Boardwalk Pipeline Partners LP

08/04/2025 | Press release | Distributed by Public on 08/04/2025 05:27

Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our accompanying interim condensed consolidated financial statements and related notes, included elsewhere in this report, and prepared in accordance with accounting principles generally accepted in the United States of America (U.S.) (GAAP), and our consolidated financial statements, related notes, Management's Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2024 (2024 Annual Report on Form 10-K).
We operate in the midstream portion of the natural gas and natural gas liquids, olefins and other hydrocarbons industry, providing transportation and storage for those commodities. We also provide ethane supply and transportation services for industrial customers in Louisiana and Texas.
Current Growth Projects
We regularly review opportunities to expand our existing facilities and footprint to meet growing demand for transportation and storage services. Recent growth of liquefied natural gas export and power generation demand has led to growth projects for us. As of June 30, 2025, we have growth projects for which we have executed precedent or long-term firm transportation agreements that are expected to increase capacity on our pipeline systems by an aggregate of 2.6 billion cubic feet per day (Bcf/d) at an aggregate cost of approximately $1.7 billion and are scheduled to be completed through 2029. These projects remain contingent upon, among other things, the receipt of required regulatory approvals and permits.
These projects have lengthy planning and construction periods and, as a result, will not contribute to our earnings and cash flows until they receive the required regulatory approvals and permits and are constructed and placed into service over the next several years. Refer to Liquidity and Capital Resourcesof this Quarterly Report on Form 10-Q for further discussion of capital expenditures and financing. Our cost and timing estimates for these projects are based on a variety of inputs such as contractor indicative bids, quotes on materials and internally-developed financial models, metrics and timelines and are subject to a variety of risks and uncertainties, including obtaining timely regulatory and permit approvals and the cost thereof, adverse weather conditions during construction, our ability to acquire and cost of obtaining the right to construct and operate on land not owned by us, delays in obtaining and shortages and price increases for key materials (including pipe, compressor stations and related equipment), tariff implications and shortages and increased costs of qualified labor. Factors in the estimates include, among other things, those related to pipeline costs based on mileage, size and type of pipe, materials, including compressors and related equipment, land, engineering and construction costs and timely receipt of all necessary permits and approvals. Actual costs and timing of in-service dates for our growth projects may differ, perhaps materially, from our estimates. In addition, failure to timely meet development milestones may result in, among other things, contractual counterparties having the ability to terminate contracts with us. Refer to Part I, Item IA, Risk Factors of our 2024 Annual Report on Form 10-K for additional risks associated with our growth projects and the related financing.
The below identifies our more significant growth projects:
Kosciusko Junction Project (Kosci project): The Kosci project is expected to increase the capacity of our pipeline system by 1.2 Bcf/d through the addition of compression facilities, the installation of 110 miles of natural gas pipeline, and other system modifications. The capacity for this project is supported by precedent agreements with utility customers, including two precedent agreements that were executed in July 2025. This project is designed to connect supply from the Haynesville, Utica/Marcellus, and Fayetteville basins to markets in the southeast U.S. that are either tied into our existing pipeline systems or will be served through third-party pipeline interconnects. This project has an expected in-service date of the first half of 2029 and remains subject to Federal Energy Regulatory Commission (FERC) approval, acquisition of land rights, and receipt of environmental permits and authorizations.
Southeast Compression for Utility Reliability Expansion Project (SECURE project):We executed two precedent agreements for the SECURE project, which is expected to increase the capacity of our pipeline system by 0.3 Bcf/d and provide additional transportation from west to east across our pipeline systems. This project is expected to increase the peak-day transmission capacity by increasing the horsepower at three existing compressor stations and constructing a new compressor station. This project supports growing energy demands and power generation needs, has an expected in-service date of the first half of 2028, and remains subject to FERC approval and receipt of environmental permits and authorizations.
