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Form 8-K NuStar Energy L.P. For: Jan 29

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January 29, 2016 8:26 AM EST


 
 
 
 
 
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): January 29, 2016
NuStar Energy L.P.
(Exact name of registrant as specified in its charter)
Delaware
001-16417
74-2956831
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
 
 
 
19003 IH-10 West
San Antonio, Texas 78257
 
 
(Address of principal executive offices)
 
 
 
 
 
(210) 918-2000
 
 
(Registrant’s telephone number, including area code)
 
 
 
 
 
Not applicable
 
 
(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:
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 




Item 2.02    Results of Operations and Financial Condition.

On January 29, 2016, NuStar Energy L.P., a Delaware limited partnership, issued a press release announcing financial results for the quarter and year ended December 31, 2015. 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.


Item 9.01    Financial Statements and Exhibits.

(d)     Exhibits.

Exhibit Number
 
Exhibit
 
 
 
Exhibit 99.1
 
Press Release dated January 29, 2016.





SIGNATURES
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.
 
 
NUSTAR ENERGY L.P.
 
 
 
 
 
 
By:
Riverwalk Logistics, L.P.
 
 
its general partner
 
 
 
 
 
 
 
By:
NuStar GP, LLC
 
 
 
its general partner
 
 
 
 
 
Date: January 29, 2016
 
 
By:
/s/ Amy L. Perry
 
 
 
Name:
Amy L. Perry
 
 
 
Title:
Senior Vice President, General Counsel–Corporate & Commercial and Corporate Secretary





EXHIBIT INDEX
Exhibit Number
 
Exhibit
 
 
 
Exhibit 99.1
 
Press Release dated January 29, 2016.





Exhibit 99.1
NuStar Energy Covers Distribution in the Fourth Quarter and for the Full-Year 2015
Quarterly Distribution Remains at $1.095 per Unit
Highest Annual Distribution Coverage Since 2009
2015 EBITDA and DCF Highest in Partnership’s History

SAN ANTONIO, January 29, 2016 - NuStar Energy L.P. (NYSE: NS) today announced fourth quarter 2015 earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were $150.6 million, compared to fourth quarter 2014 EBITDA of $136.0 million. For the year ended December 31, 2015, the partnership reported $662.7 million of EBITDA from continuing operations, an increase of 21% over the $547.9 million reported for the year ended December 31, 2014 and the highest reported in the partnership’s history.

Fourth quarter 2015 distributable cash flow (DCF) from continuing operations available to limited partners was $89.6 million, or $1.15 per unit, compared to 2014 fourth quarter DCF from continuing operations available to limited partners of $95.4 million, or $1.23 per unit. For the year ended December 31, 2015, DCF from continuing operations available to limited partners was $377.9 million, or $4.85 per unit, which was higher than the $354.8 million, or $4.56 per unit, earned in 2014.

“2015 was another great year for NuStar, despite challenging industry fundamentals,” said Brad Barron, President and Chief Executive Officer of NuStar Energy L.P. and NuStar GP Holdings, LLC.  “We were able to exceed a one-to-one distribution coverage ratio for a second year in a row.

“Key contributions from our Linden terminal acquisition, increased storage renewal rates at many of our terminal locations, higher utilization across our terminal system and strong South Texas crude volumes across our docks at our Corpus Christi North Beach facility provided for an 11% increase in storage revenues compared to 2014. Our pipeline segment continued to benefit from our investments in our South Texas Crude Oil Pipeline system, as pipeline revenues increased 7% year over year.”

Barron went on to say, “DCF from continuing operations available to limited partners covers the distribution to the limited partners by 1.05 times for the fourth quarter of 2015 and by 1.11 times for the full-year 2015, our highest annual distribution coverage since 2009.”

The partnership reported fourth quarter net income applicable to limited partners of $47.5 million, or $0.61 per unit, compared to net income applicable to limited partners of $41.5 million, or $0.54 per unit, for the fourth quarter of 2014. For the year ended December 31, 2015, the partnership reported net income applicable to limited partners of $257.4 million, or $3.30 per unit, compared to net income applicable to limited partners of $163.3 million, or $2.10 per unit, in 2014.

