Boardwalk Pipeline Boosts Capital Spending in Eagle Ford Shale, Other Growth Areas after Profits Slip in Second-Quarter 2014

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Researched by Industrial Info Resources (Sugar Land, Texas)--Boardwalk Pipeline Partners LP (NYSE:BWP) (Houston, Texas), a midstream master limited partnership that services the natural gas and liquids markets, saw its profits drop in second-quarter 2014 as near-even revenues couldn't offset a major one-time charge this quarter, as well as an asset sale gain in the same period last year. The company is looking to projects in areas where production is booming, like the Eagle Ford Shale. Net income was reported to be $57.4 million, an 18.58% decrease from second-quarter 2013.

Industrial Info is tracking more than $1.8 billion in active projects involving Boardwalk, including $40 million of ethylene storage cavern additions in Sulphur, Louisiana. The project, which is set to be completed early next year, involves leaching three new caverns with a total capacity of 1 million barrels. Optimized Process Design is performing EPC services, and Audubon Engineering (Baton Rouge, Louisiana) is performing engineering. To support the cavern additions, Boardwalk is planning to build a $25 million NGL pump station.

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Total revenues stood at $293.4 million, a 1.63% increase from the same period last year. Second-quarter 2014 profits were affected negatively by a $10 million charge related to the effectively suspended Bluegrass Pipeline Project, which runs from the Utica and Marcellus shales to the U.S. Gulf Coast, while second-quarter 2013 profits benefited from a $17 million gain from the sale of storage base gas.

Growth capital expenditures for the first half of 2014 totaled $123.7 million and maintenance capital expenditures totaled $39 million, compared with first-half 2013 totals of $120.4 million and $21.8 million, respectively.

During the quarter, Boardwalk made progress at its Flag City Cryogenic Natural Gas Processing Plant in southern Texas. The plant, which has been in service for about a year, has been increasingly utilized as the Eagle Ford Shale sees production boom.

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"I am pleased to announce that we contracted for an additional 30 million cubic feet per day of firm gathering and processing capacity at our Flag City processing plant under a five-year agreement," said Stanley Horton, the chairman, president and chief executive officer of Boardwalk, in a conference call. "Boardwalk will spend approximately $14 million to construct a lateral for this new customer, which is expected to go into service in the first quarter of 2015. With this new agreement in place, the Flag City plant is now 70% contracted on a firm basis, and we continue to process additional volumes on an interruptible basis as well."

One of Boardwalk's major projects nearing completion is its long-term contract with Kentucky Utilities (Lexington, Kentucky) to serve the Cane Run combined-cycle power plant with about 150,000 MMBTU per day. The project is set to go into service in the fourth quarter. Among the projects undertaken during the quarter was an 11-year transportation agreement to serve an industrial plant in Louisiana with about 100,000 MMBTU per day, set to start up in first-quarter 2016; and a five-year agreement to serve a new gas-fired plant in Indiana with about 105,000 MMBTU per day, set to start up in second-quarter 2017.

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"We are seeing an increased interest for our pipeline capacity, and are working diligently to transform our assets to serve an ever-changing marketplace," Horton said in the conference call. "Many of our projects we're working on are repurposing existing capacity for new uses."

He added: "A supply push from the northeast is occurring, as Marcellus and Utica production is ramping up and needs to find additional market outlets. At the same time, an offsetting demand pull is emerging. Our throughput is located near many potential power generation and industrial and LNG export facilities. These end-use markets value flexible and reliable transportation as storage services, and value supply optionality--all of which we are capable of providing."

Late in April, Boardwalk and partner Williams Companies (NYSE:WMB) (Tulsa, Oklahoma) suspended all capital funding for their Bluegrass Pipeline Project, although the joint venture between the two companies remains in place. The pipeline was expected to ship as much as 400,000 barrels a day of products, including butane and propane, from the Marcellus and Utica shales to petrochemical facilities along the U.S. Gulf Coast for purposes including exports. The project included the $500 million construction of a natural gas liquids (NGL) fractionator near Sulphur, Louisiana. The fractionator was designed to produce up to 200,000 barrels per day of NGL.

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A Boardwalk subsidiary had awarded the engineering, procurement and construction (EPC) contract for the project to Optimized Process Designs LLC (Katy, Texas). For more information, see April 18, 2014, article - Boardwalk Selects EPC Firm for Louisiana NGL Fractionation Project.

In an earlier press release, Williams executives cited "an insufficient level of firm customer commitments." However, Boardwalk executives insisted that the project was not dead.

Boardwalk is a subsidiary of Loews Corporation (NYSE:L) (New York, New York).

For more information, visit Industrial Info's North American Oil and Gas Transmission Project Database.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.