I think the material for KMI's January analysts conference has the ROI percentage that is expected for this project. KMI's other pipelines, in addition to Elba Express, are also likely to benefit form the additional movement of NG from the producing areas to the export facility.
Note that KMI's normal business model is to lease out the facility under long term contracts, and not take the commodity price risk. I would think the Shell will actually own the NG that is received at Elba, and will convert that NG to LNG. So multiplying the annual capacity of the facility by an estimated price of NG is not going to be relevant to KMI. That's my recollection.
unkaphil60, KMI did plan to build a $2 billion war chest. This was part of their projections when the rollup was announced. They did have to win approval of the MLP unit holders to do the rollup,. Going from the generous MLP distributions to an even much smaller dividend might have been completely unappealing to the unit holders.
I think there would have been no way to avoid the Moody's event. The NGPL acquisition triggered it, and that acquisition was something KMI needed to do. Had KMI somehow been able to hold the stock in the $30's, and continue with their debt and equity funding of capex, it would have just built up KMI's debt even more. The dividend cut had to happen, and it was done at a time when it should have been clear that outside events forced this change upon KMI. It wasn't part of the plan all along. But there are those shareholders who believe they were mislead. That''s why I get the thumbs down vote.
I am very happy with what I believe is the outlook for KMI. The future is even brighter than it would have been if KMI had somehow been able continue debt and equity funding of capex (in this market). I don't know how ETP and WPZ are going to fund their capex without distribution cuts from those MLPs.
Doing a financial trade is not KMI's business. Building the infrastructure to connect the new shale gas reserves to growing markets is clearly KMI's most important long-term objective. I don't think that allowing NGPL to go into bankruptcy would have been a safe gamble for KMI. Some other group might have started a bidding war for control. When you consider what NGPL is. It couldn't be duplicated today. Think of what it can do regarding Marcellu/Utica gas that can't be piped into New England. KMI is in a good spot.
KMI traded at $11.20 back in January was it? Its $18.60 now. The stock price can be subject to hysteria. Investors don't have to be. In a few years long-term investors will be very happy with what KMI has done.
lakedog, I'm glad to see that someone else also sees ocelotz as being unique. He is a basher whose posts aren't plainly obvious in their intent. He writes in sentences and and complete paragraphs, so he is capable of articulating complex thought. But the posts usually (absolutely always) contain facts pulled out of thin air that are always incorrect and negative towards KMI. He never posts answers when questioned, and has never explained himself in any way to demonstrate that he is posting in good faith.
The point I was trying to make was that doogoo1's post about the steep decline in crude oil shipments by rail was not valid regarding KMI because KMI apparently has no crude by rail terminals in the U.S. (they'd have to be in the Bakken, right?). KMI has rail terminals in Alberta, but we should assume that their future has been taken into consideration in light of the Trans Mountain expansion.
A lot of the wolf cries have to be ignored because the cries come first, and the research regarding KMI's actual asset locations comes second, if at all.
piatt123, you think KMI should have been able to acquire the interstate pipelines of KMP and EPB for their book value? Any payment above net book value results in goodwill you know.
Don't forget the share of SNG's debt that Southern Co would be assuming. Seems to be $2.68 billion total, which at 50% is $1.34 B plus the $1.47 B cash equals $2.81 billion total debt reduction. Possibly all of the partnership debt could be off loaded if the partnership's stand alone credit rating is strong and the debt was nonrecourse. It didn't happen with the NGPL acquisition.
Its unlikely that the rating agencies would not be aware of desperation, if it were present.
ok, so ocelotz is generally recognized (hopefully) as a short who is providing biased information. Somehow I wasn't picking that up. It can get to be as if a person receives a phone call each day asking if their refrigerator is running. ocelotz deserves abuse heaped on him.
tiglet2l, seen it? What do you mean by "it"? I'm sure that RK could always see that a dividend cut might be necessary. It was his job to try to prevent it. Not surrender to it. What was he supposed to have done? Had he mentioned the possibility of the cut a couple of months earlier, it would have just brought the stock down to the mid-teens that much earlier (immediately), with the added fear that something must really be wrong since the move would have been seen as self inflicted, rather than imposed by the market price of the stock.
There is no way that KMI management could have given a warning to shareholders earlier that would have allowed shareholders to sell in the 30's or high 20's before the panic set in driving the stock to the low teens in Jan - Feb. The crash would have occurred immediately after the announcement.
doogoo1, think clearly and don't misrepresent. The cash savings is going into Construction Work in Progress (CWIP). How come you didn't mention that? You wrote that investors should be seeing noticeable improvements in the top and bottom lines (of the income statement)? Improvements equal to 100% of the cash savings? More like 10% over the 12 month period after the capex projects are put into service.
