What Investors Should Know about Boardwalk Pipeline Partners
Boardwalk Pipeline’s distributable cash flows
In the previous article, we saw that Boardwalk Pipeline Partners (BWP) generates almost 100% of its revenues from fee-based contracts. Despite these fixed fee revenues, the partnership saw a decline in its distributable cash flows. The partnership’s distributable cash flow fell to $413.3 million in 2015 compared to $449.4 million in 2014, a YoY (year-over-year) decline of 8.0%. This was due to higher maintenance capital expenditure and “a change in the timing of interest payments resulting from the issuance and retirement of debt during the year.” BWP had spent $142.5 million on maintenance in 2015.
Boardwalk Pipeline’s distributions
BWP declared a distribution of $0.10 per unit for 4Q15. BWP’s distributions have remained flat since it announced a distribution cut in the fourth quarter of 2013. Currently, the partnership is trading at a distribution yield of 2.7%.
Kinder Morgan (KMI) and Teekay LNG Partners (TGP) are the two other midstream MLPs that recently decided to cut their dividend and distribution. We might expect a similar distribution cut from some of the high yielding and highly leveraged MLPs including Crestwood Equity Partners (CEQP) and American Midstream Partners (AMID).
Boardwalk Pipeline’s capital expenditure
BWP expects to spend $720 million on growth projects in 2016, which is more than double what the partnership spent in 2015. While BWP’s growth capex is expected to double, most midstream companies have decided to slash their 2016 capital program in the wake of the decline in commodity prices. We’ll look at BWP’s plans for financing its capital expenditure in the next article. BWP forms 0.30% of the Multi-Asset Diversified Income Index Fund (MDIV).
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