Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Report") contains various forward-looking statements and information that are based on our beliefs, as well as assumptions made by us and information currently available to us. When used in this Report, words such as "proposed," "anticipate," "project," "potential," "could," "should," "continue," "estimate," "expect," "may," "believe," "will," "plan," "seek," "outlook" and similar expressions and statements regarding our plans and objectives for future operations are intended to identify forward-looking statements. Although we believe that such expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that such expectations will prove to be correct. Such statements are subject to a variety of risks, uncertainties and assumptions as described in more detail in Part I and Part II of "Item 1A, Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2011 and in this Report, respectively. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected. Although the expectations in the forward-looking statements are based on our current beliefs and expectations, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date hereof. Except as required by federal and state securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason.

The following information should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included in this Report.

Overview of Business

Buckeye Partners, L.P. is a publicly traded Delaware master limited partnership and its limited partnership units representing limited partner interests ("LP Units") are listed on the New York Stock Exchange ("NYSE") under the ticker symbol "BPL." Buckeye GP LLC ("Buckeye GP") is our general partner. As used in this Report, unless otherwise indicated, "we," "us," "our" and "Buckeye" mean Buckeye Partners, L.P. and, where the context requires, includes our subsidiaries.

We were formed in 1986 and own and operate one of the largest independent refined petroleum products pipeline systems in the United States in terms of volumes delivered, with over 6,000 miles of pipeline and over 100 active products terminals that provide aggregate storage capacity of approximately 64 million barrels. We also operate and/or maintain approximately 2,800 miles of third-party pipelines under agreements with major oil and gas, petrochemical and chemical companies, and perform certain engineering and construction management services for third parties. We also own and operate a natural gas storage facility in Northern California, and are a wholesale distributor of refined petroleum products in the United States in areas also served by our pipelines and terminals. Our flagship marine terminal in The Bahamas, Bahamas Oil Refining Company International Limited ("BORCO"), is one of the largest marine crude oil and petroleum products storage facilities in the world, serving the international markets as a premier global logistics hub.

Our primary business objective is to provide stable and sustainable cash distributions to our LP Unitholders, while maintaining a relatively low investment risk profile. The key elements of our strategy are to: (i) maximize utilization of our assets at the lowest cost per unit; (ii) maintain stable long-term customer relationships; (iii) operate in a safe and environmentally responsible manner; (iv) optimize, expand and diversify our portfolio of energy assets; and (v) maintain a solid, conservative financial position and our investment-grade credit rating.

Recent Developments

In February 2012, we signed a definitive agreement with Chevron U.S.A. Inc. ("Chevron") to acquire a marine terminal facility for liquid petroleum products in New York Harbor (the "Perth Amboy Facility") for $260.0 million in cash. In anticipation of the acquisition, we paid a deposit of $14.0 million to Chevron in February 2012. The facility, which sits on approximately 250 acres on the Arthur Kill in Perth Amboy, New Jersey, has over 4 million barrels of tankage, four docks, and significant undeveloped land available for potential expansion. The Perth Amboy Facility has water, pipeline, rail, and truck access, and is located only six miles from our Linden, New Jersey complex. Chevron agreed to enter into multi-year storage, blending, and throughput commitments with us concurrent with the acquisition. The Perth Amboy Facility will provide a link between our inland pipelines and terminals and our BORCO facility in The Bahamas, improving service offerings for our customers and providing further support to our planned clean products tankage expansion at the BORCO facility. The operations of the Perth Amboy Facility will be reported in our Pipelines & Terminals segment following closing, which is expected to close late in the second quarter or early in the third quarter of 2012.

Additionally in February 2012, we issued 4,262,575 LP Units to institutional investors in a registered direct offering for aggregate consideration of approximately $250.0 million at a price of $58.65 per LP Unit, before deducting placement agents' fees and estimated offering expenses. We have used the majority of the net proceeds from this offering to reduce the indebtedness outstanding under our Revolving Credit Agreement dated September 26, 2011 (the "Credit Facility") with SunTrust Bank and have also funded a portion of the Perth Amboy Facility and certain other growth capital expenditures.

