NuStar Energy L.P. Reports Fourth Quarter 2008 and Record Full Year 2008 Earnings and Announces Quarterly Distribution

NuStar Energy L.P. (NYSE:NS) today announced net income applicable to limited partners of $25.3 million, or $0.47 per unit, for the fourth quarter of 2008, compared to $22.6 million, or $0.47 per unit, for the fourth quarter of 2007. For the year ended December 31, 2008, net income applicable to limited partners was a record $224.7 million, or $4.22 per unit, over 1.5 times higher than the $129.2 million, or $2.74 per unit, earned in 2007.

Included in NuStar Energy L.P.’s earnings results for the fourth quarter of 2008 is a $22.7 million, or $0.41 per unit, net gain resulting primarily from the sale of non-strategic assets including an interest in the Skelly Belvieu pipeline located in Texas and three storage terminals located in Westwego, Louisiana; Milwaukee, Wisconsin; and Sparks, Nevada. The sale of the above-mentioned assets generated proceeds of $43.9 million, which were used to pay down debt. The full year 2008 earnings also include the impact from the sale of the assets and the $61.3 million, or $1.10 per unit, hedging loss incurred in the second quarter of 2008. Excluding the impact of these and other one-time items, 2008 earnings would have been significantly higher.

With respect to the quarterly distribution to unitholders for the fourth quarter of 2008, NuStar Energy L.P. also announced that its board of directors has declared a distribution of $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 fourth quarter of 2007 and will be paid on February 12, 2009, to holders of record as of February 5, 2009.

Distributable cash flow available to limited partners for the fourth quarter of 2008 was $28.8 million, or $0.53 per unit, compared to $34.9 million, or $0.72 per unit, for the fourth quarter of 2007. For the year ended December 31, 2008, distributable cash flow available to limited partners was a record $288.7 million, or $5.44 per unit, compared to $198.6 million, or $4.22 per unit, last year. Distributable cash flow available to limited partners for the fourth quarter of 2008 covers the distribution by 0.50 times. For the full year of 2008, distributable cash flow available to limited partners covers the distribution by a strong 1.33 times.

"I am excited to report that 2008 was a record year with earnings, distributable cash flow and EBITDA reaching all-time highs for NuStar,” said Curt Anastasio, Chief Executive Officer and President of NuStar Energy L.P. and NuStar GP Holdings, LLC. "By far, the biggest contributor to the increase in our earnings in 2008 was the addition of our asphalt operations, which generated $76 million of operating income in the first nine months we owned these assets.

"We also benefitted from the successful and timely completion of multiple storage expansion projects under our $400 million construction program, which contributed approximately $15 million of incremental operating income in 2008. With our record earnings, we achieved our stated goal of increasing the distribution by around 7 percent. In addition, primarily due to lower working capital requirements, we reduced our debt balance by nearly $300 million during the last six months of the year and currently have over $600 million of availability under our $1.2 billion revolver.

"With respect to our fourth quarter 2008 earnings, our results were weaker than expected primarily due to the unprecedented and rapid decline in crude oil and refined product prices since mid-September, which outpaced the slower decline in the weighted average costs of goods sold in our asphalt operations.

"Despite the sluggish economy, we are optimistic on the outlook for our three business segments for 2009. For our transportation business segment, we expect our results to be better as we will benefit from a tariff increase expected to be around 7.5 percent starting July 1, 2009, and our 2009 volumes should be comparable to 2008. Further, a gradual recovery in refined product demand by the second half of this year due to lower prices and an improving economy could generate stronger demand and benefit our pipeline volumes. Our storage segment results should be better in 2009 as we benefit from a full year’s contribution from the completed projects under our $400 million construction program, or around an incremental $23 million of operating income.

"Within our asphalt and fuels marketing segment, we are currently projecting earnings for our asphalt operations to be better in 2009 compared to 2008 as a result of better-than-historic margins from the tightening U.S. asphalt supply and demand picture. Similar to last year, a major impact to asphalt supply is expected to be the significant reduction of asphalt production at numerous refineries due to lower refinery utilization rates. Currently, U.S. asphalt inventory levels are well below last year and as a result of the expected refinery run cuts, we may see a new five-year average low for the start of the 2009 asphalt paving season. The proposed economic stimulus package is expected to provide additional highway funding and could generate significant demand further benefiting NuStar. In addition, the U.S. refinery coker projects we are tracking, which are expected to further tighten asphalt supply as they come on line, are proceeding as planned. This continues to support our bullish long-term view of the asphalt business,” said Anastasio.

A conference call with management is scheduled for 11:00 a.m. ET (10:00 a.m. CT) today, January 26, 2009, to discuss the financial and operational results for the fourth quarter and full year of 2008. Investors interested in listening to the presentation may call 800-622-7620, passcode 80060009. International callers may access the presentation by dialing 706-645-0327, passcode 80060009. The company intends to have a playback available following the presentation, which may be accessed by calling 800-642-1687, passcode 80060009. 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 8,491 miles of pipeline, 82 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 and company's beliefs as well as assumptions made by and information currently available to the partnership and company. These statements reflect the partnership and company'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. and NuStar GP Holdings, LLC.'s 2007 annual reports on Form 10-K and subsequent filings with the Securities and Exchange Commission.