NuStar Snaps Up AGE Refining Assets

San Antonio-based partnership NuStar Energy L.P. (NS - Analyst Report) has agreed to acquire certain refining and midstream properties from the bankrupt AGE Refining Inc. for $41 million. The purchase – already cleared by the U.S. Bankruptcy Court – is expected to close shortly. AGE Refining filed for Chapter 11 on February 8, 2010, citing a cash-flow crunch and is currently in the midst of a court-supervised sale process.

As per the deal, NuStar will buy AGE Refining’s 14,500 barrel-per-day refinery in San Antonio, Texas and a 200,000 barrels terminal in Elmendorf, Texas from the refiner's Chapter 11 Bankruptcy trustee. 

The low-cost refinery, which is based on the South Side of San Antonio, is involved in the purchase and processing of crude oils and condensates from across South Texas, including the rapidly developing Eagle Ford Shale. It manufactures and sells a number of products that include jet fuels, ultra-low sulphur diesel, naphtha, reformates, liquefied petroleum gas, specialty solvents, and other fuels, to commercial/retail customers and the US military.

The transaction, though relatively small, is being hailed as a great acquisition by NuStar, immediately adding to its earnings and distributable cash flow. The owner and operator of crude oil and refined products pipelines and storage facilities believes that the AGE Refining assets will provide the partnership with a significant economic benefit by capitalizing on the lower cost light crude oil coming out of the Eagle Ford Shale. NuStar also intends to take advantage of  lower transportation costs, given the proximity of the refinery to its operations.

NuStar Energy – which competes in the ‘Oil and Gas Pipelines’ industry with firms like Buckeye Partners L.P. (BPL - Analyst Report) and Pioneer Southwest Energy Partners L.P. (PSE - Snapshot Report) – has a Zacks #3 Rank (Hold rating) in the short run. It is the fourth largest independent liquids terminal operator in the world and second largest in the U.S., apart from being the number one asphalt producer on the East Coast and number three asphalt producer in the U.S.

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