Results of Operations

Non-GAAP Financial Measures

Adjusted EBITDA is the primary measure used by our senior management, including our Chief Executive Officer, to: (i) evaluate our consolidated operating performance and the operating performance of our business segments;
(ii) allocate resources and capital to business segments; (iii) evaluate the viability of proposed projects; and (iv) determine overall rates of return on alternative investment opportunities. Distributable cash flow is another measure used by our senior management to provide a clearer picture of Buckeye's cash available for distribution to its unitholders. We define EBITDA, a measure not defined under generally accepted accounting principles ("GAAP"), as net income attributable to our unitholders before interest and debt expense, income taxes and depreciation and amortization. Adjusted EBITDA and distributable cash flow eliminate (i) non-cash expenses, including but not limited to, depreciation and amortization expense resulting from the significant capital investments we make in our businesses and from intangible assets recognized in business combinations; (ii) charges for obligations expected to be settled with the issuance of equity instruments; and (iii) items that are not indicative of our core operating performance results and business outlook.

We believe that investors benefit from having access to the same financial measures that we use and that these measures are useful to investors because they aid in comparing our operating performance with that of other companies with similar operations. The Adjusted EBITDA and distributable cash flow data presented by us may not be comparable to similarly titled measures at other companies because these items may be defined differently by other companies.

The following table presents Adjusted EBITDA by segment and on a consolidated basis, distributable cash flow and a reconciliation of net income, which is the most comparable GAAP financial measure, to Adjusted EBITDA and distributable cash flow for the periods indicated (in thousands):

                                                                  Three Months Ended
                                                                      March 31,
                                                                 2012           2011
Adjusted EBITDA:
Pipelines & Terminals                                          $  88,232      $  90,120
International Operations                                          31,666         25,507
Natural Gas Storage                                               (1,268 )        2,452
Energy Services                                                   (6,172 )        2,759
Development & Logistics                                            2,529          1,401

Total Adjusted EBITDA                                          $ 114,987      $ 122,239


Reconciliation of Net Income to Adjusted EBITDA and
Distributable Cash Flow:
Net income                                                     $  53,467      $  67,813
Less: Net income attributable to noncontrolling interests         (1,508 )       (1,320 )

Net income attributable to Buckeye Partners, L.P.                 51,959         66,493
Add: Interest and debt expense                                    28,810         28,497
Income tax expense (benefit)                                         337           (176 )
Depreciation and amortization                                     33,027         26,241
Non-cash deferred lease expense                                      975          1,030
Non-cash unit-based compensation expense                           2,627          2,086
Less: Amortization of unfavorable storage contracts (1)           (2,748 )       (1,932 )

Adjusted EBITDA                                                $ 114,987      $ 122,239

Less: Interest and debt expense, excluding amortization of
deferred financing costs and debt discounts                      (27,917 )      (27,393 )
Income tax expense (benefit)                                        (337 )          176
Maintenance capital expenditures                                 (13,110 )       (7,473 )

Distributable cash flow                                        $  73,623      $  87,549

(1) Represents amortization of negative fair values allocated to certain unfavorable storage contracts acquired in connection with the BORCO acquisition.

The following table presents product volumes transported and average daily throughput for the Pipelines & Terminals segment in barrels per day ("bpd") and total volumes sold in gallons for the Energy Services segment for the periods indicated:

                                                           Three Months Ended
                                                                March 31,
                                                           2012          2011
     Pipelines & Terminals (average bpd in thousands):
     Pipelines:
     Gasoline                                                653.6         602.9
     Jet fuel                                                332.5         326.5
     Middle distillates (1)                                  339.1         351.1
     Other products (2)                                       20.5          22.5

     Total pipelines throughput                            1,345.7       1,303.0

     Terminals:
     Products throughput (3)                                 852.3         535.5

     Energy Services (in millions of gallons):
     Sales volumes                                           344.8         381.5

(1) Includes diesel fuel, heating oil and kerosene.

