NuStar Energy L.P. [NS-PA] Filings

10-Q 1 ns-20230630.htm 10-Q ns-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 1-16417

_________________________________________

NuStar Energy L.P.

(Exact name of registrant as specified in its charter)

_________________________________________


Delaware						74-2956831
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

19003 IH-10 West

San Antonio, Texas

(Address of principal executive offices)

78257

(Zip Code)

Registrant’s telephone number, including area code (210) 918-2000

_______________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Units

New York Stock Exchange

8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

NSprA

New York Stock Exchange

7.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

NSprB

New York Stock Exchange

9.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

NSprC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The number of common units outstanding as of July 31, 2023 was 110,907,171.

Table of Contents

NUSTAR ENERGY L.P.

FORM 10-Q

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022	4
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	5
	Consolidated Statements of Partners’ Equity and Mezzanine Equity for the Three and Six Months Ended June 30, 2023 and 2022	6
	Condensed Notes to Consolidated Financial Statements	8
	1. Organization and Basis of Presentation	8
	2. Dispositions	8
	3. Revenue from Contracts with Customers	10
	4. Debt	11
	5. Commitments and Contingencies	12
	6. Series D Cumulative Convertible Preferred Units	12
	7. Partners' Equity	14
	8. Net Income (Loss) per Common Unit	16
	9. Supplemental Cash Flow Information	17
	10. Segment Information	18

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Cautionary Statement Regarding Forward-Looking Information	20
	Overview	20
	Results of Operations	23
	Liquidity and Capital Resources	29
	Critical Accounting Policies	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	37

PART II – OTHER INFORMATION



Item 5.	Other Information	38

Item 6.	Exhibits	39

SIGNATURES		40

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited, Thousands of Dollars, Except Unit Data)


	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	3,813	$	14,489
Accounts receivable, net	125,116		149,971

Inventories	10,477		15,397

Prepaid and other current assets	27,548		24,067

Total current assets	166,954		203,924
Property, plant and equipment, at cost	5,693,440		5,733,685
Accumulated depreciation and amortization	(2,397,938)		(2,330,602)
Property, plant and equipment, net	3,295,502		3,403,083
Intangible assets, net	494,880		513,696
Goodwill	732,356		732,356




Other long-term assets, net	200,723		120,627
Total assets	$	4,890,415	$	4,973,686

Liabilities, Mezzanine Equity and Partners’ Equity
Current liabilities:
Accounts payable	$	64,938	$	67,765

Current portion of finance leases	4,677		4,416

Accrued interest payable	38,476		37,607
Accrued liabilities	66,168		76,072

Taxes other than income tax	7,695		10,607


Total current liabilities	181,954		196,467
Long-term debt, less current portion of finance leases	3,310,561		3,293,415

Deferred income tax liability	3,262		3,219
Mandatorily redeemable Series D preferred units (Note 6)	81,229		—
Other long-term liabilities	213,828		131,299
Total liabilities	3,790,834		3,624,400

Commitments and contingencies (Note 5)

Series D preferred limited partners (Note 6)	230,264		446,970

Partners’ equity (Note 7):
Preferred limited partners
Series A (9,060,000 units outstanding as of June 30, 2023 and December 31, 2022)	218,307		218,307
Series B (15,400,000 units outstanding as of June 30, 2023 and December 31, 2022)	371,476		371,476
Series C (6,900,000 units outstanding as of June 30, 2023 and December 31, 2022)	166,518		166,518
Common limited partners (110,906,500 and 110,818,718 units outstanding as of June 30, 2023 and December 31, 2022, respectively)	144,409		177,620

Accumulated other comprehensive loss	(31,393)		(31,605)
Total partners’ equity	869,317		902,316


Total liabilities, mezzanine equity and partners’ equity	$	4,890,415	$	4,973,686

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Service revenues	$	275,367	$	278,067	$	560,633	$	543,372
Product sales	102,967		152,090		211,568		296,648
Total revenues	378,334		430,157		772,201		840,020

Costs and expenses:
Costs associated with service revenues:
Operating expenses (excluding depreciation and amortization expense)	93,363		94,948		182,525		181,350
Depreciation and amortization expense	62,530		62,240		124,584		125,543
Total costs associated with service revenues	155,893		157,188		307,109		306,893
Costs associated with product sales	86,914		134,178		180,375		260,893

Impairment loss	—		—		—		46,122
General and administrative expenses (excluding depreciation and amortization expense)	31,620		27,909		60,345		54,980
Other depreciation and amortization expense	1,037		1,823		2,592		3,647

Total costs and expenses	275,464		321,098		550,421		672,535

Gain on sale of assets	—		—		41,075		—

Operating income	102,870		109,059		262,855		167,485

Interest expense, net	(58,170)		(50,941)		(115,541)		(100,759)


Other income, net	2,633		2,012		7,142		5,683
Income before income tax expense	47,333		60,130		154,456		72,409
Income tax expense	1,192		931		2,379		898
Net income	$	46,141	$	59,199	$	152,077	$	71,511

Basic and diluted net (loss) income per common unit (Note 8)	$	(0.20)	$	0.20	$	0.42	$	(0.02)



Basic and diluted weighted-average common units outstanding	110,905,471		110,306,641		110,893,293		110,242,201


