Boardwalk Pipeline Partners' (BWP) CEO Stan Horton on Q2 2016 Results - Earnings Call Transcript

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Boardwalk Pipeline Partners, LP (NYSE:BWP)

Q2 2016 Results Earnings Conference Call

August 01, 2016 09:30 AM ET

Executives

Molly Whitaker - Director, IR and Corporate Communications

Stan Horton - President and CEO

Jamie Buskill - CFO

Analysts

Jeremy Tonet - JP Morgan

Elvira Scotto - RBC Capital Markets

Christine Cho - Barclays

Richard Verdi - Ladenburg

John Edwards - Credit Suisse

Shneur Gershuni - UBS

Ryan Levine - Citi

Sharon Lui - Wells Fargo

Operator

Good day ladies and gentlemen and welcome to the Boardwalk Pipeline Partners Second Quarter 2016 Earnings call. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Molly Whitaker, Director of Investor Relations and Corporate Communications. Ma’am, you may begin.

Molly Whitaker

Thank you, Shannon. Good morning everyone and welcome to the second quarter 2016 earnings call for Boardwalk Pipeline Partners. I’m pleased to be joined today by Mr. Stan Horton, our President and CEO, and Mr. Jamie Buskill, our CFO.

If you would like a copy of the earnings release associated with this call, please download it from our website at www.bwpmlp.com. Following our prepared remarks this morning, we will turn the call over for your questions.

We would like to remind you that this conference call will include the use of statements that are forward-looking in nature. Statements in this earnings call related to matters that are not historical facts are forward-looking statements. These statements are based on management’s beliefs and assumptions using currently available information and expectations. Actual results achieved by the Company may differ materially from those projected in any forward-looking statements, due to a wide range of risks and uncertainties including those that are set forth in our SEC documents. The Company expressly disclaims any obligation to update or revise any forward-looking statements made during this call.

I would also like to remind you that during this call today, we may discuss certain non-GAAP financial measures such as EBITDA and distributable cash flow. With regard to such financial measures, please refer to our earnings release for reconciliation to the most comparable GAAP measures.

Now, I would like to turn the call over to Stan Horton.

Stan Horton

Thank you, Molly, and good morning everyone. I hope you’ve had a chance to review the press release we issued this morning. In addition to reporting earnings, we announced the quarterly distribution of $0.10 per unit or $0.40 annualized.

I will provide a commercial update and then Jamie will cover the second quarter financial results.

Two of our major growth projects recently commenced service on time and on budget and two additional growth projects will commence service in the coming weeks, and are currently also on time and on budget. Our Ohio to Louisiana Access project commenced service on June 1. With this project, our Texas Gas system is now truly a bidirectional pipeline. Our Southern Indiana Lateral project, which serves an industrial customer, was placed into service in late June. The Western Kentucky Lateral which serves a new natural gas power plant is expected to commence service in the third quarter. The project to serve a power plant in South Texas is also expected to be placed into service in the third quarter.

I am very pleased with the ability of our operations and construction groups to bring these important projects in as planned.

Now, let me update you on our other growth projects that are currently under development.

Construction of the Northern Supply Access project began in July. We have made the decision to defer the capital related to the 100,000 MMBtu a day that is currently unsold and at this time only construct for the current contracted volume of 284,000 MMBtu a day. As a result, we will reduce our capital estimates for this project from 310 million to 230 million. This decision will generate similar project return while we take steps to preserve the option to construct for the remaining 100,000 MMBtu a day as the market interest in the project increases. We still anticipate that the 284,000 MMBtu a day of capacity will be in service in the first half of 2017.

We are also progressing with construction of our Boardwalk Louisiana Midstream project to provide ethane and ethylene transportation and storage services for Sasol’s new ethane cracker and derivatives complex. We expect this project will commence service in late 2017.

Our Brine Supply project is proceeding on schedule and is expected to commence service in 2018. In June, we obtained the first certificate to build the Coastal Bend Header project which is the largest of our current growth projects. All of the firm transportation agreements associated with this project have been executed and preliminary construction activities are under way. This project is expected to commence service in 2018.

