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NuStar Energy L.P. Reports Better-Than-Expected Second Quarter 2008 Earnings and Announces Quarterly Distribution

July 25, 2008

NuStar Energy L.P. (NYSE:NS) today announced net income applicable to limited partners of $8.2 million, or $0.15 per unit, for the second quarter of 2008, which is better than the break-even earnings estimate that was communicated in the interim second quarter guidance update. These results compare to $34.6 million, or $0.74 per unit, earned in the second quarter of 2007. For the six months ended June 30, 2008, net income applicable to limited partners was $57.9 million, or $1.12 per unit, compared to $61.2 million, or $1.31 per unit, for the six months ended June 30, 2007.

Excluding the impact of the cash hedging loss and other items, adjusted net income applicable to limited partners for the second quarter of 2008 would have been $68.1 million, or $1.25 per unit. For the six months ended June 30, 2008, net income applicable to limited partners would have been $108.5 million, or $2.09 per unit. As communicated on May 28 in NuStar Energy L.P.’s guidance update, the second quarter 2008 results include a $61.3 million, or $1.10 per unit, loss associated with crude oil and refined product hedges placed on approximately 30 percent of the total inventories acquired with the CITGO asphalt acquisition on March 20.

With respect to the quarterly distribution to unitholders for the second quarter of 2008, NuStar Energy L.P. also announced that its board of directors has declared a distribution of $0.985 per unit, which would equate to $3.94 per unit on an annualized basis. This quarterly distribution represents an increase of $0.035 per unit, or 3.7 percent, over the $0.95 per unit distribution for the second quarter of 2007 and will be paid on August 13, 2008, to holders of record as of August 6, 2008.

“We are pleased to announce that we delivered better-than-expected earnings primarily due to stronger asphalt margins and higher asphalt volumes sold,” said Curt Anastasio, Chief Executive Officer and President of NuStar Energy L.P. and NuStar GP Holdings, LLC. “Without the hedging loss, our earnings for the second quarter would have been the highest quarterly earnings ever reported by NuStar, which follows our record earnings in the first quarter of 2008. The operating income contribution from the asphalt business in the second quarter was $52.8 million before the hedging loss, which was even better than we expected and our base business continues to perform well.

“I am excited to announce that we have recently completed storage expansion projects at our facilities in Texas City, Texas and St. James, Louisiana. We expect that several other storage expansion projects will be complete by the end of the third quarter, including projects at St. James, Louisiana; Jacksonville, Florida; Amsterdam in the Netherlands and Linden, New Jersey (New York Harbor). When completed, these projects are expected to add approximately $20 million to operating income in 2008 over 2007. With our $400 million construction program drawing to an end, we are focusing on the next phase of growth primarily associated with storage expansion projects in the U.S. and internationally.

“Our employees have done a great job of integrating the asphalt assets into our system. We have identified around $35 million of high-return, quick pay-back projects at both the Paulsboro and Savannah asphalt plants and we continue to evaluate other opportunities at these facilities,” he said.

Distributable cash flow available to limited partners for the second quarter of 2008 was $31.5 million, or $0.58 per unit, compared to $53.6 million, or $1.15 per unit, for the second quarter of 2007. For the six months ended June 30, 2008, distributable cash flow available to limited partners was $103.5 million, or $2.04 per unit, compared to $101.0 million, or $2.16 per unit for the six months ended June 30, 2007. Distributable cash flow available to limited partners covers the distribution to the limited partners by 0.59 times for the second quarter of 2008.

Excluding the impact of the cash hedging loss and other items, distributable cash flow available to limited partners for the second quarter of 2008 would have also been the best in the partnership’s history at $92.7 million, or $1.70 per unit, and the coverage ratio available to limited partners would have been a strong 1.73 times. For the six months ended June 30, 2008, distributable cash flow available to limited partners would have been $155.2 million, or $2.97 per unit, and the coverage ratio available to limited partners would have been 1.51 times before the hedging loss and other items.

“We continue to believe third quarter 2008 earnings will be exceptionally strong and the contribution from the asphalt business for 2008, even with the hedging loss, to be in the EBITDA range previously communicated. The good news is that we expect to increase the distribution in the third quarter of 2008. Despite the recent drop in crude oil prices, asphalt prices have continued to increase dramatically due to tight supplies and are expected to be even higher in the third quarter of 2008 compared to the second quarter of 2008. Based on current fundamentals, we now expect asphalt prices of between $625 and $700 per short ton for the third quarter of 2008, which is significantly higher than $450 per short ton we averaged in the second quarter. As a result, third quarter 2008 margins for the asphalt business are also expected to be significantly better. While we expect refined product and crude oil pipeline volumes to decline slightly primarily due to high fuels prices, increases in transportation tariffs should offset the negative financial impact of lower volumes. In addition, we expect to see continued good results from our storage business since the majority of it is contracted from three to ten years,” said Anastasio.

