uploads///EBITDA Estimates

What Drove Buckeye Partners’ 2Q16 Earnings Growth?

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Aug. 8 2016, Published 12:49 p.m. ET

Buckeye Partners’ 2Q16 EBITDA

Buckeye Partners (BPL) reported its 2Q16 earnings on August 5, 2016. Buckeye Partners’ 2Q16 EBITDA (earnings before interest, tax, depreciation, and amortization) increased to $244.6 million from $212.9 million in 1Q15, a YoY (year-over-year) increase of 24.3%. The partnership also beat its 2Q16 EBITDA estimate by 8.4%.

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Buckeye Partners’ 2Q16 drivers

The increase in BPL’s 2Q16 EBITDA was mainly driven by a strong performance from all three of its segments.

  • Global Marine Terminals: BPL’s Global Marine Terminals segment saw 33.4% YoY EBITDA growth in 2Q16, which was mainly driven by the startup of Buckeye Texas Partners’ operation in South Texas and higher utilization and storage rates. The segment’s terminal asset utilization rate was 99% in 2Q16, compared to 96% in 1Q15.
  • Merchant Services: Merchant Services, which is involved in the crude oil and refined product acquisition and marketing business, benefited from “stronger distillate spreads during the second quarter.”
  • Pipelines & Terminals: The Pipelines & Terminals segment posted 33.4% YoY adjusted EBITDA growth in 2Q16. The segment benefited from strong terminal throughput volumes. This was slightly offset by lower pipeline volumes. In the pipeline system, gasoline volumes continued to grow, while crude oil and distillate volumes saw a YoY decline. Crude oil volumes were impacted by a decline at the Eagle Ford Shale.

Western Gas Partners (WES) and Crestwood Equity Partners (CEQP) are among the midstream MLPs that are negatively impacted by the decline in Eagle Ford Shale production.

Buckeye Partners’ distributable cash flow

Buckeye Partners’ distributable cash flow for 2Q16 was $183.1 million, compared to $144.9 million during the second quarter of 2015, a YoY increase of 26.4%. The increase in distributable cash flow drove BPL’s coverage ratio. BPL’s 2Q16 coverage ratio came in at ~1.2x.

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