Kinder Morgan Energy Misses Q3 Earnings, Ups Distribution - Analyst Blog

Kinder Morgan Energy Partners L.P. (KMP) reported third-quarter 2014 earnings from continuing operations of 57 cents per limited partner unit (excluding certain items), missing the Zacks Consensus Estimate of 62 cents. The quarterly results however improved from the year-earlier profit level of 54 cents.

 

Revenues increased 19.9% to $3,933.0 million from $3,279.0 million in the year-ago quarter. Also, the top line came above the Zacks Consensus Estimate of $3,573.0 million.

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 dilute its business risks. Kinder Morgan Inc. (KMI), one of the largest mid-stream energy companies in the U.S., owns the partnership's general partner interest.

The partnership's cash distribution per common unit was raised to $1.40 ($5.60 annualized), representing 4% year-over-year growth. The distribution is payable Nov 14, 2014. The partnership has increased the quarterly distribution 53 times since the current management team took over in Feb 1997.

Kinder Morgan's payout hike was fueled by outstanding results at Tennessee Gas Pipeline (“TGP”), increased oil and NGL production at Scurry Area Canyon Reef Operators Committee (SACROC), and strong results from its Products Pipelines and Terminals businesses.

The partnership's distributable cash flow – a measure of its ability to make unitholders' payments – before considering certain items was $607 million versus $554 million in the year-ago quarter. Distributable cash flow per unit, excluding certain items, was $1.31, up 3.1% year over year.

Third Quarter Segmental Highlights
    
Products Pipelines: The business segment's earnings before DD&A and certain items climbed 10% year over year to $222 million. Higher volumes on the Kinder Morgan Crude and Condensate Pipeline, along with the Pacific system contributed to the upside. Total refined products' volume was up 6.8% from the prior-year quarter.

Natural Gas Pipelines: Earnings before DD&A and certain items from the segment increased 9% year over year to $661 million. The performance was aided by strong performance at its TGP, El Paso Natural Gas (EPNG) and South Texas midstream assets.

CO2: The segment's earnings before DD&A and certain items were $363 million, up 4% year over year on the back of increased yield at SACROC as well as increase in oil production and higher NGL sales volumes.

Terminals: The business segment earned $247 million before DD&A and certain items, up 25% year over year. The segment benefited from incremental earnings from various expansions coming online including the Battleground Oil Specialty Terminal Company LLC and Houston Ship Channel facilities. Strong petcoke volumes, including the impact of the BP plc (BP) operated Whiting facility expansion, and improved steel volumes also contributed to this segment's earnings improvement.

Kinder Morgan Canada: The segment reported earnings of $50 million before DD&A and certain items, up 13.6% year over year, reflecting favorable foreign exchange rates along with high demand for Trans Mountain Pipeline and higher mainline throughput into Washington.

Financials

As of Sep 30, 2014, Kinder Morgan had cash and cash equivalents of $268 million and long-term debt of $20,810 million. Debt-to-capitalization ratio was 53.9% versus 53.8% in the last quarter.

Zacks Rank

Kinder Morgan currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the oil and gas sector include Enbridge Energy Management LLC (EEQ) with a Zacks Rank #1 (Strong Buy).

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