Boardwalk Pipeline Sees Gains in Third-Quarter 2013 from Storage Revenues, Expects Stronger Demand for Natural Gas

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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, posted slight overall gains for the third quarter of 2013, as Storage segment revenues and a major acquisition offset the majority of losses in other segments. Net income for the quarter was reported to be $62.3 million, a 7.04% increase from the third quarter of 2012.

Total operating revenues stood at $275.5 million, a 1.81% increase from the same period last year. The October 2012 acquisition of Boardwalk Louisiana Midstream LLC, a midstream natural gas liquids company with transportation and storage assets in the U.S. Gulf Coast region, has been a major driver of Boardwalk Pipeline's recent profits. The company also benefited from a $12.5 million gain from the quarter's sale of storage gas. (The total gain from storage gas sales for the first three quarters of 2013 is $29.5 million.) However, unfavorable market conditions and contract renewals caused a drop in Transportation segment revenues, and lower natural gas price spreads meant fewer opportunities in the Parking & Lending and Storage segments.

Capital expenditures for the first nine months of the year total about $177.4 million for growth projects and $36.9 million for maintenance projects. Growth expenditures for all of 2012 totaled just $147.1 million.

Industrial Info is tracking $935 million in projects involving Boardwalk Pipeline, including the planned, $130 million expansion of grassroot natural gas pipeline in the U.S. Southeast region. The project involves installing 38 miles of 42-inch-diameter transmission pipe to transport up to 510 million standard cubic feet per day of natural gas from Hattiesburg, Mississippi, near Jasper County, to the state border near Mobile, Alabama. The plant is owned by Gulf South Pipeline Company LP, a subsidiary of Boardwalk Pipeline Partners. It is expected to kick off in the second quarter of next year.

"The development of relatively new, unconventional shale basins, especially the Marcellus, has and continues to reorder traditional flows of gas in interstate commerce, resulting in declining basin differentials across our pipeline systems," said Stanley Horton, the president, director and chief executive officer of Boardwalk Pipeline, in a conference call. "These declining basin differentials have put pressure on the value of transporting natural gas, which we have seen negatively impact our Transportation revenues. In fact, when contracting this year and in the previous two years, we have seen reductions both in the rates we've been able to obtain in firm and interruptible Transportation agreements, and in the total amount of capacity that we've been able to contract.

"We expect this trend to continue in 2014, and for the cumulative effect to put pressure on our Transportation revenues in the remainder of 2013 and 2014."

Horton mentioned several recent accomplishments that will pay off for Boardwalk Pipeline in the future, including the completion of leaching at new cavern in the Petal Storage facility; the beginning of construction on a 125 million-cubic-foot-per-day pipeline in northern Texas, which is expected to be in service in early 2014; and the completion of the $50 million Choctaw Brine project, which was placed into service in September.

"We believe that the long-term outlook for natural gas demand growth is strong," Horton said. "Demand growth from electric generation, industrial users and LNG exports is forecasted to add 20 billion cubic feet per day of new market demand in North America over the next decade. The electric generation load is growing in markets we serve off both our Gulf South and Texas gas pipeline systems; we are seeing industrial demand growth in our Mississippi River corridor and our Texas gas market area. And many of the LNG export facilities are in the Gulf Coast area, near our pipeline systems. We are optimistic, long-term, that increasing natural gas demand will result in higher utilization of our pipeline system."

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.

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