In addition to the projects I just discussed, we have added three new commercial projects that total approximately 65 million in capital. These three projects are consistent with our strategy to add new and used markets to our natural gas system and to grow our liquids related business. Two of the new projects are Boardwalk Louisiana Midstream. We recently executed new long-term contract to provide ethylene transportation and storage services to two petrochemical customers in Louisiana.

The first project will provide transportation and storage services at our Choctaw Hub and includes transportation on our Evangeline ethylene pipeline. The contract term is 10 years and the expected in-service date is early 2018. The second project is to provide transportation and storage services at the Sulphur Hub. The contract term is 15 years and the expected in-service date is late 2017.

We also recently completed a successful open season on Gulf South to serve a proposed power generation facility in the Mississippi River corridor area of Louisiana. The expected in-service date for the project remains subject to the power plant receiving approval and other regulatory approvals is 2018. We have filed a certificate for this project with the Federal Energy Regulatory Commission. The project is anchored by an approximately 130,000 MMBtu a day 10-year preceding agreement.

In summary, we continue to make progress in executing our growth strategy including the recent completion of projects placed into service, all on-time and within budget. We’ve invested approximately $400 million in our current slate of growth projects, and our project backlog now stands at approximately $1.2 billion including the newly announced growth projects discussed today. Financially, we’re seeing the benefits of our efforts. While there is still a lot of work to do, I’m very pleased with our performance during the first half of 2016.

Now, let me turn the call over to Jamie to discuss our financial results.

Jamie Buskill

Thank you, Stan, and good morning everyone. For the quarter, we reported revenues net of fuel and transportation expenses of $295 million, an increase of $21 million or 8%. This increase was primarily due to the receipt of approximately $13 million of proceeds from the settlement of a legal claim, higher storage, and parking and lending revenues due to favorable market conditions, and the return to service of our Evangeline pipeline in mid-2015. During the second quarter of 2015, our revenues were favorably impacted by the receipt of approximately $6 million from business interruption insurance proceeds.

We transported approximately 562 TBtu of natural gas and approximately 16 million barrels of liquids in the second quarter of 2016. As part of the Gulf South rate case settlement starting April 1st in this year, most of the fuel activity for Gulf South is now part of a fuel tracker, meaning the Company is no longer at risk for under or over recovery of the fuel volume subject to the tracker. From an accounting standpoint, starting April 1st, the related fuel will no longer run through the income statement. This change affects our gross revenues and the offsetting fuel expense line item that is not material to the bottom-line.

Excluding fuel and transportation expenses and depreciation, we recorded operating expenses of $106 million for the quarter, which was comparable to the $107 million reported from the second quarter of 2015. Net income was $66 million, an increase of $26 million or 63% from $40 million for the comparable period last year. EBITDA for the quarter was $190 million, an increase of $23 million or 14%. Net income and EBITDA reflect the increases in operating revenues. We generated $129 million of distributable cash flow for the quarter compared to $92 million generated in the second quarter of 2015.

Distributable cash flow reflects the operating revenue increases as well as lower maintenance capital expenditures for the quarter. In the second quarter, we invested $153 million in capital expenditures, which includes $126 million in growth capital and $27 million in maintenance capital. Year-to-date, we have invested $259 million in capital comprised of $218 million in growth capital and $41 million in maintenance capital. Primarily due to the reduction in capital for the Northern Supply Access project that Stan discussed earlier, we are reducing our 2016 total capital expenditure forecast from $850 million to $760 million. Our maintenance capital estimate will remain at $130 million but our growth capital estimate is now $630 million.

As we have discussed before, we’re in the middle of building out our major projects and we have major construction activities planned for later this year and into 2017, so timing of capital expenditures could change as the year progresses.

I would like to take a few minutes to discuss some of the continuing steps we are taking to improve our liquidity position. In May, we issued $550 million or 5.95% 10-year bonds. The proceeds will be used to retire our $250 million 5.875% bonds that mature in November of this year and our $300 million 5.50% bonds that mature in February 2017. In the interim, we use the funds to pay down our credit facilities and sign capital projects. And we ended the quarter with $162 million in cash.

Effective today, we also extended the borrowing period under our $300 million subordinated loan agreement with our general partner by two years from December 31, 2016 to December 31, 2018. We have not utilized this facility. Also effective today, we exercised a one-year extension option on our credit facility, extending the maturity date from May 2020 to May 2021. I am pleased to announce that all but one bank participated in the extension, resulting in $1.475 billion being extended from May 2020 to May 2021. Currently, we do not have any amount drawn on our credit facility.

