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Kinder Morgan Energy Partners, L.P. Message Board

  • bluecheese4u bluecheese4u Oct 17, 2012 7:28 PM Flag

    Kinder Morgan Energy Partners Increases Quarterly Distribution to $1.26 Per Unit

    Kinder Morgan Energy Partners Increases Quarterly Distribution to $1.26 Per Unit

    Distribution 9% Higher Than Third Quarter 2011

    October 17, 2012 04:06 PM Eastern Daylight Time
    HOUSTON--(BUSINESS WIRE)--Kinder Morgan Energy Partners, L.P. (NYSE: KMP) today increased its quarterly cash distribution per common unit to $1.26 ($5.04 annualized) payable on Nov. 14, 2012, to unitholders of record as of Oct. 31, 2012. This represents a 9 percent increase over the third quarter 2011 cash distribution per unit of $1.16 ($4.64 annualized) and is up from $1.23 per unit ($4.92 annualized) for the second quarter of 2012. KMP has increased the distribution 45 times since current management took over in February 1997.

    “Growth in the third quarter compared to the same period last year was attributable to excellent oil production at SACROC, strong NGL production at the Snyder Gasoline Plant, higher production at the Katz Field and higher oil prices”
    .
    Chairman and CEO Richard D. Kinder said, “KMP had a strong third quarter with all five of our business segments reporting better results than in the third quarter of 2011. In total, KMP produced $1.14 billion in segment earnings before DD&A and certain items, a 21 percent increase over $0.94 billion for the same period a year ago. Third quarter highlights included contributions from the dropdowns of 100 percent of Tennessee Gas Pipeline (TGP) and 50 percent of El Paso Natural Gas (EPNG), record export coal volumes in our Terminals business, strong oil production at SACROC in our CO2 segment and increased natural gas demand for electric power generation on the TGP system. Looking ahead, we see significant growth opportunities across all of our business segments, and we remain very excited about the additional prospects that we expect KMP to realize from Kinder Morgan, Inc.’s acquisition of El Paso Corporation, which closed in the second quarter. With our large footprint of assets in North America, KMP is well positioned for future growth.”

    KMP reported third quarter distributable cash flow before certain items of $455 million, up 15 percent from $394 million for the comparable period in 2011. Distributable cash flow per unit before certain items was $1.28 compared to $1.19 for the third quarter last year. Third quarter net income before certain items was $574 million compared to $451 million for the same period in 2011. Including certain items, net income was $383 million compared to $216 million for the third quarter last year. Certain items for the third quarter totaled a net loss of $191 million versus a net loss of $235 million for the same period last year.

    For the first nine months of the year, distributable cash flow before certain items was $1.29 billion, up 17 percent from $1.10 billion for the comparable period in 2011. Distributable cash flow per unit before certain items was $3.72 compared to $3.40 for the same period last year. Net income before certain items was $1.58 billion compared to $1.27 billion for the first three quarters of 2011. Including certain items, net income was $737 million versus $789 million for the same period last year. Certain items for the first nine months of the year totaled a net loss of $838 million versus a net loss of $479 million for the comparable period in 2011. The loss, due to certain items for the first three quarters, was primarily attributable to the re-measurement of discontinued operations to fair value related to the KMP assets to be divested in order to obtain Federal Trade Commission approval for Kinder Morgan, Inc.’s acquisition of El Paso.

    Overview of Business Segments

    The Products Pipelines business produced third quarter segment earnings before DD&A and certain items of $185 million, up 4 percent from $178 million for the comparable period in 2011. This segment currently is expected to end the year slightly below its published annual budget of 6 percent growth.

    “The increase in earnings compared to the third quarter of 2011 was driven by higher earnings at our West Coast and Southeast Terminals,” Kinder said. “Growth at our West Coast Terminals was attributable to the Carson, Calif., tank expansion project which is being completed ahead of schedule, while growth at our Southeast Terminals was a result of two acquisitions and increased throughput volumes of refined products and biofuels. Earnings were also favorably impacted by higher volumes on the Cochin Pipeline reflecting a completed expansion project and a favorable tax adjustment, as well as better results from our transmix business due to favorable gasoline and diesel pricing.” Natural gas liquids (NGL) volumes on Cochin increased by 40 percent compared to the third quarter last year.

