UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 _________________________________________

FORM 10-Q

 _________________________________________

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014

OR

o	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

 _________________________________________

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  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act:

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o  (Do not check if a smaller reporting company)	Smaller reporting company	o

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

The number of common units outstanding as of October 31, 2014 was 77,886,078.

NUSTAR ENERGY L.P.

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2014 and 2013	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013	5
	Condensed Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	46
PART II – OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 6.	Exhibits	47
SIGNATURES		48

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars, Except Unit Data)

	September 30, 2014			December 31, 2013
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	25,686		$	100,743
Accounts receivable, net of allowance for doubtful accounts of $306 and $1,224 as of September 30, 2014 and December 31, 2013, respectively	220,841			281,310
Receivable from related parties	45			51,084
Inventories	117,937			138,147
Income tax receivable	3,661			826
Other current assets	37,523			39,452
Assets held for sale	2,256			21,987
Total current assets	407,949			633,549
Property, plant and equipment, at cost	4,706,896			4,500,837
Accumulated depreciation and amortization	(1,315,466		)	(1,190,184		)
Property, plant and equipment, net	3,391,430			3,310,653
Intangible assets, net	61,815			71,249
Goodwill	617,429			617,429
Investment in joint ventures	72,872			68,735
Deferred income tax asset	4,902			5,769
Note receivable from related party	—			165,440
Other long-term assets, net	320,970			159,362
Total assets	$	4,877,367		$	5,032,186
Liabilities and Partners’ Equity
Current liabilities:
Accounts payable	$	177,961		$	298,751
Payable to related party	14,119			8,325
Short-term debt	21,400			—
Accrued interest payable	27,501			33,113
Accrued liabilities	39,053			38,632
Taxes other than income tax	15,053			9,745
Income tax payable	4,035			4,006
Total current liabilities	299,122			392,572
Long-term debt	2,731,551			2,655,553
Long-term payable to related party	30,489			41,139
Deferred income tax liability	27,785			27,350
Other long-term liabilities	19,775			11,778
Commitments and contingencies (Note 5)
Partners’ equity:
Limited partners (77,886,078 common units outstanding as of September 30, 2014 and December 31, 2013)	1,788,360			1,921,726
General partner	40,419			43,804
Accumulated other comprehensive loss	(60,134		)	(63,394		)
Total NuStar Energy L.P. partners’ equity	1,768,645			1,902,136
Noncontrolling interest	—			1,658
Total partners’ equity	1,768,645			1,903,794
Total liabilities and partners’ equity	$	4,877,367		$	5,032,186

See Condensed Notes to Consolidated Financial Statements.

3

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 September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Revenues:
Service revenues	$	266,651		$	243,712		$	755,551		$	700,922
Product sales	527,771			534,433			1,637,829			1,977,423
Total revenues	794,422			778,145			2,393,380			2,678,345
Costs and expenses:
Cost of product sales	509,794			527,217			1,578,508			1,928,237
Operating expenses:
Third parties	84,570			87,025			246,541			248,493
Related party	31,394			30,076			91,025			93,440
Total operating expenses	115,964			117,101			337,566			341,933
General and administrative expenses:
Third parties	7,567			8,336			20,044			24,171
Related party	17,400			10,495			48,942			41,807
Total general and administrative expenses	24,967			18,831			68,986			65,978
Depreciation and amortization expense	48,599			46,245			142,765			133,116
Total costs and expenses	699,324			709,394			2,127,825			2,469,264
Operating income	95,098			68,751			265,555			209,081
Equity in earnings (loss) of joint ventures	2,749			(5,358		)	1,737			(26,629		)
Interest expense, net	(33,007		)	(30,823		)	(100,546		)	(92,849		)
Interest income from related party	—			1,828			1,055			4,560
Other (expense) income, net	(1,388		)	1,389			1,816			3,917
Income from continuing operations before income tax expense	63,452			35,787			169,617			98,080
Income tax expense	4,335			105			10,317			8,087
Income from continuing operations	59,117			35,682			159,300			89,993
Income (loss) from discontinued operations, net of tax	2,831			(2,446		)	(2,316		)	616
Net income	61,948			33,236			156,984			90,609
Less net loss attributable to noncontrolling interest	(173		)	(161		)	(395		)	(439		)
Net income attributable to NuStar Energy L.P.	$	62,121		$	33,397		$	157,379		$	91,048
Net income (loss) per unit applicable to limited partners:
Continuing operations	$	0.61		$	0.31		$	1.59		$	0.71
Discontinued operations	0.03			(0.03		)	(0.03		)	0.02
Total (Note 10)	$	0.64		$	0.28		$	1.56		$	0.73
Weighted-average limited partner units outstanding	77,886,078			77,886,078			77,886,078			77,886,078
Comprehensive income	$	58,167		$	38,790		$	159,811		$	90,042
Less comprehensive loss attributable to noncontrolling interest	(159		)	(729		)	(828		)	(2,206		)
Comprehensive income attributable to NuStar Energy L.P.	$	58,326		$	39,519		$	160,639		$	92,248

See Condensed Notes to Consolidated Financial Statements.

