UPDATE: J.P. Morgan Downgraded Boardwalk Pipeline Partners
In a report published Monday, J.P. Morgan analyst Jeremy Tonet downgraded Boardwalk Pipeline Partners, LP (NYSE: BWP) from Neutral to Underweight.
Tonet commented on Boardwalk's unfavorable risk/ reward profile based on challenging natgas operating environment. The challenging natgas T&S fundamentals "has driven lower contract renewals and deteriorating baseline transportation and storage revenues. The prolific production of the Marcellus at the northern end of BWP's system is a primary contributor to this structural challenge, a trend that we do not see reversing any time soon." Boardwalk expects an approximate $40M loss of contract renewals.
J.P. Morgan noted that BWP's near-term growth and Bluegrass pipeline remain uncertain. The analyst reported that competitor initiatives increase the uncertainty of the Bluegrass prospects given Boardwalk's "lack of a completion of a binding open season." Further risk weighs on the markets demand of higher yield given the company's weak growth.
Boardwalk reported 3Q13 EBITDA of $172 million versus J.P. Morgan's $171 million estimate and street median of $181 million. Gas transportation revenues decreases 3 percent YoY at $234 million and parking & lending revenues were hit at -41 percent YoY at $5 million.
BWP closed at $31.25 on Friday and is currently trading at -2.3 percent.
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