UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021March 31, 2022
OR
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☐ | 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)
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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:
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common units | | NS | | New York Stock Exchange |
Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units | | NSprA | | New York Stock Exchange |
Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units | | NSprB | | New York Stock Exchange |
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:
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Large accelerated filer | | þ | Accelerated filer | | ☐ |
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Non-accelerated filer | | ☐ | Smaller reporting company | | ☐ |
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| | | 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, 2021April 30, 2022 was 109,532,470.110,303,252.
NUSTAR ENERGY L.P.
FORM 10-Q
TABLE OF CONTENTS
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Item 1. | | |
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Item 2. | | |
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Item 3. | | |
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Item 4. | | |
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Item 1A. | | |
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Item 6. | | |
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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, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
Assets | Assets | | | | Assets | | | |
Current assets: | Current assets: | | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 23,500 | | | $ | 153,625 | | Cash and cash equivalents | $ | 8,398 | | | $ | 5,637 | |
Accounts receivable, net | Accounts receivable, net | 143,392 | | | 133,473 | | Accounts receivable, net | 142,527 | | | 135,126 | |
| Inventories | Inventories | 12,812 | | | 11,059 | | Inventories | 19,310 | | | 16,644 | |
| Prepaid and other current assets | Prepaid and other current assets | 30,177 | | | 25,400 | | Prepaid and other current assets | 15,079 | | | 27,135 | |
| Assets held for sale | | Assets held for sale | 86,458 | | | — | |
Total current assets | Total current assets | 209,881 | | | 323,557 | | Total current assets | 271,772 | | | 184,542 | |
Property, plant and equipment, at cost | Property, plant and equipment, at cost | 6,255,183 | | | 6,164,742 | | Property, plant and equipment, at cost | 5,625,080 | | | 5,728,848 | |
Accumulated depreciation and amortization | Accumulated depreciation and amortization | (2,323,020) | | | (2,207,230) | | Accumulated depreciation and amortization | (2,171,692) | | | (2,187,206) | |
Property, plant and equipment, net | Property, plant and equipment, net | 3,932,163 | | | 3,957,512 | | Property, plant and equipment, net | 3,453,388 | | | 3,541,642 | |
Intangible assets, net | Intangible assets, net | 604,497 | | | 630,209 | | Intangible assets, net | 546,679 | | | 557,785 | |
Goodwill | Goodwill | 766,416 | | | 766,416 | | Goodwill | 732,356 | | | 732,356 | |
| Other long-term assets, net | Other long-term assets, net | 133,023 | | | 139,324 | | Other long-term assets, net | 125,730 | | | 140,007 | |
Total assets | Total assets | $ | 5,645,980 | | | $ | 5,817,018 | | Total assets | $ | 5,129,925 | | | $ | 5,156,332 | |
Liabilities, Mezzanine Equity and Partners’ Equity | Liabilities, Mezzanine Equity and Partners’ Equity | | | | Liabilities, Mezzanine Equity and Partners’ Equity | | | |
Current liabilities: | Current liabilities: | | Current liabilities: | |
Accounts payable | Accounts payable | $ | 70,484 | | | $ | 71,731 | | Accounts payable | $ | 70,360 | | | $ | 82,446 | |
| Current portion of finance lease obligations | Current portion of finance lease obligations | 3,522 | | | 3,839 | | Current portion of finance lease obligations | 4,000 | | | 3,848 | |
| Accrued interest payable | Accrued interest payable | 39,161 | | | 50,847 | | Accrued interest payable | 72,107 | | | 34,139 | |
Accrued liabilities | Accrued liabilities | 60,711 | | | 77,770 | | Accrued liabilities | 54,447 | | | 79,818 | |
| Taxes other than income tax | Taxes other than income tax | 15,432 | | | 16,998 | | Taxes other than income tax | 10,196 | | | 14,475 | |
| Liabilities held for sale | | Liabilities held for sale | 66,496 | | | — | |
Total current liabilities | Total current liabilities | 189,310 | | | 221,185 | | Total current liabilities | 277,606 | | | 214,726 | |
Long-term debt, less current portion | Long-term debt, less current portion | 3,496,933 | | | 3,593,496 | | Long-term debt, less current portion | 3,168,425 | | | 3,183,555 | |
| Deferred income tax liability | Deferred income tax liability | 12,252 | | | 13,011 | | Deferred income tax liability | 2,848 | | | 11,831 | |
Other long-term liabilities | Other long-term liabilities | 152,047 | | | 157,825 | | Other long-term liabilities | 137,763 | | | 147,956 | |
Total liabilities | Total liabilities | 3,850,542 | | | 3,985,517 | | Total liabilities | 3,586,642 | | | 3,558,068 | |
| Commitments and contingencies (Note 6) | Commitments and contingencies (Note 6) | 0 | | 0 | Commitments and contingencies (Note 6) | 0 | | 0 |
| Series D preferred limited partners (23,246,650 preferred units outstanding as of June 30, 2021 and December 31, 2020) (Note 8) | 607,718 | | | 599,542 | | |
Series D preferred limited partners (23,246,650 preferred units outstanding as of March 31, 2022 and December 31, 2021) (Note 8) | | Series D preferred limited partners (23,246,650 preferred units outstanding as of March 31, 2022 and December 31, 2021) (Note 8) | 621,018 | | | 616,439 | |
| Partners’ equity (Note 9): | Partners’ equity (Note 9): | | Partners’ equity (Note 9): | |
Preferred limited partners | Preferred limited partners | | Preferred limited partners | |
Series A (9,060,000 units outstanding as of June 30, 2021 and December 31, 2020) | 218,307 | | | 218,307 | | |
Series B (15,400,000 units outstanding as of June 30, 2021 and December 31, 2020) | 371,476 | | | 371,476 | | |
Series C (6,900,000 units outstanding as of June 30, 2021 and December 31, 2020) | 166,518 | | | 166,518 | | |
Common limited partners (109,532,026 and 109,468,127 common units outstanding as of June 30, 2021 and December 31, 2020, respectively) | 523,711 | | | 572,314 | | |
Series A (9,060,000 units outstanding as of March 31, 2022 and December 31, 2021) | | Series A (9,060,000 units outstanding as of March 31, 2022 and December 31, 2021) | 218,307 | | | 218,307 | |
Series B (15,400,000 units outstanding as of March 31, 2022 and December 31, 2021) | | Series B (15,400,000 units outstanding as of March 31, 2022 and December 31, 2021) | 371,476 | | | 371,476 | |
Series C (6,900,000 units outstanding as of March 31, 2022 and December 31, 2021) | | Series C (6,900,000 units outstanding as of March 31, 2022 and December 31, 2021) | 166,518 | | | 166,518 | |
Common limited partners (110,297,849 and 109,986,273 common units outstanding as of March 31, 2022 and December 31, 2021, respectively) | | Common limited partners (110,297,849 and 109,986,273 common units outstanding as of March 31, 2022 and December 31, 2021, respectively) | 239,010 | | | 299,502 | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | (92,292) | | | (96,656) | | Accumulated other comprehensive loss | (73,046) | | | (73,978) | |
Total partners’ equity | Total partners’ equity | 1,187,720 | | | 1,231,959 | | Total partners’ equity | 922,265 | | | 981,825 | |
| Total liabilities, mezzanine equity and partners’ equity | Total liabilities, mezzanine equity and partners’ equity | $ | 5,645,980 | | | $ | 5,817,018 | | Total liabilities, mezzanine equity and partners’ equity | $ | 5,129,925 | | | $ | 5,156,332 | |
See Condensed Notes to Consolidated Financial Statements.
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended March 31, | |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | |
Revenues: | Revenues: | | | | | | | | Revenues: | | | | |
Service revenues | Service revenues | $ | 300,788 | | | $ | 284,151 | | | $ | 572,671 | | | $ | 600,897 | | Service revenues | $ | 265,305 | | | $ | 271,883 | | |
Product sales | Product sales | 126,305 | | | 55,389 | | | 216,068 | | | 131,434 | | Product sales | 144,558 | | | 89,763 | | |
Total revenues | Total revenues | 427,093 | | | 339,540 | | | 788,739 | | | 732,331 | | Total revenues | 409,863 | | | 361,646 | | |
Costs and expenses: | Costs and expenses: | | | | | | | | Costs and expenses: | | | | |
Costs associated with service revenues: | Costs associated with service revenues: | | Costs associated with service revenues: | | |
Operating expenses (excluding depreciation and amortization expense) | Operating expenses (excluding depreciation and amortization expense) | 100,493 | | | 101,078 | | | 187,780 | | | 201,260 | | Operating expenses (excluding depreciation and amortization expense) | 86,402 | | | 87,287 | | |
Depreciation and amortization expense | Depreciation and amortization expense | 68,964 | | | 69,214 | | | 137,382 | | | 137,275 | | Depreciation and amortization expense | 63,303 | | | 68,418 | | |
Total costs associated with service revenues | Total costs associated with service revenues | 169,457 | | | 170,292 | | | 325,162 | | | 338,535 | | Total costs associated with service revenues | 149,705 | | | 155,705 | | |
Cost associated with product sales | 112,641 | | | 50,676 | | | 193,754 | | | 118,126 | | |
Costs associated with product sales | | Costs associated with product sales | 126,715 | | | 81,113 | | |
Impairment loss | | Impairment loss | 46,122 | | | — | | |
| Goodwill impairment loss | 0 | | | 0 | | | 0 | | | 225,000 | | |
General and administrative expenses (excluding depreciation and amortization expense) | General and administrative expenses (excluding depreciation and amortization expense) | 27,477 | | | 23,700 | | | 51,969 | | | 46,671 | | General and administrative expenses (excluding depreciation and amortization expense) | 27,071 | | | 24,492 | | |
Other depreciation and amortization expense | Other depreciation and amortization expense | 1,913 | | | 2,171 | | | 3,960 | | | 4,357 | | Other depreciation and amortization expense | 1,824 | | | 2,047 | | |
| Total costs and expenses | Total costs and expenses | 311,488 | | | 246,839 | | | 574,845 | | | 732,689 | | Total costs and expenses | 351,437 | | | 263,357 | | |
Operating income (loss) | 115,605 | | | 92,701 | | | 213,894 | | | (358) | | |
Operating income | | Operating income | 58,426 | | | 98,289 | | |
| Interest expense, net | Interest expense, net | (53,780) | | | (59,499) | | | (108,698) | | | (106,993) | | Interest expense, net | (49,818) | | | (54,918) | | |
| Loss on extinguishment of debt | 0 | | | (3,842) | | | 0 | | | (3,842) | | |
Other income (expense), net | 2,896 | | | 2,216 | | | 3,294 | | | (4,273) | | |
Income (loss) before income tax expense | 64,721 | | | 31,576 | | | 108,490 | | | (115,466) | | |
Income tax expense | 1,338 | | | 1,810 | | | 2,850 | | | 2,409 | | |
Net income (loss) | $ | 63,383 | | | $ | 29,766 | | | $ | 105,640 | | | $ | (117,875) | | |
| Basic and diluted net income (loss) per common unit (Note 10) | $ | 0.25 | | | $ | (0.06) | | | $ | 0.30 | | | $ | (1.74) | | |
Other income, net | | Other income, net | 3,671 | | | 398 | | |
Income before income tax (benefit) expense | | Income before income tax (benefit) expense | 12,279 | | | 43,769 | | |
Income tax (benefit) expense | | Income tax (benefit) expense | (33) | | | 1,512 | | |
Net income | | Net income | $ | 12,312 | | | $ | 42,257 | | |
| Basic and diluted net (loss) income per common unit (Note 10) | | Basic and diluted net (loss) income per common unit (Note 10) | $ | (0.22) | | | $ | 0.05 | | |
| Basic and diluted weighted-average common units outstanding | Basic and diluted weighted-average common units outstanding | 109,529,658 | | | 109,194,722 | | | 109,518,004 | | | 109,046,061 | | Basic and diluted weighted-average common units outstanding | 110,177,045 | | | 109,506,222 | | |
| | Comprehensive income (loss) | $ | 65,627 | | | $ | 32,520 | | | $ | 110,004 | | | $ | (151,434) | | |
Comprehensive income | | Comprehensive income | $ | 13,244 | | | $ | 44,377 | | |
See Condensed Notes to Consolidated Financial Statements.
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, Thousands of Dollars)
| | | Six Months Ended June 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
Cash Flows from Operating Activities: | Cash Flows from Operating Activities: | | | | Cash Flows from Operating Activities: | | | |
Net income (loss) | $ | 105,640 | | | $ | (117,875) | | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | |
Net income | | Net income | $ | 12,312 | | | $ | 42,257 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization expense | Depreciation and amortization expense | 141,342 | | | 141,632 | | Depreciation and amortization expense | 65,127 | | | 70,465 | |
Amortization of unit-based compensation | Amortization of unit-based compensation | 7,154 | | | 5,193 | | Amortization of unit-based compensation | 3,412 | | | 3,871 | |
Amortization of debt related items | Amortization of debt related items | 6,025 | | | 3,976 | | Amortization of debt related items | 2,532 | | | 3,042 | |
| Goodwill impairment loss | 0 | | | 225,000 | | |
| Impairment loss | | Impairment loss | 46,122 | | | — | |
| Changes in current assets and current liabilities (Note 11) | Changes in current assets and current liabilities (Note 11) | (43,333) | | | (6,174) | | Changes in current assets and current liabilities (Note 11) | 17,512 | | | 24,397 | |
Decrease in other long-term assets | Decrease in other long-term assets | 5,440 | | | 5,980 | | Decrease in other long-term assets | 3,644 | | | 2,381 | |
(Decrease) increase in other long-term liabilities | (6,162) | | | 3,601 | | |
Decrease in other long-term liabilities | | Decrease in other long-term liabilities | (662) | | | (1,678) | |
Other, net | Other, net | (1,869) | | | 9,108 | | Other, net | (4,169) | | | 922 | |
Net cash provided by operating activities | Net cash provided by operating activities | 214,237 | | | 270,441 | | Net cash provided by operating activities | 145,830 | | | 145,657 | |
Cash Flows from Investing Activities: | Cash Flows from Investing Activities: | | | | Cash Flows from Investing Activities: | | | |
Capital expenditures | Capital expenditures | (87,194) | | | (96,358) | | Capital expenditures | (32,750) | | | (40,463) | |
Change in accounts payable related to capital expenditures | Change in accounts payable related to capital expenditures | (5,345) | | | (15,509) | | Change in accounts payable related to capital expenditures | (14,498) | | | (5,449) | |
Proceeds from insurance recoveries | | Proceeds from insurance recoveries | 5,805 | | | — | |
Proceeds from sale or disposition of assets | Proceeds from sale or disposition of assets | 304 | | | 5,787 | | Proceeds from sale or disposition of assets | 341 | | | 130 | |
| Net cash used in investing activities | Net cash used in investing activities | (92,235) | | | (106,080) | | Net cash used in investing activities | (41,102) | | | (45,782) | |
Cash Flows from Financing Activities: | Cash Flows from Financing Activities: | | | | Cash Flows from Financing Activities: | | | |
Proceeds from Term Loan, net of discount and issuance costs | 0 | | | 463,051 | | |
| | Proceeds from long-term debt borrowings | Proceeds from long-term debt borrowings | 490,500 | | | 326,984 | | Proceeds from long-term debt borrowings | 253,000 | | | 270,400 | |
Proceeds from short-term debt borrowings | 0 | | | 52,000 | | |
| | Long-term debt repayments | Long-term debt repayments | (588,300) | | | (704,715) | | Long-term debt repayments | (268,800) | | | (418,100) | |
Short-term debt repayments | 0 | | | (57,500) | | |
| | Distributions to preferred unitholders | Distributions to preferred unitholders | (63,774) | | | (60,846) | | Distributions to preferred unitholders | (31,025) | | | (31,887) | |
Distributions to common unitholders | Distributions to common unitholders | (87,623) | | | (108,846) | | Distributions to common unitholders | (44,041) | | | (43,811) | |
| Payments for termination of interest rate swaps | 0 | | | (49,225) | | |
Payment of tax withholding for unit-based compensation | (632) | | | (8,820) | | |
Increase (decrease) in cash book overdrafts | 458 | | | (1,359) | | |
| Other, net | Other, net | (3,482) | | | (13,043) | | Other, net | (8,848) | | | (2,331) | |
Net cash used in financing activities | Net cash used in financing activities | (252,853) | | | (162,319) | | Net cash used in financing activities | (99,714) | | | (225,729) | |
Effect of foreign exchange rate changes on cash | Effect of foreign exchange rate changes on cash | 727 | | | (945) | | Effect of foreign exchange rate changes on cash | 176 | | | 475 | |
Net (decrease) increase in cash, cash equivalents and restricted cash | (130,124) | | | 1,097 | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | Net increase (decrease) in cash, cash equivalents and restricted cash | 5,190 | | | (125,379) | |
Cash, cash equivalents and restricted cash as of the beginning of the period | Cash, cash equivalents and restricted cash as of the beginning of the period | 162,426 | | | 24,980 | | Cash, cash equivalents and restricted cash as of the beginning of the period | 14,439 | | | 162,426 | |
Cash, cash equivalents and restricted cash as of the end of the period | Cash, cash equivalents and restricted cash as of the end of the period | $ | 32,302 | | | $ | 26,077 | | Cash, cash equivalents and restricted cash as of the end of the period | $ | 19,629 | | | $ | 37,047 | |
See Condensed Notes to Consolidated Financial Statements.
