ns-20240331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 1-16417

NuStar Energy L.P.

(Exact name of registrant as specified in its charter)


Delaware						74-2956831
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

19003 IH-10 West

San Antonio, Texas 78257

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (210) 918-2000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Units

New York Stock Exchange

8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

NSprA

New York Stock Exchange

7.625% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

NSprB

New York Stock Exchange

9.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units

NSprC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The number of common units outstanding as of April 26, 2024 was 126,535,349.

Table of Contents

NUSTAR ENERGY L.P.

FORM 10-Q

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	3
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and 2023	4
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	5
	Consolidated Statements of Partners’ Equity and Mezzanine Equity for the Three Months Ended March 31, 2024 and 2023	6
	Condensed Notes to Consolidated Financial Statements	7
	1. Organization and Basis of Presentation	7
	2. New Accounting Pronouncements	8
	3. Revenue from Contracts with Customers	9
	4. Debt	10
	5. Commitments and Contingencies	11
	6. Partners’ Equity	11
	7. Net Income per Common Unit	13
	8. Supplemental Cash Flow Information	14
	9. Segment Information	15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	Cautionary Statement Regarding Forward-Looking Information	16
	Overview	16
	Results of Operations	18
	Liquidity and Capital Resources	21
	Critical Accounting Estimates	25
	New Accounting Pronouncements	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	27

PART II – OTHER INFORMATION



Item 5.	Other Information	28

Item 6.	Exhibits	28

SIGNATURES		29

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited, Thousands of Dollars, Except Unit Data)


	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	5,374	$	2,765
Accounts receivable	140,522		135,787

Inventories	18,057		18,623

Prepaid and other current assets	22,061		29,927

Total current assets	186,014		187,102
Property, plant and equipment, at cost	5,825,323		5,789,927
Accumulated depreciation and amortization	(2,560,477)		(2,507,390)
Property, plant and equipment, net	3,264,846		3,282,537
Intangible assets, net	466,654		476,063
Goodwill	732,356		732,356




Other long-term assets, net	212,255		218,334
Total assets	$	4,862,125	$	4,896,392

Liabilities and Partners’ Equity
Current liabilities:
Accounts payable	$	62,793	$	77,050

Current portion of finance leases	4,958		4,951

Accrued interest payable	77,903		39,975
Accrued liabilities	74,535		88,062

Taxes other than income tax	8,443		10,948


Total current liabilities	228,632		220,986
Long-term debt, less current portion of finance leases	3,394,454		3,410,338

Deferred income tax liability	3,940		3,933

Other long-term liabilities	216,236		214,854
Total liabilities	3,843,262		3,850,111

Commitments and contingencies (Note 5)

Partners’ equity (Note 6):
Preferred limited partners
Series A (9,060,000 units outstanding as of March 31, 2024 and December 31, 2023)	218,307		218,307
Series B (15,400,000 units outstanding as of March 31, 2024 and December 31, 2023)	371,476		371,476
Series C (6,900,000 units outstanding as of March 31, 2024 and December 31, 2023)	166,518		166,518
Common limited partners (126,535,271 and 126,516,713 units outstanding as of March 31, 2024 and December 31, 2023, respectively)	285,303		312,905
Accumulated other comprehensive loss	(22,741)		(22,925)
Total partners’ equity	1,018,863		1,046,281
Total liabilities and partners’ equity	$	4,862,125	$	4,896,392

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, Thousands of Dollars, Except Unit and Per Unit Data)


	Three Months Ended March 31,
	2024		2023
Revenues:
Service revenues	$	278,539	$	285,266
Product sales	112,288		108,601
Total revenues	390,827		393,867

Costs and expenses:
Costs associated with service revenues:
Operating expenses (excluding depreciation and amortization expense)	85,901		89,162
Depreciation and amortization expense	63,603		62,054
Total costs associated with service revenues	149,504		151,216
Costs associated with product sales	94,166		93,461


General and administrative expenses (excluding depreciation and amortization expense)	42,237		28,725
Other depreciation and amortization expense	1,053		1,555

Total costs and expenses	286,960		274,957

Gain on sale of assets	—		41,075

Operating income	103,867		159,985

Interest expense, net	(62,480)		(57,371)


