SOURCE: Buckeye Partners, L.P.

Buckeye Partners, L.P.

November 02, 2009 08:00 ET

Buckeye Partners Reports 2009 Third Quarter Results and Increases Quarterly Distribution

HOUSTON, TX--(Marketwire - November 2, 2009) - Buckeye Partners, L.P. ("Buckeye") (NYSE: BPL) today reported its financial results for the third quarter of 2009. Net income attributable to Buckeye's unitholders for the third quarter of 2009 was $57.9 million, or $0.89 per limited partner ("LP") unit, compared to $46.6 million, or $0.75 per LP unit, for the third quarter of 2008. Net income attributable to Buckeye's unitholders before special charges (as defined below) for the third quarter of 2009 was $58.9 million, or $0.90 per LP unit. Buckeye recorded special charges of $1.0 million for organizational restructuring in the third quarter of 2009.

Revenue in the third quarter of 2009 was $423.4 million compared to revenue in the third quarter of 2008 of $496.2 million. Buckeye's Adjusted EBITDA (as defined below) for the third quarter of 2009 was $94.4 million compared to $83.1 million for the third quarter of 2008. Operating income for the third quarter of 2009 was $76.0 million compared to operating income of $64.5 million for the third quarter of 2008. Operating income before special charges for the third quarter of 2009 was $77.0 million.

For the first nine months of 2009, net income attributable to Buckeye's unitholders was $63.3 million, or $0.55 per LP unit, compared to $130.3 million, or $2.10 per LP unit, for the first nine months of 2008. Net income attributable to Buckeye's unitholders before special charges for the first nine months of 2009 was $164.7 million, or $2.55 per LP unit. Buckeye recorded special charges during the second and third quarters of 2009 to recognize an asset impairment of $72.5 million and $29.1 million for expenses related to an organizational restructuring.

For the first nine months of 2009, revenue was $1.19 billion compared to $1.37 billion for the first nine months of 2008. Buckeye's Adjusted EBITDA for the first nine months of 2009 was $265.2 million compared to $229.0 million in the same period last year. Operating income for the first nine months of 2009 was $111.6 million compared to operating income of $181.3 million for the first nine months of 2008. Operating income before special charges for the first nine months of 2009 was $213.2 million.

"Buckeye made substantial progress in the third quarter of 2009, both operationally and financially," said Forrest E. Wylie, Chairman and CEO of Buckeye's general partner. "Although difficult economic conditions reduced our product volumes, we achieved significant growth in Adjusted EBITDA, our primary measure of success. We generated an increase of 13.7 percent in Adjusted EBITDA over the third quarter of 2008, when demand was stronger."

Wylie also said further improvements are expected as the company continues to realize the benefits of implementing its best practices initiative. "Our goal is to become the best-in-class asset manager by reaching the highest asset utilization at the lowest cost per unit without compromising our commitment to safe and environmentally responsible operations," Wylie said. "In addition to being on track to achieve forecasted annualized savings of $18 million to $22 million, the best practices initiative is helping to create a more commercial culture by fostering accountability and entrepreneurship throughout the organization. During the third quarter of 2009, we realized $2.7 million in savings from these initiatives. A key strategy for increasing optimization of the company's pipelines, terminals, and storage systems is the continued growth of Buckeye's Energy Services group, which is helping to improve utilization rates on Buckeye's underutilized pipelines and terminals through its marketing efforts in areas served by those assets."

The recently announced agreement with ConocoPhillips to acquire two refined-product pipelines and three associated storage and distribution terminals will give Buckeye increased capacity and access to more markets in the Midwest. When the transaction closes, which is expected to occur before the end of 2009, Buckeye will gain more than 300 miles of pipelines between the St. Louis and Chicago areas, 2.3 million barrels of storage capacity and ethanol blending facilities.

"The combined footprint will increase the commercial value of our assets to our customers by offering enhanced distribution connectivity and flexible storage capabilities," Wylie said.

The Board of Directors of Buckeye GP LLC, the general partner of Buckeye, declared a regular quarterly partnership cash distribution of $0.925 per LP unit, payable on November 30, 2009 to unitholders of record on November 12, 2009. This cash distribution represents a quarterly increase in the distribution of $0.0125 per LP unit and an annualized cash distribution level of $3.70 per LP unit. This is the 91st consecutive quarterly cash distribution paid by Buckeye.

