A Closer Look at Kinder Morgan Energy Partners’ Strong Second Quarter Results

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Kinder Morgan Energy Partners’ strong results were the key to fueling the results of Kinder Morgan and Kinder Morgan Management.

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A Closer Look at Kinder Morgan Energy Partners’ Strong Second Quarter Results

  1. 1. A Closer Look at Kinder Morgan Energy Partners’ Strong Second Quarter Results Source: Kinder Morgan
  2. 2. Kinder Morgan’s second quarter • The MLP delivered strong results with distributable cash flow up 11% to $561 million. • Because of that, the partnership remains on pace to meet or exceed its full-year targets for distributions. Kinder Morgan Energy Partners reported results on July 16th. Photo credit: Kinder Morgan
  3. 3. Why the focus on Kinder Morgan Energy Partners?  Because Kinder Morgan Management’s (KMR) only assets are units of Kinder Morgan Energy Partners (KMP), the MLP’s results are what fuels the stock.  Meanwhile, 75% of Kinder Morgan’s (KMI) cash this past quarter came from its ownership of the general partner interest and units of KMP as well as shares of KMR.  Basically, as KMP goes so goes both KMR and KMI.
  4. 4. Kinder Morgan Energy Partners started 2014 off by delivering strong first-quarter results. In order for a repeat performance the company needed to again see solid results across four of its five business segments. Photo credit: Kinder Morgan
  5. 5. Last quarter the natural gas pipeline segment fueled strong growth. While both the CO2 and terminals segments also delivered solid growth. Source: Kinder Morgan Energy Partners press release. Note: Segment earnings in millions.
  6. 6. We see a similar thing this quarter as the natural gas pipeline segment experienced the most growth. While the terminals and products pipelines segments also contributed growth. Source: Kinder Morgan Energy Partners press release. Note: Segment earnings in millions.
  7. 7. Now, let’s drill down a bit deeper into each segment.
  8. 8. Natural Gas Pipelines  Segment earnings rose 13% over last year’s second quarter to $556 million.  The company noted that its quarter was fueled by outstanding results from the Tennessee Gas Pipeline.  Its services are in high demand due to the growth of the Marcellus and Utica Shale plays.  Earnings in the quarter were boosted by expansion projects, including the $175 million Utica Backhaul project that began service in April.
  9. 9. Natural Gas Pipelines  The other highlight was higher throughput from El Paso Natural Gas due to increased natural gas exports to Mexico.  Additionally, the Copano Energy acquisition contributed to results this year.  For the full-year, the natural gas pipelines segment expects to exceed its published annual budget of 14% growth.
  10. 10. CO2  Segment earnings rose 3% from last year’s second quarter to $360 million.  Strong performance from SACROC led the segment as oil production was up 7%, while NGL production rose 3%.  The CO2 business remains on track to meet its published annual budget of 8% growth.
  11. 11. Products Pipelines  Segment earnings surged 17% from last year’s second quarter to $209 million.  Higher volumes from the KMCC pipeline, including a significant ramp in Eagle Ford condensate volume, fueled growth in the quarter.  That being said, the segment expects its growth to come in slightly below its published annual budget of 18% growth.
  12. 12. Terminals  Segment earnings surged 19% from last year’s second quarter to $227 million.  About 60% of the growth in the quarter came from organic growth projects as expansions at several terminal facilities fueled increased earnings.  This segment is on track to exceed its published annual budget of 21% growth due to the acquisition of American Petroleum Tankers.
  13. 13. Canada  Segment earnings slipped from $50 million in last year’s second quarter to $40 million this quarter.  While demand remained strong, earnings were impacted by unfavorable foreign exchange rates.  This segment’s growth remains at a stand still until it can move forward with its proposed expansion of the Trans Mountain Pipeline.
  14. 14. Overall, Kinder Morgan Energy Partners delivered a strong quarter. As a whole, the company remains on pace to meet or exceed its published annual budget targets. Photo credit: Kinder Morgan Add it all up
  15. 15. Looking ahead  Kinder Morgan Energy Partners is on pace to hit this year’s growth targets.  However, it is also moving ahead with projects that will fuel future growth.  The company added a net $500 million to its project backlog since the first quarter, and its backlog now stands at $15.4 billion.  This past quarter it added $1.2 million in new projects while removing $700 million of projects that were recently placed into service.
  16. 16. Bottom line  While Kinder Morgan Energy Partners’ results weren’t as outstanding as its first quarter results, the second quarter was still very strong.  The company remains on pace to meet or exceed this year’s guidance.  Further, it continues to add projects to fuel future growth.  Bottom line, the main engine of the Kinder Morgan family of companies is still a well oiled machine.
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