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Higher Throughput Volume by Terminals Could Drive Performance

Kurt Gallon

Buckeye Partners' 4Q15 Earnings: What Analysts Expect

(Continued from Prior Part)

BPL’s Pipelines & Terminals segment

Pipelines & Terminals is Buckeye Partners’ (BPL) largest business segment in terms of EBITDA. The segment alone accounted for 57% of the company’s total segment EBITDA in the third quarter of 2015. The Pipelines & Terminals segment mainly provides crude oil and refined products transportation, storage, and terminalling services.

The Pipelines & Terminals segment’s 3Q15 adjusted EBITDA fell 8.9% YoY (year-over-year), driven by higher operating expenses toward FERC litigation fees and higher costs to support growth. Also, 55% of the segment’s revenue comes from Pipelines while Terminals contribute the remaining 45%. The segment’s 4Q15 performance is expected to be driven by higher throughput volume by Terminals. This might be offset by lower refined products Pipeline throughput.

Global Marine Terminals segment

The Global Marine Terminals segment’s 3Q15 adjusted EBITDA rose 40.7% YoY primarily due to strong volumes across both pipelines and terminalling operations. The segment’s average capacity utilization rose to 97% in 3Q15 from 84% in 3Q14. The trend is expected to continue in the fourth quarter, driven by:

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

Merchant Services segment

The Merchant Services segment provides crude oil and refined products distribution and marketing services. It saw its 3Q15 adjusted EBITDA fall by 75.2% YoY. The fall was due to lower sales volumes and falling commodities prices. Additionally, 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 similar falls in their crude oil and refined petroleum products acquisition and marketing businesses. BPL forms 0.12% of the PowerShares Dividend Achievers Portfolio (PFM).

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