San Antonio-based NuStar Energy LP reported its fourth-quarter and end-of-year results in its first financial report since announcing it will soon be acquired by Dallas-based Sunoco LP.
San Antonio-based NuStar Energy LP has recently reported solid earnings for the fourth quarter and full year, marking a significant milestone as the company prepares for its acquisition by Dallas-based Sunoco LP. This report not only reflects the financial health of NuStar but also sets the stage for the transitions ahead in 2024.
The news came following the cancellation of a scheduled earnings conference call, as announced by NuStar CEO Brad Barron and other senior executives, likely a strategic move considering the forthcoming merger. The acquisition, which is expected to close in the second quarter of 2024, casts a shadow of uncertainty over the usual post-earnings dialogue with investors and analysts.
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In a statement, Barron expressed satisfaction with the company’s performance, noting, “I am pleased to report that we have delivered another quarter of solid earnings results and made significant progress on many of our strategic initiatives in 2023.”
Looking at the numbers, NuStar’s full-year net income for 2023 reached an impressive $273.7 million, equivalent to 72 cents per unit, up from $222.7 million (or 36 cents per unit) in the previous year. Adjusted EBITDA for the same period was recorded at $735.1 million, an increase from the prior year by approximately $12.7 million.
NuStar’s fourth-quarter earnings also displayed resilience, reporting a net income of $70.4 million, or 37 cents per unit, despite a decline from $91.6 million, or 18 cents per unit in the same period of 2022. The contrast indicates fluctuating market conditions and potential operational challenges.
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NuStar operates a crude oil pipeline system in the Permian Basin, which transported an average of 528,000 barrels per day in Q4. While this figure was slightly down compared to the same time in 2022, it represented a marginal increase from Q3 of the same year. Barron attributed some of this inconsistency to “producer-specific operational issues and delays,” although he noted that many of these challenges had been largely resolved throughout the year.
In terms of operational performance, NuStar’s pipeline segment recorded an operating income of $130 million in Q4 2023, which is a slight decrease from the previous year’s Q4 earnings of $132 million. However, this dip was reportedly mitigated by increased throughput across their refined products system, showcasing a strategic pivot toward more diversified income streams.
Overall, despite a dip in revenue across the year — down to $1.63 billion in 2023 from $1.68 billion in 2022 — the company’s refined products systems alongside its ammonia system demonstrated robust performance. Barron highlighted their total throughputs, which reflect the strength and strategic positioning of these assets in the mid-Continent and Texas markets.
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Hyper-focusing on key operational segments, NuStar’s storage business also outperformed, with 2023 generating an operating income of $88 million compared to $61 million the previous year. This growth hints at improved demand and operational efficiencies, especially from West Coast operations that have contributed to positive outcomes.
Despite the impending merger with Sunoco, NuStar has set clear financial expectations for 2024, forecasting a net income between $220 million and $260 million and an EBITDA range of $720 million to $780 million. This foresight indicates continued confidence in their operational capability and market positioning.
Finally, following the January announcement of the stock swap deal with Sunoco, NuStar’s stock experienced an 18% increase, which further underscores investor confidence amid a complex market environment. As of recent reporting, shares had climbed more than 2.5%, hitting $23.15 per unit.