BREINIGSVILLE, Pa., Oct. 28 /PRNewswire-FirstCall/ -- Buckeye Partners, L.P. (the "Partnership") today reported its financial results for the third quarter of 2008. The Partnership's net income for the third quarter of 2008 was $46.6 million, or $0.79 per LP unit, compared with net income of $36.4 million, or $0.71 per LP unit, reported for the third quarter of 2007. The Partnership's EBITDA (as defined below) for the third quarter of 2008 was $81.3 million, compared with EBITDA of $60.6 million in the third quarter of 2007. Net income per LP unit in the third quarter of 2008 reflects an increase in the average number of LP units outstanding during the third quarter to 48.4 million from an average of 42.7 million LP units outstanding in the third quarter of 2007.
Revenue in the third quarter of 2008 was $496.2 million compared with revenue in the third quarter of 2007 of $125.7 million. Revenue in the third quarter of 2008 includes $16.8 million generated by the Partnership's Natural Gas Storage segment, which consists of the natural gas storage facilities that were acquired in January 2008, and $344.5 million generated by the Partnership's Energy Services segment consisting principally of the wholesale operations of Farm & Home Oil Company LLC, which were acquired in February 2008 and merged into the Partnership's Buckeye Energy Services LLC subsidiary on August 1, 2008. Operating income in the third quarter of 2008 was $64.5 million compared with operating income of $47.5 million in the third quarter of 2007. Operating income in the third quarter of 2008 includes $8.9 million from the Natural Gas Storage segment and $3.8 million from the Energy Services segment.
The Board of Directors of Buckeye GP LLC, the general partner of the Partnership, declared a regular quarterly partnership cash distribution of $0.875 per LP unit, payable November 28, 2008 to unitholders of record on November 7, 2008. This cash distribution represents a quarterly increase in the distribution of $0.0125 per LP unit to an indicated annualized cash distribution level of $3.50 per LP unit. This is the 87th consecutive quarterly cash distribution paid by the Partnership.
Separately, the Partnership is pleased to announce that its subsidiary, Lodi Gas Storage, L.L.C. ("Lodi"), has successfully begun natural gas injection into an expansion of its natural gas storage reservoir known as Kirby Hills located near Suisun City, California. When fully operational, the expansion of the Kirby Hills storage facility, known as Kirby Hills Phase II will add an estimated 11 billion cubic feet ("Bcf") of natural gas storage capacity to Lodi's current storage capacity. With the Kirby Hills Phase II expansion, Lodi's aggregate storage capacity is expected to be approximately 33 Bcf, and its injection and withdrawal rates are expected to increase to 600 million cubic feet per day ("MMcfd") and 700 MMcfd, respectively. The Kirby Hills Phase II expansion project is expected to be fully operational in February 2009.
Forrest E. Wylie, Chairman and CEO, stated, "We are pleased to report solid financial results for Buckeye in the third quarter and year to date 2008. Buckeye's business fundamentals remain strong despite the turmoil in the economy generally and continued volatility in refined petroleum product prices. In the third quarter, our Pipeline Operations segment experienced a slight decline in operating income compared to the same period last year as revenue declines associated with a 4.6 percent reduction in pipeline volumes in the quarter were not fully offset by the positive impact of tariff rate increases and good cost control. Our Terminalling and Storage segment continued to produce favorable year on year results due primarily to increased ethanol blending and additive injection charges at our product terminals. In addition, we continue to be extremely pleased with the results of the Natural Gas Storage segment, as our natural gas storage operations in northern California performed in line with our expectations. We look forward to increased business opportunities in this segment resulting from our Kirby Hills Phase II expansion project. Finally, our Energy Services segment has stabilized as the rapid run-up in refined petroleum product prices and associated volatility abated somewhat in the third quarter of 2008. Based on our overall financial performance in the third quarter, we are pleased to announce another increase in our quarterly cash distribution to unitholders.
