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Midstream companies move down and back up again with oil prices

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NuStar’s share price is 22.5% higher this year

By: Jennifer Hill

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Even in what’s supposed to be the boring part of the oil and gas business, it’s interesting times.

Midstream companies, which transport and store crude oil and petroleum products, are traditionally touted as the stable-and-steady segment of the energy industry, but even they have tracked crude oil’s dive down — and risen with this year’s tentative oil price recovery.

 After dropping 30 percent in 2015 with the oil bust, San Antonio-based pipeline company NuStar Energy LP’s share price is up 22.5 percent this year. It closed at $50.17 Friday.

Share prices at other large midstream companies are up too for the year: Kinder Morgan by 33 percent and Plains All American Pipeline by 14 percent.

Analyst Brian Gamble of Simmons & Co. said midstream remains a variable business subject to the cycles of the oil market, but much of the angst of the oil bust has been absorbed already by midstream companies. Those that needed to file bankruptcy to restructure have done so. Others, like NuStar, have been biding their time on some projects.

NuStar reports its second-quarter financial results Tuesday morning. Analysts expect the San Antonio-based master limited partnership to earn 50 cents per unit, according to an average estimate of 12 analysts polled by Thomson Financial Network. That would be down from 54 cents per unit in the second quarter last year.

“I think the overall story for NuStar is it’s been on an even keel for a while and it remains that way,” said Gamble.

NuStar Energy LP in June said it had pushed back by a year a joint project to export liquefied petroleum gases and refined fuels by pipeline to Mexico. Executive changes at Petroleos Mexicanos, Mexico’s national oil company known as Pemex, delayed the project to 2017.

Gamble said the delay shouldn’t have any negative ramification for NuStar because low oil prices have taken time pressure off that project. “While not ideal, it’s not a huge fly in the ointment. They’ve got time to get that done,” he said. “You never want to see a delay, but when you’re dealing with foreign government, a delay is expected at times. It doesn’t speak ill for the fate of the project.”

Gamble said NuStar also has been realistic about not getting any sort of growth from its assets in the Eagle Ford Shale in South Texas right now. The giant shale field started to boom in late 2008, but drilling has slowed dramatically while exploration and production companies pull back spending.

“They’re seeing the Eagle Ford take a pause. Their assets are still posited to benefit when oil bounces back,” Gamble said.

Last year, a record amount of crude oil from the Eagle Ford Shale in South Texas moved through NuStar’s system, helping boost the company’s performance for 2015 to record levels. This year, falling crude oil prices have meant NuStar is moving less Eagle Ford oil. Instead it has benefited from a high volume of crude oil in storage.

NuStar has around 8,700 miles of pipeline and 79 terminal and storage facilities that store and distribute crude oil, refined products and specialty liquids. It has operations in the U.S., Canada, Mexico, the Netherlands and United Kingdom.


TAGS: Oil, Crude, Shale, Gas


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