NuStar Energy L.P. Reports Record First Quarter 2008 Earnings and Announces Quarterly Distribution

NuStar Energy L.P. (NYSE:NS) today announced net income applicable to limited partners of $51.8 million, or $1.05 per unit, for the first quarter of 2008, nearly double the $26.7 million, or $0.57 per unit, earned in the first quarter of 2007. The partnership's first quarter 2008 results represent the highest quarterly earnings in the partnership's history. Included in the first quarter 2008 results in other income is a $4.3 million gain, or $0.08 per unit, for the sale of an idle refined products pipeline; $3.3 million of income, or $0.06 per unit, related to settlement of the business interruption insurance claim for the impact of the fire at Valero Energy's McKee refinery last year; and $1.8 million, or $0.04 per unit, related to a non-cash foreign exchange gain on U.S. dollars held by our Canadian subsidiary. Excluding the impact of these and other items, adjusted earnings for the first quarter of 2008 would have been $43.8 million, or $0.89 per unit, which still represents the highest first quarter earnings in the partnership’s history. Distributable cash flow available to limited partners for the first quarter of 2008 was $70.3 million, or $1.42 per unit, compared to $47.4 million, or $1.01 per unit, for the first quarter of 2007. Distributable cash flow available to limited partners covers the distribution to the limited partners by 1.44 times for the first quarter of 2008. With respect to the quarterly distribution to unitholders for the first quarter of 2008, NuStar also announced that its board of directors has declared a distribution of $0.985 per unit, or $3.94 per unit on an annual basis, which will be paid on May 14, 2008, to holders of record as of May 7, 2008. "2008 is off to a great start with the highest quarterly earnings in the partnership’s history,” said Curt Anastasio, Chief Executive Officer and President of NuStar Energy L.P. and NuStar GP Holdings, LLC. "During the quarter, we benefited from increased throughputs on our pipelines and terminals serving Valero Energy’s McKee refinery, higher storage lease and throughput revenues on several of our refined product terminals and a higher contribution from our marketing and trading businesses. With the remainder of the projects in our $400 million construction program expected to be in service during the year and the recent completion of the CITGO Asphalt Refining Company acquisition, 2008 is shaping up to be an exciting year for NuStar. "With respect to our recent acquisition of CITGO Asphalt Refining Company, which we closed on March 20 near the end of the first quarter, we continue to expect these assets will be a significant contributor to our distributable cash flow in 2008, particularly in the second and third quarters during the asphalt paving season. "Our employees have done a terrific job integrating these assets in the short time that we have owned them and I am very pleased with the quality of the assets, the management team and the employees. We are in a great position to build upon the asset base having identified around $35 million of high-return, quick pay-back projects at both the Paulsboro and Savannah refineries that can be implemented in the next six to 24 months. Most of these are projects that focus on allowing greater flexibility to run different crude oil qualities at the refineries. Other projects focus on increasing the energy efficiency of the refineries, increasing the production of the higher quality, higher value polymer modified asphalt and improving the yields and quality of roofing flux and intermediate products. Longer term, we continue to evaluate other projects that focus on the increased flexibility to diminish our exposure to the seasonality of the asphalt business and increase refinery throughput in the off season. "Looking ahead to the second quarter of 2008, we expect to benefit from the recently acquired asphalt business as asphalt margins should recover from weak first quarter levels. These increasing margins are driven by seasonal asphalt demand ramping up during the second quarter, as well as low inventory levels on the U.S. East Coast compared to last year,” said Anastasio. A conference call with management is scheduled for 11:00 a.m. ET (10:00 a.m. CT) today, April 22, 2008, to discuss the financial and operational results for the first quarter of 2008. Investors interested in listening to the presentation may call 800-622-7620, passcode 42662979. International