NuStar Energy L.P. Reports Highest Quarterly Earnings in Partnership's History; Previously...

NuStar Energy L.P. Reports Highest Quarterly Earnings in Partnership's History; Previously Announced Increase in Quarterly Distribution to $1.0575 Per Unit

SAN ANTONIO--(Business Wire)--
NuStar Energy L.P. (NYSE:NS) today 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.

Cautionary Statement Regarding Forward-Looking Statements

This press release includes forward-looking statements regarding
future events. All forward-looking statements are based on the
partnership's beliefs as well as assumptions made by and information
currently available to the partnership. These statements reflect the
partnership's current views with respect to future events and are
subject to various risks, uncertainties and assumptions. These risks,
uncertainties and assumptions are discussed in NuStar Energy L.P.'s
2007 annual report on Form 10-K and subsequent filings with the
Securities and Exchange Commission.

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*T
NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information
(Unaudited, Thousands of Dollars, Except Unit Data and Per Unit Data)

Three Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------------
2008 2007 2008 2007
------------- ------------- ------------ ------------
Statement of
Income Data:
Revenues:
Services
revenues $ 187,104 $ 188,677 $ 547,775 $ 511,970
Product sales 1,638,122 208,340 3,247,805 502,903
------------- ------------- ------------ ------------
Total revenues 1,825,226 397,017 3,795,580 1,014,873

Costs and
expenses:
Cost of product
sales 1,467,152 199,023 3,036,077 475,011
Operating
expenses 127,095 91,981 322,473 258,637
General
and
administrative
expenses 20,358 16,118 55,985 48,607
Depreciation
and
amortization
expense 35,143 29,534 100,019 84,736
------------- ------------- ------------ ------------
Total costs
and expenses 1,649,748 336,656 3,514,554 866,991
------------- ------------- ------------ ------------
Operating income 175,478 60,361 281,026 147,882
Equity earnings
from joint
ventures 2,122 1,613 6,072 4,970
Interest
expense, net (25,228) (19,381) (67,027) (57,687)
Other income,
net 1,696 12,191 12,236 35,914
------------- ------------- ------------ ------------
Income before
income tax
expense 154,068 54,784 232,307 131,079
Income tax
expense 2,791 3,571 11,071 9,046
------------- ------------- ------------ ------------
Net income 151,277 51,213 221,236 122,033
Less net income
applicable to
general partner
(Note 1) (9,817) (5,842) (21,904) (15,414)
------------- ------------- ------------ ------------
Net income
applicable to
limited partners$ 141,460 $ 45,371 $ 199,332 $ 106,619
============= ============= ============ ============

Income per unit
applicable to
limited partners
(Note 1): $ 2.60 $ 0.97 $ 3.78 $ 2.28
============= ============= ============ ============

Weighted average
number of basic
units
outstanding 54,460,549 46,809,749 52,753,696 46,809,749

EBITDA (Note 2) $ 214,439 $ 103,699 $ 399,353 $ 273,502

Distributable
cash flow (Note
2) $ 164,649 $ 68,690 $ 282,007 $ 179,938

September 30, September 30, December 31,
2008 2007 2007
------------- ------------- ------------
Balance Sheet
Data:
Debt, including
current portion
(a) $ 2,051,486 $ 1,515,358 $ 1,446,289
Partners' equity
(b) 2,266,187 1,873,168 1,994,832
Debt-to-
capitalization
ratio (a) /
((a)+(b)) 47.5% 44.7% 42.0%
*T

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NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Barrel Data)

Three Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------

Segment Data: (Note 3)
Storage:
Throughput
(barrels/day) 713,323 844,511 756,319 802,622
Throughput revenues $ 22,640 $ 26,069 $ 68,790 $ 71,771
Storage lease
revenues 93,141 80,919 267,764 230,971
----------- ----------- ----------- -----------
Total revenues 115,781 106,988 336,554 302,742
Operating expenses 68,699 58,214 183,818 167,019
Depreciation and
amortization expense 16,900 15,886 49,548 46,322
----------- ----------- ----------- -----------
Segment operating
income $ 30,182 $ 32,888 $ 103,188 $ 89,401
=========== =========== =========== ===========

Transportation:
Refined products
pipelines throughput
(barrels/day) 652,174 719,385 682,214 661,709
Crude oil pipelines
throughput
(barrels/day) 398,341 410,758 405,276 369,184
----------- ----------- ----------- -----------
Total throughput
(barrels/day) 1,050,515 1,130,143 1,087,490 1,030,893
Revenues $ 81,163 $ 83,900 $ 233,970 $ 214,928
Operating expenses 39,543 32,677 99,873 89,609
Depreciation and
amortization expense 12,659 12,825 38,061 37,591
----------- ----------- ----------- -----------
Segment operating
income $ 28,961 $ 38,398 $ 96,036 $ 87,728
=========== =========== =========== ===========

Asphalt and fuels
marketing:
Product sales $1,638,122 $ 208,340 $3,247,834 $ 502,903
Cost of product sales 1,471,084 200,182 3,046,755 478,274
Operating expenses 24,770 2,142 50,848 4,446
Depreciation and
amortization expense 4,664 68 9,872 68
----------- ----------- ----------- -----------
Segment operating
income $ 137,604 $ 5,948 $ 140,359 $ 20,115
=========== =========== =========== ===========

