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Kinder Morgan: Is There A Multi-Billion Dollar Elephant In The Room?
- The Kinder Morgan merger transaction has been approved.
- There has been much written about the positive synergies of the merger.
- Nonetheless, the conceivably largest benefit from the merger has gone mostly unheralded. Furthermore, I believe this benefit is not currently priced in to the stock.
- I submit this one major attribute of the merger is the primary driver behind Kinder's 10% dividend growth projections over the next 5 years.
- Kinder Morgan announces that voters APPROVE the merger.
- This is a transformational event for Kinder Morgan and the midstream sector as a whole.
- Due to its projected growth, Kinder Morgan is now one of the best dividend-growth stocks in the market.
Kinder Morgan: Stock Nosedives, Time To Sell Out Or Buy With Both Hands?
- The Kinder Morgan merger was overwhelmingly approved by shareholders and unitholders alike.
- Even so, the stock took a nose dive as soon as the news was announced. What gives?
- In the following article we will attempt to make sense of the stock’s sell-off on the merger approval news and decide if this is actually a buying opportunity.
Kinder Morgan: Is The Merger Actually Bad News For KMP Unitholders?
- Kinder Morgan is a day away from the announcement of one of the most important proxy votes in the company’s history.
- November 20, 2014 is the deadline for shareholders and unitholders to vote on merging the Kinder family of companies.
- The question remains - Is the merger really a good deal for KMP unitholders considering the tax consequences? Some say it is not.
Kinder Morgan: A Golden Dividend Growth Opportunity Is Never Offered Twice
- Kinder Morgan currently offers dividend investors a safe investment opportunity. The company has a fortress balance sheet and strong cash flow.
- The planned consolidation of the companies is expected to reward investors with 8% dividend growth per share for the next five years.
- Furthermore, the stock appears undervalued with several positive catalysts on the horizon. This bodes well for capital appreciation making it an excellent total return play.
- The tax sections of the KMP Merger Proposal answer many previously unclear items but are confusing in other areas.
- The exchange of KMP units for KMI shares will be treated the same as a taxable sale of the KMP units.
- Recapture of Depreciation, etc., is applicable in determining Ordinary Income and Capital Income.
- There is no discussion of the different results that happen when KMP is held in a tax advantaged account, nor any reference to UBTI.
A Closer Look At Kinder Morgan Energy Partners' 3Q14 Distributable Cash Flow
- Notwithstanding the pending consolidation of Kinder Morgan entities, an evaluation of KMP’s recent results and DCF is still highly relevant.
- DCF coverage based on sustainable DCF has improved and exceeds reported coverage;the improvement was both quantitative and qualitative.
- Recent market turmoil and sharp decline in commodity prices, particularly oil, is not expected to adversely affect KMP/KMI.
- Project backlog is growing and could further accelerate if the anticipated increase in demand from conversion to gas by utilities and petrochemical companies materializes.
- The company's third-quarter financial results were $3.93 billion, 20% higher than revenue in Q3 2013. Its earnings per share were reported at 57 cents.
- KMP and KMI, along with other names, are in talks for a potential buyout that will bring all companies under one roof to strengthen long-term growth prospects.
- KMP has announced that it will expand its Galena Park and Pasadena terminals to cater to the increase in demand for refined products storage and docks services.
- Oil prices are likely to remain depressed in the future as the IEA has cut oil demand forecasts.
- Stock prices have declined as a result of the Brent oil decline and are at one of their lowest levels. Dividend growth is expected at 11% after acquisition by KMI.
- Kinder Morgan was sold off with the rest of oil industry stocks over the past few weeks.
- It appears oil has bottomed and the entire sector is rallying after a steep sell off.
- Nevertheless, with the recent tectonic shifts in the global oil and gas markets, is the deck stacked against Kinder’s success?
Kinder Morgan Energy Partners: Yet Another Distribution Increase Underpins Long-Term Value Proposition
- Kinder Morgan Energy Partners reported 3Q 2014 results last week.
- KMP beat on revenues and missed on earnings.
- Kinder Morgan's growth story completely intact as evidenced by strong segment earnings.
- Distribution growth underpinned by strong distributable cash flow growth.
- KMP, or KMI, remain strong buys for long-term oriented income investors.
3 Reasons Why Kinder Morgan Energy Partners Is The Best Value Long Bond Trade
- On October 17, there were 16,317 corporate bond trades in 2,876 bond issues of 931 bond issuers worth $5.17 billion.
