Is This the Right Time for Buckeye Partners?

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Part 2
Is This the Right Time for Buckeye Partners? PART 2 OF 11

A Look at Buckeye Partners’ Recent Operating Performance

Buckeye Partners’ 2Q17 EBITDA

Buckeye Partners (BPL) posted weak 2Q17 earnings, reporting an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $269.2 million compared to $256.6 million in 2Q16. That’s a YoY (year-over-year) rise of 4.9%. However, it missed analysts’ estimate by a huge margin. Its operating income also fell to $170.6 million in 2Q17 compared to $189.9 million in the same quarter of 2016. The YoY fall was mainly due to weak performances for its Domestic Pipelines & Terminals and Merchant Services segments.

A Look at Buckeye Partners’ Recent Operating Performance

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Domestic Pipelines & Terminals

Domestic Pipelines & Terminals is currently Buckeye Partners’ largest business segment in terms of adjusted EBITDA. The segment accounted for 54.0% of total adjusted EBITDA during the second quarter of 2017. However, the segment’s contribution has fallen significantly in recent years with the growth in the Global Marine Terminals segment. The segment posted a 4.6% YoY fall in adjusted EBITDA during the recent quarter, mainly due to the termination of a crude-by-rail contract. That was partially offset by strong pipeline throughput volumes driven by expansion projects placed into service.

Global Marine Terminals

Buckeye Partners’ Global Marine Terminals’ 2Q17 performance was impacted by a fall in capacity utilization during the second quarter compared to the same quarter in the prior year. That was due to BPL’s inability to renew a long-term contract in one of the Caribbean facilities. Clark Smith, BPL’s CEO (chief executive officer), said, “We recognized that the loss of this customer would have a near term impact on our utilization and resulting storage revenues but we determined that the long-term benefit of diversifying our customer base and eliminating any current financials for this customer was the best decision for Buckeye.” The segment’s 3Q17 performance might be impacted by the recent hurricanes in Texas and Florida. We’ll look more at that in a later part of this series.

Merchant Services

Buckeye Partners’ Merchant Services segment has been its worst performing segment in recent quarters due to lower margins resulting from weak commodity prices. It posted a 67.1% YoY fall in adjusted EBITDA in 2Q17.


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