Strategic Overview
The foundation of our business is supported by the following key elements:
Our commitment to operating safe and reliable pipelines
We are committed to providing natural gas transportation and storage services in a manner that will ensure the safety of our employees, contractors, customers and the communities we serve. Our operating companies have been safely delivering natural gas to customers since the 1930s and we plan to continue that tradition through a highly-trained work force and continual reinvestment in our assets. We have in place an assurance program to validate compliance with all of the regulatory requirements involved in interstate pipeline operations and have a thorough and proactive public awareness program to educate landowners, public officials and excavators about pipeline safety.
A significant portion of our revenues is supported by firm capacity reservation charges
We provide a significant portion of our pipeline transportation and storage services through firm contracts under which our customers pay monthly capacity reservation charges (which are owed regardless of actual pipeline or storage capacity utilization). For the 12 months ended December 31, 2009, approximately 89% of our revenues were derived from firm contracts, consisting of approximately 74% from firm capacity reservation charges and 15% from utilization charges on firm contracts. Approximately 11% of our revenues were derived from interruptible transportation, interruptible storage, parking and lending (PAL) and other services. Although each year a portion of our capacity becomes subject to contract renewal risk, substantially all of our operating capacity on our pipeline systems is under contract, with a weighted-average contract life of approximately six years.
Our integrated pipeline systems provide customers with diverse supply, delivery and storage options
In addition to conventional onshore and offshore Gulf Coast supply sources, our pipelines are located near long-lived unconventional natural gas supply sources, including the Haynesville Shale, Eagle Ford Shale, Barnett Shale, Bossier Sands, Fayetteville Shale and Caney Woodford Shale. Our pipelines also have the flexibility to deliver to many diversified markets:
Approximately 15 major natural gas pipelines that serve the Midwest, Northeast or Southeast
Over 300 local distribution company (LDC) locations
Over 45 natural gas-fired power generation facilities
Approximately 160 industrial locations
Based upon 2009 revenues, our deliveries were as follows: pipeline interconnects (54%), LDCs (22%), storage activities (11%), power plants (4%), industrial end-users (4%) and other (5%). Additionally, natural gas demand is seasonal in nature and requires support from storage in order to manage peak demand. We have 11 storage facilities in four states with aggregate working gas capacity of approximately 163 Bcf.
Boardwalk has a strong balance sheet
As we enter 2010, we have completed all of the financing for our announced expansion projects. The earliest maturity date of our indebtedness is 2012. We continue to maintain investment-grade ratings for our senior unsecured debt.
Industry Fundamentals
Our industry has built significant new pipeline infrastructure that will support the development of unconventional natural gas supply basins across the United States. Additionally, new unconventional basins are developing in areas not traditionally associated with natural gas production. These new developments have caused changes in natural gas transportation dynamics and have increased competition in certain pipeline markets, resulting in lower basis spreads, which is the difference in gas prices between receipt and delivery locations. Basis spreads may impact the rates pipelines negotiate with customers when contracts come up for renewal. Fortunately, our new, larger footprint, including storage, provides more diversity for our customers and lessens the impact that one particular market could have on our business. In addition, our integrated pipeline systems can flow gas in multiple directions, allowing us to quickly respond to changing market conditions. Furthermore, with a large, integrated and flexible system, we are well positioned to pursue new growth opportunities, such as our Haynesville Project and our Clarence Compression Project.
Natural gas burns cleaner than oil and coal, produces fewer greenhouse gases and has become an increasingly popular source of power generation. In the past year, natural gas gained more attention from policymakers due to a renewed focus on cleaner sources of energy, coupled with the development of significant domestic reserves and a focus on U.S. energy independence. Long term, we believe that natural gas will increasingly become the fuel of choice, fostering growth in natural gas demand and the need for new pipeline infrastructure.
Looking Forward
We plan to:
Continue to operate our pipeline and storage systems safely and reliably.
Deliver strong financial results.
Successfully complete our announced expansion and growth projects in a timely and cost-effective manner.
Utilize our assets to improve operating efficiencies and maximize growth opportunities.
Successfully renegotiate or remarket existing contracts that are terminating.
Pursue growth opportunities and consider acquisitions that fit our strategic criteria.