"In connection with the current credit crisis, I would like to emphasize that Buckeye is in the favorable position of having a strong balance sheet that allows us to fund our current slate of internal growth projects with cash flow from operations and debt rather than equity. We have sufficient borrowing capacity available to us under our $600 million revolving credit facility. Our conservative approach to risk and credit metrics has put us in a good position in these times of tightening credit markets."
The Partnership will host a conference call to discuss the third quarter on Wednesday, October 29, 2008, at 11:00 a.m. Eastern Time. Investors are invited to listen to the conference call via the Internet, on either a live or replay basis at: http://www.videonewswire.com/event.asp?id=52531. Interested parties may participate in the call by joining the conference at (719) 325- 4783 and referencing conference ID 8584701. An audio replay of the conference call also will be available through November 3, 2008 by dialing (719) 457-0820 Code: 8584701.
Buckeye Partners, L.P. (http://www.buckeye.com/) is a publicly traded partnership that owns and operates one of the largest independent refined petroleum products pipeline systems in the United States in terms of volumes delivered, with approximately 5,400 miles of pipeline. Buckeye Partners, L.P. also owns 64 refined petroleum products terminals, operates and maintains approximately 2,200 miles of pipeline under agreements with major oil and chemical companies, owns a major natural gas storage facility in northern California, and markets refined petroleum products in certain of the geographic areas served by its pipeline and terminal operations. The general partner of Buckeye Partners, L.P. is owned by Buckeye GP Holdings L.P. .
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EBITDA, a measure not defined under generally accepted accounting principles ("GAAP"), is defined by the Partnership as income from continuing operations before interest expense (including amortization and write-off of deferred debt financing costs), income taxes, depreciation, and amortization. EBITDA should not be considered an alternative to net income, operating profit, cash flow from operations, or any other measure of financial performance presented in accordance with GAAP. Because EBITDA excludes some items that affect net income and these items may vary among other companies, the EBITDA data presented may not be comparable to similarly titled measures at other companies. Management of the Partnership uses EBITDA as a performance measure to assist in the analysis and assessment of the Partnership's operations, to evaluate the viability of proposed projects, and to determine overall rates of return on alternative investment opportunities. The Partnership believes that investors benefit from having access to the same financial measures used by the Partnership's management. Please see the attached reconciliation of EBITDA to income from continuing operations, the most directly comparable GAAP measure.
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This press release includes forward-looking statements that we believe to be reasonable as of today's date. Such statements are identified by use of the words "anticipates", "estimates", "expects", "intends", "plans", "predicts", "projects", "should", and similar expressions. Actual results may differ significantly because of risks and uncertainties that are difficult to predict and that may be beyond the control of the Partnership. Among them are (1) changes in laws or regulations to which we are subject, including those that permit the treatment of us as a partnership for federal income tax purposes, (2) terrorism, adverse weather conditions, environmental releases, and natural disasters, (3) changes in the marketplace for our products or services, such as increased competition, better energy efficiency, or general reductions in demand, (4) adverse regional or national economic conditions or adverse capital market conditions, (5) shutdowns or interruptions at the source points for the products we transport, store, or sell, (6) unanticipated capital expenditures in connection with the construction, repair, or replacement of our assets, and (7) volatility in the price of refined petroleum products and the value of natural gas storage services. You should read our Annual Report on Form 10-K and our most recently filed Quarterly Report on Form 10-Q 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.
