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| 8-K - FORM 8-K - BUCKEYE PARTNERS, L.P. | d311264d8k.htm |
 Buckeye Partners, L.P.
Morgan Stanley
MLP and Diversified Natural Gas Corporate Access Event
March 7, 2012
Exhibit 99.1 |
 2
Legal Notice / Forward–Looking Statements
Forward–Looking Statements
This presentation contains "forward-looking statements" that we
believe to be reasonable as of the date of this presentation. These statements, which include any statement that does
not relate strictly to historical facts, use terms such as
“anticipate,” “assume,”
“believe,”
“estimate,”
“expect,”
“forecast,”
“intend,”
“plan,”
“position,”
“predict,”
“project,”
or “strategy”
or the negative connotation or other variations of such terms or
other similar terminology. In particular, statements, express or implied,
regarding future results of operations or ability to generate sales,
income or cash flow, to make acquisitions, or to make distributions to
unitholders are forward-looking statements. These forward-looking statements are based on
management’s current plans, expectations, estimates, assumptions and
beliefs concerning future events impacting Buckeye Partners, L.P. (the
“Partnership”
or “BPL”) and therefore
involve a number of risks and uncertainties, many of which are beyond
management’s control. Although the Partnership believes that its expectations stated in this presentation are
based on reasonable assumptions, actual results may differ materially from those
expressed or implied in the forward-looking statements. The factors listed in the “Risk Factors”
sections of, as well as any other cautionary language in, the Partnership’s
public filings with the Securities and Exchange Commission, provide examples of risks, uncertainties and events
that may cause the Partnership’s actual results to differ materially from
the expectations it describes in its forward-looking statements. Each forward-looking statement speaks only as of
the date of this presentation, and the Partnership undertakes no
obligation to update or revise any forward-looking statement.
Pending
Perth
Amboy
Terminal
Acquisition.
Our
pending
Perth
Amboy
Terminal
acquisition
may
not
be
consummated.
The
closing
of
the
acquisition
is
subject
to
certain
environmental and real property regulatory conditions and customary closing
conditions, and the acquisition agreement may, in certain circumstances, be terminated. Please see page 20
“Our pending acquisition of Perth Amboy Terminal may not be
consummated” for more information. |
 3
About Buckeye
Buckeye Partners, L.P. (“Buckeye”) (NYSE: BPL) is a publicly traded
partnership that provides midstream logistics services Buckeye has over
125 years of continuous operations and over 25 years as an MLP listed on the NYSE
Current
market
capitalization
near
$6.0
billion
Investment grade credit rating
Buckeye’s operations are conducted in three strategic business units
and five reporting segments:
Domestic Pipelines & Terminals
International Pipelines & Terminals
Buckeye Services
Energy Services
Natural Gas Storage
Development & Logistics
Asset Highlights
Over 6,000 miles of pipeline with ~ 100 delivery locations
More than 100 liquid petroleum product terminals
Over 64 million barrels of liquid petroleum product
storage capacity
~30 Bcf of working natural gas storage capacity
in northern California
~2,800 miles of pipeline under operation and maintenance
contracts
Buckeye’s revenue is largely fee-based providing consistent cash
flows that support distribution growth
Organizational Overview |
 4
Investment Highlights
Buckeye’s current management team is both driving increased utilization of
the legacy assets and successfully delivering record growth through
accretive acquisitions Reorganization in 2009 supports the
partnership’s objective to transform Buckeye into the best-in-class asset
manager operating with a highly commercialized and entrepreneurial focus
Buy-in
of general partner positions Buckeye to successfully compete for high growth
acquisition opportunities and expansion projects
Recently
announced
strategic
organizational
realignment
provides
for
management
of
our
business
units
under
experienced leaders to provide increased focus and drive growth
Recent acquisitions provide Buckeye with increased geographic and product
diversity, including access to international logistics
opportunities Pending acquisition of marine terminal facility in Perth
Amboy, NJ from Chevron furthers Buckeye’s strategy to create a fully
integrated and flexible system that offers unparalleled connectivity and service capabilities
Buckeye has investment grade financial metrics and a conservative approach
toward financing growth Buckeye has a proven 26-year track record as a
publicly traded partnership through varying economic and commodity price
cycles
Buckeye has paid cash distributions to unitholders each quarter since its
formation in 1986 and has increased distributions for the past 31
consecutive quarters Driving Unitholder Value
|
 5
Management Objectives
The current management team has consistently executed on each element of our
strategy to transform Buckeye into a best-in-class asset manager
by: Implementing best practices across our business
Improving our cost structure through an organizational restructuring in
2009 Expanding
our
asset
portfolio
through
accretive
acquisitions
and
organic
growth
projects
Diversifying
our
legacy
business
into
new
geographies,
products,
and
asset
classes
Reducing cost of capital through the buy-in of our general partner
Financing acquisitions conservatively to maintain a strong balance sheet
Increasing cash distributions each quarter
We continue to be committed to our mission of delivering superior returns
through our talented, valued employees and our core strengths of:
Best-in-class customer service
Operational excellence that provides consistent, reliable performance to
optimize the assets we own and operate An unwavering commitment to safety,
environmental responsibility, and personal integrity An entrepreneurial
approach toward asset acquisition and development Achieving Financial and
Operational Excellence |
 6
CEO Succession and Strategic Organizational
Realignment
Management Structure after Reorganization
CEO succession effective February 10, 2012:
Clark C. Smith, Buckeye’s President and Chief Operating Officer,
to succeed Forrest E. Wylie as Chief Executive Officer, and will
join the Board of Directors of Buckeye’s general partner.
