UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 7, 2007

 

NUSTAR ENERGY L.P.

(Exact name of registrant as specified in its charter)

 

 

 

 

Registrant’s telephone number, including area code: (210) 918-2000

 

_______________________

 

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

 

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On November 7, 2007, NuStar Energy L.P., a Delaware limited partnership, issued a press release announcing financial results for the quarter ended September 30, 2007. A copy of the press release announcing the financial results is furnished with this report as Exhibit 99.1, and is incorporated herein by reference.

 

The information in this report is being furnished, not filed, pursuant to Item 2.02 of Form 8-K. Accordingly, the information in this report, including the press release, will not be incorporated by reference into any registration statement filed by NuStar Energy L.P. under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

 

NON-GAAP FINANCIAL MEASURES

 

The press release announcing the earnings discloses certain financial measures, EBITDA, distributable cash flow, and distributable cash flow per unit, that are non-GAAP financial measures as defined under SEC rules. The press release furnishes a reconciliation of these non-GAAP financial measures to their nearest GAAP financial measures. 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, distributable cash flow, nor distributable cash flow per unit are intended to represent cash flows for the period, nor are they presented as an alternative to net income or cash flow from operations. 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.

 

 

NuStar Energy L.P. has prepared a slide presentation for use in connection with today’s earnings call. The slides are available on NuStar Energy L.P.’s website at www.nustarenergy.com under “Management Presentations.”

 

 

 

 

 

 

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

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EXHIBIT INDEX

 

 

 

 

 

Exhibit 99.1

 

NuStar Energy L.P. Reports Higher Third Quarter 2007 Earnings

 

SAN ANTONIO, November 7, 2007 – NuStar Energy L.P. (NYSE:NS) today announced net income applicable to limited partners of $45.4 million, or $0.97 per unit, for the third quarter of 2007 compared to $36.9 million, or $0.79 per unit, earned in the third quarter of 2006. For the nine months ended September 30, 2007, net income applicable to limited partners was $106.6 million, or $2.28 per unit, compared to $99.6 million, or $2.13 per unit, for the nine months ended September 30, 2006.

 

Distributable cash flow available to limited partners from continuing operations for the third quarter of 2007 was $62.7 million, or $1.34 per unit, compared to $55.5 million, or $1.19 per unit, for the third quarter of 2006. For the nine months ended September 30, 2007, distributable cash flow available to limited partners from continuing operations was $163.7 million, or $3.50 per unit, compared to $150.3 million, or $3.21 per unit, for the nine months ended September 30, 2006. As of September 30, 2007, the partnership’s debt-to-capitalization ratio was 44.7 percent compared to 41.9 percent as of December 31, 2006.

 

NuStar Energy L.P. previously announced that its board of directors had declared an increase in the quarterly distribution rate to $0.985 per unit, or $3.94 per unit on an annual basis, which will be paid on November 14, 2007, to holders of record as of November 8, 2007. This quarterly distribution represents an increase of $0.07 per unit, or 7.7 percent, over the $0.915 distribution for the third quarter of 2006 and an increase of $0.035 per unit, or 3.7 percent, over the $0.95 distribution for the second quarter of 2007. Distributable cash flow available to limited partners covers the distribution to the limited partners by 1.36 times for the third quarter of 2007.

 

Included in the third quarter 2007 results in other income is a $7.3 million gain, or $0.15 per unit, related to the sale of NuStar’s interest in a coal property in Wyoming that was acquired through the Kaneb purchase in 2005. Further, the net impact of the fire at Valero Energy’s McKee refinery, taking into consideration insurance proceeds received in the third quarter, increased net income by $3.3 million, or $0.07 per unit. Excluding the impact of these and other special items, adjusted earnings were $38.0 million, or $0.81 per unit, for the third quarter of 2007.

 

NuStar Energy L.P. also announced this morning a proposed acquisition of CITGO Asphalt Refining Company’s asphalt operations and assets for $450 million plus working capital estimated to be $100 million at closing.

 

“We are excited about the significant opportunities we have by acquiring CITGO’s asphalt operations on the U.S. East Coast,” said Curt Anastasio, NuStar Energy L.P.’s Chief Executive

 

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Officer. “As refiners continue to add cokers to be able to process more of the bottom of the barrel, we expect this will reduce asphalt feedstocks resulting in higher margins. Since we are acquiring CITGO’s asphalt assets at significantly less than replacement value, we believe we are poised to benefit from these positive fundamentals. We anticipate closing around year-end and expect to quickly integrate these assets.

