On Jan 6, we have issued an updated research report on Buckeye Partners, L.P. (BPL). Investments in both organic and inorganic growth projects, along with strategic asset divestment are expected to boost the partnership’s performance.
In addition, Buckeye Partners’ strategy of paying cash distributions at regular intervals is commendable. However, stringent government regulations, increasing debt burden and operating costs will likely prove headwinds.
This Zacks Rank #3 (Hold) stock continues to invest substantially in expanding its operations through infrastructure development projects and acquisitions. The partnership projected $425–$455 million as capital expenditure for 2014. Buckeye Partners has completed crude oil storage capacity expansion and pipeline connections at the Hartsdale Crude Tanks and Pipeline in the Chicago Complex.
In Sep 2014, Buckeye Partners acquired 80% interest in Buckeye Texas Partners LLC for $821 million. These initiatives will collectively enable the partnership to meet increasing midstream service demand of exploration and production companies.
Buckeye Partners is currently streamlining its existing operations by divesting its natural gas storage division. The partnership recently sold all of its outstanding limited liability interests in Lodi Gas Storage, L.L.C. to Brookfield Infrastructure. The partnership intends to utilize the proceeds from the latest divestiture to repay existing debts and invest in growth ventures.
Apart from pursuing growth ventures, Buckeye Partners is also maximizing unitholder wealth through payment of regular cash distributions. The partnership paid $384.4 million as cash distribution during the first nine months of 2014. This enables the partnership to attract more investors on the stock.
However, Buckeye Partners’ operations are subject to state and federal regulations. A modification in rules might disrupt its functions by forcing it to install infrastructure at its facilities, thereby increasing the costs of operation.
Key Picks from the Sector
Some better-ranked stocks in the sector include Enbridge Energy Management LLC (EEQ), PBF Logistics LP (PBFX) and Spectra Energy Partners, LP (SEP), each carrying a Zacks Rank #1 (Strong Buy).
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