The last step we have taken is merely a housekeeping item. The equity distribution agreement supporting our aftermarket equity program expired earlier this year, and we will file an updated agreement this week to refresh the program. Again, this is a housekeeping item. As we’ve stated before, based on our current slate of projects and our current forecast, we do not anticipate the need to issue equity this year.

Finally, I will provide an update on where we stand regarding our debt metrics. We ended the quarter with our debt to EBITDA ratio at 4.79 times based on our trailing-12 month reported EBITDA. If you net the debt by the amount of cash we are carrying on the balance sheet, the ratio drops to 4.58 times. This compares to the 5.22 times that we reported last year at this time. We had another good quarter with positive financial results. With $162 million in cash, all $1.5 billion of our credit facility available as well as all of the $300 million subordinated debt arrangement and by extending the maturity date on our credit facility, we continue to take steps to improve our liquidity to help find our upcoming debt maturities and capital projects.

That concludes my remarks. I will now turn the call over to the operator for questions.

Question-and-Answer Session

Operator

[Operator instructions] Our first question comes from Jeremy Tonet with JP Morgan. You may begin.

Jeremy Tonet

With regards to the growth projects that you guys announced this morning, just wondering if you could talk, speak a little bit to the type of economics that you might see on these projects or kind of what your targets are with new growth CapEx going forward, as far as hurdle rates are concerned?

Stan Horton

Well, I’ve been asked that question a lot and I’ll give you the answer that I always give people. We don’t give individual project rate of returns. But, on our interstate pipelines, these are good solid regulated rate of return type projects and will continue to be so. Some are a little bit above the regulated rate of returns, some are a little bit less than, but over time these are good solid regulated returns when you see them in the aggregate.

Jeremy Tonet

And do you see more opportunity for projects like this coming together?

Stan Horton

We do. I’ve said in the past that I kind of look at the deal flow that goes through our commercial group, not every deal that they work on is going to wind up into fruition. But if you kind of look at the deal flow from time to time on things that they’re working on, I’m pretty bullish that we’re going to continue to see these kind of projects in the future. We’re still seeing a lot of demand growth in electric generation. Not every LNG facility has every bit of contracts that they need. I do believe in the years ahead, there’ll be additional ones constructed. We’re seeing some growth in the river corridor area for industrial. So, yes, I’m pretty bullish. I like the project flow that’s going through our commercial groups.

Jeremy Tonet

Thanks for that. That’s encouraging. There’s been kind of a growing trend out there I think with midstream companies partnering with utilities. Could you speak to -- do you see any type of opportunities like that being on the horizon for you guys?

Stan Horton

Well, it’s difficult to talk about what may be on the horizon. We’re kind of focused on our own growth prospects. You just never know what may materialize in the future, but we don’t tend to worry about what may happen. We just kind of concentrate on the projects at hand and the growth projects that we have in hand and the rest of it will take care of itself over time.

Jeremy Tonet

Fair enough. And then just one last one if I could. 4.58 debt to EBITDA seems like that’s really kind of come in over the past year or so. Just wondering if you could kind of refresh us with your philosophy as far as where you want to see the balance sheet before you will look to increase the distribution in any sense?

Stan Horton

Yes. We’ve been pretty consistent with that since the February 2014 when we took the initiative to reduce the dividend. We said at that time, we wanted to see our debt to EBITDA in the low 4 times. That’s not a snapshot. We want to see at the low 4 times and we want to see it at the low 4 times on a sustainable basis. So, when we see a line of sight that that’s going to happen and we can start talking to our Board about what we may want to do on the dividend. But, we still got growth projects that need to be placed into service. We’re not quite there yet.

Operator

Thank you. Our next question is from Elvira Scotto with Royal Bank of Canada Capital Markets. You may begin.

Elvira Scotto

Hi, good morning. Question on the new projects that are tied to Boardwalk Louisiana Midstream, are those all backed by take or pay contracts?

Stan Horton

Yes. As I mentioned, one is a 10-year contract and the other one is the 15-year contract.