4

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, Thousands of Dollars)

	Nine Months Ended September 30,
	2014			2013
Cash Flows from Operating Activities:
Net income	$	156,984		$	90,609
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	142,765			137,185
Amortization of debt related items	7,015			1,721
Gain from sale or disposition of assets	(3,840		)	(8,739		)
Asset impairment loss	2,067			—
Deferred income tax expense (benefit)	2,453			(3,815		)
Equity in (earnings) loss of joint ventures	(1,737		)	26,629
Distributions of equity in earnings of joint ventures	5,879			5,787
Changes in current assets and current liabilities (Note 11)	1,080			116,838
Other, net	2,529			12,325
Net cash provided by operating activities	315,195			378,540
Cash Flows from Investing Activities:
Capital expenditures	(229,548		)	(260,701		)
Change in accounts payable related to capital expenditures	10,910			(2,879		)
Proceeds from sale or disposition of assets	25,975			116,467
Increase in note receivable from related party	(13,328		)	(50,761		)
Other, net	(853		)	156
Net cash used in investing activities	(206,844		)	(197,718		)
Cash Flows from Financing Activities:
Proceeds from long-term debt borrowings	537,436			1,299,220
Proceeds from note offering, net of issuance costs	—			687,151
Proceeds from short-term debt borrowings	205,200			—
Long-term debt repayments	(451,269		)	(1,897,182		)
Short-term debt repayments	(183,800		)	—
Distributions to unitholders and general partner	(294,153		)	(294,153		)
Payments for termination of interest rate swaps	—			(33,697		)
Other, net	2,540			3,168
Net cash used in financing activities	(184,046		)	(235,493		)
Effect of foreign exchange rate changes on cash	638			(4,412		)
Net decrease in cash and cash equivalents	(75,057		)	(59,083		)
Cash and cash equivalents as of the beginning of the period	100,743			83,602
Cash and cash equivalents as of the end of the period	$	25,686		$	24,519

See Condensed Notes to Consolidated Financial Statements.

5

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) (NYSE: NS) is engaged in the transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. Unless otherwise indicated, the terms “NuStar Energy,” “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. NuStar GP Holdings, LLC (NuStar GP Holdings) (NYSE: NSH) owns our general partner, Riverwalk Logistics, L.P., and owns a 15.1% total interest in us as of September 30, 2014.

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.

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. Noncontrolling interests are separately disclosed on the financial statements. Inter-partnership balances and transactions have been eliminated in consolidation. We account for our investments in joint ventures using the equity method of accounting.

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. Financial information for the three and nine months ended September 30, 2014 and 2013 included in these Condensed Notes to Consolidated Financial Statements is derived from our unaudited condensed consolidated financial statements. Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. The consolidated balance sheet as of December 31, 2013 has been derived from the audited consolidated financial statements as of that date. 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, 2013.

New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board jointly issued a comprehensive new revenue recognition standard. The standard is effective for public entities for annual and interim periods beginning after December 15, 2016, using one of two retrospective transition methods. Early adoption is not permitted for public entities. We are currently assessing the impact of this new guidance on our financial statements and disclosures, and we have not yet selected a transition method.

In April 2014, the FASB amended the disclosure requirements for discontinued operations. Under the amended guidance, a discontinued operation is defined as the disposal of a component that represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results. The amended guidance also requires expanded disclosures about discontinued operations and disposals of a significant part of an entity that do not qualify as discontinued operations. The amended guidance is effective prospectively to new disposals and new classifications of assets held for sale in annual periods beginning after December 15, 2014, and interim periods within those annual periods. Accordingly, we plan to adopt the amended guidance January 1, 2015.

2. DISPOSITIONS AND DISCONTINUED OPERATIONS

Dispositions

On February 26, 2014, we sold our remaining 50% ownership interest in NuStar Asphalt LLC to Lindsay Goldberg LLC (Lindsay Goldberg), a private investment firm (the Asphalt JV Sale). Effective February 27, 2014, NuStar Asphalt LLC changed its name to Axeon Specialty Products LLC (Axeon). Lindsay Goldberg now owns 100% of Axeon. As a result of the Asphalt JV Sale, we ceased applying the equity method of accounting. Upon completion of the Asphalt JV Sale, the parties agreed to: (i) convert the $250.0 million unsecured revolving credit facility provided by us to Axeon (the NuStar JV Facility)

6

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

from a revolving credit agreement into a $190.0 million term loan (the Axeon Term Loan); (ii) terminate the terminal services agreements with respect to our terminals in Rosario, NM, Catoosa, OK and Houston, TX; (iii) amend the terminal services agreements for our terminals in Baltimore, MD and Jacksonville, FL; and (iv) transfer ownership of both the Wilmington, NC and Dumfries, VA terminals to Axeon, which were categorized as assets held for sale at December 31, 2013. See Note 8 for a discussion of our agreements with Axeon.

Discontinued Operations

Terminals Held for Sale.In addition to the terminals located in Wilmington, NC and Dumfries, VA, we have identified and plan to divest several non-strategic, underperforming terminal facilities. As a result, we have classified the associated property, plant and equipment as “Assets held for sale” on the consolidated balance sheets. We presented the results of operations for those facilities, which were previously reported in the storage segment, as discontinued operations for all periods presented. In September 2014, we sold our 75% interest in our facility in Mersin, Turkey for total proceeds of $13.4 million. We recognized a gain of $3.7 million, which is included in discontinued operations for the three and nine months ended September 30, 2014. In June 2014, we sold three terminals located in Mobile, AL with an aggregate storage capacity of 1.8 million barrels for total proceeds of $13.7 million. We allocated interest expense to discontinued operations based on the ratio of net assets discontinued to consolidated net assets as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
	(Thousands of Dollars)
Allocated interest expense	$	115	$	352	$	811	$	1,056

San Antonio Refinery.On January 1, 2013, we sold our fuels refinery in San Antonio, Texas (the San Antonio Refinery) and related assets for approximately $117.0 million (the San Antonio Refinery Sale). We recognized a gain of $9.3 million on the sale, which is included in discontinued operations for the nine months ended September 30, 2013.

