Publicly traded energy master limited partnership
NuStar Energy L.P.
) entered into an agreement with TexStar Midstream Services LP to
spread out its presence in the Eagle Ford Shale.
NUSTAR ENERGY (NS): Free Stock Analysis
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Per the deal, NuStar will purchase crude oil pipeline, gathering
and storage systems, plus natural gas liquids (NGL) assets for
$425 million. The crude pipeline system runs from LaSalle County
and Frio County to Live Oak County and can transport 100,000
barrels per day (BPD) of crude oil. It also includes 140 miles of
transmission and gathering line for crude oil. The NGL assets
include a 38-mile Y-grade NGL pipeline and two fractionators.
The deal will be concluded in two separate transactions. Crude
oil assets will be purchased first followed by the acquisition of
NGL assets. NuStar will finance the deal through borrowings under
its credit facilities and junior subordinated notes.
It is expected that the acquisition of crude oil assets will be
completed in early December after Federal Trade Commission
review. The second part of the deal is likely to close by first
quarter of 2013.
Simultaneously, NuStar also declared its plan to divest its San
Antonio refinery on South Presa Street and related terminal in
We like NuStar Energy for its diversified asset base and robust
distribution-growth prospects. A strong pipeline of organic
growth projects and contribution from acquisitions provide the
partnership with an above peer-group average distribution
coverage ratio. Furthermore, the majority of NuStar's business is
derived from an attractive set of fee-based storage and
transportation assets that support the U.S. and international
However, over the last few years, NuStar has consolidated its
business through a combination of organic efforts and accretive
acquisitions. We believe the higher operating expenses associated
with this expanded asset base may lead to reduced returns going
Acquisitions have historically played a major role in the
partnership's growth profile and are expected to remain
significant in the future. NuStar may find it difficult to
complete accretive transactions moving forward, which could
negatively impact its growth rate.
NuStar - which was spun off from the U.S. refiner
Valero Energy Corp.
) in 2006 - currently retains a Zacks #5 Rank (short-term Strong