On Oct 17, we have issued an updated research report on Buckeye Partners, L.P. (BPL). The partnership’s systematic investments in expanding its operations through the addition of infrastructure and acquisitions, and asset-monetization strategies are expected to boost future growth.
In addition, its practice of paying regular cash distribution is commendable. However, stringent government regulations, increasing debt burden and operating costs are concerning.
This Zacks Rank #4 (Sell) stock holds a geographically-diversified asset base and continues to follow both organic as well as acquisition-driven growth strategy.
In the first half of 2014, the partnership invested almost $201.5 million which is in line with its plans of deploying a total of $335 million in 2014. Buckeye Partners has already completed the construction of a new crude oil rail off-loading system at Perth Amboy and is currently in the middle of several important ventures, including the Hartsdale/Hammond crude tank work.
Regarding inorganic growth projects, Buckeye Partners acquired an 80% interest in Buckeye Texas Partners LLC for $860 million in Sep 2014. Previously, the partnership had acquired certain assets from Hess Corp. (HES).
The scheduled completion of these projects and proper integration of the acquired assets with existing operations will allow Buckeye Partners to serve more upstream players.
Sometimes, Buckeye Partners pursues an asset divestment program and utilizes the proceeds in reducing the partnership’s debt burden as well as in profitable ventures.
In addition to investments in growth projects, Buckeye Partners follows a practice of paying stable cash distribution and often increases the same. In Aug 2014, the partnership paid $1.1125 per unit as quarterly cash distribution, roughly 1.1% higher than the year-ago payout. This initiative will help to retain investor interest in the stock.
On the flip side, Buckeye Partners operations are subject to stringent environmental regulations. Any modification in the rules might impact the partnership’s operating and compliance costs adversely.
Key Picks from the Sector
Other better-ranked stocks in the sector include Access Midstream Partners, L.P. (ACMP) and Delek Logistics Partners, LP (DKL), each sporting a Zacks Rank #1 (Strong Buy).
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