Comprehensive income	$	46,149	$	100,073	$	152,289	$	113,317

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, Thousands of Dollars)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income	$	152,077	$	71,511
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	127,176		129,190
Amortization of unit-based compensation	7,302		6,746
Amortization of debt related items	5,224		5,085
Gain on sale of assets	(41,075)		—


Impairment loss	—		46,122


Changes in current assets and current liabilities (Note 9)	1,785		(30,940)
Decrease in other long-term assets, net	5,692		6,626
Increase (decrease) in other long-term liabilities	796		(6,218)
Other, net	(6,672)		(5,835)
Net cash provided by operating activities	252,305		222,287

Cash flows from investing activities:
Capital expenditures	(54,532)		(71,425)
Change in accounts payable related to capital expenditures	1,450		(8,716)
Proceeds from insurance recoveries	12,395		5,805
Proceeds from sale or disposition of assets, net of transaction costs	102,769		59,531




Net cash provided by (used in) investing activities	62,082		(14,805)

Cash flows from financing activities:


Proceeds from long-term debt borrowings	443,000		480,400


Long-term debt repayments	(427,700)		(528,100)






Redemption of Series D preferred units	(174,515)		—
Distributions to preferred unitholders	(64,890)		(62,432)
Distributions to common unitholders	(88,724)		(88,164)




Other, net	(12,376)		(11,243)
Net cash used in financing activities	(325,205)		(209,539)

Effect of foreign exchange rate changes on cash	310		763
Net decrease in cash, cash equivalents and restricted cash	(10,508)		(1,294)
Cash, cash equivalents and restricted cash as of the beginning of the period	23,377		14,439
Cash, cash equivalents and restricted cash as of the end of the period	$	12,869	$	13,145

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY AND MEZZANINE EQUITY

Three Months Ended June 30, 2023 and 2022

(Unaudited, Thousands of Dollars, Except Per Unit Data)


	Limited Partners								Mezzanine Equity
	Preferred		Common		Accumulated Other Comprehensive Loss		Total Partners’ Equity (Note 7)		Series D Preferred Limited Partners (Note 6)		Total
Balance as of April 1, 2023	$	756,301	$	207,164	$	(31,401)	$	932,064	$	450,641	$	1,382,705
Net income	22,112		14,015		—		36,127		10,014		46,141
Other comprehensive income	—		—		8		8		—		8
Distributions to partners:
Series A, B and C preferred	(22,112)		—		—		(22,112)		—		(22,112)
Common ($0.40 per unit)	—		(44,362)		—		(44,362)		—		(44,362)
Series D preferred	—		—		—		—		(10,014)		(10,014)



Unit-based compensation	—		3,006		—		3,006		—		3,006
Series D preferred unit accretion	—		(3,303)		—		(3,303)		3,303		—
Series D preferred unit redemption	—		(32,067)		—		(32,067)		(223,677)		(255,744)
Other	—		(44)		—		(44)		(3)		(47)
Balance as of June 30, 2023	$	756,301	$	144,409	$	(31,393)	$	869,317	$	230,264	$	1,099,581




Balance as of April 1, 2022	$	756,301	$	239,010	$	(73,046)	$	922,265	$	621,018	$	1,543,283
Net income	15,669		27,676		—		43,345		15,854		59,199
Other comprehensive income	—		—		40,874		40,874		—		40,874
Distributions to partners:
Series A, B and C preferred	(15,669)		—		—		(15,669)		—		(15,669)
Common ($0.40 per unit)	—		(44,123)		—		(44,123)		—		(44,123)
Series D preferred	—		—		—		—		(15,854)		(15,854)


Unit-based compensation	—		2,681		—		2,681		—		2,681
Series D preferred unit accretion	—		(4,734)		—		(4,734)		4,734		—
Other	—		1		—		1		(1)		—
Balance as of June 30, 2022	$	756,301	$	220,511	$	(32,172)	$	944,640	$	625,751	$	1,570,391

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY AND MEZZANINE EQUITY

Six Months Ended June 30, 2023 and 2022

(Unaudited, Thousands of Dollars, Except Per Unit Data)


	Limited Partners								Mezzanine Equity
	Preferred		Common		Accumulated Other Comprehensive Loss		Total Partners’ Equity (Note 7)		Series D Preferred Limited Partners (Note 6)		Total
Balance as of January 1, 2023	$	756,301	$	177,620	$	(31,605)	$	902,316	$	446,970	$	1,349,286
Net income	43,696		87,218		—		130,914		21,163		152,077
Other comprehensive income	—		—		212		212		—		212
Distributions to partners:
Series A, B and C preferred	(43,696)		—		—		(43,696)		—		(43,696)
Common ($0.80 per unit)	—		(88,724)		—		(88,724)		—		(88,724)
Series D preferred	—		—		—		—		(21,163)		(21,163)



Unit-based compensation	—		7,390		—		7,390		—		7,390
Series D preferred unit accretion	—		(6,974)		—		(6,974)		6,974		—
Series D preferred unit redemption	—		(32,067)		—		(32,067)		(223,677)		(255,744)
Other	—		(54)		—		(54)		(3)		(57)
Balance as of June 30, 2023	$	756,301	$	144,409	$	(31,393)	$	869,317	$	230,264	$	1,099,581