Forrest E. Wylie to continue to serve as Non-Executive
Chairman of the Board, where he will remain active in developing
our strategic vision.
Strategic Organizational Realignment, effective January 16,
2012; Buckeye operations organized into three business
units, each headed by a President.
Domestic Pipelines and Terminals
International Pipelines and Terminals
Buckeye Services
Strategic Organizational Realignment rationale:
Previous structure organized around functions (e.g.,
commercial, operations, etc.).
Growth has resulted in increased complexities in each of
Buckeye’s business areas, requiring focus and ownership
of skilled executives on daily basis.
Allows business unit Presidents to focus on all aspects
of performance -
including commercial, operational and
financial performance -
of their respective business
unit.
Presidents of business units accountable for overall
performance of those units.
Board of Directors
Forrest E. Wylie, Chairman
Clark C. Smith
Chief Executive Officer
Mary F. Morgan
President, International
Pipelines and Terminals
Robert A. Malecky
President, Domestic
Pipelines and Terminals
Jeremiah J. Ashcroft III
President,
Buckeye Services
Domestic
Pipelines
Domestic
Terminals
BORCO
Terminal
Yabucoa
Terminal
Energy
Services
Natural Gas
Storage
Keith E. St.Clair
Chief Financial
Officer
Khalid A. Muslih
Corp. Development
Strategic Planning
William H.
Schmidt, Jr.
General Counsel
Mark S. Esselman
Global
Human Resources
Development
& Logistics |
 7
Pipeline, Terminal, Storage and Delivery Locations
Current Asset Map
Domestic Pipelines
Domestic Terminals
International Terminals
Contract Pipeline Operations
Delivery Locations
Lodi Gas Storage, LLC
WesPac Pipelines -
Memphis, LLC
West Shore Pipe Line Company
Muskegon Pipeline LLC
South Portland Terminal LLC |
 8
Domestic Pipelines & Terminals
Pipelines & Terminals segment represents Buckeye’s
largest segment contribution to Adjusted EBITDA
Over 6,000 miles of pipeline located primarily in the
Northeast and Midwest United States moving
approximately 1.3 million barrels of liquid petroleum
products per day with more than 100 delivery points
Approximately 100 liquid petroleum product storage
terminals located throughout the United States
Over 37 million barrels of storage capacity
Terminal Throughput Volumes
Pipeline
Throughput
Volumes
(2)
Segment Adjusted EBITDA
(1)
(1)
See Appendix for Non-GAAP Reconciliations
(2)
Pipeline volumes exclude contribution from the Buckeye NGL Pipeline sold in
January of 2010 $207.5
$238.9
$253.8
$302.2
$346.4
$361.0
0
100
200
300
400
2006
2007
2008
2009
2010
2011
414.7
482.3
464.4
471.9
562.5
742.8
0
100
200
300
400
500
600
700
800
2006
2007
2008
2009
2010
2011
1,430.5
1,427.0
1,361.3
1,296.0
1,304.5
1,347.5
0
500
1,000
1,500
2,000
2006
2007
2008
2009
2010
2011 |
 9
BP Pipelines & Terminals Acquisition
Total transaction purchase price of $165 million
Transaction benefits:
Represents a key step in Buckeye’s continued expansion and geographic
diversification efforts Facilitates participation in several growth
markets outside Buckeye’s previous system footprint Provides stable
tariff and fee-based revenue streams, supported by multi-year throughput commitments by BP
Acquisition was accretive to distributable cash flow
Several identified opportunities for further commercial development of these
assets Rapid realization of operating synergies with Buckeye’s
existing assets 33 liquid products terminals located in:
Alabama-
2 terminals
California-
2 terminals
Florida-
1 terminal
Iowa -5 terminals
Indiana-
1 terminal
643 miles of refined product pipeline including:
590-mile “Lower V”
pipeline system that originates in Dubuque, Iowa and runs southwest into
Missouri and then northwest back into Iowa
53 miles of pipelines in northern Ohio
Kentucky -1 terminal
Michigan-
3 terminals
Missouri-
1 terminal
Ohio-
8 terminals
Pennsylvania-
2 terminals
South Carolina-
3 terminals
Virginia-
3 terminals
Wisconsin-
1 terminal
Overview |
 10
Perth Amboy Acquisition Overview
Acquisition
of
a
New
York
Harbor
marine
terminal
for
liquid
petroleum
products
from
Chevron
for
$260
million
in
cash
Proceeds from recently announced registered direct offering of LP units to fund
