Kinder Morgan Builds Up Bakken Footprint

---

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Spending more than $600 million to acquire gas gathering and processing infrastructure in the Bakken shale, Kinder Morgan Incorporated (NYSE:KMI) (KMI) (Houston, Texas) said it can now reduce future spending to accommodate growth in North Dakota.

Through a subsidiary, Hiland Partners Holdings LLC, Kinder Morgan said Tuesday that it agreed to spend $640 million to purchase gas infrastructure systems in the Bakken from Outrigger Energy II LLC (Denver, Colorado).

"With this transaction, KMI expects to reduce future capital expenditures needed to accommodate the growth of its existing Bakken customers," the company said in a statement. "Initially, KMI plans to fund the transaction with short-term borrowings and cash on hand."

Like its peers, Kinder Morgan was jarred by the lower-for-longer price performance for commodity prices last year, with crude oil prices largely rangebound and U.S. natural gas prices hitting historic lows.

In a December statement on its expectations for full-year 2024 performance, however, the company said it expected to post a 4% increase in earnings before interest, taxes, depreciation and amortization (EBITDA), an alternative measure of financial performance, with gains coming largest from its natural gas pipeline assets.

"This strategic acquisition allows us to efficiently expand our footprint and provide incremental transportation and processing services to meet the growing needs of our customers," said Tom Dender, the president of midstream operations for natural gas at Kinder Morgan.

Assets set to be acquired from Outrigger include a processing facility with a design capacity of 270 million cubic feet per day (MMcf/d) and a 104-mile gas-gathering pipeline with a capacity of 350 MMcf/d.

The Bakken shale patch is known more for its oil than natural gas. Federal estimates show crude oil production should average 1.26 million barrels per day (BBL/d) for 2024, with an expected increase to 1.35 million BBL/d this year.

About 95% of the gas associated with crude oil production is captured, however. That said, Bakken natural gas production is expected to average only 3.6 billion cubic feet per day (Bcf/d). That represents 10% of what's produced from the largest inland gas basin, Appalachia.

At its peak, though, North Dakota flared off nearly 40% of the associated gas in the Bakken.

The acquisition from Outrigger marks something of a trend for Kinder Morgan. Following a December divestment from Phillips 66 (NYSE:PSX) (Houston), Kinder Morgan and ArcLight Capital Partners (Boston, Massachusetts) were left in sole control of Gulf Coast Express LLC, which operates a pipeline that moves 2 Bcf/d of natural gas from the Permian Basin to a gas hub in Aqua Dulce, Texas.

Later, Kinder Morgan said its Tennessee Gas Pipeline Company LLC would proceed with the nearly $1.4 billion Mississippi Crossing Project in Mississippi and Alabama, strengthening the pipeline operator's position in the Southeast U.S. markets. The project would be able to transport up to 1.5 Bcf/d of natural gas and include the construction of nearly 206 miles of pipe. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Project Database can learn more by viewing the related project reports.

Shale basins are evolving along with production trends. The so-called gas-to-oil ratio in a reservoir increases as pressure declines due to production. As the pressure drops, heavier hydrocarbons get trapped in subsurface pores, allowing room for lighter products such as natural gas to move into the production well.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).