(2) Includes liquefied petroleum gas ("LPG").

(3) Amounts for 2012 include throughput volumes at terminals acquired from BP Products North America Inc. and its affiliates and ExxonMobil Corporation on June 1, 2011 and July 19, 2011, respectively.

Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

Consolidated

Adjusted EBITDA was $115.0 million for the three months ended March 31, 2012, which is a decrease of $7.2 million, or 5.9%, from $122.2 million for the corresponding period in 2011. The decrease in Adjusted EBITDA was primarily related to losses incurred in the Energy Services segment as a result of declining basis in the Midwest refined petroleum commodity markets that adversely affected the value of our inventory portfolio and a decrease in lease revenue in the Natural Gas Storage segment due to lower storage prices caused by compressed seasonal spreads, partially offset by an increase in earnings at BORCO due to a full quarter of operations as well as lower acquisition and integration costs in the International Operations segment.

Revenue was $1,259.4 million for the three months ended March 31, 2012, which is an increase of $6.9 million, or 0.6%, from $1,252.5 million for the corresponding period in 2011. The increase in revenue was primarily related to pipeline and terminal acquisitions in 2011 and revenue on legacy assets in the Pipelines & Terminals segment, partially offset by a net decrease in revenue in the Energy Services segment.

Operating income was $80.4 million for the three months ended March 31, 2012, which is a decrease of $12.2 million, or 13.1%, from $92.6 million for the corresponding period in 2011. The decrease in operating income was primarily related to a negative contribution associated with the operating activities in the Energy Services segment and an increase in depreciation and amortization due to a full quarter of operations for BORCO in the International Operations segment and the pipeline and terminal acquisitions in 2011 in the Pipelines & Terminals segment, partially offset by a positive contribution relating to the operating activities of the pipeline and terminal acquisitions in the Pipelines & Terminals segment.

Distributable cash flow was $73.6 million for the three months ended March 31, 2012, which is a decrease of $13.9 million, or 15.9%, from $87.5 million as compared to the corresponding period in 2011. The decrease in distributable cash flow was primarily related to a decrease of $7.2 million in Adjusted EBITDA as described above and a $5.6 million increase in maintenance capital expenditures relating to pipeline and tank integrity work performed in the Pipelines & Terminals and International Operations segments.

Adjusted EBITDA by Segment

Pipelines & Terminals. Adjusted EBITDA from the Pipelines & Terminals segment was $88.2 million for the three months ended March 31, 2012, which is a decrease of $1.9 million, or 2.1%, from $90.1 million for the corresponding period in 2011. The negative factors impacting Adjusted EBITDA were $12.4 million of operating expenses related to pipeline and terminal assets acquired during the second half of 2011, a $5.2 million decrease in revenue due to lower pipeline and terminalling volumes on assets existing prior to acquisitions in 2011 (which we refer to as our "legacy" assets), a $4.6 million increase in operating expenses, which included integrity program expenditures, payroll costs and environmental remediation expenses, $3.1 million in unfavorable settlement experience, a $2.9 million increase in acquisition and integration expenses, a $2.3 million increase in other costs and a $1.4 million decrease in earnings from equity investments primarily due to the sale of our interest in West Texas LPG Pipeline Limited Partnership in May 2011.

The positive factors impacting Adjusted EBITDA were $18.3 million in revenue related to pipeline and terminal acquisitions, $9.8 million due to higher pipeline tariff rates and terminalling contract rate escalations on our legacy assets and a $1.9 million increase in other revenue.

Overall pipeline and terminalling volumes increased by 3.3% and 59.2%, respectively, as a result of the pipeline and terminal acquisitions. Legacy pipeline volumes decreased by 4.0% primarily due to lower heating oil deliveries as a result of the unseasonably mild winter, as well as changes in supply patterns related to the recent refinery closures affecting the Pennsylvania market. Legacy terminalling volumes decreased by 5.6% primarily due to lower demand for gasoline and middle distillates caused by high commodity prices, a milder than normal winter and supply interruptions due to refinery closures and maintenance.