- We rank the issues of 20 years or more in maturity by the ratio of credit spread to default probability.
- Kinder Morgan Energy Partners tops the rankings due to three things that are dependent on low credit risk: ability to issue long maturities, high trade volume, and best spread-PD ratio.
- KMP delivered another strong quarter and continues to be an attractive dividend growth story.
- Its business is primarily fee based with nat gas pipelines, storage, and product pipelines generating solid results while its commodity exposed oil business performed surprisingly well.
- With an impending merger with KMI that eliminates IDR payments and strong operational results, I would be a buyer here.
Preliminary Review Of Kinder Morgan Energy Partners' 3Q'14 Results
- Adjusted EBDA per unit and segment earnings per unit exhibit slow growth year-to-year for the past 5 calendar quarters.
- Distributions per unit are growing somewhat faster than DCF per unit.
- Recent market turmoil and sharp decline in commodity prices, particularly oil, is not expected to have an adverse effect.
- Project backlog is growing and could further accelerate if the anticipated increase in demand from conversion to gas by utilities and petrochemical companies materializes.
Kinder Morgan Energy Partners: Did You Buy The Dip?
- KMP posts its Q3 2014 results.
- Distribution per unit was increased to $1.40 ($5.60 per year), up 4% Y/Y.
- I believe KMP merits a $100 per unit price target due to the upcoming merger with KMI.
- KMI has entered into a bridge credit agreement for up to $5.0 billion.
- These funds are to be used to pay for the cash consideration and transaction costs related to its acquisition of KMP, KMR, and EPB.
- This event moves the Kinder Morgan mega-merger forward a notch.
- KMP has received some good news about the Trans Mountain Expansion project as the judge has refused to grant an injunction against KMP's survey work for the project.
- The project has the capacity to triple the revenues as well as cash flows of the existing capacity of the pipeline.
- The expansion project has the potential to add close to $1 billion to the top line of the partnership.
- Fee-based, volume-centric crude transportation contracts have less exposure to the commodity price risk.
Kinder Morgan Consolidation: Not For The Reasons You Think
- The convoluted structure of the Kinder Morgan umbrella will change.
- The stated reason for the deal is that it will open up the firm to more growth and offer it a lower cost of capital.
- To us, the reason is not quite as sanguine. Find out why in this article.
Kinder Morgan: Making Sense Of The Trans Mountain Debate
- Kinder Morgan’s Trans Mountain pipeline continues to face opposition.
- Canadian politics are likely to blame.
- The financial impact of further delays could be quite large.
Kinder Morgan Energy Partners: These 2 Projects Will Be Important For The Partnership
- The ruling about the crude-by-rail project in Richmond is a positive news for the company, and it can now go ahead with its project.
- Crude-by-rail project has the capacity of 72,000 barrels per day and it will further enhance the midstream revenues of the partnership.
- Trans Mountain Pipeline might see some delays as the expansion project is seeing considerable opposition from the local and the city of Burnaby.
- The expansion of Trans Mountain Pipeline will triple the revenue as well as cash flows potential of the partnership from its Canadian operations.
Kinder Morgan: A Good Example Of Why Investors Should Never Pay Attention To Wall Street Analysts
- Richard Kinder made a takeover offer for its MLP entities last week.
- The merger deal sent shares and units through the roof and investors can cheer double-digit returns over just a couple of trading days.
- Analysts, once again, didn't see it coming.
- Investors are well advised to do their own research and not rely on Wall Street analysts who are again famously late to the party.
Sat, Nov. 22, 3:14 PM
- Test drilling began Friday night. Kinder Morgan (NYSE:KMI) intends to work 24 hours a day over the next 10 to 12 days to complete its work.
- KMI is test drilling 250 meters into the ground as part of its survey work for a proposed expanded pipeline, which would see it bore a tunnel under the mountain to reroute its existing Trans Mountain pipeline.
- KMI received a court injunction a week ago to have protesters removed from the site. More than 30 protesters have been arrested since Thursday.
Thu, Nov. 20, 5:42 PM
Thu, Nov. 20, 2:09 PM
- Kinder Morgan (KMI -0.9%) confirms that shareholders and unitholders at KMI, Kinder Morgan Partners (NYSE:KMP), Kinder Morgan Management (NYSE:KMR) and El Paso Pipeline (NYSE:EPB) approved all proposals related to bringing all four pipeline companies under one roof.