The following table summarizes the results from discontinued operations:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2014		2013			2014			2013
	(Thousands of Dollars)
Revenues	$	276	$	1,865		$	3,456		$	5,756
Income (loss) before income tax expense	$	2,831	$	(3,114	)	$	(2,316	)	$	(1,324	)

3. INVENTORIES

Inventories consisted of the following:

	September 30, 2014		December 31, 2013
	(Thousands of Dollars)
Crude oil	$	6,294	$	6,485
Finished products	102,602		123,656
Materials and supplies	9,041		8,006
Total	$	117,937	$	138,147

7

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

4. DEBT

Revolving Credit Agreement

During the nine months ended September 30, 2014, the balance under our $1.5 billionfive-year revolving credit agreement (the 2012 Revolving Credit Agreement) increased by $79.4 million, which we used for general partnership purposes. The 2012 Revolving Credit Agreement bears interest, at our option, based on either an alternative base rate, a LIBOR-based rate or a EURIBOR-based rate. The interest rate on the 2012 Revolving Credit Agreement is subject to adjustment if our debt rating is downgraded (or upgraded) by certain credit rating agencies. As of September 30, 2014, our weighted average interest rate was 2.2% and we had $582.4 million outstanding.

The 2012 Revolving Credit Agreement contains customary restrictive covenants, such as limitations on indebtedness, liens, mergers, asset transfers and certain investing activities. In addition, the 2012 Revolving Credit Agreement requires us to maintain, as of the end of each rolling period, which consists of any period of four consecutive fiscal quarters, a consolidated debt coverage ratio (consolidated debt to consolidated EBITDA, each as defined in the 2012 Revolving Credit Agreement) not to exceed 5.00-to-1.00. The requirement not to exceed a maximum consolidated debt coverage ratio may limit the amount we can borrow under the 2012 Revolving Credit Agreement to an amount less than the total amount available for borrowing. As of September 30, 2014, our consolidated debt coverage ratio was 4.0x, and we had $839.1 million available for borrowing.

On October 29, 2014, we amended and restated the 2012 Revolving Credit Agreement primarily to reduce the interest rate, to extend the maturity to October 29, 2019 and to amend certain of the restrictive covenants.

Gulf Opportunity Zone Revenue Bonds

In 2008, 2010 and 2011, the Parish of St. James, Louisiana issued, pursuant to the Gulf Opportunity Zone Act of 2005, tax-exempt revenue bonds (the GoZone Bonds) associated with our St. James, Louisiana terminal expansions. The GoZone Bonds bear interest based on a weekly tax-exempt bond market interest rate, and we pay interest monthly. The interest rate was 0.1% as of September 30, 2014. Following the issuance, the proceeds were deposited with a trustee and are disbursed to us upon our request for reimbursement of expenditures related to our St. James terminal expansions. We include the amount remaining in trust in “Other long-term assets, net,” and we include the amount of bonds issued in “Long-term debt” on the consolidated balance sheets. For the nine months ended September 30, 2014, we received $0.8 million from the trustee. As of September 30, 2014, the amount remaining in trust totaled $82.7 million.

Short-term Lines of Credit

In 2014, we entered into two short-term line of credit agreements with an aggregate uncommitted borrowing capacity of up to $80.0 million. These agreements allow us to better manage the fluctuations in our daily cash requirements and minimize our excess cash balances. The interest rate and maturity vary and are determined at the time of the borrowing. We had $21.4 million outstanding under these short-term lines of credit as of September 30, 2014.

5. COMMITMENTS AND CONTINGENCIES

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. As of September 30, 2014, we have accrued $1.1 million for contingent losses. The amount that will ultimately be paid may differ from the recorded accruals, and the timing of such payments is uncertain. In addition, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on our results of operations, financial position or liquidity.

6. FAIR VALUE MEASUREMENTS

We segregate the inputs used in measuring fair value into three levels: Level 1, defined as observable inputs such as quoted prices for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs in which little or no market data exists. We consider counterparty credit risk and our own credit risk in the determination of all estimated fair values.

8

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Recurring Fair Value Measurements

The following assets and liabilities are measured at fair value on a recurring basis:

	September 30, 2014
	Level 1			Level 2			Level 3			Total
	(Thousands of Dollars)
Assets:
Other current assets:
Product imbalances	$	2,822		$	—		$	—		$	2,822
Commodity derivatives	6,714			3,166			—			9,880
Other long-term assets, net:
Commodity derivatives	—			233			—			233
Total	$	9,536		$	3,399		$	—		$	12,935
Liabilities:
Accrued liabilities:
Product imbalances	$	(2,335	)	$	—		$	—		$	(2,335	)
Commodity derivatives	—			(1,615		)	—			(1,615		)
Other long-term liabilities:
Commodity derivatives	—			(105		)	—			(105		)
Guarantee liability	—			—			(1,730		)	(1,730		)
Total	$	(2,335	)	$	(1,720	)	$	(1,730	)	$	(5,785	)

	December 31, 2013
	Level 1			Level 2			Level 3			Total
	(Thousands of Dollars)
Assets:
Other current assets:
Product imbalances	$	1,980		$	—		$	—		$	1,980
Commodity derivatives	—			4,948			—			4,948
Other long-term assets, net:
Commodity derivatives	—			6,977			—			6,977
Total	$	1,980		$	11,925		$	—		$	13,905
Liabilities:
Accrued liabilities:
Product imbalances	$	(2,190	)	$	—		$	—		$	(2,190	)
Commodity derivatives	(1,433		)	(800		)	—			(2,233		)
Contingent consideration	—			—			(1,318		)	(1,318		)
Other long-term liabilities:
Commodity derivatives	—			(1,575		)	—			(1,575		)
Guarantee liability	—			—			(1,880		)	(1,880		)
Total	$	(3,623	)	$	(2,375	)	$	(3,198	)	$	(9,196	)

Product Imbalances.We value our assets and liabilities related to product imbalances using quoted market prices in active markets as of the reporting date.