indirectly a portion of the purchase price Unique opportunity to acquire
key link in the product logistics chain to unlock significant long-term value across the Buckeye
enterprise
Near-term plans to transform existing terminal into a highly efficient,
multi-product storage, blending and throughput facility Anticipated
growth capex investment in the facility of ~$200-225 million over the next three years at attractive annual Adjusted
EBITDA
investment
multiple
of
4
–
5x,
resulting
in
all-in
Adjusted
EBITDA
investment
multiple
of
7
–
8x
(2)
Transaction supported by multi-year storage, blending and throughput
commitments from Chevron Estimated to close in second half of Q2
2012 Accretive to distributable cash flow per unit in 2013
Facility Overview
Located in New York Harbor as a NYMEX delivery point
Approximately 4.0 MMBbls total storage capacity
~2.7 MMBbls of active refined product storage
~1.3 MMBbls of refurbishable storage
4 docks (1 ship, 3 barge
(3)
) with water draft up to 37’
Pipeline, water, rail and truck access
~250 acre site with significant undeveloped acreage for
expansion potential
Close proximity for integration with Buckeye’s Linden
complex
(1)
The acquisition is subject to closing conditions and the acquisition agreement
may, in certain circumstances,
be
terminated.
As
a
result,
we
cannot
assure
you
if
or
when
the
acquisition
will
close. Please see page 26 “Our pending acquisition of Perth Amboy
Terminal may not be consummated”
for more information.
Aerial Overview
Note: Facility located in Perth Amboy, NJ. Green line above
indicates approximate property boundaries (2)
Includes acquisition purchase price and capital spent on tanks, terminal piping,
dock and truck rack improvements, and ~6 miles of new
16” pipeline to be constructed from Perth Amboy to Buckeye’s
Linden, NJ complex. (3)
One of the barge docks is currently out of service
Transaction
Overview
(1) |
 11
Represents missing link to connect the Buckeye system with direct water access
for marine imports Positions Buckeye to provide logistical solutions to
meet East Coast supply challenges Enhances competitive supply
alternatives to move product to end markets on the Buckeye system Further
positions the Buckeye system to handle anticipated increase in marine imports through New York Harbor
Improves connectivity and service capabilities for customers to increase
Buckeye system utilization Creates a link between BORCO and the Buckeye
system Facilitates movements within and out of the New York Harbor
with the construction of a new high performance pipeline from
Perth Amboy to Buckeye’s Linden complex
Serves as critical origination point to further drive volumes for
Buckeye’s planned pipeline expansions from Linden complex Supports
facility expansion at BORCO as U.S. east coast refined product imports increase
Provides significant operational flexibility to optimize multiple product
service offerings as market needs evolve Anticipated growth capex
investment in the facility of ~$200-225 million over the next three years at attractive annual Adjusted
EBITDA
investment
multiple
of
4
–
5x,
resulting
in
all-in
Adjusted
EBITDA
investment
multiple
of
7
–
8x
(1)
Enhances ability to increase cash distributions and/or improve cash coverage
ratio Opportunity to realize meaningful synergies with other Buckeye
pipeline and terminal assets Strategic Rationale
Provides
Security &
Diversity of
Product
Supply
Enhances
System
Integration
Drives
Future
Growth
Opportunities
Strengthens
Distributable
Cash Flow
Profile
(1)
Includes
acquisition
purchase
price
and
capital
spent
on
tanks,
terminal
piping,
dock
and
truck
rack
improvements,
and
~6
miles
of
new
16”
pipeline
to
be
constructed
from
Perth
Amboy
to
Buckeye’s
Linden,
NJ
complex |
   12
Long-Term Vision –
“Connecting the Dots…”
Global supply locations and product flows are shifting
Recent announcements of Northeast U.S. and
Caribbean refinery shutdowns have created a
need for new sources of product supply
New global refining capacity coming online will
seek deficit markets
Buckeye recognized the need to further accommodate
waterborne refined product imports into the Northeast
U.S.
