By a News Reporter-Staff News Editor at Energy Weekly News -- NuStar Energy L.P. (NYSE: NS) announced fourth quarter 2013 distributable cash flow from continuing operations available to limited partners was $75.3 million, or $0.97 per unit, compared to 2012 fourth quarter distributable cash flow from continuing operations available to limited partners of $60.5 million, or $0.78 per unit. For the year ended December 31, 2013, distributable cash flow from continuing operations available to limited partners was $257.8 million, or $3.31 per unit, higher than the $210.8 million, or $2.89 per unit earned in 2012.
"2013 was a major turning point for NuStar as we took steps to significantly reduce our exposure to margin-based operations and continued to invest in the growth of our more stable pipelines and terminals business," said Brad Barron, President and Chief Executive Officer of NuStar Energy L.P. and NuStar GP Holdings, LLC. "We're starting to see the results of this strategic redirection as the first quarter is off to a good start.
"We're excited about several important initiatives being announced that are expected to help improve our earnings in 2014 and beyond. We have made tremendous progress on the expansion of our Corpus Christi dock, which is now expected to be in service later this month - several months ahead of schedule. We completed construction on our second rail-car offloading facility at our St. James terminal. We forged an agreement with Lindsay Goldberg to divest our remaining 50% interest in our Asphalt Joint Venture, and we completed an agreement with Oxy to re-activate our idled 12" pipeline between Mont Belvieu and Corpus Christi.
"We have made a lot of progress over the past couple of months, and we're going to keep up the pace as everyone is focused on our goal of returning to one-to-one coverage of our distribution. Largely as a result of the improved adjusted EBITDA results in all three of our segments in 2013, NuStar's fourth quarter distributable cash flow from continuing operations available to limited partners covered the distribution to the limited partners by 0.89 times, the highest quarterly coverage ratio since the third quarter of 2011. Based on our current projections, we expect to start exceeding a one-times coverage ratio in the second half of 2014 and for the full year 2014," said Barron. Fourth Quarter and Full Year Earnings Results As a result of some of the non-cash charges described below, fourth quarter earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations was negative $192.3 million compared to fourth quarter 2012 EBITDA of $81.8 million. For the year ended December 31, 2013, EBITDA from continuing operations was $127.2 million, higher than the $107.6 million in 2012.
NuStar Energy L.P. reported a fourth quarter net loss applicable to limited partners of $368.3 million, or $4.73 per unit, compared to a net loss applicable to limited partners of $21.2 million, or $0.27 per unit, reported in the fourth quarter of 2012. Without certain adjustments in the fourth quarters of both years, as described below, the fourth quarter of 2013 would have generated adjusted net income applicable to limited partners of $16.6 million, or $0.21 per unit, compared to the fourth quarter 2012 adjusted net income applicable to limited partners of $19.5 million, or $0.25 per unit.
For the year ended December 31, 2013, the company reported a net loss applicable to limited partners of $311.5 million, or $4.00 per unit, compared to a net loss applicable to limited partners of $263.3 million, or $3.61 per unit, in 2012. Without certain adjustments in both years, as described below, adjusted net income applicable to limited partners would have been $58.8 million, or $0.75 per unit, compared to 2012 adjusted net income applicable to limited partners of $53.6 million, or $0.73 per unit.
As previously announced on January 30, 2014, the fourth quarter 2013 distribution of $1.095 per unit will be paid on February 14, 2014 to holders of record as of February 10, 2014.
"Absent the impact of several non-cash adjustments, our fourth quarter 2013 results in both our fee-based pipeline and storage segments were higher than last year's fourth quarter," said Barron. "The completion of several internal growth projects in these segments contributed to the improved fourth quarter results."