Commodity Derivatives.We base the fair value of certain of our commodity derivative instruments on quoted prices on an exchange; accordingly, we include these items in Level 1 of the fair value hierarchy. We also have derivative instruments for which we determine fair value using industry pricing services and other observable inputs, such as quoted prices on an

9

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

exchange for similar derivative instruments. Therefore, we include these derivative instruments in Level 2 of the fair value hierarchy. See Note 7 for a discussion of our derivative instruments.

Contingent Consideration.On December 13, 2012, NuStar Logistics acquired certain assets from TexStar Midstream Services, LP and certain of its affiliates (collectively, TexStar) for approximately $325.0 million (the TexStar Asset Acquisition), including contingent consideration. In connection with the TexStar Asset Acquisition, we could have been obligated to pay additional consideration to TexStar, depending upon the cost of work required to complete certain assets and obtain outstanding real estate rights (collectively, the Contingent Consideration). In August 2014, we settled with TexStar and reduced the associated liability to $0.

Guarantees. As of September 30, 2014, we recorded a liability of $1.7 million representing the fair value of guarantees we have issued on behalf of Axeon. We estimated the fair value considering the probability of default by Axeon and an estimate of the amount we would be obligated to pay under the guarantees at the time of default. We calculated the fair value based on the guarantees outstanding as of September 30, 2014, totaling $73.3 million, plus two guarantees that do not specify a maximum amount. Our estimate of the fair value is based on significant inputs not observable in the market and thus falls within Level 3 of the fair value hierarchy. See Note 8 for a discussion of our agreements with Axeon.

In the event we are obligated to perform under any of these guarantees, the amount paid by us will be treated as additional borrowings under the Axeon Term Loan. As a result, we increased the carrying value of the note receivable from Axeon by the same amount as the increase to the liability for the fair value of the guarantees outstanding as of September 30, 2014.

The following table summarizes the activity in our Level 3 liabilities:

	Nine Months Ended September 30, 2014
	(Thousands of Dollars)
Beginning balance	$	3,198
Amounts settled	(870		)
Adjustments to guarantee liability	(150		)
Changes in fair value recorded in earnings:
Operating expenses	(448		)
Ending balance	$	1,730

Non-recurring Fair Value Measurements

We classified the property, plant and equipment associated with certain terminals as “Assets held for sale” on the consolidated balance sheet and recorded those assets at fair value, less costs to sell. We estimated the fair values of $2.3 million and $22.0 million as of September 30, 2014 and December 31, 2013, respectively, using a weighted-average of values calculated using an income approach and a market approach. The income approach calculates fair value by discounting the estimated net cash flows generated by the related terminal. The market approach involves estimating the fair value measurement on an earnings multiple based on public company transaction data. Our estimate of the fair value is based on significant inputs not observable in the market and thus falls within Level 3 of the fair value hierarchy.

Fair Value of Financial Instruments

We recognize cash equivalents, receivables, note receivables, payables and debt in our consolidated balance sheets at their carrying amounts. The fair values of these financial instruments, except for a note receivable from Axeon and long-term debt, approximate their carrying amounts. The estimated fair value and carrying amounts of the debt and note receivable were as follows:

	September 30, 2014				December 31, 2013
	Fair Value		Carrying Amount		Fair Value		Carrying Amount
	(Thousands of Dollars)
Long-term debt	$	2,783,666	$	2,731,551	$	2,636,734	$	2,655,553
Note receivable from Axeon	$	148,300	$	170,385	$	133,416	$	165,440

We estimated the fair value of our publicly-traded senior notes based upon quoted prices in active markets; therefore, we determined that the fair value of our publicly traded senior notes falls in Level 1 of the fair value hierarchy. For our other debt,

10

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

for which a quoted market price is not available, we 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 of the Axeon Term Loan is $170.4 million, consisting of the following: (i) the outstanding principal amount of $190.0 million; (ii) plus the fair value of guarantees of $1.7 million as of September 30, 2014 (iii) less equity losses from our investment in Axeon of $21.3 million incurred prior to the Asphalt JV Sale and after the carrying value of our equity investment in Axeon was reduced to zero. We review the financial information of Axeon monthly for possible non-payment indicators.

We estimated the fair value of the note receivable using discounted cash flows, which use observable inputs such as time to maturity and market interest rates, and determined the fair value falls in Level 2 of the fair value hierarchy. See Note 8 for additional information on the note receivable from Axeon.

7. DERIVATIVES AND RISK MANAGEMENT ACTIVITIES

We utilize various derivative instruments to manage our exposure to commodity price risk and interest rate risk. Our risk management policies and procedures are designed to monitor interest rates, futures and swap positions and over-the-counter positions, as well as physical volumes, grades, locations and delivery schedules, to help ensure that our hedging activities address our market risks. Our risk management committee oversees our trading controls and procedures and certain aspects of commodity and trading risk management. Our risk management committee also reviews all new commodity and trading risk management strategies in accordance with our risk management policy, as approved by our board of directors.

