Kinder Morgan Energy Partners L.P.
's (
KMP
) second quarter 2012 earnings of 37 cents per limited partner unit
(excluding certain items) fell short of the Zacks Consensus
Estimate by 10 cents. However, the results were 23.3% above the
year-ago quarter's earnings of 30 cents.
Revenue decreased 4.4% to $1,852.0 million in the reported quarter
from $1,938 million in the year-ago quarter. Moreover, it missed
the Zacks Consensus Estimate of $2,228 million.
Despite the earnings miss, the partnership's cash distribution per
common unit was raised to $1.23 ($4.92 annualized), representing a
7% year-over-year growth. The distribution is payable on August 14,
2012. The partnership has now increased the quarterly
distribution 44 times since its current management took over in
February 1997.
Kinder Morgan's payout hike was fueled by growth opportunities in
the midstream energy sector, with more emphasis in the natural gas
shale plays as well as in the coal export business.
The partnership's distributable cash flow - a measure of its
ability to make unitholders' payments - before considering certain
items, was $366 million versus $324 million in the comparable
quarter last year. Additionally, distributable cash flow per unit,
excluding certain items, was recorded at $1.07, up 5.9% year over
year.
Segmental Highlights
Products Pipelines
: The business segment's earnings before DD&A and certain items
fell 5.1% year over year to $166 million. The lower FERC and
California Public Utilities Commission rates on its Pacific system
as well as reduced volumes on CALNEV and Pacific system, led to
increased expenses, which in turn weighed down on earnings. Total
refined products volume was 164.3 million barrels, dipping 0.9%
from the prior-year period.
Natural Gas Pipelines
: Earnings before DD&A and certain items from the business
jumped 24.6% year over year to $238 million. The performance was
aided by Petrohawk's acquisition of a 50% interest in KinderHawk
and improved contributions from the Fayetteville Express Pipeline.
Further, Kinder Morgan Treating benefited from the SouthTex
acquisition in December of 2011 and subsequent strong plant sales.
Overall, transport volumes moved up 6% from the year-ago quarter,
mainly attributable to robust volumes on the Fayetteville Express
Pipeline system and solid transport volumes on the Texas intrastate
pipeline system, partly due to Eagle Ford Gathering volumes.
CO2
: The segment's earnings before DD&A and certain items were
$320 million, up 19.4% year over year as a result of higher oil
prices, increased yield at the Katz Field and record natural gas
liquids (NGL) output at the Snyder Gasoline Plant,.
Terminals
: The business segment earned $183 million before DD&A and
certain items in the second quarter, up 10.2% year over year.
Kinder Morgan Canada
: The segment reported second-quarter earnings of $52 million
before DD&A and certain items, at par with the year-ago
quarter. The highlights of the segment in the quarter was a new
toll agreement on the Trans Mountain pipeline, enhanced domestic
throughput on the Trans Mountain and the Westridge Terminal as well
as superior performance from the Platte Pipeline.
Financials
As of June 30, 2012, Kinder Morgan had cash and cash equivalents of
$522 million and long-term debt of $12,154 million.
Debt-to-capitalization ratio stood at 61.6% (versus 62.4% in the
last quarter).
Our Take
Kinder Morgan is one of the largest publicly-traded master limited
partnerships (MLP) and generally serves as a benchmark for the
pipeline MLP group. A focus on fee-based and diversified businesses
has enabled the partnership to dilute its business risks.
Recently, Kinder Morgan wrapped up its agreement with a private
equity and venture capital firm,
Kohlberg Kravis Roberts & Co.
(
KKR
) to purchase the latter's 50% interest in a joint venture. The
transaction is also expected to be immediately accretive to the
distributable cash flow of the partnership.
Other efforts made by Kinder Morgan to expand its portfolio include
the commissioning of its crude oil and condensate pipeline, in
order to ship the increasing oil and condensate production from the
Eagle Ford, Texas region to the Houston refining hub. The
partnership successfully completed the pipeline project on time and
within budget.
The partnership's parent company
Kinder Morgan Inc.
(
KMI
) recently acquired El Paso Corp. (
EP
) to create the largest natural gas pipeline system in North
America.
Kinder Morgan currently holds a Zacks #3 Rank (short-term Hold
rating). Longer term, we maintain a Neutral recommendation on the
stock.
KKR & CO LP (KKR): Free Stock Analysis
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KINDER MORGAN (KMI): Free Stock Analysis Report
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