NuStar Energy L.P.
), the San Antonio-based publicly traded partnership, reported
better-than-expected second-quarter results, owing to improved
performance from the pipeline and storage business units.
The partnership's second-quarter results were out before the
opening bell on Jul 25, 2014. NuStar closed at $65.35 per unit on
that day, up about 2% from the previous day, owing to the favorable
NuStar's earnings per unit (EPU) - from continuing operations -
came in at 58 cents, beating the Zacks Consensus Estimate of 48
cents. The bottom line also increased from the year-ago quarter
figure of 30 cents per unit.
NuStar Energy LP - Earnings Surprise |
However, quarterly revenues of $749.8 million failed to meet the
Zacks Consensus Estimate of $813.0 million and were also below the
year-ago level of $902.0 million, mainly due to lower quarterly
sales from the Fuels Marketing segment.
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 on Aug 11,
2014, to unitholders of record as on Aug 6, 2014.
Distributable cash flow (DCF) available to limited partners for the
second quarter was $93.6 million or $1.20 per unit (providing 1.10x
distribution coverage), compared with $56.8 million or 73 cents per
unit in the year-earlier quarter. This is the first time since the
third quarter of 2011 that the partnership has managed to cover its
Total quarterly throughput volumes in the Pipeline segment were
948,513 barrels per day (Bbl/d), up 17.0% from the year-ago period.
The throughput volumes in the crude oil pipelines increased 21.7%
from the year-ago quarter to 427,122 Bbl/d. Moreover, throughput
revenues rose 21.5% to $117.8 million. The segment's operating
income increased 17.6% year over year to $60.2 million on an
increase in throughput volumes.
Throughput volumes in the Storage segment rose nearly 10% year over
year to 894,194 Bbl/d.
Quarterly revenues were up 1.6% to about $145.0 million from the
second quarter of the previous year. The segment reported profit of
$50.0 million, marking an improvement from $44.4 million in the
year-ago quarter, owing to higher throughput and lower operating
The unit reported an income of $4.8 million, against the year-ago
quarter profit of $3.4 million. Lower revenues from product sales
led to the deterioration.
The partnership recorded total operating costs of $115.5
million, up 3.8% year over year.
As of Jun 30, 2014, the partnership had total debt of $2,726.6
million, representing a debt-to-capitalization ratio of 60.1%.
NuStar expects its third-quarter 2014 EPU to be higher than the
year-ago quarter's profit. Moreover, the partnership continues to
believe that 2014 operating profits from its pipeline business unit
will register a $40.0 to $60.0 million increase from the 2013
level. The partnership's fuels marketing segment is expected to
have profits in the $20.0 to $30.0 million range. Moreover, given
these projected figures, NuStar expects to cover distributions for
the full year as well.
NuStar now plans to invest $330 million to $350 million in growth
projects in 2014, lower than the previous estimate as it has
transferred part of its growth project spending to 2015. The key
focus of the investment remains on the pipeline segment.
Stocks to Consider
NuStar currently carries a Zacks Rank #2 (Buy), implying that it is
expected to outperform the broader U.S. equity market over the next
one to three months.
One can also consider other players from the same industry like
Magellan Midstream Partners LP (
), Valero Energy Partners LP (
) and Enterprise Products Partners LP (
). While Magellan Midstream and Valero Energy Partners sport a
Zacks Rank #1 (Strong Buy), Boardwalk Pipeline Partners holds a
Zacks Rank #2.
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