Boardwalk Pipeline Partners L.P. (BWP)

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Boardwalk Pipeline Partners, LP (BWP)

Q4 2011 Earnings Call

February 06, 2012 9:00 am ET

Executives

Allison McLean -

Stanley C. Horton - Chief Executive Officer, President and Director

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

Patrick Giroir -

Analysts

Elvira Scotto - RBC Capital Markets, LLC, Research Division

Darren Horowitz - Raymond James & Associates, Inc., Research Division

S. Ross Payne - Wells Fargo Securities, LLC, Research Division

Sharon Lui - Wells Fargo Securities, LLC, Research Division

John D. Edwards - Morgan Keegan & Company, Inc., Research Division

Yves Siegel - Crédit Suisse AG, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Boardwalk Pipeline Partners, LP Earnings Conference Call. My name is Shantaley, and I will be your facilitator for today's call. [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 call, Ms. Allison McLean, Director of Investor Relations. Please proceed.

Allison McLean

Thank you, Shantaley. Good morning, everyone, and welcome to the fourth 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; Mr. Jamie Buskill, our CFO; and Pat Giroir, President of Boardwalk Field Services. 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'd 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 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 statement.

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 C. Horton

Thank you, Allison. Good morning, everyone. I hope you've had a chance to review the press releases we issued this morning. In addition to reporting earnings this morning, we increased our quarterly distribution to $0.53 per unit or $2.12 annualized, and we announced our Boardwalk Field Services, South Texas, Eagle Ford expansion project.

The Marcellus and Eagle Ford are 2 of the most profitable shale plays in North America. Rigs are still growing in both of these liquid-rich areas, and significant midstream infrastructure is still needed. That is why Boardwalk Field Services has focused its efforts on producer needs in these areas. I'm happy to report that effort is paying off. In addition to the Marcellus gathering project we announced last fall, we now have a significant Eagle Ford project as well.

Today, we announced that we will add 55 miles of gathering pipeline and a cryogenic processing to our South Texas gathering system, which Boardwalk Field Services begin operating on January 1. The existing South Texas gathering system gave us a good starting position in the Eagle Ford, and much of the additional gathering pipeline can be built on existing right of way.

All told when complete, the gathering system will be comprised of approximately 400 miles of pipeline with the capability of gathering in excess of 300 million cubic per day of liquids rich gas in Karnes and Dewitt counties, 2 counties in the heart of the play.

The plant, to be called Flag City Processing Plant, will be located near Edna, Texas and will have a 150 million cubic feet per day capacity. Boardwalk will also provide redelivery of process residue gas to a number of interstate and intrastate pipelines, including Gulf South. The project is estimated to cost approximately $180 million and is expected to go into service in early 2013.

We have executed a fixed price contract with Exterran to design, manufacture and construct the processing plant. We have executed long-term, fee-based gathering and processing agreements with Statoil and Talisman for approximately 50% of the processing capacity, and we are in active negotiations with several producers for the remaining volume.

Now I'll provide you with an update of our Marcellus gathering project. This project is under construction with the majority of the expenditures expected to occur in the next 12 to 24 months. The total project is expected to cost approximately $90 million, and we believe the initial portion of this project will go into service in mid-2012. And we continue to explore other opportunities in the Marcellus area.

In the fourth quarter, our joint venture, BoardWalk HP Storage Company, formed with an affiliate of our general partner, completed the acquisition of Petal and Hattiesburg for $550 million. We currently own a 20% interest in the JV. These assets are very strategic to Boardwalk.

The operating caverns, which have long-term firm contracts with credit worthy customers, are already connected to go south and are ideal for serving gas-fired electric power generation demand, especially demand in the Southeast.

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