DBRS Confirms Express Pipeline Limited Partnership & Express Pipeline LLC at A (low) and BBB (low)

DBRS has today confirmed the Issuer Rating and Senior Unsecured Notes due 2020 rating for Express Pipeline Limited Partnership & Express Pipeline LLC (collectively, Express or the Company) at A (low) and the Subordinated Secured Notes due 2019 at BBB (low). All trends are Stable. The confirmations reflect the Company’s low business risk profile supported by long-term take or pay shipping contracts and a strong financial risk profile.

The Company’s business risk profile remains consistent with current ratings. The Company has addressed its re-contracting risk related to the original transportation shipping agreements (TSAs), which expire in 2015, by successfully signing new TSAs during the 2013 open season. The majority of these TSAs are with investment grade shippers, cover 80% of capacity and come into effect in a phased manner, reaching a maximum firm contracted volume of 225,000 barrels/day by September 2014. The average term of the agreements is approximately ten years on a volume weighted average basis and the longest dated contracts expire in 2033. Although the new firm contracts cover 80% of the throughput capacity on Express, Platt system volumes are entirely uncommitted. This exposes the Company to throughput risk should the current market fundamentals change and adversely impact earnings and cash flow. However, long-term supply/demand trends support the importance of Western Canada Sedimentary Basin (WCSB) crude oil shipments to refineries in the U.S. Rocky Mountain (PADD IV) and Midwest (PADD II) regions. Furthermore, Platte is the only crude oil pipeline from PADD IV to PADD II and the relatively strong throughput on Express (approximately 50% of Express volumes flow through to Platte), and rising U.S. domestic crude oil production continue to have a positive impact on Platte volumes.

The Company’s strong financial risk profile is supported by the high capacity utilization driven by the demand fundamentals for crude oil in the markets served by Express. The Company’s credit metrics (Cash flow-to-debt: 70.3%; Debt-to-capital: 36.6%; EBIT-to-Interest: 8.7 times at December 31, 2013) are well within the “A” rating category.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Pipeline and Diversified Energy Companies which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.