Interest Rate Risk

As of September 30, 2014, we had no forward-starting interest rate swap agreements. However, we previously entered into certain interest rate swap agreements to manage our exposure to changes in interest rates, which included forward-starting interest rate swap agreements. These swaps qualified, and we designated them, as cash flow hedges. In 2013, we terminated our remaining forward-starting interest rate swap agreements. We recorded the effective portion of mark-to-market adjustments as a component of “Accumulated other comprehensive loss.” The amount in accumulated other comprehensive income (OCI) is amortized into “Interest expense, net” as the interest payments occur or expensed immediately if the interest payments are probable not to occur.

Commodity Price Risk

We are exposed to market risks related to the volatility of crude oil and refined product prices. In order to reduce the risk of commodity price fluctuations with respect to our crude oil and finished product inventories and related firm commitments to purchase and/or sell such inventories, we utilize commodity futures and swap contracts, which qualify and we designate as fair value hedges. Derivatives that are intended to hedge our commodity price risk, but fail to qualify as fair value or cash flow hedges, are considered economic hedges, and we record associated gains and losses in net income.

The volume of commodity contracts is based on open derivative positions and represents the combined volume of our long and short open positions on an absolute basis, which totaled 15.6 millionbarrels and 15.2 million barrels as of September 30, 2014 and December 31, 2013, respectively.

As of December 31, 2013, we had $3.3 million of margin deposits related to our derivative instruments and none as of September 30, 2014.

11

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The fair values of our derivative instruments included in our consolidated balance sheets were as follows:

		Asset Derivatives				Liability Derivatives
	Balance Sheet Location	September 30, 2014		December 31, 2013		September 30, 2014			December 31, 2013
		(Thousands of Dollars)
Derivatives Designated as Hedging Instruments:
Commodity contracts	Other current assets	$	470	$	—	$	(63	)	$	—
Commodity contracts	Accrued liabilities	—		—		—			(130		)
Derivatives Not Designated as Hedging Instruments:
Commodity contracts	Other current assets	25,508		16,168		(16,035		)	(11,220		)
Commodity contracts	Other long-term assets, net	1,754		15,883		(1,521		)	(8,906		)
Commodity contracts	Accrued liabilities	2,807		4,523		(4,422		)	(6,626		)
Commodity contracts	Other long-term liabilities	246		5,448		(351		)	(7,023		)
Total		30,315		42,022		(22,329		)	(33,775		)
Total Derivatives		$	30,785	$	42,022	$	(22,392	)	$	(33,905	)

Certain of our derivative instruments are eligible for offset in the consolidated balance sheets and subject to master netting arrangements. Under our master netting arrangements, there is a legally enforceable right to offset amounts, and we intend to settle such amounts on a net basis. The following are the net amounts presented on the consolidated balance sheets:

Commodity Contracts	September 30, 2014			December 31, 2013
	(Thousands of Dollars)
Net amounts of assets presented in the consolidated balance sheets	$	10,113		$	11,925
Net amounts of liabilities presented in the consolidated balance sheets	$	(1,720	)	$	(3,808	)

The earnings impact of our derivative activity was as follows:

Derivatives Designated as Fair Value Hedging Instruments	Income Statement Location	Amount of Gain (Loss) Recognized in Income on Derivative (Effective Portion)			Amount of Gain (Loss) Recognized in Income on Hedged Item			Amount of Gain (Loss) Recognized in Income  on Derivative (Ineffective Portion)
		(Thousands of Dollars)
Three months ended September 30, 2014:
Commodity contracts	Cost of product sales	$	1,219		$	(1,058	)	$	161
Three months ended September 30, 2013:
Commodity contracts	Cost of product sales	$	(3,853	)	$	4,184		$	331
Nine months ended September 30, 2014:
Commodity contracts	Cost of product sales	$	2,178		$	(2,840	)	$	(662	)
Nine months ended September 30, 2013:
Commodity contracts	Cost of product sales	$	4,059		$	(6,298	)	$	(2,239	)

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Derivatives Designated as Cash Flow Hedging Instruments	Amount of Gain (Loss) Recognized  in OCI  on Derivative (Effective Portion)		Income Statement Location (a)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)			Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective  Portion)
	(Thousands of Dollars)			(Thousands of Dollars)
Three months ended September 30, 2014:
Interest rate swaps	$	—	Interest expense, net	$	(2,625	)	$	—
Three months ended September 30, 2013:
Interest rate swaps	$	—	Interest expense, net	$	(1,653	)	$	—
Nine months ended September 30, 2014:
Interest rate swaps	$	—	Interest expense, net	$	(8,062	)	$	—
Nine months ended September 30, 2013:
Interest rate swaps	$	7,213	Interest expense, net	$	(4,615	)	$	—

(a) Amounts are included in specified location for both the gain (loss) reclassified from accumulated OCI into income (effective portion) and the gain (loss) recognized in income on derivative (ineffective portion).