Buckeye will host a conference call with members of executive management on Monday, November 2, 2009, at 11:00 a.m. Eastern Time. To access the live Webcast of the call, go to http://www.visualwebcaster.com/event.asp?id=63429 10 minutes prior to its start. A replay will be archived and available at this link for 14 days. Interested parties may participate in the call by dialing 800-406-6465 at least 10 minutes prior to the start and referencing conference ID 4693347.

Buckeye Partners, L.P. (www.buckeye.com) is a publicly traded partnership that owns and operates one of the largest independent refined petroleum products pipeline systems in the United States in terms of volumes delivered, with approximately 5,400 miles of pipeline. Buckeye Partners, L.P. also owns 64 refined petroleum products terminals, operates and maintains approximately 2,400 miles of pipeline under agreements with major oil and chemical companies, owns a major natural gas storage facility in northern California, and markets refined petroleum products in certain of the geographic areas served by its pipeline and terminal operations. The general partner of Buckeye Partners, L.P. is owned by Buckeye GP Holdings L.P. (NYSE: BGH).

EBITDA, a measure not defined under U.S. generally accepted accounting principles ("GAAP"), is defined by Buckeye as net income attributable to Buckeye's unitholders from continuing operations before interest expense, income taxes and depreciation and amortization. The EBITDA measure eliminates the significant level of non-cash depreciation and amortization expense that results from the capital-intensive nature of Buckeye's businesses and from intangible assets recognized in business combinations. In addition, EBITDA is unaffected by Buckeye's capital structure due to the elimination of interest expense and income taxes. Adjusted EBITDA, which also is a non-GAAP measure, is defined by Buckeye as EBITDA plus non-cash deferred lease expense, which is the difference between the estimated annual land lease expense for Buckeye's natural gas storage facility in the Natural Gas Storage segment to be recorded under GAAP and the actual cash to be paid for such annual land lease. In addition, Buckeye's management has excluded the impairment expense related to Buckeye's approximately 350-mile natural gas liquids pipeline that runs from Wattenberg, Colorado to Bushton, Kansas (the "Buckeye NGL Pipeline") and reorganization expense from Adjusted EBITDA in order to evaluate the results of Buckeye's operations on a comparative basis over multiple periods. This press release also includes discussion of net income attributable to Buckeye's unitholders before special charges, which is a non-GAAP measure derived by excluding from net income attributable to Buckeye's unitholders charges to recognize the Buckeye NGL Pipeline impairment expense and for expenses related to an organizational restructuring, and operating income before special charges, which is a non-GAAP measure derived by excluding from operating income charges to recognize the Buckeye NGL Pipeline impairment expense and for expenses related to an organizational restructuring. EBITDA, Adjusted EBITDA, net income attributable to Buckeye's unitholders before special charges, and operating income before special charges should not be considered alternatives to net income, operating income, cash flow from operations or any other measure of financial performance presented in accordance with GAAP.

The EBITDA and Adjusted EBITDA data presented may not be comparable to similarly titled measures at other companies because EBITDA and Adjusted EBITDA exclude some items that affect net income attributable to Buckeye's unitholders, and these items may vary among other companies. Management of Buckeye uses Adjusted EBITDA to evaluate the consolidated operating performance and the operating performance of the business segments and to allocate resources and capital to the business. In addition, Buckeye's management uses Adjusted EBITDA as a performance measure to evaluate the viability of proposed projects and to determine overall rates of return on alternative investment opportunities. Net income attributable to Buckeye's unitholders before special charges and operating income before special charges are useful measures for investors because they allow comparison of Buckeye's core operations from period to period.

Distributable cash flow, which is a financial measure included in the schedules to this press release, is another measure not defined under GAAP that is defined by Buckeye as net income attributable to Buckeye unitholders from continuing operations, excluding depreciation and amortization, the Buckeye NGL Pipeline impairment expense and Buckeye's reorganization expense. In addition, distributable cash flow excludes the deferred land lease expense for Buckeye's Natural Gas Storage segment and the senior administrative charge, which has been waived indefinitely, both of which are non-cash items, and is reduced by maintenance capital expenditures. Distributable cash flow is useful to investors because it removes non-cash items from net income and provides a clearer picture of Buckeye's cash available for distribution to its unitholders.