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY AND MEZZANINE EQUITY
Three Months Ended June 30,March 31, 2022 and 2021 and 2020
(Unaudited, Thousands of Dollars, Except Per Unit Data)
| | | Limited Partners | | Mezzanine Equity | | | Limited Partners | | Mezzanine Equity | |
| | Preferred | | Common | | Accumulated Other Comprehensive Loss | | Total Partners’ Equity (Note 9) | | Series D Preferred Limited Partners (Note 8) | | Total | | Preferred | | Common | | Accumulated Other Comprehensive Loss | | Total Partners’ Equity (Note 9) | | Series D Preferred Limited Partners (Note 8) | | Total |
Balance as of March 31, 2021 | $ | 756,301 | | | $ | 537,537 | | | $ | (94,536) | | | $ | 1,199,302 | | | $ | 603,563 | | | $ | 1,802,865 | | |
Net income | 16,033 | | | 31,496 | | | 0 | | | 47,529 | | | 15,854 | | | 63,383 | | |
Balance as of January 1, 2022 | | Balance as of January 1, 2022 | $ | 756,301 | | | $ | 299,502 | | | $ | (73,978) | | | $ | 981,825 | | | $ | 616,439 | | | $ | 1,598,264 | |
Net income (loss) | | Net income (loss) | 15,238 | | | (18,780) | | | — | | | (3,542) | | | 15,854 | | | 12,312 | |
Other comprehensive income | Other comprehensive income | 0 | | | 0 | | | 2,244 | | | 2,244 | | | — | | | 2,244 | | Other comprehensive income | — | | | — | | | 932 | | | 932 | | | — | | | 932 | |
Distributions to partners: | Distributions to partners: | | Distributions to partners: | |
Series A, B and C preferred | Series A, B and C preferred | (16,033) | | | — | | | — | | | (16,033) | | | — | | | (16,033) | | Series A, B and C preferred | (15,238) | | | — | | | — | | | (15,238) | | | — | | | (15,238) | |
Common ($0.40 per unit) | Common ($0.40 per unit) | — | | | (43,812) | | | — | | | (43,812) | | | — | | | (43,812) | | Common ($0.40 per unit) | — | | | (44,041) | | | — | | | (44,041) | | | — | | | (44,041) | |
Series D preferred | Series D preferred | — | | | — | | | — | | | — | | | (15,854) | | | (15,854) | | Series D preferred | — | | | — | | | — | | | — | | | (15,854) | | | (15,854) | |
| Unit-based compensation | Unit-based compensation | 0 | | | 2,652 | | | 0 | | | 2,652 | | | — | | | 2,652 | | Unit-based compensation | — | | | 6,910 | | | — | | | 6,910 | | | — | | | 6,910 | |
Series D preferred unit accretion | Series D preferred unit accretion | — | | | (4,155) | | | — | | | (4,155) | | | 4,155 | | | 0 | | Series D preferred unit accretion | — | | | (4,581) | | | — | | | (4,581) | | | 4,581 | | | — | |
Other | Other | 0 | | | (7) | | | 0 | | | (7) | | | 0 | | | (7) | | Other | — | | | — | | | — | | | — | | | (2) | | | (2) | |
Balance as of June 30, 2021 | $ | 756,301 | | | $ | 523,711 | | | $ | (92,292) | | | $ | 1,187,720 | | | $ | 607,718 | | | $ | 1,795,438 | | |
Balance as of March 31, 2022 | | Balance as of March 31, 2022 | $ | 756,301 | | | $ | 239,010 | | | $ | (73,046) | | | $ | 922,265 | | | $ | 621,018 | | | $ | 1,543,283 | |
| | | Balance as of March 31, 2020 | $ | 756,301 | | | $ | 855,722 | | | $ | (104,209) | | | $ | 1,507,814 | | | $ | 586,837 | | | $ | 2,094,651 | | |
Net income (loss) | 16,033 | | | (918) | | | 0 | | | 15,115 | | | 14,651 | | | 29,766 | | |
Balance as of January 1, 2021 | | Balance as of January 1, 2021 | $ | 756,301 | | | $ | 572,314 | | | $ | (96,656) | | | $ | 1,231,959 | | | $ | 599,542 | | | $ | 1,831,501 | |
Net income | | Net income | 16,033 | | | 10,370 | | | — | | | 26,403 | | | 15,854 | | | 42,257 | |
Other comprehensive income | Other comprehensive income | 0 | | | 0 | | | 2,754 | | | 2,754 | | | — | | | 2,754 | | Other comprehensive income | — | | | — | | | 2,120 | | | 2,120 | | | — | | | 2,120 | |
Distributions to partners: | Distributions to partners: | | Distributions to partners: | |
Series A, B and C preferred | Series A, B and C preferred | (16,033) | | | — | | | — | | | (16,033) | | | — | | | (16,033) | | Series A, B and C preferred | (16,033) | | | — | | | — | | | (16,033) | | | — | | | (16,033) | |
Common ($0.40 per unit) | Common ($0.40 per unit) | — | | | (43,677) | | | — | | | (43,677) | | | — | | | (43,677) | | Common ($0.40 per unit) | — | | | (43,811) | | | — | | | (43,811) | | | — | | | (43,811) | |
Series D preferred | Series D preferred | — | | | — | | | — | | | — | | | (14,651) | | | (14,651) | | Series D preferred | — | | | — | | | — | | | — | | | (15,854) | | | (15,854) | |
| Unit-based compensation | Unit-based compensation | 0 | | | 2,056 | | | 0 | | | 2,056 | | | — | | | 2,056 | | Unit-based compensation | — | | | 2,678 | | | — | | | 2,678 | | | — | | | 2,678 | |
Series D Preferred Unit accretion | Series D Preferred Unit accretion | — | | | (5,064) | | | — | | | (5,064) | | | 5,064 | | | 0 | | Series D Preferred Unit accretion | — | | | (4,021) | | | — | | | (4,021) | | | 4,021 | | | — | |
Other | Other | 0 | | | (1) | | | 0 | | | (1) | | | (6) | | | (7) | | Other | — | | | 7 | | | — | | | 7 | | | — | | | 7 | |
Balance as of June 30, 2020 | $ | 756,301 | | | $ | 808,118 | | | $ | (101,455) | | | $ | 1,462,964 | | | $ | 591,895 | | | $ | 2,054,859 | | |
Balance as of March 31, 2021 | | Balance as of March 31, 2021 | $ | 756,301 | | | $ | 537,537 | | | $ | (94,536) | | | $ | 1,199,302 | | | $ | 603,563 | | | $ | 1,802,865 | |
See Condensed Notes to Consolidated Financial Statements.
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY AND MEZZANINE EQUITY
Six Months Ended June 30, 2021 and 2020
(Unaudited, Thousands of Dollars, Except Per Unit Data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Limited Partners | | | | | | Mezzanine Equity | | |
| Preferred | | Common | | Accumulated Other Comprehensive Loss | | Total Partners’ Equity (Note 9) | | Series D Preferred Limited Partners (Note 8) | | Total |
Balance as of January 1, 2021 | $ | 756,301 | | | $ | 572,314 | | | $ | (96,656) | | | $ | 1,231,959 | | | $ | 599,542 | | | $ | 1,831,501 | |
Net income | 32,066 | | | 41,866 | | | 0 | | | 73,932 | | | 31,708 | | | 105,640 | |
Other comprehensive income | 0 | | | 0 | | | 4,364 | | | 4,364 | | | — | | | 4,364 | |
Distributions to partners: | | | | | | | | | | | |
Series A, B and C preferred | (32,066) | | | — | | | — | | | (32,066) | | | — | | | (32,066) | |
Common ($0.80 per unit) | — | | | (87,623) | | | — | | | (87,623) | | | — | | | (87,623) | |
Series D preferred | — | | | — | | | — | | | — | | | (31,708) | | | (31,708) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Unit-based compensation | 0 | | | 5,330 | | | 0 | | | 5,330 | | | — | | | 5,330 | |
Series D preferred unit accretion | — | | | (8,176) | | | — | | | (8,176) | | | 8,176 | | | 0 | |
| | | | | | | | | | | |
Balance as of June 30, 2021 | $ | 756,301 | | | $ | 523,711 | | | $ | (92,292) | | | $ | 1,187,720 | | | $ | 607,718 | | | $ | 1,795,438 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balance as of January 1, 2020 | $ | 756,301 | | | $ | 1,087,805 | | | $ | (67,896) | | | $ | 1,776,210 | | | $ | 581,935 | | | $ | 2,358,145 | |
Net income (loss) | 32,066 | | | (178,982) | | | 0 | | | (146,916) | | | 29,041 | | | (117,875) | |
Other comprehensive loss | 0 | | | 0 | | | (33,559) | | | (33,559) | | | — | | | (33,559) | |
Distributions to partners: | | | | | | | | | | | |
Series A, B and C preferred | (32,066) | | | — | | | — | | | (32,066) | | | — | | | (32,066) | |
Common ($1.00 per unit) | — | | | (108,846) | | | — | | | (108,846) | | | — | | | (108,846) | |
Series D preferred | — | | | — | | | — | | | — | | | (29,041) | | | (29,041) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Unit-based compensation | 0 | | | 18,107 | | | 0 | | | 18,107 | | | — | | | 18,107 | |
Series D Preferred Unit accretion | — | | | (9,966) | | | — | | | (9,966) | | | 9,966 | | | 0 | |
Other | 0 | | | 0 | | | 0 | | | 0 | | | (6) | | | (6) | |
Balance as of June 30, 2020 | $ | 756,301 | | | $ | 808,118 | | | $ | (101,455) | | | $ | 1,462,964 | | | $ | 591,895 | | | $ | 2,054,859 | |
See Condensed Notes to Consolidated Financial Statements.
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 3 business segments: pipeline, storage and fuels marketing.
Recent Developments
COVID-19.Sale of Point Tupper Terminal. On April 29, 2022, we sold the equity interests in our wholly owned subsidiaries that own our Point Tupper terminal facility to EverWind Fuels for $60.0 million, plus working capital, which is subject to adjustment. The coronavirus, or COVID-19, hadterminal facility has a severe negative impact on global economic activity during 2020, significantly reducing demandstorage capacity of 7.8 million barrels and has been included in the storage segment. We recognized a pre-tax impairment loss of $46.1 million in the first quarter of 2022 and expect to utilize the sales proceeds to reduce debt and thereby improve our debt metrics. Please refer to Note 3 for petroleum products and increasing the volatility of crude oil prices, beginning in March 2020. Amid signs of stabilization and improvement across the U.S. economy in 2021, ongoing uncertainty surrounding the COVID-19 pandemic has caused and may continue to cause volatility and could have a significant impact on management’s estimates and assumptions in 2021 and beyond.more information.
Senior Notes.Debt Amendments. On February 1, 2021,January 28, 2022, we repaidamended and restated our $300.0 million of 6.75% senior notes at maturity with borrowings under our$1.0 billion unsecured revolving credit agreement.
Term Loan Credit Agreement. On February 16, 2021,agreement to extend the maturity to April 27, 2025, replace the LIBOR-based interest rate and modify other terms. Also on January 28, 2022, we terminated an unsecured term loan creditamended our $100.0 million receivables financing agreement with certain lendersto extend the scheduled termination date to January 31, 2025, replace the LIBOR-based interest rate and Oaktree Fund Administration, LLC, as administrative agent for the lenders (the Term Loan).modify other terms. Please refer to Note 5 for further discussion about the Term Loan.more information.
Other Event
Selby Terminal Fire. On October 15, 2019, our terminal facility in Selby, California experienced a fire that destroyed two storage tanks and temporarily shut down the terminal. For the six months ended June 30, 2021, weWe received insurance proceeds of $20.5$5.8 million and for the year ended December 31, 2020, we received insurance proceeds of $35.0 million, including $25.0$20.5 million for the sixthree months ended June 30, 2020. GainsMarch 31, 2022 and 2021, respectively. We recorded a gain from business interruption insurance of $4.0 million and $3.1 million for the sixthree months ended June 30,March 31, 2021, and June 30, 2020, respectively, arewhich is included in “Operating expenses” in the condensed consolidated statements of comprehensive income (loss).income. Insurance proceeds relate tofor cleanup costs and business interruption and are therefore included in “Cash flows from operating activities” in the consolidated statementstatements of cash flows. We believe we have adequate insurance to offset additional costs.
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 sixthree months ended June 30, 2021March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.2022. 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, 2020.2021.
We have reclassified certain previously reported amounts in the consolidated financial statements and notes to conform to current-period presentation.
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
2. NEW ACCOUNTING PRONOUNCEMENT
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
In August 2020, the Financial Accounting Standards Board (FASB) issued guidance intended to simplify the accounting for convertible instruments by eliminating certain accounting models for convertible debt instruments and convertible preferred stock, requiring the calculation of diluted earnings-per-unitearnings per unit to include the effect of potential unit settlement for any convertible instruments that may be settled in either cash or units, and amending the disclosure requirements for convertible instruments. The guidance is effective for annual periods beginning after December 15, 2021, and early adoption is permitted for annual periods beginning after December 15, 2020.2021. Amendments may be applied using either a modified retrospective approach or a fully retrospective approach. We plan to adoptadopted the amended guidance on January 1, 2022 using the modified retrospective approach. We are currently assessingWhile the impact of this amended guidance did not have a material impact on our financial position, results of operations, andor disclosures and planat adoption, changes to the earnings per unit guidance could result in changes to our diluted net income (loss) per common unit. Please refer to Note 10 for additional information.
Reference Rate Reform
In March 2020, the FASB issued guidance intended to provide additional information aboutrelief to companies impacted by reference rate reform. The amended guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The publication of U.S. dollar LIBOR rates for the most common tenors is expected to cease after publication on June 30, 2023, and, pursuant to the Adjustable Interest Rate (LIBOR) Act signed into law in the U.S. on March 15, 2022, the Board of Governors of the Federal Reserve System has been directed to select a benchmark replacement rate to automatically replace LIBOR in LIBOR-based contracts that lack adequate fallback provisions upon cessation. As of March 31, 2022, $402.5 million of our variable-rate debt uses LIBOR as a benchmark for establishing the interest rate. In addition, the distribution rate on our 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units is a floating rate based on LIBOR, and the distribution rates on our 7.625% Series B and 9.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units convert from fixed rates to floating rates based on LIBOR in June 2022 and December 2022, respectively. The FASB’s guidance is effective as of March 12, 2020 through December 31, 2022. We adopted the guidance on a prospective basis. The guidance did not have an impact on our financial position, results of operations or disclosures at a future date.transition, but we will continue to evaluate its impact on contracts modified on or before December 31, 2022.
3. GOODWILLDISPOSITION AND IMPAIRMENT
In March 2020,Sale of Point Tupper Terminal. On February 11, 2022, we entered into an agreement to sell the COVID-19 pandemicequity interests in our wholly owned subsidiaries that own our Point Tupper terminal facility in Nova Scotia, Canada (the Point Tupper Terminal Operations) to EverWind Fuels for $60.0 million, plus working capital, which is subject to adjustment. The terminal facility has a storage capacity of 7.8 million barrels and actions taken by the Organization of Petroleum Exporting Countries and other oil-producing nations (OPEC+) resulted in severe disruptionshas been included in the capitalstorage segment. We completed the sale on April 29, 2022 and commodities markets, which ledexpect to significant decline inutilize the sales proceeds to reduce debt and thereby improve our unit price. As a result, our equity market capitalization fell significantly. The decline in crude oil prices and demand for petroleum products also led to a decline in expected earnings from somedebt metrics as part of our goodwill reporting units. These factorsstrategic plan to strengthen our balance sheet. We compared the carrying value of the Point Tupper Terminal Operations, which includes $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 others related to COVID-19 and OPEC+ caused us to conclude there were triggering events that occurred in March 2020 that required us to perform a goodwill impairment test as of March 31, 2020. Wewe recognized a goodwillpre-tax impairment chargeloss of $225.0$46.1 million in the first quarter of 2020,2022, which is reportedpresented in "Impairment loss" on the pipeline segment. Our assessment did not identify any other reporting units at riskconsolidated statement of comprehensive income. We believe that the sales price of $60.0 million provides a goodwill impairment.
We calculated the estimated fair valuereasonable indication of each of our reporting units using a weighted-average of values determined from an income approach and a market approach. The income approach involves estimating the fair value of each reporting unit by discounting its estimated future cash flows using a discount rate that would be consistent with a market participant’s assumption. The market approach bases the fair value measurement on information obtained from observed stock prices of public companies and recent merger and acquisition transaction data of comparable entities. In order to estimate the fair value of goodwill, management must make certain estimates and assumptions that affect the total fair value of the reporting unit including, among other things, an assessment of market conditions, projected cash flows, discount rates and growth rates. Management’s estimates of projected cash flows related to the reporting unit include, but are not limited to, future earnings of the reporting unit, assumptions about the use or disposition of assets included in the reporting unit, estimated remaining lives of those assets, and future expenditures necessary to maintain the asset’s existing service potential. The assumptions in the fair value measurement reflect the current market environment, industry-specific factors and company-specific factors.
We assess goodwill for impairment annually on October 1, or more frequently if events or changes in circumstances indicate it might be impaired, and completed our most recent quantitative assessment on October 1, 2020. Although we determined that 0 impairment charges resulted from our October 1, 2020 impairment assessment, the fair value of the crude oil pipelines reporting unit, whichPoint Tupper Terminal Operations as it represents an exit price in an orderly transaction between market participants. The sales price is includeda quoted price for identical assets and liabilities in the pipeline reporting segment, exceeded its carrying value by approximately 4.0%. The goodwill associated with the crude oil pipelines reporting unit totaled $308.6 million as of June 30, 2021a market that is not active and, October 1, 2020. Considering that the carrying value of the reporting unit was written down to itsthus, our fair value with the first quarter of 2020 impairment charge discussed above, changes to certain assumptions used in our estimate could cause the fair value to be less than the carrying value of the crude oil pipelines reporting unit, resulting in an impairment. We did not identify any factors that warrant an interim goodwill impairment test or an evaluation of the recoverability of the carrying value of our long-lived assets as of June 30, 2021.
Management’s estimates are based on numerous assumptions about future operations and market conditions, which we believe to be reasonable but are inherently uncertain. The uncertainties underlying our assumptions and estimates, including uncertainty surrounding the COVID-19 pandemic, could differ significantly from actual results and lead to a different determinationfalls within Level 2 of the fair value of our assets.hierarchy.
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
During the first quarter of 2022, we determined the Point Tupper Terminal Operations met the criteria to be classified as held for sale. Accordingly, the consolidated balance sheet reflects the assets and liabilities of the Point Tupper Terminal Operations as held for sale as of March 31, 2022. The following table provides the carrying amounts of the major classes of assets and liabilities included in “Assets held for sale” and “Liabilities held for sale” on the consolidated balance sheet:
| | | | | |
| March 31, 2022 |
| (Thousands of Dollars) |
Cash | $ | 2,429 | |
Accounts receivable | 1,138 | |
Inventories | 399 | |
Prepaid and other current assets | 1,792 | |
Property, plant and equipment, net of accumulated depreciation and impairment loss | 65,716 | |
Other long-term assets, net | 14,984 | |
Assets held for sale | $ | 86,458 | |
| |
Accounts payable | $ | 2,636 | |
Deferred income tax liability | 7,638 | |
Accrued liabilities | 4,355 | |
Other long-term liabilities | 9,640 | |
Impairment reserve (cumulative translation losses) | 42,227 | |
Liabilities held for sale | $ | 66,496 | |
4. 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:
| | | 2021 | | 2020 | | 2022 | | 2021 |
| | Contract Assets | | Contract Liabilities | | Contract Assets | | Contract Liabilities | | Contract Assets | | Contract Liabilities | | Contract Assets | | Contract Liabilities |
| | (Thousands of Dollars) | | (Thousands of Dollars) |
Balances as of January 1: | Balances as of January 1: | | Balances as of January 1: | |
Current portion | Current portion | $ | 2,694 | | | $ | (22,019) | | | $ | 2,140 | | | $ | (21,083) | | Current portion | $ | 2,336 | | | $ | (15,443) | | | $ | 2,694 | | | $ | (22,019) | |
Noncurrent portion | Noncurrent portion | 932 | | | (47,537) | | | 1,003 | | | (40,289) | | Noncurrent portion | 504 | | | (46,027) | | | 932 | | | (47,537) | |
Total | Total | 3,626 | | | (69,556) | | | 3,143 | | | (61,372) | | Total | 2,840 | | | (61,470) | | | 3,626 | | | (69,556) | |
| Activity: | Activity: | | Activity: | |
Additions | Additions | 1,898 | | | (19,401) | | | 2,670 | | | (34,156) | | Additions | 71 | | | (9,645) | | | 92 | | | (9,658) | |
Transfer to accounts receivable | Transfer to accounts receivable | (2,055) | | | — | | | (2,258) | | | — | | Transfer to accounts receivable | (2,037) | | | — | | | (1,990) | | | — | |
Transfer to revenues | Transfer to revenues | (250) | | | 25,987 | | | (125) | | | 29,848 | | Transfer to revenues | (83) | | | 12,117 | | | (125) | | | 15,877 | |
| Total | Total | (407) | | | 6,586 | | | 287 | | | (4,308) | | Total | (2,049) | | | 2,472 | | | (2,023) | | | 6,219 | |
| Balances as of June 30: | | |
Balances as of March 31: | | Balances as of March 31: | |
Current portion | Current portion | 2,590 | | | (17,002) | | | 2,218 | | | (20,235) | | Current portion | 277 | | | (13,454) | | | 733 | | | (16,524) | |
Noncurrent portion | Noncurrent portion | 629 | | | (45,968) | | | 1,212 | | | (45,445) | | Noncurrent portion | 448 | | | (45,544) | | | 870 | | | (46,813) | |
Held for sale | | Held for sale | 66 | | | — | | | — | | | — | |
Total | Total | $ | 3,219 | | | $ | (62,970) | | | $ | 3,430 | | | $ | (65,680) | | Total | $ | 791 | | | $ | (58,998) | | | $ | 1,603 | | | $ | (63,337) | |
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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, 2021March 31, 2022 (in thousands of dollars):
| 2021 (remaining) | | $ | 245,634 | | |
2022 | | 399,345 | | |
2022 (remaining) | | 2022 (remaining) | | $ | 315,545 | |
2023 | 2023 | | 280,095 | | 2023 | | 283,526 | |
2024 | 2024 | | 189,149 | | 2024 | | 189,426 | |
2025 | 2025 | | 130,697 | | 2025 | | 132,497 | |
2026 | | 2026 | | 90,396 | |
Thereafter | Thereafter | | 176,403 | | Thereafter | | 93,490 | |
Total | Total | | $ | 1,421,323 | | Total | | $ | 1,104,880 | |
Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to customer service contracts that have fixed pricing and fixed volume terms and conditions, generally including contractsconditions. The revenue shown above includes $19.2 million relating to our Point Tupper Terminal Operations that was held for sale as of March 31, 2022.
