San Antonio-based publicly traded partnership
NuStar Energy L.P.
(
NS
) has commenced a public offering of 5,250,000 common units
representing limited partner interests.
The transportation and storage master limited partnership (
MLP
) also intends to provide the underwriters with a 30-day option to
purchase up to 787,500 additional common units to cover
over-allotments, if any. NuStar plans to use the net proceeds from
this offering to pay back the outstanding debt under its revolving
credit facility.
NuStar Energy - which competes in the 'Oil and Gas Production
Pipeline' industry with firms like
Tesoro Logistics L.P.
(
TLLP
),
Enbridge Energy Management LLC
(
EEQ
), etc. - has a Zacks #3 Rank (Hold rating) for the short run. We
are also maintaining our long-term Neutral recommendation on the
units.
NuStar engages in the transportation and storage of crude oil as
well as refined products in the U.S., the Netherlands Antilles,
Canada, Mexico and the U.K.
NuStar owns a high-quality, large and diverse asset portfolio
with operations in eight different countries. It is the fourth
largest independent liquids terminal operator in the world and
second largest in the U.S., apart from being the number one asphalt
producer on the East Coast and number three asphalt producer in the
U.S.
Over the last few years, the partnership has consolidated its
business through a combination of organic efforts and accretive
acquisitions. Other positive attributes in the NuStar story are its
strong balance sheet, investment grade rating and strong track
record for distribution growth.
However, we remain concerned of the slowdown in demand growth
for refined products (which adversely affects pipeline and terminal
throughput), as well as cost overruns on expansion projects (that
leads to lower returns) and higher business risk associated with
NuStar's more volatile asphalt operations.
As a result, our long-term total return expectation for NuStar
remains rather muted. We do not see any significant price upside
for the units over the next few quarters and expect the partnership
to grow at a somewhat more conservative and sustainable pace.
ENBRIDGE ENERGY (
EEQ
): Free Stock Analysis Report
NUSTAR ENERGY (
NS
): Free Stock Analysis Report
TESORO LOGISTIC (
TLLP
): Free Stock Analysis Report
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