NuStar Energy L.P. Reports Fourth Quarter and Full-Year 2020 Earnings Results
NuStar Energy L.P. (NYSE: NS) today announced its fourth quarter and full-year 2020 earnings results.
“As we came into 2020, we had just booked the best fourth quarter in company history and we were expecting a record year. However, by March 2020, the COVID-19 pandemic had devastated much of the global economy,” said NuStar President and CEO Brad Barron. "Faced with historically difficult conditions, our employees stepped up and through hard work and prudent planning, including right-sizing our capital program and significantly reducing our costs, we generated solid results."
Barron noted that 2020 was an unprecedented year filled with many unique pandemic-related obstacles to overcome, including a
“Largely as a result of these items, NuStar reported net income of
“I am also happy to say that despite a very difficult year for our economy, our industry and our company, our operations did not skip a beat in 2020 thanks to the dedication of our employees. We had no work-related COVID-19 transmissions and our safety and environmental record continued to be significantly better than our industry averages. And even though the pandemic depressed activity for much of the globe, we actually increased the number of barrels per day we handled, in both our pipeline and our storage segments, over 2019. In fact, in 2020 NuStar moved more than 817 million barrels of crude oil and refined products through our pipelines and terminals, 6 million more than in 2019.
"NuStar also reported full-year 2020 earnings before interest, taxes, depreciation and amortization (EBITDA) of
“Our performance is a testament to our employees' perseverance, as well as to the remarkable resilience and quality of our assets and the markets we serve," Barron said.
Below is a year-over-year and quarter-over-quarter comparison of NuStar's unadjusted results and adjusted results that exclude the previously mentioned non-cash and non-operational charges:
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
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|
2020 -
|
2020 -
|
2019 |
|
2020 -
|
2020 -
|
2019 |
||||||||||||
|
|
||||||||||||||||||
|
(Thousands of Dollars, Except Per Unit and Ratio Data) |
||||||||||||||||||
From continuing operations: |
|
|
|
|
|
|
|
||||||||||||
Income (loss) |
$ |
15,532 |
|
$ |
50,229 |
|
$ |
78,408 |
|
|
$ |
(198,983) |
|
$ |
206,423 |
|
$ |
206,834 |
|
EPU |
$ |
(0.19) |
|
$ |
0.13 |
|
$ |
0.40 |
|
|
$ |
(3.15) |
|
$ |
0.57 |
|
$ |
0.60 |
|
EBITDA |
$ |
146,349 |
|
$ |
181,046 |
|
$ |
196,407 |
|
|
$ |
317,835 |
|
$ |
723,241 |
|
$ |
667,582 |
|
DCF |
$ |
63,066 |
|
$ |
63,066 |
|
$ |
107,119 |
|
|
$ |
193,926 |
|
$ |
335,672 |
|
$ |
345,278 |
|
Distribution coverage ratio |
1.44x |
1.44x |
1.64x |
|
1.11x |
1.92x |
1.33x |
||||||||||||
NuStar reported full-year 2020 adjusted net income of
Turning to the quarterly results, Barron commented, “To put NuStar’s quarter-over-quarter results into perspective, you need to bear in mind that you are comparing a pandemic-strapped fourth quarter in 2020 with the highest fourth quarter in the company's history.”
NuStar's fourth quarter 2020 adjusted net income was
Pipeline Demand Returns to Near Pre-Pandemic Levels
Barron discussed strengthening demand on both NuStar’s refined products and crude oil pipeline systems.
"In our pipeline segment, after seeing refined product demand improve steadily through the summer, we continued to see stable, positive results all the way through December," he said. “On average, across our refined product systems, for the month of December, we were at about 90 percent of typical demand. This was largely due to unplanned downtime at one of our customer’s refineries, but we were back up to almost 100 percent in January, in line with pre-pandemic volumes, which is quite remarkable compared to other systems in different markets.”
He also noted that NuStar’s Permian crude volumes have continued to improve. The system’s volumes averaged approximately 418,000 barrels per day (BPD) for the fourth quarter, and rose to an average 427,000 BPD during January. That steady upward trend continued as the system exited January at approximately 439,000 BPD.
“We believe that the volume we moved on our Permian System in January can be maintained in 2021 with about 16 active rigs without any drilled but uncompleted wells (DUCs). And we have been encouraged that our rig count had risen above that number to approximately 20 rigs," Barron said. "This brings our system’s count to a little more than 10 percent of the total number of rigs running across the entire Permian Basin as of the end of January.
“We believe our system’s strong performance, even through 2020’s unprecedented challenges, is a continued reflection of its clear advantages: premier location, lowest producer costs and highest product quality.
