Buckeye Partners L.P
) operating earnings of 55 cents per unit in the second quarter
2012 fell short of the Zacks Consensus Estimate by 11 cents per
unit. Earnings were 12.7% lower than 63 cents earned in the
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Soft performance at Energy Services largely induced the
underperformance. Nevertheless, the company experienced improving
business conditions at its domestic pipelines and terminals as well
as in its international operations.
Total revenue at the end of the second quarter 2012 was $0.98
billion versus $1.18 billion in the prior-year quarter, reflecting
a decline of 8.8%. Revenue substantially missed the Zacks Consensus
Estimate of $1.172 billion.
Low product sales, partially offset by increase in transportation
and other activities from its crude oil and petroleum products led
to the overall decline.
The overall revenue decline resulted from Energy Services revenue
dipping 13.6% year over year and International Operations' revenue
declining 4.8% year over year. However, a 12.2% increase in
Pipelines & Terminals revenue, 16.9% improvement in Natural Gas
Storage revenue and 24.3% increase in Development & Logistics
revenue helped offset the decline.
During the quarter, total costs and expenses decreased 9.1% year
over year to $900.8 million. Operating expenses escalated 12.9% to
$101.5 million and general & administrative expenses increased
by 4.0% to $16.9 million.
The partnership's adjusted EBITDA marginally improved 1.9% to
$119.9 million from $117.6 million in the second quarter of 2011.
Interest and debt expenses inched down to $27.6 million from $28.6
million reported in the year-ago quarter.
Total cash and cash equivalents as of June 30, 2012, were $0.6
million versus $12.9 million as of December 31, 2011.
Buckeye's long-term debt as of June 30, 2012, was $2.28 billion
compared with $2.39 billion of long-term debt as of December 31,
Buckeye spent $73.7 million on capital expenditures during the
quarter, compared with $62.4 million in the prior-year quarter.
The partnership approved a cash distribution of $1.0375 per unit
payable on August 31, 2012 to unitholders of record on August 15,
2012. This distribution also represents a 2.5% year-over-year
Acquisition and Developments
In late July, Buckeye completed the acquisition of a marine
terminal facility for liquid petroleum products in New York Harbor
from Chevron U.S.A. Inc., a unit of
), in a cash deal worth $260 million.
The acquisition augments Buckeye's total liquid petroleum storage
capacity by nearly 6% to over 68 million barrels. Also, undeveloped
land in the facility will cushion future expansion.
This purchase will enable a strong connection between waterborne
imports with end-destination markets through its internal pipeline
and terminal imports. This also includes inland linkages with BORCO
Buckeye placed in service the 1.1 million barrels of storage
capacity on July 1, representing the initial phase of the BORCO
One of its close peers,
The Williams Companies, Inc.
) reported soft second quarter 2012 results, owing to challenging
natural gas market conditions along with higher acquisition related
Operating earnings came in at 22 cents per share, in line with the
Zacks Consensus Estimate and plunging 24.1% year over year.
The company generated revenues of $1.8 billion, missing our
forecast of $2.0 billion and also declining 7.0% year over year.
We retain our Neutral recommendation on Buckeye. The partnership
presently retains a short-term Zacks #3 Rank (Hold) indicating no
clear directional pressure in the near term