A conference call with management is scheduled for 11:00 a.m. ET (10:00 a.m. CT) today, July 25, 2008, to discuss the financial and operational results for the second quarter of 2008. Investors interested in listening to the presentation may call 800-622-7620, passcode 54135570. International callers may access the presentation by dialing 706-645-0327, passcode 54135570. The company intends to have a playback available following the presentation, which may be accessed by calling 800-642-1687, passcode 54135570. 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 9,063 miles of pipeline, 85 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 88 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’s beliefs as well as assumptions made by and information currently available to the partnership. These statements reflect the partnership’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.’s 2007 annual report on Form 10-K and subsequent filings with the Securities and Exchange Commission.

 NuStar Energy L.P. and Subsidiaries Consolidated Financial Information (Unaudited, Thousands of Dollars, Except Unit Data and Per Unit Data)    Three Months Ended        Six Months Ended June 30,                 June 30, -----------------------  ----------------------- 2008        2007         2008        2007 ----------- -----------  ----------- ----------- Statement of Income Data: Revenues: Services revenues           $   180,555 $   162,940  $   360,671 $   323,293 Product sales         1,197,025     158,092    1,609,683     294,563 ----------- -----------  ----------- ----------- Total revenues      1,377,580     321,032    1,970,354     617,856  Costs and expenses: Cost of product sales                1,175,916     148,061    1,568,925     275,988 Operating expenses               106,928      85,444      195,378     166,656 General and administrative expenses                19,544      17,581       35,627      32,489 Depreciation and amortization expense                 34,830      27,860       64,876      55,202 ----------- -----------  ----------- ----------- Total costs and expenses           1,337,218     278,946    1,864,806     530,335 ----------- -----------  ----------- ----------- Operating income         40,362      42,086      105,548      87,521 Equity earnings from joint ventures                 1,749       1,746        3,950       3,357 Interest expense, net          (24,934)    (19,452)     (41,799)    (38,306) Other income, net                        631      17,100       10,540      23,723 ----------- -----------  ----------- ----------- Income before income tax expense                 17,808      41,480       78,239      76,295 Income tax expense                  3,718       1,783        8,280       5,475 ----------- -----------  ----------- ----------- Net income               14,090      39,697       69,959      70,820 Less net income applicable to general partner (Note 1)               (5,885)     (5,118)     (12,087)     (9,572) ----------- -----------  ----------- ----------- Net income applicable to limited partners   $     8,205 $    34,579  $    57,872 $    61,248 =========== ===========  =========== ===========   Income per unit applicable to limited partners (Note 1):          $      0.15 $      0.74  $      1.12 $      1.31 =========== ===========  =========== ===========  Weighted average number of basic units outstanding   54,372,035  46,809,749   51,890,892  46,809,749  EBITDA (Note 2)     $    77,572 $    88,792  $   184,914 $   169,803  Distributable cash flow (Note 2)                 $    38,425 $    59,020  $   117,358 $   111,248    June 30,    June 30,               December 31, 2008        2007                    2007 ----------- -----------             ------------ Balance Sheet Data: Debt, including current portion (a)                $ 2,182,813 $ 1,446,044              $ 1,446,289 Partners' equity (b)                  2,189,301   1,862,473                1,994,832 Debt-to- capitalization ratio (a) / ((a)+(b))                49.9%       43.7%                    42.0% 

 NuStar Energy L.P. and Subsidiaries Consolidated Financial Information - Continued (Unaudited, Thousands of Dollars, Except Barrel Data)   Three Months Ended   Six Months Ended June 30,            June 30, ------------------- ------------------- 2008      2007      2008      2007 ---------- -------- ---------- --------  Segment Data: (Note 3) Storage: Throughput (barrels/day)       760,856  781,669    778,054  781,331 Throughput revenues         $   23,029 $ 23,152 $   46,150 $ 45,702 Storage lease revenues          88,631   76,188    174,623  150,052 ---------- -------- ---------- -------- Total revenues               111,660   99,340    220,773  195,754 Operating expenses              61,121   55,225    115,119  108,805 Depreciation and amortization expense           16,697   15,335     32,648   30,436 ---------- -------- ---------- -------- Segment operating income     $   33,842 $ 28,780 $   73,006 $ 56,513 ========== ======== ========== ========  Transportation: Refined products pipelines throughput (barrels/day)      700,024  647,887    697,397  632,393 Crude oil pipelines throughput (barrels/day)      411,600  348,482    408,782  348,052 ---------- -------- ---------- -------- Total throughput (barrels/day)             1,111,624  996,369  1,106,179  980,445 Revenues                    $   77,028 $ 65,255 $  152,807 $131,028 Operating expenses              30,473   29,194     60,330   56,932 Depreciation and amortization expense           12,797   12,525     25,402   24,766 ---------- -------- ---------- -------- Segment operating income     $   33,758 $ 23,536 $   67,075 $ 49,330 ========== ======== ========== ========  Asphalt and fuels marketing: (Note 4) Product sales               $1,197,054 $158,092 $1,609,712 $294,563 Cost of product sales        1,179,489  149,049  1,575,671  278,092 Operating expenses              19,860    1,692     26,078    2,304 Depreciation and amortization expense            4,520        -      5,208        - ---------- -------- ---------- -------- Segment operating income     $  (6,815) $  7,351 $    2,755 $ 14,167 ========== ======== ========== ========  Consolidation and intersegment eliminations: Revenues                    $  (8,162) $(1,655) $ (12,938) $(3,489) Cost of product sales          (3,573)    (988)    (6,746)  (2,104) Operating expenses             (4,526)    (667)    (6,149)  (1,385) Depreciation and amortization expense              816        -      1,618        - ---------- -------- ---------- -------- Total                        $    (879) $      - $  (1,661) $      - ========== ======== ========== ========  Consolidated Information: Revenues                    $1,377,580 $321,032 $1,970,354 $617,856 Cost of product sales        1,175,916  148,061  1,568,925  275,988 Operating expenses             106,928   85,444    195,378  166,656 Depreciation and amortization                   34,830   27,860     64,876   55,202 ---------- -------- ---------- -------- Segment operating income         59,906   59,667    141,175  120,010 General and administrative expenses        19,544   17,581     35,627   32,489 ---------- -------- ---------- -------- Consolidated operating income                      $   40,362 $ 42,086 $  105,548 $ 87,521 ========== ======== ========== ======== 