Elvira Scotto

Okay, great. And I know you guys said that you’re going to move forward with Northern Supply Access at 284,000 MMBtu. But, are you still actively marketing the other 100,000?

Stan Horton

We are. And in addition to the other 100,000, I’ve said on previous calls that our total capacity that we can do on north to south flows on our Texas Gas is a total of 1.3 Bcf. So, in addition to the 100,000, we’ve got about another 280,000 that can be marketed. With the low commodity rates and drilling that come down, we saw less interest in that. I mean, if we had to subscribe, we wouldn’t be cutting back on the 100,000. I do believe in time that we’ll get the entire 1.3 Bcf a day subscribed. But, I think it’s going to take a little bit of time. I think it’s going to take prices going back to the level that’s going to spur a little bit more drilling, and with the drillings comes the volume. So, as I’ve said in the past, we need to be patient. And I think we’ll be rewarded with that patience.

Elvira Scotto

Thank you. That’s helpful. And then, just the last question for me. Following up on the kind of what you need to see to restart distribution growth I know you guys have said that you don’t expect to issue any equity in 2016 and you still have -- you’ve extended actually the low-sub debt. But conceptually, given your coverage ratio and cost of equity, would you consider issuing equity, just to delever more quickly, so that Boardwalk can reduce leverage faster and restart distribution growth sooner?

Jamie Buskill

Hi. This is Jamie. We can’t comment on what we may do in the future. Our goal right now is just to make sure we have plenty of liquidly in place. We have the bulk of our capital expenditures that will occur over this year and through next year, and that’s really what we’ve been focused on right now.

Operator

Thank you. Our next question is from Christine Cho with Barclays. You may begin.

Christine Cho

I just wanted to follow-up on the deferred CapEx for Northern Supply for the unsold 100 million a day. The deferred CapEx, what does that exactly entail; does that just mean you’re installing less compressor stations?

Stan Horton

Yes. So that’s basically -- it’s a compression-only project and we just reduced the amount of horsepower that we have to put on the project. There is other smaller facilities; but primarily, it’s less compression.

Christine Cho

Okay. And then, Gulf Crossing has a bunch of contracts rolling off in 2019, and I know it’s a ways off. But we are starting to hear some producers contemplate going back into other plays, other than the Marcellus and Utica, like the Haynesville. Is there any thought and maybe lowering the tariff today to incentivize drilling in exchange for an extension of the contract? Just curious as to what the appetite is for that on your own end and the producers?

Stan Horton

Well, I’m not going to, on a earnings call, talk about what our commercial strategies may be with our customers in that area. Suffice it to say that we do recognize that we have contracts and a large amount of contracts rolling off on Gulf Crossing in the latter part of 2019. Those customers are important customers to us; we’re in contact with them just almost on a weekly basis, and we continue to work the problem with them. And we’ll continue to do so. But I really don’t want to get into what the commercial strategy may be.

Christine Cho

Okay. And then, what was the settlement of the legal claim related to?

Jamie Buskill

That was a confidential settlement, that’s all we can basically disclose regarding that.

Christine Cho

Well, did you guys take a charge for it in prior quarters?

Jamie Buskill

It’s safe to say that we didn’t see the EBITDA contribution in prior quarters that we would have seen absent the issue.

Christine Cho

Okay. And then, last question for me. O&M seems like it was light for the quarter. What was driving that and should we expect that to continue?

Jamie Buskill

Well, if you look for the year-to-date, it’s closer to in line the last year. And it has to do with our maintenance projects that are expensed rather than capitalized, and it’s merely a timing issue as to when those projects take place.

Operator

Thank you. Our next question is from Richard Verdi with Ladenburg. You may begin.

Richard Verdi

Actually all my questions have pretty much been addressed, but I have a follow-up to a couple of the earlier callers’ inquiries pertaining to distribution. First, I guess with coverage so high and the favorable growth prospects in front of the Company, is there any chance that Boardwalk might wretch it off that threshold from the low 4s to 4.5 times? And secondly, from a modeling perspective, when we think about the low 4s, because Jamie, you had mentioned when you add cash into the debt, you’re looking from a net debt perspective. Could we maybe think that, okay, leverage might be at 4.5 times, but on a net debt level LTM it could be 4.3 times, and that’s when the distribution could potentially be raised? I am just hoping, you could give me some color for that.