callers may access the presentation by dialing 706-645-0327, passcode 42662979. The company intends to have a playback available following the presentation, which may be accessed by calling 800-642-1687, passcode 42662979. A live broadcast of the conference call will also be available on the company’s Web site at www.nustarenergy.com. Further information on the conference call is provided in a management presentation posted to the NuStar Energy L.P. and NuStar GP Holdings, LLC Web sites at www.nustarenergy.com and www.nustargp.com in the Investors portion of the Web sites. NuStar Energy L.P. is a publicly traded, limited partnership based in San Antonio, with 9,063 miles of pipeline, 85 terminal facilities, four crude oil storage tank facilities and two asphalt refineries with a combined throughput capacity of 104,000 barrels per day. One of the largest asphalt refiners and marketers in the U.S. and the second largest independent liquids terminal operator in the nation, NuStar has operations in the United States, the Netherlands Antilles, Canada, Mexico, the Netherlands and the United Kingdom. The partnership’s combined system has over 86 million barrels of storage capacity, and includes two asphalt refineries, crude oil and refined product pipelines, refined product terminals, a petroleum and specialty liquids storage and terminaling business, as well as crude oil storage facilities. For more information, visit NuStar Energy L.P.'s Web site at www.nustarenergy.com. Cautionary Statement Regarding Forward-Looking Statements This press release includes forward-looking statements regarding future events. All forward-looking statements are based on the partnership's beliefs as well as assumptions made by and information currently available to the partnership. These statements reflect the partnership's current views with respect to future events and are subject to various risks, uncertainties and assumptions. These risks, uncertainties and assumptions are discussed in NuStar Energy L.P.'s 2007 annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission. NuStar Energy L.P. Consolidated Financial Information March 31, 2008 and 2007 (unaudited, thousands of dollars, except unit data and per unit data)     Three Months Ended March 31, 2008   2007 Statement of Income Data: Revenues: Service revenues $ 180,326 $ 160,353 Product sales 412,658   136,471   Total revenues 592,984 296,824   Costs and expenses: Cost of product sales 389,284 127,927 Operating expenses 89,507 81,212 General and administrative expenses 16,321 14,908 Depreciation and amortization expense 30,276   27,342   Total costs and expenses 525,388   251,389   Operating income 67,596 45,435 Equity earnings from joint ventures 2,249 1,611 Interest expense, net (16,902 ) (18,854 ) Other income, net 9,684   6,623   Income before income tax expense 62,627 34,815 Income tax expense 4,562   3,692   Net income 58,065 31,123 Less net income applicable to general partner (Note 1) (6,246 ) (4,454 ) Net income applicable to limited partners $ 51,819   $ 26,669       Net income per unit applicable to limited partners (Note 1) $ 1.05   $ 0.57     Weighted average number of basic units outstanding 49,409,749 46,809,749   EBITDA (Note 2) $ 109,805 $ 81,011   Distributable cash flow (Note 2) $ 77,262 $ 52,228   March 31,   December 31, 2008 2007 Balance Sheet Data: Debt, including current portion (a) $ 2,203,299 $ 1,446,289 Partners' equity (b) 1,994,644 1,994,832 Debt-to-capitalization ratio (a) / ((a)+(b)) 52.5% 42.0% NuStar Energy L.P. Consolidated Financial Information - Continued March 31, 2008 and 2007 (unaudited, thousands of dollars, except barrel information)     Three Months Ended March 31, 2008   2007   Operating Data: Refined product terminals: (Note 3) Throughput (barrels/day) 291,762 241,774 Throughput revenues $ 13,498 $ 11,737 Storage lease revenues 83,918   73,864   Total revenues 97,416 85,601 Operating expenses 52,459 50,810 Depreciation and amortization expense 14,021   13,188   Segment operating income $ 30,936   $ 21,603     Refined product pipelines: (Note 3) Throughput (barrels/day) 694,772 616,728 Revenues $ 60,745 $ 53,424 Operating expenses 26,179 24,365 Depreciation and amortization expense 11,368   11,008   Segment operating income $ 23,198   $ 18,051     Crude oil pipelines: Throughput (barrels/day) 405,964 347,617 Revenues $ 15,034 $ 12,349 Operating expenses 3,939 3,373 Depreciation and amortization expense 1,237   1,233   Segment operating income $ 9,858   $ 7,743     Crude oil