Absent a gain related to the January 2, 2015 acquisition of the remaining 50% ownership in the Linden terminal, adjusted EBITDA from continuing operations for the year ended December 31, 2015 would have been $606.5 million, still a record for the partnership, while adjusted net income applicable to limited partners would have been $202.2 million, or $2.59 per unit.
The partnership also announced that its board of directors has declared a fourth quarter 2015 distribution of $1.095 per unit. The fourth quarter 2015 distribution will be paid on February 12, 2016 to holders of record as of February 8, 2016.
2016 Earnings Guidance

“Our overall expectations for 2016 are essentially unchanged from what we conveyed to you previously, but we have adjusted our EBITDA expectations for our storage and pipeline segments. We now expect our storage segment 2016 EBITDA to be $310 to $330 million, up approximately $15 million from previous guidance, due to an increase in our expected storage rates and throughput activity at some of our terminals.
Pipeline segment 2016 EBITDA is now expected to be $335 to $355 million, lower than our previous guidance due to reduced Eagle Ford volume projections for 2016. Fuels marketing segment EBITDA is still projected to be in the range of $15 to $35 million,” said Barron.
Barron went on to say, “Our 2016 capital spending projections remain unchanged. We have budgeted to spend $360 to $380 million for strategic capital and $35 to $45 million on reliability capital spending. However, we are in the process of prioritizing all capital spending for 2016 to avoid accessing the public debt and equity markets. We plan to finance 2016

-More-



spending with excess cash on our balance sheet, borrowings from our $1.5 billion credit facility and possibly by accessing the convertible preferred market.”
Barron concluded by saying, “Based on these projections we expect to once again cover our current distribution in 2016.”
Fourth Quarter Earnings Conference Call Details
A conference call with management is scheduled for 9:00 a.m. CT today, January 29, 2016, to discuss the financial and operational results for the fourth quarter of 2015. Investors interested in listening to the presentation may call 800/622-7620, passcode 22232103. International callers may access the presentation by dialing 706/645-0327, passcode 22232103. The partnership intends to have a playback available following the presentation, which may be accessed by calling 800/585-8367, passcode 22232103. International callers may access the playback by calling 404/537-3406, passcode 22232103. The playback will be available until 10:59 p.m. CT on February 29, 2016.
Investors interested in listening to the live presentation or a replay via the internet may access the presentation directly by clicking here or by logging on to NuStar Energy L.P.’s Web site at www.nustarenergy.com.
The presentation will disclose certain non-GAAP financial measures. Reconciliations of certain of these non-GAAP financial measures to U.S. GAAP may be found in this press release, with additional reconciliations located on the Financials page of the Investors section of NuStar Energy L.P.’s Web site at www.nustarenergy.com.
NuStar Energy L.P., a publicly traded master limited partnership based in San Antonio, is one of the largest independent liquids terminal and pipeline operators in the nation.  NuStar currently has approximately 8,700 miles of pipeline and 79 terminal and storage facilities that store and distribute crude oil, refined products and specialty liquids.  The partnership’s combined system has approximately 93 million barrels of storage capacity, and NuStar has operations in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, and the United Kingdom.  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 Energy L.P.’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of NuStar Energy L.P.’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 Energy L.P., 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 Statements

This press release includes forward-looking statements regarding future events, such as the partnership’s future performance. 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 and NuStar GP Holdings, LLC’s 2014 annual reports on Form 10-K and subsequent filings with the Securities and Exchange Commission. Actual results may differ materially from those described in the forward-looking statements.



NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Statement of Income Data:
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Service revenues
$
281,025

 
$
270,895

 
$
1,114,153

 
$
1,026,446

Product sales
183,894

 
410,843

 
969,887

 
2,048,672

Total revenues
464,919

 
681,738

 
2,084,040

 
3,075,118

Costs and expenses:
 
 
 
 
 
 
 
Cost of product sales
169,500

 
389,020

 
907,574

 
1,967,528

Operating expenses
117,612

 
135,359

 
473,031

 
472,925

General and administrative expenses
27,096

 
27,070

 
102,521

 
96,056

Depreciation and amortization expense
52,687

 
48,943

 
210,210

 
191,708

Total costs and expenses
366,895

 
600,392

 
1,693,336

 
2,728,217

Operating income
98,024

 
81,346

 
390,704

 
346,901

Equity in earnings of joint ventures
—

 
3,059

 
—

 
4,796

Interest expense, net
(33,559
)
 
(31,735
)
 
(131,868
)
 
(131,226
)
Other (expense) income, net
(70
)
 
2,683

 
61,822

 
4,499

Income from continuing operations before
income tax expense
64,395

 
55,353

 
320,658

 
224,970

Income tax expense
4,915

 
484

 
14,712

 
10,801

Income from continuing operations
59,480

 
54,869

 
305,946

 
214,169

(Loss) income from discontinued operations, net of tax
—

 
(1,475
)
 
