The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Oil Refining Company (BORCO) saw revenues for the nine months to end-September 2013 increase by 13.3 per cent year-over-year to $160.2 million, as it enjoyed Supreme Court success over the multi-million damage done to its jetty.

The Grand Bahama-based oil storage/blending facility’s parent company, in its 10-Q filing with the US Securities & Exchange Commission (SEC), revealed that BORCO’s top-line performance was continuing to improve, with the third quarter up 10.8 per cent year-over-year.

New York Stock Exchange (NYSE) listed Buckeye Partners, in its 10-Q filing, said “Revenue generated in the Bahamas was $53.4 million and $48.2 million for the three months ended September 30, 2013, and 2012, respectively.

“:For the nine months ended September 30, 2013, and 2012, the..... revenue generated in the Bahamas was $160.2 million and $141.4 million, respectively.”

There was further good news for Buckeye Partners in the Bahamas, as the Supreme Court denied an application to cap the liability for $25 million worth of damage done to one of BORCO’s jetties.

“On May 25, 2012, a ship collided with a jetty at our BORCO facility while berthing, causing damage to portions of the jetty,” Buckeye disclosed.

“The extent of the damage is presently estimated to be approximately $25 million. Buckeye has insurance to cover this loss, subject to a $5 million deductible.”

The SEC filing detailed how BORCO/Buckeye had launched legal proceedings in the Bahamas on May 26, 2012, in a bid to obtain from the guilty vessel’s owner security for repair costs and compensation for other losses.

“The vessel owner has claimed that it is entitled to limit its liability to approximately $17 million, but we are contesting the right of the vessel owner to such limitation,” Buckeye said.

“ A hearing in the Bahamas court on the vessel owner’s right to limit its liability was held on July 23, 2013, and the court of first instance denied the vessel owner the right to limit its liability for the incident, leaving the vessel owner responsible for all provable damages. The vessel interests have appealed that decision and the appeal is pending.”

While the dispute appears headed towards the Supreme Court, Buckeye added: “Full security for our claim has been provided by the vessel owner’s insurers, reserving all of their defenses.

“We also have notified the customer on whose behalf the vessel was at the BORCO facility that we intend to hold them responsible for all damages and losses resulting from the incident pursuant to the terms of an agreement between the parties.”

On the positive side, Buckeye said the jetty damage had no material impact on BORCO’s operations, and repairs were complete. Deeming its losses ‘recoverable’, Buckeye has recorded a $5 million receivable on its balance sheet.

Meanwhile, Buckeye said the $7 million, or 20.6 per cent, year-over-year increase in its international operations’ 2013 third quarter adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) was driven largely by the benefits resulting from the 4.7 million barrel expansion to BORCO’s storage capacity.

“The positive factors impacting adjusted EBITDA were a $4.6 million increase in storage revenue, primarily as a result of realising the full benefit of our completed expansion capacity brought online at our BORCO facility in early September,” Buckeye said, noting that the Grand Bahama-based facility also generated a $1.1 million increase in berthing and heating services.

However, this was partially offset by a $1 million increase in operating expenses due to the “increased costs necessary to operate the expanded capabilities of the BORCO facility”.

Buckeye’s total adjusted EBITDA and revenues were also driven higher by “increased storage capacity and customer utilisation of our BORCO facility”.

It added: “The increase in revenue was primarily related to new fuel oil supply and distribution services in the Caribbean, as well as the full benefit of the completed expansion capacity brought online at our BORCO facility.

“The [full year] increase in revenue was offset by a $3.7 million increase in operating expenses primarily due to increased costs necessary to operate the expanded capabilities of the BORCO facility....”

BORCO’s increased 4.7 million barrel capacity drove a $15.9 million increase in storage revenue for the nine months to end-September 2013, along with a $3.9 million increase in ancillary revenues.