The Tribune

By NEIL HARTNELL

Tribune Business Editor

THE Bahamas Oil Refining Company (BORCO) has secured a "key commercial win" through a long-term contract that supports a further 1.2 million barrel oil storage capacity expansion, with the Grand Bahama-based facility driving a 24.1 per cent adjusted operating income increase for its parent's international operations.

Clark C. Smith, president and chief executive of New York Stock Exchange (NYSE) listed Buckeye Partners, told a conference call with Wall Street analysts that BORCO's April agreement with "a major customer" would facilitiate a further 1.2 million barrel capacity expansion, on top of the 3.5 million barrel first phase expansion in Grand Bahama that is already underway.

Describing BORCO as central to its parent's strategy of concentrating services and assets around new opportunities in the rapidly changing global oil and energy industries, Mr Smith said: "BORCO has seen increased customer demand for crude oil storage capacity.

"We are pleased to announce a successful long-term agreement for increased crude oil storage capacity at BORCO of 1.2 million barrels to be operational by the third quarter of 2013."

Mr Smith added that the same customer supporting the construction of the extra 1.2 million barrels of storage capacity had also agreed to "substantially increase the existing tankage" it leases at BORCO.

Referring to BORCO as "a good example" of Buckeye's strategy, and "uniquely positioned to participate in the changing global logistics chain", Mr Smith said the contract to further expand storage capacity on top of the existing 3.5 million barrel build-out was "a key commercial win for the BORCO team".

He added: "Our strategy is to maximise the expansion of the storage capacity [at BORCO]. Our engineering and construction teams have exceeded expectations, and we expect them to deliver increased tankage on time and on budget."

BORCO's new tankage will also include flexible product tanks and blending capacity. Mary Morgan, Buckeye's head of international operations, said the construction costs for the extra 1.2 million barrels of tankage were "in line" with estimates for the earlier expansion.

Keith St Clair, Buckeye's executive vice-president and chief financial officer, said the company's international operations - of which BORCO comprises more than 90 per cent - generated 24.1 per cent growth in adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) during the 2012 first quarter.

The international operations saw adjusted EBITDA rise from $25.507 million during the 2011 first quarter to $31.67 million this time around, although Mr St Clair said 2012 was up against weak comparatives as Buckeye did not complete the acquisition of 100 per cent of BORCO until mid-February 2011.

Mr St Clair added that BORCO's commercial team were, during the 2012 first quarter, able to lease all the storage tankage not taken the final three months of 2011.

Storage revenues rose 3.3 per cent year-over-year, while BORCO's berthing and heating revenues "increased significantly" by 19.6 per cent and 37.9 per cent respectively. Mr St Clair said this was "driven primarily by the return to historical berthing levels of a major customer, for whom BORCO is a key part of the logistics chain".

Mr Morgan said all available tankage at BORCO was now leased, with long-term contracts accounting for 65 per cent of its current storage business. Long-term contracts were averaging three years in duration.