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:
Period: | 4Q11 | 2011 |
|---|---|---|
| Reported DCF per unit | $0.77 | $3.51 |
| Distributions per unit | $1.04 | $4.08 |
| Coverage ratio based on reported DCF | 0.74 | 0.86 |
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: | 9/30/2011 | 6/30/2011 | 3/31/2011 | 9/30/2010 | 6/30/2010 | 3/31/2010 | |
| Net cash provided by operating activities | (2.8) | 28.5 | 156.4 | 64.2 | 87.9 | 144.0 | |
| 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) | 14.6 | 8.5 | 5.8 | 31.9 | 5.7 | |
| Add: Net income attributable to noncontrolling interests | 1.5 | 1.6 | 1.3 | 49.0 | 41.9 | 39.4 | |
| Working capital used | 14.8 | 71.4 | - | 17.3 | - | - | |
| Risk management activities | 81.9 | (10.1) | 78.6 | 3.3 | (6.3) | 19.2 | |
| Proceeds from sale of assets / disposal of liabilities | - | - | - | - | - | - | |
| Other | 3.9 | (0.7) | (2.0) | (4.7) | (2.4) | 0.3 | |
| DCF as reported | 81.0 | 76.8 | 86.4 | 70.7 | 65.1 | 64.6 |
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).
[...] is an update to a prior article dated February 13, 2012, in which I noted that a significant portion of Buckeye Partners’ (BPL) current yield (then [...]
[...] is an update to a prior article dated February 13, 2012, in which I noted that a significant portion of Buckeye Partners’ (BPL) current yield (then [...]
[...] is an update to a prior article dated February 13, 2012, in which I noted that a significant portion of Buckeye Partners’ (BPL) current yield (then [...]