HOUSTON, February 8, 2019 — Buckeye Partners, L.P. (“Buckeye”) (NYSE: BPL) today reported its financial results for the fourth quarter and full year 2018. Net income attributable to Buckeye was $482.5 million for the fourth quarter of 2018 compared to $126.3 million for the fourth quarter of 2017. The fourth quarter of 2018 benefited from the $343.0 million gain recognized upon closing of the previously announced sale of a package of domestic pipeline and terminal assets during the quarter. Adjusted EBITDA (as defined below) for the fourth quarter of 2018 was $234.7 million compared to $289.9 million for the fourth quarter of 2017. Buckeye’s fourth quarter 2018 results do not include any contribution from VTTI B.V. (“VTTI”) as a result of the partnership’s agreement to sell its 50% equity interest in VTTI, which was completed in January 2019. Included in the fourth quarter 2017 results was a $35.8 million contribution to Adjusted EBITDA from VTTI.
Net income attributable to Buckeye was $3.13 per diluted unit for the fourth quarter of 2018 compared to net income attributable to Buckeye of $0.85 per diluted unit for the fourth quarter of 2017. The diluted weighted average number of units outstanding in the fourth quarter of 2018 was 154.1 million compared to 147.3 million in the fourth quarter of 2017.
“We have reduced our leverage, strengthened our balance sheet, increased our distribution coverage ratio and significantly improved our overall financial flexibility as a result of our recently completed dispositions of the package of non-integrated domestic pipeline and terminal assets in December 2018 and our equity interest in VTTI in January 2019,” stated Clark C. Smith, Chairman, President and Chief Executive Officer. “We believe these actions solidified our investment grade credit rating, eliminated the need for Buckeye to access the public equity markets and will allow us to reallocate capital to the higher return growth opportunities across our remaining assets, positioning us to provide solid returns for our unitholders over the long-term.”
“Turning to our fourth quarter, Buckeye’s Adjusted EBITDA results declined compared to the same period in 2017 due in large part to the sale of VTTI. Challenging market conditions for segregated storage also continued to impact our Global Marine Terminals segment. These adverse market conditions were partially offset by the improved contribution from Buckeye Texas Partners, driven by our acquisition of the remaining 20% minority interest in 2018 and improved operating performance. Our Domestic Pipelines and Terminals segment benefited from record pipeline and terminal throughput volumes and strong demand on our Midwest systems, combined with higher butane blending margins. These benefits were offset by the impact of the first quarter 2018 expiration of a crude-by-rail contract at our Chicago Complex and lower storage and pipeline settlement revenues, driven by lower petroleum product prices. Our Buckeye Merchant Services segment was negatively impacted by weaker distillate market conditions and lower rack margins but continued to generate strong utilization across our portfolio of assets and achieved a record contribution to our other segments.”
Distributable cash flow (as defined below) for the fourth quarter of 2018 was $143.6 million compared to $188.9 million for the fourth quarter of 2017. Buckeye also reported distribution coverage of 1.24 times for the fourth quarter of 2018.
Distribution. Buckeye also announced today that its general partner declared a cash distribution of $0.75 per limited partner unit (“LPUnit”) for the quarter ended December 31, 2018. The distribution will be payable on February 26, 2019 to unitholders of record on February 19, 2019. Buckeye has paid distributions in each quarter since its formation in 1986.
Full Year Results. For 2018, the net loss attributable to Buckeye was $59.0 million compared to net income attributable to Buckeye of $478.8 million for 2017. The year-over-year decrease is primarily attributable to the $537.0 million non-cash goodwill impairment charge and the $300.3 million non-cash loss related to the sale of our equity investment in VTTI, which were recorded in the third quarter of 2018, partially offset by the $343.0 million gain on the sale of the package of domestic pipeline and terminal assets recognized during the fourth quarter of 2018. Buckeye benefited in 2018 from higher pipeline transportation and butane blending revenues, an increased contribution from Buckeye Texas Partners, and gains recognized on the termination of our forward interest rate swaps and property damage recoveries. Those benefits were more than offset by the impact of continued weakness in segregated storage, particularly in the Caribbean, the lack of a contribution from VTTI in the fourth quarter of 2018 as a result of our agreement to sell our equity interest, the expiration of a crude-by-rail contract at our Chicago Complex, and increased interest expense.
