Kinder Morgan's Natural Gas Revenues Keep Climbing, Fueling $22 Billion in Projects

Researched by Industrial Info Resources (Sugar Land, Texas)--Kinder Morgan Incorporated (NYSE:KMI) (KMI) (Houston, Texas) reaped the benefits of rapidly growing natural gas demand in second-quarter 2018 as increased activity across nearly all its large midstream systems drove an 11% growth in natural gas pipeline earnings, compared with the same period last year. Transportation volumes were up 12%. Industrial Info is tracking $22.3 billion in active projects involving Kinder Morgan, including more than $7.5 billion worth that are slated to begin or finish construction in the third quarter.

Click on the image at right for a graph detailing Kinder Morgan's top 10 states and provinces in North America for active projects.

The second quarter also saw 10% year-over-year gains in ethanol volumes and a 5% jump in oil volumes. However, KMI reported an overall net loss of $180 million, driven by a $600 million writedown of pipeline and gathering facilities in Oklahoma. In the past few months, KMI has shifted its focus back to its home state of Texas, where a lack of midstream capacity in the booming Permian Basin has pipeline companies pitching countless proposals.

Kinder Morgan's work in Texas includes the largest segment of its planned, $1.7 billion Gulf Coast Express natural gas pipeline, a joint venture with Targa Resources Corporation (NYSE:TGRP) (Houston) and DCP Midstream LP (NYSE:DCP) (Denver, Colorado). The estimated $650 million Spread 2 is designed to run 180 miles from Rankin to Del Rio; like the other three spreads, it would carry 1.98 billion cubic feet per day of natural gas. For more information, see Industrial Info's project report.

One of KMI's largest pipeline projects set to begin construction in the third quarter is its $1.36 billion Utica Marcellus Texas Pipeline (UMTP) project, which involves converting 964 miles of its Tennessee Gas Pipeline (TGP) system from carrying natural gas to transporting purity and mixed natural gas liquids (NGL) produced in the Marcellus and Utica shale plays. Delivery points are scattered along the Texas Gulf Coast. Five segments of the UMTP are expected to begin construction before the end of the quarter:

• $155 million segment from Columbiana County, Ohio, to Greenup County, Kentucky, which will run 125 miles; see project report
• $240 million segment from Muskingum County, Ohio, to Greenup County, Kentucky, which will run 85 miles; see project report
• $160 million segment from Powell, Kentucky, to Nunnelly, Tennessee, which will run 117 miles; see project report
• $270 million segment from Nunnelly, Tennessee, to Greenville, Mississippi, which will run 210 miles; see project report
• $210 million segment from Greenville, Mississippi, to Natchitoches, Louisiana, which will run 350 miles; see project report

Another major change to the TGP system is KMI's $280 million Abandonment and Capacity Restoration Project (ACR), which involves abandoning some facilities in the system and selling others to the UMTP project. ACR also seeks to modify some existing pipeline and compression facilities on the TGP system and to construct others. Those set to begin construction in the third quarter include:

• $55 million Compressor Station 202.5 near Youngstown, Ohio; see project report
• $55 million Compressor Station 206.5 near New Philadelphia, Ohio; see project report
• $55 million Compressor Station 211.5 near McConnelsville, Ohio; see project report
• $55 million Compressor Station 216.5 near Jackson, Ohio; see project report
• $40 million unit addition at Compressor Station 110 in Morehead, Kentucky; see project report
• $20 million pipeline loop near Morehead, Kentucky, running 7.6 miles; see project report

Each of the above projects is expected to wrap up in second-quarter 2019. The completed ACR will allow for the transport of up to 200 million standard cubic feet per day of natural gas from the Marcellus and Utica shale plays to supply areas in the U.S. Southeast region, which covers the Gulf Coast area east of Louisiana.

Among the KMI projects set to wrap up in the current quarter are several phases of KMI's $285 million Broad Run Expansion project, which is designed to further bolster the natural gas-carrying capacity on the TGP system. These include:

• $60 million Compressor Station 563 in Joelton, Tennessee; see project report
• $55 million Compressor Station 875 near Richmond, Kentucky; see project report
• $50 million in additions and modifications to Compressor Station 106 in Clay City, Kentucky; see project report
• $45 million Compressor Station 118 A near Charleston, West Virginia; see project report
• $60 million Compressor Station 119 A near Charleston, West Virginia; see project report

KMI also is putting the final touches on the $350 million Harrison County-to-Fulton County segment of the Utopia NGL Pipeline in Ohio. The 241-mile line will help to transport up to 50,000 BBL/d of refined or fractionated NGLs, such as ethane and propane, to Windsor, Ontario. KMI says the capacity will be expandable to more than 75,000 BBL/d. For more information, see Industrial Info's project report.

Second-quarter 2018's 12% growth in transportation volumes follows 10% year-over-year growth in first-quarter 2018. In May, KMI agreed to sell its massive TransMountain Pipeline system to Canada for about $3.5 billion, ending its involvement in a closely watch, hotly disputed project. KMI expects to use the proceeds to pay down debt.

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