Derivatives Not Designated as Hedging Instruments	Income Statement Location	Amount of Gain (Loss) Recognized in Income
		(Thousands of Dollars)
Three months ended September 30, 2014:
Commodity contracts	Cost of product sales	$	6,680
Three months ended September 30, 2013:
Commodity contracts	Cost of product sales	$	(4,941	)
Nine months ended September 30, 2014:
Commodity contracts	Cost of product sales	$	2,270
Nine months ended September 30, 2013:
Commodity contracts	Cost of product sales	$	(4,492	)
Commodity contracts	(Loss) income from discontinued operations	(218		)
Total		$	(4,710	)

For derivatives designated as cash flow hedging instruments, once a hedged transaction occurs, we reclassify the effective portion from accumulated OCI to “Cost of product sales” or “Interest expense, net.” As of September 30, 2014, we expect to reclassify a loss of $10.0 million to “Interest expense, net” within the next twelve months.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

8. RELATED PARTY TRANSACTIONS

The following table summarizes information pertaining to related party transactions:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
	(Thousands of Dollars)
Revenues	$	—	$	1,491	$	929	$	13,308
Operating expenses	$	31,394	$	30,076	$	91,025	$	93,440
General and administrative expenses	$	17,400	$	10,495	$	48,942	$	41,807
Interest income	$	—	$	1,828	$	1,055	$	4,560
Revenues included in discontinued operations, net of tax	$	36	$	885	$	528	$	2,875
Expenses included in discontinued operations, net of tax	$	184	$	1,441	$	1,596	$	4,403

NuStar GP, LLC

Our operations are managed by NuStar GP, LLC, the general partner of our general partner. Under a services agreement between NuStar Energy and NuStar GP, LLC, employees of NuStar GP, LLC perform services for our U.S. operations. Certain of our wholly owned subsidiaries employ persons who perform services for our international operations. Employees of NuStar GP, LLC provide services to both NuStar Energy and NuStar GP Holdings; therefore, we reimburse NuStar GP, LLC for all employee costs, other than the expenses allocated to NuStar GP Holdings.

We had a payable to NuStar GP, LLC of $14.1 million and $8.3 million as of September 30, 2014 and December 31, 2013, respectively, with both amounts representing payroll, employee benefit plan expenses and unit-based compensation. We also had a long-term payable to NuStar GP, LLC as of September 30, 2014 and December 31, 2013 of $30.5 million and $41.1 million, respectively, related to amounts payable for retiree medical benefits and other post-employment benefits.

Axeon

As a result of the Asphalt JV Sale, we ceased reporting transactions between us and Axeon as related party transactions in our consolidated financial statements on February 26, 2014.

Financing Agreements and Credit Support. Effective upon the Asphalt JV Sale, the NuStar JV Facility was converted into the Axeon Term Loan. The Axeon Term Loan will step down from $190.0 million over time: first, to $175.0 million on December 31, 2014 and then to $150.0 million on September 30, 2015. While the Axeon Term Loan does not provide for any other scheduled payments, Axeon is required to use all of its excess cash, as defined in the Axeon Term Loan, to repay the Axeon Term Loan. The Axeon Term Loan must be repaid in full on September 28, 2019. All repayments of the Axeon Term Loan, including those scheduled in 2014 and 2015, are subject to Axeon meeting certain restrictive requirements contained in its third-party credit facility. The carrying value of the Axeon Term Loan is included in “Other long-term assets, net” on the consolidated balance sheet as of September 30, 2014.

NuStar Energy will continue to provide credit support, such as guarantees, letters of credit and cash collateral, as applicable, of up to $150.0 million. Our obligation to provide credit support will be reduced by a minimum of $25.0 million beginning February 2016 and will terminate in full no later than September 28, 2019. As of September 30, 2014, we provided guarantees for commodity purchases, lease obligations and certain utilities for Axeon with an aggregate maximum potential exposure of $73.3 million, plus two guarantees to suppliers that do not specify a maximum amount, but for which we believe any amounts due would be minimal. A majority of these guarantees have no expiration date. As of September 30, 2014, we have also provided $61.9 million in letters of credit on behalf of Axeon. In the event we are obligated to perform under any of these guarantees or letters of credit, the amount paid by us will be treated as additional borrowings under the Axeon Term Loan.

Crude Oil Supply Agreement. We were a party to a crude oil supply agreement with Axeon (the Axeon Crude Oil Supply Agreement) that committed Axeon to purchase from us a minimum number of barrels of crude oil in a given year. The Axeon Crude Oil Supply Agreement terminated effective January 1, 2014. As of December 31, 2013, we had a receivable from Axeon of $50.7 million, mainly associated with crude oil sales under the Axeon Crude Oil Supply Agreement.

Services Agreement between Axeon and NuStar GP, LLC. NuStar GP, LLC and Axeon were a party to a services agreement, which provided that NuStar GP, LLC furnish certain administrative and other operating services necessary to conduct the

14

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

business of Axeon for an annual fee totaling $10.0 million, subject to adjustment (the Axeon Services Agreement). The Axeon Services Agreement terminated on June 30, 2014.

9. PARTNERS’ EQUITY

Partners’ Equity Activity

The following table summarizes changes in the carrying amount of equity attributable to NuStar Energy L.P. partners and noncontrolling interest:

	Three Months Ended September 30, 2014									Three Months Ended September 30, 2013
	NuStar Energy L.P. Partners’ Equity			Noncontrolling Interest			Total Partners’ Equity			NuStar Energy L.P. Partners’ Equity			Noncontrolling Interest			Total Partners’ Equity
	(Thousands of Dollars)
Beginning balance	$	1,808,370		$	989		$	1,809,359		$	2,429,132		$	11,134		$	2,440,266
Net income (loss)	62,121			(173		)	61,948			33,397			(161		)	33,236
Other comprehensive income (loss):
Foreign currency translation adjustment	(6,420		)	14			(6,406		)	4,469			(568		)	3,901
Net loss on cash flow hedges reclassified into interest expense, net	2,625			—			2,625			1,653			—			1,653
Total other comprehensive income (loss)	(3,795		)	14			(3,781		)	6,122			(568		)	5,554
Cash distributions to partners	(98,051		)	—			(98,051		)	(98,051		)	—			(98,051		)
Other	—			(830		)	(830		)	(26		)	—			(26		)
Ending balance	$	1,768,645		$	—		$	1,768,645		$	2,370,574		$	10,405		$	2,380,979

