Kinder Morgan earnings rise as pipeline network expands

Kinder Morgan Energy Partners LP, the second biggest US pipeline company by market value, net income has risen 70% in the third quarter as it continues to benefit from its expanded pipeline network moving US oil and natural gas.

Earlier this week, the Houston based company said that profit rose from US$ 405 million in 2012 to US$ 689 million this year. Revenue increased 31.3% to approximately US$ 3.28 billion. In addition, the company said it will pay a third quarter distribution to unit holders of US$ 1.35, up 7% from last year.

El Paso and Copano transactions
Kinder Morgan’s third quarter results continued to benefit from the acquisition of El Paso Corp and Copano Energy. Richard Kinder, Chief Executive Officer of Kinder Morgan Inc., said “We continue to be pleased with the assets that we acquired from both Copano and El Paso, which drove this segment’s third quarter earnings growth.”

Kinder added, “Our El Paso and Copano transactions have significantly increased our natural gas footprint in the US, and KMP is well positioned to play a leading role in building and expanding infrastructure required to connect developing natural gas supplies to markets.”

In May, Kinder Morgan completed its US$3.3 billion acquisition of Copano Energy LLC. This gave the company control of 11 100 km of gas pipeline in Texas, Wyoming and Oklahoma. In September, Kinder Morgan and Valero Energy Corp. placed their 141 m Parkway Pipeline into service. The pipeline can transport up to 110 000 bpd of refined oil products from Norco, Louisiana to Collins, Mississippi.

Reduced expenses
According to Kinder Morgan, some of its gains come from reduced expenses. Kinder Morgan plans to cut the operating expanded for pipelines it acquired from El Paso Corp from US865 million in 2011 to US$ 674 million this year. This will save the company an annual saving of US$ 191 million. Richard Kinder said, “When we acquire assets we reduce fat, not muscle or bone.’

Future opportunities
The company believes that natural gas will continue to play a large role as fuel in the US, and expects several opportunities for more earnings related to the resource. Kinder said, “Looking ahead, EPB has identified approximately US$1.1 billion in expansion and joint venture investments, and we are pursuing customer commitments for additional projects.”

According to Kinder, potential opportunities involve moving more natural gas produced from the Utica and Macellus Shale plays in the northeast into New England, which is one of the nation’s largest natural gas markets.

“We are very happy with the king of footprint that we have in the Macellus and the Utica and we think we’re going to be able to use that to our advantage and help our customers over the next several years,” Kinder said.

Edited from various sources by Hannah Priestley-Eaton

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