Tags: Boardwalk | MLP | distributions | BWP

Boardwalk Builds MLP Distributions

By    |   Wednesday, 26 Oct 2011 10:34 AM

Boardwalk Partners (BWP) is an energy master limited partnership with a record of steadily increasing dividend distributions. Most energy MLPs are focused on either exploration and production or pipeline transport. Boardwalk Partners is firmly in the latter camp. The pipeline MLPs tend to have a more predictable revenue stream and a more stable distribution policy.

Boardwalk Partners owns three interstate pipelines with more than 14,000 miles of pipeline plus 11 natural gas storage facilities with a total capacity exceeding 167 billion cubic feet of gas. The pipelines gather gas from several major, long term production gas drilling regions and transport to a wide range of end users and gas processing companies.

In October 2011, for instance, the company signed a $90 million agreement for a gas gathering pipeline network in western Pennsylvania with Southwestern Energy (SWN).

The accounting for limited partnerships is different than for regular corporations and the net income per share often has little meaning. Investors can keep an eye on distributable cash flow to determine if the distribution rate of an L.P. is in jeopardy.

In the first half of 2011, Boardwalk Partners had distributable cash flow decline by 18 percent to $200 million from $246 million in 2010. The majority of the decline was due to a list of one-time items, but investors should look for a rebound in distributable income to support the distribution.

Growth and stability

The Boardwalk Partners growth strategy is to steadily expand the pipeline and storage network to increase capacity and add customers. From 2005 through 2010, operating revenues doubled from $550 million per year to more than $1.1 billion.

The company looks for long term pricing contracts and currently has about 80 percent of revenues on such contracts. The quarterly distribution rate has been increased every quarter since 2005. Recently the distribution has increased by a quarter of a cent each quarter, so the rate of increase is quite low.

The general partner units of Boardwalk Partners are 100 percent owned by Loews Corporation (L), which also holds 62 percent of the limited partnership units.

The analysts at Morgan Keegan recently upgraded BWP to outperform from market perform. UBS analysts have also upgraded their outlook, giving the stock a buy rating.

The company reports next on Oct. 30.

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Boardwalk Partners (BWP) is an energy master limited partnership with a record of steadily increasing dividend distributions. Most energy MLPs are focused on either exploration and production or pipeline transport. Boardwalk Partners is firmly in the latter camp. The...
Boardwalk,MLP,distributions,BWP
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2011-34-26
Wednesday, 26 Oct 2011 10:34 AM
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