- KMI also projects a 16% dividend increase to $2/share for 2015, and expects to grow the dividend by ~10%/year during 2015-20 while producing excess coverage of more than $2B.
Wed, Nov. 19, 12:45 PM
- Kinder Morgan Partners (KMP +0.8%) rises to new 52-week highs a day ahead of the shareholder vote on the merger that would consolidate Richard Kinder's oil pipeline empire into a single entity.
- The closing of the Kinder Morgan (KMI +0.6%) merger is expected to occur on Nov. 26, which would make it the final trading day for KMP, El Paso Pipeline (EPB +0.7%) and Kinder Morgan Management (KMR +0.6%).
Fri, Nov. 14, 5:11 PM
- Kinder Morgan (KMI, KMP) says it will resume preliminary work on its Trans Mountain pipeline after a British Columbia court granted an injunction against protesters blocking work crews at the Burnaby Mountain conservation area.
- The injunction is Kinder’s latest win against the project’s opponents; the city of Burnaby sought to block work on the site after crews cut down trees, but lost before both a court and the national energy regulator.
- Kinder Morgan hopes to triple the size of its 300K bbl/day Trans Mountain pipeline in a C$5.4B expansion that would carry more crude from Alberta to the port of Vancouver and on to Asian markets.
Tue, Nov. 11, 3:21 PM
- Prospects for energy MLPs remain bright despite lower crude oil prices, Credit Suisse’s John Edwards says, as Q3 distribution growth in the sector has averaged ~11% Y/Y and direct cash flow per unit rose 20% Y/Y on average.
- The analyst says he saw little change in capex plans from energy MLPs in Q3 reports: Kinder Morgan (KMI, KMP) said it had seen no impact to business, Enterprise Products Partners (NYSE:EPD) continues to expect to invest $3.7B-$4.2B for 2015 and 2016 - the same as indicated before the oil price pullback - and Spectra Energy Partners (NYSE:SEP) remains on track in its drive to a $35B program.
- Credit Suisse upgrades Midcoast Energy Partners (NYSE:MEP), ONEOK Partners (NYSE:OKS), Targa Resources Partners (NYSE:NGLS) and Western Gas Partners (NYSE:WES) to Outperform from Neutral, while reducing Magellan Midstream Partners (NYSE:MMP) to Neutral from Outperform.
- ETFs: AMLP, AMJ, MLPL, YMLP, MLPI, MLPA, MLPN, EMLP, MLPG, MLPX, MLPS, MLPY
Mon, Nov. 10, 6:21 PM
- Kinder Morgan (KMI, KMP) is overstating the economic benefits and and downplaying the costs of its proposed Trans Mountain pipeline expansion, according to a new report from Goodman Group consultants and Simon Fraser University.
- The authors say Kinder Morgan’s claim of 36K person-years of employment that would be created in British Columbia during the project’s development should be closer to 12K.
- On the cost side, the report also takes issue with Kinder Morgan’s worst-case spill scenario envisions costs of $100M-$300M, envisioning multi-billions dollars in costs if oil spills in a populated area.
Thu, Nov. 6, 3:16 PM
- A lawyer representing Kinder Morgan (KMI, KMP) subsidiary Trans Mountain tells the British Columbia Supreme Court that it should scrutinize the concerted effort by protesters to stop the company from its lawful activities, which he describes as “a conspiracy to harm.”
- While people may be motivated by environmental objectives such as climate change, "but the actual specific dominant purpose here... is to harm Kinder Morgan by preventing Trans Mountain [from doing] its work," the lawyer tells the court as it considers an injunction application against protesters blockading pipeline work.
- Five protesters are named as defendants in the court action that precedes a multimillion-dollar civil lawsuit over claims of trespass, assault and intimidation against employees prevented from conducting survey work on Burnaby Mountain.
Thu, Nov. 6, 9:45 AM
- The Kinder Morgan (KMI, KMP) consolidation continues to move forward after a Delaware state judge said yesterday that investors who had filed a class action suit attempting to stop the $44B deal don’t have a case.
- The plaintiffs asked sought a court order temporarily stopping the deal they claimed would have big tax consequences for them after years of holding units in the company’s main pipeline operating partnership; taxes on such units are deferred until an investor’s death or until they are sold, but Kinder Morgan’s transaction would trigger the delayed taxes.
