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Boardwalk Pipeline Partners, LP Q3 2010 Earnings Call Transcript

Boardwalk Pipeline Partners, LP Q3 2010 Earnings Call Transcript

Boardwalk Pipeline Partners, LP (BWP)

Q3 2010 Earnings Call

October 25, 2010 9:00 am ET


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

Rolf Gafvert - Chief Executive Officer of Boardwalk GP LLC, President of Boardwalk GP LLC and Director of Boardwalk GP LLC


Barrett Blaschke - RBC Capital Markets

Ross Payne - Wachovia Securities

Bernard Colson - Oppenheimer & Co. Inc.

Jeremy Tonet - UBS

Elvira Scotto - Crédit Suisse AG

Darren Horowitz - Raymond James & Associates

Stephen Maresca - Morgan Stanley

Harry Mateer - Lehman Bothers

Gabriel Moreen - BofA Merrill Lynch

Sharon Lui - Wells Fargo Securities, LLC


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Good day, ladies and gentlemen, and welcome to Q3 2010 Boardwalk Pipeline Partners, LP Earnings Conference Call. My name is Sameetha, and I'll be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today's call, Ms. Allison McLean, Director of Investor Relations. Please proceed.

Allison McLean

Thank you, Sameetha. Good morning, everyone, and welcome to the Third Quarter 2010 Earnings Call for Boardwalk Pipeline Partners, LP. I’m Allison McLean, and I’m pleased to be joined today by Mr. Rolf Gafvert, our 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 include the use of statements that are forward-looking in nature. Statements in this earnings call relate 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 will 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 a reconciliation to the most comparable GAAP measures.

Now I'd like to turn the call over to Mr. Rolf Gafvert.

Rolf Gafvert

Thank you, Allison. Good morning, everyone, and thank you for joining us today. I hope all of you have had a chance to review the press releases we issued earlier this morning. We announced a quarterly distribution to unitholders of $0.515 per unit, a $0.05 increase over last quarter. Distribution to unitholders have increased each quarter since our initial public offering in 2005. I will now provide an update on our business, and then Jamie will discuss our financial performance in greater detail.

First, I would like to talk about several significant project milestones achieved in the past few months. I am pleased to report that our Haynesville Expansion Project is now in service. This project came in under budget, and Jamie will discuss the capital costs in greater detail in a few minutes.

In addition, we've received FERC approval to proceed with our Clarence Compression Project. This project is proceeding as planned with the late 2011 in-service statement. Earlier this month, we received PHMSA approval to operate our Fayetteville Lateral at a higher operating pressure. By the end of the fourth quarter, we plan to operate this lateral at its full design capacity of 1.3 Bcf per day. With the Fayetteville Lateral in place, I am pleased to announce that all of our major expansion projects have PHMSA approval to operate at their full design capacity.

Now we will provide a brief update on some factors impacting our business. As discussed in prior earnings call, the basis spreads between different supply and market locations on our systems have narrowed, adversely affecting transportation rates we were able to charge on contract renewals and short-term available capacity. However, our expansion projects continue to experience high utilization rates and we continued to see increased production from the shale areas connected to our pipelines.

We are also seeing power plant operators become more interested in long-term firm contracts on our system. As a result of the hot weather this summer, we experienced record deliveries to power plants on three different days during the third quarter. We currently serve approximately 40 power generation facilities in 10 states and recently signed a long-term firm contract with a major power provider.

That concludes my overview for Boardwalk. I would now like to turn the call over to Jamie, who will share with you the financial results for the third quarter.

Jamie Buskill

Thanks, Rolf, and good morning, everyone. Operating revenues for the third quarter of 2010 were $258 million, an increase of $53 million or 25% from $205 million for the comparable period in 2009. The increase was driven by transportation revenues from our pipeline expansion projects. Transportation revenues from expansion projects for 2009 were lower than expected due to operating those pipelines at reduced pressures and temporary shutdowns following the discovery and remediation of anomalies in certain joints of pipes.

Turning now to operating expenses. We reported operating expenses of $165 million for the quarter, an increase of $14 million or 9% from $151 million for the comparable period in 2009. The increase was driven by higher operating costs and expenses due to higher depreciation of property taxes resulting from an increase in asset base due to expansion assets having been placed into service, higher operations and maintenance expense and an impairment loss related to a portion of pipe inventory that we expected to sell. The increased expenses were offset by gains on the sale of gas related to the Western Kentucky Storage Expansion.

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