TEPPCO Piping Earnings (TPP)

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TEPPCO Partners (NYSE:TPP), a pipeline master limited partnership, reported third quarter earnings of $0.40/common unit on revenues of $4.2 billion. Analysts were expecting $0.43/common unit and revenues of $3.36 billion. Net income totaled $47 million, down slightly from third quarter 2007 income of $47.6 million. The company estimated that Hurricanes Gustav and Ike reduced EBITDA by about $3.7 million. For the first nine months of the year, TEPPCO’s net income is off $74.7 million from a year ago.

The largest single contributor to TEPPCO’s results is the sale ofpetroleum products, which generated $4.03 billion in revenues. Unlikemost other pipeline companies, TEPPCO buys most of the crude oil ittransports and resells it at the downstream end of the pipe. Petroleumpurchases accounted for $3.99 billion of the company’s expenses.

The company reported total debt of $2.3 billion, and $600 million onits revolving credit facility. TEPPCO expects capex to reach $425-$450million for all of 2008, and $350-$400 million in 2009.

Earlier this month, TEPPCO announced a cash distribution of$0.725/common unit for the third quarter. At that time, the company’spresident noted that TEPPCO "continues to benefit from a diverse set ofbusinesses that emphasize fee-based cash flows." That’s the very shortstory of pipeline MLPs. It also happens to be true.

Paul Ausick
October 28, 2008