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Overview

NuStar Energy L.P. (NYSE:NS) engages operates in three segments: Storage, Transportation, and Asphalt and Fuels Marketing. The Storage segment operates terminal and storage facilities for petroleum products, specialty chemicals, crude oil, and other liquids; and crude oil storage tanks. Its terminals also offer pilotage, tug assistance, line handling, launch, emergency response, and other ship services. The Transportation segment transports refined petroleum products, crude oil, and anhydrous ammonia.

The Asphalt and Fuels Marketing segment refines crude oil to produce asphalt and other refined products. This segment also purchases gasoline and other refined petroleum products for resale. As of December 31, 2010, the company had 65 terminal and storage facilities providing approximately 80.4 million barrels of storage capacity; 5,605 miles of refined product pipelines with 21 associated terminals that offer storage capacity of 4.6 million barrels, as well as 2 tank farms providing storage capacity of 1.2 million barrels; 2,000 miles of anhydrous ammonia pipelines; 812 miles of crude oil pipelines with 16 associated storage tanks comprising storage capacity of 1.9 million barrels; and 2 asphalt refineries with a combined capacity of 104,000 barrels per day, as well as 2 associated terminal facilities with a combined storage capacity of 5.0 million barrels. Riverwalk Logistics, L.P.

Reasons to be bullish on NuStar Energy L.P.

  • Nustar energy has a diversified asset base and good long term distribution growth prospects.
  • The American Recovery and Revitalization Act should prove to be beneficial to Nustar as a good portion of these funds will be spent on highway improving projects. As a result, this should drive revenues higher in the Asphalt and fuels' marketing segments.
  • The majority of Nustars revenue is derived from an attractive group of fee- based (sort like a toll both operators) transportation and storage prospects.
  • It has a consistent track record of increasing distributions; the yearly distribution of $4.38 per unit is approximately 120% higher than its distribution rate of $2.00 per unit annualised at the time of its 2001 IPO.
  • Unlike many the traditional midstream businesses, which are suffering from lower throughput and lower transportation volumes. Nustars Asphalt business provides it with a steady stream of strong earnings and cash flow flows. Given the very tight supply and rising demand the outlook for the Asphalt business remains very bright going forward.
  • A good 5 year dividend average of 7.36%
  • It has consecutively increased dividends for 10 years in a row
  • It has a good 3 year total return of 71%
  • Net income has been trending higher in general for the past 3 years
  • Sales have been increasing nicely for the past 3 years and surged rather strongly from $4.4 billion in 2010 to $6.5 billion in 2011.
  • It sports a decent quick and current ratio of 1.34 and 1.22 respectively
  • Has a LT debt to equity ratio of 0.86
  • A decent interest coverage ratio of 4.47

NuStar Energy L.P.

Industry: Refining & Marketing

It has a free cash flow of $-38.7 million and a current ratio of 1.22 and an interest coverage ratio of 4.47

Performance

  • Total return for the past 3 years = 71.41%
  • Total return for the past 5 years = 30.46%
  • Total return for the past 12 months = -6.75%

Growth

  • Net income for the past three years
  • Net Income - 2011 = $225 million
  • Net Income - 2010 = $239 million
  • Net Income - 2009 = $222 million

  • EBITDA ($mil) 12/2011 = $N/A
  • EBITDA ($mil) 12/2010 = $483
  • EBITDA ($mil) 12/2009 = $461
  • Sales ($mil) 12/2011 = $6575
  • Sales ($mil) 12/2010 = $4403
  • Sales ($mil) 12/2009 = $3856

Dividend Sustainability

Total cash flow from operating activities

  • 2008 = $485.19 million
  • 2009 = $180.59 million
  • 2010 = $362.5 million

  • Payout Ratio 12/2011 = N/A
  • Payout Ratio 5 Yr Avg 12/2011 = 483
  • Change in Payout Ratio = 461
  • Other Key Important Ratios
  • Price to Sales = 0.65
  • Price to Book = 1.57
  • Price to Tangible Book = 2.38
  • Price to Cash Flow = 10.86
  • Price to Free Cash Flow = -8.7
  • Quick Ratio = 1.34
  • Current Ratio = 1.22
  • LT Debt to Equity = 0.86
  • Total Debt to Equity = 0.86
  • Interest Coverage = 4.47
  • Inventory Turnover = 8.28
  • Asset Turnover = 1.12