Buckeye believes that investors benefit from having access to the same financial measures used by Buckeye's management. Further, Buckeye believes that these measures are useful to investors because they are one of the bases for comparing Buckeye's operating performance with that of other companies with similar operations, although Buckeye's measures may not be directly comparable to similar measures used by other companies. Please see the attached reconciliations of each of EBITDA, Adjusted EBITDA, net income attributable to Buckeye's unitholders before special charges, and distributable cash flow to net income attributable to Buckeye's unitholders as well as a reconciliation of operating income before special charges to operating income.

This press release includes forward-looking statements that we believe to be reasonable as of today's date. Such statements are identified by use of the words "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "should," and similar expressions. Actual results may differ significantly because of risks and uncertainties that are difficult to predict and that may be beyond Buckeye's control. Among them are (1) changes in laws or regulations to which we are subject, including those that permit the treatment of us as a partnership for federal income tax purposes, (2) terrorism, adverse weather conditions, environmental releases, and natural disasters, (3) changes in the marketplace for our products or services, such as increased competition, better energy efficiency, or general reductions in demand, (4) adverse regional or national economic conditions or adverse capital market conditions, (5) shutdowns or interruptions at the source points for the products we transport, store, or sell, (6) unanticipated capital expenditures in connection with the construction, repair, or replacement of our assets, (7) volatility in the price of refined petroleum products and the value of natural gas storage services, (8) nonpayment or nonperformance by our customers, (9) our ability to realize efficiencies expected to result from our recently announced reorganization, and (10) our ability to integrate acquired assets with our existing assets and to realize anticipated cost savings and other efficiencies. You should read our Annual Report on Form 10-K and our most recent Quarterly Reports on Form 10-Q for a more extensive list of factors that could affect results. We undertake no obligation to revise our forward-looking statements to reflect events or circumstances occurring after today's date.


                          BUCKEYE PARTNERS, L.P.
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                  (In thousands, except per unit amounts)
                                (Unaudited)


                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Revenues
  Product sales                 $ 258,188  $ 345,729  $ 728,744  $ 933,211
  Transportation and other
   services                       165,256    150,441    462,760    435,783
                                ---------  ---------  ---------  ---------
     Total revenue                423,444    496,170  1,191,504  1,368,994
                                ---------  ---------  ---------  ---------

Costs and expenses:
  Cost of product sales and
   natural gas storage services   258,507    334,959    702,623    913,163
  Operating expenses               65,537     72,684    207,639    207,124
  Depreciation and amortization    14,253     15,457     43,408     41,415
  Asset impairment expense              -          -     72,540          -
  General and administrative        8,186      8,619     24,625     26,042
  Reorganization expense              996          -     29,109          -
                                ---------  ---------  ---------  ---------
     Total costs and expenses     347,479    431,719  1,079,944  1,187,744
                                ---------  ---------  ---------  ---------

  Operating income                 75,965     64,451    111,560    181,250
                                ---------  ---------  ---------  ---------

Other income (expense):
  Investment and equity income      3,870      2,616      9,381      6,829
  Interest and debt expense       (20,543)   (19,053)   (53,780)   (55,008)
  Other income                        301         20        281         57
                                ---------  ---------  ---------  ---------
     Total other expense          (16,372)   (16,417)   (44,118)   (48,122)
                                ---------  ---------  ---------  ---------

  Income from continuing
   operations                      59,593     48,034     67,442    133,128
  Income (loss) from
   discontinued operations              -       (176)         -      1,230
                                ---------  ---------  ---------  ---------
  Net income                        59,593     47,858     67,442    134,358
   Less: Net income
    attributable to
    noncontrolling interest        (1,704)    (1,256)    (4,164)    (4,087)
                                ---------  ---------  ---------  ---------
  Net income attributable to
   Buckeye Partners, L.P.       $  57,889  $  46,602  $  63,278  $ 130,271
                                =========  =========  =========  =========

Amounts attributable to Buckeye
 Partners, L.P.
  Income from continuing
   operations                   $  57,889  $  46,778  $  63,278  $ 129,041
  Income (loss) from
   discontinued operations              -       (176)         -      1,230
                                ---------  ---------  ---------  ---------
     Total                      $  57,889  $  46,602  $  63,278  $ 130,271
                                =========  =========  =========  =========

