Boardwalk Pipeline Partners LP, the natural gas transporter majority owned by Loews Corp., tumbled the most in almost four years after slashing quarterly payments to investors 81 percent as cash flow drops.
Boardwalk fell 46 percent to $13.01 at the close in New York, the biggest decline since it began trading publicly in 2005. The owner of 14,450 miles (23,250 kilometers) of pipelines plans to lower its quarterly distribution to 10 cents a unit from 53.25 cents, the Houston-based partnership said in a statement today.
Increased U.S. gas production has reduced transportation rates and revenue from storage services is expected to decline, Chief Executive Officer Stanley Horton told analysts on an earnings conference call today. “Because our transportation and storage revenues are continuing to face substantial market headwinds, we do not perceive these conditions changing appreciably over the next 12 to 24 months,” he said.
Cash saved from cutting the distribution will be used to reduce debt and the partnership doesn’t plan to sell additional units this year. A subsidiary of Loews has agreed to provide as much as $300 million in subordinated debt to fund Boardwalk’s capital expenditures this year as well as financial support for the proposed Bluegrass pipeline project, a joint venture with Williams Cos. that would bring gas from the Marcellus and Utica shale formations to the Gulf Coast.
“Once-stable long-haul pipes had been deteriorating due to Midwestern gas oversupply,” Tudor Pickering Holt & Co. said in a note to clients today. The company might be considering a sale of the pipeline partnership now that cash flow is “less meaningful,” according to the note.
Loews, a holding company owned by New York’s Tisch family, fell 4.3 percent to $43.26, the biggest drop since July 2012.