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Inside NuStar Energy’s Distribution Coverage in 4Q16

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NuStar Energy’s distributions

NuStar Energy (NS) declared a distribution of ~$1.1 per unit for 3Q16. NuStar’s distributions have remained flat for the past several quarters. However, the partnership has managed to cover its distribution in all quarters, despite the challenging price environment. The company reported a distribution coverage ratio of 1.02x in 3Q16.

The partnership expects to cover its distribution in the fourth quarter of 2016 and in 2017. NuStar’s distributable cash flow growth in 2017 is expected to be mainly driven by its terminal acquisition from Martin Midstream Partners (MMP), storage renewals, and expansion projects placed during 2016–2017.

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Martin acquisition

NuStar Energy recently completed the $93-million acquisition of MMP’s crude oil and refined products terminal assets in Corpus Christi. The acquisition is expected to generate $13.5 million of annual EBITDA (earnings before interest, taxes, depreciation, and amortization), resulting in a 7.0x EBITDA multiple. The terminal includes ~1.2 million barrels of storage. The company now has 3.6 million barrels of total storage in Corpus Christi.

According to NuStart Chief Executive Officer Brad Barron, “This acquisition further strengthens NuStar’s position as one of the top logistics players in the Corpus Christi region, which has long been a strategic hub for us.”

Barron also stated: “We now have access to a new pipeline and new customers and greater connectivity to domestic and international crude oil and refined products markets…an existing customer has expressed interest in increasing volumes and the length of our contract with them thanks to the increased dock space and capacity we now have.”

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