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NuStar Energy’s Cash Flow Measures: How Do They Compare?

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NuStar Energy’s distributable cash flows

NuStar Energy’s (NS) 1Q16 distributable cash flow fell by 8.1% YoY (year-over-year), resulting in a decline in its coverage ratio between 1Q15 and 1Q16. However, the distribution coverage ratio is still above 1.0. NuStar is expected to end 2016 with a YoY decline in distributable cash flow due to a decline in EBITDA (earnings before interest, tax, depreciation, and amortization), as discussed in the previous article, and higher maintenance capital spending in the remaining quarters. This might result in a decline in the partnership’s coverage ratio.

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NuStar Energy’s distributions

NS declared a distribution of $1.10 per unit for 1Q16. NuStar’s distributions have remained flat for the past several quarters. We have to wait and see whether NuStar Energy is able to cover its distribution in the coming quarters, considering the expected decline in distributable cash flows.

Currently, NS is trading at a distribution yield of 8.7%. Peers Buckeye Partners (BPL), Sunoco Logistics Partners (SXL), and Rose Rock Midstream Partners (RRMS) trade at distribution yields of 6.9%, 7.3%, and 10.7%, respectively. NuStar’s general partner, NuStar GP Holdings (NSH), which is dependent upon distribution income from NS, is trading at a distribution yield of 8.6%. The Alerian MLP ETF (AMLP), which comprises 24 midstream energy MLPs, is trading at a distribution yield of 9.1%.

NuStar Energy’s capital expenditure

NS reduced its 2016 capital guidance by 50% to $180 million to $200 million. According to NuStar CEO Bradley Barron, “we’re moving forward with our best projects with the highest rates of return. These projects are key to our long-term growth and success and are being financed with excess cash on our balance sheet and borrowings under our $1.5 billion credit facility.”

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