    Total refined products volumes decreased 2.5 percent compared to the third quarter of 2011. Overall segment gasoline volumes (including transported ethanol on the Central Florida Pipeline) were down 3.5 percent compared to the third quarter of 2011 attributable to lower volumes on Plantation, Pacific and CALNEV (reflecting ongoing weak demand, higher retail prices and lower volumes transported to and on CALNEV due to a competing pipeline), offset somewhat by an increase in gasoline and ethanol volumes on Central Florida Pipeline of 7.4 percent versus the third quarter last year. Overall segment diesel volumes declined 2.6 percent versus the same period last year, although they were up on Plantation (due to increased volumes related to a refinery upgrade). Overall segment commercial and military jet fuel volumes were up 1.2 percent compared to the third quarter of 2011, due primarily to a 1.9 percent increase in commercial volumes on Pacific and an increase in military volumes on CALNEV resulting from a recently completed project in Barstow, Calif.

    The Products Pipelines segment handled 8.9 million barrels of biofuels (ethanol and biodiesel) in the third quarter, up 12 percent from the same period a year ago. Once again this segment realized significant growth in biodiesel barrels stored and blended, and continues to make investments in assets across its operations to accommodate more biofuels.

    The Natural Gas Pipelines business produced third quarter segment earnings before DD&A and certain items of $383 million, up 54 percent from $247 million for the comparable period in 2011, and is currently expected to exceed its published annual budget of 19 percent growth due to the dropdowns, as described below.

    “Growth in the third quarter compared to the same period last year was driven by the TGP and EPNG dropdowns, contributions from our Eagle Ford assets, good results at Kinder Morgan Treating (benefiting from SouthTex acquisition) and higher earnings at Fayetteville Express (contracts ramping up),” Kinder said. Earnings declined on the Texas intrastate pipeline system compared to the third quarter last year due to timing associated with integrity management projects and specific repair costs to a well at the Markham storage facility. KMIGT and Trailblazer also produced lower results.

    TGP experienced significantly higher throughput for natural gas fired power generation in both the third quarter and for the first nine months, as power operators continued to consume more natural gas. TGP’s gas-fired power generation volumes increased by 8 percent versus the third quarter of 2011 and by 20 percent during the first nine months of this year compared to the same period a year ago.

    Overall segment transport volumes (including volumes from acquired pipelines for all periods) were up 11 percent in the third quarter compared to the same period last year attributable to higher volumes on Fayetteville Express and solid transport volumes on the Texas intrastate pipeline system, due in part to Eagle Ford Gathering volumes. Sales volumes on the Texas intrastates were up 6 percent compared to the third quarter of 2011.

    The CO2 business produced third quarter segment earnings before DD&A and certain items of $332 million, up 16 percent from $287 million for the same period in 2011. Due to lower NGL prices, this segment is expected to be modestly below its published annual budget of 26 percent growth.

    “Growth in the third quarter compared to the same period last year was attributable to excellent oil production at SACROC, strong NGL production at the Snyder Gasoline Plant, higher production at the Katz Field and higher oil prices,” Kinder said. “This segment’s results were impacted again by lower NGL prices, which are now projected to be about 21 percent lower for the full year than was assumed when the 2012 budget was developed, which equates to a negative impact of over $50 million.”

    The company continued to realize strong NGL production in the third quarter, producing gross volumes of 18.7 thousand barrels per day (MBbl/d), up 12 percent from the same period in 2011. NGL production declined compared to the second quarter this year due to planned vessel inspections in September at the Snyder plant.

    Oil production at the SACROC Unit increased to 30 MBbl/d in the third quarter, up 2 percent from the same period last year and 6 percent from the second quarter this year, and well above plan. Production continued to be relatively stable at the Yates Field, which produced 20.6 MBbl/d in the third quarter, about a 4 percent decline compared to the same period last year and flat versus the second quarter this year, and slightly below plan. Production at the Katz Field was 1.8 MBbl/d in the third quarter, up significantly from 0.5 MBbl/d for the same period last year, but flat with the second quarter this year and well below plan. The average West Texas Intermediate (WTI) crude oil price for the third quarter was $92.25 per barrel compared to a budgeted projection of $93.60 for the same period.

