KMP Shares Up on Deeprock Expansion - Analyst Blog


Shares of Kinder Morgan Energy Partners LP ( KMP ) rose 2.9% to close at $82.43 on Oct 18, 2013, as investors cheered the partnership's proposal to build nine new tanks with a capacity of 2.25 million barrels.

The new tanks to be build at the Deeprock oil storage facility at Cushing, Oklahoma, are expected to accommodate oil from a reversed pipeline.

Due to rapid expansion in the past three years, the oil hub has a current storage capacity of 1.75 million barrels and total capacity of just less than 80 million barrels.

The storage will obtain shale oil from North Dakota's Bakken formation and carry it along the 430-mile Pony Express pipeline. Tallgrass Energy Partners LP ( TEP ), the operator, will be responsible for reversing and converting the pipeline to carry oil.

The project also involves two pipelines that will link to five Cushing destinations and will have a capability to manage 350,000 barrels of oil per day upon completion. Kinder Morgan Energy Partners has a stake of 51% in the Deeprock facility. The partnership will commit $26 million of the total $52 million project cost.

Kinder Morgan is one of the largest publicly traded master limited partnerships (MLPs) and generally serves as a benchmark for the pipeline MLP group. A focus on fee-based and diversified businesses has enabled the partnership to spread its business risks. 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.

Kinder Morgan Energy Partners carries a Zacks Rank #3 (Hold). However, Zacks Ranked #1 (Strong Buy) stocks - Stone Energy Corp. ( SGY ) and Linn Energy LLC ( LINE ) - are good buying options for the short term.

KINDER MORG ENG (KMP): Free Stock Analysis Report

LINN ENERGY LLC (LINE): Free Stock Analysis Report

STONE ENERGY CP (SGY): Free Stock Analysis Report

TALLGRASS ENRGY (TEP): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: KMP , LINE , SGY , TEP

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