NuStar to Significantly Expand Its Presence in Eagle Ford Shale Play with Accretive Acquisition; Con

NuStar to Significantly Expand Its Presence in Eagle Ford Shale Play with Accretive Acquisition; Continues Phase-Out of Margin-Based Businesses with Refinery Sale Process

NuStar to purchase crude assets and natural gas liquids assets from TexStar; initiates process to sell its San Antonio refinery

SAN ANTONIO--(BUSINESS WIRE)-- NuStar Energy L.P. (NYS: NS) today announced that it has signed an agreement to purchase crude oil pipeline, gathering and storage assets and natural gas liquids (NGL) assets in the Eagle Ford Shale region from TexStar Midstream Services LP for $425 million. The asset acquisition will close in two separate transactions and will likely be financed with a combination of borrowings under NuStar's credit facility and junior subordinated notes. The crude oil assets will be acquired first followed by the acquisition of the NGL assets a couple of months later.

The crude oil and NGL assets NuStar is acquiring will be integrated with NuStar's existing pipeline operations in the region. Upon successful completion of Federal Trade Commission review, the acquisition of the crude oil assets is expected to close in early December, while the NGL asset transaction is expected to be completed early in the first quarter of 2013, subject to certain closing conditions.

The company also announced today that it has initiated a sale process for its San Antonio refinery and related terminal in Elmendorf, Texas (purchased out of bankruptcy in April 2011). The assets include a pipeline NuStar constructed, which connects the terminal to the refinery.

"The TexStar acquisition and refinery divestiture are the next critical steps in our strategic redirection of NuStar away from the margin-based refining and marketing business in order to further grow our fee-based pipeline and storage operations through internal growth projects and acquisitions," said NuStar President and CEO Curt Anastasio. "NuStar was actually the first company to move Eagle Ford crude by pipeline, and we are fortunate to have extensive pipeline and terminal assets already in operation throughout the Eagle Ford region. In fact, we have more high-return investment opportunities in stable, fee-based transportation and storage projects than we have seen in the history of our company. With this acquisition, we are capturing the opportunity to fill up previously under-utilized and idle pipelines and to construct new pipeline connections and other logistics assets for further growth.

"And while fuels refining was not a part of our overall strategic plan when we purchased the San Antonio refinery and related assets, it was a relatively small transaction for us that presented an outstanding opportunity. We are extremely proud of the improvements we made at the refinery since we purchased it," Anastasio added. "The sales process we have initiated has attracted strong bidder interest and we expect to announce a definitive agreement within the next few weeks. As a result of this sale, we will be able to pay down debt, reduce our earnings volatility, and focus on more stable, high-return pipeline and terminal assets and expansion projects like this TexStar acquisition. At the same time, this transaction will give the refinery employees the opportunity to be a part of a refining company that has the depth of refining resources and expertise to provide the support the refinery needs to succeed over the long-term."

"We believe this sale will be very beneficial to our customers, our employees and South Texas," said Scott Martin, Co-CEO of TexStar Midstream Services, LP. "Partnering with NuStar, whose operations are also based in San Antonio will guarantee a smooth transition, while the economic upside of these assets will continue to benefit the local economy. We have been working in South Texas since before the Eagle Ford emerged and recognized early on the impact that the new play would have toward the production of energy and the resulting economic impact to the state of Texas. This foresight allowed TexStar to quickly see the opportunity set for expanded crude oil gathering and transportation in South Texas, positioning TexStar to be one of the first movers with its crude oil line. In addition, the sale of the crude oil assets will allow us to refocus on TexStar's gas gathering, treating and processing businesses. We believe the firm access this transaction will provide us to NGL transportation, fractionation and purity product takeaway will be a strong differentiator when compared to our competition."

Crude Oil Assets

The 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 (the Highway 16 terminal is currently under construction), 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 60,000 BPD, and that its 100,000-BPD capacity should be reached in the next few months. The majority of the throughput on this system is secured by long-term, take-or-pay commitments and acreage dedications from Eagle Ford producers and marketers.

NGL Assets

NuStar is also acquiring a 38-mile Y-grade NGL pipeline that runs from Pettus to Refugio, Texas and two fractionators that have a combined capacity of 57,000 BPD. In conjunction with the acquisition of these NGL assets, NuStar and TexStar plan to enter into take-or-pay Y-grade transportation and fractionation agreements.

"This NGL initiative offers an exciting new platform for the future growth of our company," said Anastasio. "We are strategically positioning ourselves to help Eagle Ford producers with the growing demand for NGL outlets by being able to transport and process NGLs as they produce petroleum reserves from the oil and wet gas regions of the shale play."