Jamie Buskill

First of all, I think we’ve been very consistent as to what our targets are on our debt to EBITDA metric. So, that hasn’t changed for several years. Just to remember this, even our ratio right now in the trailing 12 months has come down, we still have a lot of capital expenditures to take place over the next 18 months. So, you will see that trend up over the short term because of the negative carry that happens when you build out these long lead time projects. As Stan mentioned, our biggest project Coastal Bend, we’re really just starting on that. So, you’ve got to get through these projects. There is always a risk when you build projects. So far, we’ve been on time, on budget and everything is looking good in that regards that we would like to get more of risk behind us.

Operator

Thank you. Our next question is from John Edwards with Credit Suisse. You may begin.

John Edwards

Yes. Good morning, everybody and congrats on a nice quarter. Just may be extending a little bit Christine’s question on the future contract rollovers. Stan, are you starting to have discussions on extending those contracts, is there any color you can give us there?

Stan Horton

Suffice it to say that we have discussions with our customers just constantly, they are ongoing. We want to know what their plans are. So, they are just ongoing. I am not going to get into, on our earnings call again, our commercial strategies and what our private discussions are with our customers. But, we understand what the issue is out there. And we’re focused on it, we’re very focused on that. And our customers understand that those contracts roll over and that they have choices to make, and they’re focused on it too. So that’s about all I can say about it right now.

John Edwards

Okay, fair enough. And then, it sounds like your commercial development activities are going pretty well. Would you say at this point there’s been over the last year say an increase in potential development opportunities, you think it’s about the same or do you think it’s fallen off a bit?

Stan Horton

Well, we went through a 12-month period where we were very, very fortunate that our work paid off that we were able to announce $1.6 billion worth of growth projects coming about a three-year period. And it’s hard to do that year after year on a company our size, and I wouldn’t expect that. I mean it’s -- the Coastal Bend by itself was a $720 million project. But, when I look at the drawing board and I look at the project that we’ve got, I’m very comfortable that the deal flow is moving forward. I can’t say that we’re going to announce another $1.6 billion worth of projects over the next 12 months, but I do think that the projects that we’re working on are going to give us some good sustainable growth going out in the future. And that’s what we are concentrating on.

John Edwards

Just for modeling purposes, would you say you know maybe an annual capital spend going forward might be sort of in the $500 million range, is that something that would be fair, can you comment on that?

Stan Horton

My good friend and CFO, Jamie Buskill has the same, he says we don’t give guidance on that. So, I’m going to follow back to Jamie Buskill and say we don’t give guidance on that.

John Edwards

You have to admit, I have to try.

Stan Horton

Jamie was kicking me under the table so.

John Edwards

Okay, well fair enough. I was trying maybe to speak to that, but anyway. One of the other major players involved in ethylene, ethane exports and so on. One of the comments that was made on another call was that there might be a bit of a glut of ethylene coming while the steam crackers coming on. And I’m just wondering what your thoughts are in regard to that and how you think it might impact some of the pipeline projects you’ve got with transporting natural gas liquids, ethane and so on.

Stan Horton

We’re seeing still some pretty good demand, just like the projects that I just announced. So, for us, we’re doing fine. And I like the projects and the deal flows that are going on into Boardwalk Louisiana Midstream. So, in think we’re positioned very well there.

John Edwards

Okay. And so with the kind of the coming demand for ethane, kind of the market discussion here is around 700,000 barrels a day is currently being reject -- or maybe 600 being rejected, but there’s over the next few years probably about 700,000 of demand coming and maybe 300,000 barrels a day of exports, and that -- in light of that you feel that there is going to be some good project opportunities for you maybe in the Evangeline area. Would that be fair?

Stan Horton

I do. That’s fair.

Operator

Thank you. Our next question is from Shneur Gershuni with UBS. You may begin.

Shneur Gershuni

Most of my questions have asked many different ways with fewer answers than expected. But let me try couple of different questions, if I may. First, the D.C. Circuit Court decision remanding the case back to FERC, do you see that is having any potential impact, if it shakes out the way the Court sort of thought about it? I was wondering if you can opine on that.

