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Analysis of Buckeye Partners’ Recent Operating Performance

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BPL’s adjusted EBITDA

Buckeye Partners’ (BPL) adjusted EBITDA (or earnings before interest, tax, depreciation, and amortization) from continuing operations increased to $204.2 million in 3Q15 from $200.6 million in 3Q14—a marginal increase of 1.2%.

Buckeye Partners’ 3Q15 adjusted EBITDA growth was driven by strong performance from its Global Marine Terminals. This was offset by weak operating results from its Pipelines and Terminals and Merchant Services segments.

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BPL’s Pipelines and Terminals segment

Buckeye Partners’ Pipelines and Terminals segment’s 3Q15 adjusted EBITDA decreased 8.9% YoY (year-over-year), driven by higher operating expenses toward FERC (Federal Energy Regulatory Commission) litigation fees and higher costs to support growth. Pipelines contribute to 55% of the segment’s revenue and Terminals contribute the remaining 45%.

BPL’s Global Marine Terminals segment

BPL’s Global Marine Terminals segment’s 3Q15 adjusted EBITDA increased 40.7% YoY, primarily due to strong volumes across both pipelines and terminaling operations. The segment’s average capacity utilization increased to 97% in 3Q15 from 84% in 3Q14 driven by:

  • renewal of several contracts at higher rates and longer terms
  • higher storage demand considering the huge supply glut

Including this segment’s revenue, terminals accounted for 65% of the total Pipelines and Terminals segment revenue.

BPL’s Merchant Services segment

BPL’s Merchant Services segment provides crude oil and refined products distribution and marketing services. BPL’s 3Q15 adjusted EBITDA decreased by 75.2% YoY. The decrease was due to lower sales volumes and declining commodities prices. The segment’s weak performance is expected to continue in the coming quarters.

Sunoco Logistics (SXL), Genesis Energy (GEL), and NGL Energy Partners (NGL) also saw a similar decline in their crude oil and refined petroleum products acquisition and marketing businesses. BPL forms 0.59% of the Multi-Asset Diversified Income Index ETF (MDIV).

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