Buckeye Partners L.P. (BPL)

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Buckeye Partners, L.P. (BPL)

Q1 2013 Earnings Call

May 03, 2013 11:00 am ET

Executives

Clark C. Smith - Chief Executive Officer of Buckeye Gp, President of Buckeye Gp and Director of Buckeye Gp Llc

Todd J. Russo - Vice President of Buckeye Gp Llc, Secretary of Buckeye Gp Llc and General Counsel of Buckeye Gp Llc

Keith E. St. Clair - Chief Financial Officer of Buckeye GP LLC and Executive Vice President of Buckeye GP LLC

Robert A. Malecky - Senior Vice President of Buckeye GP LLC and President of Domestic Pipelines & Terminals Business Unit

Jeremiah J. Ashcroft - Senior Vice President of Buckeye GP LLC and President of Buckeye Services Business Unit

Analysts

Gabriel P. Moreen - BofA Merrill Lynch, Research Division

James Jampel

David L. Labonte - Kayne Anderson Capital Advisors, L.P.

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Buckeye Partners, L.P. 2013 First Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to your host for today, Mr. Clark C. Smith, President and Chief Executive Officer. Sir, you may begin.

Clark C. Smith

All right. Thank you, Ben. Good morning, everyone, and welcome to the Buckeye Partners' first quarter 2013 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 some important highlights for the quarter, Keith will review our financial results in further detail.

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

Todd J. Russo

Thanks, Scott -- 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, 2012, as 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'll turn the call back over to Clark.

Clark C. Smith

Thanks, Todd. I'd like to begin my comments by recognizing that Buckeye experienced another good quarter in terms of safety and operations, which is a critical focus of our employees across all of Buckeye's assets. We continue to enhance our health, safety, security and environmental programs to prevent incidents and reduce risk to our employees, contractors and communities.

One way we do this is through our participation in the Association of Oil Pipe Lines and American Petroleum Institute industry trade associations in our pursuit of continuous improvement in the areas of pipeline safety and emergency response. These trade associations identify opportunities to promote inter-company learning and sharing of best practices, areas where additional research and technology development are necessary, such as enhancements and leak detection, as well as other programs that will improve the industry's and Buckeye's pipeline safety performance.

In the area of emergency response, focus is being given to improving response communications and training of emergency responders. Buckeye's participation involves leadership positions on the AOPL board and the API Performance Excellence Team, as well as committee participation on many other critical API committees and work groups. Safety has been and always will be our highest priority at Buckeye.

Turning to our operating results. I am pleased that Buckeye's talented employees were able to follow up a strong second half performance in 2012 with an outstanding first quarter of 2013.

Adjusted EBITDA of $158.8 million is a first quarter record for Buckeye and represents a 38% improvement year-over-year. 4 of our 5 businesses showed improvement over the prior-year quarter, with our Domestic Pipelines & Terminals leading the way with a 31% improvement in adjusted EBITDA. Contributions from growth capital projects, particularly across our Terminal business, helped drive this performance.

In addition, Energy Services had a great quarter, delivering over $7 million of adjusted EBITDA, reinforcing their successful turnaround from the difficult market conditions experienced in late 2011 and early 2012. Also showing earnings improvements were our international operations in our Development & Logistics businesses.

We are pleased with Buckeye's distribution coverage, improving to 1.21x for the quarter and 1.15x over the last 12 months. This sustained improvement in performance, as well as our positive outlook, allowed us to declare a cash distribution of $1.05 per limited partner unit, which is an increase of $0.0125 over the prior sequential quarter in the year-ago quarter. This is significant, as we had suspended distribution increases beginning with the year-ago quarter after a long history of consecutive quarterly distribution growth.

Our Board takes a long-term view in determining the appropriate level of limited partner distributions, considering not only this quarter's results but, importantly, looking forward to the full year 2013 and into 2014 and beyond. The Board evaluates many factors, including the business environment, our historical and projected performance and other consideration, such as the strength of our balance sheet, in determining the appropriate level of distribution each quarter.

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