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NuStar (NS) Signs $250M Contract to Offload Storage Terminals
NuStar Energy L.P. (NS - Free Report) announced the divestment of its oil storage terminals to Sunoco LP (SUN - Free Report) in a $250-million deal.
The divestment involves eight of the partnership’s oil storage terminals, of which seven are located on the East Coast and one in Florida. The facilities have a storage capacity of 14.8 million barrels. This represents about a fifth of NuStar’s overall storage space throughout its network, which covers the United States as well as facilities in Mexico and Canada.
NuStar’s network of storage facilities is focused in Texas and the Midwest. Notably, the decision to divest the eight terminals was made as these no longer complement the partnership’s pipeline and storage business, and fit into its long-term plans.
Henceforth, the best alternative for further development of the facilities and NuStar is to be owned by some other entities, which can utilize the terminals’ capabilities. Motor fuel distributor Sunoco possesses assets in New York Harbor and the Southeast United States, which will provide synergistic opportunities to ensure further achievements of the divested facilities.
Following the divestment, NuStar will be left with 64 storage facilities in North America. In December 2020, the company divested two storage terminals in Texas City, with a capacity of 3 million barrels. As the demand for oil and gas was approaching its end amid the pandemic, so did the space to hold the world’s oil.
NuStar intends to use the proceeds from the recent divestment to improve its debt metrics. The agreement is expected to complete by fourth-quarter 2021, subject to the satisfaction of customary closing conditions.
Company Profile & Price Performance
Headquartered in San Antonio, TX, NuStar is a midstream energy service provider. It engages in the transportation and storage of crude oil as well as refined products.
Shares of the partnership have underperformed the industry in the past three months. Its stock has lost 16.4% compared with the industry’s 4.7% decline.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
NuStar currently carries a Zack Rank #3 (Hold).
Some better-ranked players in the energy space are RPC, Inc. (RES - Free Report) and Viper Energy Partners LP (VNOM - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
RPC’s earnings for 2021 are expected to surge 330% year over year.
Viper Energy’s earnings for 2021 are anticipated to jump 51.5% year over year.