Shares of Boardwalk Pipeline Partners Declined 10% in September, Here's Why

BWP Chart

What: Shares of Boardwalk Pipeline Partners were pulled down more than 10% in the month of September thanks to a general decline in the energy and MLP space in particular. The biggest reason these sectors were hit hard is the possibility of banks tightening their lending to the energy sector.

So What: First things first, Boardwalk was fighting a big uphill battle this past month that made a 10% decline almost inevitable. The company was recently added to the Alerian MLP index, making it part of the Alerian MLP ETF . Over the month the entire MLP index and ETF declined 12%. In that context, the 10% decline by Boardwalk doesn't seem that bad.

BWP data by YCharts

There are a couple of factors at play here when it comes to why the entire MLP space has suffered so much in recent weeks. The first is the continued decline of oil and gas activity is finally starting to sink its teeth into the nation's production numbers. As production growth stalls and actually turns to decline, the demand for new pipeline volumes isn't there right now. This brings into question the billions of dollars in investments pipeline companies are making to accommodate the more recent growth numbers.

The other big factor at play here is the tightening of credit for the oil and gas sector. Cheap oil and gas prices are making many banks and other lenders re-evaluate the credit lines available to these companies, which could mean that the cost of debt to fund new projects could increase across the board. For Boardwalk, this could mean its current project backlog of $1.5 billion might be more expensive to build.

Now What: These are the factors impacting the entire space, but they don't all necessarily translate to issues for Boardwalk. There are two things to keep in mind with Boardwalk that make these issues seem less pressing. One is that it has an investment grade credit rating thanks to its well financed general partner Loews , meaning that access to capital shouldn't be too difficult. The other is that many of Boardwalks projects are what are known as demand-pull projects, meaning that most of its customers are end users of oil and gas like power plants and manufacturing facilities. These customers are much less likely to lower their volume demands as oil and gas prices decline.

Looking at this, it would seem that this past month's decline is a bit overdone, and it could be a buying opportunity. Keep in mind, though, that the company does have its own issues to work through. The company slashed its distribution by 80% last year because it was overloaded with high debt levels and it was paying out too much to its shareholders, and its still dealing with these debt issues while it builds out that $1.5 billion in projects. Based on its current financial position and lack of visibility for distribution growth in the future, there are simply more lucrative opportunities in the MLP space to be excited about Boardwalk's stock.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Shares of Boardwalk Pipeline Partners Declined 10% in September, Here's Why originally appeared on

Tyler Crowe has no position in any stocks mentioned. You can follow him at or on Twitter @TylerCroweFool .The Motley Fool recommends Loews. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More