Kinder Morgan Energy Partners L.P.
) wrapped up its previously announced divestiture agreement with
Tallgrass Energy Partners, LP.
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The agreement includes the sale of Kinder Morgan Interstate Gas
Transmission, Trailblazer Pipeline Company, the Casper-Douglas
natural gas processing and West Frenchie Draw treating facilities
in Wyoming and the partnership's 50% interest in the Rockies
Express Pipeline (REX).
The deal fetches Kinder Morgan $1.8 billion in cash. The total
divestiture value however includes the proportionate amount of
the REX debt. Including this, the deal amount comes to $3.3
Kinder Morgan plans to use the proceeds to repay a $2.0 billion
credit facility which was issued earlier in August to acquire
stakes of Tennessee Gas Pipeline (TGP) as well as El Paso Natural
Gas (EPNG) from its parent company
Kinder Morgan Inc.
). During the third quarter, Kinder Morgan acquired stakes of TGP
and 50% of EPNG from its parent company. This was part of Kinder
Morgan Inc.'s acquisition of El Paso Corp. that entailed the
divestiture of three U.S. natural gas pipelines.
Kinder Morgan Energy Partners is one of the largest publicly
traded master limited partnerships and generally serves as a
benchmark for the pipeline master limited partnership (MLP)
group. A focus on fee-based and diversified businesses has
enabled the partnership to spread its business ventures. In
addition, the CO2 business is a major growth avenue for the
partnership with the commodity price risk being offset by a
long-term hedging strategy.
Recently, Kinder Morgan inked a deal with oil refiner
) for the transportation of Eagle Ford crude and condensate to
the latter's Sweeny refinery in Brazoria County, Texas.
These deals position Kinder Morgan well and ensure stable cash
flow for the partnership and its unit holders going forward.
However, as inherent in all oil and gas majors, Kinder Morgan
remains vulnerable to volatile crude oil and natural gas prices,
imbalance between supply and demand for its products and rising
interest rates. Such factors can hurt the partnership's volumes
As such, we see the stock performing in line with the broader
market and maintain our long-term Neutral recommendation,
supported by a Zacks #3 Rank (short-term Hold rating).