Disaggregation of Revenues
The following table disaggregates our revenues:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| (Thousands of Dollars) |
Pipeline segment: | | | | | | | |
Crude oil pipelines | $ | 86,124 | | | $ | 74,588 | | | | | |
Refined products and ammonia pipelines | 102,559 | | | 94,640 | | | | | |
Total pipeline segment revenues from contracts with customers | 188,683 | | | 169,228 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Storage segment: | | | | | | | |
Throughput terminals | 26,441 | | | 24,794 | | | | | |
Storage terminals (excluding lessor revenues) | 50,719 | | | 73,416 | | | | | |
Total storage segment revenues from contracts with customers | 77,160 | | | 98,210 | | | | | |
Lessor revenues | 10,761 | | | 10,364 | | | | | |
Total storage segment revenues | 87,921 | | | 108,574 | | | | | |
| | | | | | | |
Fuels marketing segment: | | | | | | | |
Revenues from contracts with customers | 133,260 | | | 83,855 | | | | | |
| | | | | | | |
Consolidation and intersegment eliminations | (1) | | | (11) | | | | | |
| | | | | | | |
Total revenues | $ | 409,863 | | | $ | 361,646 | | | | | |
5. DEBT
Revolving Credit Agreement
On January 28, 2022, NuStar Logistics amended and restated its $1.0 billion unsecured revolving credit agreement (the Revolving Credit Agreement) to, among other things: (i) extend the maturity date from October 27, 2023 to April 27, 2025; (ii) increase the maximum amount of letters of credit capable of being issued from $400.0 million to $500.0 million; (iii) replace LIBOR benchmark provisions with payment obligationscustomary secured overnight financing rate, or SOFR, benchmark provisions; (iv) remove the 0.50x increase permitted in our consolidated debt coverage ratio for take-or-pay minimum volume commitments.certain rolling periods in which an acquisition for aggregate net consideration of at least $50.0 million occurs; and (v) add baskets and exceptions to certain negative covenants.
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, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (Thousands of Dollars) |
Pipeline segment: | | | | | | | |
Crude oil pipelines | $ | 82,034 | | | $ | 79,110 | | | $ | 156,622 | | | $ | 170,832 | |
Refined products and ammonia pipelines (excluding lessor revenues) | 110,872 | | | 86,173 | | | 205,512 | | | 189,307 | |
Total pipeline segment revenues from contracts with customers | 192,906 | | | 165,283 | | | 362,134 | | | 360,139 | |
Lessor revenues | 0 | | | 825 | | | 0 | | | 1,650 | |
Total pipeline segment revenues | 192,906 | | | 166,108 | | | 362,134 | | | 361,789 | |
| | | | | | | |
Storage segment: | | | | | | | |
Throughput terminals | 35,143 | | | 32,199 | | | 59,937 | | | 70,922 | |
Storage terminals (excluding lessor revenues) | 73,742 | | | 76,880 | | | 147,158 | | | 151,046 | |
Total storage segment revenues from contracts with customers | 108,885 | | | 109,079 | | | 207,095 | | | 221,968 | |
Lessor revenues | 10,363 | | | 10,328 | | | 20,727 | | | 20,656 | |
Total storage segment revenues | 119,248 | | | 119,407 | | | 227,822 | | | 242,624 | |
| | | | | | | |
Fuels marketing segment: | | | | | | | |
Revenues from contracts with customers | 114,939 | | | 54,025 | | | 198,794 | | | 127,927 | |
| | | | | | | |
Consolidation and intersegment eliminations | 0 | | | 0 | | | (11) | | | (9) | |
| | | | | | | |
Total revenues | $ | 427,093 | | | $ | 339,540 | | | $ | 788,739 | | | $ | 732,331 | |
5. DEBT
Revolving Credit Agreement
On February 16, 2021, NuStar Logistics amended its $1.0 billion revolving credit agreement due October 27, 2023 (the Revolving Credit Agreement) to, among other things, expand certain adjustments related to our maximum consolidated debt coverage ratio and minimum consolidated interest coverage ratio.
As of June 30, 2021,March 31, 2022, we had $185.0$106.5 million of borrowings outstanding and $809.8$888.7 million available for borrowing under the Revolving Credit Agreement. Letters of credit issued under the Revolving Credit Agreement totaled $5.2$4.8 million as of June 30, 2021March 31, 2022 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 LIBOR-basedSOFR-based rate. The interest rate on the Revolving Credit Agreement isand 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, 2021,March 31, 2022, our weighted-average interest rate related to borrowings under the Revolving Credit Agreement was 2.6%3.0%.
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 under the Revolving Credit Agreement to an amount that is less than the total amount available for borrowing. For thea rolling period of four quarters, ended June 30, 2021, the consolidated debt coverage ratio (as defined in the Revolving Credit Agreement) could notcannot 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, 2021,March 31, 2022, we believe that we are in compliance with the covenants in the Revolving Credit Agreement.
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
NuStar Logistics Senior Notes
Senior Note Repayment. We repaid our $300.0 million of 6.75% senior notes due February 1, 2021 with borrowings under our Revolving Credit Agreement.
Current Maturities. We expect to fund senior note maturities in February 2022 by utilizing borrowings under our Revolving Credit Agreement. Therefore, these senior note maturities are classified as long-term debt.
Term Loan Credit Agreement
On April 19, 2020, NuStar Energy and NuStar Logistics entered into an unsecured term loan credit agreement with certain lenders and Oaktree Fund Administration, LLC, as administrative agent for the lenders. The Term Loan provided for an aggregate commitment of up to $750.0 million pursuant to a three-year unsecured term loan credit facility. NuStar Logistics drew $500.0 million on April 21, 2020, which we repaid on September 16, 2020. On February 16, 2021, we terminated the Term Loan.
Receivables Financing Agreement
NuStar Energy and NuStar Finance LLC (NuStar Finance), 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, with a scheduled termination date of January 31, 2025, (the Receivables Financing Agreement) and agreements with certain of NuStar Energy’s wholly owned subsidiaries (collectively with the Receivables Financing Agreement, the Securitization Program). NuStar Energy provides a performance guarantee in connection with the Securitization Program. NuStar Finance’s sole activity consists of purchasing receivables from NuStar Energy’s subsidiaries that participate inUnder the Securitization Program, certain of NuStar Energy’s wholly owned subsidiaries sell their accounts receivable to NuStar Finance on an ongoing basis, and providing these receivablesNuStar Finance provides the newly acquired accounts receivable as collateral for NuStar Finance’sits revolving borrowings under the Securitization Program.Receivables Financing Agreement. NuStar Finance is a separate legal entity and the assets of NuStar Finance, including these accounts receivable, are not available to satisfy the claims of creditors of NuStar Energy, its subsidiaries selling receivables under the Securitization Program or their affiliates. The amount available for borrowing is based on the availability of eligible receivables and other customary factors and conditions. On January 28, 2022, the Receivables Financing Agreement was amended to, among other things: (i) extend the scheduled termination date from September 20, 2023 to January 31, 2025; (ii) reduce the floor rate in the calculation of our borrowing rates; and (iii) replace provisions related to the LIBOR rate of interest with references to SOFR rates of interest.
Borrowings by NuStar Finance under the Receivables Financing Agreement bear interest, at the applicable bankNuStar Finance’s option, at a base rate or a SOFR rate, each as defined in the Receivables Financing Agreement. As of March 31, 2022, the amount of borrowings outstanding under the Receivables Financing Agreement. The weighted averageAgreement totaled $72.0 million, the weighted-average interest rate related to outstanding borrowings under the Securitization Program as of June 30, 2021 was 2.3%. As of June 30, 2021, $125.41.9% and $132.2 million of our accounts receivable was included in the Securitization Program. The amount of borrowings outstanding under the Receivables Financing Agreement totaled $74.2 million as of June 30, 2021.
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, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (Thousands of Dollars) | | (Thousands of Dollars) |
Fair value | Fair value | $ | 3,793,490 | | | $ | 3,799,378 | | Fair value | $ | 3,222,517 | | | $ | 3,459,153 | |
Carrying amount | Carrying amount | $ | 3,443,530 | | | $ | 3,539,258 | | Carrying amount | $ | 3,115,915 | | | $ | 3,130,625 | |
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 net fair value adjustments, unamortized discounts and unamortized debt issuance costs.
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
6. COMMITMENTS, CONTINGENCIES AND CONTINGENCIESUNCERTAINTIES
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 $0.1$0.9 million and $2.6$0.1 million for contingent losses as of June 30, 2021March 31, 2022 and December 31, 2020,2021, 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.
NUSTAR ENERGY L.P. AND SUBSIDIARIESCOVID-19. Ongoing uncertainty surrounding the COVID-19 pandemic has caused and may continue to cause volatility and could have a significant impact on management’s estimates and assumptions in 2022 and beyond.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
7. DERIVATIVES
We utilize various derivative instruments to manage our exposure to interest rate risk and commodity price risk. Our risk management policies and procedures are designed to monitor interest rates, futures and swap positions and over-the-counter positions, as well as physical commodity volumes, grades, locations and delivery schedules, to help ensure that our hedging activities address our market risks. Derivative financial instruments associated with commodity price risk with respect to our petroleum product inventories and related firm commitments to purchase and/or sell such inventories were not material for any periods presented.
We were a party to certain interest rate swap agreements to manage our exposure to changes in interest rates, which consisted ofincluded forward-starting interest rate swap agreements related to a forecasted debt issuance in 2020. We entered into these swaps in order to hedge the risk of fluctuations in the required interest payments attributable to changes in the benchmark interest rate during the period from the effective date of the swap to the issuance of the forecasted debt. Under the terms of the swaps, we paid a weighted-average fixed rate and received a rate based on the three-month USD LIBOR. These swapsthat qualified as cash flow hedges and we designated them as such.prior to their termination. We recordedreclassify the mark-to-market adjustments as a component ofrelated to these cash flows hedges that were recorded in “Accumulated other comprehensive loss” (AOCI), and the amount in AOCI is recognized in into “Interest expense, net” as the underlying forecasted interest payments occur or if the interest payments are probable not to occur. In June 2020, we terminated forward-starting interest rate swaps with an aggregate notional amount of $250.0 million and paid $49.2 million, which is amortized intoWe reclassified losses on cash flow hedges to “Interest expense, net” asof $0.5 million and $1.3 million for the related forecasted interest payments occur.
Our forward-starting interest rate swaps had the following impact on earnings:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (Thousands of Dollars) |
Loss recognized in other comprehensive loss on derivative | $ | 0 | | | $ | (461) | | | $ | 0 | | | $ | (30,291) | |
Loss reclassified from AOCI into interest expense, net | $ | (1,335) | | | $ | (878) | | | $ | (2,683) | | | $ | (1,525) | |
three months ended March 31, 2022 and 2021, respectively. As of June 30, 2021,March 31, 2022, we expect to reclassify a loss of $4.0$2.1 million to “Interest expense, net” within the next twelve months associated with unwound forward-starting interest rate swaps.
8. SERIES D CUMULATIVE CONVERTIBLE PREFERRED UNITS
Distributions on the Series D Cumulative Convertible Preferred Units (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, to holders of record on the first business day of each payment month. The number of Series D Preferred Units issued and outstanding as of March 31, 2022 and December 31, 2021 totaled 23,246,650. The distribution rates on the Series D Preferred Units are as follows: (i) 9.75%, or $57.6 million, per annum ($0.619 per unit per distribution period) for the first two years (beginning with the September 17, 2018 distribution); (ii) 10.75%, or $63.4 million, per annum ($0.682 per unit per distribution period) for years three through five; and (iii) the greater of 13.75%, or $81.1 million, 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.
In July 2021,April 2022, our board of directors declared distributions of $0.682 per Series D Preferred Unit to be paid on SeptemberJune 15, 2021.2022.
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
9. 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 monthmonth.
Distribution information for our Series B and C Preferred Units is as follows (until thefollows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Units | | | | | | | | | | Fixed Distribution Rate Per Unit Per Quarter | | Fixed Distribution Per Quarter | | Date at Which Distribution Rate Becomes Floating | | Floating Annual Rate (as a Percentage of the $25.00 Liquidation Preference per Unit) |
| | | | | | | | | | | | (Thousands of Dollars) | | | | |
| | | | | | | | | | | | | | | | |
Series B Preferred Units | | | | | | | | | | $ | 0.47657 | | | $ | 7,339 | | | June 15, 2022 | | Three-month LIBOR plus 5.643% |
Series C Preferred Units | | | | | | | | | | $ | 0.56250 | | | $ | 3,881 | | | December 15, 2022 | | Three-month LIBOR plus 6.88% |
The distribution rate changeson our Series A Preferred Units converted from a fixed rate to a floating rate):rate of the three-month LIBOR plus 6.766% on December 15, 2021. Distribution information for our Series A Preferred Units is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Units | | | | | | | | | | Fixed Distribution Rate Per Unit Per Quarter | | Fixed Distribution Per Quarter | | Date at Which Distribution Rate Becomes Floating |
| | | | | | | | | | | | (Thousands of Dollars) | | |
Series A Preferred Units | | | | | | | | | | $ | 0.53125 | | | $ | 4,813 | | | December 15, 2021 |
Series B Preferred Units | | | | | | | | | | $ | 0.47657 | | | $ | 7,339 | | | June 15, 2022 |
Series C Preferred Units | | | | | | | | | | $ | 0.56250 | | | $ | 3,881 | | | December 15, 2022 |
| | | | | | | | | | | | | | |
Period | | Distribution Rate per Unit | | Total Distribution |
| | | | (Thousands of Dollars) |
| | | | |
| | | | |
| | | | |
March 15, 2022 - June 14, 2022 | | $ | 0.47817 | | | $ | 4,332 | |
December 15, 2021 - March 14, 2022 | | $ | 0.43606 | | | $ | 3,951 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
In July 2021,April 2022, our board of directors declared distributions with respect to the Series A, B and C Preferred Units to be paid on SeptemberJune 15, 2021.2022.
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 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 April 2022, our board of directors declared distributions with respect to our common units for the quarter ended March 31, 2022.
The following table summarizes information about quarterly cash distributions declared forto our common limited partners:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Quarter Ended | | Cash Distributions Per Unit | | Total Cash Distributions | | Record Date | | Payment Date |
| | | | (Thousands of Dollars) | | | | |
| | | | | | | | |
June 30, 2021 | | $ | 0.40 | | | $ | 43,814 | | | August 6, 2021 | | August 12, 2021 |
March 31, 2021 | | $ | 0.40 | | | $ | 43,834 | | | May 10, 2021 | | May 14, 2021 |
December 31, 2020 | | $ | 0.40 | | | $ | 43,787 | | | February 8, 2021 | | February 12, 2021 |
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) | | | | |
| | | | | | | | |
| | | | | | | | |
March 31, 2022 | | $ | 0.40 | | | $ | 44,165 | | | May 9, 2022 | | May 13, 2022 |
December 31, 2021 | | $ | 0.40 | | | $ | 44,008 | | | February 8, 2022 | | February 14, 2022 |
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Accumulated Other Comprehensive Income (Loss)
The balance of and changes in the components included in AOCI were as follows:
| | | Three Months Ended June 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | Foreign Currency Translation | | Cash Flow Hedges | | Pension and Other Postretirement Benefits | | Total | | Foreign Currency Translation | | Cash Flow Hedges | | Pension and Other Postretirement Benefits | | Total | | 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) | | (Thousands of Dollars) |
Balance as of March 31 | $ | (41,405) | | | $ | (40,802) | | | $ | (12,329) | | | $ | (94,536) | | | $ | (50,600) | | | $ | (45,307) | | | $ | (8,302) | | | $ | (104,209) | | |
Other comprehensive income (loss): | | |
Other comprehensive income (loss) before reclassification adjustments | 1,094 | | | 0 | | | 0 | | | 1,094 | | | 2,638 | | | (461) | | | 0 | | | 2,177 | | |
Balance as of January 1 | | Balance as of January 1 | $ | (41,761) | | | $ | (36,486) | | | $ | 4,269 | | | $ | (73,978) | | | $ | (42,362) | | | $ | (42,150) | | | $ | (12,144) | | | $ | (96,656) | |
Other comprehensive income before reclassification adjustments | | Other comprehensive income before reclassification adjustments | 829 | | | — | | | — | | | 829 | | | 957 | | | — | | | — | | | 957 | |
Net gain on pension costs reclassified into other income, net | Net gain on pension costs reclassified into other income, net | 0 | | | 0 | | | (187) | | | (187) | | | 0 | | | 0 | | | (305) | | | (305) | | Net gain on pension costs reclassified into other income, net | — | | | — | | | (420) | | | (420) | | | — | | | — | | | (187) | | | (187) | |
Net loss on cash flow hedges reclassified into interest expense, net | Net loss on cash flow hedges reclassified into interest expense, net | 0 | | | 1,335 | | | 0 | | | 1,335 | | | 0 | | | 878 | | | 0 | | | 878 | | Net loss on cash flow hedges reclassified into interest expense, net | — | | | 529 | | | — | | | 529 | | | — | | | 1,348 | | | — | | | 1,348 | |
Other | Other | 0 | | | 0 | | | 2 | | | 2 | | | 0 | | | 0 | | | 4 | | | 4 | | Other | — | | | — | | | (6) | | | (6) | | | — | | | — | | | 2 | | | 2 | |
Other comprehensive income (loss) | Other comprehensive income (loss) | 1,094 | | | 1,335 | | | (185) | | | 2,244 | | | 2,638 | | | 417 | | | (301) | | | 2,754 | | Other comprehensive income (loss) | 829 | | | 529 | | | (426) | | | 932 | | | 957 | | | 1,348 | | | (185) | | | 2,120 | |
Balance as of June 30 | $ | (40,311) | | | $ | (39,467) | | | $ | (12,514) | | | $ | (92,292) | | | $ | (47,962) | | | $ | (44,890) | | | $ | (8,603) | | | $ | (101,455) | | |
Balance as of March 31 | | Balance as of March 31 | $ | (40,932) | | | $ | (35,957) | | | $ | 3,843 | | | $ | (73,046) | | | $ | (41,405) | | | $ | (40,802) | | | $ | (12,329) | | | $ | (94,536) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2021 | | 2020 |
| 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 | $ | (42,362) | | | $ | (42,150) | | | $ | (12,144) | | | $ | (96,656) | | | $ | (43,772) | | | $ | (16,124) | | | $ | (8,000) | | | $ | (67,896) | |
Other comprehensive income (loss): | | | | | | | | | | | | | | | |
Other comprehensive income (loss) before reclassification adjustments | 2,051 | | | 0 | | | 0 | | | 2,051 | | | (4,190) | | | (30,291) | | | 0 | | | (34,481) | |
Net gain on pension costs reclassified into other income, net | 0 | | | 0 | | | (374) | | | (374) | | | 0 | | | 0 | | | (610) | | | (610) | |
Net loss on cash flow hedges reclassified into interest expense, net | 0 | | | 2,683 | | | 0 | | | 2,683 | | | 0 | | | 1,525 | | | 0 | | | 1,525 | |
Other | 0 | | | 0 | | | 4 | | | 4 | | | 0 | | | 0 | | | 7 | | | 7 | |
Other comprehensive income (loss) | 2,051 | | | 2,683 | | | (370) | | | 4,364 | | | (4,190) | | | (28,766) | | | (603) | | | (33,559) | |
Balance as of June 30 | $ | (40,311) | | | $ | (39,467) | | | $ | (12,514) | | | $ | (92,292) | | | $ | (47,962) | | | $ | (44,890) | | | $ | (8,603) | | | $ | (101,455) | |
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
10. NET INCOME (LOSS) PER COMMON UNIT
Basic 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. 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 may include the Series D Preferred Units and contingently issuable performance unit awards and the Series D Preferred Units.awards.
