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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), incurred both strong benefits and high costs from recent acquisitions and major projects in the second quarter of 2012. During the quarter, KMI completed a $20 billion plus acquisition of El Paso Corporation (NYSE:EP) (Houston) and cut a deal with Peabody Energy (NYSE:BTU) (St. Louis Missouri) in which it will invest $400 million to expand its terminal network on the Gulf Coast. Product volumes were higher in most of KMP's major segments. Net income was reported to be $153 million, a 33.48% decrease from second-quarter 2011.
Total revenues for the quarter stood at $1.85 billion, a 4.44% decrease from the same period last year. In the Products Pipelines segment, the company benefited from a 27% increase in natural gas liquid (NGL) volumes in the Cochin and Cypress pipeline systems, as well as higher gasoline and diesel volumes in the Plantation system. In the Natural Gas Pipelines segment, KMP saw strong storage revenues and higher earnings from the Fayetteville Express Pipeline, which helped boost transport volumes 6%, but earned lower sales margins from the Texas intrastate pipeline system. The CO2 segment was negatively affected by NGL prices that were 23% lower than were expected at the end of last year, although Snyder Gasoline Plant (Snyder, Texas) reported record NGL production.
Significantly, the Terminals segment saw strong growth from coal exports from rising international demand, more than offsetting the ongoing decline in domestic demand. Following the completion of the $400 million expansion deal with Peabody, KMI will have a coal export nameplate capacity of about 27 million short tons per year in its Gulf Coast terminal network. The expanded facilities will service Peabody's Colorado, Powder River Basin and Illinois Basin coal products. For more information, see July 20, 2012, article - U.S. Coal Majors Invest in Coal Export Network as Overseas Growth Markets Beckon. KMP also cut a deal with BP plc (NYSE:BP) (London, England) in which it will invest $75 million to construct five new tanks at its Galena Park Terminal on the Houston Ship Channel.
KMI's acquisition of El Paso resulted in some losses during the second quarter, attributed to obtaining approval from the Federal Trade Commission (FTC) for the deal. According to a press release from KMP, the losses were due largely to "the re-measurement of discontinued operations to fair value related to the KMP assets to be divested in order to obtain FTC approval." As part of the process, KMI agreed to sell Kinder Morgan Interstate Gas Transmission, the Trailblazer Pipeline Company, its Casper-Douglas natural gas processing and West Frenchie Draw treating facilities in Wyoming, and it's 50% interest in the Rockies Express Pipeline. KMI also will offer to sell all of the Tennessee Gas Pipeline and 50% of the El Paso Natural Gas Pipeline to KMP to replace the divested assets. KMI expects these deals to close in third-quarter 2012.
Industrial Info is tracking more than $2 billion in active projects involving KMP, including the $190 million construction of a grassroot crude oil and condensate pipeline from Cuero, Texas, to the Houston Ship Channel, and $85 million in tank additions at a refined petroleum products terminal in Carson, California. The pipeline project involves constructing 70 miles of 24-inch pipeline from the Eagle Ford Shale and converting 109 miles of 20-inch existing natural gas pipeline to crude and condensate service. The terminal project involves constructing seven 75,000-barrel-per-day cone roof tanks to increase storage capacity of refined petroleum products at the 4.6 million-barrel-per-day terminal, which currently has 52 tanks. The projects are expected to be completed in August and October this year, respectively.
"If you look across all of our pipelines, the power demand is very high," said Richard D. Kinder, the chairman and chief executive officer of KMP, in a conference call. "We're setting records, both for the month and the year to date, for gas delivered and power demand on both the Tennessee and southern natural gas systems."
The Products Pipelines segment was the only major KMP segment to report a drop in earnings when compared with the same period last year:
"Probably the most important development at KMP, and perhaps throughout the whole Kinder Morgan family of companies, is the tremendous project development that we're seeing," Kinder said in the conference call. "We're now estimating that our project backlog is now approaching $10 billion. The bulk of that is at KMP, but some is in the assets we still hold at KMI, and some is in the El Paso Pipeline Partners LP (NYSE:EPB) assets. A huge backlog of projects--and those are already either approved, or we expect to approve them with the board very shortly. And it's money that will not be spent just in 2012, obviously, but over the next three or four years. All of these projects are backed by long-term contracts with our shippers, which is obviously a critical thing for us."
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.
