Kinder Morgan Looks to Brighter Future with Upbeat Prospects in Canada, Gulf Coast

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Researched by Industrial Info Resources (Sugar Land, Texas)--Midstream energy company Kinder Morgan Incorporated (NYSE:KMI) (Houston, Texas) saw a decline in revenues as its pipelines transported less oil and gas in fourth-quarter 2016. But executives at the company are optimistic about the near term, as write-downs and impairment charges have sharply declined, offsetting much of the negative effects in earnings, and a high-profile project in Canada recently cleared its last regulatory hurdle. Industrial Info is tracking $22.89 billion in active projects involving Kinder Morgan.

Kinder Morgan said in press release that it expects to invest $3.2 billion in growth projects during 2017, although it assumes it will find a joint-venture partner on its Trans Mountain project who will contribute toward its growth. (Kinder Morgan also assumes average annual prices for West Texas Intermediate (WTI) crude oil of $53 per barrel and Henry Hub natural gas of $3 per MMBtu.)

The company reported net profits of $170 million for the quarter, compared with a net loss of $721 million in the same period of 2015; revenues, however, fell to $3.39 billion from $3.64 billion. One of the biggest factors boosting the fourth quarter's results was nearly $1 billion in write-downs related to impairments; fourth-quarter 2015 saw a $1.15 billion impairment charge.

Earlier this week, British Columbia Premier Christy Clark announced the province has granted an environmental assessment certificate to the $5.5 billion Trans Mountain expansion project, after Kinder Morgan agreed to pay the province up to $760 million over 20 years as part of a revenue-sharing agreement. Clark vowed the proceeds would go toward environmental protection. In November, Canadian Prime Minister Justin Trudeau approved the project, along with Enbridge Incorporated's (NYSE:EMB) Prime Line 3 replacement project, while rejecting a separate project from Enbridge.

Two of the largest components of the Trans Mountain project, both tracked by Industrial Info, are the $3.5 billion segment in British Columbia and a $1.13 billion segment in Alberta. The 690-kilometer British Columbia segment would consist of two spreads: from a point near Hargreaves to the company's Darfield Crude Oil Pump Station near Barriere, and from the under-construction Black Pines Pump Station near Kamloops to the Westridge Crude Oil Terminal near Burnaby. The Alberta segment will run about 290 kilometers from the company's terminal in Edmonton to the crude oil pump station in Hinton. For more information, see Industrial Info's project reports on the British Columbia and Alberta segments.

Kinder Morgan expects the expansion will bring system capacity up to 890,000 barrels per day (BBL/d), from 300,000 BBL/d. The existing pipeline, built in 1953, runs from the Westridge Marine Terminal to Edmonton, Alberta.

U.S. Gulf Coast Growth Opens Path for New Pipeline
One of the biggest myths to be busted during the past few years' downturn in commodity prices is that long-term contracts insulate midstream companies from the ups and downs of oil and gas pricing. Although Kinder Morgan's midstream gathering and processing volumes continued to decline during the fourth quarter, driven by slumping oil and gas production in Texas' Eagle Ford Shale, the company expects its natural gas businesses to benefit from higher demand across the U.S., as well as expected growth in LNG exports, exports to Mexico, and continued growth in the petrochemical industry.

One of Kinder Morgan's largest proposed projects in the U.S. is the Utica Marcellus Texas Pipeline (UMTP) project, which is designed to transport a variety of natural gas liquids (NGLs) produced from the Utica and Marcellus shale plays to delivery points along the Texas Gulf Coast. Although the project is in its early planning phases, where plenty of factors could increase, decrease or eliminate the expected spending, executives believe the project will benefit from the ongoing petrochemical buildout in the Gulf Coast region.

The project involves converting the more than 1,000 miles of pipeline from handling natural gas to handling "Y-grade" NGL. These segments include a $170 million Pennsylvania segment; a $325 million Ohio segment; a $160 million Tennessee segment; a $270 million Mississippi segment; and a $210 million Louisiana segment. For more information, see Industrial Info's project reports on the Pennsylvania, Ohio, Tennessee, Mississippi and Louisiana conversions.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.