Other income, net	2,599		4,509
Income before income tax expense	43,986		107,123
Income tax expense	1,244		1,187
Net income	$	42,742	$	105,936

Basic and diluted net income per common unit (Note 7)	$	0.15	$	0.61



Basic and diluted weighted-average common units outstanding	126,533,909		110,880,981


Comprehensive income	$	42,926	$	106,140

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, Thousands of Dollars)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	42,742	$	105,936
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	64,656		63,609
Amortization of unit-based compensation	4,340		3,628
Amortization of debt related items	3,011		2,607
Gain on sale of assets	—		(41,075)





Changes in current assets and current liabilities (Note 8)	20,714		32,614
Decrease in other long-term assets, net	4,681		3,294
Increase (decrease) in other long-term liabilities	1,510		(1,729)
Other, net	(1,920)		(4,300)
Net cash provided by operating activities	139,734		164,584

Cash flows from investing activities:
Capital expenditures	(34,644)		(22,083)
Change in accounts payable related to capital expenditures	(5,546)		(4,308)
Proceeds from insurance recoveries	—		12,395
Proceeds from sale or disposition of assets	42		102,670




Net cash (used in) provided by investing activities	(40,148)		88,674

Cash flows from financing activities:


Proceeds from long-term debt borrowings	142,500		120,300


Long-term debt repayments	(159,600)		(301,600)







Distributions to preferred unitholders	(23,283)		(32,661)
Distributions to common unitholders	(50,613)		(44,362)




Other, net	(5,913)		(4,365)
Net cash used in financing activities	(96,909)		(262,688)

Effect of foreign exchange rate changes on cash	32		170
Net increase (decrease) in cash, cash equivalents and restricted cash	2,709		(9,260)
Cash, cash equivalents and restricted cash as of the beginning of the period	12,016		23,377
Cash, cash equivalents and restricted cash as of the end of the period	$	14,725	$	14,117

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY AND MEZZANINE EQUITY

Three Months Ended March 31, 2024 and 2023

(Unaudited, Thousands of Dollars, Except Per Unit Data)


	Limited Partners								Mezzanine Equity
	Preferred		Common		Accumulated Other Comprehensive Loss		Total Partners’ Equity (Note 6)		Series D Preferred Limited Partners		Total
Balance as of January 1, 2024	$	756,301	$	312,905	$	(22,925)	$	1,046,281	$	—	$	1,046,281
Net income	23,266		19,476		—		42,742		—		42,742
Other comprehensive income	—		—		184		184		—		184
Distributions to partners:
Series A, B and C preferred	(23,266)		—		—		(23,266)		—		(23,266)
Common ($0.40 per unit)	—		(50,613)		—		(50,613)		—		(50,613)




Unit-based compensation	—		3,546		—		3,546		—		3,546


Other	—		(11)		—		(11)		—		(11)
Balance as of March 31, 2024	$	756,301	$	285,303	$	(22,741)	$	1,018,863	$	—	$	1,018,863




Balance as of January 1, 2023	$	756,301	$	177,620	$	(31,605)	$	902,316	$	446,970	$	1,349,286
Net income	21,584		73,203		—		94,787		11,149		105,936
Other comprehensive income	—		—		204		204		—		204
Distributions to partners:
Series A, B and C preferred	(21,584)		—		—		(21,584)		—		(21,584)
Common ($0.40 per unit)	—		(44,362)		—		(44,362)		—		(44,362)
Series D preferred	—		—		—		—		(11,149)		(11,149)


Unit-based compensation	—		4,384		—		4,384		—		4,384
Series D Preferred Unit accretion	—		(3,671)		—		(3,671)		3,671		—
Other	—		(10)		—		(10)		—		(10)
Balance as of March 31, 2023	$	756,301	$	207,164	$	(31,401)	$	932,064	$	450,641	$	1,382,705

See Condensed Notes to Consolidated Financial Statements.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization and Operations

NuStar Energy L.P. (NuStar Energy) is a publicly traded Delaware limited partnership. Unless otherwise indicated, the terms “NuStar Energy,” “NS,” “the Partnership,” “we,” “our” and “us” are used in this report to refer to NuStar Energy L.P., to one or more of our consolidated subsidiaries or to all of them taken as a whole. Our business is managed under the direction of the board of directors of NuStar GP, LLC (the Board of Directors), the general partner of our general partner, Riverwalk Logistics, L.P., both of which are indirectly wholly owned subsidiaries of ours. As of March 31, 2024, our limited partner interests consisted of the following:

•common units (NYSE: NS); and

•8.50% Series A (NYSE: NSprA), 7.625% Series B (NYSE: NSprB) and 9.00% Series C (NYSE: NSprC) Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units.

