Goldman answers pushback on Kinder Morgan upgrade, reiterates bullish view

Goldman Sachs reiterates its bullish stance on Kinder Morgan (KMI, KMP) in a response to pushback from some investors after last week's upgrade to Conviction Buy.

Bearish investors point out that KMI is not a pure play on Marcellus/Utica infrastructure growth, but the firm believes KMI's announced and potential incremental projects can add meaningfully to cash flow and backlog growth; with gas infrastructure coming increasingly into focus, KMI should benefit from growth in Appalachia and across the continent at strong returns.

On financial flexibility, KMI should manage coverage given its highly fee-based and hedged cash flow profile; on maintenance capex, Goldman admits Kinder spends a relatively low amount on E&P, but E&P represents only ~15% of cash flows and generates strong returns, and sees midstream maintenance as appropriate.

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Comments (10)
  • das555
    , contributor
    Comments (315) | Send Message
    GS hurt the shorts...
    19 May 2014, 05:09 PM Reply Like
  • Ruffdog
    , contributor
    Comments (2727) | Send Message
    I likesqueesing shorts!; feels good!
    19 May 2014, 05:50 PM Reply Like
  • gcrain
    , contributor
    Comments (88) | Send Message
    19 May 2014, 05:51 PM Reply Like
  • Ruffdog
    , contributor
    Comments (2727) | Send Message
    One of KMI's pipelines is the Ruby NG pipeline which I am not sure if he has transferred from KMI to EPB yet or not. If you go to the KMI website it seem to indicate the transfer has not happened yet, but if you go to the Ruby site it says EPB is its owner. Ruby pipeline is a long term gold mine for EL Paso because TRP is building a NG export terminal in British Columbia. Ruby is the only way to get NG out of Wyoming to the west coast. Once the gas is transported to the west coast it can be backflowed to Canada and transported to Asia.


    Another is the TransMountain pipeline in Canada. If the Keystone pipeline is not approved then more oil going to the gulf will come from North Dakota which is a good thing. The tar sand oil can get piped to the west coast via the TransMountain pipeline which will triple the capacity in the next couple of years.


    With a yield of 7.5% yield and a Richard Kinder insurance policy EPB and KMP are a relatively great risk free investment. And why did it take so long for GS to add KP to its Conviction Buy List?


    Long KMP and EPB.
    19 May 2014, 05:59 PM Reply Like
    , contributor
    Comments (4471) | Send Message
    I'll take Goldman over the hedgeye manipulators.
    19 May 2014, 07:11 PM Reply Like
  • djsulli
    , contributor
    Comments (2140) | Send Message
    Long KMI and looking to add. I'll bet on Richard K.


    19 May 2014, 07:41 PM Reply Like
  • romilar
    , contributor
    Comments (751) | Send Message
    In the not to distant future, people who buy or add the Kinders now, are going to be very pleased with themselves.


    I will count myself among them.


    Long KMI and going much longer...Rom
    19 May 2014, 09:34 PM Reply Like
  • rado403
    , contributor
    Comments (93) | Send Message
    Wow-- all the noise that had been written for months -- it has gotten boring,listless and noisy-----enough-- have you seen Kinder's place in the Roaring Fork valley?===
    19 May 2014, 10:10 PM Reply Like
  • Value Doc
    , contributor
    Comments (845) | Send Message
    That's very revealing from a contrarian sentiment perspective. The point about "KM not being a Marcellus pure-play"--so that means it's not a good investment at any price??? The vast network of other assets is worthless? Pretty obvious that investors making that comment are blinded by short-term momentum and recency bias.
    20 May 2014, 01:39 AM Reply Like
  • worldbank
    , contributor
    Comments (386) | Send Message
    Who are these "guys" that are bad mouthing KMI et al, AGAIN! We have the 4th largest energy company in the US not getting the respect. GO RICHARD!
    20 May 2014, 03:15 PM Reply Like
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