	Nine Months Ended September 30, 2014									Nine Months Ended September 30, 2013
	NuStar Energy L.P. Partners’ Equity			Noncontrolling Interest			Total Partners’ Equity			NuStar Energy L.P. Partners’ Equity			Noncontrolling Interest			Total Partners’ Equity
	(Thousands of Dollars)
Beginning balance	$	1,902,136		$	1,658		$	1,903,794		$	2,572,384		$	12,611		$	2,584,995
Net income (loss)	157,379			(395		)	156,984			91,048			(439		)	90,609
Other comprehensive income (loss):
Foreign currency translation adjustment	(4,802		)	(433		)	(5,235		)	(10,628		)	(1,767		)	(12,395		)
Net unrealized gain on cash flow hedges	—			—			—			7,213			—			7,213
Net loss on cash flow hedges reclassified into interest expense, net	8,062			—			8,062			4,615			—			4,615
Total other comprehensive income (loss)	3,260			(433		)	2,827			1,200			(1,767		)	(567		)
Cash distributions to partners	(294,153		)	—			(294,153		)	(294,153		)	—			(294,153		)
Other	23			(830		)	(807		)	95			—			95
Ending balance	$	1,768,645		$	—		$	1,768,645		$	2,370,574		$	10,405		$	2,380,979

15

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Accumulated Other Comprehensive Loss

The balance of and changes in the components included in “Accumulated other comprehensive loss” were as follows:

	Foreign Currency Translation			Cash Flow Hedges			Total
	(Thousands of Dollars)
Balance as of January 1, 2014	$	(13,658	)	$	(49,736	)	$	(63,394	)
Activity	(4,802		)	8,062			3,260
Balance as of September 30, 2014	$	(18,460	)	$	(41,674	)	$	(60,134	)

Allocations of Net Income

Our partnership agreement, as amended, sets forth the calculation to be used to determine the amount and priority of cash distributions that the common unitholders and the general partner will receive. The partnership agreement also contains provisions for the allocation of net income and loss to the unitholders and the general partner. For purposes of maintaining partner capital accounts, the partnership agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interests. Normal allocations according to percentage interests are made after giving effect to priority income allocations, if any, in an amount equal to incentive cash distributions allocated 100% to the general partner.

The following table details the calculation of net income applicable to the general partner:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(Thousands of Dollars)
Net income attributable to NuStar Energy L.P.	$	62,121		$	33,397		$	157,379		$	91,048
Less general partner incentive distribution	10,805			10,805			32,415			32,415
Net income after general partner incentive distribution	51,316			22,592			124,964			58,633
General partner interest	2		%	2		%	2		%	2		%
General partner allocation of net income after general partner incentive distribution	1,025			452			2,498			1,174
General partner incentive distribution	10,805			10,805			32,415			32,415
Net income applicable to general partner	$	11,830		$	11,257		$	34,913		$	33,589

Cash Distributions

The following table reflects the allocation of total cash distributions to the general and limited partners applicable to the period in which the distributions were earned:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
	(Thousands of Dollars, Except Per Unit Data)
General partner interest	$	1,961	$	1,961	$	5,883	$	5,883
General partner incentive distribution	10,805		10,805		32,415		32,415
Total general partner distribution	12,766		12,766		38,298		38,298
Limited partners’ distribution	85,285		85,285		255,855		255,855
Total cash distributions	$	98,051	$	98,051	$	294,153	$	294,153
Cash distributions per unit applicable to limited partners	$	1.095	$	1.095	$	3.285	$	3.285

16

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The following table summarizes information related to our quarterly cash distributions:

Quarter Ended	Cash Distributions Per Unit		Total Cash Distributions		Record Date	Payment Date
			(Thousands of Dollars)
September 30, 2014 (a)	$	1.095	$	98,051	November 10, 2014	November 14, 2014
June 30, 2014	$	1.095	$	98,051	August 6, 2014	August 11, 2014
March 31, 2014	$	1.095	$	98,051	May 7, 2014	May 12, 2014
December 31, 2013	$	1.095	$	98,051	February 10, 2014	February 14, 2014

(a) The distribution was announced on October 31, 2014.

10. NET INCOME PER UNIT

We have identified the general partner interest and incentive distribution rights (IDR) as participating securities and use the two-class method when calculating the net income per unit applicable to limited partners, which is based on the weighted-average number of common units outstanding during the period. Basic and diluted net income per unit applicable to limited partners are the same because we have no potentially dilutive securities outstanding.

The following table details the calculation of earnings per unit:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(Thousands of Dollars, Except Unit and Per Unit Data)
Net income attributable to NuStar Energy L.P.	$	62,121		$	33,397		$	157,379		$	91,048
Less general partner distribution (including IDR)	12,766			12,766			38,298			38,298
Less limited partner distribution	85,285			85,285			255,855			255,855
Distributions in excess of earnings	$	(35,930	)	$	(64,654	)	$	(136,774	)	$	(203,105	)
General partner earnings:
Distributions	$	12,766		$	12,766		$	38,298		$	38,298
Allocation of distributions in excess of earnings (2%)	(719		)	(1,293		)	(2,736		)	(4,061		)
Total	$	12,047		$	11,473		$	35,562		$	34,237
Limited partner earnings:
Distributions	$	85,285		$	85,285		$	255,855		$	255,855
Allocation of distributions in excess of earnings (98%)	(35,211		)	(63,361		)	(134,038		)	(199,044		)
Total	$	50,074		$	21,924		$	121,817		$	56,811
Weighted-average limited partner units outstanding	77,886,078			77,886,078			77,886,078			77,886,078
Net income per unit applicable to limited partners	$	0.64		$	0.28		$	1.56		$	0.73

