Kinder Morgan Benefits from Pipelines, Coal Exports in First-Quarter 2013, Sees Gold in U.S. Natural Gas Market

Researched by Industrial Info Resources (Sugar Land, Texas)--Energy pipeline transportation and storage company Kinder Morgan Energy Partners LP (NYSE:KMP) (KMP) (Houston, Texas), whose general partner is owned by Kinder Morgan Incorporated (NYSE:KMI) (KMI) (Houston), more than tripled its net income from the same period last year, as contributions from key pipeline systems and coal export volumes proved exceptionally generous, as did natural gas liquids (NGL) production at a key facility. Net income was reported to be $783 million, compared with $206 million in first-quarter 2012, when the company incurred exceptional costs.

Total revenues stood at $2.66 billion, a 43.99% increase from the same period last year. The Natural Gas Pipelines segment saw an increase of 78% in adjusted earnings, boosted by contributions from the Tennessee Gas Pipeline and the El Paso Natural Gas Pipeline, as well as positive results in the Eagle Ford shale plays. Stronger Eagle Ford volumes and increased deliveries to Mexico helped to increase the segment's transport volumes. The Terminals benefited from a solid increase in export crude volumes, despite declines in domestic coal volumes, and new contracts with higher rates at liquids terminals on the Gulf Coast and in the Northeast.

Kinder Morgan's SACROC plant in Texas reported strong oil and record liquid natural gas (LNG) production, which offset much of the CO2 segment's losses from lower NGL prices. Earnings improved in the Products Pipelines segment, due in part to higher volumes and revenues from an ethane-propane mix that the Cochin Pipeline began transporting in the summer of 2012.

A gain from the sale of Express-Platte Pipeline accounted for most of a $137 million net gain from certain items. KMP reported sustaining capital expenditures of $48 million for the quarter, compared with $44 million in the same period last year.

Industrial Info is tracking $19.4 billion in active projects involving Kinder Morgan, including $210 million in additions at the Edmonton Crude Oil Terminal in Sherwood Park, Alberta. The Phase I project involves constructing seven new tanks--including four 400,000-barrel, two 300,000-barrel, and one 220,000-barrel tanks--to increase crude oil storage capacity by more than 2.4 million barrels. The crude oil storage terminal currently has more than 28 tanks for a total 5 million-barrel capacity.

Industrial Info also is tracking the $170 million Natural Gas Pipeline Looping Addition in northern New Jersey. The project, which is part of the $400 million Northeast Upgrade Pipeline Project from the Marcellus Shale, involves installing two 30-inch-diameter transmission pipeline loops to transport up to 636 million standard cubic feet per day of natural gas.

"The strong performance at KMI was driven by good results at both Kinder Morgan Energy Partners and El Paso Pipeline Partners (NYSE:EPB), and by good results in the pipeline assets that we still retain at KMI," said Richard D. Kinder, the chairman and chief executive officer of KMP, in a conference call.

Kinder said that Kinder Morgan had identified more than $12 billion in expansion and joint venture investments across North America and that it plans to invest more than $3 billion in expansions this year. He added that the company plans to complete its $3.9 billion acquisition of Copano Energy LLC (NASDAQ:CPNO) (Houston, Texas) in early May. Copano's nine processing plants and 6,900 miles of pipelines focus on gathering natural gas from wells. Kinder said that he expects the U.S. natural gas market to continue its rapid development in coming years, driving the demand for midstream infrastructure and, thus, Kinder Morgan's services.

"Aside from Copano, we have lots of other projects under way in our natural gas segment, mostly at the Tennessee Gas Pipeline in the northeast, where we have $900 million worth of projects alone," Kinder said in the conference call. "But we're also finding opportunities to move more gas to Mexico, to expand our Texas operations, and we're now in an open season to determine the industry interest in our proposed Freedom Pipeline, which would convert a portion of El Paso Natural Gas from natural gas to crude oil service, and would move crude from the Permian Basin in West Texas to the California refineries."

Kinder Morgan Partners expects 2013's average West Texas Intermediate crude oil price to be about $91.68 per barrel.

For more information, visit Industrial Info's North American Oil & Gas Transmission Project Database and North American Oil & Gas Terminal Project Database.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.