Buckeye Partners L.P. (BPL) announced its first-quarter 2011 operating earnings of 79 cents per limited partner unit, a penny short of the Zacks Consensus Estimate of 80 cents per unit. The results of the partnership were higher than the year-ago earnings of 56 cents per unit.
Total Revenue
Total revenue of the partnership at the end of the first quarter was $1.25 billion versus $0.73 billion in the year-ago quarter, reflecting a growth of 71.3%.
Revenue of the partnership during the quarter was higher than the Zacks Consensus estimates of $0.84 billion.
Business Realignment
During the reported quarter the partnership realigned its business segments to reflect the alteration in its operations. The partnership combined two of its reporting segments, Pipeline Operations and Terminalling & Storage into a new reporting segment Pipelines & Terminals.
The partnership also decided to combine the results from its acquired Bahamas Oil Refining Company International (BORCO) and its terminal in Yabucoa, Puerto Rico and report the same as a new segment International Operations.
The partnership will continue to operate under five segments, namely Pipelines & Terminals, International Operations, Natural Gas Stroage, Energy Services and Development & Logistics.
Quarterly Highlights
The growth in total revenue was primarily driven by the Energy Services segment. Revenue from Energy Services increased a substantial 85.0% year over year to $1.05 billion, constituting 83.9% of total revenue in the reported quarter versus 77.7% in the year-ago quarter. International Operations constituted 3.6% of total revenue in the reported quarter.
During the quarter the partnership saw 75.3% inflation in total costs and expenses, primarily due to an 82.2% rise in the input costs. However, the increase in costs was more than offset by growth in revenue, which positively impacted the operating results of the partnership.
During the first quarter 2011 the operating income of the partnership increased by 32.9% year over year.
Interest and debt expenses at the end of first quarter 2011 were $28.5 million, higher than $21.7 million at prior-quarter end due to higher debt levels.
Financial Update
Total cash and cash equivalents as of March 31, 2011, were $66.4 million versus $16.5 million as of March 31, 2010.
Buckeye's long-term debt as of March 31, 2011 was $2.4 billion compared with $1.44 billion of long-term debt as of March 31, 2010.
Buckeye spent $38.7 million on capital expenditure during the year compared with $10.9 million in the previous year. The rise in capital expenditure was mainly due to the partnership’s expansion in international operations, plus the spends on in its Pipeline & Terminals segment.
Cash Distribution
The partnership once again raised its cash distribution rate to be paid to unit holders. The current distribution rate of the partnership stands at $1.00 per unit, which reflects a 5.3% increase from the first quarter 2010 cash distribution per unit of 95 cents. The distribution is payable on May 31, 2011 to unitholders of record on May 16, 2011.
At the Peer
Ferrellgas Partners, L.P. (FGP), which competes with Buckeye Partners, reported earnings per unit of 31 cents in the second quarter of fiscal 2011, way beyond the Zacks Consensus Estimate of $1.18. The results were also lower than the year-ago quarter's $1.10 per unit.
Ferrellgas Partners' total revenue of $840.9 million in the quarter was 8.1% higher than $777.8 million reported in the comparable year-ago period.
Our View
During the quarter the partnership completed the acquisition of BORCO and entered into a definite agreement with BP plc (BP) unit BP North America to acquire 33 refined petroleum products terminals and 1,000 miles of pipeline. These new acquisitions are likely to add to earnings once integrated with the partnership’s current operations.
Buckeye Partners currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-tern Neutral rating on the stock.
Based in Houston, Texas, Buckeye Partners, L.P. primarily operates refined petroleum products pipeline systems in the United States.
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