Earnings Results for the Third Quarter of 2017
Tue November 7, 2017 6:45 AM|Business Wire|About: NS
Q3: 10-08-17 Earnings Summary
News
EPS of $0.15 misses by $-0.11 Revenue of $440.57M (- 0.2% Y/Y) beats by $38.4M
Net Hurricane Financial Impact for Full-Year 2017 Estimated to be $11 Million
Quarterly Distributions Announced Previously
SAN ANTONIO--(BUSINESS WIRE)-- For the third quarter of 2017, net income applicable to common limited partners was $14 million, or $0.15 per unit, down 63% from $39 million, or $0.49 per unit for third quarter 2016, while earnings before interest, taxes, depreciation and amortization (EBITDA) were $156 million, up 9% from $142 million for third quarter 2016.
“The disconnect between our third quarter net income and EBITDA was expected, as net income was burdened by the higher interest and depreciation expense and the additional units issued to finance the Permian Acquisition,” said Brad Barron, President and Chief Executive Officer of NuStar Energy L.P. (NS) and NuStar GP Holdings, LLC. “However, the fact that EBITDA for both our pipeline and storage segments were higher quarter-over-quarter, largely as a result of contributions from our Permian Crude System and the Martin Terminal acquisition, underscores the long-term potential of our acquisition strategy.
“In addition to the significant market headwinds that the MLP sector has faced for some time now, a spate of hurricanes in September caused damage in the Gulf and substantial destruction in the Caribbean. As a result, a large proportion of the nation’s refining capacity was shut down, in some cases for weeks, which had a negative impact on many MLPs - including NuStar,” Barron noted.
“Hurricanes Harvey and Irma affected six of our facilities in Texas and Florida, where, thanks to our employees’ planning and preparation for rising water, we sustained relatively minimal damage and were able to resume operations soon after the storms had passed.
“Unfortunately, while our planning and preparation for Hurricane Irma at our St. Eustatius terminal mitigated the effect of rising water there, virtually no advanced planning can buffer the impact of 146-mph winds and 30-foot seas. The sheer force of Irma’s high winds and waves inflicted substantial damage to our facility, as the storm battered our tanks, marine facilities and terminal buildings, eroded the shoreline and deposited debris throughout the facility.
“We are grateful that all of our tanks at the facility, other than those under construction, were largely spared and determined safe to stay in-service. We were able to resume operations there within a matter of weeks, and we expect the facility to be fully operational by mid-December.
“Importantly, we expect our insurance to fully cover the cost of repairing the property damage at our St. Eustatius facility, over our insurance deductible. In total, across our seven affected facilities, we currently expect the financial impact of the hurricanes to be a net loss of approximately $11 million.
“Planning and preparation are critical, whether you’re talking about inclement weather or business cycles. And it’s due to the planning effort that we launched in 2014, at the outset of this historic low crude price cycle, that we successfully returned to 1.0 times cover of our distribution, maintained full coverage for three years, de-risked our business and optimized our base business assets.
“Perhaps most importantly, the groundwork we laid positioned us to establish a significant platform for growth in what’s proven to be the strongest, most resilient U.S. shale play, the Permian Basin,” said Barron. “When we purchased our Permian Crude System this past May, we projected that the acquisition would be dilutive to our coverage for a little over a year, but we made the decision to move forward because the system’s long-term growth far outweighs the short-term impact to our coverage ratio. And that’s exactly what we have seen: the Permian Basin is meeting, and, in some cases, exceeding, our initial forecasts. The basin continues to grow, and the same is true for our system, with rig counts, throughputs and volumes all up.
“As we projected at the time of the acquisition, our distribution coverage ratio for third quarter 2017 was below 1.0 times. Due to the anticipated higher financing costs, along with unanticipated higher reliability costs, in the third quarter 2017, our DCF available to common limited partners was $67.0 million or about $20 million less than the third quarter of 2016, and our distribution coverage ratio to the common limited partners for third quarter 2017 was 0.66 times.
“Our Permian Crude System has been growing, and we believe it will continue to grow, on pace with our forecast. While we continue to execute on our growth plan for our Permian Crude System, we will continue to work efficiently, safely and responsibly, to return to 1.0 times cover, reduce our leverage and build long-term unitholder value,” said Barron.
As previously announced on October 18, 2017, the third quarter 2017 Series A preferred unit distribution of $0.53125 per unit and Series B preferred unit distribution of $0.47657 per unit will be paid on December 15, 2017 to holders of record as of December 1, 2017. In addition, the third quarter 2017 common unit distribution of $1.095 per unit will be paid on November 14, 2017 to holders of record as of November 9, 2017.
Third Quarter 2017 Earnings Conference Call Details
A conference call with management is scheduled for 9:00 a.m. CT today, November 7, 2017, to discuss the financial and operational results for the third quarter of 2017. Investors interested in listening to the discussion may dial toll-free 844/889-7787, passcode 93805813. International callers may access the discussion by dialing 661/378-9931, passcode 93805813. The partnership intends to have a playback available following the discussion, which may be accessed by dialing toll-free 855/859-2056, passcode 93805813. International callers may access the playback by dialing 404/537-3406, passcode 93805813. The playback will be available until 12:00 p.m. CT on December 7, 2017.
