Buckeye Partners LP (BPL) announced its second-quarter 2010 operating earnings of 78 cents per limited partner unit, which was lower than the Zacks Consensus Estimate of 88 cents per limited partner unit. The results of the partnership were in line with the year-ago earnings of 78 cents.
Total Revenue
Total revenue of the partnership at the end of the second quarter was $667.3 million versus $351.2 million in the year-ago quarter, reflecting a growth of 90.0%. Reported results came in higher than the Zacks Consensus Estimate of $555 million.
The growth in total revenue was primarily driven by the Energy Services segment. Revenue from Energy Services soared 149% year-over-year to $501.9 million, constituting 75.2% of total revenue in the reported quarter versus 57.4% in the year-ago quarter.
All the other segments of Buckeye saw an improvement in performance on a year-over-year basis. However, as a percentage of total revenue, segment revenues during the reported quarter declined over the prior year.
Operational Update
Operating expenses of the partnership during the reported quarter increased to $593.4 million. The growth in cost was mainly due to the higher cost of product sales and natural gas storage services.
Total operating expenses in the reported quarter were lower than the top-line, while expenses outstripped the top-line in the year-ago quarter. Accordingly, the partnership reported an operating income in the reported quarter versus an operating loss in the year-ago quarter. The higher expenses in the year-ago quarter were mainly due to asset impairment expenses and reorganization expense, which totaled $100.6 million.
Interest and debt expenses of the partnership increased 32.4% to $21.3 million in the reported quarter versus $16.1 million in the year-ago quarter.
Financial Update
Total cash and cash equivalents as of June 30, 2010, were $12.5 million versus $22.0 million as of June 30, 2009.
Buckeye spent approximately $25.6 million on capital expenditure during the first six months of 2010, down from $39.9 million in the comparable period, a year ago.
Cash Distribution
The partnership announced an increase in the cash distribution rate by 5 cents to 96.25 cents per LP unit for the quarter ended Jun 30, 2010. The distribution will be payable on Aug 31, 2010, to unitholders of record on Aug 16, 2010. The previous distribution rate was 91.25 cents.
Our View
Although the partnership failed to meet the consensus expectation, the performance from the Pipeline Operations and Terminalling & Storage segments drove the results of the partnership. The lower cost for operating these segments boosted profitability.
We retain a short-term Zacks #3 Rank (Hold) rating on Buckeye. Based in Houston, Texas, Buckeye Partners primarily operates refined petroleum products pipeline systems in the United States.
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