17

NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

11. STATEMENTS OF CASH FLOWS

Changes in current assets and current liabilities were as follows:

	Nine Months Ended September 30,
	2014			2013
	(Thousands of Dollars)
Decrease (increase) in current assets:
Accounts receivable	$	60,010		$	145,803
Receivable from related parties	51,037			83,265
Inventories	19,865			47,145
Income tax receivable	(2,939		)	1,204
Other current assets	1,637			24,026
Increase (decrease) in current liabilities:
Accounts payable	(134,932		)	(176,161		)
Payable to related party	5,841			18,180
Accrued interest payable	(5,611		)	2,643
Accrued liabilities	807			(33,618		)
Taxes other than income tax	5,319			3,144
Income tax payable	46			1,207
Changes in current assets and current liabilities	$	1,080		$	116,838

The above changes in current assets and current liabilities differ from changes between amounts reflected in the applicable consolidated balance sheets due to the change in the amount accrued for capital expenditures and the effect of foreign currency translation.

Cash flows related to interest and income taxes were as follows:

	Nine Months Ended September 30,
	2014		2013
	(Thousands of Dollars)
Cash paid for interest, net of amount capitalized	$	103,832	$	88,529
Cash paid for income taxes, net of tax refunds received	$	9,826	$	8,183

12. SEGMENT INFORMATION

Our segments represent strategic business units that offer different services and products. We evaluate the performance of each segment based on its respective operating income, before general and administrative expenses and certain non-segmental depreciation and amortization expense. General and administrative expenses are not allocated to the operating segments since those expenses relate primarily to the overall management at the entity level. Our principal operations include transportation of petroleum products and anhydrous ammonia, the terminalling and storage of petroleum products and the marketing of petroleum products. Intersegment revenues result from storage agreements with wholly owned subsidiaries of NuStar Energy at lease rates consistent with rates charged to third parties for storage. Related party revenues mainly result from storage agreements with our joint ventures.

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Results of operations for the reportable segments were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(Thousands of Dollars)
Revenues:
Pipeline	$	125,461		$	111,508		$	346,218		$	301,761
Storage:
Third parties	137,771			130,227			400,421			393,390
Intersegment	6,174			6,890			20,147			24,911
Related party	—			1,491			929			4,663
Total storage	143,945			138,608			421,497			422,964
Fuels marketing:
Third parties	531,190			534,919			1,645,812			1,969,886
Related party	—			—			—			8,645
Total fuels marketing	531,190			534,919			1,645,812			1,978,531
Consolidation and intersegment eliminations	(6,174		)	(6,890		)	(20,147		)	(24,911		)
Total revenues	$	794,422		$	778,145		$	2,393,380		$	2,678,345
Operating income:
Pipeline	$	65,652		$	58,018		$	178,878		$	149,126
Storage	49,401			41,051			141,415			139,419
Fuels marketing	7,518			(9,079		)	21,897			(7,240		)
Consolidation and intersegment eliminations	(25		)	123			(35		)	1,382
Total segment operating income	122,546			90,113			342,155			282,687
General and administrative expenses	24,967			18,831			68,986			65,978
Other depreciation and amortization expense	2,481			2,531			7,614			7,628
Total operating income	$	95,098		$	68,751		$	265,555		$	209,081

Total assets by reportable segment were as follows:

	September 30, 2014		December 31, 2013
	(Thousands of Dollars)
Pipeline	$	1,898,684	$	1,797,698
Storage	2,237,537		2,275,183
Fuels marketing	306,636		445,882
Total segment assets	4,442,857		4,518,763
Other partnership assets	434,510		513,423
Total consolidated assets	$	4,877,367	$	5,032,186

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NUSTAR ENERGY L.P. AND SUBSIDIARIES

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

13. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

NuStar Energy has no operations and its assets consist mainly of its investments in NuStar Logistics and NuPOP, both wholly owned subsidiaries. The senior and subordinated notes issued by NuStar Logistics are fully and unconditionally guaranteed by NuStar Energy and NuPOP. As a result, the following condensed consolidating financial statements are presented as an alternative to providing separate financial statements for NuStar Logistics and NuPOP.

Condensed Consolidating Balance Sheets

September 30, 2014

(Thousands of Dollars)

	NuStar Energy		NuStar Logistics		NuPOP		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Cash and cash equivalents	$	913	$	7	$	—	$	24,766	$	—		$	25,686
Receivables, net	—		44,063		14,384		162,439		—			220,886
Inventories	—		2,187		8,765		107,029		(44		)	117,937
Income tax receivable	—		—		—		3,661		—			3,661
Other current assets	—		13,537		3,349		20,637		—			37,523
Assets held for sale	—		—		—		2,256		—			2,256
Intercompany receivable	—		1,296,459		—		—		(1,296,459		)	—
Total current assets	913		1,356,253		26,498		320,788		(1,296,503		)	407,949
Property, plant and equipment, net	—		1,743,433		558,646		1,089,351		—			3,391,430
Intangible assets, net	—		57,511		—		4,304		—			61,815
Goodwill	—		149,453		170,652		297,324		—			617,429
Investment in wholly owned subsidiaries	2,333,931		175,150		907,661		925,563		(4,342,305		)	—
Investment in joint venture	—		—		—		72,872		—			72,872
Deferred income tax asset	—		—		—		4,902		—			4,902
Other long-term assets, net	673		287,358		26,329		6,610		—