Parks Line Upgrade and Sorrento Station Project (PLUSS project): The PLUSS project is expected to increase the capacity of our pipeline system by approximately 0.2 Bcf/d of incremental capacity and is supported by precedent agreements
to serve industrial and power markets in the Mississippi River corridor. As part of the project, we intend to add compression facilities, modify our pipelines and perform other system modifications on our pipeline systems. This project has an expected in-service date of the first half of 2028 and remains subject to FERC approval, acquisition of land rights, and receipt of environmental permits and authorizations.
Eunice - Iowa: This project is expected to increase the capacity of our pipeline system by approximately 0.1 Bcf/d of incremental capacity to the Lake Charles, Louisiana area and is supported by three precedent agreements. The project has an expected in-service date of the first half of 2027 and consists of the addition of compression facilities. This project was recently approved by FERC but remains subject to acquisition of land rights.
Northeast Texas Power Plant Project:This project is expected to increase the delivery capacity of our pipeline system by approximately 0.3 Bcf/d in Northeast Texas, through the construction of 16 miles of natural gas pipeline and a delivery meter that will connect to a power plant. The project is supported by a precedent agreement with a utility customer and is expected to be in-service the second half of 2027 and remains subject to FERC approval, acquisition of land rights and receipt of environmental permits and authorizations.
Ohio Power Plant Project: This project is expected to increase the delivery capacity of our pipeline system by approximately 0.3 Bcf/d in Hamilton County, Ohio, through the construction of seven miles of natural gas pipeline and a delivery meter that will connect to a power plant. The project is supported by a precedent agreement with a utility customer and is expected to be in-service the first half of 2028 and remains subject to FERC approval, acquisition of land rights and receipt of environmental permits and authorizations.
Carnation Project: This project is expected to increase the capacity of our pipeline system by approximately 0.2 Bcf/d of incremental capacity in Hamilton County, Ohio, through the installation of a compressor unit and auxiliary equipment. This project is supported by a precedent agreement with a local distribution company and is expected to support regional energy needs. It has an expected in-service date of the second half of 2027 and remains subject to FERC approval and receipt of environmental permits and authorizations.
In addition to growth projects for which we have executed precedent agreements, we regularly consider other potential growth projects at earlier stages of development. We may from time to time make public disclosures regarding these potential projects, for instance, through announcements of open seasons for potential future capacity. In addition to the risks and uncertainties described above regarding the growth projects for which we have executed precedent agreements, these potential growth projects at earlier stages of development are subject to a variety of additional risks and uncertainties as we have not reached final investment decisions or secured executed precedent agreements for them. Therefore, these potential growth projects at earlier stages of development are highly speculative and may not be consummated as contemplated in any such public disclosures or at all.
Consolidated Results of Operations
Note 2 in Part II, Item 8. of our 2024 Annual Report on Form 10-K contains a summary of our revenue contracts and the related revenue recognition policies. A significant portion of our revenues are fee-based, being derived from capacity reservation charges under firm agreements with customers, which do not vary significantly period to period, but are impacted by longer-term trends in our business, such as changes in pricing on contract renewals and other factors as discussed in our 2024 Annual Report on Form 10-K. The pricing contained in the purchase and sales agreements associated with our ethane supply services is generally based on the same ethane commodity index, plus a fixed delivery fee. As a result, except for possible timing differences that may occur when volumes are purchased in one month and sold in another month, our ethane supply services, like our other businesses, have little to no direct commodity price exposure. Our operating costs and expenses do not vary significantly based upon the volume of products transported, with the exception of costs recorded inCosts associated with service revenues. Our operations and maintenance expenses are impacted by our compliance with the requirements of, among other regulations, the Pipeline and Hazardous Materials Safety Administration Mega Rule and our efforts to monitor, control and reduce emissions, as further discussed in our 2024 Annual Report on Form 10-K.
We use earnings before interest, income taxes, depreciation and amortization (EBITDA), a measure not included in U.S. GAAP, as a financial measure to assess our operating and financial performance and return on invested capital. We believe that some investors may find this measure useful in evaluating our performance as EBITDA is a commonly used metric within the midstream industry.