774

 
(3,791
)
Net income
$
59,480

 
$
53,394

 
$
306,720

 
$
210,378

Net income applicable to limited partners
$
47,485

 
$
41,522

 
$
257,366

 
$
163,339

Net income (loss) per unit applicable to limited partners:
 
 
 
 
 
 
 
Continuing operations
$
0.61

 
$
0.55

 
$
3.29

 
$
2.14

Discontinued operations
—

 
(0.01
)
 
0.01

 
(0.04
)
Total
$
0.61

 
$
0.54

 
$
3.30

 
$
2.10

Weighted-average limited partner units outstanding
77,886,078

 
77,886,078

 
77,886,078

 
77,886,078

 
 
 
 
 
 
 
 
EBITDA from continuing operations (Note 1)
$
150,641

 
$
136,031

 
$
662,736

 
$
547,904

DCF from continuing operations (Note 1)
$
102,393

 
$
108,173

 
$
428,971

 
$
405,890

 
 
 
 
 
 
 
 
 
December 31,
 
 
 
 
 
2015
 
2014
 
 
 
 
Balance Sheet Data:
 
 
 
 
 
 
 
Total debt
$
3,163,349

 
$
2,826,452

 
 
 
 
 Partners’ equity
1,609,844

 
1,716,210

 
 
 
 
 Consolidated debt coverage ratio (Note 2)
4.5x

 
4.0x

 
 
 
 



NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Barrel Data)
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Pipeline:
 
 
 
 
 
 
 
Refined products pipelines throughput (barrels/day)
551,246

 
533,521

 
522,146

 
510,737

Crude oil pipelines throughput (barrels/day)
435,007

 
490,969

 
471,632

 
437,757

Total throughput (barrels/day)
986,253

 
1,024,490

 
993,778

 
948,494

Throughput revenues
$
130,492

 
$
130,812

 
$
508,522

 
$
477,030

Operating expenses
40,081

 
44,421

 
153,222

 
154,106

Depreciation and amortization expense
22,058

 
20,036

 
84,951

 
77,691

Segment operating income
$
68,353

 
$
66,355

 
$
270,349

 
$
245,233

Storage:
 
 
 
 
 
 
 
Throughput (barrels/day)
888,033

 
918,929

 
899,606

 
887,607

Throughput revenues
$
31,762

 
$
31,867

 
$
130,127

 
$
123,051

Storage lease revenues
123,067

 
111,142

 
494,781

 
441,455

Total revenues
154,829

 
143,009

 
624,908

 
564,506

Operating expenses
70,185

 
74,952

 
290,322

 
277,554

Depreciation and amortization expense
28,541

 
26,368

 
116,768

 
103,848

Segment operating income
$
56,103

 
$
41,689

 
$
217,818

 
$
183,104

Fuels Marketing:
 
 
 
 
 
 
 
Product sales and other revenue
$
185,497

 
$
414,205

 
$
976,216

 
$
2,060,017

Cost of product sales
172,820

 
392,734

 
922,906

 
1,983,339

Gross margin
12,677

 
21,471

 
53,310

 
76,678

Operating expenses
9,926

 
18,563

 
39,803

 
51,857

Depreciation and amortization expense
—

 
—

 
—

 
16

Segment operating income
$
2,751

 
$
2,908

 
$
13,507

 
$
24,805

Consolidation and Intersegment Eliminations:
 
 
 
 
 
 
 
Revenues
$
(5,899
)
 
$
(6,288
)
 
$
(25,606
)
 
$
(26,435
)
Cost of product sales
(3,320
)
 
(3,714
)
 
(15,332
)
 
(15,811
)
Operating expenses
(2,580
)
 
(2,577
)
 
(10,316
)
 
(10,592
)
Total
$
1

 
$
3

 
$
42

 
$
(32
)
Consolidated Information:
 
 
 
 
 
 
 
