Kinder Morgan Earnings Preview: What We’re Watching
Kinder Morgan Partners (NYSE:KMP) plans to announce its Q3 2011 earnings on Wednesday, Oct 19. KMP is a subsidiary of Kinder Morgan Inc. that owns and operates pipelines and storage terminals throughout the U.S. The company faces direct competition from other pipeline and energy companies like Enterprise Products Partners (NYSE:EPD), Williams Companies, Inc. (NYSE:WMB) and from pipeline subsidiaries of energy giants like Exxon Mobil Corporation (NYSE:XOM).
We have a $78.80 price estimate for KMP, which is around 10% ahead of the current market price. Below we look at some of the key developments from the quarter.
The company continues its investment towards increasing its network of pipelines and terminals. Although, the debt crisis in Europe had created concerns over the global economic scenario, we believe that the demand and shipments for the energy related commodities have held their ground in U.S. In the upcoming Q3 results, we will see an increase in the the overall shipments and the volumes handled by KMP at the terminals.
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Below we list some of the key developments in the last quarter that will add to the volumes handled by the company:
- KMP purchased Perohawk Energy’s 50 percent interest in KinderHawk Field Services, the natural gas gathering and treating service provider.
- The company purchased 25 percent interest in Petrohawk’s natural gas and condensate gathering business in Eagle Ford Shale.
- KMP increased its carbon dioxide output by adding (activating) 12 more locations at the Katz Field in the Permian Basin of West Texas.
- Completed a 91-mile, 10-inch diameter Eastern Shelf Pipeline, which delivers carbon dioxide to the Katz Field as well as to third-party customers in the region.
The rising prices of the crude oil continues to drive the strong demand for carbon dioxide, used for enhanced oil recovery from the wells. Moreover, the companies continue to switch from coal to natural gas to fire furnaces and burners as it is a more efficient, clean and easy to handle fuel, driving the demand for natural gas.
While stock prices of most of the companies have taken a beating in the stock market during the past few months, Kinder Morgan’s stock has been range bound, showing the confidence that the investors hold in the company’s fundamentals.
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