NuStar Energy

The fortunes of U.S. midstream companies in 2020 and beyond will be largely determined by how shrewdly they invested during the frenzied infrastructure build-out of the past few years. One of the most interesting case studies is San Antonio-based NuStar Energy, a master limited partnership born in 2001 to hold refiner Valero Energy’s midstream assets and spun off as a separate entity in 2007. In May 2017, as the industry was still recovering from the late 2014 plunge in crude oil prices, the MLP made a major play to capture growing Permian production through the ~$1.5 billion acquisition of Navigator Energy, which owned a crude oil gathering, transportation, and terminaling system in the Midland Basin. The purchase was widely panned as overpriced by analysts and investors, and NuStar’s unit price plummeted by 60%. But by 2019, the company’s Permian acquisition — and soaring exports from its Corpus Christi terminal — drove big year-on-year gains in NuStar’s fourth-quarter 2019 operating income and EBITDA. Today, we preview our new Spotlight report on NuStar.

With Permian crude oil production now topping 4 MMb/d — and likely to surpass 5 MMb/d in short order — producers in the play are working closely with midstream companies to help ensure there is sufficient capacity in place to efficiently transport their crude from the lease to larger shuttle systems, regional hubs and takeaway pipelines. Sometimes, gathering systems need to be built from scratch, but in most cases, it is more cost-effective to expand existing systems that are already connected to key infrastructure downstream. Today, we continue our series with a look at a big pipeline network that NuStar Energy acquired two-plus years ago and has been expanding and improving ever since.