The most misleading misconception about KMP is that it is not dependent on the price of oil. Kinder Morgan is the second largest oil producer in Texas, and operates one of the largest oil fields ever discovered. Not dependent on the price of oil and nat gas? Yeah sure, where did you hear that? Cramer? Some buffoon named "abter"? This is a highly leveraged oil producer that relies on the Kult of Kinder to lure ever more gullible and poorly informed investors to fund the Kinderponzi.
This from the Houston Chronicle last month.
"The Yates Field, among the largest ever found in the U.S., has been in continuous production for 85 years and has been exploited by a list of oil companies, some of them no longer in existence.
But scientists believe massive amounts of oil still remain stranded in the rocks - and oil prices near $100 a barrel have raised the urgency to get more of it out.
Houston pipeline giant Kinder Morgan, the field's owner since 2003, will tell you that's easier said than done.
The company had initial success reversing years of declines at Yates by injecting large quantities of carbon dioxide into the field. The technique has been used since the 1970s in mature West Texas fields to help free trapped oil. But recently production has dropped again.
"What we're trying to do now is stabilize the decline," Darrell Ricketson, vice president of Permian Basin oil and gas operations at the firm, said during a recent tour of the famed field in eastern Pecos County. That may soon include experimenting with alternate recovery methods, like injecting steam or chemicals."
Read more: http://www.chron.com/disp/story.mpl/business/energy/7628175.html#ixzz1USfORggD
>Are you invested in KMI or any other MLPs(GPs or LPs)? From what I can tell KMI seems like the place to be, much like any other GP that is taking 50% of the growth at no cost.
I've invested in LINE and LGCY in the past and had pretty good returns, but I don't hold any positions now. I'm not invested in KMI for two reasons: 1) I think what they're doing is unethical and don't want to be a part of it, and 2) with management this tricky, I wouldn't feel safe even holding the "good side" of this deal.
Are you invested in KMI or any other MLPs(GPs or LPs)? From what I can tell KMI seems like the place to be, much like any other GP that is taking 50% of the growth at no cost. I am not in KMP and would never touch an LP with such an expensive cost of capital.
>You should head over to investor villiage and post your concerns. They will surely tell you where you are right and where you are wrong.
Well, I've been investing for a long time (20+ years) and I think I'm pretty good at math and finance theory so I don't take anyone's statements automatically in these areas, I require them to present reasons that convince me.
I don't give most credentials too much weight since I've worked for and against people with quite impressive sounding credentials who don't always measure up and I've encountered very smart people with no credentials, so I require the arguments to speak for themselves. Sorry for discussing this point at such length, but it's apparently a favorite way for investors to make their decisions and I think it's a very bad idea for many reasons.
Also, even most experienced investors are not good at analyzing a truly unique company structure like the MLPs since there's been no time-tested analysis of the structure AFAIK. Basically the MLP creators have sold the investment community on the "proper" way to evaluate these companies and your average "intelligent investor" has by and large adopted these models to their own detriment.
For example, the basic inequality of distribution dilution of an MLP with a large IDR can't really be argued against, IMO, but KMP investors seem more than willing to ignore it when evaluating the investment quality of these vehicles. In part, I think this is because MLPs are promoted as tax-advantaged investments (this is something everyone likes to hear when investing :-).
>Also on November 29, 2010, we announced that for the year 2011, we anticipate that (i) our business segments will generate approximately $3.6 billion in earnings before all non-cash depreciation, depletion and amortization expenses, including amortization of excess cost of equity investments...
I just checked the annual report numbers and yahoo's and they seem to agree to me. First, note that this is a reference to 2011 numbers (e.g. it's a forecast).
Second, note this key phrase: "earnings before all non-cash depreciation, depletion, and amortization expenses". This is not earnings, this is just a number called distributable cash flow that KMP uses to calculate how much to distribute to unitholders and the GP. Actual earnings include these "non-cash" losses and makes for a very different picture. For example, in 2010, depreciation,depletion,amortization loss was 904.8 million.
To see the numbers I'm using, just look under "Result of Operations/Consolidated" here:
I've know KMP produced a significant portion of profits from oil sales for the last 8 years. The oil is loosed from the depleted fields by sequestering CO2. It's good of you to point out that CO2 injection seems to have run its coarse and that now its time for some less efficient technology that may not be equally profitable.
Compare "total cash flow from operating activities" with "total cash flow from investing" + "dividends paid," ie distributions.
If you really believe that KM* is a ponzi scheme, what are you doing in this market? You have a death wish?
Fact is, most knowledgeable experts in this field disagree with you about Richard Kinder and his companies. As for Abter1, he makes a LOT more sense than you do.
Sorry, Charlie, 1 star for you.
>If you really believe that KM* is a ponzi scheme, what are you doing in this market? You have a death wish?
Sorry, I never meant to imply that I own KMP: I don't. I don't actually read this board much normally except when I've made a posting, but I check in every once in a while just so I don't miss the boat when it finally starts to sink.
Discussing KMP is just a hobby for me, since I find the structure used quite fascinating. It took me quite a while poring through the annual reports to understand all the tricks (and I'm not sure I've seen everything yet since a lot of the actual operation details of KMP would take me too long to research). I actually think Kinder is a pretty bright guy, if he originated the MLP/IDR system. As one small example, normally the massive, ever-growing financing of KMP over the years should have raised red flags, but the excuse of replenishing the diminishing assets of a typical MLP is used to cover for this.
>Fact is, most knowledgeable experts in this field disagree with you about Richard Kinder and his companies. As for Abter1, he makes a LOT more sense than you do.
Yep, like those guys at Goldman Sachs who rate this so highly and own part of the GP. Yep, good guys to trust. That's about like Kinder telling you it's a good stock.
As far as the majority of the pro-KMP posters here, I've always found their counter-arguments quite weak. Most just resort to one of two arguments: 1) trust the professional stock analysts blindly (that's a winning investment strategy) or 2) they've made a lot of money in this stock over the past decade so I must be wrong.
If you follow 1, why bother to read postings that discuss the stock's quality since these analysts have already told you this is an awesome stock. I'm only interested in arguing facts and analysis: an appeal to higher authority in the arena of stock investing as a means of refuting my arguments is pretty silly. Possibly you're not familiar with the results that the Wall Street Journal used to routinely report when comparing paid analysts picks to those of a random dart board throw?
Anyone who uses 2 clearly doesn't understand ponzi schemes very well and really needs a basic education in stock fraud. Just look at how long Madoff's lasted. That's actually the problem with this stock for me: it's difficult to know just how long it's gonna last. If I could pin that time down, I could take a big short position against it, but Ponzi life times are pretty unpredictable, since they go suddenly with a crisis of confidence.
If anyone wants to debate my points without resorting to the above two arguments, I'm more than willing to discuss the matter as long as we keep the discussion civil. I actually have a few questions of my own that I wouldn't mind getting answered (e.g. how the net tangible assets is getting computed as negative).