The net loss attributable to Buckeye was $0.41 per diluted unit for 2018 compared to net income attributable to Buckeye of $3.32 per diluted unit for 2017. The diluted weighted average number of units outstanding for 2018 was 152.4 million compared to 143.1 million for 2017.
Adjusted EBITDAfor 2018 was $1,005.0 million compared to $1,113.9 million for 2017. Distributable cash flow for 2018 was $631.6 million compared to $731.9 million for 2017. Buckeye reported distribution coverage of 1.04 times for 2018 compared to 1.00 times in 2017.
Conference Call. Buckeye will host a conference call with members of executive management today, February 8, 2019, at 11:00 a.m. Eastern Time. To access the live webcast of the call, go to https://edge.media-server.com/m6/p/nr4omhb4 ten minutes prior to its start. Interested parties may participate in the call by dialing 877-870-9226 and entering the conference ID 9058408. A replay will be archived and available at this link through March 11, 2019, and the replay also may be accessed by dialing 800-585-8367 and entering the conference ID 9058408.
About Buckeye Partners, L.P.
Buckeye Partners, L.P. (NYSE: BPL) is a publicly traded master limited partnership which owns and operates a diversified global network of integrated assets providing midstream logistic solutions, primarily consisting of the transportation, storage, processing and marketing of liquid petroleum products. Buckeye is one of the largest independent liquid petroleum products pipeline operators in the United States in terms of volumes delivered, with approximately 6,000 miles of pipeline. Buckeye also uses its service expertise to operate and/or maintain third-party pipelines and terminals and perform certain engineering and construction services for its customers. Buckeye’s global terminal network comprises more than 115 liquid petroleum products terminals with aggregate tank capacity of over 118 million barrels across our
portfolio of pipelines, inland terminals and marine terminals located primarily in the East Coast, Midwest and Gulf Coast regions of the United States as well as in the Caribbean. Buckeye’s global network of marine terminals enables it to facilitate global flows of crude oil and refined petroleum products, offering its customers connectivity between supply areas and market centers through some of the world’s most
important bulk storage and blending hubs. Buckeye’s flagship marine terminal in The Bahamas, Buckeye Bahamas Hub, is one of the largest marine crude oil and refined petroleum products storage facilities in the world and provides an array of logistics and blending services for the global flow of petroleum products. Buckeye’s Gulf Coast regional hub, Buckeye Texas Partners, offers world-class marine terminalling, storage and processing capabilities. Buckeye is also a wholesale distributor of refined petroleum products in certain areas served by its pipelines and terminals. More information concerning Buckeye can be found at www.buckeye.com.
