Buckeye Partners L.P. (BPL)

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Buckeye Partners, L.P. (BPL)

Q4 2009 Earnings Call Transcript

February 5, 2009 11:00 am ET

Executives

Forrest Wylie – Chairman & CEO

Bill Schmidt – VP, General Counsel and Secretary

Keith St. Clair – CFO and SVP

Clark Smith – President and COO

Bob Malecky – VP, Marketing

Todd Johnson – VP, Commercial Operations

Analysts

Ross Payne – Wells Fargo

Michael Blum – Wells Fargo

Adam Rothenberg – Zimmer Lucas Partners

Selman Akyol – Stifel Nicolaus

Michael Cerasoli – Goldman Sachs

Ethan Bellamy – Wunderlich Securities

Brian Zarahn – Barclays Capital

Presentation

Operator

Good morning, everyone and welcome to the Buckeye Partners and Buckeye GP Holdings fourth quarter and full year 2009 financial results conference call. As a reminder, today's conference call is being recorded.

At this time, I'd like to turn the call over to Forrest E. Wylie, Chairman and Chief Executive Officer for introductory remarks.

Forrest Wylie

Thank you, Joe and thanks, everyone and welcome to the Buckeye Partners LP and Buckeye GP Holdings LP fourth quarter and full year 2009 analyst conference call. Speaking on the call today are Keith St. Clair, our Senior Vice President and Chief Financial Officer; and Clark Smith, our President and Chief Operating Officer.

Keith is going to review the financial results for both Buckeye Partners and Buckeye GP Holdings LP, which we will refer to as BGH, and Clark will discuss our operating highlights for the quarter.

Also in the call today are Khalid Muslih, President of Buckeye Development and Logistics and Vice President of Corporate Development; Todd Johnson, Vice President of Commercial Operations; Bob Malecky, Vice President of Customer Services; Jeff Beson [ph], our Vice President and Controller; Bill Schmidt, our Vice President and General Counsel; and Mark Stockard, our Director of Investor Relations.

Following our prepared remarks, we will open the call to questions. But first, I'd like Bill to read the forward-looking statement.

Bill Schmidt

Thanks, Forrest. Before we begin, I'd like to remind everyone that we may make statements on the call that could be considered as forward-looking statements as defined by the SEC. Future results are subject to numerous contingencies, many of which are outside our control and forward-looking statements – and any forward-looking statements we make are qualified by the risk factors and other information set forth in our Form 10-K and Form 10-Qs most recently filed with the SEC.

In addition, during the call we will be discussing Buckeye Partners' adjusted EBITDA, net income attributable to Buckeye's unitholders before special items and distributable cash flow, all of which are non-GAAP measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in the press release that we issued earlier this morning and is posted on the Investor Center section of Buckeye Partners' website at www.buckeye.com. Also, unless we indicate otherwise, all financial results we discuss on today's call will be those of Buckeye Partners LP.

With that, I'll turn the call back over to Forrest.

Forrest Wylie

Thanks, Bill. So let me begin by saying we had a very solid fourth quarter. We generated substantial improvements in virtually all of our key financial metrics. This performance demonstrates that our transition of Buckeye, which didn’t go into full force until the second half of the 2009, is working. This transition strategy is really very simple. The key, perhaps not surprisingly, is execution and I'm very proud of the progress that the entire organization is making.

We remain on target with our previously forecasted annual savings of approximately $18 million per year related to our best practices restructuring in July and have achieved about $6.6 million of savings in 2009. Our primary operational objective is also simple, to be the best-in-class asset manager. That means achieving the highest utilization at the lowest cost per unit without compromising our commitment to safe and environmentally responsible operations.

Now, I can't stress enough that we are not just merely cutting cost. That's not always productive. We are focused on true productivity improvement through higher and more efficient utilization of our pipeline, storage, terminal, and natural gas assets. This is the mindset that our newly decentralized structure is creating in our workforce and we are seeing the mindset take hold.

So what specifically have we done to execute this strategy? First, we have looked for geographic diversity. Historically, our results have been disproportionately dependent upon the economic cycles and weather patterns of the North Eastern United States. Clearly, we can reduce that volatility by expanding our network in other areas of the country. The 2008 Lodi acquisition, which is located in California, as well as the purchase of the Midwestern assets from ConocoPhillips in the fourth quarter represented good examples of the geographic diversity we are trying to bring to Buckeye.

Second, we have been seeking product diversity, moving away from only refined products. Our diversification into the natural gas is an excellent example. The third element of our plan is becoming more commercial as an overall enterprise. Our Buckeye Energy Service marketing division is a good example of this strategy. BES drives marketing margins, as well as improves our asset utilization. This is the part – this is part of the reason we've been expanding our profitability even while transporting and terminalling volumes have been declining over the past two-and-a-half years.

The other major change that we made this year was create a more commercial culture and decentralize our operating structure to encourage accountability and entrepreneurship throughout the organization.

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