NuStar Energy L.P. Reports Solid Second Quarter 2023 Earnings Results

Balance Sheet Continues to Strengthen with Repurchase of More Series D Preferred Units

Pipeline Segment's Operating Income Up Seven Percent Quarter-Over-Quarter

Fuels Marketing Segment Reports Another Strong Quarter

West Coast Region's Revenues Up Approximately 30 Percent Quarter-Over-Quarter

Positive Outlook for Remainder of 2023

NuStar Energy L.P. (NYSE:NS) today announced solid results for the second quarter of 2023 fueled by strong volumes in its refined products and Ammonia pipelines.

"I am pleased to report that we have delivered another quarter of positive results, and we are on track to achieve all of our strategic priorities this year," said NuStar Chairman and CEO Brad Barron.

"One of our top stated priorities is to continue to strengthen our balance sheet," Barron said. "And in June and July, we took another big step forward in that regard by repurchasing another 8.1 million Series D preferred units, leaving only about one-third of the original issuance still outstanding. Although our second quarter earnings per unit were impacted by the premium paid to redeem these units, totaling $0.29 per unit, we are pleased to have significantly strengthened our balance sheet and are on track to redeem all of the remaining Series D units by the end of 2024, which is two years ahead of our original schedule."

"NuStar reported net income of $46 million for the second quarter of 2023, and largely as a result of the $0.29 per unit premium charge, a $0.20 net loss per unit, compared to net income of $59 million, or $0.20 per unit, for the second quarter of 2022," said Barron. "It is important to note that earnings before interest, taxes, depreciation and amortization (EBITDA) were not impacted by the premium associated with the accelerated repurchase of the Series D preferred units, and we reported EBITDA of $169 million for the second quarter of 2023, which is comparable to second quarter of 2022 adjusted EBITDA of $174 million."

Operations Continue to Perform Well

NuStar's Pipeline Segment generated operating income of $108 million and EBITDA of $152 million in the second quarter of 2023, compared to operating income of $101 million and EBITDA of $145 million in the second quarter of 2022.

"Our refined products systems and our Ammonia Pipeline System continued to deliver solid, dependable revenue contributions, with throughput up three percent in the second quarter of 2023 compared to the second quarter of 2022, reflecting the strength of these assets and our position in the markets we serve in the mid-Continent and throughout Texas," said Barron. "In addition, our McKee System continued to perform well, with higher revenues and throughputs versus the same period last year, due to increased demand across the system, as well as a customer's maintenance issues in the second quarter of 2022."

Barron highlighted the strong performances of NuStar's Fuels Marketing Segment and West Coast Renewable Fuels Strategy.

"After a near record-breaking 2022, our Fuels Marketing Segment has reported another strong quarter in 2023, generating operating income and EBITDA of $7 million, which is comparable to the segment's strong second quarter of 2022 results," said Barron. "In addition, thanks in large part to our West Coast Renewable Fuels strategy, our West Coast region delivered another great quarter with revenues approximately 30 percent higher compared to the second quarter of 2022."

NuStar's Permian Crude System volumes averaged 508,000 barrels per day (BPD), down slightly compared to second quarter of 2022 volumes.

"Our second quarter Permian volumes reflected some producer-specific operational issues and delays in the first half of the year that we expect to be resolved over the remainder of the year," said Barron. "As those issues are resolved and those producers ramp up activity, we expect volumes to pick up. In fact, we have already seen an uptick in July with volumes averaging almost 530,000 barrels per day and we continue to expect to exit 2023 in the range of 570,000 to 600,000 barrels per day."

Balance Sheet Continues to Strengthen

NuStar Executive Vice President and Chief Financial Officer Tom Shoaf gave a positive update on the company's continued progress in building its financial strength and flexibility.

"We are pleased that we ended the second quarter of 2023 with a debt-to-EBITDA ratio of 3.73 times," said Shoaf. "By accelerating the repayment of the Series D units over the course of this past year, while at the same time taking the necessary steps to protect our healthy debt-to-EBITDA metric, we have demonstrated our commitment to continuing to improve our balance sheet."

"We ended the second quarter of 2023 with $750 million available on our $1 billion unsecured revolving credit facility. And on June 30, we announced that we renewed our unsecured revolving credit agreement, maintaining the facility's $1 billion capacity and extending the maturity of the facility an additional 21 months to January 2027."

Shoaf stated that even with the accelerated repayment of the Series D units, NuStar is still on track to finish the year with a healthy debt-to-EBITDA ratio below four times.

Positive Outlook for Remainder of 2023

Shoaf also gave an update on full-year guidance for net income and adjusted EBITDA, as well as strategic capital and reliability capital for 2023.

"We expect to generate full-year 2023 net income in the range of $252 to $290 million and full-year 2023 adjusted EBITDA in the range of $700 to $760 million," said Shoaf.

He also noted that NuStar plans to spend $125 to $145 million in strategic capital in 2023.