The Series D Preferred Units are convertible into common units atcontain certain unitholder conversion and redemption features, and we use the option of the holder at any time on or after June 29, 2020. As such, we calculatedif-converted method to calculate the dilutive effect of the conversion or redemption feature that is most advantageous to our Series D Preferred Units using the if-converted method.preferred unitholders. The effect of the assumed conversion or redemption of the Series D Preferred Units outstanding aswas antidilutive for each of the end of each period presented was antidilutive;three months ended March 31, 2022 and 2021; therefore, we did not include such conversion in the computation of diluted net (loss) income (loss) per common unit.
Contingently issuable performance units are included as dilutive potential common units if it is probable that that performance measures will be achieved, unless to do so would be antidilutive. There were 0 dilutive potential common units outstanding related to the performance units for all periods presented.
The following table details the calculation of net income (loss) per common unit:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| (Thousands of Dollars, Except Unit and Per Unit Data) |
Net income (loss) | $ | 63,383 | | | $ | 29,766 | | | $ | 105,640 | | | $ | (117,875) | |
Distributions to preferred limited partners | (31,887) | | | (30,684) | | | (63,774) | | | (61,107) | |
Distributions to common limited partners | (43,814) | | | (43,678) | | | (87,648) | | | (87,408) | |
Distribution equivalent rights to restricted units | (586) | | | (502) | | | (1,184) | | | (1,008) | |
Distributions in excess of income (loss) | $ | (12,904) | | | $ | (45,098) | | | $ | (46,966) | | | $ | (267,398) | |
| | | | | | | |
Distributions to common limited partners | $ | 43,814 | | | $ | 43,678 | | | $ | 87,648 | | | $ | 87,408 | |
Allocation of distributions in excess of income (loss) | (12,904) | | | (45,098) | | | (46,966) | | | (267,398) | |
Series D Preferred Unit accretion | (4,155) | | | (5,064) | | | (8,176) | | | (9,966) | |
Net income (loss) attributable to common units | $ | 26,755 | | | $ | (6,484) | | | $ | 32,506 | | | $ | (189,956) | |
| | | | | | | |
Basic and diluted weighted-average common units outstanding | 109,529,658 | | | 109,194,722 | | | 109,518,004 | | | 109,046,061 | |
| | | | | | | |
Basic and diluted net income (loss) per common unit | $ | 0.25 | | | $ | (0.06) | | | $ | 0.30 | | | $ | (1.74) | |
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 March 31, | | |
| 2022 | | 2021 | | | | |
| (Thousands of Dollars, Except Unit and Per Unit Data) |
Net income | $ | 12,312 | | | $ | 42,257 | | | | | |
Distributions to preferred limited partners | (31,092) | | | (31,887) | | | | | |
Distributions to common limited partners | (44,165) | | | (43,834) | | | | | |
Distribution equivalent rights to restricted units | (633) | | | (598) | | | | | |
Distributions in excess of income | $ | (63,578) | | | $ | (34,062) | | | | | |
| | | | | | | |
Distributions to common limited partners | $ | 44,165 | | | $ | 43,834 | | | | | |
Allocation of distributions in excess of income | (63,578) | | | (34,062) | | | | | |
Series D Preferred Unit accretion | (4,581) | | | (4,021) | | | | | |
Net (loss) income attributable to common units | $ | (23,994) | | | $ | 5,751 | | | | | |
| | | | | | | |
| | | | | | | |
Basic and diluted weighted-average common units outstanding | 110,177,045 | | | 109,506,222 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Basic and diluted net (loss) income per common unit | $ | (0.22) | | | $ | 0.05 | | | | | |
11. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in current assets and current liabilities were as follows:
| | | Six Months Ended June 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (Thousands of Dollars) | | (Thousands of Dollars) |
Decrease (increase) in current assets: | Decrease (increase) in current assets: | | Decrease (increase) in current assets: | |
Accounts receivable | Accounts receivable | $ | (9,942) | | | $ | 25,386 | | Accounts receivable | $ | (13,704) | | | $ | 12,232 | |
| Inventories | Inventories | (1,744) | | | 4,176 | | Inventories | (3,062) | | | (6,471) | |
| Other current assets | Other current assets | (4,752) | | | (8,781) | | Other current assets | 10,289 | | | 9,689 | |
Increase (decrease) in current liabilities: | Increase (decrease) in current liabilities: | | Increase (decrease) in current liabilities: | |
Accounts payable | Accounts payable | 3,588 | | | (15,197) | | Accounts payable | 4,284 | | | 5,067 | |
| Accrued interest payable | Accrued interest payable | (11,686) | | | (177) | | Accrued interest payable | 37,968 | | | 27,149 | |
Accrued liabilities | Accrued liabilities | (17,222) | | | (11,625) | | Accrued liabilities | (14,178) | | | (19,082) | |
Taxes other than income tax | Taxes other than income tax | (1,575) | | | 44 | | Taxes other than income tax | (4,085) | | | (4,187) | |
| Changes in current assets and current liabilities | Changes in current assets and current liabilities | $ | (43,333) | | | $ | (6,174) | | Changes in current assets and current liabilities | $ | 17,512 | | | $ | 24,397 | |
The above changes in current assets and current liabilities 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 foreign currency translation;
•paymentsthe reclassification of certain assets and liabilities to “Assets held for sale” and “Liabilities held for sale” on the termination of interest rate swaps included in cash flows from financing activities;consolidated balance sheet (please refer to Note 3 for additional discussion); and
•the effect of accrued compensation expense paid with fully vested common unit awards.
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Cash flows related to interest and income taxes were as follows:
| | | Six Months Ended June 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (Thousands of Dollars) | | (Thousands of Dollars) |
Cash paid for interest, net of amount capitalized | Cash paid for interest, net of amount capitalized | $ | 114,339 | | | $ | 103,034 | | Cash paid for interest, net of amount capitalized | $ | 9,320 | | | $ | 24,737 | |
Cash paid for income taxes, net of tax refunds received | Cash paid for income taxes, net of tax refunds received | $ | 5,882 | | | $ | 4,661 | | Cash paid for income taxes, net of tax refunds received | $ | 185 | | | $ | 554 | |
As of June 30, 2021March 31, 2022 and December 31, 2020,2021, 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 wasis included in the consolidated balance sheets as follows:
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (Thousands of Dollars) | | (Thousands of Dollars) |
Cash and cash equivalents | Cash and cash equivalents | $ | 23,500 | | | $ | 153,625 | | Cash and cash equivalents | $ | 8,398 | | | $ | 5,637 | |
Assets held for sale | | Assets held for sale | 2,429 | | | — | |
Other long-term assets, net | Other long-term assets, net | 8,802 | | | 8,801 | | Other long-term assets, net | 8,802 | | | 8,802 | |
Cash, cash equivalents and restricted cash | Cash, cash equivalents and restricted cash | $ | 32,302 | | | $ | 162,426 | | Cash, cash equivalents and restricted cash | $ | 19,629 | | | $ | 14,439 | |
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
12. 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, (loss), 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, | | Three Months Ended March 31, | |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | |
| | (Thousands of Dollars) | | (Thousands of Dollars) |
Revenues: | Revenues: | | Revenues: | | |
| Pipeline | Pipeline | $ | 192,906 | | | $ | 166,108 | | | $ | 362,134 | | | $ | 361,789 | | Pipeline | $ | 188,683 | | | $ | 169,228 | | |
| Storage | Storage | 119,248 | | | 119,407 | | | 227,822 | | | 242,624 | | Storage | 87,921 | | | 108,574 | | |
| Fuels marketing | Fuels marketing | 114,939 | | | 54,025 | | | 198,794 | | | 127,927 | | Fuels marketing | 133,260 | | | 83,855 | | |
| Consolidation and intersegment eliminations | Consolidation and intersegment eliminations | 0 | | | 0 | | | (11) | | | (9) | | Consolidation and intersegment eliminations | (1) | | | (11) | | |
Total revenues | Total revenues | $ | 427,093 | | | $ | 339,540 | | | $ | 788,739 | | | $ | 732,331 | | Total revenues | $ | 409,863 | | | $ | 361,646 | | |
| Operating income (loss): | Operating income (loss): | | Operating income (loss): | | |
Pipeline | Pipeline | $ | 96,512 | | | $ | 71,981 | | | $ | 175,891 | | | $ | (50,943) | | Pipeline | $ | 95,752 | | | $ | 79,379 | | |
Storage | Storage | 46,185 | | | 43,242 | | | 88,903 | | | 91,821 | | Storage | (14,975) | | | 42,718 | | |
Fuels marketing | Fuels marketing | 2,298 | | | 3,349 | | | 5,029 | | | 9,792 | | Fuels marketing | 6,544 | | | 2,731 | | |
| Total segment operating income | Total segment operating income | 144,995 | | | 118,572 | | | 269,823 | | | 50,670 | | Total segment operating income | 87,321 | | | 124,828 | | |
General and administrative expenses | General and administrative expenses | 27,477 | | | 23,700 | | | 51,969 | | | 46,671 | | General and administrative expenses | 27,071 | | | 24,492 | | |
Other depreciation and amortization expense | Other depreciation and amortization expense | 1,913 | | | 2,171 | | | 3,960 | | | 4,357 | | Other depreciation and amortization expense | 1,824 | | | 2,047 | | |
Total operating income (loss) | $ | 115,605 | | | $ | 92,701 | | | $ | 213,894 | | | $ | (358) | | |
Total operating income | | Total operating income | $ | 58,426 | | | $ | 98,289 | | |
NUSTAR ENERGY L.P. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
Total assets by reportable segment were as follows:
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (Thousands of Dollars) | | (Thousands of Dollars) |
Pipeline | Pipeline | $ | 3,540,298 | | | $ | 3,609,508 | | Pipeline | $ | 3,405,703 | | | $ | 3,441,272 | |
Storage | Storage | 1,918,515 | | | 1,897,167 | | Storage | 1,518,082 | | | 1,537,037 | |
Fuels marketing | Fuels marketing | 43,537 | | | 31,967 | | Fuels marketing | 66,006 | | | 41,562 | |
Total segment assets | Total segment assets | 5,502,350 | | | 5,538,642 | | Total segment assets | 4,989,791 | | | 5,019,871 | |
| Other partnership assets | Other partnership assets | 143,630 | | | 278,376 | | Other partnership assets | 140,134 | | | 136,461 | |
Total consolidated assets | Total consolidated assets | $ | 5,645,980 | | | $ | 5,817,018 | | Total consolidated assets | $ | 5,129,925 | | | $ | 5,156,332 | |
13. SUBSEQUENT EVENT
On August 1, 2021, we entered into an agreement to sell our storage facilities at eight locations, including all our North East Terminals and our one terminal in Florida to Sunoco LP for $250.0 million, subject to adjustment. During July 2021, sale negotiations with the potential buyer progressed significantly and management with appropriate authority agreed to the sale. The terminals have an aggregate storage capacity of 14.8 million barrels and are included in the storage segment. We expect to complete the sale by the beginning of the fourth quarter and will utilize the sales proceeds to improve our debt metrics. The book value at closing, including an allocation of goodwill for the terminal reporting unit, is expected to exceed the agreed purchase price and result in an estimated non-cash loss in the range of $130.0 million to $140.0 million in the third quarter of 2021.
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
In this Form 10-Q, we make certain forward-looking statements, such as statements regarding our plans, strategies, objectives, expectations, estimates, predictions, projections, assumptions, intentions, resources and the future impact of the coronavirus, or COVID-19, the responses thereto, the Russia-Ukraine conflict, economic activity and the actions by oil producing nations on our business, as well as the timing of, expected use of proceeds from and the other anticipated benefits from the announced sale of terminals.business. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. These forward-looking statements can generally be identified by the words “anticipates,” “believes,” “expects,” “plans,” “intends,” “estimates,” “forecasts,” “budgets,” “projects,” “will,” “could,” “should,” “may” and similar expressions. These statements reflect our current views with regard to future events and are subject to various risks, uncertainties and assumptions, which may cause actual results to differ materially. Please read Item 1A. “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2020, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 and this Quarterly Report on Form 10-Q, as well as additional information provided from time to time in our subsequent filings with the Securities and Exchange Commission, for a discussion of certain of those risks, uncertainties and assumptions.
If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those described in any forward-looking statement. Other unknown or unpredictable factors could also have material adverse effects on our future results. Readers are cautioned not to place undue reliance on this forward-looking information, which is as of the date of this Form 10-Q. We do not intend to update these statements unless we are required by the securities laws to do so, and we undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is presented in five sections:
•Overview, including Trends and Outlook
•Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Policies
•New Accounting Pronouncements
OVERVIEW
NuStar Energy L.P. (NYSE: NS) is primarily engaged in the transportation, terminalling and storage of petroleum products and renewable fuels and the transportation of anhydrous ammonia. 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.
Our operations consist of three reportable business segments: pipeline, storage and fuels marketing. As of June 30, 2021,March 31, 2022, our assets included 9,9209,940 miles of pipeline and 7364 terminal and storage facilities, which provideprovided approximately 7257 million barrels of storage capacity. As described below, on April 29, 2022 we sold our Point Tupper terminal facility with a storage capacity of 7.8 million barrels. We conduct our operations through our subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP). We generate revenue primarily from:
•tariffs for transportation through our pipelines;
•fees for the use of our terminal and storage facilities and related ancillary services; and
•sales of petroleum products.
The following factors affect the results of our operations:
•economic factors and price volatility;
•industry factors, such as changes in the prices of petroleum products that affect demand or production, or regulatory changes that could increase costs or impose restrictions on operations;
•factors that affect our customers and the markets they serve, such as utilization rates and maintenance turnaround schedules of our refining company customers and drilling activity by our crude oil production customers;
•company-specific factors, such as facility integrity issues, maintenance requirements and outages that impact the throughput rates of our assets; and
•seasonal factors that affect the demand for products transported by and/or stored in our assets and the demand for products we sell.
Recent Developments
AgreementSale of Point Tupper Terminal. On April 29, 2022, we sold the equity interests in our wholly owned subsidiaries that own our Point Tupper terminal facility (the Point Tupper Terminal Operations) to Sell Terminals. On August 1, 2021, we entered into an agreement to sell our storage facilities at eight locations, including all our North East Terminals and our one terminal in Florida to Sunoco LPEverWind Fuels for $250.0$60.0 million, plus working capital, which is subject to adjustment. The terminals have an aggregateterminal facility has a storage capacity of 14.87.8 million barrels and arehas been included in the storage segment. We recognized a non-cash pre-tax impairment loss of $46.1 million in the first quarter of 2022 and expect to complete the sale by the beginning of the fourth quarter and will utilize the sales proceeds to reduce debt and thereby improve our debt metrics. The book value at closing, including an allocation of goodwill for the terminal reporting unit, is expected to exceed the agreed purchase price and result in an estimated non-cash loss in the range of $130.0 million to $140.0 million in the third quarter of 2021.
COVID-19. The coronavirus, or COVID-19, had a severe negative impact on global economic activity during 2020, significantly reducing demand for petroleum products and increasing the volatility of crude oil prices, beginning in March 2020. While a number of countries, including the United States, have made significant progress in 2021 in deploying COVID-19 vaccines, which has improved economic conditions and outlook in those nations, many more continue to struggle to obtain and/or disseminate vaccinations to their populace, which is frustrating widespread global economic recovery. Even in the United States, if a sufficient proportion of people are not vaccinated to reach herd immunity, or as variants emerge, we may face additional resurgence in COVID-19 case count in some regions, as we have recently seen, which could slow the pace of domestic economic improvement and undermine rebounding demand in the markets our assets serve. We continue to closely monitor each of our locations across North America to ensure the safety of our employees as well as the operational functionality of each location.
Senior Notes. On February 1, 2021, we repaid our $300.0 million of 6.75% senior notes at maturity with borrowings under our revolving credit agreement.
Term Loan Credit Agreement. On February 16, 2021, we terminated an unsecured term loan credit agreement with certain lenders and Oaktree Fund Administration, LLC, as administrative agent for the lenders (the Term Loan). Please refer to Note 5 3of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for further discussion.additional information.
Debt Amendments. On January 28, 2022, we amended and restated our $1.0 billion unsecured revolving credit agreement to extend the maturity to April 27, 2025, replace the LIBOR-based interest rate and modify other terms. Also on January 28, 2022, we amended our $100.0 million receivables financing agreement to extend the scheduled termination date to January 31, 2025, replace the LIBOR-based interest rate and modify other terms.
