EDA Lowers NuStar View as Crude Volumes Disappoint

The Daley Note: October 19, 2023

East Daley Analytics has lowered our forecast for NuStar Energy (NS) ahead of the company’s 3Q23 earnings following an underwhelming print last quarter by the Permian Crude segment.

In the latest NuStar Financial Blueprint, EDA revised down our forecast for crude oil volumes gathered by the NS Permian system in the Midland Basin. Given the volume impacts in 1H23, we have lowered our NS forecast for the year. We now expect Permian crude volumes to hit the low end of management’s exit-2023 guidance of 570-600 Mb/d.

The NS Permian segment exited 2022 at a gathering rate of 584 Mb/d, but well shut-ins from Winter Storm Elliott and lower rig activity resulted in 2Q23 volumes coming in much lower at just over 500 Mb/d. In the latest NuStar Blueprint, EDA forecasts the Permian system exits 2023 at a rate of ~570 Mb/d, a 2% decline vs the 2022 exit rate.

Despite the downgrade, the Permian crude system continues to be a source of future revenue growth for NuStar. East Daley expects system volumes to grow by 5% through YE25. Prices have rallied recently, but the backwardated WTI curve and continued consolidation in the basin could pose some risk to those volumes. We have observed notable rig attrition this year from companies involved in Permian merger activity. – James Taylor Tickers: NS.

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