We are primarily engaged in the transportation, terminalling and storage of petroleum products and renewable fuels and the transportation of anhydrous ammonia. We also market petroleum products. We conduct our operations through our subsidiaries, primarily NuStar Logistics, L.P. (NuStar Logistics) and NuStar Pipeline Operating Partnership L.P. (NuPOP). We have three business segments: pipeline, storage and fuels marketing.

Merger Agreement

On January 22, 2024, NuStar Energy entered into an Agreement and Plan of Merger (the Merger Agreement) with Sunoco LP, a Delaware limited partnership (Sunoco), Saturn Merger Sub, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Sunoco (Merger Sub), Riverwalk Logistics, L.P., NuStar GP, LLC, and Sunoco GP LLC, a Delaware limited liability company and sole general partner of Sunoco (the Sunoco GP). The Merger Agreement provides that, among other things and on the terms and subject to the conditions set forth therein, Sunoco will acquire NuStar Energy in an all-equity transaction by means of a merger of Merger Sub with and into NuStar Energy (the Merger) with NuStar Energy surviving the Merger as a subsidiary of Sunoco.

On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the Effective Time), each NuStar Energy common unit issued and outstanding immediately prior to the Effective Time will be converted into and shall thereafter represent the right to receive 0.400 of a common unit of Sunoco and, if applicable, cash in lieu of fractional units. See Note 6 for information on the conditional special distribution to our common unitholders.

Each series of NuStar Energy preferred units issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding from and after the Effective Time as limited partnership interests of the surviving entity in the Merger having the same terms as are applicable to the applicable series of preferred units immediately prior to the Effective Time.

The completion of the Merger is subject to the fulfillment or waiver of certain conditions, including, among others, approval and adoption by NuStar Energy’s common unitholders of the Merger Agreement and the transactions contemplated thereby, including the Merger. For more information regarding the Merger and Merger Agreement, see our current report on Form 8-K filed with the SEC on January 22, 2024 and our definitive merger proxy statement on Schedule 14A filed with the SEC on

April 3, 2024.

Other Events

Sale-Leaseback Transaction. On March 21, 2023, we sold our corporate headquarters facility and approximately 24 acres of underlying land located in San Antonio, Texas (the Corporate Headquarters) for an aggregate cash sales price of $103.0 million and immediately entered into an operating lease agreement (the HQ Lease Agreement) to lease back the Corporate Headquarters for an initial term of 20 years, with two renewal options of ten years each (the Sale-Leaseback Transaction). Upon closing of the sale in the first quarter of 2023, the Sale-Leaseback Transaction qualified as a completed sale, and we recognized a gain of $41.1 million, which is presented in “Gain on sale of assets” on the condensed consolidated statements of comprehensive income.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Series D Preferred Units. In the second and third quarters of 2023, we redeemed all of our outstanding Series D Cumulative Convertible Preferred Units (the Series D Preferred Units) at the then applicable redemption price plus accrued and unpaid distributions. Prior to their redemption, the Series D Preferred Units were presented as mezzanine equity, and we allocated net income to the Series D Preferred Units equal to the amount of distributions earned during the period. Distributions on the Series D Preferred Units were payable on the 15th day (or next business day) of each of March, June, September and December, to holders of record on the first business day of each payment month.

