Will Dominion Midstream’s Capital Projects Drive Its Growth?

Dominion Midstream Partners’s (DM) operations are capital-intensive, requiring investments to expand, upgrade, or maintain existing operations of its midstream assets. For 2015, DM incurred total capital expenditures of $1.3 billion, including maintenance capex.

DM’s Covepoint liquefaction project’s estimated cost is $3.4 billion–$3.8 billion, excluding financing costs. Domestic natural gas will be delivered to the Cove Point LNG facility through pipelines for liquefaction and will be exported as LNG.

This project is expected to be in service in late 2017. Until December 2015, Covepoint incurred $2.2 billion of the development costs.

DM’s St. Charles Transportation project and Keys Energy project have estimated costs of ~$30 million and $40 million, respectively. Service is expected to commence in June 2016 for the St. Charles Transportation project and March 2017 for the Keys Energy project.

Columbia to Eastover and Transco to Charleston are other key projects expected to be in service in 3Q16 and 4Q17, respectively.

In February 2016, Dominion Resources (D), DM’s parent company, acquired Questar Corporation for $4.4 billion. DM will issue some of its common units in exchange for certain assets of Questar Corporation, which are expected to be contributed to Dominion Midstream.

On acquisition, Dominion’s chairman, president, and CEO, Thomas F. Farrell II, said, “Of note, Dominion Midstream investors will benefit from the addition of Questar, as it is expected to contribute more than $425 million of EBITDA to Dominion’s inventory of top-quality, low-risk MLP-eligible assets, supporting Dominion Midstream’s targeted annual cash distribution growth rate of 22 percent.”