1
Forward Looking Statements This presentation includes forward-looking statements within the meaning of the Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of NuStar Energy L.P. and NuStar GP Holdings, LLC. All forward-looking statements are based on the companies beliefs as well as assumptions made by and information currently available to the companies. These statements reflect the companies 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 filings with the Securities and Exchange Commission. 2
NuStar Overview 3
NuStar Overview A leading publicly traded growthoriented partnership (NYSE: NS) One of the largest independent petroleum pipeline and terminal operators in the U.S. Second largest independent liquids Public Unitholders 36,563,957 NSH Units 86.0% Membership Interest NYSE: NSH William E. Greehey 5,944,418 NSH Units 14.0% Membership Interest terminal operator in the world Total unitholder return of around Public Unitholders 39,577,419 NS Units 77.7% L.P. Interest 2.0% G.P. Interest 20.3% L.P. Interest Incentive Distribution Rights 250% since April 2001 IPO Public owns approximately 78% of NYSE: NS NuStar Energy L.P. s common units NuStar GP Holdings, LLC (NYSE: NSH) holds remaining ownership of NuStar Energy L.P. including 2% general partner, 20.3% of NuStar Energy L.P. s common units and incentive distribution rights 4
Current Map of Operations Assets Stats: 9,113 miles of crude oil and refined product pipelines 85 terminal facilities and four crude oil storage tank facilities Approximately 81 million barrels of storage capacity 5
Pro Forma Map of Operations with CITGO Asphalt Refining Company Albany New Haven Bronx Perth Amboy St. Louis Hopewell Bristol Fulcro Gainesville Gwinnett Lithonia Charlotte Charleston CITGO-Wilmington Wilmington Tampa CITGO Asphalt Refinery NuStar Terminals Leased to CITGO CITGO owned Terminal CITGO leased Terminal Assets Stats: 9,113 miles of crude oil and refined product pipelines 88 terminal facilities and four crude oil storage tank facilities Nearly 86 million barrels of storage capacity with CITGO Asphalt 2 asphalt refineries capable of processing 104,000 bpd of crude oil 6
Sustained Growth Over Time Assets have grown over 11 times since April 2001 IPO Total Assets Pro Forma ~$4.4 billion $387 million 2001 2002 2003 2004 2005 2006 9/30/2007 Pro Forma 2008 Royal Trading Co. April 2001 Wichita Falls, South TX pipeline 2 asphalt St. James Crude Oil MLP IPO TX Business system terminals Facility CITGO Asphalt (OK & NM) Refining Company Southlake, TX terminal Crude oil storage facilities at Ringgold, TX UDS acquired by Valero Energy on December 31, 2001 Southlake, TX refined product pipeline Paulsboro, NJ refined product terminal Interest in Asphalt terminal Amarillo / (Pittsburg, CA) Abernathy / Lubbock, TX refined product pipeline Joint Venture - Dos Laredos propane terminal and pipeline system in South TX/Mexico Kaneb acquisition 4 pipeline systems; over 5,000 miles 79 terminal facilities Construction of more than 110 miles of pipeline in Northern Mexico/ South TX 3.3 million barrels of storage capacity Interest in Capwood pipeline (57-mile pipeline) in March 2006 7
Currently In the Midst of the Largest Internal Growth Program in the History of the Partnership NuStar Internal Growth Capex (Dollars in Millions) $214 Portland Vancouver $158 Stockton Linden & Optimization Baltimore $90 Savannah Jacksonville Amsterdam Terminal Expansion $2 $21 $20 $44 2002 2003 2004 2005 2006 2007 Budget 2007 Forecast Texas City St. James Ammonia Pipeline lateral St. Eustatius Terminal Expansion Numerous high-return storage and pipeline projects 2007 internal growth capital forecast around $55 million higher than 2007 budget Nearly all of the projects expected to be completed on time and on budget, despite increases in labor and material costs Most expected to be completed in early to mid-2008.benefiting 2008 results 8
Distribution Growth NuStar Energy L.P. Quarterly Distribution Increases ~8% Y-o-Y growth $0.95 $0.985 NuStar GP Holdings, LLC Quarterly Distribution Increases ~12.5% Y-o-Y growth $0.32 $0.32 $0.34 $0.36 $0.915 $0.915 $0.915 $0.885 $0.2574 * 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 3Q06 4Q06 1Q07 2Q07 3Q07 NuStar Energy L.P. increased the 3 rd quarter 2007 distribution to $0.985 per unit, or $3.94 per unit on an annual basis Increase of 7 cents per unit, or 7.7% over the $0.915 distribution for the 3 rd quarter of 2006 Strong coverage ratio of 1.36 times applicable to the limited partners Cost of capital lower as incentive distribution rights are capped at 25% NuStar GP Holdings, LLC increased the 3 rd quarter 2007 distribution to $0.36 per unit, or $1.44 per unit on an annual basis Increase of 4 cents per unit, or 12.5%, over the initial quarterly distribution of $0.32 per unit * Initial quarterly distribution for NSH is prorated for the period from closing of the initial public offering on July 19, 2006 to September 30, 2006 and is based on an initial quarterly distribution of $0.32 per unit. 9
