Recent

% | $
Quotes you view appear here for quick access.

Kinder Morgan Energy Partners Message Board

  • zlzhao22 zlzhao22 May 20, 2012 10:46 PM Flag

    about its energy hedge

    KMP hedges crude oil price at $93.75. What does this mean? If the price goes below this number, it will earn less profit? Or if the price above that number then it will earn less?

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • dunepray7@bellsouth.net dunepray7 May 29, 2012 1:35 PM Flag

      Boyz, Boyz,
      I was simply trying to answer the original question, not get into every element of the KMP business model. You should know hedging contracts against the price of oil is what the term implies. KMP is the most diversified MLP out there, in my opinion.

      dune

    • markramey@ymail.com markramey May 28, 2012 3:11 PM Flag

      That simply means they can sell all they produce at the hedged price. As long as the cost of production is less than the hedge (by far in this case) they earn a profit.

    • dunepray7@bellsouth.net dunepray7 May 21, 2012 8:36 AM Flag

      Remember, MLP's are like toll gates. It is KMP's hedging effort (contract) to lessen the markets price fluctuations of oil and give KMP a better insight of future cash flow. Simply put, if the price of crude rises above 93.75 the contracted oil company has the benefit of moving its products through KMP piplines at that price level's cost. If the price of crude drops below, then KMP benefits in the ratio, having secured the contract at higher costs to the oil company. Earnings, as related to this measure, should not concern you greatly. Cash flow is the key. There is much more to it, however, this is the short answer. MLP's are not c-corporations. Cash flow and their costs to cover their distribution should be your chief concerns.

      dune

      • 2 Replies to dunepray7
      • "Simply put, if the price of crude rises above 93.75 the contracted oil company has the benefit of moving its products through KMP piplines at that price level's cost. If the price of crude drops below, then KMP benefits in the ratio, having secured the contract at higher costs to the oil company."

        So if KMP didn't enter into any hedges, what would happen? How is KMP hurt or helped by rises or declines in the price of crude flowing thru its pipes? The more valuable the product, the more KMP charges the customer to ship it? Why does KMP care if it has to charge the customer more? Competition from rival pipelines or what?

        One would think that the customer would be more concerned about declines in the price of crude if it has to pay the same transportation charges for a product that has declined in value. Its margins would be squeezed.

        Talking about difficult topics is like working out in the gym. No pain, no gain.

      • I am kind of new to MLP. Can you explain why KMI keeps dropping while KMR holds up? Thanks.

 
KMP
0.00(0.00%)