  • Dividend yield 5 year average = 7.36
  • Dividend rate = $ 4.36
  • Dividend growth rate 3 year avg = 2.2%
  • Dividend growth rate 5 year avg = 3.59
  • Consecutive dividend increases = 10 years
  • Paying dividends since = 2001
  • Total return last 3 years = 71.41%
  • Total return last 5 years = 30.46%

Related companies (Peer Group analysis)

Markwest Energy Partners L.P. (NYSE:MWE)

Industry: Equipment & Services

It has a free cash flow rate of $-38.18M and a current ratio of 1.14 and an interest coverage ratio of 7.67

Net income for the past three years

  • Net Income - 2011 = $ as of 9/31/2011 it stands at $134 million
  • Net Income - 2010 = $31 million
  • Net Income - 2009 = $-118.6 million
  • Net income=2008= $208 million

Total cash flow from operating activities

  • 2008 = $226 million
  • 2009=$223 million
  • 2010 = $312.33 million
  • 2011= as of 9/31/2011 it stands at $331 million
  • Dividend yield 5 year average = 9.02
  • Dividend rate = $ 2.86

  • Dividend growth rate 5 year avg = 6.27
  • Consecutive dividend increases = 1 years
  • Paying dividends since = 2002
  • Total return last 3 years = 610.63%

Magellan Midstream Partners LP (NYSE:MMP)

Industry: Equipment & Services

It has a free cash flow rate of $313 million and a current ratio of 2.05 and an interest coverage ratio of 3.24

Net income for the past three years

  • Net Income - 2011 = $226 million
  • Net Income - 2010 = $312 million
  • Net Income - 2009 = $414 million

Total cash flow from operating activities

  • 2008 = $435.58 million
  • 2009 = $269.44 million
  • 2010 = $424.66 million

  • Dividend yield 5 year average = 6.4
  • Dividend rate = $ 3.17
  • Dividend growth rate 3 year avg = 4.59%
  • Dividend growth rate 5 year avg = 5.29
  • Consecutive dividend increases = 10 years
  • Paying dividends since = 2001
  • Total return last 3 years = 176.02%
  • Total return last 5 years = 105.05%

Williams Partners L.P. (NYSE:WPZ)

Industry: Equipment & Services

It has a free cash flow rate of $541.88M and a current ratio of 0.73 and an interest coverage ratio of 4.35

Net income for the past three years

  • Net Income - 2011 = $1009 million
  • Net Income - 2010 = $1085 million
  • Net Income - 2009 = $N/A million

Total cash flow from operating activities

  • 2008 = $247.39 million
  • 2009 = $1.49 billion
  • 2010 = $1.82 billion

  • Dividend yield 5 year average = 7.93
  • Dividend rate = $ 2.96
  • Dividend growth rate 3 year avg = 5.9%
  • Dividend growth rate 5 year avg = 8.3
  • Consecutive dividend increases = 6 years
  • Paying dividends since = 2005
  • Total return last 3 years = 593.91%
  • Total return last 5 years = 71.46%

Targa Resources Partners LP (NYSE:NGLS)

Industry: Equipment & Services

It has a free cash flow rate of $50.31M and a current ratio of 1.16 and an interest coverage ratio of 2.81

Net income for the past three years

  • Net Income - 2011 = $-12 million
  • Net Income - 2010 = $109 million
  • Net Income - 2009 = $N/A million

Total cash flow from operating activities

  • 2008 = $95.24 million
  • 2009 = $422.9 million
  • 2010 = $371.2 million

  • Dividend yield 5 year average = 8.68
  • Dividend rate = $ 2.29
  • Dividend growth rate 3 year avg = 5.6%
  • Dividend growth rate 5 year avg = 27.51
  • Consecutive dividend increases = 4 years
  • Paying dividends since = 2007
  • Total return last 3 years = 549.08%
  • Total return last 5 years = 111.86%

Conclusion

While NuStar Energy L.P. is a good long term play, we would not quite rate it as great; there are other plays such as MWE and MMP which in our opinion could make for better long-term investments. In terms of rate of return, if one had invested 100K in MWE or MMP, it would have grown to $699K and 438K respectively contrary to $232K in NS.

Having said that the future does look bright for Nustar and past performance is no guarantee of future performance. The ideal strategy might be to split one's money over the three mentioned names. WPZ is also another good long term play. As the markets are extremely overbought long-term investors should consider waiting for a strong pull back before committing large sums of money to this market.

EPS, EPS surprise and operating by segment pie charts obtained from zacks.com. Earning's estimates and growth rate charts obtained from dailyfiance.com. Dividend history sourced from dividata.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies-let the buyer beware.

Source: NuStar Energy Vs. Peers As A Long-Term Dividend Play