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Analysis of Buckeye Partners’ Cash Flow Measures

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Jan. 20 2016, Updated 1:07 p.m. ET

Buckeye Partners’ capital expenditure

Buckeye Partners’ (BPL) capital expenditures for the first nine months of 2015 were ~$433.1 million. This is 43.9% higher than what BPL spent during the first nine months of 2014.

The increase in BPL’s total capital expenditure was driven by higher maintenance capital expenditures and investment in expansion opportunities, including:

  • 1 million barrels of refrigerated LPG storage facility
  • 5 million barrels of condensate and naphtha storage
  • 50,000 barrels per day condensate splitter

BPL’s 2015 capital expenditure is expected to lie in the range of $585 million–$645 million. The majority of BPL’s 2015 capex is allocated to its Global Marine Terminal segment. This mainly includes the Buckeye Texas Partners’ midstream platform in the Gulf Coast, which BPL acquired from Trafigura.

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Buckeye Partners’ distributable cash flows

Distributable cash flow is calculated by adjusting net income for certain non-cash charges and maintenance expenditures. BPL’s 3Q15 distributable cash flow was up 8.2% year-over-year (YoY) versus 3Q14.

The partnership’s 4Q15 distributable cash flow is expected to be driven by the recent projects placed into service, including the condensate splitter and the refrigerated LPG storage capacity discussed above.

Buckeye Partners’ distributions

Buckeye Partners’ distributions have continued to grow over the past several quarters. BPL declared a distribution of $1.175 per unit for 3Q15. This represents an ~4.4% YoY increase over 3Q14 and an ~1.1% sequential increase over 2Q15.

Wall Street analysts expect BPL to grow its distributions by 4.49% in 4Q15 on a YoY basis. We have to wait and see whether BPL continues to grow its distribution, keeping in mind its low distribution coverage and the current challenging market environment.

BPL’s peers Sunoco Logistics (SXL), NuStar Energy (NS), and VTTI Energy Partners (VTTI) are expected to grow their 4Q15 distributions by 24.04%, 0.46%, and 14.29% YoY. BPL forms ~5.7% of the Global X MLP ETF (MLPA).

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