Consolidation and
intersegment
eliminations:
Revenues $ (9,840) $ (2,211) $ (22,778) $ (5,700)
Cost of product sales (3,932) (1,159) (10,678) (3,263)
Operating expenses (5,917) (1,052) (12,066) (2,437)
Depreciation and
amortization expense 920 755 2,538 755
----------- ----------- ----------- -----------
Total $ (911) $ (755) $ (2,572) $ (755)
=========== =========== =========== ===========

Consolidated
Information:
Revenues $1,825,226 $ 397,017 $3,795,580 $1,014,873
Cost of product sales 1,467,152 199,023 3,036,077 475,011
Operating expenses 127,095 91,981 322,473 258,637
Depreciation and
amortization expense 35,143 29,534 100,019 84,736
----------- ----------- ----------- -----------
Segment operating
income 195,836 76,479 337,011 196,489
General and
administrative
expenses 20,358 16,118 55,985 48,607
----------- ----------- ----------- -----------
Consolidated
operating income $ 175,478 $ 60,361 $ 281,026 $ 147,882
=========== =========== =========== ===========
*T

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NuStar Energy L.P. and Subsidiaries
Consolidated Financial Information - Continued
(Unaudited, Thousands of Dollars, Except Unit Data and Per Unit Data)

Notes:
1. Net income is allocated between limited partners and the general
partner's interests based on provisions in the partnership
agreement. The net income applicable to limited partners is
divided by the weighted average number of limited partnership
units outstanding in computing the net income per unit applicable
to limited partners. The following table details the calculation
of net income applicable to the general partner:

Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------
2008 2007 2008 2007
--------- -------- --------- ---------
Net income applicable to
general partner and limited
partners' interest $151,277 $51,213 $221,236 $122,033
Less general partner
incentive distribution 6,929 4,915 17,835 13,238
--------- -------- --------- ---------
Net income after general
partner incentive
distribution 144,348 46,298 203,401 108,795
General partner interest 2% 2% 2% 2%
--------- -------- --------- ---------

General partner allocation
of net income after general
partner incentive
distribution 2,888 927 4,069 2,176
General partner incentive
distribution 6,929 4,915 17,835 13,238
--------- -------- --------- ---------
Net income applicable to
general partner $ 9,817 $ 5,842 $ 21,904 $ 15,414
========= ======== ========= =========

2. NuStar Energy L.P. utilizes two financial measures, EBITDA and
distributable cash flow, which are not defined in United States
generally accepted accounting principles. Management uses these
financial measures because they are widely accepted financial
indicators used by investors to compare partnership performance.
In addition, management believes that these measures provide
investors an enhanced perspective of the operating performance of
the partnership's assets and the cash that the business is
generating. Neither EBITDA nor distributable cash flow are
intended to represent cash flows for the period, nor are they
presented as an alternative to net income. They should not be
considered in isolation or as substitutes for a measure of
performance prepared in accordance with United States generally
accepted accounting principles.

The following is a reconciliation of net income to EBITDA and
distributable cash flow:

Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------
2008 2007 2008 2007
--------- --------- --------- ---------

Net income $151,277 $ 51,213 $221,236 $122,033
Plus interest expense,
net 25,228 19,381 67,027 57,687
Plus income tax expense 2,791 3,571 11,071 9,046
Plus depreciation and
amortization expense 35,143 29,534 100,019 84,736
--------- --------- --------- ---------
EBITDA 214,439 103,699 399,353 273,502
Less equity earnings from
joint ventures (2,122) (1,613) (6,072) (4,970)
Less interest expense,
net (25,228) (19,381) (67,027) (57,687)
Less reliability capital
expenditures (11,083) (11,597) (28,001) (23,558)
Less income tax expense (2,791) (3,571) (11,071) (9,046)
Plus distributions from
joint ventures - - 500 544
Mark-to-market impact on
hedge transactions (a) (8,566) 1,153 (5,675) 1,153
--------- --------- --------- ---------
Distributable cash flow 164,649 68,690 282,007 179,938

General partner's interest
in distributable cash flow (8,247) (5,956) (22,105) (16,230)
--------- --------- --------- ---------
Limited partners' interest
in distributable cash flow $156,402 $ 62,734 $259,902 $163,708
========= ========= ========= =========

Distributable cash flow per
limited partner unit $ 2.872 $ 1.340 $ 4.908 $ 3.497

(a) Distributable cash flow excludes the impact of mark-to-market
gains and losses which arise from valuing certain derivative
contracts.

3. Beginning in the second quarter of 2008, we changed the way we
report our segmental results. We combined the refined product
terminals and crude oil storage tanks segments into the storage
segment, and we combined the refined product pipelines and crude
oil pipelines segments into the transportation segment. Previous
periods have been restated to conform to this presentation. The
asphalt and fuels marketing segment includes all product sales and
related costs, including our two asphalt refineries, which we
acquired on March 20, 2008. Additional operational information
related to the asphalt and fuels marketing segment is available on
our website at www.nustarenergy.com under the investors portion of
the website.
*T

NuStar Energy, L.P., San Antonio
Investors, Mark Meador, Director,
Investor Relations: 210-918-2895
or
Media, Mary Rose Brown, Senior Vice President,
Corporate Communications: 210-918-2314
Web site: http://www.nustarenergy.com

Copyright Business Wire 2008