Other Events
Eastern U.S. Terminals Disposition. On October 8, 2021, we completed the sale of nine U.S. terminal and storage facilities, including all our North East Terminals and one terminal in Florida (the Eastern U.S. Terminal Operations) to Sunoco LP for $250.0 million in cash (the Eastern U.S. Terminals Disposition). The terminals had an aggregate storage capacity of 14.8 million barrels and were included in the storage segment. We utilized the proceeds from the sale to reduce debt and improve our debt metrics.
Trends and Outlook
As America beginsWhile 2022 marks the third year of the COVID-19 pandemic in the U.S., we continue to recover from the impact of COVID-19 and returns to normal activity and growth, we are seeingsee signs of stabilization and improvement, across the U.S. and in NuStar’s footprint. U.S. refined product demand outlook has improvedseen some sustained improvement, as COVID-19 vaccinations have continued to allow more and more Americans to return topeople go about normal day-to-day activities and to begin traveling. However, the “Delta” variant has increasedvariants may emerge that could significantly increase COVID-19 case counts, significantly in many parts of the United States, which may further impact the overall demand recovery in 2021.2022.
Since Russia’s military invasion of Ukraine in late February 2022, prices for a number of the commodities produced in those countries, including oil and gas, rose sharply and have been volatile, on market concerns about worldwide supply constraints. The long-term impact of the ongoing Russia-Ukraine conflict, along with the lingering impact of COVID-19, on the global and U.S. economy remains uncertain; however, at this time, we do not expect a significant impact to our operations or financial position.
Although U.S. oil production has been slow to respond to the recent increase in crude oil prices due to a variety of factors, including supply chain challenges, we expect sustained healthy U.S. shale production growth in 2022 from improving global demand as well as supply constraints from the Russia-Ukraine conflict. We expect our Permian system volumes to see healthy growth in 2022. Refined product demand on NuStar’s pipeline systems averaged 100% ofrebounded in 2021 to pre-pandemic demand for the first half of the year after reaching 105% for the second quarter. We continue tolevels or higher, and we expect our refined products pipeline systems to perform at or above 100% of our pre-pandemic levels through 2022; however, if prices for motor fuels continue to rise and remain at those levels for a sustained period, consumer demand could fall, which would reduce demand for the remainder oftransportation and storage services we provide. So far this year. Strengtheningyear, the sustained recovery in refined product demand has increased U.S. refiners’ utilization and demand for crude oil, and rebounding crude demand, along with tempered global supply,which has contributed to higherincreased throughputs on certain of our crude prices and improved expectations for U.S. shale production, particularly in the Permian Basin. We believe the Permian Basin, and our system in particular, has geological advantages over other shale plays, including lower production costs and higher product quality, that have benefited and willoil pipelines, which we expect to continue to benefit our assets in 2021 as crude demand, price and production continue to recover. Sustained healthy U.S. shale production growth, combined with improving global demand, should drive U.S. export growth over time, which should be positive for crude volumes on our Corpus Christi Crude System, as well as for our St. James terminal.through 2022. In addition, we continue to expect to benefit from the growth of our renewable fuels distribution system on the West Coast. WeCoast, where we expect to provide an increasing share of California’s renewable fuels as we complete our planned tank conversion projects.
The lingering impact of the COVID-19 pandemic continues to ripple through the U.S. economy, notably in the form of rising inflation and supply chain issues, which affected certain industries and geographic areas to varying degrees during 2021; the Russia-Ukraine conflict seems to have only amplified inflation and supply chain constraints so far in 2022. The U.S. Federal Reserve has raised interest rates and is expected to implement several more increases in 2022, which will increase the cost of our variable-rate debt. In addition, the distribution rates of our Series A, B and C Preferred Units have converted, or will convert in 2022, from fixed rates to floating rates that increase or decrease with prevailing interest rates. On the other hand, our ability to pass along rate increases reflecting changes in producer and/or consumer price indices to our customers, under our tariffs and contracts, should counterbalance the impact of inflation on our costs. We plan to continue to manage our operations with fiscal discipline in this turbulent environment. Upon closing of the announced sale of terminals,and to evaluate our capital expenditures as we remain committed to improving our debt metrics and strengthening our balance sheet. We expect to use the proceeds to further lower our leverage. For the full-year 2021, we expect reliability and strategic capital expenditures to be comparable to 2020. We expectcontinue to fund all of our expenses, distribution requirements and capital expenditures for the full-year 20212022 using internally generated cash flows.
Our outlook for the partnership, both overall and for any of our segments, may change, as we base our expectations on our continuing evaluation of several factors, many of which are outside our control. These factors include, but are not limited to, uncertainty surrounding the COVID-19 pandemic including its duration and lingering impacts to the economy;Russia-Ukraine conflict; uncertainty surrounding future production decisions by the Organization of Petroleum Exporting Countries and other oil-producing nations (OPEC+); the state of the economy and the capital markets; changes to our customers’ refinery maintenance schedules and unplanned refinery downtime; crude oil prices; the supply of and demand for petroleum products, renewable fuels and anhydrous ammonia; demand for our transportation and storage services; the availability and costs of personnel, equipment, supplies and services essential to our operations; the ability to obtain timely permitting approvals; and changes in laws and regulations affecting our operations. Please read Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Reports on Form 10-Q for additional discussion on how these factors could affect our operations.
RESULTS OF OPERATIONS
Consolidated Results of Operations
Three Months Ended June 30, 2021March 31, 2022 Compared to Three Months Ended June 30, 2020March 31, 2021 | | | Three Months Ended June 30, | | Change | | Three Months Ended March 31, | | Change |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| | (Unaudited, Thousands of Dollars, Except Per Unit Data) | | (Unaudited, Thousands of Dollars, Except Per Unit Data) |
Statement of Income Data: | Statement of Income Data: | | Statement of Income Data: | |
Revenues: | Revenues: | | Revenues: | |
Service revenues | Service revenues | $ | 300,788 | | | $ | 284,151 | | | $ | 16,637 | | Service revenues | $ | 265,305 | | | $ | 271,883 | | | $ | (6,578) | |
Product sales | Product sales | 126,305 | | | 55,389 | | | 70,916 | | Product sales | 144,558 | | | 89,763 | | | 54,795 | |
Total revenues | Total revenues | 427,093 | | | 339,540 | | | 87,553 | | Total revenues | 409,863 | | | 361,646 | | | 48,217 | |
| Costs and expenses: | Costs and expenses: | | Costs and expenses: | |
Costs associated with service revenues | Costs associated with service revenues | 169,457 | | | 170,292 | | | (835) | | Costs associated with service revenues | 149,705 | | | 155,705 | | | (6,000) | |
Cost associated with product sales | 112,641 | | | 50,676 | | | 61,965 | | |
| Costs associated with product sales | | Costs associated with product sales | 126,715 | | | 81,113 | | | 45,602 | |
Impairment loss | | Impairment loss | 46,122 | | | — | | | 46,122 | |
| General and administrative expenses | General and administrative expenses | 27,477 | | | 23,700 | | | 3,777 | | General and administrative expenses | 27,071 | | | 24,492 | | | 2,579 | |
Other depreciation and amortization expense | Other depreciation and amortization expense | 1,913 | | | 2,171 | | | (258) | | Other depreciation and amortization expense | 1,824 | | | 2,047 | | | (223) | |
| Total costs and expenses | Total costs and expenses | 311,488 | | | 246,839 | | | 64,649 | | Total costs and expenses | 351,437 | | | 263,357 | | | 88,080 | |
| Operating income | Operating income | 115,605 | | | 92,701 | | | 22,904 | | Operating income | 58,426 | | | 98,289 | | | (39,863) | |
| Interest expense, net | Interest expense, net | (53,780) | | | (59,499) | | | 5,719 | | Interest expense, net | (49,818) | | | (54,918) | | | 5,100 | |
| Loss on extinguishment of debt | — | | | (3,842) | | | 3,842 | | |
| Other income, net | Other income, net | 2,896 | | | 2,216 | | | 680 | | Other income, net | 3,671 | | | 398 | | | 3,273 | |
Income before income tax expense | 64,721 | | | 31,576 | | | 33,145 | | |
Income tax expense | 1,338 | | | 1,810 | | | (472) | | |
Income before income tax (benefit) expense | | Income before income tax (benefit) expense | 12,279 | | | 43,769 | | | (31,490) | |
Income tax (benefit) expense | | Income tax (benefit) expense | (33) | | | 1,512 | | | (1,545) | |
| Net income | Net income | $ | 63,383 | | | $ | 29,766 | | | $ | 33,617 | | Net income | $ | 12,312 | | | $ | 42,257 | | | $ | (29,945) | |
| Basic and diluted net income (loss) per common unit | $ | 0.25 | | | $ | (0.06) | | | $ | 0.31 | | |
Basic and diluted net (loss) income per common unit | | Basic and diluted net (loss) income per common unit | $ | (0.22) | | | $ | 0.05 | | | $ | (0.27) | |
|
Consolidated Overview. Net income increased $33.6decreased $29.9 million for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020,March 31, 2021, mainly due to a non-cash pre-tax impairment loss of $46.1 million recorded in the first quarter of 2022 related to our Point Tupper Terminal Operations and lower operating income from our storage segment, excluding the impairment loss. These decreases were partially offset by higher operating income from our pipeline segment in the second quarter of 2021 as pandemic recovery resulted in higher demand.segment.
Corporate Items. General and administrative expenses increased $3.8$2.6 million for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020,March 31, 2021, mainly due to higher compensation costs.
Interest expense, net, decreased $5.7$5.1 million for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020, mainlyMarch 31, 2021, primarily due to interest expense recorded inlower overall debt balances following the second quarterrepayment of outstanding debt, partially with the proceeds from October 2021 and December 2020 related to the Term Loan, which was repaid on September 16, 2020. This decrease was partially offset by increased interest expense on the September 2020 issuance of $1.2 billion of senior notes.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Change |
| 2021 | | 2020 | |
| (Unaudited, Thousands of Dollars, Except Per Unit Data) |
Statement of Income Data: | | | | | |
Revenues: | | | | | |
Service revenues | $ | 572,671 | | | $ | 600,897 | | | $ | (28,226) | |
Product sales | 216,068 | | | 131,434 | | | 84,634 | |
Total revenues | 788,739 | | | 732,331 | | | 56,408 | |
| | | | | |
Costs and expenses: | | | | | |
Costs associated with service revenues | 325,162 | | | 338,535 | | | (13,373) | |
Cost associated with product sales | 193,754 | | | 118,126 | | | 75,628 | |
| | | | | |
Goodwill impairment loss | — | | | 225,000 | | | (225,000) | |
General and administrative expenses | 51,969 | | | 46,671 | | | 5,298 | |
Other depreciation and amortization expense | 3,960 | | | 4,357 | | | (397) | |
| | | | | |
Total costs and expenses | 574,845 | | | 732,689 | | | (157,844) | |
| | | | | |
Operating income (loss) | 213,894 | | | (358) | | | 214,252 | |
| | | | | |
Interest expense, net | (108,698) | | | (106,993) | | | (1,705) | |
| | | | | |
Loss on extinguishment of debt | — | | | (3,842) | | | 3,842 | |
Other income (expense), net | 3,294 | | | (4,273) | | | 7,567 | |
Income (loss) from before income tax expense | 108,490 | | | (115,466) | | | 223,956 | |
Income tax expense | 2,850 | | | 2,409 | | | 441 | |
| | | | | |
| | | | | |
Net income (loss) | $ | 105,640 | | | $ | (117,875) | | | $ | 223,515 | |
| | | | | |
| | | | | |
| | | | | |
Basic and diluted net income (loss) per common unit: | $ | 0.30 | | | $ | (1.74) | | | $ | 2.04 | |
| | | | | |
asset sales.
Consolidated Overview. We recorded net income of $105.6 million for the six months ended June 30, 2021, compared to a net loss of $117.9 million for the six months ended June 30, 2020, mainly due to a non-cash goodwill impairment charge of $225.0 million related to our crude oil pipelines reporting unit in the first quarter of 2020. Please refer to Note 3 of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for additional information on the goodwill impairment. Excluding the impact of the $225.0 million goodwill impairment, operating income decreased due to higher general and administrative expenses and decreases in operating income for the storage and fuels marketing segments.
We saw a rebound in demand across most of our pipelines in the second quarter of 2021, while we experienced lower throughput and lower revenue during the first quarter of 2021 due to the continuing effects of the COVID-19 global pandemic that began in March 2020, compared to the strong first quarter of 2020. Additionally, Winter Storm Uri brought snow and damaging ice and caused widespread power outages in Texas and surrounding states in February 2021, which reduced operating income by $10.7 million in the first quarter of 2021, including $9.5 million in the pipeline segment and $1.2 million in the storage segment.
Corporate Items.General and administrative expenses increased $5.3 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, mainly due to higher compensation costs.
Interest expense, net, increased $1.7 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to the interest on the September 2020 issuance of $1.2 billion of senior notes, which was partially offset by lower expenses due to the repayment of the Term Loan on September 16, 2020.
We recorded otherOther income, net ofincreased $3.3 million for the sixthree months ended June 30, 2021,March 31, 2022, compared to other expense, net of $4.3 million for the sixthree months ended June 30, 2020, mainlyMarch 31, 2021, primarily due to foreign exchange rate fluctuations associated with our Mexican subsidiary.fluctuations.
Pipeline Segment
As of June 30, 2021, we ownMarch 31, 2022, our pipeline assets consist of 9,940 miles of pipeline with 33 terminals and 13.0 million barrels of storage capacity. Our Central West System includes 3,205 miles of refined product pipelines and 2,2152,235 miles of crude oil pipelines, as well as 5.6 million barrels of storage capacity, which comprisepipelines. In addition, our Central West System. In addition, we ownEast System includes 2,500 miles of refined product pipelines, consisting of the East and North Pipelines, and a 2,000-mile ammonia pipeline (the Ammonia Pipeline), which comprise our Central East System. The East and North Pipelines have storage capacity of 7.4 million barrels.. We charge tariffs on a per barrel basis for transportation in our refined product and crude oil pipelines and on a per ton basis for transportation in the Ammonia Pipeline. Other revenues include product sales of surplus pipeline loss allowance (PLA) volumes.
Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020
| | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Change |
| 2021 | | 2020 | |
| (Thousands of Dollars, Except Barrels/Day Information) |
Crude oil pipelines throughput (barrels/day) | 1,244,215 | | | 1,063,739 | | | 180,476 | |
Refined products and ammonia pipelines throughput (barrels/day) | 606,973 | | | 452,678 | | | 154,295 | |
Total throughput (barrels/day) | 1,851,188 | | | 1,516,417 | | | 334,771 | |
| | | | | |
Throughput and other revenues | $ | 192,906 | | | $ | 166,108 | | | $ | 26,798 | |
Operating expenses | 51,404 | | | 50,099 | | | 1,305 | |
Depreciation and amortization expense | 44,990 | | | 44,028 | | | 962 | |
| | | | | |
Segment operating income | $ | 96,512 | | | $ | 71,981 | | | $ | 24,531 | |
Total revenues increased $26.8 million and throughputs increased 334,771 barrels per day for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, primarily due to the 2021 rebound in demand as the economy continues to recover from the pandemic resulting in:
•an increase in revenues of $12.4 million and an increase in throughputs of 33,598 barrels per day on our East and North pipelines combined;
•an increase in revenues of $9.6 million and an increase in throughputs of 105,004 barrels per day on our McKee System pipelines;
•an increase in revenues of $8.3 million and an increase in throughputs of 57,017 barrels per day on our Permian Crude System, as well as higher sales of crude oil from pipeline loss allowance volumes in the second quarter of 2021;
•an increase in revenues of $3.3 million and an increase in throughputs of 13,238 barrels per day on our Valley Pipeline, as well as higher revenue from higher minimum volume commitments in the second quarter of 2021; and
•an increase in revenues of $2.7 million and an increase in throughputs of 39,127 barrels per day on our Three Rivers System, despite operational issues at a customer’s refinery in the second quarter of 2021.
These increases in revenue were partially offset by the following:
•a decrease in revenues of $4.2 million, despite an increase in throughputs of 63,067 barrels per day on our Corpus Christi Crude Pipeline System, mainly due to lower minimum volume commitments, while the increase in throughputs was primarily due to the rebound in demand in the second quarter of 2021;
•a decrease in revenues of $3.5 million, despite an increase in throughputs of 12,721 barrels per day on our Ardmore System, primarily due to the expiration of a customer contract and fewer barrels moved at higher average tariffs in the second quarter of 2021, which more than offset the revenue from increased throughputs resulting from the rebound in demand; and
•a decrease in revenues of $2.3 million and a decrease in throughputs of 5,424 barrels per day on our Ammonia Pipeline, mainly due to unfavorable weather conditions for agricultural application and outages at customers’ facilities in the second quarter of 2021.
Operating expenses increased $1.3 million for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, mainly due to an increase in compensation expense of $1.4 million, an increase in insurance expense of $0.7 million due to higher premiums and an increase in power costs of $0.6 million due to higher throughput. These increases were partially offset by lower maintenance and regulatory expense of $1.0 million.
Depreciation and amortization expense increased $1.0 million for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, due to projects associated with our Permian Crude System and other completed projects.
SixThree Months Ended June 30, 2021March 31, 2022 Compared to SixThree Months Ended June 30, 2020March 31, 2021
| | | Six Months Ended June 30, | | Change | | Three Months Ended March 31, | | Change |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| (Thousands of Dollars, Except Barrels/Day Information) | |
Pipeline Segment: | | Pipeline Segment: | (Thousands of Dollars, Except Barrels/Day Information) |
Crude oil pipelines throughput (barrels/day) | Crude oil pipelines throughput (barrels/day) | 1,173,166 | | | 1,297,892 | | | (124,726) | | Crude oil pipelines throughput (barrels/day) | 1,309,085 | | | 1,101,327 | | | 207,758 | |
Refined products and ammonia pipelines throughput (barrels/day) | Refined products and ammonia pipelines throughput (barrels/day) | 558,121 | | | 523,555 | | | 34,566 | | Refined products and ammonia pipelines throughput (barrels/day) | 563,248 | | | 508,726 | | | 54,522 | |
Total throughput (barrels/day) | Total throughput (barrels/day) | 1,731,287 | | | 1,821,447 | | | (90,160) | | Total throughput (barrels/day) | 1,872,333 | | | 1,610,053 | | | 262,280 | |
| Throughput and other revenues | Throughput and other revenues | $ | 362,134 | | | $ | 361,789 | | | $ | 345 | | Throughput and other revenues | $ | 188,683 | | | $ | 169,228 | | | $ | 19,455 | |
Operating expenses | Operating expenses | 96,459 | | | 100,345 | | | (3,886) | | Operating expenses | 48,103 | | | 45,055 | | | 3,048 | |
Depreciation and amortization expense | Depreciation and amortization expense | 89,784 | | | 87,387 | | | 2,397 | | Depreciation and amortization expense | 44,828 | | | 44,794 | | | 34 | |
Goodwill impairment loss | — | | | 225,000 | | | (225,000) | | |
Segment operating income (loss) | $ | 175,891 | | | $ | (50,943) | | | $ | 226,834 | | |
| Segment operating income | | Segment operating income | $ | 95,752 | | | $ | 79,379 | | | $ | 16,373 | |
Pipeline segment revenues increased $19.5 million and throughputs increased 262,280 barrels per day for the sixthree months ended June 30, 2021 were comparableMarch 31, 2022, compared to the sixthree months ended June 30, 2020, despite a decrease in throughputs of 90,160 barrels per day.March 31, 2021. The first six months of 2020 included strong demand in the first quarter, prior to the pandemic, which was followed by severely reduced demand in the second quarter, resulting from COVID-19 restrictions, including stay-at-home orders and business closures. In comparison, results for the first quarter of 2021 were negatively affected by Winter Storm Uri, which brought snow and damaging ice and caused widespread power outages in Texas and surrounding states in February 2021, as well as the lingering effects offrom the COVID-19 restrictions. However, bypandemic, as demand did not recover to pre-pandemic levels until the second quarter of 2021, demand had largely recovered to pre-pandemic levels.