Balance as of January 1, 2022	$	756,301	$	299,502	$	(73,978)	$	981,825	$	616,439	$	1,598,264
Net income	30,907		8,896		—		39,803		31,708		71,511
Other comprehensive income	—		—		41,806		41,806		—		41,806
Distributions to partners:
Series A, B and C preferred	(30,907)		—		—		(30,907)		—		(30,907)
Common ($0.80 per unit)	—		(88,164)		—		(88,164)		—		(88,164)
Series D preferred	—		—		—		—		(31,708)		(31,708)



Unit-based compensation	—		9,591		—		9,591		—		9,591
Series D preferred unit accretion	—		(9,315)		—		(9,315)		9,315		—
Other	—		1		—		1		(3)		(2)
Balance as of June 30, 2022	$	756,301	$	220,511	$	(32,172)	$	944,640	$	625,751	$	1,570,391

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization and Operations

NuStar Energy L.P. (NYSE: NS) is a Delaware limited partnership primarily engaged in the transportation, terminalling and storage of petroleum products and renewable fuels and the transportation of anhydrous ammonia. Unless otherwise indicated, the terms “NuStar Energy,” “NS,” “the Partnership,” “we,” “our” and “us” are used in this report to refer to NuStar Energy L.P., to one or more of our consolidated subsidiaries or to all of them taken as a whole. Our business is managed under the direction of the board of directors of NuStar GP, LLC, the general partner of our general partner, Riverwalk Logistics, L.P., both of which are indirectly wholly owned subsidiaries of ours.

We conduct our operations through our subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP). We have three business segments: pipeline, storage and fuels marketing.

Recent Developments

Partial Redemptions of Series D Preferred Units. On June 30, 2023, we redeemed an aggregate 5,500,000 of our Series D Cumulative Convertible Preferred Units (Series D Preferred Units), at a price per unit of $31.88, for an aggregate purchase price of $175.3 million. On June 29, 2023, NuStar Energy L.P. notified the holders of our Series D Preferred Units of our intent to exercise our right to redeem an aggregate 2,560,000 of our Series D Preferred Units, at a price per unit of $32.18 for an aggregate purchase price of $82.4 million. This redemption closed on July 31, 2023. Please see Note 6 for additional information on these redemptions.

Debt Amendments. On June 30, 2023, we amended our $1.0 billion unsecured revolving credit agreement, mainly to extend the maturity date from April 27, 2025 to January 27, 2027. On June 29, 2023, we amended our $100.0 million receivables financing agreement to extend the scheduled termination date from January 31, 2025 to July 1, 2026. Please refer to Note 4 for more information.

Basis of Presentation

These unaudited condensed consolidated financial statements include the accounts of the Partnership and subsidiaries in which the Partnership has a controlling interest. Inter-partnership balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, and all disclosures are adequate. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022.

2. DISPOSITIONS

Sale-Leaseback Transaction

On March 21, 2023, we sold our corporate headquarters facility and approximately 24 acres of underlying land located in San Antonio, Texas (the Corporate Headquarters) for an aggregate cash sales price of approximately $103.0 million and immediately leased back the Corporate Headquarters for an initial term of twenty years, with two renewal options of ten years each (the Sale-Leaseback Transaction). Upon closing of the sale in the first quarter of 2023, the Sale-Leaseback Transaction qualified as a completed sale, and we recognized a gain of $41.1 million, which is presented in “Gain on sale of assets” on the condensed consolidated statements of comprehensive income. We entered into the Sale-leaseback Transaction in order to monetize the Corporate Headquarters and used the proceeds to repay borrowings on our revolving credit agreement.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Pursuant to the lease agreement, rent for the initial term starts at $6.4 million per year and increases annually by 2.5%. At inception of the lease, right-of-use assets and lease liabilities associated with the Sale-Leaseback Transaction assumed a reasonably certain term of 20 years and were included in our consolidated balance sheet as follows (thousands of dollars):


Operating lease right-of-use assets:
Other long-term assets, net	$	82,230


Operating lease liabilities:
Accrued liabilities	$	710
Other long-term liabilities	81,498
Total operating lease liabilities	$	82,208

Following our entrance into the Sale-Leaseback Transaction, the weighted-average discount rate for our operating leases was 6.1%.

Point Tupper Terminal Disposition

On April 29, 2022, we sold the equity interests in our wholly owned subsidiaries that owned our Point Tupper terminal facility in Nova Scotia, Canada (the Point Tupper Terminal Operations) to EverWind Fuels for $60.0 million. The terminal facility had a storage capacity of 7.8 million barrels and was included in the storage segment. We used the sales proceeds to reduce debt and improve our debt metrics.

