Boardwalk Expansions Include New Locations, Products

Boardwalk Pipeline Partners continued to expand in Q3 2011 as it announced a new gathering system in the Marcellus and a 300-million-cubic-feet-per-day rich-gas system in the Eagle Ford.

The $90 million Marcellus system will be anchored through a 15-year contract with Southwestern Energy Co. In order to build the Eagle Ford system, the company is reconfiguring underutilized pipeline assets on its Gulf South Pipeline in South Texas to transport liquids from the Eagle Ford shale.

“Boardwalk is now focused on offering a greater array of new services to our customers while maintaining our current risk profile,” Stan Horton, the company’s chief executive and president, said during a conference call to discuss quarterly earnings.

He added that the Marcellus system allows the company to increase its geographic diversity and its product diversity. “The Marcellus is one of these basins that is going to be extremely important, so I think being in that basin is very good for us. I would be disappointed if it’s the only deal that we wind up doing in the Marcellus. … The fact that we were able to do this one helps us do additional ones.”

The same holds true of the Eagle Ford, and the company anticipates converting other underutilized pipelines in the region to handle rich-gas from the play. These underutilized pipelines may include more pipe from the Gulf South system.

“Pipelines and storage remain our core business and going forward we will focus on strengthening our existing pipeline assets by continuing to attach new supplies and markets to our systems via expansions,” he continued.

Evidence of this focus was found in the company’s recent acquisition of the Petal and Hattiesburg natural gas storage facilities in Mississippi from Enterprise Products Partners for $550 million. Both facilities are connected to Boardwalk’s Gulf South Pipeline and are expected to be attached to the system’s 42-inch Southeast expansion.

In addition to the synergies that this acquisition is expected to provide, it is located in a region that may provide up to six additional storage caverns. Horton said that one of these caverns is expected to be brought into service in 2013. Two of the remaining five caverns are already permitted by FERC and will be brought into service as market conditions dictate.

“The location and the salt dome type of storage make these assets ideal for serving natural gas demand in the Southeast, which is expected to grow substantially in the next decade due to an anticipated increase in gas-fired electric power generation,” he said.

The current storage caverns in operation are subscribed on a firm basis with an average contract life of approximately seven years. About 80% of the customers are electric and gas utilities, which helps to reduce the impact of low gas prices.

Lower gas prices are having a negative effect on Boardwalk’s parking and lending revenues. However, its revenues increased from last year because of increased transportation revenues due to pipeline expansions. Revenues in the quarter increased 4% to $269 million and earnings were up 1% to $148 million from Q3 2010.