    This segment is an area where KMP is exposed to commodity price risk, but that risk is partially mitigated by a long-term hedging strategy intended to generate more stable realized prices. The realized weighted average oil price per barrel for the quarter, with all hedges allocated to oil, was $88.64 versus $70.43 for the third quarter of 2011. The realized weighted average NGL price per barrel for the second quarter, allocating none of the hedges to NGLs, was $44.27 compared to $68.86 for the same period last year.

    The Terminals business produced third quarter segment earnings before DD&A and certain items of $184 million, up 2 percent from $181 million for the comparable period in 2011, and is currently expected to meet its published annual budget of 8 percent growth. Growth for the quarter was evenly distributed among organic sources and acquisitions.

    “Internal growth in this segment was led again by strong export coal volumes across our terminal network, including new shipments at our Houston bulk terminals,” Kinder said. Export coal volumes increased by 32 percent (up 1.2 million tons) compared to the third quarter of 2011, while overall coal throughput declined by 8 percent. For the first nine months of this year, export coal volumes increased by 45 percent (up 4.9 million tons) versus 2011, and overall coal throughput is up 2 percent.

    “Segment earnings also received a boost from good results at our liquids terminals on the Houston Ship Channel and in New York Harbor (resulting from increased volumes, new contracts and incremental tank capacity), and at Fairless Hills (resulting from increased steel volumes),” Kinder said. Acquisitions that contributed to growth versus the third quarter last year included an additional equity investment in December of 2011 in Watco Companies, which owns the largest privately held short line railroad business in the United States.

    In the third quarter, this segment handled 15.7 million barrels of ethanol, up slightly compared to the same period last year. Combined, the terminals and products pipelines business segments handled about 24.6 million barrels of ethanol compared to 23.5 million barrels in the third quarter of 2011. KMP continues to handle approximately 30 percent of the ethanol used in the United States.

    Kinder Morgan Canada produced third quarter segment earnings before DD&A and certain items of $56 million, up 15 percent from $48 million for the same period last year, and currently is expected to slightly exceed its published annual budget of 1 percent growth.

    “Highlights in the third quarter compared to the same period last year included the impact of the 2012 toll agreement on the Trans Mountain pipeline system, favorable book taxes, strong throughput on Trans Mountain and at the Westridge Terminal, and continued good results from the Express-Platte Pipeline,” Kinder said. Trans Mountain volumes increased compared to the third quarter last year due to a pressure restriction in 2011 that was lifted earlier in 2012.

    2012 Outlook

    As previously announced, KMP expects to declare cash distributions of $4.98 per unit for 2012, an 8 percent increase over the $4.61 it distributed for 2011. Due to deteriorating NGL prices, KMP now expects to generate 2012 distributable cash flow slightly above its distributions, but below budget. Excluding the dropdown transactions discussed below and expansion projects associated with those assets, KMP now expects to invest approximately $2.2 billion in expansions (including contributions to joint ventures) and acquisitions for 2012. Approximately $500 million of the equity required for this investment program is expected to be funded by Kinder Morgan Management, LLC (NYSE: KMR) dividends. As previously announced, and related to KMI’s acquisition of El Paso Corporation, the average annual growth rate in KMP distributions per unit and KMR dividends per share is expected to be around 7 percent from 2011 through 2015.

    KMP’s budget assumed an average WTI crude oil price of approximately $93.75 per barrel in 2012, which approximated the forward curve at the time the budget was prepared. The overwhelming majority of cash generated by KMP’s assets is fee based and is not sensitive to commodity prices. In its CO2 segment, the company hedges the majority of its oil production, but does have exposure to unhedged volumes, a significant portion of which are natural gas liquids. For 2012, the company expects that every $1 change in the average WTI crude oil price per barrel will impact the CO2 segment by approximately $6 million, or slightly over 0.1 percent of KMP’s combined business segments’ anticipated segment earnings before DD&A.

    KMR also expects to declare dividends of $4.98 per share for 2012.

    businesswire

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