storage tanks: Throughput (barrels/day) 503,489 539,214 Revenues $ 11,907 $ 10,813 Operating expenses 2,335 2,770 Depreciation and amortization expense 1,930   1,913   Segment operating income $ 7,642   $ 6,130     Refining and marketing: (Note 3) Product sales $ 412,658 $ 136,471 Cost of product sales 392,457 129,043 Operating expenses 6,218 612 Depreciation and amortization expense 918   -   Segment operating income $ 13,065   $ 6,816     Consolidation and intersegment eliminations: Revenues $ (4,776 ) $ (1,834 ) Cost of product sales (3,173 ) (1,116 ) Operating expenses (1,623 ) (718 ) Depreciation and amortization expense 802   -   Total $ (782 ) $ -     Consolidated information: Revenues $ 592,984 $ 296,824 Cost of product sales 389,284 127,927 Operating expenses 89,507 81,212 Depreciation and amortization expense 30,276   27,342   Segment operating income 83,917 60,343 General and administrative expenses 16,321   14,908   Consolidated operating income $ 67,596   $ 45,435   NuStar Energy L.P. Consolidated Financial Information - Continued March 31, 2008 and 2007 (unaudited, thousands of dollars, except unit data and per unit data)   Notes: 1. Net income is allocated between limited partners and the general partner's interests based on provisions in the partnership agreement. The net income applicable to limited partners is divided by the weighted average number of limited partnership units outstanding in computing the net income per unit applicable to limited partners. The following table details the calculation of net income applicable to the general partner:   Three Months Ended March 31, 2008   2007     Net income applicable to general partner and limited partners' interest $ 58,065 $ 31,123 General partner incentive distribution 5,188 3,910 Net income after general partner incentive distribution 52,877 27,213 General partner interest 2% 2% General partner allocation of net income after general partner incentive distribution 1,058 544 General partner incentive distribution 5,188 3,910 Net income applicable to general partner $ 6,246 $ 4,454   2. NuStar Energy L.P. utilizes two financial measures, EBITDA and distributable cash flow, which are not defined in United States generally accepted accounting principles. Management uses these financial measures because they are widely accepted financial indicators used by investors to compare partnership performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the partnership's assets and the cash that the business is generating. Neither EBITDA nor distributable cash flow are intended to represent cash flows for the period, nor are they presented as an alternative to net income. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles. The following is a reconciliation of net income to EBITDA and distributable cash flow:   Three Months Ended March 31, 2008 2007   Net income $ 58,065 $ 31,123 Plus interest expense, net 16,902 18,854 Plus income tax expense 4,562 3,692 Plus depreciation and amortization expense 30,276   27,342   EBITDA 109,805 81,011 Less equity earnings from joint ventures (2,249 ) (1,611 ) Less interest expense, net (16,902 ) (18,854 ) Less reliability capital expenditures (7,369 ) (4,626 ) Less income tax expense (4,562 ) (3,692 ) Plus distributions from joint ventures 500 - Mark-to-market impact on hedge transactions (a) (1,961 )   -   Distributable cash flow 77,262 52,228   General partner's interest in distributable cash flow (6,929 ) (4,864 ) Limited partners' interest in distributable cash flow $ 70,333   $ 47,364     Weighted average number of limited partnership units outstanding 49,409,749 46,809,749   Distributable cash flow per limited partner unit $ 1.423 $ 1.012   (a) Distributable cash flow excludes the impact of mark-to-market gains and losses which arise from valuing certain derivative contracts that are considered economic hedges. We enter into these contracts to mitigate our exposure to price fluctuations related to our inventory.   3. The refining and marketing segment includes our two asphalt refineries, which we acquired on March 20, 2008, as well as our marketing and trading operations. During the fourth quarter of 2007, we revised the manner in which we internally evaluate our segment performance and made certain organizational changes. As a result, we changed the way we report our segmental information such that all product sales and related costs and assets are included in the refining and marketing segment. Previous periods have been restated to conform to this presentation.