A component of the BORCO investment thesis
was to help facilitate product flow into the
Buckeye system in PADD I
BORCO and Perth Amboy are two key components of a
long-term strategy:
Create a more fully integrated and flexible system
that offers unparalleled connectivity and service
capabilities
Execution on this strategy will continue to differentiate
Buckeye’s service offerings and provide sustainability
and optionality for further growth in our core businesses
BORCO
Perth Amboy |
 13
International Pipelines & Terminals
BORCO
Yabucoa, Puerto Rico
Bahamas Oil Refining Company International (“BORCO”)
BORCO owns and operates a world-class marine storage terminal for liquid
petroleum products 80 tanks providing 21.4 million barrels of crude oil,
fuel oil, and refined petroleum product storage Strategically positioned
along major shipping lanes off the southern tip of Grand Bahama Island, only 80 miles
from Florida and 920 miles from New York Harbor
Deep water berthing capability to handle ULCCs and VLCCs
Identified near term expansion project and room to ultimately double the
existing storage capacity Yabucoa Terminal
Well maintained facility with superior
blending/manufacturing facilities
4.6 million barrels of refined petroleum product,
fuel oil, and crude oil storage capacity
Strategic location supports a strong local market
and also provides regional growth opportunities
Long term fee-based revenues supported by multi-
year volume commitments from Shell |
 14
BORCO Marine Terminal
BORCO Overview
BORCO owns and operates a world-class marine
storage terminal for crude oil, fuel oil and refined
petroleum products
21.4 MMBbls capacity
Located in Freeport, Bahamas, 80 miles from
Southern Florida and 920 miles from New York
Harbor
Deepwater access (up to 91 feet) and the ability
to berth VLCCs and ULCCs
Majority of capacity under long-term (3-5 year)
take or pay contracts
World class customer base
Variable revenue generation from ancillary
services such as berthing, blending, bunkering,
and transshipping
Hub for international logistics
Near term expansion project of up to 7.9 million
barrels with room to double existing storage
capacity
Product Breakdown
Storage
83%
Berthing
11%
Other
Ancillary
6%
Fuel Oil
66%
Crude Oil
20%
Refined
Products
14%
Take-or-Pay
Variable
(1)
Excludes non-cash amortization of unfavorable storage contracts.
2011
Revenue
Breakdown
(1) |
 15
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2012B
2013E
2014E
2015E
2016E
-
50
100
150
200
250
300
350
400
Yellowfield 1
Bluefield 1
Bluefield 2
Yellowfield 2
Yellowfield 3
Yellowfield 4
CAPEX
BORCO Expansion Project
Near term expansion project at BORCO is
expected to provide up to an additional 7.9
million barrels of storage capacity
Project to be completed in phases
Phase 1 to add approximately 3.5 million
barrels of storage capacity
Initiated in the second quarter of 2011
First incremental capacity expected to
be online in the second half of 2012
Combination of refined products and
fuel oil
Later phases expected to provide up to an
additional 4.4 million barrels of storage
capacity
Total project cost expected to be $350-400
million
Combined EBITDA from all phases
expected to be $70-80 million
Longer term opportunity to double existing
storage capacity
Identified Near Term Project
(1)
Graph reflects expected midpoint of capital spend range. Dates represent expected
date that capacity is placed in service. Q3 ‘12
Q4 ‘12
Q2 ‘13
Q3 ‘13
Q3 ‘14
Q3 ‘15
BORCO
Expansion
Capacity
(1) |
 16
Buckeye Services
Natural Gas Storage
Buckeye Energy Services (“BES”) markets refined
petroleum products and other ancillary products in
areas served by Buckeye’s pipelines and terminals
BES offers a wide range of products such as heating
oil, diesel, kerosene, propane, gasoline, and ethanol
and other bio fuels
Over 1 billion gallons of products sold annually
BES contributed ~$44 million in revenue to the
Pipelines & Terminals segment in 2011 by utilizing
that segment’s assets to transport and store BES
product
Energy Services
Development & Logistics
Buckeye Development & Logistics (“BDL”)
currently operates approximately 2,800 miles of
pipelines and 1.4 million barrels of storage capacity
BDL is also responsible for identifying and
completing potential acquisitions and organic growth
projects for Buckeye
BDL services offered to customers
Contract operations
Project origination
Asset development
Engineering design
Project management
Buckeye’s Lodi Gas Storage facility is a high performance natural gas