During the first quarter of 2022, we determined the Point Tupper Terminal Operations met the criteria to be classified as held for sale. We compared the carrying value of the Point Tupper Terminal Operations, which included $42.2 million in cumulative foreign currency translation losses accumulated since our acquisition of the Point Tupper terminal facility in 2005, to its fair value less costs to sell, and we recognized a pre-tax impairment loss of $46.1 million in the first quarter of 2022, which is presented in "Impairment loss" on the condensed consolidated statements of comprehensive income. We believe that the sales price of $60.0 million provided a reasonable indication of the fair value of the Point Tupper Terminal Operations as it represented an exit price in an orderly transaction between market participants. The sales price was a quoted price for identical assets and liabilities in a market that was not active and, thus, our fair value estimate fell within Level 2 of the fair value hierarchy. Upon closing in the second quarter of 2022, we released $39.6 million of foreign currency translation losses from accumulated other comprehensive loss and finalized our sales price, resulting in a gain of $1.6 million, which was presented in “Other income, net” on the condensed consolidated statement of comprehensive income for the period.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Contract Assets and Contract Liabilities

The following table provides information about contract assets and contract liabilities from contracts with customers:


	2023				2022
	Contract Assets		Contract Liabilities		Contract Assets		Contract Liabilities
	(Thousands of Dollars)
Balances as of January 1:
Current portion	$	2,612	$	(17,647)	$	2,336	$	(15,443)
Noncurrent portion	304		(41,405)		504		(46,027)
Total	2,916		(59,052)		2,840		(61,470)

Activity:
Additions	3,782		(45,998)		2,112		(17,692)
Transfer to accounts receivable	(2,856)		—		(2,198)		—
Transfer to revenues	—		33,718		(83)		24,841

Total	926		(12,280)		(169)		7,149

Balances as of June 30:
Current portion	2,703		(27,379)		2,251		(13,555)
Noncurrent portion	1,139		(43,953)		420		(40,766)

Total	$	3,842	$	(71,332)	$	2,671	$	(54,321)

Current contract assets are included in “Prepaid and other current assets” and noncurrent contract assets are included in “Other long-term assets, net” on the consolidated balance sheets. The current portion of contract liabilities is included in “Accrued liabilities” and the noncurrent portion of contract liabilities is included in “Other long-term liabilities” on the consolidated balance sheets.

Remaining Performance Obligations

The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenue as of June 30, 2023:


	Remaining Performance Obligations
	(Thousands of Dollars)
2023 (remaining)	$	204,812
2024	337,666
2025	229,535
2026	163,771
2027	81,059
Thereafter	124,800
Total	$	1,141,643

Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to customer contracts that have fixed pricing and fixed volume terms and conditions, including contracts with payment obligations for minimum volume commitments.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Disaggregation of Revenues

The following table disaggregates our revenues:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(Thousands of Dollars)
Pipeline segment:
Crude oil pipelines	$	93,186	$	94,010	$	189,789	$	180,134
Refined products and ammonia pipelines	113,515		106,555		230,095		209,114
Total pipeline segment revenues from contracts with customers	206,701		200,565		419,884		389,248



Storage segment:
Throughput terminals	23,839		30,929		51,154		57,370
Storage terminals (excluding lessor revenues)	43,049		47,089		85,065		97,808
Total storage segment revenues from contracts with customers	66,888		78,018		136,219		155,178
Lessor revenues	11,321		10,765		22,647		21,526
Total storage segment revenues	78,209		88,783		158,866		176,704

Fuels marketing segment:
Revenues from contracts with customers	93,426		140,809		193,453		274,069

Consolidation and intersegment eliminations	(2)		—		(2)		(1)

Total revenues	$	378,334	$	430,157	$	772,201	$	840,020

4. DEBT

Revolving Credit Agreement

On June 30, 2023, we amended our $1.0 billion unsecured revolving credit agreement (the Revolving Credit Agreement), mainly to extend the maturity date from April 27, 2025 to January 27, 2027. The amendment also includes a requirement that we certify that the sum of our Revolving Credit Agreement availability and unrestricted cash balance is no less than $150.0 million on a pro forma basis prior to using any borrowings under the Revolving Credit Agreement to redeem certain unsecured indebtedness or our Series D Preferred Units.

As of June 30, 2023, the Revolving Credit Agreement had $750.4 million available for borrowing and $245.0 million of borrowings outstanding. Letters of credit issued under the Revolving Credit Agreement totaled $4.6 million as of June 30, 2023 and limit the amount we can borrow under the Revolving Credit Agreement. Obligations under the Revolving Credit Agreement are guaranteed by NuStar Energy and NuPOP. The Revolving Credit Agreement provides for U.S. dollar borrowings, which bear interest, at our option, based on an alternative base rate or a SOFR-based rate. The Revolving Credit Agreement and certain fees under the Receivables Financing Agreement, defined below, are the only debt arrangements with interest rates that are subject to adjustment if our debt rating is downgraded (or upgraded) by certain credit rating agencies. As of June 30, 2023, our weighted-average interest rate related to borrowings under the Revolving Credit Agreement was 7.7%.