The following table presents a reconciliation of net income to EBITDA (in millions):
For the
Six Months Ended
June 30,
2025 2024
Net income $ 327.5 $ 262.2
Income taxes
0.8 0.6
Depreciation and amortization 224.4 212.0
Interest expense 79.3 90.2
Interest income (4.0) (12.5)
EBITDA $ 628.0 $ 552.5
For the Six Months Ended June 30, 2025 and 2024
Our net income for the six months ended June 30, 2025, increased $65.3 million, or 25%, to $327.5 million compared to $262.2 million for the six months ended June 30, 2024. Our EBITDA increased $75.5 million, or 14%, to $628.0 million for the same period. Our net income and EBITDA increased primarily due to the factors discussed below.
Operating revenues for the six months ended June 30, 2025, increased $164.6 million, or 17%, to $1,152.6 million compared to $988.0 million for the six months ended June 30, 2024. Our transportation revenues increased $65.9 million, primarily due to re-contracting at higher rates and recently completed growth projects; our storage, parking and lending (PAL) revenues increased $16.4 million due to favorable market conditions which allowed for contracting at higher rates; and our product sales revenues increased $81.6 million primarily from higher volumes from the sale of ethane due to a customer outage in 2024, which impacted 2024 volumes.
Operating costs and expenses for the six months ended June 30, 2025, increased $99.4 million, or 15%, to $750.8 million compared to $651.4 million for the six months ended June 30, 2024, primarily from higher product costs associated with increased ethane product sales, increased depreciation and amortization expense and higher property taxes due to higher assessments and an increased asset base.
Our interest income and expense for the six months ended June 30, 2025, as compared to the same period in the prior year, were impacted by the following items:
•decreased interest expense of $10.9 million due to the pre-financing of long-term debt in 2024; and
•decreased interest income of $8.5 million due to income earned from cash invested in short-term investments in 2024 from the pre-financing of a December 2024 debt maturity.
Segment Results
In the fourth quarter 2024, we began reporting our operations under two business segments: Natural Gas and Natural Gas Liquids. Management uses Segment EBITDA, which is contained in Note 10 in Part I, Item 1. of this Quarterly Report on Form 10-Q, as a basis to assess segment financial performance and allocate resources.
The following table provides our Total Segment EBITDA and a reconciliation to EBITDA (in millions):
For the
Six Months Ended
June 30,
2025 2024
Natural Gas $ 517.9 $ 457.1
Natural Gas Liquids 110.1 95.4
Total Segment EBITDA
$ 628.0 $ 552.5
EBITDA (1)
$ 628.0 $ 552.5
(1)Refer to the reconciliation of net income to EBITDA in the table under Consolidated Results of Operations.
For the Six Months Ended June 30, 2025 and 2024
Natural Gas Segment
The Natural Gas segment's operating revenues for the six months ended June 30, 2025, increased $83.0 million or 12%, to $799.0 million, compared to $716.0 million for the six months ended June 30, 2024. Segment operating costs increased $22.2 million for the six months ended June 30, 2025, or 9%, to $281.1 million, compared to $258.9 million for the six months ended June 30, 2024. EBITDA increased by $60.8 million to $517.9 million for the same period.
EBITDA for the six months ended June 30, 2025, as compared to the same period in the prior year, was primarily impacted by the following items:
•increased transportation revenues of $62.7 million primarily due to re-contracting at higher rates, recently completed growth projects and higher utilization-based revenue;
•increased storage and PAL revenues of $21.0 million due to favorable market conditions which allowed for re-contracting at higher rates;
•decreased natural gas product sales of $3.5 million;
•decreased gains from contract settlements of $6.8 million; and
•increased property taxes of $4.9 million from higher property tax assessments and an increased asset base.
Natural Gas Liquids Segment
The Natural Gas Liquids segment's operating revenues for the six months ended June 30, 2025, increased $82.8 million, or 28%, to $379.5 million compared to $296.7 million for the six months ended June 30, 2024. Segment operating costs increased $68.1 million for the six months ended June 30, 2025, or 34%, to $269.4 million, compared to $201.3 million for the six months ended June 30, 2024. EBITDA increased by $14.7 million to $110.1 million for the same period.
