S.A.’S Nustar rebounds to profit in 1st quarter
San Antonio-based pipeline operator Nustar Energy swung to a healthy profit for the first quarter as the U.S. oil and gas industry’s recovery from the pandemic continued pushing ahead.
Demand for crude oil and refined petroleum products has reached pre-pandemic levels as COVID-19 vaccinations are being distributed and economic activity has begun to return, the company said. That helped push Nustar to a $42 million profit on $362 million in revenue during the three months spanning January through March. A year ago, it reported a loss of $148 million on $392.8 million in revenue.
“As America begins to recover from the impact of COVID-19 and begins returning to normal activity and growth, we are seeing signs of stabilization and improvement across the U.S. and in Nustar’s footprint,” said Brad Barron, president and CEO.
A hiccup was the winter storm in February, Nustar executives said, which caused the company to miss about $11 million in earnings because of production disruptions. The majority of the loss was caused by reduced oil demand in Texas, issues with freezing equipment in the Permian Basin and problems at an ammonia supplier’s facility, Nustar said.
Despite the weeklong downturn when most of Texas was
paralyzed, Nustar still saw refined product demand for the quarter average 95 percent of pre-pandemic demand.
Last year, Nustar gradually reduced the number of rigs it had in operation in the Permian Basin until it bottomed out at nine in August. By April, the company’s Permian rig count had bounced back to 25 — a signal of rebounding oil demand.
“This stronger refined product demand is contributing to higher crude prices, which are improving expectations for U.S. shale production, particularly in the Permian Basin,” Barron said.
The company moved 1.1 million barrels per day of crude oil and refined products through its 10,000-mile long pipeline network, which generated $79 million in income for the company.
Nustar’s fuel storage business also reported healthy results. The company’s 73 storage facilities averaged throughput of 400,000 barrels per day, and made the company $42 million in income.
The company’s revenue declined from the same period a year ago, and its pipeline and storage volumes also fell. But Nustar said the company’s yearago results were record-setting.
“First quarter 2020 was also a record-breaker with all-time high crude oil pipeline volumes,” said Tom Shoaf, chief financial officer. “Meanwhile, in the first quarter of 2021, we were still dealing with the lingering effects of the pandemic on the global economy and were significantly impacted by Winter Storm Uri and its aftermath.”
After Nustar’s earnings announcement, CFRA Analyst Stewart Glickman maintained a “hold” rating on its stock. He raised the target for Nustar shares by $4, to $21.
The company “said it expects its refined products business to run at pre-pandemic levels for the remainder of ’21,” Glickman said. “We estimate that NS can self-fund both its growth (capital expenditure) needs as well as dividends through” 2022.
Nustar units closed trading Tuesday at $19.00, down nearly 2.7 percent from Monday’s closing price.