Buckeye Rises on Cost Initiatives

| About: Buckeye Partners (BPL)

Buckeye Partners L.P. (NYSE:BPL) earnings in the fourth quarter of 2009 were above Zacks Consensus Estimate of 92 cents per limited partner unit and earnings reported a year ago of 89 cents. Buckeye reported earnings of $1.03 per unit in the quarter. For the full-year 2009, the partnership reported earnings of $3.63 per unit compared to the Zacks Consensus Estimate of $3.50 and the year-ago earnings of $3.00.

Revenue increased 8% year over year to $578.9 million in the quarter, while it declined 7% year over year to 1.8 billion for the full-year 2009. The increase in quarterly revenue was primarily due to increased volumes marketed in the energy services segment and higher natural gas storage and terminalling revenues. Buckeye's adjusted EBITDA was $105.7 million (up 18%) in the quarter and $370.9 million (up 17%) in 2009. Operating income, before special charges, for the reported quarter and the full year increased 20% and 18%, respectively to $87.0 million and $300.2 million.

Buckeye continues to realize the cost reduction benefits through its best practices initiative. Buckeye achieved about $6.6 million of savings in 2009 and has set a target to achieve its previously forecasted annual savings of approximately $18 million per year related to its best practices initiative as announced in July 2009.

Buckeye continued to generate solid financial and operational performance in the fourth quarter of 2009. In November 2009, Buckeye completed the previously announced acquisition of 310 miles of refined petroleum products pipelines and three refined petroleum products terminals from ConocoPhillips (NYSE:COP) and integrated these strategic assets into its business.

During the year, the partnership continued to grow geographically, developed product diversity and became more commercial as an overall enterprise. The partnership has created a more commercial culture and has decentralizing its operating structure to encourage accountability and entrepreneurship throughout the organization. This accountability is being encouraged with a gain sharing program that gives incentive to employees to make positive changes to improve their businesses. With this program, Buckeye expects to achieve an annualized earnings improvement of over $8 million in 2010.

Financially, distributable cash flow increased to $73.1 million in the quarter from $55.6 million last year. In 2009, distributable cash flow totaled $273.4 million versus $216.0 million in 2008. The partnership’s distribution coverage improved to 1.2 times for the quarter compared to 1.04 times last year. For the full year of 2009, distribution coverage increased to 1.5 – 1.15 times from 1.03 times for the full year of 2008.

From a balance sheet and liquidity perspective, Buckeye ended the year with $34.6 million in cash and long-term debt of $1.5 billion. At year-end, the partnership had $78 million drawn on its revolving credit facility, which has a committed capacity of $580 million. Furthermore, it has no maturities on long-term debt until the third quarter of 2012.

At December 31, 2009, its ratio of net long-term debt to adjusted EBITDA was 3.95 times and adjusted EBITDA to interest coverage was 4.96 times. Both of these metrics represent improvements from the prior year.

The Board of Directors of Buckeye GP LLC (NYSE:BGH), the general partner of Buckeye, raised the regular quarterly partnership cash distribution by 5.6% to 93.75 cents per unit. The distribution is payable on February 26, 2010, to unitholders of record as on February 16, 2010. Buckeye’s annualized cash distribution is now $3.75 per unit.

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Tagged: , Oil & Gas Pipelines, Earnings
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