Kinder Morgan to Increase CO2 Footprint - Analyst Blog

Kinder Morgan Energy Partners L.P.'s KMP share price rose 0.2% following news of the partnership's plans to make an investment of about $671 million to increase its carbon dioxide (CO2) infrastructure in southwestern Colorado and New Mexico.

The partnership intends to develop its CO2 production operations in the Cow Canyon area of the McElmo Dome source field in Montezuma County, CO. It also proposes to extend the 500-mile Cortez Pipeline, which is used to move CO2 from southwestern Colorado to eastern New Mexico and West Texas, for employing in enhanced oil recovery (EOR) projects.

The Cow Canyon development project is estimated to involve a capital expenditure of about $344 million. The initiative is likely to boost CO2 production in the McElmo Dome source field by 200 million cubic feet per day (MMcf/d).

Other activities to be accomplished as per the plan are the ongoing 3-D seismic acquisition, 16 new wells, activation of one production well and one produced water disposal well, water separation facilities, one central compressor station, and associated gathering and produced water disposal pipelines.

Kinder Morgan expects the first 100 MMcf/d of CO2 from the Cow Canyon development to be commissioned by Jul 2015, while the remaining capacity is expected to come online by the end of 2015.

The Cortez Pipeline expansion is expected to entail an investment of about $327 million. This project will increase the pipeline's capacity to 2 billion cubic feet per day (Bcf/d) from 1.35 Bcf/d by adding a 64-mile loop in New Mexico and three new pump stations – one in Colorado and two in New Mexico. It will also include modification of five existing pump stations – one in Colorado, three in New Mexico and one in Texas.

Kinder Morgan, the operator of Cortez Pipeline, with 50% interests, expects the expansion to be completed by Jul 2015 to handle the additional volumes from Cow Canyon. Meanwhile, the southern portion is anticipated to be complete by mid 2016 to handle the additional 300 MMcf/d of CO2 expected from the company's St. Johns CO2 source field.

Kinder Morgan currently carries a Zacks Rank #3 (Hold). However, better-ranked stocks in the oil and gas industry that are expected to perform well include Unit Corp UNT, Targa Resources Partners LP NGLS and Boardwalk Pipeline Partners LP BWP. All of these sport a Zacks Rank #1 (Strong Buy).