The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Oil Refining Company (BORCO) saw a 29 per cent year-over-year increase in the number of ships berthing at its facilities during the 2012 fourth quarter, with its “unparalleled capabilities” ensuring 97 per cent of storage tanks were fully leased.

Unveiling its full-year and fourth quarter results, BORCO’s owner, New York Stock Exchange (NYSE) listed Buckeye Partners, said the Grand Bahama-based petroleum products storage facility had already seen increased revenues from the 1.9 million barrel capacity expansion that came on-line during the 2012 second half.

Buckeye executives added that the increased fourth quarter shipping traffic had also boosted BORCO’s ‘ancillary revenues’ - namely berthing fees, while heating revenues had also increased.

Indeed, Mary Morgan, the Buckeye executive directly responsible for BORCO, said that while market conditions were improving, “the most important drivers” were the capabilities present at the Grand Bahama site.

She told a conference call with Wall Street analysts that BORCO’s ship berthing facilities, featuring six offshore jetties and an inland dock, were “superior” to all its Caribbean rivals, while its blending and heating capabilities were “unparalleled” in the region.

Ms Morgan added that BORCO had also increased pumping rates for “certain commodities” to 55,000 barrels per hour, and had the ability to handle ships simultaneously.

BORCO’s performance helped Buckeye’s international operations to enjoy a 35.7 per cent year-over-year increased in adjusted EBITDA (earnings before interest, taxation, depreciation and amortisation) for the 2012 fourth quarter, rising from $26.748 million to $36.299 million.

Clark C. Smith, Buckeye’s president and chief executive, told analysts: “BORCO benefited from the incremental contribution of 1.9 million barrels of extra capacity that were completed in the 2012 second half.”

Some 775,000 barrels of that number came on-line during the three months to end-December 2012, and Mr Smith said Buckeye had been able to keep expenses associated with BORCO’s expansion flat - even recovering some of those costs.

Those 1.9 million barrels are part of Buckeye’s first phase expansion plan for BORCO, which involves adding a total 4.7 million barrels of new storage capacity.

That will take BORCO’s total capacity to 24.9 million barrels. Of those initial 4.7 million barrels, another 1.6 million will become operational during the 2013 first quarter, with the final 1.2 million coming online during the 2013 third quarter.

“An additional 1.6 million barrels of crude oil expansion capacity are expected to be placed in service during the 2013 first quarter,” Mr Smith confirmed.

He added that both they, and the 1.2 million barrels coming on-line during the 2013 third quarter, were already fully leased under pre-agreed contracts with clients.

Mr Smith said major producers, particularly offshore and Latin American ones, were already driving demand for further expansion at BORCO.

Confirming that ship berthings had increased by 29 per cent during the 2012 fourth quarter, Mr Smith added: “All this success is due to BORCO’s marine infrastructure that gives us a competitive advantage over all other rival terminals in the region.”

Keith St Clair, Buckeye’s chief financial officer, said that apart from one tank being out of action for scheduled maintenance, BORCO’s storage capacity was 97 per cent leased during the 2012 fourth quarter.

Operational expenses on Grand Bahama had also decreased, Mr St Clair said, due to the implementation of Buckeye’s “best practices model”, which had reduced the expense “run rate”.

However, Ms Morgan, Buckeye’s senior vice-president and president of its international terminal and pipeline operations, was even more effusive about BORCO’s capabilities and growth potential.

Storage rates were increasing, and Ms Morgan said 20 million barrels of BORCO’s storage capacity was taken on two-year leases. The remainder was on one-year or short-term contracts, as she described this arrangement as “typical for BORCO”.

Apart from tanks taken out for maintenance work, Ms Morgan said: “Everything is contracted, and we expect that to continue.”

And she added: “The most important drivers are the capabilities of the facilities we have in place at BORCO.

“Our berthing facilities are superior to anything any of the other facilities [in the Caribbean] have. We have a lot of spare capacity at berthing, we have blending and heating capabilities that are unparalleled with any of our competitors in our area.”

BORCO’s capacity to handle “simultaneous operations” meant that tankers did not have to wait in a queue for those ahead of it to be serviced.

“We’ve been able to attract the customer that wants these superior kinds of facilities, and that’s a key driver of why we’ve been able to have that storage fully leased,” Ms Morgan said, “and why we expect these trends to continue.

“We continue to see improvements in storage rates, and expect that trend to continue.”

Ms Morgan said the percentage of BORCO’s tankage being used for crude oil storage had increased from 14 per cent in 2011 to 24 per cent in 2012.

BORCO, as one of the world’s largest marine petroleum storage terminals, as viewed as a key strategic asset by Buckeye due to both its capabilities and location.

Its proximity to the US, and being in the key US east coast timezone, means it is a perfect entry point to Buckeye’s American systems and infrastructure.

Meanwhile, its position on major shipping lanes means it is perfectly poised to service a growing volume of tanker traffic, which is set to be further boosted by the 2014 Panama Canal expansion.