The Revolving Credit Agreement is subject to maximum consolidated debt coverage ratio and minimum consolidated interest coverage ratio requirements, which may limit the amount we can borrow to an amount that is less than the total amount available for borrowing. For a rolling period of four quarters, the consolidated debt coverage ratio (as defined in the Revolving Credit Agreement) may not exceed 5.00-to-1.00, and the consolidated interest coverage ratio (as defined in the Revolving Credit Agreement) must not be less than 1.75-to-1.00. As of June 30, 2023, we believe that we are in compliance with the covenants in the Revolving Credit Agreement.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Receivables Financing Agreement

NuStar Energy and NuStar Finance LLC, a special purpose entity and wholly owned subsidiary of NuStar Energy, are parties to a $100.0 million receivables financing agreement with a third-party lender (the Receivables Financing Agreement) and agreements with certain of NuStar Energy’s wholly owned subsidiaries (collectively with the Receivables Financing Agreement, the Securitization Program). Under the Securitization Program, certain of NuStar Energy’s wholly owned subsidiaries sell their accounts receivable to NuStar Finance on an ongoing basis, and NuStar Finance provides the newly acquired accounts receivable as collateral for its revolving borrowings under the Receivables Financing Agreement. On June 29, 2023, we amended the Receivables Financing Agreement to extend the scheduled termination date from January 31, 2025 to July 1, 2026. As of June 30, 2023, the amount of borrowings outstanding under the Receivables Financing Agreement totaled $71.2 million, the interest rate related to outstanding borrowings was 6.7% and $108.2 million of our accounts receivable was included in the Securitization Program.

Fair Value of Long-Term Debt

The estimated fair values and carrying amounts of long-term debt, excluding finance leases, were as follows:


	June 30, 2023		December 31, 2022
	(Thousands of Dollars)
Fair value	$	3,250,699	$	3,169,664
Carrying amount	$	3,260,205	$	3,242,289

We have estimated the fair value of our publicly traded notes based upon quoted prices in active markets; therefore, we determined that the fair value of our publicly traded notes falls in Level 1 of the fair value hierarchy. With regard to our other debt, for which a quoted market price is not available, we have estimated the fair value using a discounted cash flow analysis using current incremental borrowing rates for similar types of borrowing arrangements and determined that the fair value falls in Level 2 of the fair value hierarchy. The carrying amount includes unamortized debt issuance costs.

5. COMMITMENTS AND CONTINGENCIES

We have contingent liabilities resulting from various litigation, claims and commitments. We record accruals for loss contingencies when losses are considered probable and can be reasonably estimated. Legal fees associated with defending the Partnership in legal matters are expensed as incurred. We accrued $1.3 million and $0.3 million for contingent losses as of June 30, 2023 and December 31, 2022, respectively. The amount that will ultimately be paid related to such matters may differ from the recorded accruals, and the timing of such payments is uncertain. We evaluate each contingent loss at least quarterly, and more frequently as each matter progresses and develops over time, and we do not believe that the resolution of any particular claim or proceeding, or all matters in the aggregate, would have a material adverse effect on our results of operations, financial position or liquidity.

6. SERIES D CUMULATIVE CONVERTIBLE PREFERRED UNITS

Partial Redemptions

On May 25, 2023 and June 29, 2023, NuStar Energy L.P. notified the holders of our Series D Preferred Units of our intent to exercise our right to redeem a portion of our outstanding Series D Preferred Units. The redemptions closed on June 30, 2023 and July 31, 2023, respectively, and were primarily funded with borrowings under our Revolving Credit Agreement, which had been partially paid down in the first quarter of 2023 with proceeds from the Sale-Leaseback Transaction. On the respective notification dates, those Series D Preferred Units became mandatorily redeemable; therefore, we reclassified those Series D Preferred Units from mezzanine equity to liability-classified “Mandatorily redeemable Series D preferred units” valued at the redemption price, excluding accrued distributions (Net Redemption Price). As of June 30, 2023, we presented the liability-classified Series D Preferred Units as non-current on our balance sheet as we had the intent and ability to refinance them on a long-term basis using our Revolving Credit Agreement. We recorded the difference between the carrying value of those Series D Preferred Units prior to reclassification and the Net Redemption Price as a deemed distribution, which reduced our common equity and reduced net income attributable to common units in the calculation of basic and diluted net income (loss) per common unit. At each closing, we accounted for the redemptions as extinguishments of debt. Distributions accrued for redeemed units from the notification dates to the redemption dates totaled $1.7 million for the three and six months ended June 30, 2023, and are reported in “Interest expense, net” on the condensed consolidated statements of comprehensive income.

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Information related to the redemptions is shown below (thousands of dollars, except date, unit and per unit data):


	June 30, 2023 Redemption		July 31, 2023 Redemption
Notification date	May 25, 2023		June 29, 2023

Units redeemed	5,500,000		2,560,000
Redemption price per unit, including accrued distributions	$	31.88	$	32.18
Redemption price, including accrued distributions	$	175,340	$	82,381
Accrued distributions	825		1,152
Net Redemption Price	$	174,515	$	81,229

Carrying value of units at notification date	$	152,467	$	71,210
Net Redemption Price	174,515		81,229
Loss to common limited partners attributable to redemption	$	(22,048)	$	(10,019)

Loss per common limited partner unit attributable to redemption	$	(0.20)	$	(0.09)

Distributions

We allocate net income to our Series D Preferred Units equal to the amount of distributions earned during the period. Distributions on the Series D Preferred Units are payable out of any legally available funds, accrue and are cumulative from the original issuance dates and are payable on the 15th day (or next business day) of each of March, June, September and December, beginning September 17, 2018, to holders of record on the first business day of each payment month. The distribution rates on the Series D Preferred Units are as follows: (i) 9.75% per annum ($0.619 per unit per distribution period) for the first two years; (ii) 10.75% per annum ($0.682 per unit per distribution period) for years three through five; and (iii) the greater of 13.75% per annum ($0.872 per unit per distribution period) or the distribution per common unit thereafter. While the Series D Preferred Units are outstanding, the Partnership will be prohibited from paying distributions on any junior securities, including the common units, unless full cumulative distributions on the Series D Preferred Units (and any parity securities) have been, or contemporaneously are being, paid or set aside for payment through the most recent Series D Preferred Unit distribution payment date. Any Series D Preferred Unit distributions in excess of $0.635 per unit may be paid, in the Partnership’s sole discretion, in additional Series D Preferred Units, with the remainder paid in cash.

