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NuStar Inks $750M Term-Loan Deal, Cuts Capex to Fight Coronavirus

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With oil price witnessing a free fall, NuStar Energy L.P. (NS - Free Report) recently announced slashing its 2020 capital budget for preserving liquidity. This capital spending cut for the current year is indicative of a roughly 45% or approximately $145 million reduction from the midpoint of its prior guidance of $300-$350 million. The firm further recognized $20-$30 million worth of manageable cost reductions for this year.

The oil price is persistently trending in the bear market territory since the coronavirus outbreak and its adverse impact on global energy demand. As a result, the outlook for all the industries in the energy sector business is downbeat. Thus, energy players are limiting their operational activities by trimming capital budgets.

Apart from cost containment, this San Antonio, TX-based firm signed a $750-million unsecured term-loan agreement with funds controlled by Oaktree Capital Management, L.P. to boost its near-term cash position.  The three-year, 12% debt financing facility will allow NuStar Energy to draw $500 million at closing plus an option to withdraw an additional $250 million during the first year. The partnership with Oaktree aims to make the most of the proceeds to reduce its revolver credit loan and strengthen its cash position to clear the short-term dues and debts.

On a significant note, NuStar Energy, which owns pipelines and storage terminals all over the country, will not only be guided by its key measures but also constantly scan the commodity price movement, further aligning itself with the capex alteration plans in response to an unpredictable price scenario.

The coronavirus-induced bleak demand scenario already inflicted maximum severity on energy E&P players as evidenced by a flurry of capex-cut announcements from the likes of energy entities, namely Matador Resources Company (MTDR - Free Report) , Apache Corporation (APA - Free Report) and Occidental Petroleum Corporation (OXY - Free Report) among others. Having said that, even oil and gas partnerships like the Zacks Rank #4 (Sell) NuStar Energy are not immune to this economic uncertainty.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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