2021. Revenues and throughputs increased primarily due to the 2021 rebound in demand, resulting in:following:
•an increase in revenues of $11.4$13.2 million and an increase in throughputs of 7,825118,660 barrels per day on our Permian Crude System, mainly due to the negative impacts on the first quarter of 2021 described above, as well as an increase of $4.9 million in sales of PLA volumes in the first quarter of 2022 compared to the first quarter of 2021;
•an increase in revenues of $2.9 million and an increase in throughputs of 12,516 barrels per day on our North and East pipelines combined, due to supply disruptions from the conversion of a Wyoming refinery, resulting in higher volumes on our East Pipeline and a rebound in demand in 2022, compared to lower demand in 2021 due to the second quarter of 2021;lingering impacts from COVID-19;
•an increase in revenues of $5.7 million, despite a slight decrease in throughputs of 1,125 barrels per day on our Permian Crude System, mainly due to higher sales of crude oil from pipeline loss allowance volumes for the six months ended June 30, 2021;
•an increase in revenues of $5.4$1.5 million and an increase in throughputs of 33,13714,183 barrels per day on our McKee System pipelines, mainly due to a rebound in demand in the second quarter of 2021, partially offset by the effects of Winter Storm Urinegative impacts in the first quarter of 2021; and2021 described above;
•an increase in revenues of $2.1$1.4 million and an increase in throughputs of 2,98315,090 barrels per day on our ValleyThree Rivers System, primarily due to an increase in demand on our Nuevo Laredo and San Antonio pipelines;
•an increase in revenues of $1.1 million and an increase in throughputs of 13,899 barrels per day on our Houston Pipeline System, mainly due to a rebound in demand innew contract with a customer that began at the second quarterend of 2021March 2021; and higher
•although revenues remained comparable as a result of minimum volume commitments, for the six months ended June 30, 2021.
These increases in revenue were partially offset by:
•a decrease in revenues of $17.4 million and a decrease in throughputs of 137,814increased 65,421 barrels per day on our Corpus Christi Crude Pipeline System, mainly due to lower minimum volume commitments for the six months ended June 30, 2021, as well as lower demand for exportsa rebound in 2021, compared to the first quarter of 2020;demand.
•
These increases were partially offset by a decrease in revenues of $3.6$1.3 million and a decrease in throughputs of 2,676 barrels per day on our Ardmore System, as a resultdespite an increase in throughputs of Winter Storm Uri in the first quarter of 2021,22,227 barrels per day. Revenues decreased mainly due to the expiration of a customer contract at the end of the first quarter of 2021, and fewer barrels moved at higher average tariffs in 2021, compared to 2020; and
•a decrease in revenues of $3.1 million and a decrease inwhile throughputs of 3,645 barrels per day on our Ammonia Pipeline, mainlyincreased primarily due to unfavorable weather conditions for agricultural application and outages at customers’ facilitiesthe negative impacts in the six months ended June 30, 2021.first quarter of 2021 described above.
Operating expenses decreased $3.9increased $3.0 million for the sixthree months ended June 30, 2021,March 31, 2022, compared to the sixthree months ended June 30, 2020, primarilyMarch 31, 2021, mainly due to a decrease of $4.2 million in maintenance and regulatory expenses, mainly on our Ammonia Pipeline, and a decreasean increase in power costs of $2.8$2.5 million, across multiple pipelines, primarily resulting from lower throughputs and the addition of permanent power on our Permian Crude System. These decreases were partially offset by an increase of $4.4 million in compensation expense.
Depreciation and amortization expense increased $2.4 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, mainly due to the completion of projects on our Permian Crude System and other completed projects.
In the first quarter of 2020, the negative impact of the COVID-19 pandemic, combined with actions by OPEC+, led to a decline in our unit price and market capitalization in March 2020, and as a result, we recorded a non-cash goodwill impairment charge of $225.0 million related to our crude oil pipelines reporting unit. Please refer to Note 3 of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for additional information on the goodwill impairment.higher throughputs.
Storage Segment
Our storage segment is comprised of our facilities that provide storage, handling and other services for petroleumrefined products, crude oil, specialty chemicals, renewable fuels and other liquids. As of June 30, 2021,March 31, 2022, we ownowned and operate 38 terminalsoperated 29 terminal and storage facilities in the U.S., one terminal in Nuevo Laredo, Mexico and one terminal located in Point Tupper, Canada, with an aggregate storage capacity of 59.044.2 million barrels. Revenues for the storage segment include fees for tank storage agreements, under which a customer agrees to pay for a certain amount of storage in a tank over a period of time (storage terminal revenues), and throughput agreements, under which a customer pays a fee per barrel for volumes moved through our terminals (throughput terminal revenues).
Sale of Texas City Terminals.Point Tupper Terminal. On December 7, 2020,In the first quarter of 2022, we recorded a non-cash pre-tax impairment loss of $46.1 million related to our Point Tupper terminal facility, which was sold the equity interests in our wholly owned subsidiaries that owned two terminals in Texas City, Texason April 29, 2022 for $106.0 million (the Texas City Sale). The two terminals have an aggregate storage capacity of 3.0 million barrels and were previously included in our storage segment.$60.0 million.
Selby Terminal Fire. We recognized gainsa gain from business interruption insurance of $4.0 million and $3.1 million for the sixthree months ended June 30,March 31, 2021, and June 30, 2020, respectively,which is included in “Operating expenses,” which relateexpenses” in the condensed consolidated statements of comprehensive income and relates to a fire in October 2019 at our terminal facility in Selby, California.
Three Months Ended June 30, 2021March 31, 2022 Compared to Three Months Ended June 30, 2020March 31, 2021
| | | Three Months Ended June 30, | | Change | | Three Months Ended March 31, | | Change |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| (Thousands of Dollars, Except Barrels/Day Information) | |
Storage Segment: | | Storage Segment: | (Thousands of Dollars, Except Barrels/Day Information) |
Throughput (barrels/day) | Throughput (barrels/day) | 385,790 | | | 348,189 | | | 37,601 | | Throughput (barrels/day) | 395,803 | | | 400,302 | | | (4,499) | |
| Throughput terminal revenues | Throughput terminal revenues | $ | 35,143 | | | $ | 32,199 | | | $ | 2,944 | | Throughput terminal revenues | $ | 26,441 | | | $ | 24,794 | | | $ | 1,647 | |
Storage terminal revenues | Storage terminal revenues | 84,105 | | | 87,208 | | | (3,103) | | Storage terminal revenues | 61,480 | | | 83,780 | | | (22,300) | |
Total revenues | Total revenues | 119,248 | | | 119,407 | | | (159) | | Total revenues | 87,921 | | | 108,574 | | | (20,653) | |
Operating expenses | Operating expenses | 49,089 | | | 50,979 | | | (1,890) | | Operating expenses | 38,299 | | | 42,232 | | | (3,933) | |
Depreciation and amortization expense | Depreciation and amortization expense | 23,974 | | | 25,186 | | | (1,212) | | Depreciation and amortization expense | 18,475 | | | 23,624 | | | (5,149) | |
Impairment loss | | Impairment loss | 46,122 | | | — | | | 46,122 | |
| Segment operating income | $ | 46,185 | | | $ | 43,242 | | | $ | 2,943 | | |
Segment operating (loss) income | | Segment operating (loss) income | $ | (14,975) | | | $ | 42,718 | | | $ | (57,693) | |
Throughput terminal revenues increased $2.9$1.6 million and throughputs increased 37,601 barrels per day for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020, mainlyMarch 31, 2021, primarily due to an increase in revenues of $2.9$1.4 million and an increase in throughputs of 51,406 barrels per day on our Central West Terminals, due to a rebound in demand in the second quarter of 2021. The increase in throughputs was partially offset by a decrease in throughputs of 13,776 barrels per day at our Corpus Christi North Beach terminal due to weak export markets and volumes delivered to our customers’ refineries instead of over our docks in the second quarter of 2021; revenues remained flat at the terminal due to minimum volume commitments.beach terminal.
Storage terminal revenues decreased $3.1$22.3 million for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020,March 31, 2021, primarily due to the following:
•a decrease in revenues of $8.5$16.3 million as a result of the Texas City Sale in December 2020. This decrease was partially offset by the following:
•an increase in revenues of $2.4 million at our West Coast Terminals, mainly due to completed projects, resultingthe Eastern U.S. Terminals Disposition in higher throughputs and associated handling fees;October 2021; and
•an increasea decrease in revenues of $2.2$5.5 million and $1.1 million at our North East Terminals,St. James and Point Tupper terminals, respectively, mainly due to contango market conditions at our Linden and Piney Point terminals that led to new contracts in the second quarterexpiration of 2020 and an increase in throughput and ancillary fees.customer contracts.
Operating expenses decreased $1.9$3.9 million for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020,March 31, 2021, primarily due to a decrease in operating expenses of $5.8$9.3 million due to the Texas City SaleEastern U.S. Terminals Disposition in December 2020 and aOctober 2021. This decrease in maintenance and regulatory expenses of $1.0 million. These decreases werewas partially offset by an increase in
compensation maintenance and regulatory expense of $1.5$1.0 million an increase in 2022 and a $4.0 million recovery in the first quarter of 2021 for business interruption insurance expense of $1.3 million duerelated to higher premiums and an increase in reimbursable expenses of $1.2 million across various terminals.the Selby terminal.
Depreciation and amortization expense decreased $1.2$5.1 million for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020, primarily due to the Texas City Sale.
Six Months Ended June 30,March 31, 2021, Compared to Six Months Ended June 30, 2020
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Change |
| 2021 | | 2020 | |
| (Thousands of Dollars, Except Barrels/Day Information) |
Throughput (barrels/day) | 393,006 | | | 513,510 | | | (120,504) | |
| | | | | |
Throughput terminal revenues | $ | 59,937 | | | $ | 70,922 | | | $ | (10,985) | |
Storage terminal revenues | 167,885 | | | 171,702 | | | (3,817) | |
Total revenues | 227,822 | | | 242,624 | | | (14,802) | |
Operating expenses | 91,321 | | | 100,915 | | | (9,594) | |
Depreciation and amortization expense | 47,598 | | | 49,888 | | | (2,290) | |
| | | | | |
Segment operating income | $ | 88,903 | | | $ | 91,821 | | | $ | (2,918) | |
Throughput terminal revenues decreased $11.0 million and throughputs decreased 120,504 barrels per day for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, mainly due to a decrease in revenues of $13.3 million and a decrease in throughputs of 139,482 barrels per day at our Corpus Christi North Beach terminal. Consistent with lower volumes on our Corpus Christi Crude Pipeline System, these decreases at our Corpus Christi North Beach terminal were due to lower minimum volume commitments for the six months ended June 30, 2021, Winter Storm Uri, weak export markets and volumes delivered to our customers’ refineries instead of over our docks in the second quarter of 2021. These decreases were partially offset by an increase in revenues of $2.3 million and an increase in throughputs of 19,446 barrels per day at our Central West Terminals, due to a rebound in demand in the second quarter of 2021.
Storage terminal revenues decreased $3.8 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to a decrease in revenues of $17.1 million due to the Texas City Sale in December 2020.
This decrease was partially offset by the following:
•an increase in revenues of $5.2 million at our West Coast Terminals, mainly due to completed projects, resulting in new contracts and rate escalations as well as higher throughputs and handling fees;
•an increase in revenues of $3.4 million at our North East Terminals, primarily due to contango market conditions that led to new contracts in the second quarter of 2020 and an increase in throughput and ancillary fees;
•an increase in revenues of $2.7 million at our Gulf Coast Terminals, excluding the Texas City Sale, mainly at our St. James and Jacksonville terminals. The increase at our St. James terminal was mainly due to an increase in reimbursable revenues, higher throughput and ancillary fees and unit train activity, partially offset by a decrease in customer base, while the increase at out Jacksonville terminal was mainly due to an increase in customer base; and
•an increase in revenues of $1.0 million at our Central West Terminals, primarily at our Nuevo Laredo terminal, due to the reactivation of our refined products pipeline to transport diesel to our Nuevo Laredo terminal in Mexico, which began full service at the end of the first quarter of 2020.
Operating expenses decreased $9.6 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, primarily due to the following;
•a decrease in operating expenses of $12.0 million due to the Texas City Sale in December 2020;
•a decrease in maintenance expense of 2.5 million across various terminals; and
•a decrease in reimbursable expenses of $1.1 million, mainly due to a decrease in wharfage activity of $2.5 million at our Corpus Christi North Beach terminal and a decrease of $0.9 million in tank cleaning expenses at Pt. Tupper, partially offset by an increase of $1.7 million in tank cleaning expenses at our St. James terminal.
These decreases were partially offset by an increase in compensation expense of $3.6 million and an increase in insurance expense of $3.4 million due to higher premiums.
Depreciation and amortization expense decreased $2.3 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, mainly due to the Texas City SaleEastern U.S. Terminals Disposition in December 2020.October 2021.
Fuels Marketing Segment
The fuels marketing segment includes our bunkering operations in the Gulf Coast, as well as certain of our blending operations associated with our Central East System. The results of operations for the fuels marketing segment depend largely on the margin between our costs and the sales prices of the products we market. Therefore, the results of operations for this segment are more sensitive to changes in commodity prices compared to the operations of the pipeline and storage segments. We enter into derivative contracts to attempt to mitigate the effects of commodity price fluctuations. The financial impacts of the derivative financial instruments associated with commodity price risk were not material for any periods presented.
Three Months Ended June 30, 2021March 31, 2022 Compared to Three Months Ended June 30, 2020March 31, 2021
| | | Three Months Ended June 30, | | Change | | Three Months Ended March 31, | | Change |
| | 2021 | | 2020 | | | 2022 | | 2021 | |
| (Thousands of Dollars) | |
Fuels Marketing Segment: | | Fuels Marketing Segment: | (Thousands of Dollars) |
Product sales | Product sales | $ | 114,939 | | | $ | 54,025 | | | $ | 60,914 | | Product sales | $ | 133,260 | | | $ | 83,855 | | | $ | 49,405 | |
Cost of goods | Cost of goods | 112,063 | | | 50,115 | | | 61,948 | | Cost of goods | 126,123 | | | 82,403 | | | 43,720 | |
Gross margin | Gross margin | 2,876 | | | 3,910 | | | (1,034) | | Gross margin | 7,137 | | | 1,452 | | | 5,685 | |
Operating expenses | Operating expenses | 578 | | | 561 | | | 17 | | Operating expenses | 593 | | | (1,279) | | | 1,872 | |
| Segment operating income | Segment operating income | $ | 2,298 | | | $ | 3,349 | | | $ | (1,051) | | Segment operating income | $ | 6,544 | | | $ | 2,731 | | | $ | 3,813 | |
Segment operating income decreased $1.1increased $3.8 million for the three months ended June 30, 2021,March 31, 2022, compared to the three months ended June 30, 2020,March 31, 2021, mainly due to lowerhigher gross margins across the segment.
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Change |
| 2021 | | 2020 | |
| (Thousands of Dollars) |
Product sales | $ | 198,794 | | | $ | 127,927 | | | $ | 70,867 | |
Cost of goods | 194,466 | | | 117,069 | | | 77,397 | |
Gross margin | 4,328 | | | 10,858 | | | (6,530) | |
Operating expenses | (701) | | | 1,066 | | | (1,767) | |
| | | | | |
| | | | | |
Segment operating income | $ | 5,029 | | | $ | 9,792 | | | $ | (4,763) | |
Segment operating income decreased $4.8 million for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, mainly due to lower gross margins of $4.0 million from our bunkering operations and $2.0 million from our blending operations. The overall decrease in segment operating income was partially offset byWe received a credit loss recovery of $1.7 million that we received in the first quarter of 2021, which is included in “Operating expenses.”
LIQUIDITY AND CAPITAL RESOURCES
OverviewOVERVIEW
Our primary cash requirements are for distributions to our partners, debt service, capital expenditures and operating expenses. Our partnership agreement requires that we distribute all “Available Cash” to our common limited partners each quarter. “Available Cash” is defined in the partnership agreement generally as cash on hand at the end of the quarter, plus certain permitted borrowings made subsequent to the end of the quarter, less cash reserves determined by our board of directors, subject to requirements for distributions for our preferred units. We may maintain our distribution level with other sources of Available Cash, as provided in our partnership agreement, including borrowings under our revolving credit agreement and proceeds from the sales of assets.
In prior years, our objective was to fund our reliability capital expenditures and distribution requirements with net cash provided by operating activities during that year. If we did not generate sufficient cash from operations to meet that objective, we used cash on hand or other sources of cash flow, which primarily included borrowings under our revolving credit agreement, sales of non-strategic assets and, to the extent necessary, funds raised through debt or equity offerings. Prior to 2021, we funded our strategic capital expenditures primarily from borrowings under our revolving credit agreement, funds raised through debt or equity offerings and/or sales of non-strategic assets. However, our ability to raise funds by issuing debt or equity depends on many factors beyond our control, including our ability to access such markets with the continued uncertainty surrounding the duration and severity of the impact from the COVID-19 pandemic and actions by OPEC+.control. Our risk factors in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 20202021 describe the risks inherent to these sources of funding and the availability thereof.
DueIn the first quarter of 2022, we continued to prioritize liquidity by extending the negative impacts of, and the continued uncertainty related to, the COVID-19 pandemic and actions taken by OPEC+, we have taken steps to preserve and enhancematurity on our liquidity. We expect that amounts available under our$1.0 billion revolving credit agreement will be sufficient to address senior note maturities inApril 27, 2025, extending the scheduled termination date on our $100.0 million receivables financing agreement to January 31, 2025 and entering an agreement to sell our Point Tupper Terminal. For the full-year 2022, and we have no other senior note maturities until 2025. In addition, in response to the shifting expectations of our industry, including continuing to reduce leverage, combined with the ongoing lack of access to equity markets and the COVID-19 environment, we expect to fund all of our expenses, distribution requirements and capital expenditures using internally generated cash flows as we did for the full-year 2021.