The distribution rate on our Series D Preferred Units increased on June 15, 2023, to the greater of 13.75% per annum ($0.872 per unit per distribution period) or the distribution per common unit. Total distribution excludes amounts reported in “Interest expense, net” as described above under “Partial Redemptions of Series D Preferred Units.” Distribution information on our Series D Preferred Units is as follows:


Distribution Period	Distribution Rate per Unit		Total Distribution
			(Thousands of Dollars)
June 15, 2023 - September 14, 2023	$	0.872	$	7,598	(a)
March 15, 2023 - June 14, 2023	$	0.682	$	10,315
December 15, 2022 - March 14, 2023	$	0.682	$	11,148

June 15, 2022 - September 14, 2022	$	0.682	$	15,854
March 15, 2022 - June 14, 2022	$	0.682	$	15,854
December 15, 2021 - March 14, 2022	$	0.682	$	15,854

(a) Estimate is based on outstanding units after the July 31, 2023 redemption.

In July 2023, our board of directors declared distributions with respect to the Series D Preferred Units to be paid on September 15, 2023.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Units Issued and Outstanding

The following is a summary of our Series D Preferred Units issued and outstanding:


	Transaction Date	Price per Unit	Number of Units
Issuance	June 29, 2018	$25.38	15,760,441
Issuance	July 13, 2018	$25.38	7,486,209
Total units issued			23,246,650
Repurchase	November 22, 2022	$32.73	(6,900,000)
Units outstanding as of December 31, 2022			16,346,650
Redemption	June 30, 2023	$31.88	(5,500,000)
Units outstanding as of June 30, 2023			10,846,650

As of June 30, 2023, we reported 2,560,000 of the Series D Preferred Units outstanding in “Mandatorily redeemable Series D preferred units” and 8,286,650 Series D Preferred Units in “Mezzanine Equity” on the consolidated balance sheets. After the July 31, 2023 redemption, 8,286,650 Series D Preferred Units remain outstanding.

7. PARTNERS' EQUITY

Series A, B and C Preferred Units

We allocate net income to our 8.50% Series A, 7.625% Series B and 9.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (collectively, the Series A, B and C Preferred Units) equal to the amount of distributions earned during the period. Distributions on our Series A, B and C Preferred Units are payable out of any legally available funds, accrue and are cumulative from the original issuance dates, and are payable on the 15th day (or next business day) of each of March, June, September and December of each year to holders of record on the first business day of each payment month.

Information on our Series A, B and C Preferred Units is shown below:

Units

Units Issued and Outstanding as of June 30, 2023

Optional Redemption Date/Date When Distribution Rate Became Floating

Floating Annual Rate (as a Percentage of the $25.00 Liquidation Preference per Unit)

Series A Preferred Units

9,060,000

December 15, 2021

Three-month LIBOR plus 6.766%

Series B Preferred Units

15,400,000

June 15, 2022

Three-month LIBOR plus 5.643%

Series C Preferred Units

6,900,000

December 15, 2022

Three-month LIBOR plus 6.88%

Distribution information on our Series A, B and C Preferred Units is as follows:


	Series A Preferred Units				Series B Preferred Units				Series C Preferred Units
Distribution Period	Distribution Rate per Unit		Total Distribution		Distribution Rate per Unit		Total Distribution		Distribution Rate per Unit		Total Distribution
			(Thousands of Dollars)				(Thousands of Dollars)				(Thousands of Dollars)

June 15, 2023 - September 14, 2023 (a)	$	0.76715	$	6,950	$	0.69696	$	10,733	$	0.77428	$	5,343
March 15, 2023 - June 14, 2023	$	0.73169	$	6,629	$	0.66150	$	10,187	$	0.73881	$	5,098
December 15, 2022 - March 14, 2023	$	0.71889	$	6,513	$	0.64871	$	9,990	$	0.72602	$	5,010

June 15, 2022 - September 14, 2022	$	0.54808	$	4,966	$	0.47789	$	7,360	$	0.56250	$	3,881
March 15, 2022 - June 14, 2022	$	0.47817	$	4,332	$	0.47657	$	7,339	$	0.56250	$	3,881
December 15, 2021 - March 14, 2022	$	0.43606	$	3,951	$	0.47657	$	7,339	$	0.56250	$	3,881

(a) Total distributions are estimated based on the number of units outstanding as of June 30, 2023.

In July 2023, our board of directors declared distributions with respect to the Series A, B and C Preferred Units to be paid on September 15, 2023.