"While we continue to expect to exit the year with our Permian Crude System's volumes between 570,000 to 600,000 barrels per day, we are now forecasting lower spending for our Permian System in the range of $35 to $45 million," said Shoaf. "We continue to expect to spend around $25 million to expand our West Coast Renewable Fuels Network.

"In addition, we still expect to spend between $25 and $35 million on reliability this year."

Bright Outlook for Ammonia System

Barron closed by highlighting a project that was announced last quarter, which will connect NuStar's Ammonia Pipeline System to OCI Global's state-of-the-art ammonia products facility in Iowa. This project, which is supported by a long-term revenue commitment, is on track to be in service next year.

"We expect this healthy-return, low-capital project will meaningfully increase utilization of our Ammonia Pipeline System," said Barron. "And we expect this project to be just the first of several, as we are actively working with a number of potential customers interested in connections to our system, across our footprint, for a variety of different opportunities."

Barron continued, "As we have mentioned in past calls, we are seeing burgeoning interest in lower carbon ammonia. Interest from the companies developing "blue" and "green" ammonia production facilities that need market access, as well as from companies interested in the supply of lower carbon ammonia to make fertilizer, Diesel Exhaust Fluid (DEF) and other important products. We are also talking to a number of potential customers who are looking at new uses for lower carbon ammonia, including as a low-cost, safe way to transport hydrogen for fuel.

"In addition to the "greening" of ammonia increasing demand in the domestic ammonia market, international ammonia demand is also driving interest in building or converting logistics to export ammonia produced here in the U.S. Our Ammonia Pipeline System currently supplies the U.S.' breadbasket in the Midwest primarily with domestically produced ammonia, but growing interest in export capabilities could drive additional utilization of not only our Ammonia Pipeline System but also potentially our St. James facility, which has dock capacity and a footprint to support ammonia storage and export. We are excited about this growing interest in ammonia, and the actionable opportunities that interest is generating, for our Ammonia Pipeline System and beyond, in the near-term and over the next several years," Barron concluded.

Conference Call Details

A conference call with management is scheduled for 9:00 a.m. CT on Thursday, August 3, 2023, to discuss the financial and operational results for the second quarter of 2023. Persons interested in listen-only participation may access the conference call directly at https://edge.media-server.com/mmc/p/hu7hrnep. Persons interested in Q&A participation may pre-register for the conference call and obtain a dial-in number and passcode at https://register.vevent.com/register/BI2ecc56df0e114ea58ced5740b23a1940. A recorded version will be available two hours after the conclusion of the conference call at https://edge.media-server.com/mmc/p/hu7hrnep.

The conference call may also be accessed through the "Investors" section of NuStar Energy L.P.'s website at https://investor.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 9,500 miles of pipeline and 63 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels, ammonia and specialty liquids. The partnership's combined system has approximately 49 million barrels of storage capacity, and NuStar has operations in the United States and Mexico. For more information, visit NuStar Energy L.P.'s website at www.nustarenergy.com and its Sustainability page at https://sustainability.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 2022 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.

Note 1: NuStar Energy L.P. utilizes financial measures, such as earnings before interest, taxes, depreciation and amortization (EBITDA), distributable cash flow (DCF) and distribution coverage ratio, which are not defined in U.S. generally accepted accounting principles (GAAP). Management believes these financial measures provide useful information to investors and other external users of our financial information because (i) they provide additional information about the operating performance of the partnership's assets and the cash the business is generating, (ii) investors and other external users of our financial statements benefit from having access to the same financial measures being utilized by management and our board of directors when making financial, operational, compensation and planning decisions and (iii) they highlight the impact of significant transactions. We may also adjust these measures to enhance the comparability of our performance across periods.

Our board of directors and management use EBITDA and/or DCF when assessing the following: (i) the performance of our assets, (ii) the viability of potential projects, (iii) our ability to fund distributions, (iv) our ability to fund capital expenditures and (v) our ability to service debt. In addition, our board of directors uses EBITDA, DCF and a distribution coverage ratio, which is calculated based on DCF, as some of the factors in its compensation determinations. DCF is a financial indicator used by the master limited partnership (MLP) investment community to compare partnership performance. DCF is used by the MLP investment community, in part, because the value of a partnership unit is partially based on its yield, and its yield is based on the cash distributions a partnership can pay its unitholders.

None of these financial measures are presented as an alternative to net income. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with GAAP.

The following is a reconciliation of net income to EBITDA, DCF and distribution coverage ratio.

The following is the reconciliation for the calculation of our Consolidated Debt Coverage Ratio, as defined in our revolving credit agreement (the Revolving Credit Agreement).

The following are reconciliations of net income / net (loss) income per common unit to adjusted net income / adjusted net income per common unit.

The following is a reconciliation of EBITDA to adjusted EBITDA.

The following is a reconciliation of DCF to adjusted DCF and adjusted distribution coverage ratio.

The following is a reconciliation of projected net income to EBITDA and adjusted EBITDA.

The following are reconciliations for our reported segments of operating income to segment EBITDA.

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