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What’s Driving Buckeye Partners, L.P. (BPL)’s Domestic Operations?

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These days most investors know about the big fat distributions coming out of MLPs. However, few investors know exactly how or where these companies make their money. One MLP that should be catching the eye of investors is Buckeye Partners, L.P. (NYSE:BPL), especially since it sports a distribution of more than 6%. Let’s take a quick look inside the company’s largest segment, domestic pipelines and terminals, and see how it makes its money.

Buckeye Partners, L.P. (NYSE:BPL)

The pipelines
Buckeye Partners, L.P. (NYSE:BPL) owns and operates about 6,000 miles of pipelines in its domestic operations. For perspective, if laid end to end, that’s enough pipe to stretch from New York to Los Angeles… twice. Buckeye Partners, L.P. (NYSE:BPL)’s pipelines, though, are mostly located in the Northeast and Midwest, where the company delivers petroleum-based products to nearly 100 locations.

Buckeye Partners, L.P. (NYSE:BPL) moves nearly 1.4 million barrels of liquid petroleum products per day, including gasoline, jet fuel, and heating oil. Some of its key pipelines include delivering jet fuel to three New York City airports as well as a number of assets dedicated to piping refined products from the refineries to terminals owned by Buckeye Partners, L.P. (NYSE:BPL) to be stored until its ready to be moved to end users. The company’s pipelines are very well integrated with its terminal and storage assets so that it can generate additional revenue by providing complementary services to its customers.

The terminals and storage
Buckeye Partners, L.P. (NYSE:BPL) currently has about 100 petroleum product terminals and approximately 42 million barrels of liquid petroleum product storage capacity. The company has been busy over the past couple of years growing this asset base though a number of important strategic transactions. These are just starting to bear fruit and the company sees a lot of potential growth here as it continues to build its terminal franchise.

One of the best assets that Buckeye has acquired recently is the Perth Amboy marine terminal in the New York Harbor, which it purchased from Chevron Corporation (NYSE:CVX) for $260 million. In conjunction with the sale, Chevron Corporation (NYSE:CVX) entered into a multi-year storage and services agreement. Buckeye plans to spend more than $100 million to transform the terminal into one that can store multiple products as well as link it by pipeline to its nearby Linden complex and to upgrade it to handle Bakken-sourced crude oil coming in by rail and ship. This is an area where Buckeye really excels as it can take an underutilized asset from a large integrated company like Chevron and turn it into something of even greater value.

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