NuStar Energy (NS) has the highest leverage among peers. Its net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio stood at 6.1x at the end of 3Q17. Its leverage has risen over the last few quarters due to lower earnings and increased borrowing related to its Navigator Energy acquisition. NuStar Energy’s high leverage remains a major concern for investors.
NS is followed by Andeavor Logistics (ANDV) and Buckeye Partners (BPL), which had net debt-to-EBITDA ratios of 4.5x and 4.2x, respectively, as of September 30, 2017, below the peer average of 4.7x. ANDX is targeting a net debt-to-EBITDA ratio of 4.0x or below in 2018.
Enbridge Energy Partners (EEP) is currently the best placed in terms of leverage among peers, with a net debt-to-EBITDA ratio of 3.9x as of September 30, 2017. Moreover, EEP’s and BPL’s leverage is within industry standards. Midstream companies target a ratio between 4.0x and 4.5x.
EEP’s leverage position has improved significantly over the recent quarters, driven by measures undertaken to strengthen its balance sheet, such as asset divestments, distribution cuts, and the removal of incentive distribution rights. EEP is targeting a leverage ratio of 4.0x by 2020. This is “predicated upon its liquids pipeline growth projects being placed into service and the joint funding arrangement call options being exercised,” as noted in a recent press release.