Citi Comments On Buckeye Partners Following Better Than Expected Earnings Results

Buckeye Partners

reported 1Q:11 results that beat both Citi's estimates as well as consensus as adj EBITDA of $118.8 mil was 3% higher than Citi's $115.2 mil est and 1% above consensus of $117.7 mil. Distributable cash flow was $86.4 mil, 22% above Citi $70.8 mil est, and provided distribution coverage of 1.04x. The partnership increased the quarterly cash distribution by $0.0125 to $1.00/unit, 5.3% YoY. Buckeye Partners's nat gas storage operations showed a 75% decrease in earnings from the prior year due to low seasonal spreads and reduced volatility. Despite this current environment, mgmt continues with projects to increase capacity at its existing sites. Citi remains cautious on this business over the next few years as the current over supplied nat gas market is likely to keep pricing relatively flat and depressed for the foreseeable future, which minimizes the value of storage. Citi is maintaining its Hold rating on BPL and increasing the target price to $67.00 as Citi rolls forward its estimates by one quarter. Citi's target price assumes that BPL will be able to raise distributions to an annualized rate of $4.20/unit over the next 12 months and that the units should trade with a 6.25% yield. BPL closed Monday at $64.05