Buckeye Partners L.P.
) announced first quarter 2012 results. During the quarter,
operating earnings of 54 cents per unit were much lower than the
year-ago earnings of 79 cents per unit. Earnings also fell short of
the Zacks Consensus Estimate of 74 cents per unit.
The significant earnings underperformance can be attributed to
the combined effect of softness in demand owing to warm winter
weather and the near-term negative impact of the partnership's
Energy Service segment withdrawing its position from the
Decline in volumes by 32% from the partnership's
Pipelines & Terminals
segments and strategic losses incurred in terms of exposure to
market volatility through inventory reduction were additional
factors responsible for the decrease in earnings.
Total revenue at the end of the first quarter 2012 was $1,259.4
million versus $1,252.5 million in the prior-year quarter,
reflecting marginal growth of 0.5%. Revenue during the quarter was
lower than the Zacks Consensus Estimate of $1,268 million.
The modest revenue growth was attributed to favorable
transportation and storage activities from its crude oil and
petroleum products partially offset by low product sales.
Higher revenues owed primarily to a solid performance at
Pipelines & Terminals
. Revenue from this division increased 15.0% year over year to
$165.9 million in the first quarter, constituting 13.1% of the
total revenue. Also,
revenue increased a sharp 11.5% which constituted 3.9% of the total
However, this upward movement of revenue was partially
constrained by a combined negative effect of 62.9% from the
Natural Gas storage
During the quarter, total costs and expenses rose 1.6% year over
year to $1,179.0 million. Operating expenses increased 21.5% to
$97.5 million and general & administrative expenses raised by
9.0% to $16.9 million.
The partnership's adjusted EBITDA declined 5.8% to $115.0
million from $122.2 million in the first quarter of 2011.
Interest and debt expenses increased marginally to $28.8 million
from $28.4 million reported in the year-ago quarter.
Agreements & Mergers
Buckeye entered in to a long-term agreement for crude oil
storage at its BORCO facility in Bahamas. This contract constitutes
infrastructural expansion through construction of additional 1.2
million barrels of crude oil storage capacity which is expected to
be operational from the third quarter of 2013.
The partnership reached a consensus with Chevron U.S.A Inc.a
) for the acquisition of a marine terminal facility for liquid
petroleum products in New York Harbor in February. This will enable
strong connection between waterborne imports with end destination
markets through its internal pipeline and terminal imports. This
also includes inland linkages with BORCO operations.
Total cash and cash equivalents as of March 31, 2012, were $15
million versus $12.9 million as of December 31, 2011.
Buckeye's long-term debt as of March 31, 2012, was $2,249.7
million compared with $2,393.5 million of long-term debt as of
December 31, 2011.
Buckeye spent $74.3 million on capital expenditure during the
quarter compared with $38.0 million in the prior-year quarter.
The partnership once again raised its cash distribution rate.
The current distribution rate of the partnership stands at $1.0375
per unit, which reflects a 3.75% increase from the first quarter
2011 cash distribution per unit of $1.0 per unit. The distribution
will be payable on May 31, 2012, to unit holders of record on May
One of its close peers,
The Williams Companies, Inc.
) announced first quarter 2012 results. Williams' earnings per
share, excluding special items, came in at 39 cents, breezing past
the Zacks Consensus Estimate of 36 cents. On a year-over-year
basis, earnings improved 39.3% from 28 cents in the year-ago
The company generated revenues of $2,019 million, ahead of our
expectation of $1,847 million.
The partnership's earnings as well as revenue lagged the Zacks
Consensus Estimate for the current quarter of 2012 attributable to
lower demand for refined products due to warmer winter weather
coupled with decrease in oil pipeline volumes. We observe that
Buckeye has failed to match our earnings per unit projection for
the past three quarters.
We expect the partnership to benefit from increased long term
demand of crude oil and liquid petroleum. The production from the
BORCO facilities, which is expected to commence from the later half
of 2013, will benefit the partnership.
However, we presently have a bearish outlook on the
partnership's due to the threats of price instability of refined
petroleum products and natural gas services, adverse weather
impacts and environmental regulations resulting in windfall
costs, and unexpected changes in market related factors.
The partnership presently retains a short-term Zacks #3 Rank
(Hold). We have a long term Underperform recommendation for the
Based in Houston, Texas Buckeye Partners, L.P. owns and operates
refined petroleum products pipeline systems in the United States.
The partnership's Pipelines and Terminals segment transports
refined petroleum products and provides bulk storage and terminal
throughput services in the continental United States.
BUCKEYE PARTNRS (BPL): Free Stock Analysis
CHEVRON CORP (CVX): Free Stock Analysis Report
WILLIAMS COS (WMB): Free Stock Analysis Report
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