NuStar Energy L.P. NYSE: NS
NuStar Energy L.P. NYSE: NS NuStar Energy L.P., incorporated on December 7, 1999, is engaged in the transportation of petroleum products and anhydrous ammonia; the terminaling and storage of petroleum products, and the marketing of petroleum products. The Company's operating segments include pipeline, storage and fuels marketing. The Company conducts its operations through its subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP). The Company's assets include approximately 5,500 miles of refined product pipelines with over 20 associated terminals providing storage capacity of over five million barrels and approximately two tank farms providing storage capacity of over 1.4 million barrels; over 2,000 miles of anhydrous ammonia pipelines; approximately 1,200 miles of crude oil pipelines, with over eight associated terminals, providing approximately four million barrels of associated storage capacity, and over 50 terminal and storage facilities providing approximately 82.9 million barrels of storage capacity. 1 The company is an Oil and Gas Transportation master limited partnership (MLP) and is listed on NYSE with a market cap of $3.5B 2. Bigger companies in this segment include Enterprise Products Partners, Williams Companies, BP and Magellan Midstream Partners to name a few. The company caters to a very integral part of the whole chain of physical energy trading and logistics given the current structure of the Oil markets (contango in most cases) and a low price environment where the consumer looks for the cheapest source of barrel and helps the traders who seek arbitrage opportunities with the current dynamics which this company provides given their geographic footprint. The presence measures from USA and Canada and also has a big storage terminal in Amsterdam along with smaller terminals in UK.
Sector Brief and Recent Performance This sector has seen traction ever since the Oil markets hit the contango structure which created a huge demand for storage terminals across the world and pipelines also. The sector has since been growing and has only seen more and more capacity expansions done by various companies to capture the growing market in different geographies like Americas, Europe and Far East.
The company acquired 50% in 4.3mbbls Linden in New York Harbour in Jan 2015 mainly for storage of refined products. 3 In Feb 2015 it completed the expansion of South Texas Crude Oil Pipeline System increasing the capacity to 340,000 bpd. 3 In third quarter company finished construction of 400,000 barrels of additional storage at our Corpus Christi North Beach Terminal. 3
Company reported Q1 net income fell to $44.8 million or $0.57 per diluted share from $114.5 million or $1.47 the year earlier. While its quarter-over-quarter results were down largely as a result of an acquisition-related non-cash gain in the first quarter of last year, it fared quite well in face of the sustained low crude price environment. It exceeded the per unit guidance ranges and reported DCF from continuing operations available to limited partners that covered the distribution to the limited partners by a strong 1.14 times. 4
Key Insights:
The company is very focused on a disciplined capital spending approach and uses the cash reserves wisely, for example they recently signed one-year, 850,000 barrel storage contract at our formerly moth-balled Piney Point, Maryland facility instead of a buyout, Given the contango in the Oil market in the past several years, show the storage and pipeline lease utilization above 90% in 2015 end, in Contango market, physical oil will typically be stored for a future delivery so as to fetch a higher price. 3 Management seems to be confident of company’s future as there was some promoter buying and the dividend yield is a whopping 8.95%. 5 In 2016 company looks to add 1 million barrels of storage to complement the existing St. James storage. However the planned $125 million pipeline project for LPG and refined products has been delayed because of changes at PEMEX top management. 6
Bibliography: 1 http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=NS 2 https://in.finance.yahoo.com/q/co?s=NS 3 From the UBS Conference Presentation on company website http://investor.nustarenergy.com/phoenix.zhtml?c=123440&p=irol-presentations 4 http://investor.nustarenergy.com/phoenix.zhtml?c=123440&p=irol-newsArticle&ID=2161896 5 http://www.forbes.com/sites/dividendchannel/2016/05/06/nustar-energy-named-top-dividend-stockwith-insider-buying-and-8-95-yield-ns/#779f0cb24991 6 http://seekingalpha.com/article/3968374-nustar-energys-ns-ceo-brad-barron-q1-2016-resultsearnings-call-transcript?page=2
Sector Brief and Recent Performance This sector has seen traction ever since the Oil markets hit the contango structure which created a huge demand for storage terminals across the world and pipelines also. The sector has since been growing and has only seen more and more capacity expansions done by various companies to capture the growing market in different geographies like Americas, Europe and Far East.
The company acquired 50% in 4.3mbbls Linden in New York Harbour in Jan 2015 mainly for storage of refined products. 3 In Feb 2015 it completed the expansion of South Texas Crude Oil Pipeline System increasing the capacity to 340,000 bpd. 3 In third quarter company finished construction of 400,000 barrels of additional storage at our Corpus Christi North Beach Terminal. 3
Company reported Q1 net income fell to $44.8 million or $0.57 per diluted share from $114.5 million or $1.47 the year earlier. While its quarter-over-quarter results were down largely as a result of an acquisition-related non-cash gain in the first quarter of last year, it fared quite well in face of the sustained low crude price environment. It exceeded the per unit guidance ranges and reported DCF from continuing operations available to limited partners that covered the distribution to the limited partners by a strong 1.14 times. 4
Key Insights:
The company is very focused on a disciplined capital spending approach and uses the cash reserves wisely, for example they recently signed one-year, 850,000 barrel storage contract at our formerly moth-balled Piney Point, Maryland facility instead of a buyout, Given the contango in the Oil market in the past several years, show the storage and pipeline lease utilization above 90% in 2015 end, in Contango market, physical oil will typically be stored for a future delivery so as to fetch a higher price. 3 Management seems to be confident of company’s future as there was some promoter buying and the dividend yield is a whopping 8.95%. 5 In 2016 company looks to add 1 million barrels of storage to complement the existing St. James storage. However the planned $125 million pipeline project for LPG and refined products has been delayed because of changes at PEMEX top management. 6
Bibliography: 1 http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=NS 2 https://in.finance.yahoo.com/q/co?s=NS 3 From the UBS Conference Presentation on company website http://investor.nustarenergy.com/phoenix.zhtml?c=123440&p=irol-presentations 4 http://investor.nustarenergy.com/phoenix.zhtml?c=123440&p=irol-newsArticle&ID=2161896 5 http://www.forbes.com/sites/dividendchannel/2016/05/06/nustar-energy-named-top-dividend-stockwith-insider-buying-and-8-95-yield-ns/#779f0cb24991 6 http://seekingalpha.com/article/3968374-nustar-energys-ns-ceo-brad-barron-q1-2016-resultsearnings-call-transcript?page=2
