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Kinder Morgan Energy Partners Message Board

  • rebmunsordagova rebmunsordagova Apr 12, 2012 2:56 PM Flag

    KMP and the price of NG

    In the following interview, the CEO of ETP cites the low price of NG for company woes. The same with KMP?

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    • I heard the same report as well. I have read that ETP just doesn't have it together, and reading between the lines they must not have structured their NG contracts very well. It was a very sad interview to be honest and while anyone appreciates honesty, it was a investor relations disaster, then the guys goes and says we will need more money. I don't know I just wasn't convinced that ETP is a forboding for KMP.

      I read Morgan Stanley's MLP report, and while there rating on KMP is more or less hold, the target price remains $90 on the upper end. Also, you have to appreicate the number of business segments and types of fuels that KMP carries in its pipes and it is diversified mix. Moreover, the anaylsts have increased their estimates a bit for this quarter, so the key to KMP in the near term is how they will do on earnings comining up on the 19th of April (or whatever date they annouce), so we could all be plesently suprised, but KMP does miss the consensus. One other point is that I heard the there is a difference in price between Liquidfied Natural Gas and Natural Gas, so I don't totally understand pricisely what KMP pump through its pipes, but I just think there is some diversification in their earnings, whihc dwarfs ETP.

      Basically, ETP has a lot pipes, but does management really know how to structure deals for various products. I got the sense, they are too depending on NG. Pitiful for ETP.

      • 2 Replies to ben9471
      • You don't know the difference between Liquified natural gas and natural gas, or do you mean natural gas liquids and natural gas.

        I suspect the latter.

        Energy Transfer has been a very well run MLP for many years. They got hit with a double whammy. One, falling gas prices caused basis differentials to compress and in many cases disappear. As ETP wheels a lot more gas around within Texas (intrastate) vs interstate. Differentials are now basically as low as they can go zero. If they went below zero, that would be a differential.

        Two, propane has gotten slaughtered and ETP essentially started out as the old Heritage and Ray Davis and Kelcy Warren basically backed into it with some pipelines and took control. They grew the heck out of it for many years.

        Now they finally divested the propane ops to Amerigas and they bought Southern Union to give them interstate lines. They (ETP) bought the Louis Dreyfuss biz to get into NGLs. They (ETE) bought the GP of Regency to get into G&P and also to gain another low cost of capital vehicle.

        When all of the dust settles, ETP will be a good buy as it trades at a discount to the others. The drop downs will get ETP back to full coverage and back to growth, it will just take time.

      • KMP has primarily Interstate lines which are regulated and rates set by FERC. ETP has much Intrastate pipeline exposure which are unregulated and therefore more commodity price sensitive..Apples and Oranges

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