In an article dated December 19, 2011, regarding Buckeye Partners L.P. (BPL) I noted the following:
What I see for the 9 months ending 9/30/11 causes me concern regarding BPL's ability to make distributions that are financed by operations, not by borrowings or sale of additional partnership units.
BPL issued a press release with its fourth quarter and year-end results February 10, 2012, reporting distributable cash flow (DCF) of $72.25 million for the quarter and $318.7 for the 12 2011. Following that, on February 13, Citigroup downgraded BPL to "Sell".
The reported DCF numbers are indeed good cause for concern:
| Period: | 4Q11 | 2011 |
| Reported DCF per unit | $0.77 | $3.51 |
| Distributions per unit | $1.0375 | $4.075 |
| Coverage ratio based on reported DCF | 0.74 | 0.86 |
Indeed, sustainable DCF was substantially lower than reported DCF in each of the first 3 quarters of 2010 and in each of the first 3 quarters of 2011. To review these numbers click here.
BPL currently yields 6.74%, but investors should be aware that a significant portion of what they are receiving does not seem to be generated from sustainable sources. I will take a closer look at the numbers and compare reported to sustainable DCF once BPL files its 10-K (which will include cash flow data not provided in the press release).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
