Boardwalk Pipeline Partners LLC (BWP)
Q2 2009 Earnings Call
July 27, 2009 9:00 am ET
Alison McLean – Director, Investor Relations
Rolf Gafvert – Chief Executive Officer
Jamie Buskill – Chief Financial Officer
Sharon Lui – Wells Fargo
Stephen Maresca – Morgan Stanley
[Yves Siegal – Credit Suisse]
Ross Payne – Wells Fargo
[Ryan Greener – Harvest Fund Advisors]
Ross Haberman – Haberman Funds
John Edwards – Morgan Keegan
[Adam Rothenburg – Zimmer Lucas Partners]
Darren Horowitz – Raymond James
[Robert Cashwish – Burnham Securities]
[Jeremy Tom – UBS]
Previous Statements by BWP
» Boardwalk Pipeline Partners LP Q3 2009 Earnings Call Transcript
» Boardwalk Pipeline Partners LP Q1 2009 Earnings Call Transcript
» Boardwalk Pipeline Partners, LP Q3 2008 Earnings Call Transcript
Good morning everyone and welcome to the second quarter 2009 earnings call for Boardwalk Pipeline Partners LP. I'm Alison McLean and I'm pleased to be joined today by Mr. Rolf Gafvert, our CEO and Mr. Jamie Buskill, our CFO.
If you'd like a copy of the earnings release associated with this call, please download it from our website at www.bwpmlp.com. Following our prepared remarks this morning, we will turn the call over for your questions. We would like to remind you that this conference call will include the use of statements that are forward-looking in nature. Statements in this earnings call related to matters that are not historical fact are forward-looking statements.
These statements are based on management's beliefs and assumptions using currently available information and expectations. Actual results achieved by the company may differ materially from those projected in any forward-looking statements. The company expressly disclaims any obligation to update or revise any forward-looking statements made during this call.
I'd also like to remind you that during this call today, we may discuss certain non-GAAP financial measures such EBITDA. With regard to such financial measures, please refer to our earnings release for reconciliation to the most comparable GAAP measures.
Now, I'd like to Mr. Rolf Gafvert.
Thank you Alison and good morning everyone. I hope all of you have had a chance to review the press release we issued this morning. We have made substantial progress on our pipeline anomaly remediation efforts and our base business continues to perform as expected.
As a result, last Thursday we declared a second quarter distribution of $0.49 which is a half a cent increase from the previous quarter. Since becoming a public company in 2005, we have increased our distribution each quarter.
As we indicated during last quarter's earnings call, net income for the second quarter was negatively impacted by pipeline anomalies on our expansion pipeline projects. During the second quarter we had month long shutdowns of portions of the expansion pipelines and operated the remainder of these projects at reduced operating pressures which would reduce through put and revenue.
Over the last three months we have made substantial progress addressing the anomalies on the East Texas pipeline, Southeast and Gulf Crossing expansion projects. In April, we entered into an agreement with the Pipeline and Hazardous Material Safety Administration known and PHMSA which modified each of our special permits that define the testing protocol and remediation efforts for these pipelines including replacement of certain pipe joints that contain anomalies.
We have been working diligently to remediate those anomalies and to gain authority to increase operating pressures on our expansion projects.
As we stated in our press release, the Gulf Crossing pipeline was shut down for remediation during June and as a result effective July 1, Gulf Crossing received authority from PHMSA to operate at normal operating pressures of 72% of SMYS.
We are performing additional tests and working with PHMSA for authorization to operate Gulf Crossing at 80% of SMYS. However, we cannot predict whether or when we will receive this authorization.
In May and July portions of the Southeast pipeline and the East Texas Pipeline were shut down for anomaly remediation. We expect to complete remediation on these pipelines and subject to PHMSA approval, plan to operate these pipelines at normal operating pressures of 72% of SMYS by August 1. We continue to work with PHMSA for authorization to operate these pipelines at 80% of SMYS. Again, we cannot predict whether or when we will receive that authorization.
While our 42 inch pipeline projects combined, Southeast, East Texas and Gulf Crossing, there are approximately 96,000 pipe joints. Each joint is approximately 40 feet in length. Out of 96,000 joints, less than 200 joints were found to have anomalies. By August 1 we expect the remediation efforts on all these projects to be complete and we anticipate no further outages for anomaly remediation will be necessary. We also expect to meet substantially all of our current contractual obligations at this time.
Now I'll give an update on the 36 inch pipeline projects, the Fayetteville and Greenville laterals. We are continuing to test the Fayetteville and Greenville laterals for anomalies. We have run a high resolution tool on approximately 200 out of the 260 miles of these laterals and we planned to run the deformation tool on the final 66 miles out of Fayetteville lateral and plan to analyze the results in the near future.
Out of approximately 26,000 joints inspected to date, approximately 230 joints or slightly less than 1% appear to have anomalies. Fayetteville and Greenville will continue to operate at lower than normal operating pressures until anomaly remediation work is completed.
We are working with PHMSA on a remediation protocol to be adopted to return these pipes to standard operating pressures. We expect that anomaly remediation could begin as soon as September and may take one to five months to complete.