 NuStar Energy L.P. and Subsidiaries Consolidated Financial Information - Continued (Unaudited, Thousands of Dollars, Except Unit Data and Per Unit Data)   Notes: 1.   Net income is allocated between limited partners and the general partner's interests based on provisions in the partnership agreement. The net income applicable to limited partners is divided by the weighted average number of limited partnership units outstanding in computing the net income per unit applicable to limited partners. The following table details the calculation of net income applicable to the general partner:   Three Months Ended   Six Months Ended June 30,            June 30, ------------------- ------------------- 2008      2007      2008      2007 --------- --------- --------- ---------   Net income applicable to general partner and limited partners' interest $  14,090 $  39,697 $  69,959 $  70,820 Less general partner incentive distribution           5,718     4,413    10,906     8,323 --------- --------- --------- --------- Net income after general partner incentive distribution           8,372    35,284    59,053    62,497 General partner interest                  2%        2%        2%        2% --------- --------- --------- --------- General partner allocation of net income after general partner incentive distribution             167       705     1,181     1,249 General partner incentive distribution           5,718     4,413    10,906     8,323 --------- --------- --------- --------- Net income applicable to general partner    $   5,885 $   5,118 $  12,087 $   9,572 ========= ========= ========= =========   2.   NuStar Energy L.P. utilizes two financial measures, EBITDA and distributable cash flow, which are not defined in United States generally accepted accounting principles. Management uses these financial measures because they are widely accepted financial indicators used by investors to compare partnership performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the partnership's assets and the cash that the business is generating. Neither EBITDA nor distributable cash flow are intended to represent cash flows for the period, nor are they presented as an alternative to net income. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles.   The following is a reconciliation of net income to EBITDA and distributable cash flow:  Three Months Ended   Six Months Ended June 30,            June 30, ------------------- ------------------- 2008      2007      2008      2007 --------- --------- --------- ---------  Net income               $  14,090 $  39,697 $  69,959 $  70,820 Plus interest expense, net             24,934    19,452    41,799    38,306 Plus income tax expense                   3,718     1,783     8,280     5,475 Plus depreciation and amortization expense     34,830    27,860    64,876    55,202 --------- --------- --------- --------- EBITDA                      77,572    88,792   184,914   169,803 Less equity earnings from joint ventures     (1,749)   (1,746)   (3,950)   (3,357) Less interest expense, net           (24,934)  (19,452)  (41,799)  (38,306) Less reliability capital expenditures            (9,214)   (7,335)  (16,918)  (11,961) Less income tax expense                 (3,718)   (1,783)   (8,280)   (5,475) Plus distributions from joint ventures           -       544       500       544 Mark-to-market impact on hedge transactions (a)            468         -     2,891         - --------- --------- --------- --------- Distributable cash flow                       38,425    59,020   117,358   111,248  General partner's interest in distributable cash flow   (6,929)   (5,410)  (13,858)  (10,274) --------- --------- --------- --------- Limited partners' interest in distributable cash flow                    $  31,496 $  53,610 $ 103,500 $ 100,974 ========= ========= ========= =========  Distributable cash flow per limited partner unit                    $   0.579 $   1.145 $   2.036 $   2.157  (a) Distributable cash flow excludes the impact of mark-to- market gains and losses which arise from valuing certain derivative contracts.  3.   Beginning in the second quarter of 2008, we revised the manner in which we internally evaluate our segment performance and made certain organizational changes. As a result, we combined the refined product terminals and crude oil storage tanks segments to create the storage segment, and we combined the refined product pipelines and crude oil pipelines segments to create the transportation segment. Previous periods have been restated to conform to this presentation.   4.   The asphalt and fuels marketing segment includes our two asphalt refineries, which we acquired on March 20, 2008, as well as our marketing and trading operations. Additional operational information related to the asphalt and fuels marketing segment is available on our website at www.nustarenergy.com under the investors portion of the website. 



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