Stan Horton

Yes, I’d glad too. I spent some time with Mike McMahon, our General Counsel, when that came out. And it looked like to us, that was case specific to where the judge remanded back to FERC, based upon the fact that he didn’t like the record that the FERC presented in that particular case. We think it is case specific. We think that the FERC has another chance to go back and fill in the record. We don’t think it was attack on the Lakehead decision. In fact, we thought it was remand of a specific case back to FERC to augment the record and asked the FERC to do a better job. So, that’s the way that we read it. Could it be read more expansively, I guess, it could. But again, if you read through it, you’re not really seeing a direct attack on the Lakehead decision, which is the law of today.

Shneur Gershuni

Okay, cool. And as a follow-up, I think Jamie, you’ve sort of gone back and forth with this a little bit here. When we think about the leverage today and we think about $1.2 billion backlog, and when I sort of think about the seasonality of your OpEx cost being a little bit on the wider side today, obviously we’ve done a good net debt-to-EBITDA number. How do you think about the cadence over the next 12 months? You have two more projects starting up this quarter, you’ve got some more but you also have some big projects. Do we trend up to 4.5, do we trend up to 5, do we go down to 4? You sort of seem to indicate with CapEx, we’re going to trend up a little bit at some point. But when do you feel that get on this glide path that the magical 4.0 is actually going to be achieved?

Jamie Buskill

What I am referring to on the next 6 to 18 months is because you do have a $1.2 of capital going in and you have the negative carry. If you look at it from a trailing 12-month, you’re going to see the ratio go up slightly because of that. Now, people look at that ratio different ways. You can also argue that some of these projects, as they come on line, the construction risk is behind you. So, you should be getting EBITDA credit for those projects rather than waiting 12 months before you get a full year’s worth to your income statement. So, it depends on how you look at, how much it may go up or if it’s going up at all. But, again, that’s what I’m referring to as, when I say, we’ll say a slight increase in that ratio due to construction.

Shneur Gershuni

Well, I guess the best question is when you think about the forward distribution policy; which way do you look at it, do you look at it next 12 months or do you look at it trailing 12 months, do you give the credit, do you look at the blend between the two ratios? I mean, how do you…

Jamie Buskill

We look at a lot of things. We look at the debt to EBITDA ratio. And again, as Stan mentioned, that has to be on a sustained low 4 times. But there is other factors we look as well that go into that decision. So, the ratio is important, but it’s not the only factor. And I’m not going site here and walk through all those things that we look at and our Board looks at and coming with where the distribution should be.

Shneur Gershuni

I was more which -- do you look at it trailing or do you look at it forward, I men which is the one that you choose?

Jamie Buskill

Okay. I look at it both ways quite frankly. I look at the trailing because there are certain metrics that the trailing comes into play; also look at it on a pro forma basis, that’s what our covenant is based on, on our credit facility. Because on a pro forma, again you have risk of construction, so really dependent on where we are in the cycle of the construction project and how much risk is behind us versus in front of us. So, it really depends on the situation.

Shneur Gershuni

So, is it fair to conclude that sort of based on your comments on how you think about where leverage will go up and down over the next 6 to 18 months that we really shouldn’t be asking about your distribution policy for the next 12 to 18 months, or is it something that we should be thinking about sooner than that?

Jamie Buskill

Well, you can ask, but you’re probably going to get the same answer; we’re not going to provide guidance on that. I am happy with the progress we’ve made. I think we’re in a much better position today than we were in early 2014. But again, we still have a lot of construction left to go. And the next 18 months, we’ll be focused on that construction.

Shneur Gershuni

May be I can ask Stan a different question here. Has the Board established guidelines for you guys as management as to when they expect you to hit these numbers and targets; and are you on target with the Board’s expectations?

Stan Horton

I would say that we have goals and objectives as an organization that we agree to every year with the Board. And then, I along with the management team, are evaluated against those goals and objectives. And those goals and objectives are reviewed with the Board every year about whether we hit them or not that include both the financial and non-financial goals and objectives. So, I would say, we’re just about like any other company that along those lines.

Shneur Gershuni

Now, do you foresee at any point in time actually sharing and making this more of a transparent process because if you sort of look at the conference calls for the last two years, this question just constantly comes up, and we don’t sort of have a sense as to when you’re supposed to hit that. So, I guess that’s why you sort of had a series of questions today from many different sell side analysts asking that question. I was just wondering if there has been any thought to sort of maybe lay out sort of the plan for the next 12 to 18 months or if the plan is to just sort of stick where it’s at right now?

