Is There A Dividend Bubble: Kinder Morgan Edition
Ian Bezek • 335 Comments
Ian Bezek • 335 Comments
Cutting The Dividend Now Will Increase Kinder Morgan's Value
Andrew Walker, CFA • 186 Comments
Andrew Walker, CFA • 186 Comments
Mon, Aug. 29, 2:44 PM
- The Canadian government's planned additional review of Kinder Morgan’s (KMI +1.3%) Trans Mountain pipeline expansion will lend credibility to the final decision by allowing more opponents to be heard, Natural Resources Minister Jim Carr says.
- A government-appointed panel has held meetings throughout the summer along the pipeline route, hearing from proponents and opponents of the project, ahead of a report to be submitted in November and a decision from Prime Minister Trudeau’s cabinet by Dec. 19.
- KMI plans to triple Trans Mountain’s capacity to 890K bbl/day by twinning the existing 1,150-km line that is the only pipeline from Alberta to the Pacific coast and connects the oil sands directly to a port with reach to markets outside North America.
Thu, Aug. 18, 9:20 AM| Thu, Aug. 18, 9:20 AM | 14 Comments
Thu, Aug. 18, 7:41 AM
- The team downgrades Magellan Midstream Partners (NYSE:MMP) and Dominion Midstream Partners (NYSE:DM) to Equalweight from Overweight, and upgrades Kinder Morgan (NYSE:KMI) to Overweight.
- Kinder Morgan has been the best performer this year, up 46% vs. a 4.5% gain for MMP and a 15% decline for Dominion.
- On a year-over-year basis, the scoreboard checks out somewhat differently, with MMP's 1% gain leading the way versus declines of 36% for KMI and 24% for DM.
Mon, Jul. 25, 6:38 PM
- Kinder Morgan (NYSE:KMI) shares have shed 5.5% since it announced last week that it would keep its dividend steady at $0.50/year and not raise the dividend until it cuts its debt-to-EBITDA ratio to 5x, which might not happen until late 2018.
- But SunTrust's Tristan Richardson thinks a dividend hike could happen earlier that year, as he lifts his stock price target to $25 from $20 and adds a 25% dividend boost into his 2018 estimates.
- As KMI executes its trimmed backlog over the next 2-3 years, Richardson sees leverage continuing to ease lower, and as capital markets continue to thaw, that the two main factors will set the stage for a return to dividend growth, which could occur as early as 2018.
Wed, Jul. 20, 6:56 PM
- Kinder Morgan (NYSE:KMI) -4.9% AH after reporting in-line Q2 earnings but maintaining its dividend at the same level as the prior two quarters, disappointing investors who had hoped for a bump.
- KMI says it will pay a $0.125/share quarterly dividend, which amounts to a 2.26% dividend yield, and indicated that the payout would stay at that level for the rest of 2016, as it says it will work to fund growth investments and strengthen its balance sheet.
- Q2 revenues fell 9% Y/Y to a below consensus $3.14B, driven by a 15% decline at its carbon dioxide segment, which has been under pressure because it has more exposure to low commodities prices than KMI's other businesses.
- Q2 distributable cash flow totaled $0.47/share, down from $0.50 in the year-ago quarter and from $0.58 in Q1.
- KMI again reduces its 2016 capex forecast by $500M to a total of $2.8B after cutting its capital budget in January and April; current project backlog is $13.5B, down from $14.1B at the end of Q1, citing lower capital expenses stemming from the partnership with Riverstone on the Utopia project.
- KMI says it continues to expect 2016 distributable cash flow in excess of dividends will exceed growth capex, and does not expect to need to access the capital markets to fund growth projects for the foreseeable future beyond 2016.
Wed, Jul. 20, 4:26 PM
Wed, Jul. 20, 4:07 PM
Tue, Jul. 19, 5:35 PM
Tue, Jul. 19, 3:58 PM
- Kinder Morgan (KMI +0.8%) has moved “a lot closer” to meeting British Columbia’s conditions for the Trans Mountain pipeline expansion, “and frankly, they’re going to get there," the province's energy minister says.
- The main outstanding issue for KMI is marine spill response, something in which the federal government has an important role to play, the minister says.
- B.C. Premier Clark has said oil pipelines, including Trans Mountain, must satisfy conditions such as providing the province with economic benefits, a vigorous spill response plan and addressing aboriginal rights.
Wed, Jul. 13, 6:58 PM
- Kinder Morgan (NYSE:KMI) closed above $20/share for the first time this year, and credit analysts are growing more positive on the company as it whittles away at its debt.
- Moody’s reaffirms its Baa3 rating with a stable outlook, but the comments were upbeat: “We affirmed Kinder Morgan’s rating as the $1.5B reduction of the company’s $43B of adjusted debt will have a small but positive impact on leverage,” referring to the proceeds from last week's sale of half its equity interest in the Southern National Gas pipeline system.
- Fitch calls the sale "a positive step in KMI’s commitment towards focusing on the balance sheet and decreasing overall leverage... while continuing to maintain an interest in a strong cash flow providing asset with decent growth prospects."