Basis of Presentation

These unaudited condensed consolidated financial statements include the accounts of the Partnership and subsidiaries in which the Partnership has a controlling interest. Inter-partnership balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, and all disclosures are adequate. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

2. NEW ACCOUNTING PRONOUNCEMENTS

The Enhancement and Standardization of Climate-Related Disclosures for Investors

In March 2024, the Securities and Exchange Commission (SEC) issued final rules that require disclosure of certain climate-related information in registration statements and annual reports. The rules require presentation of certain climate-related financial metrics in our audited financial statements and disclosure of climate-related risks that are reasonably likely to have a material impact on our business, results of operations, or financial condition. The final rules follow a compliance phase-in timeline, and we will be required to apply the first requirements in our Annual Report on Form 10-K for fiscal year ending December 31, 2025. Disclosures will be required prospectively, with information for prior periods required only to the extent it was previously disclosed in an SEC filing. We are currently evaluating the impact of these final rules on our consolidated financial statements and disclosures. In April 2024, the SEC issued an order staying the final rules.

Improvements to Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (FASB) issued guidance intended to enhance the transparency and decision usefulness of income tax disclosures, primarily through changes to the rate reconciliation and income taxes paid information. The amendments are effective for annual periods beginning after December 15, 2024, and early adoption is permitted. The amendments should be applied prospectively; however, retrospective application is permitted. We plan to adopt the amended guidance on January 1, 2025, and are currently evaluating our method of adoption and the impact of this amended guidance on our disclosures.

Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued guidance intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Among other changes, the amendments will require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis. Early adoption is permitted. We adopted the annual disclosure requirements on January 1, 2024 and plan to adopt the interim disclosure requirements on January 1, 2025, and are currently evaluating the impact of this amended guidance on our disclosures.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Contract Assets and Contract Liabilities

The following table provides information about contract assets and contract liabilities from contracts with customers:


	2024				2023
	Contract Assets		Contract Liabilities		Contract Assets		Contract Liabilities
	(Thousands of Dollars)
Balances as of January 1:
Current portion	$	3,109	$	(27,131)	$	2,612	$	(17,647)
Noncurrent portion	729		(41,278)		304		(41,405)
Total	3,838		(68,409)		2,916		(59,052)

Activity:
Additions	237		(23,203)		125		(16,829)
Transfer to accounts receivable	(2,834)		—		(2,388)		—
Transfer to revenues	—		12,618		—		14,008

Total	(2,597)		(10,585)		(2,263)		(2,821)

Balances as of March 31:
Current portion	701		(33,603)		406		(21,065)
Noncurrent portion	540		(45,391)		247		(40,808)

Total	$	1,241	$	(78,994)	$	653	$	(61,873)

Current contract assets are included in “Prepaid and other current assets” and noncurrent contract assets are included in “Other long-term assets, net” on the consolidated balance sheets. The current portion of contract liabilities is included in “Accrued liabilities” and the noncurrent portion of contract liabilities is included in “Other long-term liabilities” on the consolidated balance sheets.

Remaining Performance Obligations

The following table presents our estimated revenue from contracts with customers for remaining performance obligations that has not yet been recognized, representing our contractually committed revenue as of March 31, 2024:


	Remaining Performance Obligations
	(Thousands of Dollars)
2024 (remaining)	$	299,163
2025	274,158
2026	201,486
2027	111,266
2028	74,587
Thereafter	94,828
Total	$	1,055,488

Our contractually committed revenue, for purposes of the tabular presentation above, is generally limited to customer contracts that have fixed pricing and fixed volume terms and conditions, including contracts with payment obligations for minimum volume commitments.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Disaggregation of Revenues

The following table disaggregates our revenues:


	Three Months Ended March 31,
	2024		2023
	(Thousands of Dollars)
Pipeline segment:
Crude oil pipelines	$	94,992	$	96,603
Refined products and ammonia pipelines	121,783		116,580
Total pipeline segment revenues from contracts with customers	216,775		213,183



Storage segment:
Throughput terminals (a)	12,587		27,315
Storage terminals (excluding lessor revenues) (a)	51,720		42,016
Total storage segment revenues from contracts with customers	64,307		69,331
Lessor revenues	11,571		11,326
Total storage segment revenues	75,878		80,657

Fuels marketing segment:
Revenues from contracts with customers	98,175		100,027

Consolidation and intersegment eliminations	(1)		—

Total revenues	$	390,827	$	393,867

(a)Effective January 1, 2024, revenue for certain terminals changed from throughput-based to storage-based, due to changes in customer contracts.

