Boardwalk Pipeline Partners L.P. (BWP)

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Boardwalk Pipeline Partners LP (BWP)

Q3 2009 Earnings Call

October 26, 2009 9:00 am ET

Executives

Alison McLean – Director, Investor Relations

Rolf Gafvert – Chief Executive Officer

Jamie Buskill – Chief Financial Officer

Analysts

Stephen Maresca – Morgan Stanley

Elvira Scotto – Credit Suisse

Darren Horowitz – Raymond James

Sharon Lui – Wells Fargo

Noah Lerner – Hartz Capital

Ross Payne – Wells Fargo

John Edwards – Morgan Keegan

Jeff [Ataca] – [Young Investments]

Presentation

Operator

Welcome to the third quarter 2009 Boardwalk Pipeline Partners LP earnings conference call. (Operator Instructions) I would now like to turn the presentation over to Alison McLean, Director of Investor Relations. Please proceed.

Alison McLean

Thank you. Good morning everyone and welcome to the third quarter 2009 earnings call for Boardwalk Pipeline Partners LP. I am Alison McLean and I'm pleased to be joined today by Mr. Rolf Gafvert, our CEO and Mr. Jamie Buskill, our CFO.

If you would 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 would also like to remind you that during this call today, we may discuss certain non-GAAP financial measures such as EBITDA. With regard to such financial measures, please refer to our earnings release for reconciliation to the most comparable GAAP measures.

Now, I would like to turn the call over to Mr. Rolf Gafvert.

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 are pleased to announce that all of our expansion projects are now operating at normal operating pressures and we are able to meet all of our current contractual obligations. In addition, our base business continues to perform as expected.

Last Thursday we declared a third quarter distribution of $0.495 per unit. We have increased our distribution each quarter since our initial public offering in 2005. As we discussed during last quarter’s call, net income has been negatively impacted by top line anomalies which we discovered while undergoing testing necessary to operate certain expansion pipelines at higher than normal operating pressure of 0.8 of SMYS.

Our third quarter transportation revenue from these projects excluding fuel were approximately $47 million lower than expected due to operating our expansion pipelines at lower than normal pressures before anomaly remediation and due to temporary pipeline shutdowns that occurred during the remediation.

PHMSA, the Pipeline Hazardous Material Safety Administration, retains the discretion as to whether to grant or maintain in force the authority to operate any of our expansion pipelines at normal operating pressures or at higher operating pressures. We have recently submitted a filing with PHMSA requesting a special permit to operate our 42 inch projects which includes Gulf Crossing, East Texas and Southeast at higher than normal operating pressures.

For the Fayetteville lateral we have begun the testing that is required before we can seek approval from PHMSA to operate at higher operating pressures. We believe this testing could take several months. Based on the anomaly repairs just completed we expect that our estimated capital expenditures for all expansion projects will come in below our previously reported cost estimates. Jamie Buskill, our CFO, will discuss our capital spending in greater detail in a few minutes.

I will now provide an update on our 2010 compression projects. We have received FERC approval for the Gulf Crossing and Fayetteville Greenville compression projects. We expect t complete these projects in the first quarter of 2010. By adding compression we expect to increase our peak day delivery capacity to 1.7 BcF per day for Gulf Crossing and 1.3 BcF per day for the Fayetteville lateral, both subject to PHMSA approval. We also expect to increase the peak day capacity for the Greenville lateral to 1 BcF per day which does not require a special permit from PHMSA.

We filed the first applications for our Haynesville projects in May and anticipate receiving final FERC approval in the first quarter of 2010. We expect this project to be in service by late 2010. If we are granted the authority by PHMSA to operate at higher operating pressures on the East Texas pipeline, then an additional 150 million cubic feet of capacity per day will be available for sale from this project.

These compression projects are a great example of how we can leverage our newly expanded program. As always we continue to focus on ways to optimize our system. Finally, I would like to provide an update on our storage, parking and lending business. As discussed last quarter we continue to see favorable pricing spreads between the spot price of natural gas and the futures market. As a result, we are experiencing higher parking and lending revenues in 2009 when compared to 2008.

In addition we placed the remaining portion of our Western Kentucky stores expansion in service effective October 1, 2009. The additional capacity, approximately 3 BcF, went into service one month early and the project came in well under budget.

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