Boardwalk Pipeline Sees Rough Market in Third-Quarter 2014, Remains Upbeat on Marcellus/Utica Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Difficult market conditions plagued Boardwalk Pipeline Partners LP (NYSE:BWP) (Houston, Texas), a midstream master limited partnership that services the natural gas and liquids markets, in the third quarter of 2014 as the company officially sought approval for its first north-to-south pipeline project. Net income was reported to be $29.2 million, compared with $62.3 million in third-quarter 2013, although the year-over-year comparison was partly skewed by one-time gains last year.

Industrial Info is tracking $846 million in active projects involving Boardwalk, including two major projects related to the Gulf South Pipeline Company LP (Houston), a Boardwalk subsidiary that transports gas from the Gulf Coast to markets in the U.S. Northeast and Southeast regions. Boardwalk is pursuing a $130 million expansion of the Gulf South system, installing 28 miles of 24-inch-diameter pipe that will transport up to 510 million standard cubic feet of natural gas per day from Hattiesburg, Mississippi to the state's border near Mobile, Alabama. Hatch Mott MacDonald (Spring, Texas) is performing engineering services, and Sheehan Pipe Line Construction (Tulsa, Oklahoma) is serving as general contractor.

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Further down the road, Boardwalk plans to spend an estimated $125 million to install 65 miles of 36-inch- and 42-inch-diameter pipeline supply header to transport approximately 1.4 billion cubic feet per day of natural gas to serve the first two trains of a planned LNG liquefaction terminal to the Stratton Ridge Metering Station. Both facilities are in Freeport, Texas. The project, announced in early September, is in the design phase and is not scheduled to begin construction until mid-2017.

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Total revenues stood at $278.9 million, a 1.23% increase from the same period last year. Earnings from Boardwalk's storage, parking and lending services were diminished by a tough market. Among the heaviest costs was $14.7 million of natural gas, which was purchased during the quarter to be used as a base gas. Net income also was lower due to a $13 million gain on the sale of assets in third-quarter 2013.

Growth capital expenditures for the first nine months of 2014 totaled $237.3 million and maintenance capital expenditures totaled $63.9 million, compared with totals of $177.4 million and $36.9 million, respectively, in the first nine months of 2013.

"I'm very pleased to announce that we've placed our Southeast Market Expansion Project in service, on time, and within our budget of $300 million," said Stan Horton, the director, president and chief executive officer of Boardwalk, in a conference call. "This project increases Boardwalk's ability to transport natural gas supplies to growing areas of demand in the Southeast region of the U.S. , including industrial and power generation markets in Mississippi, Alabama and Florida. This project is fully contracted at approximately 500,000 MMBTU per day, under long-term firm transportation contracts."

Horton added that the company's firm transportation agreement to service the Cane Run combined-cycle power plant in Kentucky started on November 1, with a long-term commitment of 105,000 MMBTU per day. Boardwalk also is trying to obtain the right-of-way agreements for the 19-mile Western Kentucky Market Lateral Project, which will provide up to 230,000 MMBTU per day to a proposed power plant and is expected to begin service in the third quarter of 2015. Its current estimated value is $80 million.

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Horton also was bullish on the Ohio-to-Louisiana Access Project, which is expected to provide long-term, firm transportation of natural gas sourced from the Marcellus and Utica shales from Lebanon, Ohio, to diverse delivery markets in Louisiana.

"We have filed an application with the Federal Energy Regulatory Commission (FERC) in order to request approval of our first north-to-south project, the Ohio-to-Louisiana Access Project, announced earlier this year," Horton said in the conference call. "In addition, we will soon file an application with the Commission to request approval for another previously announced project, the Southern Indiana Market Lateral, which utilizes north-to-south capacity and is designed to serve new industrial customers, subject to board and regulatory approvals."

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.