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NuStar: Finding Profits on the Bottom of the Barrel

I received this response from Investor Relations at NuStar, please note his clarification:

To Whom it May Concern:

I am the Director of Investor Relations at NuStar and wanted to say I really enjoyed your recent article titled, "NuStar: Finding Profits on the Bottom of the Barrel."

However, I would like to clarify one point in the article.

In the article, Mike Pesch, Vice President of Refining at NuStar, explains the net shortage of asphalt as follows:

“The U.S. overall has a net shortage of around 20,000 barrels a day of asphalt. If these projects come in as we’re seeing them come in, you’re looking at a potential of extra demand in the United States of around 250,000 barrels a day.”

The word "projects" was not meant to describe the expected infrastructure projects from the proposed stimulus plan, but rather the "coker projects" that refineries will be undergoing over the next few years that we believe will result in this tighter supply of asphalt.

You see, the whole rationale as to why we purchased this business from CITGO in March 2008 was based on the installation of coker projects, not infrastructure projects.

This is part of a strategy that is based on our belief that asphalt margins will improve as supply will be limited compared to continuing global demand as more coker units are added by refineries in the U.S. and abroad. In fact, the whole notion of infrastructure projects was not even an topic of issue at the time we first announced the acquisition in November 2007.

To explain further the coker rationale….Higher refining margins have improved coker economics, which have led to many refineries to add coker projects in the U.S. and around the world. Coker units allow refineries to take what was formerly used to produce asphalt and upgrade it to higher value products like gasoline and diesel. As more of these coker units come online, the asphalt supply is expected to get tighter or as Mike Pesch mentions, going from 20,000 barrels per day net short asphalt to around 250,000 barrels per day net short asphalt by 2013.

So, we are not necessarily banking on infrastructure projects, but rather coker projects coming online and causing the asphalt market to become tighter.

The proposed stimulus plan is really just "extra gravy" for us if it comes to pass.

Please let me know if you have any further questions. Again, great article. Thank you.

Mark Meador

NuStar Investor Relations