storage facility with approximately 30 Bcf of working gas capacity in
Northern California serving the greater San Francisco Bay Area Revenue is
generated through firm storage services and hub services The
facilities
collectively
have
a
maximum
injection
and
withdrawal
capability
of
approximately
550
million
cubic
feet per day (MMcf/day) and
750 MMcf/day, respectively
Lodi's facilities are designed to provide high deliverability natural gas
storage service and have a proven track record of safe and reliable
operations |
 17
Growth Drivers
Organic Growth Capital Spending
Projected Organic Growth Spend ($MM)
2012
Perth Amboy, NJ Marine Terminal, $260.0 million -
Pending
2011
BORCO Marine Terminal, $1.7 billion
BP Pipeline & Terminal Assets, $165.0 million
Maine Terminals and Pipeline, $23.5 million
2010
Buy-in of BPL’s general partner, 20 million units issued
Yabucoa, Puerto Rico Terminal, $32.6 million
Opelousas, Louisiana Terminal, $13.0 million
Additional Equity Interest in West Shore Pipe Line
Company, $13.5 million
2009
Blue/Gold Pipeline and Terminal Assets, $54.4 million
2008
Lodi Natural Gas Storage, $442.4 million
Farm & Home Oil Company
(2)
, $146.2 million
(3)
Niles and Ferrysburg, Michigan Terminals, $13.9 million
Albany, NY Terminal, $46.9 million
(1)
Excludes acquisitions with a value of $10 million or lower
(2)
Now Buckeye Energy Services
(3)
Buckeye sold the retail division of Farm & Home Oil Company in 2008 for $52.6
million Low
Midpoint
High
2012 Projected
Existing Pipelines & Terminals
$80
$90
$100
BORCO
120
140
160
Perth Amboy
50
60
70
Total Expected Spend
$250
$290
$330
Range of Expected Spend
$0.0
$80.0
$160.0
$240.0
$320.0
2008
2009
2010
2011
2012P
Existing Pipelines & Terminals
Natural Gas Storage
BORCO
Perth Amboy
$91.5
$46.5
$63.8
$261.9
$290.0
Recent
and
Pending
Transactions
(1) |
 18
Financial Performance
Adjusted EBITDA ($MM)
(1)
Cash Distributions per Unit
(1)
See Appendix for Non-GAAP Reconciliations
(2)
Distributable cash flow divided by cash distributions declared for the respective
periods (3)
Long-term debt less cash and cash equivalents divided by Adjusted
EBITDA Net LT Debt/ Adjusted EBITDA
(1)(3)(5)
0.96x
(4)
Declared Distribution Coverage
Pro Forma Distribution Coverage
(4)
Pro forma distribution coverage excludes $17.1 million of acquisition and
integration expenses incurred in 2011.
(5)
For purposes of calculating the leverage, Adjusted EBITDA for the LTM period
includes BORCO Adjusted EBITDA post-acquisition as included in
reported results and pro forma BORCO Adjusted EBITDA of $5.5 million for
the period prior to the acquisition 4.58x
3.09x
4.44x
3.95x
3.94x
4.84x
0.00x
1.00x
2.00x
3.00x
4.00x
5.00x
2006
2007
2008
2009
2010
2011
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
0.87x
0.95x
1.01x
1.16x
1.03x
0.91x
0.00x
0.20x
0.40x
0.60x
0.80x
1.00x
1.20x
1.40x
1.60x
2006
2007
2008
2009
2010
2011
$217.1
$248.5
$313.6
$370.2
$382.6
$487.9
$0
$100
$200
$300
$400
$500
2006
2007
2008
2009
2010
2011
Cash
Distribution
Coverage
(1)(2) |
 19
Summary
Proven 26-year track record as a publicly traded partnership through varying
economic and commodity price cycles Diversified portfolio of assets
provides balanced mix of stability and growth and is well positioned to take advantage of
improving economic conditions
Recent acquisitions provide Buckeye with increased geographic and product
diversity, including access to international logistics opportunities, and
provide significant near term growth projects Pending acquisition of
marine terminal facility in Perth Amboy, NJ from Chevron furthers Buckeye’s strategy to
create a fully integrated and flexible system that offers unparalleled
connectivity and service capabilities; provides significant near term
growth opportunities at attractive multiple. World-class BORCO
marine
storage
terminal
with
21.4
million
barrels
of
storage
capacity
for
crude
oil
and
liquid
petroleum
products
in
Freeport,
Bahamas
with
near
term
expansion
project
of
up
to
7.9
million
barrels;
serves
as
important logistics hub for international petroleum product flows.
Management
continues
to
drive
operational
excellence
through
its
best
practices
initiative
Execution of our strategy has allowed Buckeye to increase distributions to
unitholders for 31 consecutive quarters Investing in Stability and
Growth |
 20
Our pending acquisition of Perth Amboy Terminal may not be
consummated
Risks Related to Consummation of Perth Amboy Acquisition
Our
pending
acquisition
of
the
Perth
Amboy
Terminal
may
not
be
consummated.