Stan Horton

I think we’ve been very, very consistent that we just do not provide forward guidance. So, it’s not done within the organization, it’s been our history for quite some time, and quite frankly, I don’t see that changing. We try to give people as much guidance as to our overall strategy and why we’re doing things, but we just do not give forward guidance.

Operator

Thank you. Our next question is from Ryan Levine with Citi. You may begin.

Ryan Levine

Hi, good morning. Do you see any additional expansion opportunities on Texas Gas as power generation in the Midwest retires? And is there any way to quantify potential opportunities there.

Stan Horton

Yes, I do. Texas Gas has been one of our pipelines that has had a lot of growth in power generation. We do expect that to continue. We expect more growth on Texas Gas to move Marcellus Utica gas on north to south. We have seen some growth on Texas Gas in the industrial segment. And one of our projects that’s ongoing right now is in industrial load. So, we’ve been very happy with the growth on Texas Gas. That pipeline has been operating very, very nicely for us.

Ryan Levine

Are there specific power plants that the retirement of which would create meaningful opportunities for you?

Stan Horton

There are but I’m not going to mention them. I mean, quite frankly, we get a lot of this information from our customers. I don’t know which of that information or customers have made public. And I just don’t like talking about what my customers’ plans are on a earnings call.

Jamie Buskill

I might add, if you look globally though, and I believe we have a slide out there on our website, there are quite a few coal fired plants that are over 40 years of age near our system. So, you would anticipate over time some of those will get replaced with natural gas fired facilities.

Operator

Thank you. Our next question is from Sharon Lui with Wells Fargo. You may begin.

Sharon Lui

So, your current portfolio of investments focused on pipeline and petchem projects. Given the anticipated improved outlook on NGL, what’s your appetite to increase your exposure to G&P assets?

Stan Horton

We do have a gathering and processing, it tends to be fairly small. I would say this, we -- the gathering and processing business has a different risk profile from our other businesses. If an opportunity created itself to where there is a gathering and processing opportunity that was near one of our pipeline systems where it provided some commercial synergies and operational synergies and made sense for us, it would be something that we would certainly look at. Do we view ourselves as trying to change the risk profile of Boardwalk by going out and trying to make a large gathering and processing acquisition? I would say that’s a no. I don’t think that our investor base wants us to change the profile of Boardwalk, and gathering and processing is a different risk profile than the rest of our business. And that’s not to say that we wouldn’t do something that is a bolt-on type acquisition that would enhance either our current business or drive some supply into our interstate pipeline systems, but they would need to have that type of synergy for us to really be interested in it.

Sharon Lui

And just as a quick follow-up, understanding that the G&P business is a small portion, what are you seeing I guess in terms of the Eagle Ford volumes, is the pace of the clients dropping?

Stan Horton

You’re certainly seeing some pullback and drilling on the Eagle Ford, there has been a lot of the DUCs being completed. We’re not seeing as much of a call back on price, but you are seeing some. Hopefully that drilling will increase in there, if prices start getting high enough. We would like to see some drilling, not only in the liquids rich area, but in the dry gas areas too. So, we could certainly think more drilling there, when prices get better. That’s for sure.

Sharon Lui

Okay. And Jamie, just a follow-up on the fuel and transportation expenses and the year-over-year decline you’re seeing that that is a function of the rate case and we should expect that number to be lower going forward offset by the impact from revenues?

Jamie Buskill

That was one of the biggest drivers for the reduction in fuel and transportation expense. And yes, of course, there will be a lower number related to that fuel tracker on the expense line, but there is a corresponding reduction in transportation revenues as well. So, again, the bottom-line impact is minimal.

Operator

Thank you. I’m showing no further questions at this time. I’d like to turn the call back over to Molly Whitaker for closing remarks.

Molly Whitaker

Once again, we’d like to thank you for joining us this morning and for your continued interest in Boardwalk Pipeline Partners. As a reminder, an online replay of this call is available on our website at www.bwpmlp.com. This concludes today’s conference call. Thank you. And have a great day.

Operator

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. Have a wonderful day.

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