NuStar Energy L.P. Reports Second Quarter 2007 Earnings and Announces Quarterly Distribution Increase

NuStar Energy L.P. (NYSE:NS) today announced net income applicable to limited partners of $34.6 million, or $0.74 per unit, for the second quarter of 2007 compared to $27.5 million, or $0.59 per unit, earned in the second quarter of 2006. For the six months ended June 30, 2007, net income applicable to limited partners was $61.2 million, or $1.31 per unit, compared to $62.8 million, or $1.34 per unit, for the six months ended June 30, 2006. Distributable cash flow available to limited partners from continuing operations for the second quarter of 2007 was $53.6 million, or $1.15 per unit, compared to $41.4 million, or $0.88 per unit, for the second quarter of 2006. For the six months ended June 30, 2007, distributable cash flow available to limited partners from continuing operations was $101.0 million, or $2.16 per unit, compared to $94.8 million, or $2.03 per unit, for the six months ended June 30, 2006. As of June 30, 2007, the partnership’s debt-to-capitalization ratio was 43.7 percent compared to 41.9 percent as of December 31, 2006. NuStar Energy L.P. also announced that its board of directors has declared an increase in the quarterly distribution rate to $0.95 per unit, or $3.80 per unit on an annual basis, which will be paid on August 14, 2007, to holders of record as of August 7, 2007. This quarterly distribution represents an increase of $0.065 per unit, or 7.3 percent, over the $0.885 distribution for the second quarter of 2006 and an increase of $0.035 per unit, or 3.8 percent, over the $0.915 distribution for the first quarter of 2007. Distributable cash flow available to limited partners covers the distribution to the limited partners by 1.21 times for the second quarter of 2007. Included in the second quarter 2007 results in other income is a $13.0 million gain, or $0.27 per unit, related to a fee paid to NuStar Energy L.P. as a result of Valero Energy Corporation exercising its option in the second quarter to terminate the 2007 Services Agreement early. Also, included in the second quarter 2007 results in other income is $7.1 million of income, or $0.15 per unit, related to the business interruption insurance claim for the impact of the fire at Valero Energy’s McKee refinery that started in mid-February. Despite recording $7.1 million of business interruption insurance income, the Valero Energy McKee refinery incident still negatively impacted earnings by approximately $6.8 million, or $0.14 per unit, related to when the refinery was shutdown or running at reduced rates in the first and second quarters. "We are pleased to report yet another increase in the quarterly distribution,” said Curt Anastasio, NuStar Energy L.P.’s Chief Executive Officer. "With this increase, our quarterly distribution is nearly 60 percent higher than it was when the partnership went public in 2001. "By the end of this year, we will be on track to complete an additional $116 million of internal growth projects, several of which are expected to be in-service in the next couple of months. These projects, which will add over 2.7 million barrels of additional committed storage to our existing 80 million barrel storage capacity, are located at our terminals in Amsterdam, St. Eustatius, Portland, Texas City, Linden (New York Harbor), Vancouver and Stockton. In addition, by February 2008, another $49 million of storage expansion projects are expected to be complete, including other storage projects at our terminals in Amsterdam and St. Eustatius. We are also now moving forward with a storage expansion project at our terminal in Jacksonville, Florida, where we are looking to spend around $21 million to expand this facility by nearly 500,000 barrels under a committed storage agreement. "Looking ahead to the third quarter of 2007, we believe results will be in the range of $0.75 to $0.85 per unit. We continue to expect that earnings before interest, taxes, depreciation and amortization ("EBITDA”) will be higher in 2007 than in 2006. With the majority of our internal growth projects coming online in late 2007 and in 2008 and the new marketing, supply and trading businesses we have started in asphalt and other products, we feel confident that next year is lining up to be a great year for the partnership,” said Anastasio. A conference call with management is scheduled for 2:30 p.m. ET (1:30 p.m. CT) today to discuss the