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Buckeye Partners Sells LP Units to Reduce Debt Burden

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Houston, TX-based Buckeye Partners L.P (BPL - Free Report) recently announced the divestment of limited partner (LP) Units for a purchase price of approximately $210 million. The offering is expected to close by Sep 21, subject to customary conditions.

Other Details

Per the announcement, the partnership intends to use a portion of the funding to pay off debt, in the form of a revolving credit facility, which in turn will utilized to finance the announced merger of VTTI Energy Partners LP into a direct wholly owned subsidiary of VTTI B.V.

Along with this the partnership also anticipates to fund part of its growing capital projects in the near future with the help of the aforementioned deal.

Partnership’s Burden of Debts & Expenses

The partnership’s interest and debt expenses have been on the rise for quite some time now. As of Jun 30 2017, total costs and expenses were up by 8.9%, interest and debt expenses increased 18% compared with the prior year. The partnership will need to resort to less expensive means of raising capital and reduce overall costs and expenses.

Growth Projects in Cards

Buckeye holds a diverse portfolio of refined petroleum-product transportation assets in different geographical markets. 

The partnership has moved forward the project engineering and regulatory requirements in regards to its South Texas Gateway project. The completion of the project will enable the company to attract construction ready projects and long-term customer commitments. Additionally, its Michigan Ohio pipeline expansion that is currently in its Phase 2 will provide Midwestern refiners the access to safe, reliable pipeline transportation options.

The partnership is evaluating multiple organic growth projects as potential acquisition targets to increase customer base. In Florida, the partnership is looking forward to invest approximately $100 million by early 2018.

Price Movement

Units of Buckeye Partners have lost 11.6% in the last six months, wider than industry’s loss of 9.6%.

The underperformance can be attributed to the unfavorable weather conditions that adversely impacted the operation of the partnership in Texas and Florida.

Zacks Rank & Other Stocks

Buckeye Partners currently carries a Zacks Rank #3 (Hold). Investors can consider better-ranked stocks from the broader sector such as JA Solar Holdings, Co., Ltd. , Alliance Holdings GP, L.P. and Vermilion Energy Inc. (VET - Free Report) that sport a Zacks #1 Rank (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

JA Solar delivered an average surprise of 716.7% in the trailing four quarters. Its 2017 estimates have risen by 6000% to 61 cents per share in the last 90 days.

Alliance Holdings delivered an average earnings surprise of 13.6% in the trailing four quarters. Its 2017 estimates have risen by 5.7% to $3.34 in the last 90 days.

Vermilion Energy delivered an average earnings surprise of 528.6% in the trailing four quarters. Its 2017 estimates have risen by 38.5% to 72 centsin the last 90 days.

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