Kinder Morgan Sees Profits Flow in from Eagle Ford, Marcellus, Utica in Third-Quarter 2014, Plans More NGL Conversions

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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), saw companywide growth in third-quarter 2014 as demand continued its rapid rise in the Eagle Ford, Marcellus and Utica shales, and the company tailored more systems to carry natural gas liquids (NGL). Net income was reported to be $963 million for the quarter, a 39.77% increase from third-quarter 2013.

Industrial Info is tracking about $24 billion worth of active and unconfirmed projects involving Kinder Morgan, including two major natural gas-to-NGL pipeline conversion projects that are part of the massive Tennessee Gas Pipeline system. The company is pursuing the $325 million conversion of a 319-mile stretch from Carrollton, Ohio, to Campbellsville, Kentucky, and the $210 million conversion of a 201-mile stretch from Greenville, Mississippi, to Natchitoches, Louisiana.

The projects are part of a broader plan to convert 1,005 miles of the Tennessee Gas Pipeline so it can transport Y-Grade NGLs from the Utica and Marcellus shales to the Texas Gulf Coast. MarkWest Energy Partners LP (NYSE:MWE) (Denver, Colorado) is serving as project manager.

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Total revenues stood at $3.93 billion for the quarter, a 16.32% increase from the same period last year. Strong demand for Eagle Ford Shale condensate spurred 10% earnings growth in the Products Pipelines segment, which also benefited from higher margins on the Pacific pipeline, which is the largest products pipeline in the Western U.S. The company's Natural Gas Pipelines segment reported stronger volumes following rapid growth in the Marcellus and Utica shales, which resulted in a series of expansion projects on the Tennessee Gas Pipeline that boosted its throughput 18% from third-quarter 2013. Kinder Morgan's El Paso Natural Gas and South Texas midstream assets also grew, the latter from development in the Eagle Ford Shale.

The company's CO2 segment reported solid oil-production and NGL sales volumes at its SACROC unit in Texas' Permian Basin, with NGL production is on track for record annual results. The Terminals segment benefited from expansions at the Battleground Oil Specialty Company (BOSTCO) and Edmonton terminals, on the Houston Ship Channel and Alberta, respectively.

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For more information, see June 19, 2014, article - Oil & Gas Production Surges in Ohio's Utica Shale, Triggering New Investments.

KMP reported sustaining capital expenditures of $121 million for the quarter, compared with $92 million in the same period last year.

"Our Natural Gas Pipeline [segment]--particularly the interstate portion of our group--is leading the way with a strong performance throughout the year," said Rich Kinder, the chairman and chief executive officer of Kinder Morgan Partners, in a conference call. "As an indication of the increased demand for transportation at our natural gas pipelines, we now have new signs and pending long-term contracts since December of last year of 6.4 billion cubic feet per day. And to put that in perspective, that's about 9% of the total U.S. gas demand.

"That 6.4 [billion cubic feet per day] number is up from 5.3 [billion] at the end of the second quarter. So we continue to make real progress in attaching new throughput agreements to our system."

The Natural Gas Pipelines and Terminals segments are expected to exceed the growth predicted in their published annual budgets, with Terminals benefiting from Kinder Morgan's January acquisition of American Petroleum Tankers (APT). With estimates for gas demand growth as high as 35% over the next 10 years, possibly reaching 100 billion cubic feet per day, Kinder Morgan executives expect to see strong demand for more transport capacity from the Marcellus and Utica shales to terminals on the Gulf Coast.

Kinder Morgan Partners increased its backlog of expansion and joint venture investments by $900 million to $16.3 billion during the third quarter. Natural gas projects alone have a backlog of more than $3 billion.

"The current backlog is predominately liquids-related," said Steve King, the president and chief operating officer of Kinder Morgan Partners, in the conference call. "There's about $600 million of crude-by-rail projects that are in the backlog. About $400 million is associated with building out the APT tankers. Another $1.4 billion is in other liquids tankage.

"Looking ahead, we expect to continue to see growth in demand for the liquids infrastructure. I think that demand extends to our existing assets and Houston and Edmonton, where we continue to see nice renewal rates."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three 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.