The unprecedented shutdown of the Prudhoe Bay oil field because of corroded pipe is the latest sign of strain in global light oil supply. This supply has been operating with minimal spare capacity for the past two years while demand climbs with global economic growth. Three buy recommended companies that are the main producers in the field, BP plc (NYSE:BP), ConocoPhillips (NYSE:COP) and ExxonMobil (NYSE:XOM) are financially strong and operationally competent. Any value impact of short term loss of cash flow may be offset by rising long-term value as both six-year and one-year oil march to new weekly highs.
Instead, we worry about sell-recommended Kinder Morgan (NYSE:KMI), (NYSE:KMR), (NYSE:KMP), a financially weak company with a checkered record for pipeline safety in Arizona and California because of corroded pipe. Distorted compensation for general partner KMI creates misplaced incentives, in our opinion, to skimp on maintenance at limited partnership KMP.