San Antonio-based publicly traded partnership NuStar Energy L.P. (NS Quick QuoteNS - Free Report) reported second-quarter earnings per limited partner unit of 52 cents, 3 cents ahead of the Zacks Consensus Estimate on robust results from its ‘Pipeline’ unit that held up well in the face of commodity downturn. Cost control initiatives helped too.

However, the owner and operator of crude oil and refined products pipelines and storage facilities’ bottom line deteriorated from the year-ago quarter figure of 54 cents amid a light quarter from the ‘Storage’ and ‘Fuels marketing’ businesses.

Quarterly revenues of $437.8 million beat the Zacks Consensus Estimate of $424 million but was well below the year-ago level of $570.6 million.

Quarterly Distribution

Last week, NuStar announced a quarterly distribution of $1.095 per unit ($4.38 per unit annualized), which remains unchanged from the year-earlier as well as previous-quarter distributions. The distribution is payable on Aug 12 to unitholders of record as on Aug 9, 2016.

As per NuStar’s earnings release, distributable cash flow (DCF) available to limited partners for the second quarter was $92.8 million (providing 1.09x distribution coverage), compared with $92.2 million (providing 1.08x distribution coverage).

Segmental Performance

Pipeline:Total quarterly throughput volumes in the segment were 938,368 barrels per day (Bbl/d), down 3% from the year-ago period. While throughput volumes in the crude oil pipelines plunged 15% from the year-ago quarter to 399,372 Bbl/d, refined product pipelines throughput was up 8% to 538,996 Bbl/d.

Throughput revenues remained essentially flat year-over-year at $121.6 million. The segment’s operating income – at $63.6 million – was slightly down from the year-ago figure of $64.8 million, primarily due to decreased throughput volumes from crude oil pipelines.

Storage:Throughput volumes in the Storage segment fell 24% year over year to 727,857 Bbl/d. This brought about a 4% decline in the unit’s quarterly revenues – from $157.6 million in the second quarter of 2015 to $151.9 million.

The segment reported operating income of $51.1 million, which marks a 5% deterioration from $53.8 million earned in the year-ago quarter. Lower throughput terminal revenues were responsible for the downside. 

Fuels Marketing:The unit reported operating income of $1.4 million, almost halving from the year-ago profit of $2.7 million. Results were hampered by a 43% dip in revenues from product sales.

Costs & Expenses

The partnership incurred total costs of $346.6 million, down 28% year-over-year. In particular, operating expenses came in at $112.7 million - 4% lower from the corresponding period of last year.

Balance Sheet

As of Jun 30, 2016, the partnership had total debt of $3,205.7 million, which represents a debt-to-capitalization ratio of 68.3%.

Guidance

NuStar – a spinoff of refiner Valero Energy Corp. (VLO Quick QuoteVLO - Free Report) – stuck to its 2016 segment guidance for the ‘Pipeline’ and ‘Storage’ units but lowered its outlook for the ‘Fuels and Marketing’ segment. Full year growth capital b budget was maintained at $180-$200 million. Finally, NuStar noted that it plans to do away with quarterly guidance in the future and will only provide annual narrative.

Zacks Rank and Key Stock Picks

Currently, NuStar carries a Zacks Rank #3 (Hold).

Some better-ranked energy pipeline partnerships are Enbridge Energy Partners L.P. and Rose Rock Midstream L.P. . Both stocks carry a Zacks Rank #2 (Buy).

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