- The judge’s order means a Nov. 20 shareholder vote on the deal will proceed, although the judge did not dismiss the case outright or make any rulings on its core claims.
Wed, Nov. 5, 2:45 PM
- Kinder Morgan Partners (KMI, KMP) will expand its fleet of Jones Act tankers after agreeing to purchase two tankers from Crowley Maritime for ~$270M.
- The vessels each have ~330K barrels of cargo capacity and will join Kinder Morgan's existing fleet of five operating tankers.
- The deal is expected to be immediately accretive to cash available to KMP unitholders upon closing, which is expected to be effective Nov. 1.
Fri, Oct. 31, 9:57 AM
- Kinder Morgan (KMI, KMP) seeks a court order to stop Vancouver-area residents from blocking survey work for its Trans Mountain expansion project after protesters stopped crews from working all day Wednesday.
- The injunction application is the latest in a bitter battle over KMI’s plans to expand the pipeline through Burnaby Mountain.
Tue, Oct. 21, 11:49 AM
- Kinder Morgan Partners' (KMI, KMP) C$5.4B ($4.8B) Trans Mountain expansion, once seen as the best near-term hope for sending more of Canada's oil sands to Asia, is hitting a mountain of opposition from aboriginal communities intent on using the courts to block the proposed expansion.
- Other opponents include environmental groups and municipal leaders like the mayor of Burnaby, the Vancouver suburb that houses the existing pipeline terminus and its marine facilities.
- Although objections from local politicians and activists already have caused the National Energy Board to delay its final report on the project by more than six months to Jan. 2016, KMP says it plans to bring the project online in 2018 and remains confident it will stay on budget.
Wed, Oct. 15, 6:37 PM
- Kinder Morgan (NYSE:KMI) says Q3 earnings rose 15% Y/Y thanks to strong demand at Kinder Morgan Partners (NYSE:KMP), partly offset by a decline at El Paso Pipeline Partners (NYSE:EPB).
- KMP also reports an increase in distributable cash flow per unit, rising 10% Y/Y to $607M.
- CEO Richard Kinder says the company had identified a combined $17.9B in expansion and joint venture investments, up from $17B at the end of Q2 and $14.4B a year ago; the growth included an increase in KMP's backlog to $16.3B from $15.4B.
- Says earnings at its natural gas pipeline business rose 9%, amid strong results at its Tennessee Gas Pipeline, amid continuing growth in the Marcellus and Utica shale plays; overall natural gas transport volumes improved 10%, while gathering volumes added ~6%.
- Kinder Morgan plans to put all its publicly traded units under one roof by the end of the year, which will end its MLP structure.
- KMI +0.7% AH.
Wed, Oct. 15, 4:53 PM| 6 Comments
Wed, Oct. 15, 4:12 PM| 5 Comments
Wed, Oct. 15, 3:18 PM
- MLPs have been crushed this week, and today Citi warns that the rapid drop in oil prices has created a "negative feedback loop on spending” and that a 15% drop in oil-directed drilling activity would result in a 50% drop in oil production growth.
- It Brent oil prices stabilize at $85-$90, Citi thinks the MLPs exposed mostly to oil and natural gas liquids would rebound modestly as a new equilibrium is developed between producers and midstream companies on spending; if crude continues to slide, Citi says MLPs exposed to natural gas would outperform.
- Miller Howard, a money manager specializing in income-producing stocks, is blaming newbie investors who don't fully understand MLPs and are "in it for the yield."
- Most MLP contracts are very long term, meaning that a temporary change in the oil price has no effect on those sources of revenue, Howard says, adding that "there is far from enough infrastructure to serve the domestic energy industry, even if it slows a bit."
- Some big MLPs have turned higher even as most stocks plunge: KMI +1.8%, KMP +1.5%, EPD +4.8%, PAA +3.7%, ETP +4%, ETE +8.6%, RGP +7.2%, CQP +6.6%, TEP +5.2%, PSXP +4.1%, MMP +7.1%, PAGP +4.9%, EEP +2.1%.
- ETFs: AMLP, AMJ, MLPL, MLPI, MLPA, MLPN, EMLP, MLPX, MLPS, AMU, ENFR, ATMP, MLPW, AMZA, IMLP, OSMS
KMP vs. ETF Alternatives
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