Acquisition of CITGO Asphalt Refining Company 10
NuStar Energy L.P. to Acquire CITGO Asphalt Refining Company Purchase price of $450 million, plus an estimated $100 million for working capital at closing Expected to become the largest asphalt producer on the U.S. East Coast Attractive fundamentals expected to lead to higher asphalt margins Expected to be accretive to NuStar Energy L.P. s distributable cash flow Expect transaction to close around yearend 2007 11
CITGO Asphalt Asset Overview Business comprised of two refineries, three owned terminals, and leases on 20 third-party terminals Paulsboro, NJ Refinery: 74 mbpd Asphalt production is shipped to the Northeast Total storage capacity of 3.4 million barrels Savannah, GA Refinery: 30 mbpd Asphalt production shipped to the Southeast Sole refinery and asphalt producer on the Southeast seaboard Total storage capacity of 1.2 million barrels Wilmington, North Carolina Terminal Total storage capacity of 240,000 barrels 20 third-party leased terminals with total asphalt storage capacity of 3.8 million barrels Commitment to purchase annual average of 75,000 bpd of crude and 25,000 bpd asphalt per year over minimum 7 year period In 2006, these assets produced and marketed over 27 million barrels of asphalt and 9 million barrels of light products 12
Strategic Rationale Asphalt is a niche market Assets have been ignored by refinery consolidators and trade at discounts to replacement cost Two asphalt refineries being acquired at around 50% of replacement value Global supply/demand fundamentals for asphalt expected to benefit U.S. asphalt market Expect to see sustained increase in asphalt margins due to a tightening market Asphalt business generally insulated from economic downturns Potential to invest capital in high return projects at refineries Due to under-investment by previous owner, numerous low-hanging fruit projects available Continues to diversify NuStar s customer base and expands geographic presence NuStar is well-positioned to manage asphalt business Plan to leverage refining and marketing knowledge Anticipate opportunities for marketing, supply and trading businesses Expect to add attractive level of accretion to cash flows 13
CITGO Asphalt Acquisition Expected to be Distributable Cash Flow Accretive Financial projections for the asphalt business based on our projected economics Based on our forward projections, $675 million enterprise value (including $225 million of average inventories) represents a forward EBITDA multiple typical for refining assets Expect to holdback 50% of cash flow from asphalt business to account for volatility Maintaining a 2.0 times coverage ratio on cash flows from asphalt business Expect to see a material contribution to cash flows starting in the second quarter of 2008 Distributable cash flow per unit accretion, assuming 50% holdback, expected to be in the range of mid-to-high single digit percent for NuStar Energy L.P. and close to double that for NuStar GP Holdings, LLC 14
East Coast and West Coast are currently net short asphalt Previously, demand met by excess Mid- Continent and Gulf Coast production and further supplemented by imports Now, coker projects in Gulf Coast and Mid-Continent are expected to reduce asphalt supply Resulting imbalance expected to result in higher imports Shifting trade patterns expected to affect logistics requirements Shifting trade flows expected to drive margins upward and create further opportunities for NuStar Coker Additions Expected to Shift U.S. Asphalt Trade Patterns 2006 U.S. Inter-PADD Trade Flows 8 3 (thousands of barrels per day) 3 19 5 Imports from: Latin America Canada Europe Africa Projected 2012 U.S. Inter-PADD Trade Flows (thousands of barrels per day) 25 18 53 13 82 15 63 Imports from: Latin America Canada Europe Africa Sources: Poten & Partners; PIRA Refinery Database, Energy Information Agency 15 Note: Assumes no reduction in coker utilization rates and fuel oil production
Investment Highlights One of the largest independent petroleum pipeline and terminal liquids operators in the world Proven track record of growth and value creation through acquisitions and internal growth projects In the midst of the largest capital expenditure program in the history of the partnership Majority of $400 million construction program is underway One of only a few partnerships with incentive distribution rights capped at 25% Lower cost of capital makes NuStar more competitive in the acquisition market Acquisition of CITGO Asphalt Refining Company expected to provide attractive accretion to distributable cash flow Excellent opportunity to acquire assets at an attractive price Enhances ability to make future distribution increases 16
17