announced that its board of directors has declared a first quarter 2011 distribution of $1.075 per unit. The first quarter 2011 distribution will be paid on May 13, 2011, to holders of record as of May 9, 2011 and is higher than the $1.065 per unit distribution paid in the first quarter of 2010. Distributable cash flow available to limited partners covers the distribution to the limited partners by 0.65 times for the first quarter of 2011. “All three of our business segments generated higher operating income and EBITDA in the first quarter of 2011 when compared to the first quarter of 2010,” said Curt Anastasio, Chief Executive Officer and President of NuStar Energy L.P. and NuStar GP Holdings, LLC. “Increased shipments on higher tariff pipelines and operating expense efficiencies contributed to improved transportation segment results. Storage segment results benefited from the 2010 completion of several internal growth projects, most significantly our St. Eustatius terminal reconfiguration, as well as the May 2010 Mobile County, Alabama storage terminal acquisition.” Anastasio added, “Improved results in our crude oil trading and products trading businesses contributed to higher first quarter 2011 results in the asphalt and fuels marketing segment. The decision to terminate the 3rd party storage agreement was an important part of the favorable economics associated with our purchase of Pergrino crude oil for NuStar's Paulsboro refinery, an accretive project that will start up at the end of 2011. The buy-out associated with the early termination of the storage agreement enabled us to avoid the capital expenditure required to build a new tank.” Recent Internal Growth and Acquisition Activity “NuStar and TexStar Midstream Services, LP recently announced that they have signed a letter of intent to develop a new pipeline system to transport Eagle Ford Shale crude and condensate to Corpus Christi. The pipeline throughput agreements and storage agreements associated with this new pipeline system should improve earnings in both our transportation and storage segments beginning in the second quarter of 2012,” said Anastasio. Anastasio also noted, “Our acquisition of certain refining assets of the former AGE Refining is great news for our investors. We acquired these assets for $41 million and closed on the purchase on April 19, 2011. The refinery acquisition price represents about 20 percent of replacement cost and is expected to be immediately accretive to our earnings and cash flows. We have already hedged approximately 70 percent of the refinery's production through the futures market for crude, distillates and gasoline-related products for the next three to four years. And by hedging a significant portion of the margins we expect this acquisition to pay out in approximately two years and realize a 70 percent rate of return. Full-Year 2011 Outlook Commenting on the full-year outlook for NuStar Energy L.P., Anastasio said, “We expect 2011 EBITDA and distributable cash flow results to be higher than 2010. These improved results should allow us to recommend a distribution increase to our Board of Directors again in 2011.” Addressing business segment results Anastasio commented, “We expect EBITDA in our storage segment to be $25 to $35 million higher than 2010. This segment should benefit from internal growth projects completed in 2010 and 2011 as well as the Mobile County, Alabama terminal acquisition completed in May 2010 and the Turkey terminal acquisition completed in February 2011. EBITDA in our transportation segment should be $5 to $10 million lower due to reduced throughputs caused by the refinery turnaround activity of our customers and changing market conditions.” In regard to the margin-based asphalt and fuels marketing segment, Anastasio added, “Earnings from the recently announced acquisition of some key AGE Refining assets, slightly improving asphalt margins and improved earnings in our fuels marketing operations should cause EBITDA in this segment to be $35 to $45 million higher than the $111 million of EBITDA earned in 2010.” A conference call with management is scheduled for 10:00 a.m. ET (9:00 a.m. CT) today, April 27, 2011, to discuss the financial and operational results for the first quarter of 2011. Investors interested in listening to the presentation may call 800/622-7620, passcode 55981834. International callers may access the presentation by dialing 706/645-0327, passcode 55981834. The company intends to have a playback available following the presentation, which may be accessed by calling 800/642-1687, passcode 55981834. 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; 90 terminal and storage facilities that store and distribute crude oil, refined products and specialty liquids; and two asphalt refineries and a fuels refinery with a combined throughput capacity of 118,500 barrels per day. The partnership's combined system has over 94 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, Canada, Mexico, the Netherlands, the United Kingdom and Turkey. 