Common Limited Partners

We make quarterly distributions to common unitholders of 100% of our “Available Cash,” generally defined as cash receipts less cash disbursements, including distributions to our preferred units, and cash reserves established by the general partner, in

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

its sole discretion. These quarterly distributions are declared and paid within 45 days subsequent to each quarter-end. The common unitholders receive a distribution each quarter as determined by the board of directors, subject to limitation by the distributions in arrears, if any, on our preferred units. In July 2023, our board of directors declared distributions with respect to our common units for the quarter ended June 30, 2023.

The following table summarizes information about cash distributions to our common limited partners applicable to the period in which the distributions were earned:


Quarter Ended	Cash Distributions Per Unit		Total Cash Distributions		Record Date	Payment Date
			(Thousands of Dollars)

June 30, 2023	$	0.40	$	44,363	August 8, 2023	August 14, 2023
March 31, 2023	$	0.40	$	44,396	May 8, 2023	May 12, 2023
December 31, 2022	$	0.40	$	44,328	February 8, 2023	February 14, 2023

Accumulated Other Comprehensive Income (Loss) (AOCI)

The balance of and changes in the components included in AOCI were as follows:


	Three Months Ended June 30,
	2023								2022
	Foreign Currency Translation		Cash Flow Hedges		Pension and Other Postretirement Benefits		Total		Foreign Currency Translation		Cash Flow Hedges		Pension and Other Postretirement Benefits		Total
	(Thousands of Dollars)
Balance as of April 1	$	497	$	(33,865)	$	1,967	$	(31,401)	$	(40,932)	$	(35,957)	$	3,843	$	(73,046)
Other comprehensive income before reclassification adjustments	249		—		—		249		1,133		—		—		1,133
Sale of Point Tupper Terminal Operations reclassified into net income (Note 2)	—		—		—		—		39,646		—		—		39,646
Net gain on pension costs reclassified into other income, net	—		—		(736)		(736)		—		—		(420)		(420)
Net loss on cash flow hedges reclassified into interest expense, net	—		505		—		505		—		521		—		521
Other	—		—		(10)		(10)		—		—		(6)		(6)
Other comprehensive income (loss)	249		505		(746)		8		40,779		521		(426)		40,874
Balance as of June 30	$	746	$	(33,360)	$	1,221	$	(31,393)	$	(153)	$	(35,436)	$	3,417	$	(32,172)

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


	Six Months Ended June 30,
	2023								2022
	Foreign Currency Translation		Cash Flow Hedges		Pension and Other Postretirement Benefits		Total		Foreign Currency Translation		Cash Flow Hedges		Pension and Other Postretirement Benefits		Total
	(Thousands of Dollars)
Balance as of January 1	$	62	$	(34,380)	$	2,713	$	(31,605)	$	(41,761)	$	(36,486)	$	4,269	$	(73,978)
Other comprehensive income before reclassification adjustments	684		—		—		684		1,962		—		—		1,962
Sale of Point Tupper Terminal Operations reclassified into net income (Note 2)	—		—		—		—		39,646		—		—		39,646
Net gain on pension costs reclassified into other income, net	—		—		(1,473)		(1,473)		—		—		(840)		(840)
Net loss on cash flow hedges reclassified into interest expense, net	—		1,020		—		1,020		—		1,050		—		1,050
Other	—		—		(19)		(19)		—		—		(12)		(12)
Other comprehensive income (loss)	684		1,020		(1,492)		212		41,608		1,050		(852)		41,806
Balance as of June 30	$	746	$	(33,360)	$	1,221	$	(31,393)	$	(153)	$	(35,436)	$	3,417	$	(32,172)

As of June 30, 2023, we expect to reclassify a loss of $3.3 million to “Interest expense, net” within the next twelve months associated with unwound forward-starting interest rate swaps.

8. NET INCOME (LOSS) PER COMMON UNIT

Basic and diluted net income (loss) per common unit is determined pursuant to the two-class method. Under this method, all earnings are allocated to our limited partners and participating securities based on their respective rights to receive distributions earned during the period. Participating securities include restricted units awarded under our long-term incentive plans and, beginning on June 15, 2023, the Series D Preferred Units. We compute basic net income (loss) per common unit by dividing net income (loss) attributable to common units by the weighted-average number of common units outstanding during the period. We compute diluted net income (loss) per common unit by dividing net income (loss) attributable to common units by the sum of (i) the weighted average number of common units outstanding during the period and (ii) the effect of dilutive potential common units outstanding during the period. Dilutive potential common units include the Series D Preferred Units.

The Series D Preferred Units contain certain unitholder conversion and redemption features, and we use the if-converted method to calculate the dilutive effect of the conversion or redemption feature that is most advantageous to our Series D preferred unitholders. The effect of the assumed conversion or redemption of the Series D Preferred Units outstanding was antidilutive for each of the three and six months ended June 30, 2023 and 2022; therefore, we did not include such conversion in the computation of diluted net (loss) income per common unit.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table details the calculation of basic and diluted net (loss) income per common unit:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(Thousands of Dollars, Except Unit and Per Unit Data)
Net income	$	46,141	$	59,199	$	152,077	$	71,511
Distributions to preferred limited partners	(32,126)		(31,523)		(64,859)		(62,615)
Distributions to common limited partners	(44,363)		(44,128)		(88,759)		(88,293)
Distribution equivalent rights to restricted units	(667)		(617)		(1,339)		(1,250)
Distributions in excess of income	$	(31,015)	$	(17,069)	$	(2,880)	$	(80,647)

