Buckeye Partners, L.P. (BPL) is quietly building a logistical solutions provider for the global movement of oil products. The company has most of the eastern seaboard covered and it has pushed into much of the mid-Atlantic and Midwest. Buckeye Partners is also slowly expanding into the Caribbean as part of its international expansion efforts. This growth has enabled Buckeye Partners to grow its distribution by more than 45% since 2006.

That said, Buckeye did run into a rough patch in 2012, causing the company to halt distribution growth for five straight quarters. There are real risks that this could happen again. Here's why.

Integrating the Hess Assets
Last year Buckeye Partners spent $850 million to purchase 20 terminal assets from Hess Corp. (HES -1.82%). While those assets were a good strategic fit, there's still a risk that Buckeye will struggle to integrate these assets into its business.

The assets' earnings are underpinned by a four-year storage and throughput contract with Hess. However, the real driver of cash flow will be Buckeye's ability to add new third-party customers to increase utilization. While Buckeye has a solid history of adding customers to assets it acquires, there is still a real risk that this doesn't happen as quickly as hoped. That would impact Buckeye's ability to increase the cash flow from the business, which could impact Buckeye's ability to grow its payout to investors.

Commodity price risk
Buckeye is exposed to commodity price risk through its energy service segment as well as its natural gas storage business. The service segment markets petroleum products in the areas served by its pipelines and terminals but only delivers a tiny sliver of EBITDA. Instead, Buckeye uses it to maximize the utilization of the pipeline and terminal assets. However, the commodity price risk still does have an impact. This is why the company has been taking steps to mitigate its risks by reducing inventories and focusing on fewer geographic locations. This has also enabled the company to reduce infrastructure operating costs. Together, these steps should mitigate some of the risks associated with this segment.

That said, just last quarter Buckeye saw both its operating income and adjusted EBITDA negatively affected as both segments lost money. If, on the other hand, both segments simply broke even last quarter, Buckeye Partner's adjusted EBITDA would have been 3% higher. That's a meaningful increase in earnings for a company like Buckeye Partners.

Lack of organic growth opportunities
One of my biggest long-term concerns with Buckeye is that most of its future growth is tied to its ability to buy growth. It has some bolt-on organic growth opportunities at its Perth Amboy terminal in the New York Harbor, as well as space at its terminal in the Bahamas to expand. However, it doesn't have a large pipeline of future growth opportunities like many of its peers.

For example, Boardwalk Pipeline Partners, LP (BWP) has a visible pipeline of growth projects over the next 24 months that are more than double what it invested in the previous 24 months. However, it has additional organic expansion upside from a joint venture with Williams Companies, (WMB 1.66%) for a major natural gas liquids pipeline from the Marcellus and Utica Shale areas to the Gulf Coast. Overall, these organic growth projects provide Boardwalk Pipeline Partners with more opportunities to grow its distribution as those assets start generating cash flow. This is upside that's not as easily found at Buckeye Partners at the moment.

Investor takeaway
Overall, Buckeye Partners is a solid income producing master limited partnership. While there are visible risks that suggest it could struggle to grow its payout in the future, Buckeye has found ways to maneuver past these risks in the past, even if it has had to hold off raising its distribution until its income starts growing again. So, while investors looking for income growth might want to look elsewhere, Buckeye Partners' distribution is still pretty solid.

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