With a step that surprised analysts and moved investors in early February, Boardwalk Pipeline Partners announced a slash to its quarterly distribution a full 81% from $2.13 per unit to 10 cents per unit. And in turn, the market’s response was swift: Unit prices plummeted 46%.

The move is a cost-savings measure the company hopes will help it reach a low four times debt to EBITDA ratio in a market full of challenges that show little sign of abating, company leaders said. Currently, the company’s debt ratio is 4.6 times EBITDA.

As Chief Executive Stan Horton explained during a February 10 conference call to discuss fourth quarter earnings, Boardwalk’s transportation and storage revenues are facing substantial market headwinds that are likely to continue for the next year or two. The new distribution is intended to free up internally-generated cash that will fund growth and reduce leverage.

What’s more, parent company Loews offered up to $300 million in subordinated debt if it’s needed to fund capital expenditures, including the Bluegrass joint venture project that has yet to obtain regulatory approval. Between the lower distribution and the debt offering, Horton said Boardwalk doesn’t plan an equity raise in 2014.

Boardwalk anticipates a $40 million reduction this year from transportation contract renewals and expirations. In addition, the value of the company’s storage and park-and-lending services has taken a hit from increased gas production which has led to a compression of seasonal spreads that have flattened the natural gas pricing curve.

Increasing gas supplies in the Marcellus and Utica plays—during the last two years, the Northeast production has more than doubled from 6 billion cubic feet (Bcf) per day to 13 Bcf per day—coupled with new pipeline infrastructure have narrowed Boardwalk’s differentials, reducing the transportation rate typically obtained on contract renewals, Horton said. And, all of that comes down to the $40 million reduction for the year.

And, although Boardwalk rarely provides financial guidance, Horton said the company is making an exception to explain the distribution reduction. In 2014, the company expects distributable cash flow to be about $400 million, an almost 29% drop from the $560 million in distributable cash in 2013.

Still, analysts admitted shock at the distribution cut, which Tudor Pickering Holt & Co. described as “draconian.” At Morningstar Inc., analysts chopped their fair value estimate on Boardwalk units from $30 to $17 and revised their uncertainty rating on the company from low to high.

“We believe that Boardwalk’s dramatic decision may ultimately place the partnership on more solid footing, but greatly reduces its financial flexibility over the next several years,” Morningstar said in a February 12 research note. As such, the analysts forecast that Boardwalk will reach its four times leverage target in late 2016 or early 2017.

For this year, Boardwalk doesn’t plan to sell storage gas—an endeavor that generated $56 million in distributable cash flow in 2013. In the current environment, Boardwalk is actually loaning gas, Horton said.

“Opportunities to sell storage gas are therefore diminished,” he said.

Looking ahead, however, Horton said the same negative conditions that are stifling some aspects of the business today could actually create new opportunities down the road. The Bluegrass JV project, for example, is one the company remains bullish on. An open season on the project ended in January, and Boardwalk along with partner Williams Cos. Inc. are evaluating interest in the project, which would move gas from the Marcellus and Utica plays to the U.S. Gulf Coast petrochemical and export complex.

In addition, Boardwalk’s southeast market expansion is proceeding as planned with a fourth-quarter 2014 in-service date, Horton said. That project to supply gas to industrial and power generation markets in Mississippi, Alabama and Florida is fully contracted with 10-year firm agreements for 550,000 dekatherms per day.

The open season on the Ohio to Louisiana Access Project on Boardwalk’s Texas Gas interstate pipeline system has concluded. It will provide long-term final natural gas transportation from Lebanon, Ohio, for gas produced in the Marcellus and Utica to markets in Louisiana. By reversing existing pipelines that historically flowed from south to north, the project will cost about $115 million. Precedent agreements are in place for 625,000 dekatherms per day with an in-service target date for the first half of 2016.

In December, Boardwalk completed an expansion to serve a power plant in the Baton Rouge/River Corridor where the pipeline will be capable of delivering 100,000 dekatherms per day. Additionally, Boardwalk has completed the first phase of a project that connects to a new power plant in North Texas, where the pipeline will be able to deliver 125,000 dekatherms per day.