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 2010 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 EndedMarch 31,20112010Statement of Income Data: Revenues: Service revenues $ 198,393 $ 189,295 Product sales   1,036,223     756,234   Total revenues 1,234,616 945,529   Costs and expenses: Cost of product sales 992,367 719,221 Operating expenses 120,239 121,337 General and administrative expenses 25,983 27,269 Depreciation and amortization expense   40,296     37,929   Total costs and expenses   1,178,885     905,756   Operating income 55,731 39,773 Equity in earnings of joint venture 2,388 3,015 Interest expense, net (20,457 ) (18,586 ) Other (expense) income, net   (5,499 )   301   Income before income tax expense 32,163 24,503 Income tax expense   3,647     4,800   Net income 28,516 19,703 Less net income attributable to noncontrolling interest   14     -   Net income applicable to NuStar Energy L.P. $ 28,502   $ 19,703     Net income applicable to limited partners $ 19,365   $ 11,511     Net income per unit applicable to limited partners $ 0.30   $ 0.19     Weighted average limited partner units outstanding   64,610,549     60,210,549     EBITDA attributable to NuStar Energy L.P. (Note 1) $ 92,794 $ 81,018   Distributable cash flow attributable to NuStar Energy L.P. (Note 1) $ 55,268 $ 32,049       March 31,December 31,20112010Balance Sheet Data: Debt, including current portion (a) $ 2,362,296 $ 2,137,080 Partners' equity (b) 2,678,583 2,702,700 Debt-to-capitalization ratio (a) / ((a)+(b)) 46.9 % 44.2 %   NuStar Energy L.P. and SubsidiariesConsolidated Financial Information - Continued(Unaudited, Thousands of Dollars, Except Barrel Data)     Three Months EndedMarch 31,20112010   Segment Data:Storage: Throughput (barrels/day) 620,582 641,457 Throughput revenues $ 17,048 $ 17,827 Storage lease revenues   119,727     108,805   Total revenues 136,775 126,632 Operating expenses 66,949 65,078 Depreciation and amortization expense   21,130     18,666   Segment operating income $ 48,696   $ 42,888     Transportation: Refined products pipelines throughput (barrels/day) 502,610 527,340 Crude oil pipelines throughput (barrels/day)   310,865     363,237   Total throughput (barrels/day) 813,475 890,577 Revenues $ 73,010 $ 75,262 Operating expenses 25,906 28,753 Depreciation and amortization expense   12,707     12,752   Segment operating income $ 34,397   $ 33,757     Asphalt and fuels marketing: Product sales $ 1,040,068 $ 758,930 Cost of product sales   1,001,073     726,734   Gross margin 38,995 32,196 Operating expenses 33,980 35,051 Depreciation and amortization expense   4,897     5,041   Segment operating income (loss) $ 118   $ (7,896 )   Consolidation and intersegment eliminations: Revenues $ (15,237 ) $ (15,295 ) Cost of product sales (8,706 ) (7,513 ) Operating expenses   (6,596 )   (7,545 ) Total $ 65   $ (237 )   Consolidated Information: Revenues $ 1,234,616 $ 945,529 Cost of product sales 992,367 719,221 Operating expenses 120,239 121,337 Depreciation and amortization expense   38,734     36,459   Segment operating income 83,276 68,512 General and administrative expenses 25,983 27,269 Other depreciation and amortization expense   1,562     1,470   Consolidated operating income $ 55,731   $ 39,773                                                                                                           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 EndedMarch 31,20112010   Net income $ 28,516 $ 19,703 Plus interest expense, net 20,457 18,586 Plus income tax expense 3,647 4,800 Plus depreciation and amortization expense   40,296     37,929   EBITDA 92,916 81,018 Less equity earnings from joint ventures (2,388 ) (3,015 ) Less interest expense, net (20,457 ) (18,586 ) Less reliability capital expenditures (8,008 ) (12,355 ) Less income tax expense (3,647 ) (4,800 ) Plus distributions from joint venture 2,923 2,400 Mark-to-market impact on hedge transactions (a)   (5,960 )   (12,613 ) Distributable cash flow $ 55,379 $ 32,049   EBITDA $ 92,916 $ 81,018 EBITDA attributable to noncontrolling interest   122     -   EBITDA attributable to NuStar Energy L.P. $ 92,794 $ 81,018   Distributable cash flow $ 55,379 $ 32,049 Distributable cash flow attributable to noncontrolling interest   111     -   Distributable cash flow attributable to NuStar Energy L.P. $ 55,268 $ 32,049   General partner's interest in distributable cash flow   (10,160 )   (9,266 ) Limited partners' interest in distributable cash flow $ 45,108   $ 22,783     Distributable cash flow per limited partner unit $ 0.698 $ 0.378   (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