Allocation of net income
 attributable to Buckeye
 Partners, L.P.
  Net income (loss) allocated to
   general partner:
    Income from continuing
     operations                 $  12,242  $   8,651  $  35,363  $  22,822
                                =========  =========  =========  =========
    Income (loss) from
     discontinued operations    $       -  $     (53) $       -  $     370
                                =========  =========  =========  =========
  Net income (loss) allocated to
   limited partners:
    Income from continuing
     operations                 $  45,647  $  38,127  $  27,915  $ 106,219
                                =========  =========  =========  =========
    Income (loss) from
     discontinued operations    $       -  $    (123) $       -  $     860
                                =========  =========  =========  =========
  Earnings per limited partner
   unit-diluted:
    Income from continuing
     operations                 $    0.89  $    0.75  $    0.55  $    2.07
    Income from discontinued
     operations                         -          -          -       0.03
                                ---------  ---------  ---------  ---------
  Earnings per limited partner
   unit-diluted                 $    0.89  $    0.75  $    0.55  $    2.10
                                =========  =========  =========  =========


GAAP reconciliation of net
 income allocated to limited
 partners (as adjusted):
  Net income as reported        $  59,593             $  67,442
   Add: Asset impairment
    expense                             -                72,540
   Add: Reorganization
    expense                           996                29,109
  Net income attributable to
   noncontrolling interest (as
   adjusted)                       (1,711)               (4,377)
                                ---------             ---------
  Net income (as adjusted)         58,878               164,714
  Net income allocated to
   general partner (as adjusted)   12,247                35,844
                                ---------             ---------
  Income allocated to limited
   partners (as adjusted)       $  46,631             $ 128,870
                                =========             =========
  Earnings per limited partner
   unit-diluted (as adjusted):
    Income from continuing
     operations (as adjusted)   $    0.90             $    2.55
                                =========             =========


Weighted average number of
 limited partner units
 outstanding:
  Basic                            51,374     48,372     50,351     47,538
                                =========  =========  =========  =========
  Diluted                          51,538     48,378     50,516     47,558
                                =========  =========  =========  =========



                              September 30, December 31,
Key Balance Sheet information:     2009        2008
                                 ---------  ---------
  Cash and cash equivalents      $  27,179  $  58,843
  Long-term debt                 1,420,864  1,445,722





                          BUCKEYE PARTNERS, L.P.
                  SELECTED FINANCIAL AND OPERATING DATA
           (Financial data in thousands, except coverage ratio)
                                (Unaudited)


                           Three Months Ended         Nine Months Ended
                              September 30,             September 30,
                        ------------------------  ------------------------
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------
Revenue:
  Pipeline Operations   $    96,714  $    91,439  $   294,084  $   286,716
  Terminalling and
   Storage                   34,036       33,003       94,108       87,749
  Natural Gas Storage        28,576       16,762       60,325       43,412
  Energy Services           258,407      344,494      728,563      926,809
  Other Operations            7,516       12,011       25,446       33,637
  Intersegment
   eliminations              (1,805)      (1,539)     (11,022)      (9,329)
                        -----------  -----------  -----------  -----------
     Total              $   423,444  $   496,170  $ 1,191,504  $ 1,368,994
                        ===========  ===========  ===========  ===========

Operating income:
  Pipeline Operations   $    42,466  $    33,087  $    37,349  $   108,795
  Terminalling and
   Storage                   17,539       17,027       39,573       40,294
  Natural Gas Storage         7,659        8,914       19,691       21,474
  Energy Services             5,703        3,810       10,635        5,239
  Other Operations            2,598        1,613        4,312        5,448
                        -----------  -----------  -----------  -----------
     Total              $    75,965  $    64,451  $   111,560  $   181,250
                        ===========  ===========  ===========  ===========

Total costs and
 expenses: (1)
  Pipeline Operations   $    54,248  $    58,352  $   256,735  $   177,921
  Terminalling and
   Storage                   16,497       15,976       54,535       47,455
  Natural Gas Storage        20,917        7,848       40,634       21,938
  Energy Services           252,704      340,684      717,928      921,570
  Other Operations            4,918       10,398       21,134       28,189
  Intersegment
   eliminations              (1,805)      (1,539)     (11,022)      (9,329)
                        -----------  -----------  -----------  -----------
     Total              $   347,479  $   431,719  $ 1,079,944  $ 1,187,744
                        ===========  ===========  ===========  ===========

Depreciation and
 amortization:
  Pipeline Operations   $     9,394  $    10,092  $    28,695  $    28,704
  Terminalling and
   Storage                    1,967        1,600        5,852        4,604
  Natural Gas Storage         1,346          982        4,272        3,732
  Energy Services             1,070        2,336        3,192        3,070
  Other Operations              476          447        1,397        1,305
                        -----------  -----------  -----------  -----------
     Total              $    14,253  $    15,457  $    43,408  $    41,415
                        ===========  ===========  ===========  ===========

(1) Includes depreciation and amortization, asset impairment expense and
    reorganization expense.


