Stifel Upgrades Buckeye Partners, Believes Management Capitalized On Favorable Recontracting Environment

In a report published Monday, analysts at Stifel upgraded

from Hold to Buy. The price target was set to $89. The company's quarterly performance beat the estimates and the consensus. According to Stifel, "Performance on the quarter was driven by robust operations at the Global Marine Terminals segment where active capacity utilization increased to 93 percent from 85 percent the prior year. In addition, management noted that approximately 12 million barrels of capacity was recontracted in 1Q15 with an average rate increase of 20 percent." However, the Pipelines & Terminals segment posted more or less flat operations, year-on-year. The company said that the lower commodity prices and narrow butane blending spread adversely affected the performance of this segment. An increase in pipeline throughput, driven by rising demand for refined products, which helped mitigate the drag in the Pipelines & Terminals segment. "We view the offsetting impact from lower commodity prices (lower butane blending offset by higher pipeline volumes) as a strength of the partnership and an asset in a volatile commodity price environment," the analysts added. Buckeye Partners was able to take better than expected advantage of the contango market, with higher recontracting rates and capacity utilization. Although the contango market is unlikely to remain as strong for the remainder of the year, the company is expected to sustain favorable recontracting storage rates.