Our
pending
acquisition
of
the
Perth
Amboy
Terminal
is
expected
to
close
in
the second quarter of 2012 and is subject to closing conditions and regulatory
approvals. If these conditions and regulatory approvals are not satisfied or waived, the acquisition will not
be consummated. If the closing of the acquisition is substantially delayed or
does not occur at all, or if the terms of the acquisition are required to be modified substantially due to
regulatory concerns, we may not realize the anticipated benefits
of the acquisition fully or at all. Certain of the conditions remaining to be
satisfied include: In addition, the Perth Amboy Purchase and Sale
Agreement may be terminated by mutual agreement of the parties thereto or as follows (i) by either Chevron or Buckeye, if the
acquisition has not closed on or before June 30, 2012; provided,
however that if the HSWA Permit has not been released for public comment on or
before March 31, 2012, then Chevron shall not have the right to terminate
the Purchase and Sale Agreement unless the acquisition has not closed on or before
July 31, 2012 (in each case, subject to a 30-day
extension
to
give
effect
to
certain
cure
periods),
(ii)
by
either
Chevron
or
Buckeye,
if
the
other
party
has
materially
breached
its
obligations
under
the
Purchase
and
Sale
Agreement,
which breaches have not been cured within the applicable time frame or that by
their nature cannot be cured, (iii) by either Chevron or Buckeye, if any statute, rule or regulation
makes consummation of the acquisition illegal or otherwise prohibited, or if any
order, decree, ruling or other action by any governmental authority permanently restraining, enjoining
or otherwise prohibiting the consummation of the acquisition has
become final and non-appealable, (iv) by Chevron, if Buckeye conducts
internal inspections of out of service tanks on the Facility, retains or
utilizes the services of a New Jersey licensed site remediation professional or has any communications with any governmental authority with respect to the
assets subject to the Purchase and Sale Agreement (other than pursuant to the
HSR Act or solely in anticipation of the transfer of the assets to Buckeye at the closing), (v) by Buckeye,
upon the occurrence of a Material Discovery or a Material Adverse Change,
subject to certain cure rights of Chevron, (vi) by Chevron, upon its reasonable determination that a
Material Discovery relating to environmental liabilities cannot be cured or
remediated using reasonable methods or resources, (vii) by either Chevron or Buckeye, upon the occurrence
of certain damage to, or destruction or condemnation of, the assets subject to
the Purchase and Sale Agreement not constituting a Material Adverse Change, subject to certain cure
rights of Chevron, and (viii) by Chevron, if it determines in its sole
discretion that the HSWA Permit is not satisfactory. •
the issuance by the United States Environmental Protection Agency of an amended
hazardous and solid waste permit (the “HSWA Permit”) on terms satisfactory to Chevron
in its sole discretion;
•
the grant of a legal subdivision of certain real property to be retained by
Chevron; •
the absence of any damage to, or destruction or condemnation of,
the assets subject to the Purchase and Sale Agreement which reduces the
economic value of such assets by $20,000,000 or more (a “Material
Adverse Change”); or, if any Material Adverse Change has occurred, the cure or other mutually agreeable resolution thereof;
•
the absence of certain factual discoveries by Buckeye of certain
matters relating to title, environmental liabilities or regulatory obstacles
which reduce the economic value of the assets subject to the Purchase and
Sale Agreement by $20,000,000 or more, subject to certain exclusions (a “Material Discovery”); or, if any Material Discovery has
occurred, the cure or other mutually agreeable resolution thereof; and
•
the absence of any pending or threatened litigation or administrative
proceeding, or any pending investigation, by any party or any third party seeking to restrain or prohibit
(or questioning the validity or legality of) the consummation of
the transactions contemplated by the Purchase and Sale Agreement
or seeking damages in connection
therewith which makes it unreasonable to proceed with the consummation of the
transactions contemplated thereby. |
 21
Non–GAAP Reconciliations |
 22
Basis of Representation; Explanation of Non–GAAP Measures
Buckeye’s equity-funded merger with Buckeye GP Holdings L.P.
(“BGH”) in the fourth quarter of 2010 has been treated as a reverse merger for accounting purposes. As a result, the historical results
presented herein for periods prior to the completion of the merger are those of
BGH, and the diluted weighted average number of limited partnership (“LP”) units outstanding increased from
20.0 million in the fourth quarter of 2009 to 44.3 million in the fourth quarter
of 2010. Additionally, Buckeye incurred a non-cash charge to compensation expense of $21.1 million in the fourth quarter
of 2010 as a result of a distribution of LP units owned by BGH GP Holdings, LLC
to certain officers of Buckeye, which triggered a revaluation of an equity incentive plan that had been instituted
in 2007.