Revenues
$
464,919

 
$
681,738

 
$
2,084,040

 
$
3,075,118

Cost of product sales
169,500

 
389,020

 
907,574

 
1,967,528

Operating expenses
117,612

 
135,359

 
473,031

 
472,925

Depreciation and amortization expense
50,599

 
46,404

 
201,719

 
181,555

Segment operating income
127,208

 
110,955

 
501,716

 
453,110

General and administrative expenses
27,096

 
27,070

 
102,521

 
96,056

Other depreciation and amortization expense
2,088

 
2,539

 
8,491

 
10,153

Consolidated operating income
$
98,024

 
$
81,346

 
$
390,704

 
$
346,901




NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Per Unit Data)
Notes:
(1)
NuStar Energy L.P. utilizes financial measures such as earnings before interest, taxes, depreciation and amortization (EBITDA), distributable cash flow (DCF), adjusted net income and adjusted net income per unit (collectively, financial measures), which are not defined in U.S. generally accepted accounting principles (GAAP). 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 financial measures provide investors an enhanced perspective of the operating performance of the partnership’s assets and/or the cash that the business is generating. None of these financial measures are presented as an alternative to net income or income from continuing operations. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with GAAP. For purposes of segment reporting, we do not allocate general and administrative expenses to our reported operating segments because those expenses relate primarily to the overall management at the entity level. Therefore, EBITDA reflected in the segment reconciliations exclude any allocation of general and administrative expenses consistent with our policy for determining segmental operating income, the most directly comparable GAAP measure.
The following is a reconciliation of income from continuing operations to EBITDA from continuing operations and DCF from continuing operations:
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
Income from continuing operations
$
59,480

 
$
54,869

 
$
305,946

 
$
214,169

Plus interest expense, net
33,559

 
31,735

 
131,868

 
131,226

Plus income tax expense
4,915

 
484

 
14,712

 
10,801

Plus depreciation and amortization expense
52,687

 
48,943

 
210,210

 
191,708

EBITDA from continuing operations
150,641

 
136,031

 
662,736

 
547,904

Equity in earnings of joint ventures
—

 
(3,059
)
 
—

 
(4,796
)
Interest expense, net
(33,559
)
 
(31,735
)
 
(131,868
)
 
(131,226
)
Reliability capital expenditures
(17,936
)
 
(10,373
)
 
(40,002
)
 
(28,635
)
Income tax expense
(4,915
)
 
(484
)
 
(14,712
)
 
(10,801
)
Distributions from joint ventures
—

 
1,708

 
2,500

 
7,587

Other items (a)
9,282

 
11,686

 
(44,032
)
 
19,732

Mark-to-market impact on hedge transactions (b)
(1,120
)
 
4,399

 
(5,651
)
 
6,125

DCF from continuing operations
$
102,393

 
$
108,173

 
$
428,971

 
$
405,890

 
 
 
 
 
 
 
 
Less DCF from continuing operations available to
general partner
12,766

 
12,766

 
51,064

 
51,064

DCF from continuing operations available to
limited partners
$
89,627

 
$
95,407

 
$
377,907

 
$
354,826

 
 
 
 
 
 
 
 
DCF from continuing operations per limited partner unit
$
1.15

 
$
1.23

 
$
4.85

 
$
4.56

(a)
Other items mainly consist of (i) a ($56.3 million) non-cash gain and insurance proceeds of $7.8 million mainly received in the fourth quarter of 2015, associated with the Linden terminal acquisition on January 2, 2015; (ii) a lower of cost or market adjustment of $3.8 million for the three months and year ended December 31, 2014 and (iii) the net change in deferred revenue associated with throughput deficiency payments and construction reimbursements for all periods presented.
(b)
DCF from continuing operations excludes the impact of unrealized mark-to-market gains and losses that arise from valuing certain derivative contracts, as well as the associated hedged inventory. The gain or loss associated with these contracts is realized in DCF from continuing operations when the contracts are settled.





NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Per Unit Data)
Notes (continued):

The following is a reconciliation of net income and net income per unit to adjusted net income applicable to limited partners and adjusted net income per unit:
 
Year Ended December 31, 2015
Net income / net income per unit
$
306,720

 
$
3.30

Gain on Linden terminal acquisition
(56,277
)
 
(0.71
)
Adjusted net income
250,443

 
 
GP interest and incentive
(48,228
)
 
 
Adjusted net income applicable to limited partners / adjusted net income per unit
$
202,215

 
$
2.59


The following is a reconciliation of EBITDA from continuing operations to adjusted EBITDA from continuing operations:
 
Year Ended December 31, 2015
EBITDA from continuing operations
$
662,736

Gain on Linden terminal acquisition
(56,277
)
Adjusted EBITDA from continuing operations
$
606,459


The following are reconciliations of projected operating income to projected EBITDA for our reported segments:
 
Year Ended December 31, 2016
 
Pipeline
 
Storage
 
Fuels Marketing
Projected operating income
$ 250,000 - 265,000
 
$ 195,000 - 210,000
 
$ 15,000 - 35,000

Plus projected depreciation and amortization expense
85,000 - 90,000
 
115,000 - 120,000
 
—

Projected EBITDA
$ 335,000 - 355,000
 
$ 310,000 - 330,000
 
$ 15,000 - 35,000


(2)
The consolidated debt coverage ratio is calculated as consolidated debt to consolidated EBITDA, each as defined in our $1.5 billion five-year revolving credit agreement.






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