 

“I am also pleased to report yet another increase in the quarterly distribution, which is the second consecutive increase in the quarterly distribution this year.

 

“We continue to make substantial progress on our $400 million construction program, having completed over $80 million of terminal projects to date. With the exception of one of our Amsterdam projects, which has been pushed back slightly to the first quarter of 2008, we continue to expect the remaining projects will be completed on-time with the majority of them in-service by early to mid-2008. We have recently completed our strategic planning process and have identified many internal growth opportunities that will allow us to continue growing the partnership beyond 2008. We have already started developing several of these projects and hope to have more information on these in the near future.

 

“Looking ahead to the fourth quarter of 2007, we believe results will be in the range of $0.50 to $0.60 per unit and we continue to expect that earnings before interest, taxes, depreciation and amortization (“EBITDA”) will be higher in 2007 than in 2006,” said Anastasio.

 

A conference call with management is scheduled for 11:00 a.m. ET (10:00 a.m. CT) today, November 7, 2007, to discuss the proposed acquisition of CITGO Asphalt Refining Company and respond to questions regarding the financial and operational results for the third quarter of 2007. Investors interested in listening to the presentation may call 800/622-7620, passcode 20992515. International callers may access the presentation by dialing 706/645-0327, passcode 20992515. The company intends to have a playback available following the presentation, which may be accessed by calling 800/642-1687, passcode 20992515. A live broadcast of the conference call will also be available on the partnership’s Web site at www.nustarenergy.com. In addition, further information about the transaction is provided in a management presentation posted to the NuStar Energy L.P. and NuStar GP Holdings, LLC Web sites at www.nustarenergy.com and www.nustargp.com in the Investors portion of the Web sites.

 

 

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NuStar Energy L.P. is a publicly traded, limited partnership based in San Antonio, with 9,113 miles of pipeline, 85 terminal facilities and four crude oil storage tank facilities. The second largest independent liquids terminal operator in the world, NuStar has operations in the United States, the Netherlands Antilles, Canada, Mexico, the Netherlands and the United Kingdom. The partnership’s combined system has over 81 million barrels of storage capacity, and includes crude oil and refined product pipelines, refined product terminals, a petroleum and specialty liquids storage and terminaling business, as well as crude oil storage facilities. For more information, visit NuStar Energy L.P.’s Web site at www.nustarenergy.com.

 

Cautionary Statement Regarding Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of NuStar Energy L.P. All forward-looking statements are based on the partnership’s beliefs as well as assumptions made by and information currently available to the partnership. These statements reflect the partnership’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.’s 2006 annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission.

 

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NuStar Energy L.P.

Consolidated Financial Information

September 30, 2007 and 2006

(unaudited, thousands of dollars, except unit data and per unit data)

 

				Three Months Ended						Nine Months Ended
				September 30,						September 30,
				2007			2006			2007			2006
Statement of Income Data:
Revenues:
Services revenues			$	185,979		$	161,888		$	503,321		$	461,911
Product sales				208,563			129,135			508,551			383,084
Total revenues				394,542			291,023			1,011,872			844,995
Costs and expenses:
Cost of product sales				199,023			117,759			475,011			350,260
Operating expenses				91,981			82,502			258,637			232,727
General and administrative expenses				16,118			11,388			48,607			30,323
Depreciation and amortization expense				29,534			24,994			84,736			74,022
Total costs and expenses				336,656			236,643			866,991			687,332
Operating income				57,886			54,380			144,881			157,663
Equity earnings from joint ventures				1,613			1,464			4,970			4,514
Interest expense, net				(19,381	)		(16,606	)		(57,687	)		(48,906	)
Other income, net				14,666			1,317			38,915			1,276
Income from continuing operations
before income tax expense (benefit)				54,784			40,555			131,079			114,547
Income tax expense (benefit)				3,571			(614	)		9,046			1,997
Income from continuing operations				51,213			41,169			122,033			112,550
Loss from discontinued operations, net of income tax				—			—			—			(377	)
Net income				51,213			41,169			122,033			112,173
Net income applicable to general partner (Note 1)				(5,842	)		(4,310	)		(15,414	)		(12,550	)
Net income applicable to limited partners			$	45,371		$	36,859		$	106,619		$	99,623
Income per unit applicable to limited
partners (Note 1):
Continuing operations			$	0.97		$	0.79		$	2.28		$	2.14
Discontinued operations				—			—			—			(0.01	)
Net income			$	0.97		$	0.79		$	2.28		$	2.13
Weighted average number of limited
partnership units outstanding				46,809,749			46,809,749			46,809,749			46,809,749
EBITDA from continuing operations (Note 2)			$	103,699		$	82,155		$	273,502		$	237,475
Distributable cash flow from continuing operations (Note 2)			$	68,690		$	60,413		$	179,938		$	163,990
			September 30,			September 30,						December 31,
			2007			2006						2006
Balance Sheet Data:
Debt, including current portion (a)			$	1,515,358		$	1,179,042					$	1,354,367
Partners' equity (b)				1,873,168			1,886,671						1,875,681
Debt-to-capitalization ratio (a) / ((a)+(b))				44.7%			38.5%						41.9%