EBITDA, a measure not defined under U.S. generally accepted accounting
principles (“GAAP”), is defined by Buckeye as net income attributable to Buckeye’s unitholders before interest and debt
expense, income taxes, and depreciation and amortization. The EBITDA measure
eliminates the significant level of non-cash depreciation and amortization expense that results from the capital
-intensive nature of Buckeye’s businesses and from intangible assets
recognized in business combinations. In addition, EBITDA is unaffected by Buckeye’s capital structure due to the elimination of
interest and debt expense and income taxes. Adjusted EBITDA, which also is a
non-GAAP measure, is defined by Buckeye as EBITDA plus: (i) non-cash deferred lease expense, which is the difference
between the estimated annual land lease expense for Buckeye’s natural gas
storage facility in the Natural Gas Storage segment to be recorded under GAAP and the actual cash to be paid for such annual
land lease; (ii) non-cash unit-based compensation expense; (iii) the
2009 non-cash impairment expense related to the natural gas liquids pipeline that Buckeye sold in January 2010 (the “Buckeye NGL
Pipeline”); (iv) the 2009 expense for organizational restructuring (the
“Organizational Restructuring Expense”); (v) the 2010 non-cash BGH GP Holdings, LLC equity plan modification expense (the
“Equity Plan Modification Expense”); (vi) income attributable to
noncontrolling interests related to Buckeye for periods prior to the merger of Buckeye and BGH (the “Merger”); and (vii) the goodwill
impairment expense associated with Lodi Gas Storage, L.L.C. (“Lodi”);
less: (i) amortization of unfavorable storage contracts acquired in connection with the acquisition of Bahamas Oil Refining
Company International (“BORCO”); and (ii) gain on the sale of our
equity interest in West Texas LPG limited partnership (“WT LPG”). The EBITDA and Adjusted EBITDA data presented may not
be directly comparable to similarly titled measures at other companies because
EBITDA and Adjusted EBITDA exclude some items that affect net income attributable to Buckeye’s unitholders, and
these measures may be defined differently by other companies. Management of
Buckeye uses Adjusted EBITDA to evaluate the consolidated operating performance and the operating performance of
the business segments and to allocate resources and capital to the business
segments. In addition, Buckeye’s management uses Adjusted EBITDA as a performance measure to evaluate the viability of
proposed projects and to determine overall rates of return on alternative
investment opportunities.
Distributable cash flow, which is a financial measure included in the schedules
to this press release, is another measure not defined under GAAP. Distributable cash flow is defined by Buckeye as net
income attributable to Buckeye’s unitholders plus: (i) depreciation and
amortization expense; (ii) noncontrolling interests related to Buckeye that were eliminated as a result of the Merger; (iii) deferred
lease expense for Buckeye’s Natural Gas Storage segment; (iv)
unit-based compensation expense; (v) goodwill impairment expense associated with Lodi; (vi) write-off of deferred financing costs; (vii)
amortization of deferred financing costs and debt discounts (all of which are
non-cash expense); (viii) Equity Plan Modification Expense; (ix) the Buckeye NGL Pipeline impairment expense; (x) the
senior administrative charge; and (xi) the Organizational Restructuring Expense
(items (i) through (x) of which are non-cash expense); less: (i) maintenance capital expenditures; (ii) amortization of
unfavorable storage contracts acquired in the BORCO acquisition; and (iii) gain
on the sale of our equity investment in WTLPG. Buckeye’s management believes that distributable cash flow is useful to
investors because it removes non-cash items from net income and provides a
clearer picture of Buckeye’s cash available for distribution to its unitholders.
This presentation references forward-looking estimates of Adjusted EBITDA
investment multiples projected to be generated by the Perth Amboy terminal. A reconciliation of estimated Adjusted
EBITDA to GAAP net income is not provided because GAAP net income generated by
the Perth Amboy terminal for the applicable periods is not accessible. Buckeye has not yet completed the
necessary valuation of the various assets to be acquired, a determination of the
useful lives of these assets for accounting purposes, or an allocation of the purchase price among the various types of
assets. In addition, interest and debt expense is a
corporate-level expense that is not allocated among Buckeye’s segments and could not be allocated to the Perth Amboy terminal operations without
unreasonable effort. Accordingly, the amount of depreciation and
amortization and interest and debt expense that will be included in the additional net income generated as a result of the acquisition of
the Perth Amboy terminal is not accessible or estimable at this time. The
amount of such additional resulting depreciation and amortization and applicable interest and debt expense could be
significant, such that the amount of additional net income would vary
substantially from the amount of projected Adjusted EBITDA. This presentation also references forward-looking estimates of
Adjusted EBITDA projected to be generated by expansion activities at BORCO.
Reconciliations to GAAP net income are not provided because GAAP net income connected to such expansion
activities for the applicable periods is not accessible. Interest and debt
expense is a corporate-level expense that is not allocated among Buckeye’s segments and could not be allocated to the BORCO
expansion without unreasonable effort. Accordingly, the amount of debt
expense that will be included in the additional net income generated as a result of the BORCO expansion is not accessible or
estimable at this time. The amount of applicable interest and debt expense
could be significant, such that the amount of net income would vary substantially from the amount of projected Adjusted
EBITDA.
