Natural Gas Prices Drain Results for Boardwalk Pipeline in 2013, Expects $330 Million Growth Capex in 2014

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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, encountered difficult market conditions in 2014 as lower natural gas prices led to a decline in drilling activity and production. Net income was reported to be $19.5 million for the quarter, compared with $90.1 million in fourth-quarter 2012, and $253.7 million for the full year, a 17.09% decrease from 2012.

Total operating revenues stood at $312.9 million for the quarter, a 3.93% decrease from the same period in 2012, and $1.21 billion for the year, a 1.74% increase from 2012. Contract expirations and renewals caused fourth-quarter transportation revenues to fall, while lower natural gas price spreads diminished parking revenues. Boardwalk also incurred a $51.5 million goodwill impairment charge during the year. Still, the company benefited from the $29.9 million sale of its storage assets.

Capital expenditures for 2013 totaled about $236.1 million for growth projects and $69.7 million for maintenance projects. In 2012, capital expenditures totaled about $147.1 million for growth projects and $79.8 million for maintenance projects.

Industrial Info is tracking $1.3 billion in active projects involving Boardwalk, including the planned, $500 million construction of a natural gas liquids (NGL) fractionator near Sulphur, Louisiana. As a part of the Bluegrass Pipeline Project, the fractionator will be capable of producing 200,000 barrels per day. It is expected to kick off in the second quarter of this year.

Boardwalk Louisiana Midstream LLC, a subsidiary, is planning to begin construction on several facilities in Calcasieu Parish in 2014, including a $120 million LPG propane and butane export terminal and a $500 million NGL fractionation plant. For more information, see January 13, 2014, article - Calcasieu Parish Poised for Growth with $19 Billion in Industrial Projects on the Books for 2014.

"New supply sources of natural gas have been identified and developed, including the Marcellus and Utica shale plays," said Stanley Horton, the director, president and chief executive officer of Boardwalk, in a conference call. "In just two years, Northeast natural gas production has grown from 6 billion cubic feet per day to 13 billion cubic feet per day, and could exceed 25 billion cubic feet per day by 2020. New supply sources and related pipeline infrastructure has caused significant narrowing of basis differentials on our pipeline systems, reducing the transportation rate that we typically can attain on firm transportation contract renewals."

Capital expenditures for 2014 are expected to be about $330 million for growth projects and $90 million for maintenance projects.

Boardwalk executives said that they expected unfavorable market conditions to continue to diminish natural gas transportation and storage revenues in 2014, including a $40 million reduction from firm transportation contract renewals and expirations. Parking and lending opportunities also are expected to weaken, as executives expect the forward natural gas pricing curve to continue to narrow. The company does not plan to sell storage gas this year.

"Our Southeast market expansion is proceeding as planned," Horton said in the conference call. "This project increases Boardwalk's ability to transport natural gas supplies to growing areas of demand in the Southeast region of the United States, including industrial and power generation markets in Mississippi, Alabama and Florida. This project is fully contracted with 10-year firm agreements for approximately 550,000 dekatherms per day. We received FERC approval for this project, and anticipate a fourth-quarter 2014 approval date."

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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