International Operations. Adjusted EBITDA from the International Operations segment was $31.7 million for the three months ended March 31, 2012, which is an increase of $6.2 million, or 24.1%, from $25.5 million for the corresponding period in 2011. The increase in Adjusted EBITDA was primarily related to a $4.7 million net increase in storage fees, which includes a full quarter of operations for BORCO and a decrease in storage capacity leased due to maintenance activities, $1.7 million of noncontrolling interests income related to the remaining 20.0% in BORCO not acquired by us until February 16, 2011 and a $1.1 million decrease in acquisition and integration expenses, partially offset by a $0.9 million increase in operating expenses, which included increases in other taxes, insurance costs and lease expenses and a decrease in professional fees and a $0.4 million decrease in ancillary service revenue.

Natural Gas Storage. Adjusted EBITDA from the Natural Gas Storage segment was a loss of $1.3 million for the three months ended March 31, 2012, which is a decrease of $3.8 million, or 151.7%, from earnings of $2.5 million for the corresponding period in 2011. The decrease in Adjusted EBITDA was primarily the result of a $6.1 million decrease in lease revenue due to lower storage prices caused by compressed seasonal spreads, partially offset by a $2.3 million decrease in operating expenses, which primarily related to a decline in the number of well workovers performed during 2012 as compared to the 2011 period. Lease revenue is affected by the difference in natural gas commodity prices for the periods in which natural gas is injected and withdrawn from the storage facility (i.e., time spread).

Energy Services. Adjusted EBITDA from the Energy Services segment was a loss of $6.2 million for the three months ended March 31, 2012, which is a decrease of $9.0 million, or 323.7%, from earnings of $2.8 million for the corresponding period in 2011. During the period, market dynamics impacting the flow of product along the supply chain, such as warmer weather conditions and decreased consumer demand, created downward pressure on basis. As a result of declining basis in the Midwest refined petroleum commodity markets, the value of our inventory portfolio was adversely affected. The decrease in Adjusted EBITDA was primarily related to a $20.9 million net decrease in revenue, which included a $101.1 million decrease due to 9.6% of lower sales volumes and an $80.2 million increase as a result of approximately $0.23 per gallon increase in refined petroleum product sales price (average sales prices per gallon were $2.99 and $2.76 for the 2012 and 2011 periods, respectively).

This decrease in Adjusted EBITDA was partially offset by a $11.6 million net decrease in cost of product sales, which included a $100.5 million decrease due to 9.6% of lower volumes sold and an $88.9 million increase as a result of approximately $0.25 per gallon increase in refined petroleum product cost price (average cost prices per gallon were $2.99 and $2.74 for the 2012 and 2011 periods, respectively) and a $0.3 million decrease in operating expenses, which primarily related to payroll costs.

Development & Logistics. Adjusted EBITDA from the Development & Logistics segment was $2.5 million for the three months ended March 31, 2012, which is an increase of $1.1 million, or 80.5%, from $1.4 million for the corresponding period in 2011. The increase in Adjusted EBITDA was primarily due to a $1.4 million increase in project management revenue, $1.2 million in revenue related to the LPG storage caverns acquired in November 2011 and a $0.3 million increase in operating services contract revenue as a result of new contracts and higher fees, partially offset by a $1.2 million increase in operating expenses related to project management activities, a $0.3 million increase in operating expenses, which primarily related to payroll costs and $0.3 million in operating expenses of the LPG storage caverns.

Liquidity and Capital Resources

General

The following section describes our liquidity and capital requirements, including sources and uses of liquidity and capital resources. Our primary cash requirements, in addition to normal operating expenses and debt service, are for working capital, capital expenditures, business acquisitions and distributions to partners. Our principal sources of liquidity are cash from operations, borrowings under our Credit Facility and proceeds from the issuance of our units. We will, from time to time, issue debt securities to permanently finance amounts borrowed under our Credit Facility. Buckeye Energy Services LLC ("BES") funds its working capital needs principally from its operations and its portion of our Credit Facility. Our financial policy has been to fund maintenance capital expenditures with cash from operations. Expansion and cost reduction capital expenditures, along with acquisitions, have typically been funded from external sources including our Credit Facility as well as debt and equity offerings. Our goal has been to fund at least half of these expenditures with proceeds from equity offerings in order to maintain our investment-grade credit rating.

