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The website explains how distributable cash flow (DCF) is defined and why it is important to analyze it and derive a sustainable measure of DCF. Results reported by master limited partnerships (MLPs) are analyzed. comparisons of reported DCF to sustainable DCF are generated, and various coverage ratios and reports analyzing performance are generated. Simplified sources and uses of funds statements are presented to focus readers' attention on key cash flow items. The website also features general articles about MLPs and about other topics of interest to yield-focused investors.



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Another note of caution on Buckeye Partners L.P.’s Distributable Cash Flow

By: Ron Hiram

Published: Feb 13, 2012

In an article dated December 19, 2011, regarding Buckeye Partners L.P.(BPL)  I noted the following: “What I see for the 9 months ending 9/30/11 causes me concern regarding BPL’s ability to make distributions that are financed by operations, not by borrowings or sale of additional partnership units”.

BPL issued a press release with its fourth quarter and year-end results February 10, 2012, reporting distributable cash flow (DCF) of $72.25 million for the quarter and $318.7 for the 12  2011. Following that, on February 13, Citigroup downgraded BPL to “Sell”.

The reported DCF numbers are indeed good cause for concerns:

Reported DCF per unit$0.77$3.51
Distributions per unit$1.04$4.08
Coverage ratio based on reported DCF0.740.86


Indeed, sustainable DCF was substantially lower than reported DCF in each of the first 3 quarters of 2010 and in each of the first 3 quarters of 2011:

3months ended:9/30/20116/30/20113/31/20119/30/20106/30/20103/31/2010
Net cash provided by operating activities(2.8)28.5156.464.287.9144.0
Less: Maintenance capital expenditures(16.8)(12.3)(7.5)(9.3)(5.9)(3.3)
Less: Working capital (generated)--(139.1)-(8.1)(95.7)
Less: net income attributable to GP
Less: Net income attributable to noncontrolling interests(1.5)(1.6)(1.3)(49.0)(41.9)(39.4)
Sustainable DCF(21.1)
Add: Net income attributable to noncontrolling interests1.51.61.349.041.939.4
Working capital used14.871.4-17.3--
Risk management activities81.9(10.1)78.63.3(6.3)19.2
Proceeds from sale of assets / disposal of liabilities------
DCF as reported81.076.886.470.765.164.6


Figures in $ Millions

BPL currently yields 6.74%, but investors should be aware that a significant portion of what they are receiving from this master limited partnerships does not seem to be generated from sustainable sources. I will take a closer look at the numbers and compare reported to sustainable DCF once it files its 10-K (which will include cash flow data not provided in the press release).


3 comments to BPL: Another note of caution on Buckeye Partners L.P.’s Distributable Cash Flow

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