Low Oil & Gas Prices Offset Kinder Morgan's 2014 Growth in Marcellus, Utica, Eagle Ford Shales

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Researched by Industrial Info Resources (Sugar Land, Texas)--Energy pipeline transportation and storage company Kinder Morgan Incorporated (NYSE:KMI) (Houston) took a hit from low oil and gas prices in 2014, despite production growth. The Natural Gas Pipelines segment continues to benefit from rising demand in the Marcellus, Utica and Eagle Ford shales, and now moves about one-third of all natural gas consumed in the U.S. Net income was reported to be $1.03 billion, a 14% decrease from 2013.

Industrial Info is tracking $23.86 billion in active projects involving Kinder Morgan, one of the largest of which is the $2.5 billion construction of the Elba Island liquefied natural gas (LNG) liquefaction plant in Savannah, Georgia. The project involves installing an LNG liquefaction train, marine export facilities, and related buildings to convert approximately 150 million standard cubic feet per day of natural gas sourced from shale formations into 1.5 million tons per year of LNG for export. Chicago Bridge & Iron Company (NYSE:CBI) (Houston, Texas) is performing engineering, procurement and construction (EPC) services on the project, which is set to kick off in May.

Total revenues stood at $16.23 billion, a 15.32% increase from 2013. The company's Tennessee Gas Pipeline saw stronger demand amid natural gas production growth in the Marcellus and Utica shale plays, while higher gathering volumes in the Eagle Ford Shale drove gains in the South Texas Copano line, which saw its first full year of ownership under Kinder Morgan. Higher demand from Mexico and storage refill deliveries to California benefited the El Paso Natural Gas pipeline. The Products Pipelines segment saw a notable increase in ethanol and biodiesel shipments, following volume growth at the Tamp ethanol receipt facility and West Coast biodiesel facilities.

The CO2 segment was less fortunate, with lower West Texas Intermediate prices and a higher Midland-to-Cushing differential more than offsetting the effects of higher gross oil production, including a 10% increase at Kinder Morgan's SACROC unit in the Permian Basin.

Kinder Morgan recently announced that it plans to acquire Hiland Partners, a privately owned midstream company with crude transportation and gathering assets, and gas gathering and processing assets, in the Bakken Formation. The Bakken represents new territory for Kinder Morgan.

"We think we can do in the Bakken the kind of expansion that we did on our Kinder Morgan Crude and Condensate system down here in the Eagle Ford, which has grown from less than 50,000 barrels per day throughput to having virtually all of its 300,000-barrel-per-day capacity contracted for in future deliveries," said Richard Kinder, the chairman and chief executive officer of Kinder Morgan, in a conference call. "So think of what we're doing as building a spider web that we intend to expand over the coming months and years. The consideration for the purchase is $3 billion, including approximately $1 billion of assumed debt."

John Schlosser, the president of the Terminals segment, said that Kinder Morgan is actively managing a little less than $2 billion worth of projects on the Houston Ship Channel, including expansions at the Bosco, Pasadena and Galena Park facilities.

Kinder Morgan now has a project backlog of $17.6 billion for expansion and joint-venture investments, including $4.6 billion for natural gas projects.

"We expect the demand to continue, as I think we're still at the beginning of what ultimately is needed both for power generation, and industrial and [petrochemical] load," said Steve Kean, the president and chief operating officer of Kinder Morgan, in the conference call. "We are also seeing improvements in storage opportunities. I think--first in the current market, but also in terms of the long-term commitments--we got a firm, long-term commitment of 3 billion cubic feet of storage on our Texas Intrastate system by an LNG customer during the quarter. And I think all of this on the transport and storage side points to continued optimism about the overall value of our gas network."

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.