- Gimme Credit energy analyst Philip Adams says he is positive as long as KMI continues to show financial discipline and reduce debt, while noting that shareholders are eager for KMI to restore some of its dividend or buy back shares once it cuts debt to 5x EBITDA.
Wed, Jul. 13, 8:58 AM
- Valero Energy (NYSE:VLO) agrees to acquire the remaining 50% membership interest in Parkway Pipeline from Kinder Morgan (NYSE:KMI) for an undisclosed sum.
- The move gives VLO increased access to the eastern U.S. by connecting the pipeline to the Colonial Pipeline system that runs from Houston to New York Harbor.
- The 110K bbl/day Parkway Pipeline transports refined petroleum products from VLO's 305K bbl/day St. Charles refinery in Louisiana to Mississippi for supply into KMI's 51%-owned Plantation pipeline system; VLO says Parkway could be expanded to more than 200K bbl/day.
Tue, Jul. 12, 11:42 AM
- Kinder Morgan (KMI +3.2%) CEO Steven Kean warns that environmental groups and the media are overplaying the capabilities of wind farms and solar energy in powering U.S. energy needs.
- The CEO notes that wind turbines and solar panels rely on the weather to generate electricity, which has caused problems for grid operators in areas such as California and Hawaii with high renewable penetration, and says natural gas is needed to back up renewable sources and provide a steady flow of power as more and more coal plants close.
- Environmental groups have become increasingly litigious in fighting pipeline projects, which has meant delays in getting projects built, Kean says.
Tue, Jul. 12, 10:49 AM
- Southwestern Energy (SWN +8.4%) does not explicitly endorse new Obama administration regulations aimed at curbing the escape of methane gas from new wells and equipment, but it is among several prominent companies that agree that more methane controls are necessary, NY Times reports.
- SWN is helping to lead an industry group, One Future, which aims to reduce methane leakage to less than 1% of total U.S. gas production; other members of the group include Apache (APA +4.1%), BHP Billiton (BHP +3.1%), Hess (HES +4.1%) and Kinder Morgan (KMI +2.4%).
- SWN says the $14M it has spent on equipment, studies and other efforts to stem gas leaks has nearly paid for itself with the methane captured and sold.
- Others in the industry say new, more efficient extraction methods make additional oversight unnecessary and expensive, particularly given the sharp drop in natural gas prices in recent years.
Mon, Jul. 11, 6:53 PM
- Kinder Morgan (NYSE:KMI) may be positioning to raise its reduced dividend and resume share buybacks after the $1.47B sale of half its stake in the Southern Natural Gas pipeline system.
- The ratio of KMI’s debt to EBITDA probably will fall to 5.3x by year-end, below the company’s previous target of 5.5x, shrinking the debt load and freeing up cash that could be used to expand investor payouts, repurchase shares or pay down additional obligations, CFO Kimberly Dang said today during a conference call following the sale news.
- At first blush, the deal looks like a steal for Southern Co. (NYSE:SO), working out to a ~11.6x EV/EBITDA multiple vs. the 12x-14x a regulated pipeline would fetch in the current market, but KMI expects to make up for the shortfall with investment opportunities coming off the pipeline, taking pains to frame the deal as the start of a deeper partnership aimed at growing the SNG system.
- KMI rose 3.6% in today's trade, while SO fell 0.6%.
Mon, Jul. 11, 7:23 AM
- Southern Co. (NYSE:SO) agrees to acquire a 50% stake in the 7,600-mile Southern Natural Gas pipeline system from Kinder Morgan (NYSE:KMI) for $1.47B.
- KMI will continue to operate the system connects natural gas fields in Texas, Louisiana, Mississippi, Alabama and the Gulf of Mexico to markets in the southeast U.S.; SO is one of the pipeline's customers.
- SO says its new ownership stake in Southern Natural Gas will "position [it] for future growth opportunities and enhanced access to natural gas, which are expected to benefit customers and investors alike."
- KMI plans to use all proceeds from the sale to pay down debt, CEO Steve Kean says; KMI has canceled or postponed more than $4B in new pipeline projects this year and sold stakes in existing conduits to raise cash.
- The companies also say they plan to work together on additional projects expanding the pipeline system.
Wed, Jul. 6, 10:58 AM
- Kinder Morgan (KMI -1.3%) says it signed a 10-year, $900M agreement with Nucor (NUE +1.5%) to provide in-plant services for five facilities that produce ~13.4M tons/year of steel products.
- KMI says it will be handling ~14.8M tons/year of scrap steel, direct-reduced iron, pig iron and other feedstocks, as well as providing other ancillary services.
- KMI says the deal provides NUE and other customers access to its growing national network of marine and rail terminals, and reconfirms its commitment to growing its terminals business.
Kinder Morgan, Inc. operates as a holding company. It owns and operates pipelines and terminals that transport natural gas, gasoline, crude oil, carbon dioxide and other products and stores petroleum products, chemicals and handle bulk materials like ethanol, coal, petroleum coke and steel. The... More
Sector: Basic Materials
Industry: Oil & Gas Pipelines
Country: United States