Distributions to common limited partners	$	44,363	$	44,128	$	88,759	$	88,293
Allocation of distributions in excess of income to common limited partners	(31,015)		(17,069)		(2,880)		(80,647)
Series D Preferred Unit accretion	(3,303)		(4,734)		(6,974)		(9,315)
Series D Preferred Unit redemption	(32,067)		—		(32,067)		—
Net (loss) income attributable to common units	$	(22,022)	$	22,325	$	46,838	$	(1,669)


Basic and diluted weighted-average common units outstanding	110,905,471		110,306,641		110,893,293		110,242,201



Basic and diluted net (loss) income per common unit	$	(0.20)	$	0.20	$	0.42	$	(0.02)

9. SUPPLEMENTAL CASH FLOW INFORMATION

Changes in current assets and current liabilities were as follows:


	Six Months Ended June 30,
	2023		2022
	(Thousands of Dollars)
Decrease (increase) in current assets:
Accounts receivable	$	12,356	$	(21,262)

Inventories	4,920		1,439

Other current assets	(3,508)		705
Increase (decrease) in current liabilities:
Accounts payable	(2,427)		5,082

Accrued interest payable	869		567
Accrued liabilities	(8,300)		(14,448)
Taxes other than income tax	(2,125)		(3,023)

Changes in current assets and current liabilities	$	1,785	$	(30,940)

The above changes in current assets and current liabilities may differ from changes between amounts reflected in the applicable consolidated balance sheets due to:

•the change in the amount accrued for capital expenditures;

•the effect of accrued compensation expense paid with fully vested common unit awards; and

•current assets and current liabilities disposed of during the period.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Other supplemental cash flow information is as follows:


	Six Months Ended June 30,
	2023		2022
	(Thousands of Dollars)
Cash paid for interest, net of amount capitalized	$	110,195	$	95,112
Cash paid for income taxes, net of tax refunds received	$	2,842	$	3,646
Right-of-use assets obtained in exchange for operating lease liabilities	$	82,372	$	2,990
Right-of-use assets obtained in exchange for finance lease liabilities	$	1,818	$	1,342

Restricted cash, representing legally restricted funds that are unavailable for general use, is included in "Other long-term assets, net" on the consolidated balance sheets. “Cash, cash equivalents and restricted cash” on the consolidated statements of cash flows is included in the consolidated balance sheets as follows:


	June 30, 2023		December 31, 2022
	(Thousands of Dollars)
Cash and cash equivalents	$	3,813	$	14,489

Other long-term assets, net	9,056		8,888
Cash, cash equivalents and restricted cash	$	12,869	$	23,377

10. SEGMENT INFORMATION

Our reportable business segments consist of the pipeline, storage and fuels marketing segments. Our segments represent strategic business units that offer different services and products. We evaluate the performance of each segment based on its respective operating income, before general and administrative expenses and certain non-segmental depreciation and amortization expense. General and administrative expenses are not allocated to the operating segments since those expenses relate primarily to the overall management at the entity level.

Results of operations for the reportable segments were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(Thousands of Dollars)
Revenues:

Pipeline	$	206,701	$	200,565	$	419,884	$	389,248






Storage	78,209		88,783		158,866		176,704

Fuels marketing	93,426		140,809		193,453		274,069



Consolidation and intersegment eliminations	(2)		—		(2)		(1)
Total revenues	$

NuStar Energy L.P. [NS-PA] Filings
NuStar Energy L.P. [NS] Filings
NuStar Energy L.P. [NS-PB] Filings
NuStar Energy L.P. [NS-PC] Filings
NuStar Energy L.P. [NSS] Filings
10-Q	[2023-08-04]
10-Q	[2023-05-05]
10-K	[2023-02-23]
10-Q	[2022-11-08]
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-02-24]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-02-25]
10-Q	[2020-11-06]
10-Q	[2020-08-07]
10-Q	[2020-05-08]
10-K	[2020-02-27]
10-Q	[2019-11-08]
10-Q	[2019-08-09]
10-Q	[2019-05-10]
10-K	[2019-02-28]
10-Q	[2018-11-06]
10-Q	[2018-08-07]
10-Q	[2018-05-08]
10-K	[2018-02-28]
10-Q	[2017-11-08]
10-Q	[2017-08-08]
10-Q	[2017-05-09]
10-K	[2017-02-23]
10-Q	[2016-11-07]
10-Q	[2016-08-08]
10-Q	[2016-05-05]
10-K	[2016-02-25]
10-Q	[2015-11-05]
10-Q	[2015-08-06]
10-Q	[2015-05-07]
10-K	[2015-02-26]
10-Q	[2014-11-06]
10-Q	[2014-08-05]
10-Q	[2014-05-08]
10-K	[2014-03-03]
10-Q	[2013-11-12]
10-Q	[2013-08-07]
10-Q	[2013-05-08]
10-K	[2013-03-01]
10-Q	[2012-11-08]
10-Q	[2012-08-07]
10-Q	[2012-04-25]
10-K	[2012-02-28]

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