EBITDA for the six months ended June 30, 2025, as compared to the same period in the prior year, was primarily impacted by the following items:
•increased ethane product sales of $80.3 million primarily from higher volumes in 2025 due to a customer outage in 2024, which impacted 2024 volumes;
•increased propane and ethylene product sales of $4.8 million due to opportunistic market conditions;
•increased product costs associated with increased ethane product sales of $75.2 million; and
•decreased operation and maintenance costs due to environmental accruals recorded in 2024.
Liquidity and Capital Resources
In the first six months of 2025,we paid total distributions of $150.0 millionto Boardwalk GP, LP and Boardwalk Pipelines Holding Corp. We anticipate that our existing capital resources, including our cash and cash equivalents, revolving credit facility and our cash flows from operating activities, will be adequate to fund our operations and capital expenditures for 2025. As of June 30, 2025, we also have an effective shelf registration statement on file with the Securities and Exchange Commission (SEC) under which we may publicly issue up to $900.0 million of debt securities, warrants or rights from time to time. We have $550.0 million of 5.95% Notes maturing in June 2026 (2026 Notes). We expect to retire the 2026 Notes at their maturity through available capital resources, including borrowings under our revolving credit facility or the issuance of debt securities. Refer to Note 6 in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.
Capital Expenditures
As described in Current Growth Projects, we are currently engaged in growth projects for which we have executed precedent or long-term firm transportation agreements with an expected aggregate cost of approximately $1.7 billion, which is expected to be spent through 2029. The majority of the capital expenditures for each of these projects is expected to be spent upon receiving the FERC approval to begin construction, which is generally 12-18 months prior to the project's in-service date. We expect to finance these growth projects through a combination of operating cash flows and the issuance of long-term debt, including borrowings under our revolving credit facility. Our cost and timing estimates for these projects are subject to a variety of risks and uncertainties, and are based on the factors, described in Current Growth Projects. Actual costs and timing of in-service dates for our growth projects may differ, perhaps materially, from our estimates. Refer to Part I, Item 1A. Risk Factors of our 2024 Annual Report on Form 10-K for additional risks associated with our growth projects and the related financing.
The nature of our existing growth projects will require us to enhance or modify our existing assets to accommodate increased operating pressures or changing flow patterns. We consider capital expenditures associated with the modification or enhancement of existing assets in the context of a growth project to be growth capital to the extent that the modification would not have been made in the absence of the growth project without regard to the condition of the existing assets.
Maintenance capital expenditures for the six months ended June 30, 2025 and 2024, were $71.3 million and $72.2 million. Growth capital expenditures for the six months ended June 30, 2025 and 2024, were $50.6 million and $124.2 million.
Guarantee of Securities of Subsidiaries
Our debt is primarily issued at Boardwalk Pipelines, LP (Boardwalk Pipelines), our wholly owned subsidiary, although we have historically also issued debt at our operating subsidiaries. As of June 30, 2025, all of the outstanding notes issued by Boardwalk Pipelines (Subsidiary Issuer) and the full amount of the revolving credit facility were guaranteed by us (Parent Guarantor). The purpose of the guarantees is to help simplify our reporting and capital structure.
We guarantee amounts borrowed under the revolving credit facility, but any amounts borrowed are not subject to the reporting requirements of Rule 13-01 of Regulation S-X (Rule 13-01). As of June 30, 2025, there were no outstanding borrowings under the revolving credit facility. The following table identifies our principal amounts outstanding for the debt that is subject to the disclosure rules of Rule 13-01 (in millions):
As of June 30, 2025
Principal amounts guaranteed by Boardwalk Pipeline Partners and subject to Rule 13-01 (1)
$ 3,150.0
Principal amounts not guaranteed (2)
100.0
Other (3)
(14.1)
Total debt and finance lease obligation $ 3,235.9
(1)This represents principal amounts of all outstanding debt at Boardwalk Pipelines subject to the disclosure rules of Rule 13-01 (the Guaranteed Notes).
(2)This represents principal amounts of outstanding debt at Texas Gas Transmission, LLC.
(3)This represents amounts related to a finance lease and unamortized debt discount and issuance costs.
