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NuStar Logistics LP, a fully owned affiliate of San Antonio-based publicly traded partnership NuStar Energy LP (NS - Analyst Report), is set to offer senior notes. NuStar Energy will be the parent guarantor of the notes while NuStar Pipeline Operating Partnership LP, another subsidiary of NuStar Energy, will remain the affiliate guarantor.

The net proceeds from the notes will be utilized for general partnership issues which includes the settlement of part of the outstanding debt under the revolving credit facility of NuStar Logistics. The debt was used for capital expenditures, working capital needs along with the repayment of senior notes.

On Jul 26, 2013, NuStar Energy announced better-than-expected second-quarter 2013 earnings, mainly due to higher contribution from Pipeline and Fuels marketing businesses.  NuStar Energy’s earnings per unit (EPU) from continuing operations came in at 27 cents, ahead of the Zacks Consensus Estimate of 21 cents. The results also came well ahead of the year-ago adjusted profit of 6 cents.  

NuStar Energy is a master limited partnership (MLP) that engages in the transportation and storage of crude oil as well as refined products in the U.S., the Netherlands Antilles, Canada, Mexico, and the U.K.

Over the last few years, NuStar Energy has consolidated its business through a combination of organic efforts and accretive acquisitions. We believe that the higher operating expenses associated with this expanded asset base may lead to reduced returns, going forward.

The partnership currently retains a Zacks Rank #5 (Strong Sell), implying that it is expected to significantly underperform the broader U.S. equity market over the next 1 to 3 months.

However, one can look at oil and gas production pipeline MLPs like Magellan Midstream Partners LP (MMP - Analyst Report), Delek Logistics Partners LP (DKL - Snapshot Report) and Pioneer Southwest Energy Partners LP that offer value. Magellan Midstream retains a Zacks Rank #1 (Strong Buy), while Delek Logistics and Pioneer Southwest Energy sport a Zacks Rank #2 (Buy).

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