Boardwalk Pipeline Partners L.P. (BWP)

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Boardwalk Pipeline Partners, LP (BWP)

Q2 2011 Earnings Call

August 01, 2011 9:00 am ET


Stanley Horton - Chief Executive Officer, President and Director

Allison McLean - Director of Investor Relations

Jamie Buskill - Chief Financial Officer of Boardwalk GP LLC, Senior Vice President of Boardwalk GP LLC and Treasurer of Boardwalk GP LLC


Elvira Scotto - RBC Capital Markets, LLC

Yves Siegel - Crédit Suisse AG

John Edwards - Morgan Keegan & Company, Inc.

Sharon Lui - Wells Fargo Securities, LLC

Darren Horowitz - Raymond James & Associates, Inc.



Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Boardwalk Pipeline Partners, LP Earnings Conference Call. My name is Gina, and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's conference, Ms. Allison McLean, Director of Investor Relations. Please go ahead.

Allison McLean

Thank you, Gina. Good morning, everyone, and welcome to the second quarter 2011 earnings call for Boardwalk Pipeline Partners, LP. I’m Allison McLean, and I’m pleased to be joined today by Mr. Stan Horton, our President and 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 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 use the -- will include the use of statements that are forward-looking in nature. Statements in the earnings call related to matters that are not historical facts 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 as EBITDA and distributable cash flow. 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 turn the call over to Mr. Stan Horton.

Stanley Horton

Thank you, Allison. Good morning, everyone. This is my first earnings call as the President and CEO of Boardwalk Pipeline Partners, and I am very pleased to be here. I would like to take time today to share my general thoughts about Boardwalk and then provide an update for the quarter.

As you well know, there's been an explosive growth of U.S. shale production in North America. Boardwalk has been able to expand and extend its pipeline network over the past several years into many of these shale basins. These expansions have strengthened the value of our pipeline network and resulted in increased earnings and distributions to our investors.

However, this explosive growth has created an overabundance of natural gas, both regionally and nationally. The result has been lower natural gas prices and a reduction in price differentials, both seasonally and between basins. The reduced price differentials result in lower margins for transportation and short-term storage services such as park and lending or PAL services. As Jamie will discuss, this environment has had a negative impact on our 3- and 6-month results.

I believe that increased demand for natural gas will eventually correct the unprecedented current domestic gas glut. The demand response will likely come from the electric power in industrial sectors and perhaps from increased natural gas exports and new uses for natural gas for our transportation needs. We are beginning to see such a demand response in the form of increased deliveries through electric generation plants and industrials on our pipeline systems.

In fact, we just announced an open season to expand our delivery capacity into the Baton Rouge quarter to meet additional demand from end-use customers in that area. Boardwalk's 3 natural gas pipelines are an important conduit to move supplies from major supply centers to major market hubs. We feel good about the long-term strategic value of our pipeline assets despite the current depressed margins for transportation and storage services. Our strategy, going forward, is to strengthen our existing pipeline assets by continuing to attach new supplies and markets to our system via expansion to new projects.

Pipelines are our base business and will continue to be so in the future. However, we recognize the need to become more diverse, both geographically and in new business segments. We have previously mentioned our efforts to diversify further into the midstream sector via gathering and processes.

It is a focus of Boardwalk to offer a great array of new services to our producer customers. These will most likely be gathering and processing opportunities, but we are receptive to looking at opportunities outside of the traditional natural gas sector that could help diversify our business mix. Thus, our vision over the next several years is to strengthen our traditional pipeline business while diversifying the products and services we offer.

Regardless of the opportunity, we will be looking for growth that is accretive, strategic and that does not significantly increase Boardwalk's overall risk profile. For example, I don't envision getting into the E&P business. As a matter of policy, however, I will not comment on specific projects until they come to fruition.

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