Boardwalk Pipeline Grows through Acquisitions in Rough 2014, Expects $570 Million in Capex for 2015

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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, was rattled by rough market conditions in 2014, but managed to complete several major projects, including a key acquisition in the booming Gulf Coast ethylene transportation market, amid rising maintenance costs. Net income for 2014 was reported to be $233.6 million, a 7.92% decrease from 2013.

Industrial Info is tracking $256 million in active projects involving Boardwalk, including the $50 million conversion of an underground storage cavern in Plaquemine, Louisiana. The 6.67 billion-cubic-foot-per-day cavern no. 24 at the Choctaw site will be converted from holding natural gas to natural gas liquids (NGL). The project is expected to kick off in May and to be completed in the first quarter of 2016.

Total operating revenues stood at $1.23 billion, a 2.34% increase from 2013. Colder-than-expected winter weather drove strong gains in the early part of the year. In the fourth quarter, revenues were down 2.65% to $304.6 million after taking a hit from unfavorable market conditions for its storage and parking & lending revenues.

During the fourth quarter, Boardwalk completed its acquisition of Chevron Petrochemical Pipeline LLC from Chevron Pipe Line Company, a subsidiary of Chevron (NYSE:CVX) (San Ramon, California). Chevron Petrochemical Pipeline owns the 176-mile Evangeline ethylene pipeline system, which has the capacity to transport about 2.6 billion pounds of ethylene per year between Port Neches, Texas and Baton Rouge, Louisiana. Evangeline will now be operated by Boardwalk subsidiary Boardwalk Louisiana Midstream, and connect with its ethylene distribution system from Baton Rouge. Evangeline is supported by long-term, fee-based contracts.

Boardwalk Louisiana Midstream provides transportation and storage services for ethylene and natural gas liquids, natural gas storage and brine supply services through two hubs in southern Louisiana: the Sulphur Hub near Lake Charles, and the Choctaw Hub in the Mississippi River Corridor. The addition of the Evangeline system boosts the subsidiary's status in the ethylene transportation industry, which has been booming due to the low cost of natural gas feedstock.

Boardwalk's growth capital expenditures were reported to be $298.3 million for 2014, compared with $236.1 million in 2013, not including the Evangeline acquisition. The company spent $14.7 million in 2014 on natural gas that will be used as a base gas in its pipeline systems.

Boardwalk also saw a jump in maintenance-related capital expenditures, from $69.7 million in 2013 to $91.7 million in 2014, and acquisition costs, largely due to the fourth-quarter acquisition of the Evangeline ethylene pipeline system.

"In the third quarter, we disclosed the estimated projected firm transportation reservation revenues, based on our current contracts that are in place for the years 2014, 2015 and 2016" said Jamie Buskill, the senior vice president, chief financial officer and chief administrative officer for Boardwalk, in a conference call. "In the fourth quarter, we made significant progress in negotiating additional contract commitments. As a result, we are reflecting an increase from the third-quarter results of approximately $12 million in 2014 to $887 million; an increase of approximately $35 million in 2015 to $910 million; and an increase of approximately $75 million in 2016 to $900 million."

Buskill said that capital expenditures are expected to total about $570 million in 2015. This includes about $400 million for growth capital, $100 million related to maintenance, and $50 million for additional pipeline integrity upgrades.

"The primary reason we exceeded financial expectations in 2014 was due to a record-setting winter season that we haven't experienced so far this year, and therefore it is unlikely those results will be repeated in 2015," Buskill said in the conference call. "In addition, although we have made great progress in identifying growth opportunities, the majority of our growth projects are not slated to go into service until the 2016-to-2018 timeframe."

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.