Boardwalk Pipeline Partners LP Earnings Call Nuggets: Gas-fired Contract, EBITDA Contribution

On Monday, Boardwalk Pipeline Partners LP (NYSE:BWP) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Gas-fired Contract

Paul Jacob – Raymond James Company: On the additional gas-fired contract that you secured this quarter, just wondering if you see further opportunities for something like that this year? On the storage side, as contracts come up for renewal, what are you seeing from your customers in that regard?

Stanley C. Horton – President and CEO: I’ll take the electric one and I’ll let Jamie answer the storage one. On the electric side, yeah, we continue to see interest from customers on securing additional firm transportation to serve power generation load on the system. So, hopefully, there will be another one this year. Based upon the discussions that our commercial group are having, I would certainly expect that we would have one.

Jamie L. Buskill – CFO, SVP and Treasurer: To answer on your storage question, if you look at the first quarter, the $12 million of revenues that came from HP Storage, roughly $5 million to $6 million of that was in the transportation line on our income statement, the remaining $6 million to $7 million was on our gas storage line. So, if you back that out, you’ll see our firm storage was fairly flat on our existing systems. Where you see the more immediate impact is in our park and lend business. As Stan mentioned, although we’re up about $800,000 on the quarter, we’ve seen a much stronger market and much stronger contracts going in place, so we expect to have a better year related to parking and lending this year compared to last year.

Paul Jacob – Raymond James Company: The last one for me. As it relates to your growth CapEx, the $6.3 million that you reported this quarter just seems a little bit low to me. I was just wondering how you see your capital expenditure outlay playing out for the rest of the year?

Jamie L. Buskill – CFO, SVP and Treasurer: It was a little low and some of that has to do simply with the timing of payments. The biggest project we have going on is the processing plant we’re building in Eagle Ford area. That’s on schedule as Stan mentioned and you’ll see those costs ramp up in the second quarter and throughout the year. The other project is our gathering system in the Marcellus area, and that’s going as scheduled as well. You may recall that’s roughly $90 million project. Majority of that will be spent by the end of this year, but it will take two or three years before that’s fully ramped up. We’re building basically at the pace of our customer.

EBITDA Contribution

Sharon Lui – Wells Fargo: Just a quick question in regard to the EBITDA contribution from HP Storage in the quarter. It just seemed a bit low given that you’re showing I guess the 100%. Is the $3 million number the number we should be looking at?

Jamie L. Buskill – CFO, SVP and Treasurer: That’s not the EBITDA contribution. The EBITDA contribution is approximately $9 million for the first quarter. In fact when you look Sharon, we’re up basically $10 million on the quarter. The rest of the business was flat. There is positives and negatives in there as we discussed. The driver was basically HP Storage which again contributed that $9 million.

Sharon Lui – Wells Fargo: In terms of the reconciliation for additional cash flow, you had an asset impairment of $4 million. Can you just talk about what that relates to?

Paul Jacob – Raymond James Company: On the additional gas-fired contract that you secured this quarter, just wondering if you see further opportunities for something like that this year? On the storage side, as contracts come up for renewal, what are you seeing from your customers in that regard?

Stanley C. Horton – President and CEO: I’ll take the electric one and I’ll let Jamie answer the storage one. On the electric side, yeah, we continue to see interest from customers on securing additional firm transportation to serve power generation load on the system. So, hopefully, there will be another one this year. Based upon the discussions that our commercial group are having, I would certainly expect that we would have one.

Jamie L. Buskill – CFO, SVP and Treasurer: To answer on your storage question, if you look at the first quarter, the $12 million of revenues that came from HP Storage, roughly $5 million to $6 million of that was in the transportation line on our income statement, the remaining $6 million to $7 million was on our gas storage line. So, if you back that out, you’ll see our firm storage was fairly flat on our existing systems. Where you see the more immediate impact is in our park and lend business. As Stan mentioned, although we’re up about $800,000 on the quarter, we’ve seen a much stronger market and much stronger contracts going in place, so we expect to have a better year related to parking and lending this year compared to last year.

Paul Jacob – Raymond James Company: The last one for me. As it relates to your growth CapEx, the $6.3 million that you reported this quarter just seems a little bit low to me. I was just wondering how you see your capital expenditure outlay playing out for the rest of the year?

Jamie L. Buskill – CFO, SVP and Treasurer: It was a little low and some of that has to do simply with the timing of payments. The biggest project we have going on is the processing plant we’re building in Eagle Ford area. That’s on schedule as Stan mentioned and you’ll see those costs ramp up in the second quarter and throughout the year. The other project is our gathering system in the Marcellus area, and that’s going as scheduled as well. You may recall that’s roughly $90 million project. Majority of that will be spent by the end of this year, but it will take two or three years before that’s fully ramped up. We’re building basically at the pace of our customer.