Even though the oil and gas operator, Buckeye Partners, L.P. (BPL) reported average financials for the fourth-quarter and full-year 2014, its units showed an upward movement of nearly 1.5% in the last trading session driven by an increase in cash distribution.
The partnership reported fourth-quarter 2014 earnings from continuing operations of 82 cents per unit, below the Zacks Consensus Estimate of 90 cents. On a year-over-year basis, earnings escalated 7.9% primarily due to decent performance at some of its segments and a decline in operational costs.
Earnings for 2014 were recorded at $3.12 per unit, missing the Zacks Consensus Estimate of $3.19 by 2.2%. Earnings also dropped 4% from the 2013 level.
Total Revenue
In the quarter under review, Buckeye Partners’ total revenues were $1,286 million, missing the Zacks Consensus Estimate of $1,667 million by 22.9%. The top line also plummeted 22.3% year over year.
Total revenues declined primarily due to a weak contribution from the Merchant Services segment, partially offset by higher contributions from Global Marine Terminals, Development & Logistics and Pipeline and Terminals.
2014 revenues were reported at $6,660.2 million, falling short of the Zacks Consensus Estimate of $7,098 million by 6.2%. On a year-over-year basis, revenues escalated 31.8%
Operational Highlights
In the fourth quarter, Buckeye Partners’ adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations shot up 25.1% year over year to $223.5 million.
Total costs and expenses were $1,143 million, down 25.4% year over year primarily due to lower expenses at Merchant Services.
The partnership’s operating income increased 15.5% to nearly $143 million from $123.8 million a year ago.
Interest and debt expenses during the quarter surged 22.4% year over year to $44.2 million, primarily due to a higher debt level.
Financial Screening
As of Dec 31, 2014, Buckeye Partners had cash and cash equivalents of $8.2 million compared with $5.0 million as of Dec 31, 2013.
Long-term debt, as of Dec 31, 2014, was $3,389 million compared with $3,092.7 million as of Dec 31, 2013.
During the quarter, total capital expenditures increased 64.1% to $171.3 million from $104.4 million in the prior year.
Cash Distribution Update
The partnership has announced a fourth-quarter 2014 cash distribution of $1.1375 per limited partner unit, up 4.6% from the prior-year payout of $1.0875 and 1.1% higher than the third-quarter payout of $1.125. This will be paid on Feb 24, 2015, to unitholders of record as of Feb 17.
Other Oil and Gas Releases
Murphy Oil Corporation (MUR) reported fourth-quarter 2014 adjusted earnings of 39 cents per share, surpassing the Zacks Consensus Estimate by 56%.
Anadarko Petroleum Corporation (APC) reported fourth-quarter 2014 adjusted earnings of 37 cents per share, far short of the Zacks Consensus Estimate of 82 cents.
Plains All American Pipeline, L.P. (PAA) reported fourth-quarter 2014 adjusted earnings of 58 cents per unit, missing the Zacks Consensus Estimate by a penny.
Our View
Buckeye Partners’ quarterly earnings missed the Zacks Consensus Estimate but increased year over year. Management attributed the rise to the terminals acquired from Hess and contributions from the Buckeye Texas Partners venture which provides a vertically integrated system of midstream assets in the lucrative U.S. Gulf Coast market.
Going forward, Buckeye Partners like other oil and gas players is also expected to be hit by declining crude oil prices. However, we can expect some cash flow security from the partnership’s long-term storage contract for 1.1 million barrels of crude oil in the Chicago Complex that was brought online in the third-quarter 2014.
In addition, construction at the partnership’s LPG storage capacity at Corpus Christi facility is on track with expected service in mid-2015. Total capacity at this terminal is under long-term contracts of 7-10 years, which will also ensure a steady cash flow stream in the future.
Buckeye Partners currently carries a Zacks Rank #3 (Hold).
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