Inergy's Midstream Assets Perform Well, Prepare for Expansion

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Researched by Industrial Info Resources (Sugar Land, Texas)--Natural gas storage and transportation company Inergy LP (NYSE:NRGY) (Kansas City, Missouri) reported adjusted EBITDA of $163 million for the second quarter of the company's 2011 financial year, representing an increase of 5% from the second quarter of 2010. Net income, however, declined from $87.2 million in 2Q10 to $36.6 million, primarily because of the closing costs for acquisitions and debt extinguishment.

Most of the decline in revenue was due to lower sales volumes and revenues in the company's propane segment, while the company's midstream storage and transportation operations performed reasonably well.

In a conference call, Bill Moler, senior vice president for natural gas midstream operations, spoke of the successful operations and planned projects at Inergy's Tres Palacios gas storage facility, located about 100 miles from Houston, in the Eagle Ford Shale Play in Matagorda County, Texas. "In Texas, our Tres Palicious storage facility performed in line with expectations for the quarter," said Moler. "Tres experienced some positive operational success during the cold spells of February, as it remained online and flowing during the rolling blackouts and critically cold weather experienced in Texas during this timeframe, while other more experienced facilities reduced flows and/or shut in."

Inergy plans to add a 20-mile, 20-inch-diameter pipeline lateral to transport up to 100 million standard cubic feet per day of gas to the tailgate of Copano Energy LLC's (NASDAQ:CPNO) (Houston, Texas) Houston Central Gas Gathering Plant. Associated compressor stations will be required. Moler said that engineering and right-of-way acquisition were currently under way on the pipeline project. Inergy also plans to expand the facility's capacity from 38.4 billion cubic feet to 47.9 billion cubic feet.

Moler was optimistic about future opportunities for the company, which also has assets in the Marcellus Shale area in Pennsylvania and New York: "We have and continue to see a robust pipeline of opportunities around both our Texas and northeast footprints. The development of the Eagle Ford Shale in Texas and the Marcellus Shale in the northeast are opening are additional opportunities for our teams in each location. ...You can expect to see us pursue additional extension and expansion projects that will serve to further enhance our storage and transportation assets. We are located right in the middle of the two most active developments in the country, and we expect to get our share of development opportunities as the industry develops necessary infrastructure."

As part of its North American Industrial Database, Industrial Info is tracking more than $250 million in Inergy transmission and terminals projects.

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