The Guaranteed Notes are fully and unconditionally guaranteed by the Parent Guarantor on a senior unsecured basis. The guarantees of the Guaranteed Notes rank equally with all of our existing and future senior debt, including our guarantee of indebtedness under our revolving credit facility. The guarantees will be effectively subordinated in right of payment to all of our future secured debt to the extent of the value of the assets securing such debt. There are no restrictions on the Subsidiary Issuer's ability to pay dividends or make loans to the Parent Guarantor. The guaranteed obligations will be terminated with respect to any series of notes if that series has been discharged or defeased.
Our operating assets, operating liabilities, operating revenues, expenses and other comprehensive income either exist at or are generated by our operating subsidiaries. The Parent Guarantor and the Subsidiary Issuer have no material assets, liabilities or operations independent of their respective financing activities, which includes the Guaranteed Notes and interest expense of $75.8 million for the six months ended June 30, 2025, and includes advances to and from each other, and their
investments in the operating subsidiaries. For these reasons, we meet the criteria in Rule 13-01 to omit the summarized financial information from our disclosures.
Contractual Obligations
Our future principal payments associated with our outstanding debt obligations were $3.3 billion as of June 30, 2025, and December 31, 2024. Additionally, as of June 30, 2025, we have future capital commitments comprised of binding commitments under purchase orders for materials ordered but not received totaling approximately $279.4 million, which are expected to be settled through the end of 2028. Refer to Notes 5 and 6 in Part I, Item 1. of this Quarterly Report on Form 10-Q and Note 12 in Part II, Item 8. of our 2024 Annual Report on Form 10-K for more information on our future capital commitments, financing activities and debt obligations.
Critical Accounting Estimates and Policies
Certain amounts included in or affecting our unaudited condensed consolidated financial statements and related disclosures must be estimated, requiring us to make certain judgments and assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in our condensed consolidated financial statements. We review our estimates and assumptions on an ongoing basis, utilizing historical experience, consultation with third parties and other methods we consider reasonable. Nevertheless, actual results may differ materially from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the periods in which the facts that give rise to the revisions become known.
During 2025, there have been no significant changes to our critical accounting policies, judgments or estimates from those disclosed in our 2024 Annual Report on Form 10-K.
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q, as well as some statements in our other filings with the SEC and periodic press releases and some statements made by our officials, and us and our subsidiaries in presentations about us, are "forward-looking." Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance, intentions or achievements, and may contain the words "expect," "intend," "plan," "anticipate," "estimate," "believe," "will likely result" and similar expressions. In addition, any statement concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects and possible actions by us or our subsidiaries, are also forward-looking statements.
Forward-looking statements are based on current expectations and projections about future events and their potential impact on us. While management believes that these forward-looking statements are reasonable as and when made, there is no assurance that future events affecting us will be those that we anticipate. All forward-looking statements are inherently subject to a variety of risks and uncertainties, many of which are beyond our control, which could cause actual results to differ materially from those anticipated or projected. These include, among others, the impacts of legislative and regulatory initiatives, including tariffs, or the implementation thereof, the impacts of climate change, environmental, social and governance matters and pipeline safety requirements and initiatives, the costs of maintaining and ensuring the integrity and reliability of our pipeline systems, our ability to complete growth projects that we have commenced or will commence at budgeted amounts and within the projected timeframes, recontracting at acceptable rates, the risk of a failure in computer systems or cybersecurity attack, successful negotiation, consummation and completion of contemplated transactions, projects and agreements, risks and uncertainties related to the impacts of volatility in energy prices and our exposure to credit risk relating to default or bankruptcy by our customers. Developments in any of these areas could cause our results to differ materially from results that have been or may be anticipated or projected. Forward-looking statements speak only as of the date they are made and we expressly disclaim any obligation or undertaking to update these statements to reflect any change in our expectations or beliefs or any change in events, conditions or circumstances on which any forward-looking statement is based.
Refer to Part I, Item 1A. of our 2024 Annual Report on Form 10-K for additional risks and uncertainties regarding our forward-looking statements.
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