Buckeye believes that investors benefit from having access to the same financial
measures used by Buckeye’s management. Further, Buckeye believes that these measures are useful to
investors because they are one of the bases for comparing Buckeye’s
operating performance with that of other companies with similar operations, although Buckeye’s measures may not
be directly comparable to similar measures used by other companies.
|
 23
Non-GAAP Reconciliations
Net Income to Adjusted EBITDA ($M)
2006
2007
2008
2009
2010
2011
Net income attributable to BPL
8,734
22,921
26,477
49,594
43,080
108,501
Interest and debt expense
60,702
51,721
75,410
75,147
89,169
119,561
Income tax expense (benefit)
596
760
801
(343)
(919)
(192)
Depreciation and amortization
39,629
40,236
50,834
54,699
59,590
119,534
EBITDA
109,661
115,638
153,522
179,097
190,920
347,404
Net
income
attributable
to
noncontrolling
interests
affected
by
merger
(1)
107,091
131,941
153,546
90,381
157,467
Amortization of unfavorable storage contracts
(7,562)
Gain on sale of equity investment
(34,727)
Non-cash deferred lease expense
4,598
4,500
4,235
4,122
Non-cash unit-based compensation expense
329
968
1,909
4,408
8,960
9,150
Equity plan modification expense
21,058
Asset impairment expense
59,724
-
Goodwill impairment expense
169,560
Reorganization expense
-
-
32,057
-
Adjusted
EBITDA
(2)
217,081
248,547
313,575
370,167
382,640
487,947
Adjusted Segment EBITDA
Pipelines & Terminals
207,455
238,830
253,790
302,164
346,447
361,018
International Operations
(4,655)
112,996
Natural Gas Storage
4,204
Energy Services
Development & Logistics
9,626
9,717
8,528
6,718
5,193
7,932
Total Adjusted EBITDA
217,081
248,547
313,575
370,167
382,640
487,947
41,814
41,950
29,794
9,443
19,335
5,861
1,797
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1)
On November 19, 2010, Buckeye merged with Buckeye GP Holdings L.P.
(2)
In 2010, Buckeye revised its definition of Adjusted EBITDA to exclude
non-cash unit-based compensation expense, the 2010 non-cash equity plan modification expense and income attributable to noncontrolling interests
affected by the merger for periods prior to our buy-in of our general
partner. These amounts were excluded from Adjusted EBITDA presented for 2008, 2009 and 2010 in our Annual Report on Form 10-K for the year ended
December 31, 2010, as amended. Adjusted EBITDA for 2006 and 2007 has
been restated in this presentation to exclude these amounts for comparison purposes. |
 24
Non-GAAP Reconciliations
Net Income to Distributable Cash Flow ($M)
(1)
On November, 19, 2010, Buckeye merged with Buckeye GP Holdings L.P.
(2)
In 2011, Buckeye revised its definition of Distributable Cash Flow to exclude
amortization of deferred financing costs and debt discounts. Distributable Cash Flow for 2006-2010 have been restated to exclude those amounts for comparison purposes.
(3)
Represents cash distributions declared for limited partner units
(LP units) outstanding as of each respective period. 2011 amounts reflect actual
cash distributions paid on LP units for the quarters ended March 31, 2011, June 30, 2011, and September 30, 2011, and
estimated cash distributions for the quarter ended December 31, 2011.
Distributions with respect to the 6,915,725, 7,042,771, and 7,175,839 Class B units outstanding on the record date for the
quarters ended March 31, 2011,
June 30, 2011, and September 30, 2011, respectively, and the 7,304,880 Class B
units expected to be outstanding for the quarter ending December 31, 2011 are paid in additional Class B units rather than in cash.
2006
2007
2008
2009
2010
2011
Net income attributable to BPL
8,734
22,921
26,477
49,594
43,080
108,501
Depreciation and amortization
39,629
40,236
50,834
54,699
59,590
119,534
Net
income
attributable
to
noncontrolling
interests
affected
by
merger
(1)
107,091
131,941
153,546
90,381
157,467
-
Gain on sale of equity investment
-
-
-
-
-
(34,727)
Non-cash deferred lease expense
-
-
4,598
4,500
4,235
4,122
Non-cash unit-based compensation expense
329
968
1,909
4,408
8,960
9,150
Equity plan modification expense
-
-
-
-
21,058
-
Asset impairment expense
-
-
-
59,724
-
-
Reorganization expense
-
-
-
32,057
-
-
Non-cash senior administrative charge
-
950
1,900
475
-
-
Amortization of unfavorable storage contracts
-
-
-
-
-
(7,562)
Write-off of deferred financing costs
-
-
-
-
-
3,331
Amortization
of
deferred
financing
costs
and
debt
discounts
(2)
3,347
1,448
1,737
3,134
4,411
4,289
Goodwill impairment expense
-
-
-
-
-
169,560
Maintenance capital expenditures
(30,234)
(33,803)
(28,936)
(23,496)
(31,244)
(57,467)
Distributable Cash Flow
128,896
164,661
212,065
275,476
267,557
318,731
Distributions
for
Coverage
ratio
(3)
147,979
173,689
209,412
237,687
259,315
351,245
Coverage Ratio
0.87
0.95
1.01
1.16
1.03
0.91 |