Boardwalk Pipeline Partners: An Energy Spin-off Worth Noting

Dec.13.06 | About: Boardwalk Pipeline (BWP)

Starting today I am going to highlight some of the names from the Clear Spin-off Index.

Owensboro, Kentucky headquartered Boardwalk Pipeline Partners (NYSE:BWP) is a natural gas transportation and storage company that was spun off from Loews Corporation (LTR). It was spun-off just over a year ago on 11/10/05.

BWP operates approximately 13,470 miles of pipeline through two interstate pipeline systems that it owns. At a current market capitalization of over $3.0 billion, the firm services customers in 11 southeastern and northeastern U.S. states through their subsidiaries Texas Gas Transmission and Gulf South Pipeline Company.

Generating $607.06 million in revenues in the past year, BWP clients are municipalities, local gas distribution companies, industrial users, electric power generators, marketers, producers and others. BWP also offers natural gas storage facilities through 11 underground storage fields. BWP has set its sights on expansion within its specialty market of the eastern U.S. and is currently concentrating on a commitment of $1.1 billion for a Gulf Crossing pipeline. This project is a projected 355 miles of 42-inch interstate natural gas pipeline that will transport gas from Oklahoma and Texas to Southeast markets. It is financing a portion of this through an equity offering, another plus of being spun-off.

Its profitability is reflected in the past year operating margin of 40.66%, which is over four times the 10.09% peer group average posted in the oil and gas pipelines sector. Additionally, in the past year, BWP’s gross margin of 71.95% trounces the industry average of 18.27%. Its price to book [P/B] measurement of 2.15 is also materially less than the 2.81 average P/B of its peers.

With all of these undeniably strong fundamentals, the market is still assigning a lower price to earnings [P/E] ratio for BWP than its peers. This is perhaps due to its lagging in quarterly revenue growth; posting 10.00% growth the most recent quarter compared to its peer group average of 27.40%. Currently BWP has a trailing one year price to earnings [P/E] ratio of a 16.96 which is significantly below the industry average of 23.90. Taking into account its fundamentals, we discover how this constituent made it into the Clear Spin-Off Index. Our algorithms calculate a high probability that there very well be material room for stock price appreciation and continued success for this spun-off firm.

BWP 1-yr chart
BWP 1-yr chart

Disclosure: Boardwalk Pipeline Partners (BWP) is a constituent in the Clear Spin-Off Index