Cash Flows forBeyond 2022, absent a return of access to the Six Months Ended June 30,equity capital markets, we plan to continue to fund our expenses, distribution requirements and capital expenditures with internally generated cash flows, which could include proceeds from asset dispositions. We have no long-term debt maturities until 2025, and we have been and expect to continue to be able to access debt capital markets to refinance those maturities. Our Series D Cumulative Convertible Preferred Units (Series D Preferred Units) become redeemable, at our option, beginning in 2023, which coincides with an increase in the distribution rate of those units. Beginning in 2028, the holders of the Series D Preferred Units have the option to require us to redeem their units, and we have begun taking steps to position ourselves to redeem the Series D Preferred Units gradually over the next several years in advance of the possible mandatory redemption. By reducing our leverage, primarily through the disposition of non-strategic assets in recent years, and continuing to increase the amount by which our internally generated cash flows exceed our expenses, distribution requirements and capital expenditures, we are increasing our financial flexibility. Beyond those items, we will also continue to evaluate other sources of liquidity to manage the optional or mandatory redemption of the Series D Preferred Units.
CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 and 2020
The following table summarizes our cash flows from operating, investing and financing activities (please refer to our Consolidated Statements of Cash Flows in Item 1. “Financial Statements”):
| | | Six Months Ended June 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
| | (Thousands of Dollars) | | (Thousands of Dollars) |
Net cash provided by (used in): | Net cash provided by (used in): | | Net cash provided by (used in): | |
Operating activities | Operating activities | $ | 214,237 | | | $ | 270,441 | | Operating activities | $ | 145,830 | | | $ | 145,657 | |
Investing activities | Investing activities | (92,235) | | | (106,080) | | Investing activities | (41,102) | | | (45,782) | |
Financing activities | Financing activities | (252,853) | | | (162,319) | | Financing activities | (99,714) | | | (225,729) | |
Effect of foreign exchange rate changes on cash | Effect of foreign exchange rate changes on cash | 727 | | | (945) | | Effect of foreign exchange rate changes on cash | 176 | | | 475 | |
Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (130,124) | | | $ | 1,097 | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 5,190 | | | $ | (125,379) | |
Net cash provided by operating activities decreased $56.2 millionwas comparable for the sixthree months ended June 30, 2021,March 31, 2022, compared to the sixthree months ended June 30, 2020, primarily due toMarch 31, 2021, as lower net income in the first quarter of 2022 was driven by a non-cash impairment loss and offset by changes in working capital. Cash flows from operating activities includes insurance proceeds of $20.5 million and $25.0 million for the six months ended June 30, 2021 and 2020, respectively, which are related to cleanup costs and business interruption at our terminal facility in Selby, California that experienced a fire in October 2019.
Our working capital increased by $43.3decreased $17.5 million for the sixthree months ended June 30, 2021,March 31, 2022, compared to $6.2a decrease of $24.4 million for the sixthree months ended June 30, 2020.March 31, 2021. Working capital requirements are mainly affected by our accounts receivable and accounts payables balances, which vary depending on the timing of payments. Increased activityCash flows from operating activities for the continuing economic recovery also contributedthree months ended March 31, 2021 include $20.5 million related to cleanup costs and business interruption for the increase in working capital. In addition,2019 Selby terminal fire. Additionally, the timing of payments related to accrued interest payable changed due to the $250.0 million of 4.75% senior note issuances in 2020. Please refer to Note 11notes repaid on November 1, 2021 and the $300.0 million of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for additional discussion.6.75% senior notes repaid February 1, 2021.
For the sixthree months ended June 30, 2021,March 31, 2022, net cash provided by operating activities combined with cash on hand exceeded our distributions to unitholders reliability capital expenditures and strategic capital expenditures.
Net cash used in investing activities decreased by $13.8$4.7 million for the sixthree months ended June 30, 2021,March 31, 2022, compared to the sixthree months ended June 30, 2020,March 31, 2021, primarily due to reductions to our capital expenditures.proceeds from insurance recoveries of $5.8 million received in the first quarter of 2022.
Net cash used in financing activities increased $90.5decreased $126.0 million for the sixthree months ended June 30, 2021,March 31, 2022, compared to the sixthree months ended June 30, 2020,March 31, 2021, mainly due to a $177.6 million increasedecrease in net debt repayments. This increase was partially offset byFor the $49.2three months ended March 31, 2022, we had net debt repayments of $15.8 million, paymentcompared to terminate interest rate swaps in the second quarter of 2020 and a decrease of $21.2$147.7 million in distributions paid to our common unitholdersnet debt repayments for the sixthree months ended June 30, 2021, compared to the six months ended June 30, 2020.March 31, 2021.
Sources of LiquiditySOURCES OF LIQUIDITY
Revolving Credit Agreement.Agreement
On February 16, 2021, NuStar LogisticsJanuary 28, 2022, we amended itsand restated our unsecured $1.0 billion revolving credit agreement (the Revolving Credit Agreement) to, among other things, expand certain adjustments relatedthings: (i) extend the maturity date from October 27, 2023 to April 27, 2025; (ii) increase the maximum amount of letters of credit capable of being issued from $400.0 million to $500.0 million; (iii) replace LIBOR benchmark provisions with customary secured overnight financing rate, or SOFR, benchmark provisions; (iv) remove the 0.50x increase permitted in our maximum consolidated debt coverage ratio for certain rolling periods in which an acquisition for aggregate net consideration of at least $50.0 million occurs; and minimum consolidated interest coverage ratio.(v) add baskets and exceptions to certain negative covenants.
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 thea rolling period of four quarters, ended June 30, 2021, the consolidated debt coverage ratio (as defined in the Revolving Credit Agreement) could notcannot 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, 2021,March 31, 2022, our consolidated debt coverage ratio was 4.27x3.92x and our consolidated interest coverage ratio was 2.05x.2.16x. As of June 30, 2021,March 31, 2022, we had $809.8$888.7 million available for borrowing. We expect that amounts availableLetters of credit issued under the Revolving Credit Agreement will be sufficient to address senior note maturities in 2022.
Thetotaled $4.8 million as of March 31, 2022 and limit the amount we can borrow under the Revolving Credit Agreement is the only debt arrangement with an interest rate that is subject to adjustment if our debt rating is downgraded (or upgraded) by certain credit rating agencies. In April of 2021, Moody’s Investor Service Inc. affirmed our credit rating and changed our rating outlook from negative to stable. The following table reflects the current ratings and outlook that have been assigned to our debt:Agreement.
| | | | | | | | | | | | | | | | | |
| Fitch Ratings | | Moody’s Investor Service Inc. | | S&P Global Ratings |
Ratings | BB- | | Ba3 | | BB- |
Outlook | Stable | | Stable | | Stable |
Receivables Financing Agreement. Agreement
NuStar Energy and NuStar Finance LLC (NuStar Finance), 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 lenderslender (the Receivables Financing Agreement) and agreements with certain of NuStar Energy’s wholly owned subsidiaries. As of June 30, 2021, $125.4March 31, 2022, $132.2 million of our accounts receivable was included in the Securitization Program and the amount of borrowings outstanding under the Receivables Financing Agreement totaled $74.2$72.0 million. The amount available for borrowing under the Receivables Financing Agreement is based on the availability of eligible receivables and other customary factors and conditions.
On January 28, 2022, the Receivables Financing Agreement was amended to, among other things: (i) extend the scheduled termination date from September 20, 2023 to January 31, 2025; (ii) reduce the floor rate in the calculation of our borrowing rates; and (iii) replace provisions related to the LIBOR rate of interest with references to SOFR rates of interest. Following the amendment, borrowings under the Receivables Financing Agreement bear interest, at NuStar Finance’s option, at a base rate or a SOFR rate, each as defined in the Receivables Financing Agreement.
The interest rate on the Revolving Credit Agreement and certain fees under the Receivables Financing Agreement are the only debt arrangements that are subject to adjustment if our debt rating is downgraded (or upgraded) by certain credit rating agencies. Please refer to Note 5 of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for afurther discussion of certain of our debt agreements.
Asset Sale
We expect to utilize the proceeds from the sale of our Point Tupper terminal to reduce debt and thereby improve our debt metrics. We closed the sale on April 29, 2022.
MATERIAL CASH REQUIREMENTS
Capital RequirementsExpenditures
Our operations require significant investments to maintain, upgrade or enhance the operating capacity of our existing assets. Our capital expenditures consist of:
•strategic capital expenditures, such as those to expand or upgrade the operating capacity, increase efficiency or increase the earnings potential of existing assets, whether through construction or acquisition, as well as certain capital expenditures related to support functions; and
•reliability capital expenditures, such as those required to maintain the current operating capacity of existing assets or extend their useful lives, as well as those required to maintain equipment reliability and safety.
The following table summarizes our capital expenditures:
| | | | | | | | | | | | | | | | | |
| Strategic Capital Expenditures | | Reliability Capital Expenditures | | Total |
| (Thousands of Dollars) |
For the six months ended June 30: | | | | | |
2021 | $ | 69,762 | | | $ | 17,432 | | | $ | 87,194 | |
2020 | $ | 85,307 | | | $ | 11,051 | | | $ | 96,358 | |
| | | | | |
Expected for the year ended December 31, 2021 | $140,000 - 170,000 | | $40,000 - 50,000 | | |
| | | | | | | | | | | | | | | | | |
| Strategic Capital Expenditures | | Reliability Capital Expenditures | | Total |
| (Thousands of Dollars) |
For the three months ended March 31: | | | | | |
2022 | $ | 26,041 | | | $ | 6,709 | | | $ | 32,750 | |
2021 | $ | 31,974 | | | $ | 8,489 | | | $ | 40,463 | |
| | | | | |
Expected for the year ended December 31, 2022 | $115,000 - 145,000 | | $35,000 - 45,000 | | |
Strategic capital expenditures for the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 mainly consisted of expansion projects on our Permian Crude System and Central West Refined Products Pipelines, as well as our West Coast bio-fuels terminal projects in 2021 and our Northern Mexico refined products supply projects and expansion projects on our Corpus Christi Crude System in 2020.projects. Reliability capital expenditures for the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 primarily related to maintenance upgrade projects at our terminals.
For the year ended December 31, 2021, we expect a significant portion of our strategic capital spending to relate to our expansion projects to accommodate production growth in the Permian Basin and projects to handle biofuels demand on the West Coast. We continue to evaluate our capital budget and make changes as economic conditions warrant, and our actual capital expenditures for 2021 may increase or decrease from the expected amounts noted above. We expect to fund our capital expenditures for the full-year 2021 with internally generated cash flows, and our internal growth projects can be accelerated or scaled back depending on market conditions or customer demand. Therefore, our actual capital expenditures for 2022 may increase or decrease from the expected amounts noted above. We expect to self-fund all of our capital expenditures in 2022.
Distributions
Common Units. Distribution payments are made to our common limited partners within 45 days after the end of each quarter as of a record date that is set after the end of each quarter. The following table summarizes information about quarterly cash distributions to our common limited partners:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Quarter Ended | | Cash Distributions Per Unit | | Total Cash Distributions | | Record Date | | Payment Date |
| | | | (Thousands of Dollars) | | | | |
| | | | | | | | |
June 30, 2021 | | $ | 0.40 | | | $ | 43,814 | | | August 6, 2021 | | August 12, 2021 |
March 31, 2021 | | $ | 0.40 | | | $ | 43,834 | | | May 10, 2021 | | May 14, 2021 |
December 31, 2020 | | $ | 0.40 | | | $ | 43,787 | | | February 8, 2021 | | February 12, 2021 |
| | | | | | | | |
Preferred Units. Distributions on our 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.
The following table provides the terms related to distributions for our Series A, Series B and Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (collectively, the Series A, B and C Preferred Units):
| Units | Units | | | Fixed Distribution Rate Per Annum (as a Percentage of the $25.00 Liquidation Preference Per Unit) | | Fixed Distribution Rate Per Unit Per Annum | | Fixed Distribution Per Annum | | Optional Redemption Date/Date at Which Distribution Rate Becomes Floating | | Floating Annual Rate (as a Percentage of the $25.00 Liquidation Preference Per Unit) | Units | | | Fixed Distribution Rate Per Annum (as a Percentage of the $25.00 Liquidation Preference Per Unit) | | Fixed Distribution Rate Per Unit Per Annum | | Fixed Distribution Per Annum | | Optional Redemption Date/Date at Which Distribution Rate Becomes Floating | | Floating Annual Rate (as a Percentage of the $25.00 Liquidation Preference Per Unit) |
| | | | | | | | (Thousands of Dollars) | | | | | | | | | | | | (Thousands of Dollars) | | | | |
Series A Preferred Units | | | 8.50% | | $ | 2.125 | | | $ | 19,252 | | | December 15, 2021 | | Three-month LIBOR plus 6.766% | |
| Series B Preferred Units | Series B Preferred Units | | | 7.625% | | $ | 1.90625 | | | $ | 29,357 | | | June 15, 2022 | | Three-month LIBOR plus 5.643% | Series B Preferred Units | | | 7.625% | | $ | 1.90625 | | | $ | 29,357 | | | June 15, 2022 | | Three-month LIBOR plus 5.643% |
Series C Preferred Units | Series C Preferred Units | | | 9.00% | | $ | 2.25 | | | $ | 15,525 | | | December 15, 2022 | | Three-month LIBOR plus 6.88% | Series C Preferred Units | | | 9.00% | | $ | 2.25 | | | $ | 15,525 | | | December 15, 2022 | | Three-month LIBOR plus 6.88% |
The distribution rate on our Series A Preferred Units converted from a fixed rate to a floating rate of the three-month LIBOR plus 6.766% on December 15, 2021. Distribution information for our Series A Preferred Units is as follows:
| | | | | | | | | | | | | | |
Period | | Distribution Rate per Unit | | Total Distribution |
| | | | (Thousands of Dollars) |
| | | | |
| | | | |
| | | | |
March 15, 2022 - June 14, 2022 | | $ | 0.47817 | | | $ | 4,332 | |
December 15, 2021 - March 14, 2022 | | $ | 0.43606 | | | $ | 3,951 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
The distribution rates on the Series D Cumulative Convertible Preferred Units (Series D Preferred Units) are as follows: (i) 9.75%, or $57.6 million, per annum ($0.619 per unit per distribution period) for the first two years (beginning with the September 17, 2018 distribution); (ii) 10.75%, or $63.4 million, per annum ($0.682 per unit per distribution period) for years
three through five; and (iii) the greater of 13.75%, or $81.1 million, per annum ($0.872 per unit per distribution period) or the distribution per common unit thereafter. The number of Series D Preferred Units issued and outstanding as of March 31, 2022 and December 31, 2021 totaled 23,246,650. 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 may be paid, in the Partnership’s sole discretion, in additional Series D Preferred Units, with the remainder paid in cash.
In July 2021,April 2022, our board of directors declared distributions with respect to the Series A, B and C Preferred Units and the Series D Preferred Units to be paid on SeptemberJune 15, 2021.2022.
Common Units. Distribution payments are made to our common limited partners within 45 days after the end of each quarter as of a record date that is set after the end of each quarter. In April 2022, our board of directors declared distributions with respect to our common units for the quarter ended March 31, 2022. The following table summarizes information about quarterly 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) | | | | |
| | | | | | | | |
| | | | | | | | |
March 31, 2022 | | $ | 0.40 | | | $ | 44,165 | | | May 9, 2022 | | May 13, 2022 |
December 31, 2021 | | $ | 0.40 | | | $ | 44,008 | | | February 8, 2022 | | February 14, 2022 |
| | | | | | | | |
Debt Obligations
OurThe following table summarizes our debt obligations as of June 30, 2021 are listed below:obligations: | | | | | | | | | | | | | | | | | |
| Maturity | | June 30, 2021 |
| | | | | (Thousands of Dollars) |
Revolving Credit Agreement | October 27, 2023 | | $ | 185,000 | |
4.75% senior notes | February 1, 2022 | | $ | 250,000 | |
5.75% senior notes | October 1, 2025 | | $ | 600,000 | |
6.00% senior notes | June 1, 2026 | | $ | 500,000 | |
5.625% senior notes | April 28, 2027 | | $ | 550,000 | |
6.375% senior notes | October 1, 2030 | | $ | 600,000 | |
Subordinated Notes, with a floating interest rate of 6.9% as of June 30, 2021 | January 15, 2043 | | $ | 402,500 | |
GoZone Bonds | 2038 | thru | 2041 | | $ | 322,140 | |
Receivables Financing Agreement | September 20, 2023 | | $ | 74,200 | |
We repaid our $300.0 million of 6.75% senior notes due February 1, 2021 at maturity, and we expect to pay our $250.0 million of 4.75% senior notes due February 1, 2022, with borrowings under our Revolving Credit Agreement. | | | | | | | | | | | | | | | | | |
| Maturity | | Outstanding Obligations as of March 31, 2022 |
| | | (Thousands of Dollars) |
Receivables Financing Agreement, 1.9% as of March 31, 2022 | January 31, 2025 | | $ | 72,000 | |
Revolving Credit Agreement, 3.0% as of March 31, 2022 | April 27, 2025 | | $ | 106,500 | |
5.75% senior notes | October 1, 2025 | | $ | 600,000 | |
6.00% senior notes | June 1, 2026 | | $ | 500,000 | |
5.625% senior notes | April 28, 2027 | | $ | 550,000 | |
6.375% senior notes | October 1, 2030 | | $ | 600,000 | |
GoZone Bonds 5.85% - 6.35% | 2038 | thru | 2041 | | $ | 322,140 | |
Subordinated Notes, 7.0% as of March 31, 2022 | January 15, 2043 | | $ | 402,500 | |
We believe that, as of June 30, 2021,March 31, 2022, we are in compliance with the ratios and covenants applicable to our debt obligations. A default under certain of our debt obligations would be considered an event of default under other of our debt obligations. Please refer to Note 5 of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for a discussion of certain of our debt obligations.
Guarantor Summarized Financial Information
Information. NuStar Energy has no operations, and its assets consist mainly of its 100% ownership interest in its indirectly owned subsidiaries, NuStar Logistics and NuPOP. The senior and subordinated notes issued by NuStar Logistics are fully and unconditionally guaranteed by NuStar Energy and NuPOP. Each guarantee of the senior notes by NuStar Energy and NuPOP ranks equally in right of payment with all other existing and future unsecured senior indebtedness of that guarantor, is structurally subordinated to all existing and any future indebtedness and obligations of any subsidiaries of that guarantor that do not guarantee the notes and ranks senior to its guarantee of our subordinated indebtedness. Each guarantee of the subordinated notes by NuStar Energy and NuPOP ranks equal in right of payment with all other existing and future subordinated indebtedness of that guarantor and subordinated in right of payment and upon liquidation to the prior payment in full of all other existing and future senior indebtedness of that guarantor. NuPOP will be released from its guarantee when it no longer guarantees any obligations of NuStar Energy or any of its subsidiaries, including NuStar Logistics, under any bank credit facility or public debt instrument. The rights of holders of our senior and subordinated notes may be limited under the U.S. Bankruptcy Code or state fraudulent transfer or conveyance law. Please refer to Note 5 of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for a discussion of certain of our debt obligations.
