Tuesday, May 17, 2011

BORCO's $318m debt wiped out

By NEIL HARTNELL

Tribune Business Editor

The Bahamas Oil Refining Company's (BORCO) new owner has repaid the company's entire existing debt of $318.2 million upon assuming control, and plans to invest between $220-$280 million in capital expenditure into the Grand Bahama-based oil storage and transhipment facility during 2011.

The figures, detailed in Buckeye Partners' form 10-Q filed with the Securities & Exchange Commission (SEC) as part of complying with its 2011 first quarter results disclosure, said BORCO would account for the majority of the $320-$410 million in capital spending it planned to undertake this year.

Buckeye Partners said: "Approximately $220 million to $280 million of these amounts are related to capital expenditures in 2011 for the BORCO facility, of which $200 million to $250 million is expected to relate to expansion projects, and $20 million to $30 million is expected to relate to sustaining capital expenditures.

"Major expansion and cost reduction expenditures in 2011 will include upgrades and expansions of the jetty structure, the inland dock and berth developments and terminal storage tank expansion projects at the BORCO facility.

"We closed the BORCO acquisitions on January 18, 2011, and February 16, 2011, and have begun the evaluation of the internal control structure of BORCO. We expect that evaluation to continue during the remainder of 2011."

Buckeye Partners added that completing BORCO's acquisition earlier this year resulted in it repaying $318.2 million worth of debt the Grand Bahama-based company already had on its liability books, including its interest rate derivatives.

Again highlighting BORCO's importance to Buckeye Partners, the New York Stock Exchange-listed company generated some $41.4 million , or 91.9 per cent, of the $45.075 million in revenues produced by its international operations during the three months to March 31, 2011. That segment also includes an operation in Puerto Rico.

And, with $1.844 billion in assets, BORCO accounts for 96.8 per cent of that segment's total asset base. "BORCO is the fourth largest oil and petroleum products storage terminal in the world, and the largest petroleum products facility in the Caribbean with current storage capacity of approximately 21.6 million barrels," Buckeye Partner said.

"For BORCO, due to the high customer demand at the facility, the level of customer service being provided, the expansion capabilities of the facility, the potential of customer recontracting rates and the location of the facility in relation to international shipping routes, we anticipate the customer relationships to extend well beyond the existing contract terms with a recovery period of approximately 25 years."

The international operations segment, with considerable help from BORCO, which accounted for the lion's share of its profits, generated $18.729 million in operating income for the 2011 first quarter. Adjusted operating income reached $25.507 million, with total costs and expenses standing at $26.346 million. Capital additions amounted to $21.703 million.

"Revenue from the international operations segment was $45.1 million for the three months ended March 31, 2011," Buckeye Partners said.

"Revenues included storage fees of $33.7 million, which represent fees charged for storage of various products; berthing fees of $4.3 million, which represent amounts charged to ships that utilize the facility's jetties; and other ancillary service revenues of $5.2 million.

"Also included in revenue is the recognition of $1.9 million of revenue from unfavourable storage contracts acquired in connection with the BORCO acquisition."

As for expenses, Buckeye Partners added: "Total costs and expenses from the international operations segment were $26.3 million for the three months ended March 31, 2011, and included $15.9 million of costs and expenses related to operating the BORCO facility and the Yabucoa terminal, including payroll and benefits related costs, repairs and maintenance costs, insurance costs, professional fees, costs related to the transition services agreement we entered into with Vopak in connection with the acquisition and other expenses.

"Total costs and expenses also included $10.4 million of depreciation and s, primarily related to the depreciation of property, plant and equipment and the amortization of intangible assets."

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