4. DEBT

Revolving Credit Agreement

As of March 31, 2024, NuStar Logistics’ $1.0 billion unsecured revolving credit agreement (as amended, the Revolving Credit Agreement), due January 27, 2027, had $670.4 million available for borrowing and $325.0 million of borrowings outstanding. Letters of credit issued under the Revolving Credit Agreement totaled $4.6 million as of March 31, 2024, and limit the amount we can borrow under the Revolving Credit Agreement. Obligations under our Revolving Credit Agreement are guaranteed by NuStar Energy and NuPOP. The Revolving Credit Agreement provides for U.S. dollar borrowings, which bear interest, at our option, based on an alternative base rate or a secured overnight financing rate (SOFR) based rate. As of March 31, 2024, our weighted-average interest rate related to borrowings under the Revolving Credit Agreement was 7.9%.

Our Revolving Credit Agreement is subject to maximum consolidated debt coverage ratio and minimum consolidated interest coverage ratio requirements, which may limit the amount we can borrow to an amount that is less than the total amount available for borrowing. For the rolling period of four quarters ending March 31, 2024, the Consolidated Debt Coverage Ratio (as defined in the Revolving Credit Agreement) may not exceed 5.00-to-1.00, and the Consolidated Interest Coverage Ratio (as defined in the Revolving Credit Agreement) must not be less than 1.75-to-1.00. As of March 31, 2024, we believe that we are in compliance with these financial covenants.

Fair Value of Long-Term Debt

The estimated fair values and carrying amounts of long-term debt, excluding finance leases, were as follows:


	March 31, 2024		December 31, 2023
	(Thousands of Dollars)
Fair value	$	3,396,455	$	3,426,307
Carrying amount	$	3,343,976	$	3,359,631

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

We have estimated the fair value of our publicly traded notes based upon quoted prices in active markets; therefore, we determined that the fair value of our publicly traded notes falls in Level 1 of the fair value hierarchy. With regard to our other debt, for which a quoted market price is not available, we have estimated the fair value using a discounted cash flow analysis using current incremental borrowing rates for similar types of borrowing arrangements and determined that the fair value falls in Level 2 of the fair value hierarchy. The carrying amount includes unamortized debt issuance costs.

5. COMMITMENTS AND CONTINGENCIES

We have contingent liabilities resulting from various litigation, claims and commitments. We record accruals for loss contingencies when losses are considered probable and can be reasonably estimated. Legal fees associated with defending the Partnership in legal matters are expensed as incurred. We accrued $1.8 million and $1.3 million for contingent losses as of March 31, 2024 and December 31, 2023, respectively. The amount that will ultimately be paid related to such matters may differ from the recorded accruals, and the timing of such payments is uncertain. We evaluate each contingent loss at least quarterly, and more frequently as each matter progresses and develops over time, and we do not believe that the resolution of any particular claim or proceeding, or all matters in the aggregate, would have a material adverse effect on our results of operations, financial position or liquidity.

6. PARTNERS’ EQUITY

Series A, B and C Preferred Units

We allocate net income to our 8.50% Series A, 7.625% Series B and 9.00% Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (collectively, the Series A, B and C Preferred Units) equal to the amount of distributions earned during the period. Distributions on our Series A, B and C Preferred Units are payable out of any legally available funds, accrue and are cumulative from the original issuance dates, and are payable on the 15th day (or next business day) of each of March, June, September and December of each year to holders of record on the first business day of each payment month.

Information on our Series A, B and C Preferred Units is shown below:

Units

Units Issued and Outstanding as of March 31, 2024

Optional Redemption Date/Date When Distribution Rate Became Floating

Floating Annual Rate (as a Percentage of the $25.00 Liquidation Preference per Unit)

Series A Preferred Units

9,060,000

December 15, 2021

Three-month LIBOR(a) plus 6.766%

Series B Preferred Units

15,400,000

June 15, 2022

Three-month LIBOR(a) plus 5.643%

Series C Preferred Units

6,900,000

December 15, 2022

Three-month LIBOR(a) plus 6.88%

SEC Form 10-Q filed by NuStar Logistics, L.P.