"I am also happy to note that our fuels marketing segment results were higher than last year's fourth quarter as well." Fourth Quarter and Full Year Adjustments Fourth quarter 2013 results include $403.6 million, or $4.94 per unit, of adjustments, primarily non-cash charges associated with the write-down of asset values and the value of goodwill assigned to several of the company's terminal facilities. Fourth quarter 2012 results included $41.5 million, or $0.52 per unit, of expense items related primarily to hedge losses recorded following NuStar's decision to sell the San Antonio refinery in December 2012, as well as a handful of cancelled capital projects.
Full year 2013 results include $388.8 million, or $4.75 per unit, of adjustments, comprised of the fourth quarter 2013 non-cash adjustments mentioned previously and other adjustment items. Full year 2012 results included $323.4 million, or $4.34 per unit of adjustments, which included the fourth quarter 2012 adjustments mentioned previously, and $281.9 million, or $3.82 per unit, of expense items resulting from deconsolidating the asphalt joint venture in September 2012 and other adjustment items. Internal Growth Project Update In November, the company completed the construction of a second rail-car offloading facility at its St. James terminal in Louisiana. NuStar now has two rail-car facilities in operation at the terminal with a total offloading capacity of 100,000 to 200,000 barrels per day.
The construction of a new private dock at NuStar's Corpus Christi North Beach terminal should be completed by the end of February 2014, far earlier than anticipated. The initial estimate for the completion of the dock was the second quarter of 2014. This new dock will more than double the current loading capacity of approximately 125,000 barrels per day and will allow NuStar to handle all the new volume associated with the Phase 1 and Phase 2 expansions of the South Texas Crude Oil Pipeline expansion, as well as additional volumes shipped to Corpus Christi. Divestiture of 50% Interest in Asphalt Joint Venture NuStar has entered into an agreement with an affiliate of Lindsay Goldberg LLC, a private investment firm, to divest its 50% voting interest in an asphalt joint venture that owns a refinery located in Paulsboro, New Jersey, a terminal located in Savannah, Georgia and the related working capital. Closing for the transaction is expected to be completed no later than February 28, 2014.
After the transaction is closed, a $250 million seven-year revolving credit facility between NuStar Logistics and the joint venture will be immediately converted to a $175 million term loan, dropping to a $150 million term loan six months after closing. The transaction calls for the loan to be paid off in full no later than September 2019. NuStar Logistics will continue to provide up to $150 million of credit support to the asphalt business, in the form of guarantees and letters of credit. This commitment begins declining two years after closing and terminates in September 2019. Reactivation of Mont Belvieu to Corpus Christi 12" Pipeline NuStar and Occidental Petroleum Corporation (Oxy) have entered into a long-term agreement in which Oxy will ship natural gas liquids (NGLs) on NuStar's currently idled, 200-mile, 12-inch pipeline between Mont Belvieu and Corpus Christi, Texas. Oxy will use a majority of the line's 110,000 barrel per day capacity and NuStar will continue to market any remaining capacity to third parties. The line will begin generating distributable cash flow in the second quarter of 2014 and is expected to be placed into full NGL service in the second quarter of 2015. Once the line is in full service, it is expected to generate approximately $23 million per year of incremental EBITDA. 2014 Earnings Guidance "First quarter 2014 EBITDA results for our pipeline and fuels marketing segments should be higher than last year's first quarter due to the benefit from our Eagle Ford shale internal growth projects and improved results in our bunkering operations," said Barron. "However, our first quarter storage segment results are expected to be lower than last year primarily due to reduced LLS to WTI profit-sharing benefits at our St. James, Louisiana terminal."
Commenting on guidance for the full year 2014, Barron said, "Our pipeline segment EBITDA should be $40 to $60 million higher than 2013 while our storage segment EBITDA should be comparable to 2013. We expect our fuels marketing segment to generate EBITDA in the range of $10 to $30 million. Based on these projections, we expect our coverage ratio to start exceeding one-times in the second half of 2014 and for the full year 2014."
Keywords for this news article include: Marketing, Advertising, NuStar Energy L.P.
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