Kinder Morgan Partners (NYSE:KMP) is making the best out of the U.S. energy landscape given that it’s less dependent on commodity price swings. It has grown by leaps and bounds lately, and recently, it announced that it will start the construction of a crude oil pipeline from Montana to Oklahoma.  This would be just another project among several others, which includes the Transmountain expansion in Canada and its pending merger with El Paso.
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KMP’s CO2 and Oil production division contributes nearly 31% value to its $87 price estimate. This is the most profitable business for KMP as suggested by its EBITDA Margin, which is the highest among all of its divisions.
CO2 is an expensive commodity and KMP rules the entire value chain from production to delivery of CO2. On top of that, crude oil prices remain stubbornly high and the fee based model is doing wonders for KMP. All this put together manifests why better profitability will continue in this segment. Moreover, a continued increase in domestic U.S. oil production month-on-month bodes well with KMP’s expansion plans.  The pipeline “Pony Express” will be designed to transport nearly 100k barrels per day of crude oil and expected to be completed by 2014. We have optimistic expectations from this division, which are reflected in our estimates for its revenues.Notes:
- Kinder Morgan to begin Pony Express crude pipeline, calgaryherald.com, May 22, 2012 [↩]
- Crude Oil Production, eia.gov, May 27, 2012 [↩]