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What Drove NuStar Energy’s 2Q16 Earnings?

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NuStar Energy’s 2Q16 earnings

NuStar Energy (NS) and its general partner, NuStar GP Holdings (NSH), reported their 2Q16 earnings on August 2, 2016. NuStar Energy’s 2Q16 adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) increased to $144.7 million from $143.0 million in 2Q15, a YoY (year-over-year) increase of 1.1%. Also, NuStar Energy beat its 2Q16 EBITDA estimate by 2.0%.

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NuStar Energy’s 2Q16 EBITDA drivers

NuStar Energy’s YoY growth in 2Q16 EBITDA was driven by several factors.

  • The Storage segment benefited from higher storage rates and lower operating expenses. However, this was offset by lower crude oil throughput volumes at crude storage facilities.
  • The Pipeline segment’s performance was negatively impacted by a decline in Eagle Ford crude oil throughput volumes. This was partially offset by higher refined product throughput volumes. Throughput volumes for the segment’s South Texas pipeline fell below the MVCs (minimum volume commitments). Crestwood Equity Partners (CEQP) and Western Gas Partners (WES) are other midstream MLPs that have been impacted by the Eagle Ford production decline.
  • The Fuel Marketing segment’s operating income fell between 2Q15 and 2Q16 due to lower crude oil and fuel margins. However, NS expects a recovery in the coming quarters.

NuStar Energy’s distributions

NuStar Energy declared a distribution of $1.10 per unit for 2Q16, which is consistent with the distribution paid in the previous quarter and the first quarter of 2015. NuStar GP Holdings declared a distribution of $0.55 per unit for 2Q16.

NuStar Energy’s 2Q16 distributable cash flow fell by 4.3% QoQ (quarter-over-quarter), resulting in a decline in its coverage ratio between 1Q16 and 2Q16. However, the partnership managed to cover its distribution in 2Q16 with a distribution coverage of 1.1x.

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