Boardwalk Fully Committed on New Pipeline (BWP, CHK)

Boardwalk Pipeline Partners LP (NYSE:BWP) announced that it has signed a 10-year binding agreement with Chesapeake Energy (NYSE:CHK) for natural gas transportation on Boardwalk’s new Fayetteville Lateral pipeline. The pipeline is expected to begin operations in the third quarter and reach its phase-one capacity of 800 million cf/d during the first quarter of 2009. Full capacity of 1.3 billion cf/d is expected in 2010. Originally targeted at a capacity of 1.2 billion cf/d, the deal with Chesapeake will require additional compression facilities and further approval from the FERC.

Boardwalk stock dropped more than $3.00 last week after its follow-on offering of 10 million shares priced at $25.30. Boardwalk previously announced that it had fully committed its new Gulf Crossing pipeline at 1.4 billion cf/d. That pipeline is scheduled to be in full operation in 2011.

The company surely hopes that today’s announcement gives the stock a little boost. EPS for the first quarter of 2008 was $0.60; average analyst estimates for the second quarter are $0.35 EPS. That seems a bit gloomy, given that the latest stock offering only increased outstanding shares by about 9%. So far today Boardwalk shares are up about 0.5% at $25.13 in the first ten minutes of trading.

Paul Ausick
June 16, 2008