Adjusted EBITDA and distributable cash flow are not measures defined by accounting principles generally accepted in the United States of America (“GAAP”). We define Adjusted EBITDAas earnings (losses) before interest expense, income taxes, depreciation and amortization, further adjusted to exclude certain non-cash items, such as non-cash compensation expense; transaction, transition, and integration costs associated with acquisitions; certain unrealized gains and losses on foreign currency transactions and foreign currency derivative financial instruments, as applicable; and certain other operating expense or income items, reflected in net income, that we do not believe are indicative of our core operating performance results and business outlook, such as hurricane-related costs, gains and losses on property damage recoveries, non-cash impairment charges, and gains and losses on asset sales. We define distributable cash flow as Adjusted EBITDA less cash interest expense, cash income tax expense, and maintenance capital expenditures incurred to maintain the operating, safety, and/or earnings capacity of our existing assets, plus or minus realized gains or losses on certain foreign currency derivative financial instruments, as applicable. These definitions of Adjusted EBITDA and distributable cash flow are also applied to our proportionate share in the Adjusted EBITDA of significant equity method investments, such as that in VTTI, and are not applied to our less significant equity method investments. The calculation of our proportionate share of the reconciling items used to derive Adjusted EBITDA was based upon our 50% equity interest in VTTI, prior to adjustments related to noncontrolling interests in several of its subsidiaries and partnerships, which are immaterial. Due to certain terms of the definitive agreement regarding the divestiture of our equity interest in VTTI, we determined we no longer had the ability to exercise significant influence over the operating and financial policies of VTTI and therefore, accounted for our investment at fair value. Accordingly, beginning in the fourth quarter of 2018 and prospectively, we no longer applied the definition of Adjusted EBITDAto our investment in VTTI. Adjusted EBITDA and distributable cash flow are non-GAAP financial measures that are used by our senior management, including our Chief Executive Officer, to assess the operating performance of our business and optimize resource allocation. We use Adjusted EBITDAas a primary measure to: (i) evaluate our consolidated operating performance and the operating performance of our business segments; (ii) allocate resources and capital to business segments; (iii) evaluate the viability of proposed projects; and (iv) determine overall rates of return on alternative investment opportunities. We use distributable cash flow as a performance metric to compare cash-generating performance of Buckeye from period to period and to compare the cash-generating performance for specific periods to the cash distributions (if any) that are expected to be paid to our unitholders. Distributable cash flow is not intended to be a liquidity measure.
We believe that investors benefit from having access to the same financial measures used by management and that these measures are useful to investors because they aid in comparing our operating performance with that of other companies with similar operations. The Adjusted EBITDA and distributable cash flow data presented by us may not be comparable to similarly titled measures at other companies because these items may be defined differently by other companies. Please see the attached reconciliations of each of Adjusted EBITDA and distributable cash flow to net income.
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This press release includes forward-looking statements that we believe to be reasonable as of today’s date. All statements that express belief, expectation, estimates or intentions, as well as those that are not statements of historical facts, are forward-looking statements. Such statements use forward-looking words such as “proposed,” “anticipate,” “project,” “potential,” “could,” “should,” “continue,” “estimate,”
“expect,” “may,” “believe,” “will,” “plan,” “seek,” “outlook” and other similar expressions that are intended to identify forward-looking statements, although some forward-looking statements are expressed differently. These statements discuss future expectations and contain projections. Specific factors that could cause actual results to differ from those in the forward-looking statements include, but are not limited to: (i) changes in federal, state, local and foreign laws or regulations to which we are subject, including those governing pipeline tariff rates and those that permit the treatment of us as a partnership for federal income tax purposes; (ii) terrorism and other security risks, including cyber risk, adverse weather conditions, including hurricanes, environmental releases and natural disasters; (iii) changes in the marketplace for our products or services, such as increased competition, changes in product flows, better energy efficiency or general reductions in demand; (iv) adverse regional, national or international economic conditions, adverse capital market conditions, and adverse political developments; (v) shutdowns or interruptions at our pipeline, terminalling, storage and processing assets or at the source points for the products we transport, store or sell; (vi) unanticipated capital expenditures in connection with the construction, repair or replacement of our assets; (vii) volatility in the price of liquid petroleum products; (viii) nonpayment or nonperformance by our customers; (ix) our ability to successfully complete our organic growth projects and to realize the anticipated financial benefits; and (x) our ability to integrate acquired assets with our existing assets and to realize anticipated cost savings and other efficiencies and benefits. You should read our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2017, for a more extensive list of factors that could affect results. We undertake no obligation to revise our forward-looking statements to reflect events or circumstances occurring after today’s date except as required by law.
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This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of Buckeye’s distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, Buckeye’s distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.