San Antonio, TX-based NuStar Energy LP (NYSE: NS) has closed on the purchase of crude oil pipeline, gathering and storage assets in the Eagle Ford Shale region from TexStar Midstream Services LP for approximately $325 million. The company is also acquiring natural gas liquids (NGL) assets from TexStar that are also in the Eagle Ford Shale region for approximately $100 million, and that acquisition is expected to close in the first quarter of 2013, subject to certain closing conditions.
The closing of the TexStar acquisition comes on the heels of NuStar’s announcement that the company plans to sell its San Antonio refinery, and another announcement that it has entered into a long-term pipeline and terminal services agreement with ConocoPhillips that will allow expansion of NuStar’s South Texas Crude Oil Pipeline System. All of these transactions are part of NuStar’s announced strategic redirection away from the margin-based refining and marketing business in order to further grow its fee-based pipeline and storage operations through internal growth projects and acquisitions.
“The TexStar acquisition and related projects make NuStar one of the top logistics players in the Eagle Ford Shale region. The crude oil assets we are purchasing from TexStar will be integrated with our existing pipeline and storage system in South Texas, and this will further integrate NuStar with producers and marketers of Eagle Ford Shale crude oil,” said Curt Anastasio, president and CEO of NuStar. It will also provide Eagle Ford crude producers with greater ability to move production to Corpus Christi, where they will have access to NuStar’s Corpus Christi storage and dock space that can be utilized for shipments to other markets.
“It is important to note that these crude oil assets should begin generating cash flow immediately, and NuStar takes on no commodity or margin risk as a result of this transaction or the NGL asset transaction,” Anastasio added.
Crude oil assets
The crude asset acquisition includes a crude pipeline system that spans from LaSalle County and Frio County to Live Oak County. The system has the capacity to transport 100,000 barrels per day (BPD) of crude oil and consists of approximately 140 miles of crude transmission and gathering lines. NuStar is also acquiring five storage terminals located along the pipeline system that have a combined capacity of 643,400 barrels. They include TexStar’s Gardendale terminal in LaSalle County, its Highway 85 terminal in Frio County, its Highway 97 and Highway 16 terminals in McMullen County, and its Oakville terminal in Live Oak County. The TexStar system was connected to NuStar’s recently constructed 600,000-barrel Oakville storage terminal and the crude is transported to NuStar’s 1.6-million-barrel Corpus Christi North Beach storage terminal via its existing 16-inch pipeline.
Anastasio noted that the system is currently transporting approximately 70,000 b/d, and that its 100,000-b/d capacity should be reached by mid-2013. Approximately 90% of the throughput on this system is secured by long-term, take-or-pay commitments and acreage dedications from Eagle Ford producers and marketers.
NuStar expects to spend $65 to $85 million over the next 18 to 24 months (with the majority being spent in 2013) to integrate and complete crude gathering and terminal assets, and projected EBITDA from the assets is expected to range between $10 and $30 million in 2013, between $45 and $65 million in 2014, and between $50 and $70 million in 2015 and beyond when the assets are completed and fully integrated.
Anastasio noted that approximately $330 million of growth capital will be required to complete NGL projects after that acquisition closes, and estimated EBITDA generated from the NGL assets should be in the $40 to $60 million range in 2014, and in the $70 to $90 million range in 2015 and beyond upon completion of the NGL asset projects.