The following table presents summarized combined income statement and balance sheet information for NuStar Energy, NuStar Logistics and NuPOP (collectively, the Guarantor Issuer Group). Intercompany items among the Guarantor Issuer Group have been eliminated in the summarized combined financial information below, as well as intercompany balances and activity for the Guarantor Issuer Group with non-guarantor subsidiaries, including the Guarantor Issuer Group’s investment balances in non-guarantor subsidiaries.
| | | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 |
| | (Thousands of Dollars) | | (Thousands of Dollars) |
Summarized Combined Balance Sheet Information: | Summarized Combined Balance Sheet Information: | | Summarized Combined Balance Sheet Information: | |
Current assets | Current assets | $ | 52,004 | | | $ | 154,752 | | Current assets | $ | 27,791 | | | $ | 33,645 | |
Long-term assets | Long-term assets | $ | 2,895,016 | | | $ | 2,950,217 | | Long-term assets | $ | 2,770,973 | | | $ | 2,791,481 | |
Current liabilities (a) | Current liabilities (a) | $ | 109,676 | | | $ | 140,385 | | Current liabilities (a) | $ | 147,145 | | | $ | 119,841 | |
Long-term liabilities, including long-term debt | Long-term liabilities, including long-term debt | $ | 3,488,064 | | | $ | 3,609,306 | | Long-term liabilities, including long-term debt | $ | 3,158,526 | | | $ | 3,162,351 | |
Series D preferred limited partners interests | Series D preferred limited partners interests | $ | 607,718 | | | $ | 599,542 | | Series D preferred limited partners interests | $ | 621,018 | | | $ | 616,439 | |
| | | Six Months Ended June 30, 2021 | | Three Months Ended March 31, 2022 |
| | | (Thousands of Dollars) | | | (Thousands of Dollars) |
Summarized Combined Income Statement Information: | Summarized Combined Income Statement Information: | | Summarized Combined Income Statement Information: | |
Revenues | Revenues | | $ | 404,402 | | Revenues | | $ | 195,218 | |
Operating income | Operating income | | $ | 152,745 | | Operating income | | $ | 67,575 | |
Interest expense, net | Interest expense, net | | $ | (109,027) | | Interest expense, net | | $ | (49,877) | |
| Net income | Net income | | $ | 45,618 | | Net income | | $ | 18,825 | |
(a)Excludes $0.7$1,003.5 million and $0.6$1,004.5 million of net intercompany payables as of June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, due to the non-guarantor subsidiaries from the Guarantor Issuer Group.
Long-term assets for the non-guarantor subsidiaries totaled $2,541.1$2,087.2 million and $2,543.2$2,180.3 million as of June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. Revenue and net incomeloss for the non-guarantor subsidiaries totaled $384.3$214.6 million and $60.0$6.5 million, respectively, for the sixthree months ended June 30, 2021. Please refer to Note 5 of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for a discussion of certain of our debt obligations.March 31, 2022.
Interest Rate SwapsSeries D Preferred Units Redemption Features
Please refer to Note 7We may redeem all or any portion of the Condensed Notes23,246,650 Series D Preferred Units issued and outstanding in an amount not less than $50.0 million for cash at a redemption price equal to, Consolidated Financial Statementsas applicable: (i) $31.73 per Series D Preferred Unit, or up to $737.6 million, at any time on or after June 29, 2023 but prior to June 29, 2024; (ii) $30.46 per Series D Preferred Unit, or up to $708.1 million, at any time on or after June 29, 2024 but prior to June 29, 2025; (iii) $29.19 per Series D Preferred Unit, or up to $678.6 million, at any time on or after June 29, 2025; plus, in Item 1. “Financial Statements”each case, the sum of any unpaid distributions on the applicable Series D Preferred Unit plus the distributions prorated for the number of days elapsed (not to exceed 90) in the period of redemption (Series D Partial Period Distributions). The holders have the option to convert the units prior to such redemption.
Additionally, at any time on or after June 29, 2028, each holder of Series D Preferred Units will have the right to require us to redeem all of the Series D Preferred Units held by such holder at a discussionredemption price equal to $29.19 per Series D Preferred Unit, or approximately $678.6 million if all Series D Preferred Units are tendered, plus any unpaid Series D distributions plus the Series D Partial Period Distributions. If a holder of our interest rate swaps.Series D Preferred Units exercises its redemption right, we may elect to pay up to 50% of such amount in common units (which shall be valued at 93% of a volume-weighted average trading price of the common units); provided, that the common units to be issued do not, in the aggregate, exceed 15% of NuStar Energy’s common equity market capitalization at the time.
Environmental, Health and Safety
Our operations are subject to extensive international, federal, state and local environmental laws and regulations, in the U.S. and in the other countries in which we operate, including those relating to the discharge of materials into the environment, waste management, remediation, the characteristics and composition of fuels, climate change and greenhouse gases. Our operations are also subject to extensive health, safety and security laws and regulations, including those relating to worker and pipeline safety, pipeline and storage tank integrity and operations security. Because more stringent environmental and safety laws and regulations are continuously being enacted or proposed, the level of expenditures required for environmental, health and safety matters is expected to increase in the future.
Contingencies
We are subject to certain loss contingencies, and we believe that the resolution of any particular claim or proceeding, or all matters in the aggregate, would not have a material adverse effect on our results of operations, financial position or liquidity, as further disclosed in Note 6 of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements.”
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions related thereto that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Ongoing uncertainty surrounding the COVID-19 pandemic, including its duration and lingering impacts, and uncertainty surrounding future production decisions by oil producing nations continue to cause volatility and could significantly impact management’s estimates and assumptions. Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
NEW ACCOUNTING PRONOUNCEMENTS
Please refer to Note 2 of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for a discussion of new accounting pronouncements.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
We manage our exposure to changing interest rates principally through the use of a combination of fixed-rate debt and variable-rate debt. Borrowings under our variable-rate debt expose us to increases in interest rates.
On January 28, 2022, we amended and restated our $1.0 billion unsecured revolving credit agreement to extend the maturity to April 27, 2025, replace the LIBOR-based interest rate and modify other terms. Also on January 28, 2022, we amended our $100.0 million receivables financing agreement to extend the scheduled termination date to January 31, 2025, replace the LIBOR-based interest rate and modify other terms. Please refer to Note 5 of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for additional information about certain of our debt instruments.more information.
The following tables present principal cash flows and related weighted-average interest rates by expected maturity dates for our long-term debt, excluding finance leases:
| | | June 30, 2021 | | March 31, 2022 |
| | Expected Maturity Dates | | | | | | Expected Maturity Dates | | | | |
| | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total | | Fair Value | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total | | Fair Value |
| | (Thousands of Dollars, Except Interest Rates) | | (Thousands of Dollars, Except Interest Rates) |
Fixed-rate debt | Fixed-rate debt | $ | — | | | $ | 250,000 | | | $ | — | | | $ | — | | | $ | 600,000 | | | $ | 1,972,140 | | | $ | 2,822,140 | | | $ | 3,121,695 | | Fixed-rate debt | $ | — | | | $ | — | | | $ | — | | | $ | 600,000 | | | $ | 500,000 | | | $ | 1,472,140 | | | $ | 2,572,140 | | | $ | 2,641,192 | |
Weighted-average rate | Weighted-average rate | — | % | | 4.8 | % | | — | | | — | | | 5.8 | % | | 6.0 | % | | 5.9 | % | | — | | Weighted-average rate | — | | | — | | | — | | | 5.8 | % | | 6.0 | % | | 6.0 | % | | 6.0 | % | | — | |
Variable-rate debt | Variable-rate debt | $ | — | | | $ | — | | | $ | 259,200 | | | $ | — | | | $ | — | | | $ | 402,500 | | | $ | 661,700 | | | $ | 671,795 | | Variable-rate debt | $ | — | | | $ | — | | | $ | — | | | $ | 178,500 | | | $ | — | | | $ | 402,500 | | | $ | 581,000 | | | $ | 581,325 | |
Weighted-average rate | Weighted-average rate | — | | | — | | | 2.5 | % | | — | | | — | | | 6.9 | % | | 5.2 | % | | — | | Weighted-average rate | — | | | — | | | — | | | 2.6 | % | | — | | | 7.0 | % | | 5.6 | % | | — | |
|
| | | December 31, 2020 | | December 31, 2021 |
| | Expected Maturity Dates | | | | | | Expected Maturity Dates | | | | |
| | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total | | Fair Value | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total | | Fair Value |
| | (Thousands of Dollars, Except Interest Rates) | | (Thousands of Dollars, Except Interest Rates) |
Fixed-rate debt | Fixed-rate debt | $ | 300,000 | | | $ | 250,000 | | | $ | — | | | $ | — | | | $ | 600,000 | | | $ | 1,972,140 | | | $ | 3,122,140 | | | $ | 3,396,542 | | Fixed-rate debt | $ | — | | | $ | — | | | $ | — | | | $ | 600,000 | | | $ | 500,000 | | | $ | 1,472,140 | | | $ | 2,572,140 | | | $ | 2,858,794 | |
Weighted-average rate | Weighted-average rate | 6.8 | % | | 4.8 | % | | — | | | — | | | 5.8 | % | | 6.0 | % | | 5.9 | % | | — | | Weighted-average rate | — | | | — | | | — | | | 5.8 | % | | 6.0 | % | | 6.0 | % | | 6.0 | % | | — | |
Variable-rate debt | Variable-rate debt | $ | — | | | $ | — | | | $ | 57,000 | | | $ | — | | | $ | — | | | $ | 402,500 | | | $ | 459,500 | | | $ | 402,836 | | Variable-rate debt | $ | — | | | $ | 194,300 | | | $ | — | | | $ | — | | | $ | — | | | $ | 402,500 | | | $ | 596,800 | | | $ | 600,359 | |
Weighted-average rate | Weighted-average rate | — | | | — | | | 2.3 | % | | — | | | — | | | 7.0 | % | | 6.4 | % | | — | | Weighted-average rate | — | | | 2.5 | % | | — | | | — | | | — | | | 6.9 | % | | 5.4 | % | | — | |
Distributions on 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) 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 the 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. The Series A, B and C Preferred Units expose us to changes in interest rates as the distribution rate on our Series A Preferred Units converted to a floating rate of the applicable LIBOR plus a spread on December 15, 2021, and the distribution rates on our Series B and C Preferred Units convert from fixed rates to floating rates of the applicable LIBOR plus a spread on June 15, 2022 and December 15, 2022, respectively. Based upon the 9,060,000 Series A Preferred Units outstanding at March 31, 2022 and the $25.00 liquidation preference per unit, an increase of 100 basis points, or 1.0%, in interest rates would increase the annual distributions on our Series A Preferred Units by $2.3 million. Please see Note 9 of the Condensed Notes to Consolidated Financial Statements in Item 1. “Financial Statements” for additional information on our Series A, B and C Preferred Units.
Since the operations of our fuels marketing segment expose us to commodity price risk, we also use derivative instruments to attempt to mitigate the effects of commodity price fluctuations. Derivative financial instruments associated with commodity price risk were not material for any periods presented.
Item 4.Controls and Procedures
(a)Evaluation of disclosure controls and procedures.
Our management has evaluated, with the participation of the principal executive officer and principal financial officer of NuStar GP, LLC, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report, and has concluded that our disclosure controls and procedures were effective as of June 30, 2021.March 31, 2022.
(b)Changes in internal control over financial reporting.
There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1A. Risk Factors
Except as set forth below, there have been no material developments with respect to the risk factors previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and in Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. The information contained in this Item 1A. updates, and should be read in conjunction with, the related information set forth in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and in Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, in addition to the other information contained in this Quarterly Report on Form 10-Q.
The ongoing effects of the COVID-19 pandemic, the actions taken in response thereto and developments in the global oil markets may continue to adversely affect our business, financial condition, results of operations or cash flows.
The coronavirus, or COVID-19, had a severe negative impact on global economic activity during 2020, significantly reducing demand for petroleum products and increasing the volatility of crude oil prices, beginning in March 2020. While a number of countries, including the United States, have made significant progress in 2021 in deploying COVID-19 vaccines, which has improved economic conditions and outlook in those nations, many more continue to struggle to obtain and/or disseminate vaccinations to their populace, which is frustrating widespread global economic recovery. Even in the United States, if a sufficient proportion of people are not vaccinated to reach herd immunity, or as variants emerge, we may face additional resurgence in COVID-19 case count in some regions, as we have recently seen, which could slow the pace of domestic economic improvement and undermine rebounding demand in the markets our assets serve.
Ongoing uncertainty surrounding the COVID-19 pandemic, including its duration and lingering impacts to the economy, as well as uncertainty surrounding future production decisions by the Organization of Petroleum Exporting Countries and other oil-producing nations (OPEC+), have caused and may continue to cause volatility and could have a significant impact on management’s estimates and assumptions in 2021 and beyond. The extent of the impacts on our business, financial condition, results of operations and cash flows will depend on future developments that are highly uncertain and cannot be accurately predicted, such as: the duration and severity of the COVID-19 pandemic or other public health crises and the lingering impacts to the economy; uncertainty surrounding future production decisions by OPEC+; the state of the economy and the capital markets; changes to our customers’ refinery maintenance schedules and unplanned refinery downtime; crude oil prices; the supply of and demand for crude oil, refined products and anhydrous ammonia; demand for our transportation and storage services; the availability of personnel, equipment and services essential to our operations; the ability to obtain timely permitting approvals; and changes in laws and regulations affecting our operations.
We rely on our information technology and operational technology systems to conduct our business.Any significant cybersecurity breach or other significant disruption to those systems would cause our business, financial results and reputation to suffer, increase our costs and expose us to liability, and could adversely affect our ability to make distributions to our unitholders.
We rely on our information technology systems and our operational technology systems to process, transmit and store information, such as employee, customer and vendor data, and to conduct almost all aspects of our business, including safely operating our pipelines and storage facilities, recording and reporting commercial and financial transactions and receiving and making payments. We also rely on systems hosted by third parties, with respect to which we have limited visibility and control, and that have access to or store certain of our employee, customer and vendor data. The security of these networks and systems is critical to our operations and business strategy.
Although we take proactive steps to protect our company, systems and data from cyberattacks, such as implementing multiple layers of security, segregated systems and user access, antivirus tools, vulnerability scanning, monitoring and patch management, regular employee training, phishing tests, penetration tests, internal risk assessments, independent third-party assessments, tabletop exercises to test our incident response plan, enhanced cyber diligence of vendors and physical security measures, all companies are at risk of a cyberattack.The number and sophistication of reported cyberattacks by both state-sponsored and criminal organizations continue to increase, across industries and around the world, including recent attacks on operators of critical infrastructure assets, such as pipelines, as well as the third parties that provide technology services for critical infrastructure, in some cases with considerable negative impact on targeted companies’ ability to conduct business.
Like other companies, we recognize that, despite our security measures, we remain subject to cybersecurity incidents due to attacks from a variety of external threat actors, internal employee error or malfeasance and cybersecurity incidents suffered by our service providers, vendors or customers. In addition, in connection with COVID-19 precautions, many of our employees and those of our service providers, vendors and customers have been working, and some may continue to work, from home or other remote-work locations, where cybersecurity protections may be less robust and cybersecurity procedures and safeguards may be less effective. Moreover, certain attacker techniques and goals, such as surveillance, intelligence gathering or extended reconnaissance, may remain undetected for an extended period of time, which can increase the breadth and negative impact of
an incident. A significant failure, compromise, breach or interruption in our systems or those of third parties critical to our operations could result in a disruption of our operations; physical damage to our assets or the environment; physical, financial, or other harm to employees or others; safety incidents; damage to our reputation; loss of customers or revenues; increased costs for remedial actions; and potential litigation or regulatory fines. Failures, interruptions and similar events that result in the loss or improper disclosure of information maintained in our systems and networks or those of our vendors, including personnel, customer and vendor information, have in the past and may in the future require reporting under relevant contractual obligations and laws and regulations protecting personal data and privacy and could also subject us to litigation or other liability under relevant contractual obligations, laws and regulations. Our financial results could also be adversely affected if our systems are breached or an employee, vendor or customer causes our systems to fail, either as a result of inadvertent error or deliberate tampering with or manipulation of our systems.
Due to the continued acceleration of cyberattacks, generally and against our industry, regulatory actions by federal, state and local governmental agencies in the U.S. and in other countries in which we operate have increased. Evolving laws and regulations governing cybersecurity and data privacy and protection pose increasingly complex compliance challenges. Although we believe that we have robust cybersecurity procedures and other safeguards in place, we cannot guarantee their effectiveness, and a significant failure, compromise, breach or interruption in our systems or those of our customers or vendors could have a material effect on our operations and the operations of our customers and vendors. As threats continue to evolve and cybersecurity and data privacy and protection laws and regulations continue to develop, we spend and expect to continue spending additional resources to continue to enhance our cybersecurity, data protection, business continuity and incident response measures, to investigate and remediate any vulnerabilities to, or consequences of, cyber incidents, as well as to ensure continued regulatory compliance.
Item 6.Exhibits
| | | | | | | | |
Exhibit Number | | Description |
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| | |
| | |
| | |
10.01 | | Second Amended and Restated 5-Year Revolving Credit Agreement, dated as of January 28, 2022, among NuStar Logistics, L.P., NuStar Energy L.P. 2019 Long-Term Incentive Plan, NuStar Pipeline Operating Partnership L.P., Wells Fargo Bank, National Association, as Administrative Agent, and the lenders party thereto (incorporated by reference to Exhibit 10.110.1 to NuStar Energy L.P.’s Current Report on Form 8-K filed April 30, 2021January 31, 2022 (File No. 001-16417)) |
| | |
10.02 | | Sixth Amendment to Receivables Financing Agreement, dated as of January 28, 2022, by and among NuStar Finance, LLC, as Borrower, NuStar Energy L.P., as initial Servicer, and PNC Bank, National Association (incorporated by reference to Exhibit 10.2 to NuStar Energy L.P.’s Current Report on Form 8-K filed January 31, 2022 (File No. 001-16417)) |
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*10.0210.03 | | |
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22.01 | | |
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*31.01 | | |
| |
*31.02 | | |
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**32.01 | | |
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**32.02 | | |
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*101.INS | | Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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*101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
| | |
*101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
*101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| | |
*101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
| | |
*101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
*104 | | Cover Page Interactive Data File - Formatted in Inline XBRL and contained in Exhibit 101 |
* | Filed herewith. |
** | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NUSTAR ENERGY L.P.
(Registrant)
By: Riverwalk Logistics, L.P., its general partner
By: NuStar GP, LLC, its general partner
| | | | | | | | |
By: | | /s/ Bradley C. Barron |
| | Bradley C. Barron |
| | President and Chief Executive Officer |
| | AugustMay 6, 20212022 |
| | |
By: | | /s/ Thomas R. Shoaf |
| | Thomas R. Shoaf |
| | Executive Vice President and Chief Financial Officer |
| | AugustMay 6, 20212022 |
| | |
By: | | /s/ Jorge A. del Alamo |
| | Jorge A. del Alamo |
| | Senior Vice President and Controller |
| | AugustMay 6, 20212022 |