BUCKEYE PARTNERS, L.P. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per unit amounts) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Revenues: Product sales $345,729 $1,319 $933,211 $7,269 Transportation and other 150,441 124,334 435,783 368,279 Total revenue 496,170 125,653 1,368,994 375,548 Costs and expenses: Cost of product sales 334,959 1,278 913,163 7,154 Operating expenses 72,684 59,550 207,124 174,821 Depreciation and amortization 15,457 11,520 41,415 33,425 General and administrative 8,619 5,774 26,042 16,087 Total costs and expenses 431,719 78,122 1,187,744 231,487 Operating income 64,451 47,531 181,250 144,061 Other income (expense): Investment and equity income 2,616 2,560 6,829 7,196 Interest and debt expense (19,053) (12,391) (55,008) (38,651) Minority interests and other (1,236) (1,320) (4,030) (3,947) Total other (expense) (17,673) (11,151) (52,209) (35,402) Income from continuing operations 46,778 36,380 129,041 108,659 (Loss) income from discontinued operations (176) - 1,230 - Net income $46,602 $36,380 $130,271 $108,659 Allocation of net income: Net income allocated to general partner: Income from continuing operations $8,651 $6,116 $22,822 $18,734 (Loss) income from discontinued operations $(53) $- $370 $- Net income allocated to limited partners: Income from continuing operations $38,127 $30,264 $106,219 $89,925 (Loss) income from discontinued operations $(123) $- $860 $- Earnings per limited partner unit-basic: Income from continuing operations $0.79 $0.71 $2.23 $2.18 Income from discontinued operations - - 0.02 - Earnings per limited partner unit-basic $0.79 $0.71 $2.25 $2.18 Earnings per limited partner unit-diluted: Income from continuing operations $0.79 $0.71 $2.23 $2.18 Income from discontinued operations - - 0.02 - Earnings per limited partner unit-diluted $0.79 $0.71 $2.25 $2.18 Weighted average number of limited partner units outstanding: Basic 48,372 42,676 47,538 41,286 Diluted 48,378 42,719 47,558 41,333 BUCKEYE PARTNERS, L.P. SELECTED FINANCIAL AND OPERATING DATA (Financial data in thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2008 2007 2008 2007 Revenue: Pipeline Operations $91,439 $92,067 $286,716 $278,244 Terminalling and Storage 33,003 24,843 87,749 72,379 Natural Gas Storage 16,762 - 43,412 - Energy Services 344,494 - 926,809 - Other Operations 12,011 8,743 33,637 24,925 Intersegment eliminations (1,539) - (9,329) - Total $496,170 $125,653 $1,368,994 $375,548 Operating income: Pipeline Operations $33,087 $36,122 $108,795 $109,077 Terminalling and Storage 17,027 9,324 40,294 28,243 Natural Gas Storage 8,914 - 21,474 - Energy Services 3,810 - 5,239 - Other Operations 1,613 2,085 5,448 6,741 Total $64,451 $47,531 $181,250 $144,061 Operating, general & administrative expenses: Pipeline Operations $58,352 $55,945 $177,921 $169,167 Terminalling and Storage 15,976 15,519 47,455 44,136 Natural Gas Storage 7,848 - 21,938 - Energy Services 340,684 - 921,570 - Other Operations 10,398 6,658 28,189 18,184 Intersegment eliminations (1,539) - (9,329) - Total $431,719 $78,122 $1,187,744 $231,487 Depreciation and amortization: Pipeline Operations $10,092 $9,630 $28,704 $28,035 Terminalling and Storage 1,600 1,455 4,604 4,193 Natural Gas Storage 982 - 3,732 - Energy Services 2,336 - 3,070 - Other Operations 447 435 1,305 1,197 Total $15,457 $11,520 $41,415 $33,425 Capital additions: Pipeline Operations $24,704 $36,933 Terminalling and Storage 17,326 12,053 Natural Gas Storage 27,528 - Energy Services 2,651 - Other Operations - 2,726 Total $72,209 $51,712 Operating Data: Pipeline Throughput (b/d - 000s) 1,360.4 1,425.7 1,383.4 1,441.2 Pipeline Average Tariff (Cents/bbl.) 68.6 65.5 66.0 63.5 Terminal Throughput (b/d - 000s) 539.2 576.3 537.6 566.4 EBITDA Reconciliation: Income from continuing operations $46,778 $36,380 $129,041 $108,659 Interest and debt expense 19,053 12,391 55,008 38,651 Income tax expense 9 277 435 715 Depreciation and amortization 15,457 11,520 41,415 33,425 EBITDA $81,297 $60,568 $225,899 $181,450