financial results for the second quarter of 2007. Investors interested in listening to the presentation may call 800/622-7620, passcode 6576918. International callers may access the presentation by dialing 706/645-0327, passcode 6576918. The company intends to have a playback available following the presentation, which may be accessed by calling 800/642-1687, passcode 6576918. A live broadcast of the conference call will also be available on the partnership’s Web site at www.nustarenergy.com. NuStar Energy L.P. is a publicly traded, limited partnership based in San Antonio, with 9,113 miles of pipeline, 86 terminal facilities and four crude oil storage tank facilities. One of the largest independent terminal and petroleum liquids pipeline operators in the nation, the partnership has operations in the United States, the Netherlands Antilles, Canada, Mexico, the Netherlands and the United Kingdom. The partnership’s combined system has approximately 80 million barrels of storage capacity, and includes 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 within the meaning of the Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of NuStar Energy L.P. 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 2006 annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission. NuStar Energy L.P. Consolidated Financial Information June 30, 2007 and 2006 (unaudited, thousands of dollars, except unit data and per unit data)   Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Statement of Income Data: Revenues: Services revenues $ 160,060 $ 152,094 $ 317,342 $ 300,023 Product sales 160,446 127,874 299,988 253,949 Total revenues 320,506 279,968 617,330 553,972   Costs and expenses: Cost of product sales 148,061 118,283 275,988 232,501 Operating expenses 85,444 79,155 166,656 150,225 General and administrative expenses 17,581 10,375 32,489 18,935 Depreciation and amortization 27,860 24,839 55,202 49,028 Total costs and expenses 278,946 232,652 530,335 450,689 Operating income 41,560 47,316 86,995 103,283 Equity earnings from joint ventures 1,746 1,844 3,357 3,050 Interest expense, net (19,452) (16,604) (38,306) (32,300) Other income (expense), net 17,626 (272) 24,249 (41) Income from continuing operations before income tax expense 41,480 32,284 76,295 73,992 Income tax expense 1,783 492 5,475 2,611 Income from continuing operations 39,697 31,792 70,820 71,381 Loss from discontinued operations, net of income tax - (239) - (377) Net income applicable to general partner and limited partners' interest 39,697 31,553 70,820 71,004 Net income applicable to general partner (Note 1) (5,118) (4,041) (9,572) (8,240) Net income applicable to limited partners $ 34,579 $ 27,512 $ 61,248 $ 62,764     Income per unit applicable to limited partners (Note 1):   Continuing operations $ 0.74 $ 0.60 $ 1.31 $ 1.35 Discontinued operations - (0.01) - (0.01) Net income $ 0.74 $ 0.59 $ 1.31 $ 1.34   Weighted average number of limited partnership units outstanding 46,809,749 46,809,749 46,809,749 46,809,749   EBITDA from continuing operations (Note 2) $ 88,792 $ 73,727 $ 169,803 $ 155,320   Distributable cash flow from continuing operations (Note 2) $ 59,020 $ 45,772 $ 111,248 $ 103,577       June 30, June 30, December 31, 2007 2006 2006 Balance Sheet Data: Debt, including current portion (a) $ 1,446,044 $ 1,159,482 $ 1,354,367 Partners' equity (b) 1,862,473 1,891,092 1,875,681 Debt-to-capitalization ratio (a) / ((a)+(b)) 43.7% 38.0% 41.9% NuStar Energy L.P. Consolidated Financial Information - Continued June 30, 2007 and 2006 (unaudited, thousands of dollars, except barrel information)   Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006   Operating Data: Refined product terminals: Throughput (barrels/day) 227,953 265,277 229,360 258,811 Throughput revenues $ 11,852 $ 12,876 $ 23,300 $ 23,416 Storage lease revenues 71,908 60,493 141,156 120,026 Product sales (bunkering) 157,937 127,874 297,479 253,949 Total revenues 241,697 201,243 461,935 397,391 Cost of product sales 146,636 118,283 274,563 232,501 Operating expenses 52,529 50,092 103,522 94,071 Depreciation and amortization 13,398 11,041 26,586 21,947 Segment operating income $ 29,134 $ 21,827 $ 57,264 $ 48,872   Refined product pipelines: Throughput (barrels/day) 647,887 709,480 632,393 705,248 Throughput revenues $ 55,139 $ 52,201 $ 108,563 $ 104,247 Product sales 1,963 - 1,963 - Total revenues 57,102 52,201 110,526 104,247 Cost of product sales 1,062 - 1,062 - Operating