Boardwalk Pipeline Reaps Rewards from Acquisitions in 2012, Keeps Growth Projects on Front Burner

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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, benefited in fourth-quarter and full-year 2012 from acquisitions that enhanced the company's ability to meet growing customer demand. Net income was reported to be $90.1 million for the quarter, a 25.84% increase from fourth-quarter 2011, and $306 million for the year, a 41.01% increase from 2011.

Total revenues stood at $325.7 million for the quarter, an 8.21% increase from the same period in 2011, and $1.19 billion for the year, a 3.68% increase from 2011. In October, the company completed the acquisition of Boardwalk Louisiana Midstream LLC, which was been successfully integrated with Boardwalk during the quarter. Also, 1 million-barrel brine pond was completed and commenced operations at Louisiana Midstream during the quarter, allowing the company to expand its brine sales, transportation and storage capabilities. Louisiana Midstream and HP Storage Company LLC, which also was recently acquired by Boardwalk, added $25.6 million in revenues during the quarter and $61 million for the year.

Capital expenditures totaled about $147.1 million for growth projects and $79.8 million for maintenance projects for 2012. The company has added about 1,000 miles of pipeline in the last five years.

Industrial Info is tracking $250 million in active projects involving Boardwalk, including the $100 million construction of the Flag City Cryogenic Natural Gas Processing Plant in Edna, Texas. The project involves building a facility to process 150 million standard cubic feet per day of natural gas from the Eagle Ford Shale. Boardwalk has awarded Exterran Partners LP (Houston) an engineering and construction contract.

"In the fourth quarter, we continued to make progress implementing our three strategic goals of adding new end-use markets to our pipeline storage system; diversifying into other areas of the midstream sector; and emphasizing our need to control our cost structure to achieve greater efficiencies," said Stanley Horton, the president, director and chief executive officer of Boardwalk, in a conference call.

The company reported stronger operating revenues in each of its major segments, with Gas Transportation seeing only a slight decrease for the year:

• The Gas Transportation segment reported revenues of $284.6 million for the quarter, a 1.43% increase from fourth-quarter 2011, and $1.06 billion for the year, a decrease of less than 1% from 2011.
• The Parking and Lending segment reported revenues of $7.9 million for the quarter, compared with $3.5 million in the same period in 2011, and $28 million for the year, compared with $12 million in 2011.
• The Gas Storage segment reported revenues of $27.7 million for the quarter, compared with $14.7 million in fourth-quarter 2011, and $84.7 million for the year, a 62.26% increase from 2011.
• All other segments reported total revenues of $5.5 million for the quarter, compared with $2.2 million in the same period in 2011, and $14 million for the year, a 21.74% increase from 2011.

Horton noted that Boardwalk has numerous key projects in development. The HB Storage salt cavern expansion is on schedule for gas injections to begin in the second quarter of 2013, and it is expected to add about 5 billion cubic feet of working gas capacity, which has been fully contracted for the first year of the cavern's service. The Southeast Market Expansion Project will allow Boardwalk to transport an additional 450 million cubic feet of natural gas to meet growing demand in the U.S. Southeast, and is supported by 10-year agreements with electric generation and industrial customers; construction is expected to begin and end in early and last 2014, respectively.

Horton also warned that market conditions likely will affect revenues for 2013.

"Contracts that are being renewed are being renewed are being renewed at lower rates, because the current basis spreads impact the pricing of longer-term contracts," he said in the conference call. "In 2013, some of the contracts associated with the major expansion projects that we put in service a few years ago are up for renewal. The annual revenues associated with contracts expiring in 2013 are approximately $125 million. At this time, our best estimate is that the combination of lower rates on contract renewals and the remarketing of turn-back capacity will result in an annual revenue reduction of approximately $40 million."

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, and eight offices outside of North America, 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.