Buckeye Partners L.P. (BPL) announced its fourth-quarter 2010 operating earnings of 19 cents per limited partner unit, a long way behind the Zacks Consensus Estimate of 95 cents per unit. The results of the partnership were also lower than the year-ago earnings of 93 cents per unit.
During the quarter, the partnership completed its equity-funded merger with Buckeye GP Holdings L.P. (“BGH”). The deal is a reverse merger for accounting compliance. Hence, the historical results of the partnership for periods prior to the completion of the merger are those of BGH. As a fallout, the fourth quarter of 2010 saw an increase in the number of average limited partner units by 20.0 million versus the year-earlier quarter.
Buckeye’s 2010 operating earnings were $1.65 per unit compared with $2.49 per unit reported in 2009. The results of the company failed to meet the Zacks Consensus Estimate of $3.41 as provided by 10 covering analysts.
Total Revenue
Total revenue of the partnership at the end of the fourth quarter was $1.9 billion versus $578.9 million in the year-ago quarter, reflecting a growth of 75.9%.
The growth in total revenue was primarily driven by the Energy Services segment. Revenue from Energy Services increased a substantial 113.3% year over year to $844.6 million, constituting 83.0% of total revenue in the reported quarter versus 68.5% in the year-ago quarter.
Total revenue of the partnership at the end of 2010 shot up 78% to $3.2 billion.
All segments at Buckeye save Natural Gas Storage saw a year-over-year revenue growth for both the reported quarter as well as the fiscal year.
Quarterly Highlights
During the reported quarter the partnership experienced a growth in revenue but costs increased at a higher trajectory than revenue growth, thus impacting operating results.
During the fourth quarter 2010 the operating income of the partnership came down by 38.7% from fourth quarter 2009 levels due to a 98.5% annual inflation in cost and expenses.
Annual Highlights
Just as total costs and expenses spiraled by 83.3% in 2010, the partnership’s operating income also witnessed a 37.1% rise over the prior year, mainly propelled by solid performance at two of its operating segments.
During 2010, operating income from Pipeline Operations and Terminalling & Storage improved a respective 82.6% and 47.2% from the corresponding 2009 year-end levels. The positive results from these segments more than offset the lukewarm performance of the other segments.
Interest and debt expenses of the partnership at the end of 2010 increased to $89.1 million from $75.1 million in the prior year. The increase in interest expenses was due to higher debt levels at the end of 2010 compared with the end of 2009.
Financial Update
Total cash and cash equivalents as of December 31, 2010, was $13.6 million versus $37.6 million as of December 31, 2009.
Buckeye’s long-term debt as of December 31, 2010 was $1.52 billion compared with $1.50 billion of long-term debt as of December 31, 2009.
Buckeye spent $77.7 million on capital expenditure during the year compared with $87.3 million in the previous year. Other than Pipeline Operations, the partnership cut its capital expenditure across all its business segments.
Cash Distribution
In 2010, the total cash distributed by the partnership to its unitholders stood at $3.825 per unit versus $3.625 paid to it unitholders in 2009 reflecting a growth of 5.5%.
The current distribution rate of the partnership stands at 98.75 per unit and reflects a 5.3% increase from the fourth quarter 2009 cash distribution per unit of 93.75 cents.
Peer
Ferrellgas Partners, L.P. (FGP), which competes with Buckeye Partners, reported a loss per unit of 58 cents in the fourth quarter of 2010. The partnership’s loss in the quarter exceeded the Zacks Consensus Estimate of a loss of 54 cents, mainly due to lower propane sales.
Ferrellgas posted a profit of 47 cents per unit for the full year 2010, below the Zacks Consensus Estimate of 73 cents and the year-ago period earnings of 79 cents per unit.
Our View
We appreciate Buckeye Partners’ move to expand storage capacity via opportunistic acquisitions. The partnership at the fag end of the year acquired a refined petroleum products terminal in Puerto Rico from an associate of Royal Dutch Shell plc (RDS.A) and an 80% interest in Bahamas Oil Refining Company International (BORCO), the largest petroleum products storage terminal in the Caribbean.
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 pipeline systems for refined petroleum products in the United States.
BUCKEYE PARTNRS (BPL): Free Stock Analysis Report
FERRELLGAS -LP (FGP): Free Stock Analysis Report
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report
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