El Paso Pipeline Partners (NYSE: EPB) announced first-quarter 2014 operating earnings of 54 cents per unit, beating the Zacks Consensus Estimate of 51 cents by 5.9%, but lagging the year-ago earnings of 58 cents by 6.9%.
The partnership's earnings in the first quarter 2014 were adversely impacted by two rate case settlements that resulted in lower rates on the Southern Natural Gas (SNG) and Wyoming Interstate Company (WIC) pipelines.
Total Revenues
Total revenues at the end of the first quarter were $382 million, down 1% from $386 million in the year-ago period. Quarterly revenue was 7.9% below the Zacks Consensus Estimate of $415 million.
Highlights of the Release
The partnership's operating and maintenance costs for the quarter were $45 million, an 11.8% decline from the prior-year quarter. However, this did not benefit the operating margin as depreciation and amortization expenses climbed 10.4%.
In spite of in line expenses, the decline in total revenues affected the operating income of the partnership. Operating income of El Paso Pipeline declined 1.6% year over year to $242 million.
2014 Forecast
El Paso Pipeline Partners reaffirmed its 2014 cash distribution of $2.60 per unit, a 2% increase from the 2013 disbursement level.
The partnership reiterated that its regulated pipeline and storage assets, along with its LNG business, will generate earnings before DD&A of almost $1.3 billion in 2014, an increase of roughly $90 million year over year.
Other Upcoming Releases
Enterprise Products Partners L.P. (NYSE: EPD) is expected to release its first quarter results on May 1, 2014. The Zacks Consensus Estimate for the quarter is 74 cents.
Targa Resources Partners LP (NYSE: NGLS) is expected to release its first quarter results before the market open on May 1, 2014. The Zacks Consensus Estimate for the quarter is 43 cents.
Our View
During the reported quarter, subsidiaries of El Paso Pipeline Partners and Royal Dutch Shell (RDS.A) filed an application with the Federal Energy Regulatory Commission seeking permission to construct and operate new natural gas liquefaction and export facilities at the El Paso Pipeline unit, Southern LNG Company's terminal, located on Elba Island.
Natural gas usage is on the rise globally and the U.S. government has started to allow for the export of natural gas. If the necessary permits are received to construct the project and export liquefied gas, it can bring significant benefit to this partnership in the long term.
El Paso Pipeline Partners currently has a Zacks Rank #4 (Sell).
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