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A Look at What Fueled Earnings at Boardwalk Pipeline Partners, LP (BWP)

Midstream operator Boardwalk Pipeline Partners (NYSE:BWP) was out with its second-quarter numbers earlier this week. The company reported revenue of $288.7 million, which is up 5% from the same quarter of last year. That’s off quite a bit from the $307.3 million that analysts were expecting. However, the rest of its numbers, at least on the surface, were pretty good.

Inside the numbers
Looking at those numbers, Boardwalk Pipeline Partners, LP (NYSE:BWP) delivered net income of $70.5 million on the quarter which is up 8% over last year’s second quarter. Meanwhile, adjusted EBITDA came in at $178.5 million, up 5% over last year. The big number on the quarter was distributable cash flow, which was up 15% to $148.7 million.

Boardwalk Pipeline Partners, LP (NYSE:BWP)Looking a little deeper into the numbers, its core transportation business was relatively flat in the quarter. While Boardwalk Pipeline Partners, LP (NYSE:BWP)’s revenue was positively affected by the acquisition of Boardwalk Louisiana Midstream last October, contract renewals were a big drag. In fact, transportation revenue was down $2.7 million over last year as lower utilization and contract renewals shaved $16.1 million off the top. The company had been guiding investors to the fact that it would see significant deterioration in revenues as it renewed contracts this year, so this isn’t much of a surprise.

What is a surprise is that Boardwalk Pipeline Partners, LP (NYSE:BWP) was able to boost its earnings by $17 million thanks to a gain on the sale of base gas at its storage business. The company was able to strategically monetize some of the base gas that’s required to be held at its storage assets to maintain pressure. This freed up some capacity which the company was able to lease out to earn additional revenue. It’s important to note that this isn’t a recurring item, though the company can still monetize additional quantities of base gas as market conditions permit. Without this sale, the quarter wouldn’t have been all that great.

Looking ahead
Contract renewals will likely continue to be a drag on Boardwalk Pipeline Partners, LP (NYSE:BWP)’s results. The good news is that the company does have a number of projects in the works to boost its revenue and earnings. In the near term, investors can expect contributions from the Flag City gas processing plant which just commenced operations last quarter. In addition, the company will soon be injecting base gas into its expanded Petal natural gas storage facility, which is fully contracted.

Further ahead, the company is on schedule to complete its $300 million Southeast Market Expansion project by the end of next year. However, the big project is its 50% own joint venture with Williams Companies, Inc. (NYSE:WMB) for the Bluegrass Pipeline. The project, which will take Marcellus and Utica natural gas liquids to the Gulf Coast could also include a natural gas liquids fractionation and storage facility as well as a liquefied propane export facility. This is a key growth project still in the preliminary stages that investors need to keep an eye on to see how its progress is heading.

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