expenses 25,832 23,736 49,908 43,538 Depreciation and amortization 11,264 10,603 22,272 20,742 Segment operating income $ 18,944 $ 17,862 $ 37,284 $ 39,967   Crude oil pipelines: Throughput (barrels/day) 348,482 440,691 348,052 434,219 Throughput revenues $ 10,116 $ 14,868 $ 22,465 $ 28,917 Operating expenses 3,651 4,290 7,024 7,987 Depreciation and amortization 1,261 1,283 2,494 2,532 Segment operating income $ 5,204 $ 9,295 $ 12,947 $ 18,398   Crude oil storage tanks: Throughput (barrels/day) 564,588 484,322 551,971 498,618 Throughput revenues $ 11,589 $ 11,656 $ 22,402 $ 23,417 Operating expenses 2,951 1,037 5,721 4,629 Depreciation and amortization 1,937 1,912 3,850 3,807 Segment operating income $ 6,701 $ 8,707 $ 12,831 $ 14,981   Other: Product sales $ 546 $ - $ 546 $ - Cost of product sales 370 - 370 - Operating expenses 1,018 - 1,018 - Segment operating income $ (842) $ - $ (842) $ -   Intersegment eliminations: Revenues $ (544) $ - $ (544) $ - Cost of product sales (7) - (7) - Operating expenses (537) - (537) - Total $ - $ - $ - $ -   Consolidated Information: Revenues $ 320,506 $ 279,968 $ 617,330 $ 553,972 Cost of product sales 148,061 118,283 275,988 232,501 Operating expenses 85,444 79,155 166,656 150,225 Depreciation and amortization 27,860 24,839 55,202 49,028 Segment operating income 59,141 57,691 119,484 122,218 General and administrative expenses 17,581 10,375 32,489 18,935 Consolidated operating income $ 41,560 $ 47,316 $ 86,995 $ 103,283 NuStar Energy L.P. Consolidated Financial Information - Continued June 30, 2007 and 2006 (unaudited, thousands of dollars, except unit data and per unit data)     Notes: 1. Income is allocated between limited partners and the general partner's interests based on provisions in the partnership agreement. The income applicable to limited partners is divided by the weighted average number of limited partnership units outstanding in computing the income per unit applicable to limited partners.   The following table details the calculation of net income applicable to the general partner:   Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006     Net income applicable to general partner and limited partners' interest $ 39,697 $ 31,553 $ 70,820 $ 71,004 Less general partner incentive distribution 4,413 3,480 8,323 6,960 Net income after general partner incentive distribution 35,284 28,073 62,497 64,044 General partner interest 2% 2% 2% 2% General partner allocation of net income after general partner incentive distribution 705 561 1,249 1,280 General partner incentive distribution 4,413 3,480 8,323 6,960 Net income applicable to general partner $ 5,118 $ 4,041 $ 9,572 $ 8,240     2. NuStar Energy L.P. utilizes two financial measures, EBITDA from continuing operations and distributable cash flow from continuing operations, 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 from continuing operations nor distributable cash flow from continuing operations are intended to represent cash flows for the period, nor are they presented as an alternative to income from continuing operations. 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 income from continuing operations to EBITDA from continuing operations and distributable cash flow from continuing operations:   Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006   Income from continuing operations $ 39,697 $ 31,792 $ 70,820 $ 71,381 Plus interest expense, net 19,452 16,604 38,306 32,300 Plus income tax expense 1,783 492 5,475 2,611 Plus depreciation and amortization 27,860 24,839 55,202 49,028 EBITDA from continuing operations 88,792 73,727 169,803 155,320 Less equity earnings from joint ventures (1,746) (1,844) (3,357) (3,050) Less interest expense, net (19,452) (16,604) (38,306) (32,300) Less reliability capital expenditures (7,335) (10,052) (11,961) (16,216) Less income tax expense (1,783) (492) (5,475) (2,611) Plus distributions from joint ventures 544 1,037 544 2,434 Distributable cash flow from continuing operations 59,020 45,772 111,248 103,577   General partner's interest in distributable cash flow from continuing operations (5,410) (4,396) (10,274) (8,792) Limited partners' interest in distributable cash flow from continuing operations $ 53,610 $ 41,376 $ 100,974 $ 94,785   Weighted average number of limited partnership units outstanding 46,809,749 46,809,749 46,809,749 46,809,749   Distributable cash flow from continuing operations per limited partner unit $ 1.145 $ 0.884 $ 2.157 $ 2.025