Acquisition-Related Expenses Hurt NuStar

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On April 30, 2009, NuStar Energy(NS Quote) reported that its Q1 FY09 net income plunged 36.2%, hurt by additional expenses related to its acquisition of the former CITGO asphalt refining and marketing operations. Net income applicable to limited partners decreased to $31.64 million or $0.58 per unit from $49.56 million or $1.01 per unit in Q1 FY08. The latest quarterly results included a $4.70 million or $0.08 per unit gain, net of tax, related to property insurance proceeds received due to damage incurred from Hurricane Ike. Excluding the effect of the hurricane and other items, adjusted earnings were $25.80 million or $0.47 per unit, which beat the consensus estimate of $0.35 per unit.

Total revenue surged 7.0% to $634.00 million from $592.77 million, driven by product sales and an increase in services revenue. Services revenue increased 1.4% to $182.65 million from $180.12 million, while product sales advanced 9.4% to $451.35 million from $412.66 million a year ago. Segment-wise, revenue from storage rose 8.0% to $117.80 million from $109.11 million, supported by a 13.7% increase in the storage lease revenue. Revenue from transportation slipped 1.8% to $74.39 million from $75.78 million in the prior year's quarter. The asphalt and fuels marketing segment's product sales spiked 9.4% to $451.35 million from $412.66 million in Q1 FY08.

Reviewing NuStar's operational metrics, total transportation throughputs fell 8.6% to 1.01 million barrels per day (MMBbls/d) from 1.10 MMBbls/d, while storage throughput volumes plunged 25.1% to 595,943 barrels per day (Bbls/d) from 795,251 Bbls/d in Q1 FY08.

Recently, NuStar Energy declared a 7.4% higher quarterly distribution of $1.0575 per unit, amounting to $4.23 per unit on an annual basis, payable on May 15, 2009.

The company expects its Q2 FY09 earnings to range between $0.80 per unit and $1.20 per unit, while it anticipates a record earnings growth for full year FY09.