Buckeye Partners (BPL +0.00%) isn't a very well-known MLP. It's not as large as Enterprise Products Partners (EPD 2.44%), nor is it as complex as Kinder Morgan (KMI 2.20%) and its four separate investment vehicles. That said, it has something that neither of these giants have, which is a growing international footprint. It's this international footprint that sets Buckeye apart, and it's the company's biggest opportunity for growth in the years ahead.
The crown jewel
Source: Buckeye Partners Investor Presentation
Buckeye's wholly owned Bahamas Oil Refining Company, or BORCO, marine terminal already is one of the largest marine crude oil and petroleum products storage facilities in the world. It's the crown jewel of its growing international operations. However, this global logistics hub still has plenty of room to grow. The facility, which has storage capacity of about 26.1 million barrels, has enough room to double capacity if market conditions permit.
There are two catalysts that could drive this growth at BORCO. First, its strategic location gives it the potential to become a staging area for Latin American crude oil production that's scheduled to come online during the next decade. That strategic location also plays well into the other catalyst, which is the expected completion of the Panama Canal expansion in 2014. The expansion is expected to increase traffic by 20% to 30%, and BORCO is ideally located, and has the advanced marine infrastructure to service these vessels. Both of these catalysts have the potential to increase utilization and rates, which would add a nice boost to Buckeye's bottom line.
Buckeye Partners Investor Presentation
Other international opportunities
In addition to BORCO, Buckeye Partners owns 4.6 million barrels of petroleum product, fuel oil, and crude oil storage capacity in Puerto Rico. That facility is under a long-term, fee-based lease with Royal Dutch Shell (NYSE: RDS-A). In addition to this, Buckeye is in the process of picking up a 10 million barrel crude and refined product storage facility in St. Lucia from Hess (HES +0.00%). It's part of a 20 terminal package that Buckeye Partners is purchasing from Hess. While neither offers the organic growth opportunities embedded at BORCO, Buckeye can continue to acquire terminal assets in the Caribbean, and grow this part of its business.
Domestic opportunities
On the home front, Buckeye has several assets that are strategically positioned to capture the growth of domestic crude oil production, as well as its movement along the coast. One opportunity is to expand its Chicago asset footprint to handle crude oil from the Midwest. Buckeye also owns infrastructure near the Utica Shale that could be further utilized to become an important logistics option for producers. Finally, the Perth Amboy Facility (pictured below) is very well suited for handling crude oil being transported by rail and ship, giving Buckeye several options to further leverage its strategic location in the New York Harbor.
Source: Buckeye Investor Presentation
The bulk of the assets I've just described were acquired over the past few years. The recent addition of 19 domestic terminal assets from Hess add to the company's growing domestic footprint. What's unique about most of these terminals is that these are primarily located along the East Coast, and several have deepwater port access. This gives Buckeye the opportunity to receive refined products from both the Gulf Coast, as well as from overseas, to serve these large-growing markets.
MLPs, like Enterprise Product Partners and those under the Kinder Morgan umbrella, are currently more focused on moving oil and gas from production basins to market centers in the U.S. Buckeye, on the other hand, takes the refined oil products and brings them directly to end users. It doesn't care if the oil is coming from Latin America or the Bakken, giving it a lot of optionality from global trade.
Investor takeaway
Buckeye's international opportunities are unique, and provide the company with something that its larger rivals don't have. It gives the company another way to grow its already large distribution to investors. Bottom line, given the strategic location of Buckeye's assets and its solid growth opportunities, Buckeye is a solid income choice for investors.
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