  

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NuStar Energy L.P.

Consolidated Financial Information - Continued

September 30, 2007 and 2006

(unaudited, thousands of dollars, except barrel information)
 
 

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2007			2006			2007			2006
Operating Data:
Refined product terminals:
Throughput (barrels/day)				267,546			267,144			242,228			261,619
Throughput revenues			$	14,092		$	13,273		$	37,392		$	36,689
Storage lease revenues				76,888			62,925			218,044			182,951
Product sales (bunkering)				166,260			128,369			463,739			382,318
Total revenues				257,240			204,567			719,175			601,958
Cost of product sales				154,828			117,161			429,391			349,662
Operating expenses				55,828			49,555			159,350			143,626
Depreciation and amortization expense				13,980			11,249			40,566			33,196
Segment operating income			$	32,604		$	26,602		$	89,868		$	75,474
Refined product pipelines:
Throughput (barrels/day)				719,385			722,952			661,709			711,215
Throughput revenues			$	68,288		$	58,567		$	176,851		$	162,814
Product sales				2,323			766			4,286			766
Total revenues				70,611			59,333			181,137			163,580
Cost of product sales				1,989			598			3,051			598
Operating expenses				27,862			25,972			77,770			69,510
Depreciation and amortization expense				11,616			10,554			33,888			31,296
Segment operating income			$	29,144		$	22,209		$	66,428		$	62,176
Crude oil pipelines:
Throughput (barrels/day)				410,758			410,211			369,184			426,129
Throughput revenues			$	15,612		$	15,072		$	38,077		$	43,989
Operating expenses				4,815			4,559			11,839			12,546
Depreciation and amortization expense				1,209			1,277			3,703			3,809
Segment operating income			$	9,588		$	9,236		$	22,535		$	27,634
Crude oil storage tanks:
Throughput (barrels/day)				576,965			513,904			560,394			503,769
Throughput revenues			$	11,977		$	12,051		$	34,379		$	35,468
Operating expenses				2,650			2,416			8,371			7,045
Depreciation and amortization expense				1,906			1,914			5,756			5,721
Segment operating income			$	7,421		$	7,721		$	20,252		$	22,702
Other: (Note 3)
Product sales			$	41,560		$	—		$	42,106		$	—
Cost of product sales				43,796			—			44,166			—
Operating expenses				1,509			—			2,527			—
Depreciation and amortization expense				823			—			823			—
Segment operating income			$	(4,568	)	$	—		$	(5,410	)	$	—
Consolidation and intersegment eliminations:
Throughput revenues			$	(878	)	$	—		$	(1,422	)	$	—
Product sales				(1,580	)		—			(1,580	)		—
Total revenues				(2,458	)		—			(3,002	)		—
Cost of product sales				(1,590	)		—			(1,597	)		—
Operating expenses				(683	)		—			(1,220	)		—
Total			$	(185	)	$	—		$	(185	)	$	—
Consolidated Information:
Revenues			$	394,542		$	291,023		$	1,011,872		$	844,995
Cost of product sales				199,023			117,759			475,011			350,260
Operating expenses				91,981			82,502			258,637			232,727
Depreciation and amortization expense				29,534			24,994			84,736			74,022
Segment operating income				74,004			65,768			193,488			187,986
General and administrative expenses				16,118			11,388			48,607			30,323
Consolidated operating income			$	57,886		$	54,380		$	144,881		$	157,663

 
 

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NuStar Energy L.P.