Total revenues for the quarter stood at $1.85 billion, a 4.44% decrease from the same period last year. In the Products Pipelines segment, the company benefited from a 27% increase in natural gas liquid (NGL) volumes in the Cochin and Cypress pipeline systems, as well as higher gasoline and diesel volumes in the Plantation system. In the Natural Gas Pipelines segment, KMP saw strong storage revenues and higher earnings from the Fayetteville Express Pipeline, which helped boost transport volumes 6%, but earned lower sales margins from the Texas intrastate pipeline system. The CO2 segment was negatively affected by NGL prices that were 23% lower than were expected at the end of last year, although Snyder Gasoline Plant (Snyder, Texas) reported record NGL production.
Significantly, the Terminals segment saw strong growth from coal exports from rising international demand, more than offsetting the ongoing decline in domestic demand. Following the completion of the $400 million expansion deal with Peabody, KMI will have a coal export nameplate capacity of about 27 million short tons per year in its Gulf Coast terminal network. The expanded facilities will service Peabody's Colorado, Powder River Basin and Illinois Basin coal products. For more information, see July 20, 2012, article - U.S. Coal Majors Invest in Coal Export Network as Overseas Growth Markets Beckon. KMP also cut a deal with BP plc (NYSE:BP) (London, England) in which it will invest $75 million to construct five new tanks at its Galena Park Terminal on the Houston Ship Channel.
KMI's acquisition of El Paso resulted in some losses during the second quarter, attributed to obtaining approval from the Federal Trade Commission (FTC) for the deal. According to a press release from KMP, the losses were due largely to "the re-measurement of discontinued operations to fair value related to the KMP assets to be divested in order to obtain FTC approval." As part of the process, KMI agreed to sell Kinder Morgan Interstate Gas Transmission, the Trailblazer Pipeline Company, its Casper-Douglas natural gas processing and West Frenchie Draw treating facilities in Wyoming, and it's 50% interest in the Rockies Express Pipeline. KMI also will offer to sell all of the Tennessee Gas Pipeline and 50% of the El Paso Natural Gas Pipeline to KMP to replace the divested assets. KMI expects these deals to close in third-quarter 2012.
Industrial Info is tracking more than $2 billion in active projects involving KMP, including the $190 million construction of a grassroot crude oil and condensate pipeline from Cuero, Texas, to the Houston Ship Channel, and $85 million in tank additions at a refined petroleum products terminal in Carson, California. The pipeline project involves constructing 70 miles of 24-inch pipeline from the Eagle Ford Shale and converting 109 miles of 20-inch existing natural gas pipeline to crude and condensate service. The terminal project involves constructing seven 75,000-barrel-per-day cone roof tanks to increase storage capacity of refined petroleum products at the 4.6 million-barrel-per-day terminal, which currently has 52 tanks. The projects are expected to be completed in August and October this year, respectively.
"If you look across all of our pipelines, the power demand is very high," said Richard D. Kinder, the chairman and chief executive officer of KMP, in a conference call. "We're setting records, both for the month and the year to date, for gas delivered and power demand on both the Tennessee and southern natural gas systems."
The Products Pipelines segment was the only major KMP segment to report a drop in earnings when compared with the same period last year:
- The Products Pipelines segment reported $137 million in segment earnings, a 7.43% decrease when compared with second-quarter 2011.
- The Natural Gas Pipelines segment reported $194 million in segment earnings, a 22.01% increase when compared with the same period last year.
- The CO2 segment reported $208 million in segment earnings, a 31.65% increase when compared with second-quarter 2011.
- The Terminals segment reported $132 million in segment earnings, an 11.86% increase when compared with the same period last year.
- The Kinder Morgan Canada segment reported $38 million in segment earnings, the same amount reported in second-quarter 2011.
"Probably the most important development at KMP, and perhaps throughout the whole Kinder Morgan family of companies, is the tremendous project development that we're seeing," Kinder said in the conference call. "We're now estimating that our project backlog is now approaching $10 billion. The bulk of that is at KMP, but some is in the assets we still hold at KMI, and some is in the El Paso Pipeline Partners LP (NYSE:EPB) assets. A huge backlog of projects--and those are already either approved, or we expect to approve them with the board very shortly. And it's money that will not be spent just in 2012, obviously, but over the next three or four years. All of these projects are backed by long-term contracts with our shippers, which is obviously a critical thing for us."
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.
