If investors ever stop being willing to buy newly issued units they may not be able to pay big distributions on the units. The main thing supporting the price is the big dist. I don't see how they could pay such a big dist if they could not issue more units. In the 4 yrs 2006-2009 they paid 2,558mm in distributions and raised 2,308mm from issuing new units. It is amazing what you can do with the support of wall street. I don't think you want to own this stock if the music stops!! All just my opinion. Good luck to all.
You can't even add. Dividends for 2009 $1,727.60, 2008 $1,449.20; $3,176.80 in distributions for 2009 and 2008 without adding in 2006 or 2007 -- is your calculator broken?
2006 - 2009 operating cash flow $7458.70, distributions $5,332.50. Distribution fully covered by cash flow and by a wide margin.
The co2 division is liquidating. It's selling off its assets and distributing the proceeds to the investors. So Kinder is mischaracterizing that as cash flow. Second, he's overstating the cash flow by categorizing the expenses as capital investments. A business that's liquidating is not making any capital investments. It's true, Kinder is trying to hide the decline by squeezing a little more out of the existing fields. Still a liquidation.
Hmmm, Bilyjoerobideaux, you disappoint me. You ask questions that you already know the answer to. Since you seem to know a lot about Kinder Morgan's assets, you also almost certainly know about cash flow and how cash flow is different than earnings. Earnings is a GAAP number that is influenced by depreciation, amortization etc, which are non-cash charges. I won't fall into you trap of saying earnings aren't important. They are important, but they don't dictate how much cash can be paid out. Look at Real Estate Investment Trusts for a comparison of asset rich companies with huge depreciation charges.
Ohhh and SACROC and Yates, yes, they are depleting. Right now production is actually increasing, but eventually it will flatten out and then begin declining. I don't like that. Of course, they can continue to try and buy depleted oil fields for a song, flood them with CO2 and make a killing....I'd prefer they not be in that business, but they got it at a cheap price and it is hedged, so it is what it is. It is a material part of the business, but much of that business is also 3rd party CO2. Care to tell us what the R/P life is for SACROC and Yates....to see if you have done your homework....
Can you explain how the GP take is more than KMP earns? Why don't the earnings matter? And if you start talking about pipelines and long-lived assets, explain how KMP is going to replace Sacroc and Yates.
Is that you Kurt?
Why has this been such a personal vendetta for you? We have all heard the stories about the conference where Kinder took Kurt Wulff to task and from that day on he was out to get Kinder....personally, KMP is a very minor part of my portfolio and as such its overall performance doesn't move the needle too terribly much in either direction, so it doesn't bother me when they only achieve say 4% distribution growth, when the historical returns have been much better. Big deal. When confronted with facts, you run and hide. Is it the success that Kinder has had that you are jealous of? I made a killing when I bought KMI right after the Enron debacle and another killing when they took KMI private and collected huge dividends along the way. I rolled a portion of those proceeds into KMP. Since that time, I have done quite well relative to the market. Sure, other MLPs have done better. I know, I own a great many of them.
I don't think any investor that has done their due dilligence expects KMP to grow much more than 3-5% a year, if that. The 7% yield is a good return relative to what can be had at a bank these days in CDs. Is it risk free, Absolutely not, but I am comfortable with the risk. I know Kinder's GP can't collect IDRs if they can't pay the distribution.
I couldn't finish reading that post. My attention span has been so shot to hell that I couldn't get past the second paragraph. But I'm sure you're right. Good luck with your 7% and "critical infrastructure," whatever that is. If my toilet's out, I'm pretty sure it would be "critical infrastructure" too. Doesn't mean I'm going to invest in toilets. But go right ahead, post the route map on your wall and regale strangers with tales of IDRs and splits and tiers and stories of Rich Kinder's derring-do.
Once again, you are wrong. The GP take, and we need to make sure we are defining that as the incentive distribution rights + 2% GP stake, and not include any LP units owned by the GP because those LP units are no different that the ones held by everyone else. First, the GP take is based off of a tiered system, whereby the GP collects a certain percentage of the cash flow up to each threshold. Their is typically a 2%/98% iter, a 15%/85% tier, a 25%/75% tier and a 50%/50% tier. Currently KMP is well into the 50%/50% tier, which I assume is why you claim the GP gets half of the cash flow. Let me remind you that it is mathematically impossible for KMP to get half of the DCF (unless you count the LP units that they own) as the early tiers skew the cash to the LP unit holders.
Second, the GP take is based on the DCF paid out, not on total DCF. You and I both know this, so there should be little reason for you to try and skew the facts...again.
Finally, the comment I made about accretive cash is true. If KMP buys an asset using debt, the DCF is after interest expense. The GP doesn't get its "take" until after financing costs. Therefore, when an acquisition is made, after financing costs are accounted for, then the accretive cash is split 50/50 (according to the IDR table tier). The issue becomes murkier when you have equity financing because there is a pre-built GP burden with each unit issued (I think this is what you were alluding to when you made the comments about the GP prospering regardless of whether or not the deal is immediately accretive).
I'd summarize by saying that you have been on this board since at least around 2001 or so, when I was first buying KMI. While Kinder Morgan is very aggressive with their distribution policy, you have to remember that these guys are micromanagers. The halcyon days of rapid growth are over, but investors can still enjoy 7% returns with modest growth year over year and an investment in crucial infrastructure.
"GP gets half of the incremental accretive cash flow"
The GP take comes out of total DCF, not out of "accretive" DCF. If KMP issues shares and distribution goes down per share (as in the Petrohawk acquisition), the GP take INCREASES as long as DCF increases. So if by "incremental accretive" you mean the distribution per share goes up, that's false.
And yes you're right, if you don't care about your returns, KMP is a fine investment. That's the kind of complacency Kinder is banking on.
They also have acquired, built, or otherwise achieved another 5 billion worth of infrastructure during this interval that would cost 10 billion to replace 5 years from now. But since you don't understand it, it is no doubt best to stay clear of it. I don't think many readers of your message will pay any attention to it.