Buckeye Partners L.P. (BPL)

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Buckeye Partners, L.P. (BPL)

Q4 2012 Earnings Call

February 8, 2013 11:00 am ET

Executives

Clark C. Smith – President and Chief Executive Officer

Todd J. Russo – Deputy General Counsel & Secretary

Keith E. St. Clair – Executive Vice President and Chief Financial Officer

Robert A. Malecky – Senior Vice President and President - Domestic Pipelines and Terminals

Khalid A. Muslih – Senior Vice President - Corporate Development and Strategic Planning

Mary F. Morgan – Senior Vice President and President - International Operations

Analysts

Brian J. Zarahn – Barclays Capital

Gabe Moreen – Bank of America Merrill Lynch

Jeremy Tonet – JPMorgan

Michael J. Blum – Wells Fargo Securities, LLC

Ross Payne – Wells Fargo Securities, LLC

Connie Hsu – Morningstar, Inc.

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Buckeye Partners 2012 Fourth Quarter and Full Year Earnings Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today’s conference is being recorded.

I would now like to introduce to your host for today’s conference Mr. Clark C. Smith, President and Chief Executive Officer. Mr. Smith, please proceed.

Clark C. Smith

Thank you, Jenny and good morning everyone, and welcome to the Buckeye Partners fourth quarter 2012 conference call. Also speaking on the call today will be Keith St. Clair, our Executive Vice President and Chief Financial Officer. After I make some introductory remarks and discuss the operating highlights for the quarter, Keith will review our financial results in further detail.

Also on the call today are Bob Malecky, President of Domestic Pipelines & Terminals; Jerry Ashcroft, President of Buckeye Services; Mary Morgan, President of International Pipelines & Terminals; Khalid Muslih, Senior Vice President of Corporate Development & Strategic Planning; Jeff Beason, Vice President and Controller; and Todd Russo, Deputy General Counsel.

Following our prepared remarks, we’ll open the call to questions. But first, I’d like for Todd to provide our forward-looking statements disclaimer.

Todd J. Russo

Thanks, Clark. Before we begin, I’d like to remind everyone that we may make statements on the call today that could be construed as forward-looking statements as defined by the SEC. Future results are subject to numerous contingencies, many of which are outside our control, and any forward-looking statements we make are qualified by the risk factors and other information set forth in our Form 10-K for the year ended December 31, 2011, and our most recent Form 10-Q, each is filed with the SEC.

In addition, during the call, we will be discussing Buckeye’s adjusted EBITDA and certain other non-GAAP measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in the press release that we issued earlier this morning, which is posted on the Investor Center section of Buckeye’s website, www.buckeye.com.

With that, I will turn the call back over to Clark.

Clark C. Smith

Thank you, Todd. I’d like to begin my comments by discussing our safety performance, which continues to be outstanding across all of Buckeye’s assets. We continue to perform better than industry average safety benchmarks for OSHA recordable personal injuries and API motor vehicle incidents. We finished 2012 with a 23% and 36% year-on-year reduction respectively for those safety benchmark indictors.

Lodi, our natural gas operation in California reached a milestone of 11 years without a personal injury. BORCO, our largest terminal has celebrated over 3.5 years without a loss time incident. We also recently presented operational excellence awards to 24 asset teams within Buckeye, recognizing their completion of the entire 2012 calendar year without experiencing an OSHA recordable injury and API motor vehicle incident, a reportable product release or an operational incident. Again, 2012 was a very good year for Buckeye’s safety performance.

Now, turning to our operating results, I’m pleased to report that we are able to follow up a strong third quarter with an exceptional fourth quarter. Adjusted EBITDA for the fourth quarter of $172 million is a record for Buckeye and represents a 42% improvement over the year ago quarter and a 13% sequential improvement over the third quarter of 2012.

Distribution coverage improved to 1.32 times for the quarter and our strong performance propelled us to full year coverage of 1.04 times. We benefited from outstanding performances from all of our business segments. Our Domestic Pipes and Terminals and International segments adjusted EBITDA increased 18% and 36% respectively over the prior year quarter. This strong fourth quarter performance is a result of both improved business conditions, as well as the hard work by our Buckeye employees as we were able to recover from some challenges we faced in the first half of 2012.

It’s important to notice we review the fourth quarter that certain seasonal impacts to our business drive and improve performance in the winter months and the current quarter was a beneficiary of that seasonality. Some of the key seasonal benefits experienced in the fourth quarter include the increased contribution from butane blending, which benefits both our terminals and Energy Services businesses.

In addition, Buckeye heat oil volumes improved as a result of a return to a more normal winter. The colder weather benefited both transportation volumes on our domestic system, as well as provided higher margins for our marketing business. In addition, our health services business in Lodi took advantage of some short-term seasonal spreads for which the EBITDA contribution is largely reflected in the fourth quarter.

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