As a result of our financing activities in 2012 and in light of the fact that none of our long-term debt obligations mature prior to 2013, we believe that our borrowing capacity under our Credit Facility, ongoing cash flows from operations and proceeds from the registered direct offering in February 2012, will be sufficient to fund our operations for the remainder of 2012, including our expansion plans. We will continue to evaluate a variety of financing sources throughout 2012, including the debt and equity markets described above.

Current Liquidity

We had the following liquidity available to meet our working capital needs,
capital expenditures, business acquisitions and distributions to partners as of
the period indicated (in thousands):



                                                        March 31,
                                                           2012
               Cash and cash equivalents                $   15,059
               Availability under our Credit Facility      135,674

               Total available liquidity                $  150,733

At March 31, 2012, we had total fixed-rate and variable-rate debt obligations of $2,075.0 million and $331.4 million, respectively, with an aggregate fair value of $2,548.8 million. At March 31, 2012, we were in compliance with the covenants under our Credit Facility.

Capital Structuring Transactions

As part of our ongoing efforts to maintain a capital structure that is closely aligned with the cash-generating potential of our asset-based business, we may explore additional sources of external liquidity, including public or private debt or equity issuances. Matters to be considered will include cash interest expense and maturity profile, all to be balanced with maintaining adequate liquidity. We have a universal shelf registration statement that does not place any dollar limits on the amount of debt and equity securities that we may issue thereunder and a traditional shelf registration statement on file with the SEC that currently has a $750.0 million limit on the amount of equity securities that we may issue thereunder. The timing of any transaction may be impacted by events, such as strategic growth opportunities, legal judgments or regulatory or environmental requirements. The receptiveness of the capital markets to an offering of debt or equity securities cannot be assured and may be negatively impacted by, among other things, our long-term business prospects and other factors beyond our control, including market conditions.

Equity

In February 2012, we issued 4,262,575 LP units to institutional investors in a registered direct offering for aggregate consideration of approximately $250.0 million at a price of $58.65 per LP Unit, before deducting placement agents' fees and estimated offering expenses. We have used the majority of the net proceeds from this offering to reduce the indebtedness outstanding under our Credit Facility and have also funded a portion of the Perth Amboy Facility and certain other growth capital expenditures.

Cash Flows from Operating, Investing and Financing Activities

The following table summarizes our cash flows from operating, investing and
financing activities for the periods indicated (in thousands):



                                                Three Months Ended
                                                     March 31,
                                               2012            2011
               Cash provided by (used in):
               Operating activities          $ 181,601      $  156,382
               Investing activities            (87,996 )      (955,673 )
               Financing activities            (91,532 )       852,095

Operating Activities

Net cash provided by operating activities was $181.6 million for the three months ended March 31, 2012, which is an increase of $25.2 million, from $156.4 million for the corresponding period in 2011. The increase in net cash provided by operating activities primarily related to lower margin deposits and vendor prepayments and a reduction in refined petroleum products inventory in the Energy Services segment, partially offset by an increase in cash paid for interest.

Future Operating Cash Flows. Our future operating cash flows will vary based on a number of factors, many of which are beyond our control, including the cost of commodities, the effectiveness of our strategy, legal environmental and regulatory requirements and our ability to capture value associated with commodity price volatility.

Investing Activities

Net cash used in investing activities was $88.0 million for the three months ended March 31, 2012, which is a decrease of $867.7 million, from $955.7 million for the corresponding period in 2011. The decrease in net cash used in investing activities primarily related to $893.7 million of net cash consideration paid for the BORCO acquisition in 2011, partially offset by a $36.3 million increase in capital expenditures. See below for a discussion of capital spending.

Capital expenditures, excluding non-cash changes in accruals for capital expenditures, were as follows for the periods indicated (in thousands):

. . .