Kinder Morgan Energy Partners L.P.
) has inked an extended agreement with power producer
Calpine Energy Services L.P.
). The deal entails Kinder Morgan to transport and store natural
gas for power plants in Texas.
Kinder Morgan will provide up to 450,000 dekatherms per day of
transportation service and 5 billion cubic feet of storage
capacity for 9 Calpine electric generation facilities in Texas.
This will boost the current contracted transport capacity offered
by Kinder Morgan by one-third.
Again, the pipeline operator intends to spend approximately $30
million for the expansion of its intrastate pipeline system in
south Texas. The extended pipeline will ship gas to Calpine's
Magic Valley Generating Station in Hidalgo County.
The project mainly aims at shipping natural gas produced in the
prolific Eagle Ford shale play in south and east Texas. Kinder
Morgan is the largest independent owner and operator of petroleum
product pipelines in the U.S. It owns or operates more than
46,000 miles of pipeline and approximately 180 terminals.
The partnership will spend approximately $11 billion in organic
projects through 2015. For 2013, nearly $3 billion is planned for
expansion and acquisitions. Kinder Morgan is reaping benefits
from the recent boom in oil and gas exploration in the North
American shale formations as most of these basins have very few
or no transportation infrastructure.
We believe Kinder Morgan is an attractive investment opportunity,
capable of delivering high returns going forward. This is
facilitated by frequent natural gas shale play discoveries, an
increase in CO2 demand in the Permian Basin, and growing demand
for export coal.
However, the distribution growth scenario is closely related to
the successful completion of organic growth projects. This, in
turn, might be adversely affected by operational hindrances or
delays in completion. Additionally, it remains vulnerable to
macro conditions, unstable oil and gas prices and interest rate
Kinder Morgan units currently retain a Zacks Rank #3, which is
equivalent to a short-term Hold rating. However, there are
certain other pipeline companies like
Access Midstream Partners, L.P.
Atlas Pipeline Partners L.P.
) that offer value and are worth buying now. These companies
sport a Zacks Rank #2 (Buy).
ACCESS MIDSTRM (ACMP): Free Stock Analysis
ATLAS PIPLN PTR (APL): Free Stock Analysis
CALPINE CORP (CPN): Free Stock Analysis
KINDER MORG ENG (KMP): Free Stock Analysis
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