NuStar Energy L.P. Reports Highest Quarterly Earnings in Partnerships History

NuStar Energy L.P. announced record net income applicable to limited partners of $141.5 million, or $2.60 per unit, for the third quarter of 2008, almost three times higher than the $45.4 million, or $0.97 per unit, earned in the third quarter of 2007. The third quarter 2008 results represent the highest quarterly earnings in the partnership’s history – up $1.59 per unit over the previous quarterly record of $1.01 per unit earned in the first quarter of 2008. For the nine months ended September 30, 2008, net income applicable to limited partners was significantly higher at $199.3 million, or $3.78 per unit, compared to $106.6 million, or $2.28 per unit, for the nine months ended September 30, 2007.

With respect to the quarterly distribution to unitholders for the third quarter of 2008, NuStar Energy L.P. previously announced that its board of directors had increased the quarterly distribution rate to $1.0575 per unit, which would equate to $4.23 per unit on an annual basis. This quarterly distribution represents an increase of $0.0725 per unit, or 7.4 percent, over the $0.985 distribution for the second quarter of 2008 and third quarter of 2007 and will be paid on November 12, 2008, to holders of record as of November 5, 2008.

NuStar Energy L.P. also reported record quarterly distributable cash flow available to limited partners for the third quarter of 2008 of $156.4 million, or $2.87 per unit, or nearly 115 percent higher than the $62.7 million, or $1.34 per unit, for the third quarter of 2007. For the nine months ended September 30, 2008, distributable cash flow available to limited partners was also significantly higher at $259.9 million, or $4.91 per unit, compared to $163.7 million, or $3.50 per unit for the nine months ended September 30, 2007. Distributable cash flow available to limited partners covers the third quarter distribution to the limited partners by a strong 2.72 times.

“This was an outstanding quarter with earnings reaching an all-time quarterly high of $2.60 per unit, up over 165 percent versus the same period last year,” said Curt Anastasio, Chief Executive Officer and President of NuStar Energy L.P. and NuStar GP Holdings, LLC. “Our strong financial performance was primarily due to excellent margins and robust sales volumes on our asphalt operations, which were acquired in March. Within our asphalt and fuels marketing segment, our asphalt operations generated $122.5 million of operating income in the third quarter, or 63 percent of total segment operating income. With wide sour crude discounts and strong asphalt and intermediate product prices, our product margins averaged $16.05 per barrel.

“As a result of our strong financial results, we were able to provide a solid increase in the quarterly distribution of over seven percent to $1.0575 per unit. In addition, largely due to the excess cash flows generated from the asphalt operations and lower working capital needs, we reduced our debt balances during the third quarter by around $130 million. We currently have ample capacity under our $1.25 billion revolving credit facility with approximately $500 million available to us.

“Although we sustained property damage at our Texas City, Texas Terminal as a result of Hurricane Ike, estimated to be around $18 million, I am pleased to report that substantial repairs have already been made at this facility and we are making excellent progress toward a full recovery soon. The financial impact to us from Hurricane Ike is expected to be limited to our insurance deductible of $1 million.

“We continue to finish multiple projects on our $400 million construction program and expect to be complete with this program by May 2009. We only have around $40 million more in capital expenditures left under this program, which primarily includes storage expansion projects at Texas City, Texas; St. James, Louisiana and Amsterdam in the Netherlands. We completed around $150 million of projects in the third quarter of 2008, including storage expansion and pipeline optimization projects at St. James, Louisiana; Jacksonville, Florida; Linden, New Jersey (i.e. New York Harbor); Amsterdam and Texas City. When completed, we expect all of the projects under our $400 million construction program will contribute approximately $45 million of annual operating income.

“While we expect earnings for the fourth quarter of 2008 to be down significantly from the third quarter primarily due to the seasonality of the asphalt operations, the full year of 2008 should be a record year with the highest annual earnings in the partnership’s history. Longer-term, we expect that asphalt supply markets will continue to tighten and margins will increase as the refinery coker units come online. And, although we have identified approximately $500 million of high-return internal growth projects that could be completed over the next two to three years, we have scaled back our budgeted strategic and reliability capital expenditures in 2009 to approximately $150 million in light of the current capital markets environment,” said Anastasio.

A conference call with management is scheduled for 11:00 a.m. ET (10:00 a.m. CT) today, October 23, 2008, to discuss the financial and operational results for the third quarter of 2008. Investors interested in listening to the presentation may call 800-622-7620, passcode 67543575. International callers may access the presentation by dialing 706-645-0327, passcode 67543575. The company intends to have a playback available following the presentation, which may be accessed by calling 800-642-1687, passcode 67543575. A live broadcast of the conference call will also be available on the company’s Web site at www.nustarenergy.com.

NuStar Energy L.P. is a publicly traded, limited partnership based in San Antonio, with 9,063 miles of pipeline, 85 terminal facilities, four crude oil storage tank facilities and two asphalt refineries with a combined throughput capacity of 104,000 barrels per day. One of the largest asphalt refiners and marketers in the U.S. and the second largest independent liquids terminal operator in the nation, NuStar has operations in the United States, the Netherlands Antilles, Canada, Mexico, the Netherlands and the United Kingdom. The partnership’s combined system has over 90 million barrels of storage capacity, and includes two asphalt refineries, crude oil and refined product pipelines, refined product terminals, a petroleum and specialty liquids storage and terminaling business, as well as crude oil storage facilities. For more information, visit NuStar Energy L.P.’s Web site at www.nustarenergy.com.