NuStar Energy Is Up on Solid Q3 Earnings

NuStar Energy (NYSE: NS  ) reported third-quarter earnings this morning, posting year-over-year improvements across the board, except for revenue, which was cut in half as the partnership refocuses its business. Significantly, net income grew to $21.9 million from a loss of $6.5 million a year ago. Shares were up more than 5% as of this writing.

NuStar is in the midst of refocusing operations around its pipeline business, and this segment posted excellent results, generating $58 million in operating income, a $16 million increase over 2012. Total throughput on NuStar's systems grew by 5,731 barrels per day, year over year, while throughput revenue increased just shy of $19.0 million to $111.5 million.

Volumes increased in NuStar's storage segment, but the partnership realized lower lease renewal rates, which offset gains to the tune of $13 million. The fuels marketing segment also posted a weak quarter, which management attributed to increased competition and weak demand. On the bright side, NuStar was able to reduce this segment's operating costs by $50 million, which should contribute to positive results going forward.

Distributable cash flow was up at NuStar this quarter, coming in at $67.2 million, compared to $63.0 million a year ago. The partnership had previously announced a $1.095 distribution per unit, payable on Nov. 14. This means NuStar's third-quarter distribution coverage ratio was 0.79 times payout. Management affirmed that the partnership expects to post at least 1.0 times coverage in 2014.

Looking ahead to next year, CEO Curt Anastasio said NuStar expects improved performances for both the pipeline and fuel marketing segments, while the storage segment will remain flat. The partnership also plans to exit its asphalt joint venture, and is currently in advanced discussions with its partner.

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