Consolidated Financial Information - Continued

September 30, 2007 and 2006

(unaudited, thousands of dollars, except unit data and per unit data)
   

Notes:

1.

Income is allocated between limited partners and the general partner's interests based on provisions in the partnership agreement. The income applicable to limited partners is divided by the weighted average number of limited partnership units outstanding in computing the income per unit applicable to limited partners.

During the quarter ended September 30, 2006 our general partner reimbursed us for certain charges we incurred related to services historically provided under our Services Agreement with Valero Energy Corporation. Generally accepted accounting principles require us to record the charges as expenses and record the reimbursement as partner's capital contribution.

The following table details the calculation of net income applicable to the general partner:

				Three Months Ended					Nine Months Ended
				September 30,						September 30,
				2007			2006			2007			2006
Net income applicable to general partner
and limited partners' interest			$	51,213		$	41,169		$	122,033		$	112,173
Charges reimbursed by general partner				—			352			—			352
Net income before charges reimbursed by general partner				51,213			41,521			122,033			112,525
Less general partner incentive distribution				4,915			3,909			13,238			10,869
Net income after general partner incentive distribution				46,298			37,612			108,795			101,656
General partner interest				2%			2%			2%			2%
General partner allocation of net income
after general partner incentive distribution				927			753			2,176			2,033
Charges reimbursed by the general partner				—			(352	)		—			(352	)
General partner incentive distribution				4,915			3,909			13,238			10,869
Net income applicable to general partner			$	5,842		$	4,310		$	15,414		$	12,550

 

2.

NuStar Energy L.P. utilizes two financial measures, EBITDA from continuing operations and distributable cash flow from continuing operations, 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 from continuing operations nor distributable cash flow from continuing operations are intended to represent cash flows for the period, nor are they presented as an alternative to income from continuing operations. 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 income from continuing operations to EBITDA from continuing operations and distributable cash flow from continuing operations:

						Three Months Ended						Nine Months Ended
						September 30,						September 30,
						2007			2006			2007			2006
Income from continuing operations					$	51,213		$	41,169		$	122,033		$	112,550
Plus interest expense, net						19,381			16,606			57,687			48,906
Plus income tax expense						3,571			(614	)		9,046			1,997
Plus depreciation and amortization expense						29,534			24,994			84,736			74,022
EBITDA from continuing operations						103,699			82,155			273,502			237,475
Less equity earnings from joint ventures						(1,613	)		(1,464	)		(4,970	)		(4,514	)
Less interest expense, net						(19,381	)		(16,606	)		(57,687	)		(48,906	)
Less reliability capital expenditures						(11,597	)		(6,601	)		(23,558	)		(22,817	)
Less income tax (expense) benefit						(3,571	)		614			(9,046	)		(1,997	)
Plus general partner reimbursable charges						—			352			—			352
Plus distributions from joint ventures						—			1,963			544			4,397
Plus mark-to-market impact on hedge transactions (a)						1,153			—			1,153			—
Distributable cash flow from continuing operations						68,690			60,413			179,938			163,990
General partner's interest in distributable cash flow
from continuing operations						(5,956	)		(4,864	)		(16,230	)		(13,656	)
Limited partners' interest in distributable cash flow
from continuing operations					$	62,734		$	55,549		$	163,708		$	150,334
Weighted average number of limited
partnership units outstanding						46,809,749			46,809,749			46,809,749			46,809,749
Distributable cash flow from continuing
operations per limited partner unit					$	1.340		$	1.187		$	3.497		$	3.212

(a)  Distributable cash flow from continuing operations above excludes the impact of mark-to-market gains and losses, which arise from valuing certain derivative contracts. We enter into these contracts to mitigate our exposure to price fluctuations related to our inventory.

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NuStar Energy L.P.

Consolidated Financial Information - Continued

September 30, 2007 and 2006

(unaudited, thousands of dollars, except unit data and per unit data)
 
 

Notes (continued):

3.

The other segment primarily consists of our marketing and trading business. This business purchases heavy fuel oil, asphalt and refined products for resale to third parties. We manage our exposure to price risk associated with these inventories by entering into economic hedges. Additionally, we engage in a limited trading program. Revenues include the sales of our inventories to third parties as well as the mark-to-market results of our trading program. Cost of sales includes the cost of our inventories as well as the mark-to-market results of our economic hedges.