Boardwalk To Buy Storage Companies From Enterprise Products For $550M

October 2011, Vol. 238 No. 10

Boardwalk Pipeline Partners announced Oct. 17 that it has agreed to acquire Petal Gas Storage, L.L.C. and Hattiesburg Gas Storage Company and related entities from Enterprise Products Partners L.P. for $550 million in cash (subject to customary adjustments).

Petal and Hattiesburg operate seven high deliverability salt dome natural gas storage caverns in Forrest County, Mississippi, having approximately 29 Bcf of total storage capacity, of which approximately 19 Bcf is working gas capacity. These companies also own and operate a leaching plant, freshwater and brine disposal wells, approximately 69,000 horsepower of compression and approximately 105 miles of pipeline which connect their facilities with several major natural gas pipelines, including Boardwalk’s Gulf South pipeline. The storage capacity is currently fully subscribed under long-term fixed-fee contracts with a weighted-average remaining contract life of approximately seven years. Petal and Hattiesburg also own undeveloped land which is suitable for up to six additional storage caverns, one of which is expected to go into service in 2013. A Boardwalk subsidiary will operate these assets on behalf of the joint venture.

Boardwalk expects that the joint venture will fund this acquisition with proceeds from a $200 million 5-year bank loan and equity contributions from Boardwalk and an affiliate of its general partner, Boardwalk Pipelines Holding Corp., a wholly-owned subsidiary of Loews Corporation. BPHC will own 80% and contribute $280 million of the joint venture’s equity and Boardwalk will own 20% and contribute $70 million. The acquisition is expected to close in the fourth quarter of 2011 subject to customary closing conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

“The Petal and Hattiesburg companies are a great addition to our asset footprint,” said Stan Horton, president and CEO of Boardwalk. “The Facilities are anchored by long-term firm agreements and approximately 80% of the existing customer base is either electric or natural gas utilities. The location and type of storage assets are very desirable and, when combined with Boardwalk’s existing assets, we see exciting opportunities for synergies and growth.”

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