Capital additions:
  Pipeline Operations                             $    21,952  $    24,704
  Terminalling and
   Storage                                             13,648       17,326
  Natural Gas Storage                                  16,911       27,528
  Energy Services                                       3,132        2,651
  Other Operations                                        554            -
                                                  -----------  -----------
     Total                                        $    56,197  $    72,209
                                                  ===========  ===========
Summary of capital
 additions:
Maintenance and capital
 expenditures                                     $    11,869  $    14,497
Expansion and cost
 reduction                                             44,328       57,712
                                                  -----------  -----------
     Total                                        $    56,197  $    72,209
                                                  ===========  ===========

Operating data:
  Pipeline Throughput
   (b/d - 000s)             1,282.7      1,360.4      1,325.1      1,383.4
  Pipeline Average Tariff
   (Cents/bbl.)                74.2         68.6         72.0         66.0
  Terminal Throughput
   (b/d - 000s)               442.7        448.7        445.6        451.8


                           Three Months Ended
                              September 30,
                        ------------------------
                            2009         2008
                        -----------  -----------
Distributable Cash Flow
 Non-GAAP Reconciliation:
  Net income
   attributable to
   Buckeye Partners,
   L.P.                 $    57,889  $    46,602
  Less: Loss from
   discontinued
   operations                     -         (176)
                        -----------  -----------
  Net income
   attributable to
   Buckeye Partners,
   L.P. unitholders from
   continuing operations     57,889       46,778
                        -----------  -----------
  Depreciation and
   amortization              14,253       15,457
  Non-cash deferred
   lease expense              1,125        1,764
  Reorganization expense        996            -
  Non-cash senior
   administrative charge          -          475
  Maintenance and
   capital expenditures      (4,096)      (6,430)
                        -----------  -----------
  Distributable cash
   flow                 $    70,167  $    58,044
                        ===========  ===========

  Distributions for
   Coverage Ratio (1)   $    60,324  $    52,788
                        ===========  ===========

Coverage Ratio                 1.16         1.10
                        ===========  ===========

(1) Amount represents distribution paid in the fourth quarter of 2008 or
    to be paid in the fourth quarter of 2009.



                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ----------
Adjusted EBITDA non-GAAP
 reconciliation:
  Net income attributable to
   Buckeye Partners, L.P.       $  57,889  $  46,602  $  63,278  $  130,271
  Less: Income (loss) from
   discontinued operations              -       (176)         -       1,230
                                ---------  ---------  ---------  ----------
  Net income from continuing
   operations attributable to
   Buckeye Partners, L.P.          57,889     46,778     63,278     129,041
Interest and debt expense          20,543     19,053     53,780      55,008
Income tax expense (benefit)         (391)         9       (263)        435
Depreciation and amortization      14,253     15,457     43,408      41,415
                                ---------  ---------  ---------  ----------
    EBITDA                         92,294     81,297    160,203     225,899
Non-cash deferred lease expense     1,125      1,764      3,375       3,065
Asset impairment expense                -          -     72,540           -
Reorganization expense                996          -     29,109           -
                                ---------  ---------  ---------  ----------
    Adjusted EBITDA             $  94,415  $  83,061  $ 265,227  $  228,964
                                =========  =========  =========  ==========

Adjusted EBITDA by Operating
 Segment:
  Pipeline Operations           $  55,283  $  44,875  $ 169,039  $  141,365
  Terminalling and Storage         19,668     18,659     47,958      44,999
  Natural Gas Storage              10,221     11,694     27,734      28,336
  Energy Services                   7,003      6,207     15,035       8,454
  Other Operations                  2,240      1,626      5,461       5,810
                                ---------  ---------  ---------  ----------
    Total                       $  94,415  $  83,061  $ 265,227  $  228,964
                                =========  =========  =========  ==========

Operating Income Before Special
 Charges non-GAAP
 reconciliation:
Operating income                $  75,965             $ 111,560
Asset impairment expense                -                72,540
Reorganization expense                996                29,109
                                ---------             ---------
  Operating income before
   special charges              $  76,961             $ 213,209
                                =========             =========