Barron commented that the Permian System’s average barrels per day in 2020 was more than 9 percent over 2019, which is more than twice the 4 percent growth average for the Permian Basin as a whole over the same period.
“Looking out to 2021, we are encouraged by the outsized share of the Permian’s DUCs that reside on our Permian Crude System acreage. Our system typically transports about 10 percent of basin production, which is impressive, but we have about two times that, or about 20 percent, of the Permian Basin’s DUC inventory on our footprint.
“We believe that the volume from completions of a little over half of those DUCs, along with volume from the rigs running on our system today, should support modest growth in our volumes in 2021, and we expect to exit 2021 between 470,000 and 480,000 BPD,” Barron said.
Barron also stated that NuStar’s Corpus Christi Crude System is seeing some indications of recovery in exports.
“After seeing our Corpus Christi exports dip below minimum volume commitments (MVCs) last May, we have been pleased with the ramp-up we saw in the second half of 2020, with throughputs increasing from an average of 306,000 BPD in the second quarter and averaging 369,000 BPD in January,” he said. “For 2021, we continue to forecast revenues for our Eagle Ford and WTI commitments to be slightly above the MVC levels, but I am cautiously optimistic about some initial indications of recovery during January.”
Storage Segment Continues to Benefit From Contango Market
Discussing NuStar’s storage segment, Barron noted that the partnership benefited last year from contango conditions (where the futures price is higher than the spot price) in the Spring, and many of these storage contracts continue into or through much of 2021.
He also noted that since November, NuStar’s St. James, LA terminal has benefited from the resumption of unit train activity unloading Canadian heavy crude there.
West Coast Renewable Fuels Distribution System Continues to Grow Market Share
NuStar’s West Coast renewable fuels distribution system continued to grow as NuStar executed on projects there and further increased its market share.
“In the first half of 2020, NuStar handled about 5 percent of California’s total biodiesel volumes, over 15 percent of California’s ethanol, and close to 30 percent of the state’s renewable diesel volumes,” said Barron. “That’s an impressive share of a key market that we have achieved with a relatively modest spend. And our market share, along with our revenue, is expected to keep ramping up through 2023 as we continue to execute on our planned projects there.
Barron noted that in 2020, NuStar’s West Coast storage assets generated about 20 percent of its total storage segment revenue, one-third of which was derived exclusively from renewable fuels-related services.
“As we continue to complete our 2021 West Coast projects, we expect renewable fuels-related services to grow to contribute about 35 percent of total West Coast revenue by year-end 2021 and approach 40 percent by year-end 2022.
“Our West Coast renewables network is growing and will continue to be the key to NuStar’s ability to thrive as we all navigate through the nation’s evolving energy priorities,” Barron said.
2021 Outlook and Capital Spending
“Turning to our full-year 2021 projections, we expect NuStar’s 2021 EBITDA to be comparable to our 2020 results, less the EBITDA associated with the Texas City terminals, which we sold in December,” Barron said.
“With regard to 2021 capital spending estimates, we expect to spend
“We are starting this year encouraged by the rebound we have seen, and continue to see, across our footprint,” Barron said. "January was promising, and we hope to see that improvement continue. Given all we accomplished in 2020, I am confident that NuStar is positioned to build steady, stable value in 2021 and beyond. To do that, we will continue to focus on our strategic priorities: operating safely, reliably and efficiently; lowering our leverage to further strengthen our balance sheet; and funding all of our 2021 spending from our internally generated cash flows,” Barron concluded.
Conference Call Details
A conference call with management is scheduled for 9:00 a.m. CT today, February 4, 2021. The partnership plans to discuss the fourth quarter 2020 earnings results, which will be released earlier that day. Investors interested in listening to the discussion may dial toll-free 844/889-7787, passcode 5472607. International callers may access the discussion by dialing 661/378-9931, passcode 5472607. The partnership intends to have a playback available following the discussion, which may be accessed by dialing toll-free 855/859-2056, passcode 5472607. International callers may access the playback by dialing 404/537-3406, passcode 5472607. The playback will be available until 12:00 p.m. CT on March 6, 2021.
Investors interested in listening to the live discussion or a replay via the internet may access the discussion directly at https://edge.media-server.com/mmc/p/ojo329tj or by logging on to NuStar Energy L.P.’s website at www.nustarenergy.com.