Y-grade will be transported on the acquired NGL pipeline and NuStar's existing 12-inch Houston pipeline that currently runs from Corpus Christi to Houston after the lines are connected in mid-2013. The Y-grade pipeline systems will also be capable of delivering NGLs to Mt. Belvieu through an extension of NuStar's Houston 12-inch pipeline. Anastasio noted that NuStar has $57 million invested in its Houston 12-inch pipeline, and it was projected to lose approximately $2 million in 2012 due to market conditions that made it more favorable for some of NuStar's customers to export refined products, rather than transport them to Houston on this pipeline. By integrating the Houston 12-inch pipeline into this Y-grade pipeline system, this once under-utilized asset will now help generate approximately $40 to $50 million in annual EBITDA once fully implemented.

Under the Y-grade transportation and fractionation agreements, TexStar will dedicate Y-grade NGL production from its Pettus, Texas natural gas processing plants for shipment on the acquired Y-grade NGL pipeline and NuStar's existing 12-inch pipeline to fractionators to be refurbished and constructed by NuStar near Corpus Christi.

Capital Spending Associated with Acquisition and Anticipated Return

In conjunction with this acquisition, NuStar expects to spend $400 to $500 million over the next 18 to 24 months (with the majority being spent in 2013) to complete the Y-grade pipeline system, finish the fractionator refurbishment and relocation project, and integrate the crude oil system with its current system.

Anastasio noted that the acquisition would not be accretive in 2013, but was expected to be very accretive going forward. "This acquisition and related capital spending should generate EBITDA in the six to eight times EBITDA multiple range we realize from most of our strategic capital projects. In fact, we anticipate this project will generate approximately $135 to $145 million of annual, incremental EBITDA once fully implemented. And, while we expect this transaction to contribute EBITDA to our 2013 results, the majority of the EBITDA benefit will be realized in 2014 and beyond. As a result, this transaction has the potential to significantly transform NuStar's earnings potential for the foreseeable future. We look forward to discussing all the details of these exciting opportunities that will assist in the strategic transformation of NuStar during a forthcoming special investor presentation that we expect to host in the next few weeks."

About NuStar Energy

NuStar Energy L.P., a publicly traded master limited partnership based in San Antonio, is one of the largest independent liquids terminal and pipeline operators in the nation. NuStar currently has 8,433 miles of pipeline; 82 terminal and storage facilities that store and distribute crude oil, refined products and specialty liquids; a fuels refinery with a throughput capacity of 14,500 barrels per day; and 50% ownership in two asphalt refineries with a combined throughput capacity of 104,000 barrels per day. The Partnership's combined system has approximately 94 million barrels of storage capacity, and NuStar has operations in the United States, Canada, Mexico, the Netherlands, including St. Eustatius in the Caribbean, the United Kingdom and Turkey. For more information, visit NuStar Energy L.P.'s Web site at www.nustarenergy.com.

About TexStar

TexStar is a full service midstream company focused on providing a full suite of midstream services to producers in South Texas. TexStar's goal is to provide the highest netback possible to producers for gas and natural gas liquids by providing low cost gathering, treating, compression and processing as well as access to multiple product outlets. TexStar's gas assets include over 500 miles of low pressure sour gas gathering systems located primarily in Frio and LaSalle counties, an acid gas treater and injection well ultimately capable of processing more than 250 MMCfd of inlet gas, a high pressure rich gas system consisting of over 130 miles of 24" and 16" inlet trunk lines and over 40 miles of 20" residue take away. Both the high pressure rich gas line and the residue take away line are currently co-owned through a joint venture with TEAK Midstream, LLC. Additionally, TexStar is currently constructing a cryogenic processing plant designed for 250 MMcfd of inlet gas capacity with estimated ethane recoveries in excess of 90%, which should be operational in April 2013. TexStar is headquartered in San Antonio, TX and is a portfolio company of funds managed by EIG Global Energy Partners and HM Capital Partners, LP. More information can be found at TexStar's website www.TexStarMS.com.

Within the text of this release, we make reference to certain non-GAAP financial measures, which should not be considered as alternatives to GAAP measures.Reconciliations of these non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP are included on our website at www.nustarenergy.comwithin the Investors tab.

Media:
NuStar Energy L.P.
Mary Rose Brown, 210-918-2314
maryrose.brown@nustarenergy.com
or
TexStar Midstream Services LP
Bruce Kates, 866-768-7794
Bruce.Kates@TexStarMS.com
or
Investors:
NuStar Energy L.P.
Chris Russell, 210-918-3507
chris.russell@nustarenergy.com

KEYWORDS: United States North America Texas

INDUSTRY KEYWORDS:

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