NuStar Energy L.P., a publicly traded master limited partnership based in San Antonio, Texas, is one of the largest independent liquids terminal and pipeline operators in the nation. NuStar currently has approximately 10,000 miles of pipeline and 73 terminal and storage facilities that store and distribute crude oil, refined products and specialty liquids. The partnership’s combined system has approximately 72 million barrels of storage capacity, and NuStar has operations in the United States, Canada and Mexico. For more information, visit NuStar Energy L.P.'s website at www.nustarenergy.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes, and the related conference call will include, forward-looking statements regarding future events and expectations, such as NuStar’s future performance, plans and expenditures. All forward-looking statements are based on NuStar’s beliefs as well as assumptions made by and information currently available to NuStar. These statements reflect NuStar’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 2019 annual report 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. Except as required by law, NuStar does not intend, or undertake any obligation, to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
NuStar Energy L.P. and Subsidiaries Consolidated Financial Information (Unaudited, Thousands of Dollars, Except Unit, Per Unit and Ratio Data) |
|||||||||||||||
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||||
Statement of Income Data: |
|
|
|
|
|
|
|
||||||||
Revenues: |
|
|
|
|
|
|
|
||||||||
Service revenues |
$ |
308,976 |
|
|
$ |
317,410 |
|
|
$ |
1,205,494 |
|
|
$ |
1,148,167 |
|
Product sales |
77,666 |
|
|
82,284 |
|
|
276,070 |
|
|
349,854 |
|
||||
Total revenues |
386,642 |
|
|
399,694 |
|
|
1,481,564 |
|
|
1,498,021 |
|
||||
Costs and expenses: |
|
|
|
|
|
|
|
||||||||
Costs associated with service revenues: |
|
|
|
|
|
|
|
||||||||
Operating expenses |
106,791 |
|
|
107,324 |
|
|
403,579 |
|
|
404,682 |
|
||||
Depreciation and amortization expense |
68,721 |
|
|
68,423 |
|
|
276,476 |
|
|
264,564 |
|
||||
Total costs associated with service revenues |
175,512 |
|
|
175,747 |
|
|
680,055 |
|
|
669,246 |
|
||||
Costs associated with product sales |
73,963 |
|
|
68,193 |
|
|
256,066 |
|
|
321,644 |
|
||||
Goodwill impairment loss |
— |
|
|
— |
|
|
225,000 |
|
|
— |
|
||||
General and administrative expenses |
30,588 |
|
|
29,492 |
|
|
102,716 |
|
|
107,855 |
|
||||
Other depreciation and amortization expense |
2,163 |
|
|
2,206 |
|
|
8,625 |
|
|
8,360 |
|
||||
Total costs and expenses |
282,226 |
|
|
275,638 |
|
|
1,272,462 |
|
|
1,107,105 |
|
||||
Operating income |
104,416 |
|
|
124,056 |
|
|
209,102 |
|
|
390,916 |
|
||||
Interest expense, net |
(57,896) |
|
|
(46,184) |
|
|
(229,054) |
|
|
(183,070) |
|
||||
Loss on extinguishment of debt |
— |
|
|
— |
|
|
(141,746) |
|
|
— |
|
||||
Other (expense) income, net |
(28,951) |
|
|
1,722 |
|
|
(34,622) |
|
|
3,742 |
|
||||
Income (loss) from continuing operations
|
17,569 |
|
|
79,594 |
|
|
(196,320) |
|
|
211,588 |
|
||||
Income tax expense |
2,037 |
|
|
1,186 |
|
|
2,663 |
|
|
4,754 |
|
||||
Income (loss) from continuing operations |
15,532 |
|
|
78,408 |
|
|
(198,983) |
|
|
206,834 |
|
||||
Loss from discontinued operations, net of tax |
— |
|
|
— |
|
|
— |
|
|
(312,527) |
|
||||
Net income (loss) |
$ |
15,532 |
|
|
$ |
78,408 |
|
|
$ |
(198,983) |
|
|
$ |
(105,693) |
|
|
|
|
|
|
|
|
|
||||||||
Basic net (loss) income per common unit: |
|
|
|
|
|
|
|
||||||||
Continuing operations |
$ |
(0.19) |
|
|
$ |
0.40 |
|
|
$ |
(3.15) |
|
|
$ |
0.60 |
|
Discontinued operations |
— |
|
|
— |
|
|
— |
|
|
(2.90) |
|
||||
Total net (loss) income per common unit |
$ |
(0.19) |
|
|
$ |
0.40 |
|
|
$ |
(3.15) |
|
|
$ |
(2.30) |
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted-average common units outstanding |
109,330,616 |
|
|
108,091,736 |
|
|
109,155,117 |
|
|
107,789,030 |
|
||||
NuStar Energy L.P. and Subsidiaries Consolidated Financial Information - Continued (Unaudited, Thousands of Dollars, Except Per Unit and Ratio Data) |
|||||||||||||||
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
2020 |
| |||||||||||||