Page 6 of the 1st qtr 10-Q shows total PP&E of $41 billion at 3/31/16 vs PP&E of $40.5 billion at 12/31/15. That is a half billion $ increase, and that is after the $550 million increase in accumulated depr, depl, and amortization for the 1st Qtr of 2016. The total PP&E includes CWIP. Therefore PP&E increased by $1.050 billion before DD&A during the 1st qtr of 2016. So it looks like the balance sheet is improving very nicely.
Total growth capex is forecasted to be $2.9 billion in 2016, excluding any acquisitions. So growth capex will be swallowing all of the dividend savings, as things currently stand.
See page 101 of the 2015 Form 10-K to see how CWIP is part of total PP&E.
unkaphil60, from what I've gathered over the years, having the IRA custodian pay ( by selling MLP units, if necessary) the tax from inside the IRA is the only way to avoid a penalty. The liability is the IRA's liability, and not the account owners. If the individual paid the tax himself using his own money from outside the IRA, it would be deemed a non-allowed contribution to the IRA and would cause a penalty. If the individual took a distribution from the IRA in order to raise the funds, that distribution would be taxable, and subject to penalty if the individual was under 59 1/2, and the subsequent payment of the UBTI would be a non-allowed contribution to the IRA, causing another penalty.
Oh the "Moodys downgrade" from stable outlook to negative outlook. I wonder if KMI will ever be able to get that downgrade reversed? Wait a minute. It was reversed by Moodys in less than a week, and that was about 7 months ago.
So that's the "Moodys downgrade" story for anyone who doesn't follow this stock. I doubt that includes anyone reading these posts.
paidtopump, it wouldn't be TM's job to build offshore demand for dilbit. TM doesn't own the product and doesn't sell it. Its enough that oil sands producers want the pipeline expansion, and TM wants to build and operate that expansion.
How could Asian demand be built for dilbit if there is no adequate supply that can be shipped to Asia at this point.? Tankers currently docking at Burnaby are too small to economically make the trip to Asia.
KMI investors are not going to worry about things that they don't have to worry about. Its the equivalent of Boeing investors hearing from someone that the new jetliner won't fly.
Reasonably investors trust that they have these bases covered.
unkaphil60, there is no way that a large decades old interstate pipeline serving profitable and growing markets can be purchased without generating a large amount of goodwill. The current market value of the pipeline will much higher than the the value that is carried on the books of the seller. It was so much cheaper to build pipelines in the past, and depreciation expense has reduced the carried value further. The difference between the sales price of the pipeline (deemed sales price, since these are stock transactions, not physical asset sales) and its carried value on the seller's books is goodwill.
I'm sure ganadero is well aware of this fact. His object is to post negative comments. He will never enter into a discussion with anyone in order to reconcile differences in understanding. He won't be troubled by the facts. It would be pointless for him to try to explain his comments in further detail.
Most of us on this board are dealing in good faith, writing only what we believe to be true. Ganadero and ocelotz are not, yet they are tolerated and treated as if their comments represented valid opinions. I am becoming very intolerant of dishonesty.
I was under the impression that a big portion, or most, of the goodwill came about from the El Paso Corp acquisition in May or 2012. So 4 years would make sense.
On the day that Enron went bankrupt in December, 2001, there were over 10,000 posts on Enron's Yahoo message board. Most of those people knew that their money was gone and they were screaming in panic. You've never seen pictures on the mobs of people on the street outside the NYSE when the panic of 1907 was taking place? That is mob psychology, and it is real.
I don't know whether message boards reflect the psychology, or help to cause it, but somehow that emotion catches large numbers of people. I bought lots of KMI stock during the December through February period in the 12's, 13's, 14's, 15's, 16's, and less fortunately in November in the low to mid 20's. I remember the dozens of bashing posts each day from doogoo1 and the wizard (before your time?), and the high volume of posts each day in general. Reflecting or causing panic, I don't know, but I am happy with the prices that I paid.
Anyone wanting to respond to this post should start a new thread since this one has gotten impossible to navigate.
doogoo1, listen to the CC, or read the transcript, and you won't be disappointed by expecting pay down of debt using current cash flow when management has no intention of doing that.
ganadero65, you wrote: "But what I am still curious about is at what point is it no longer legitimate to increase total asset value buy including $23 billion in goodwill? Is EPB's and KMP's current appraised value already rolled into "Property, Plant and Equipment"? If so, why isn't $23 billion nothing more than a made up number?"
The total cost of an acquisition is fixed pursuant to the purchase agreement with respect to the cash portion of the compensation, and is fixed by the fair market value of the acquirer's stock, when there is a stock swap, on the date of the merger closing. So the total cost of an acquisition is ultimately fixed. Debt assumed by the acquirer is also part of the acquisition cost.
Next, the net book value of the assets acquired is fixed, and is recorded on the acquired company's books. The excess of acquisition cost over the net book value of what is acquired has to be recorded as goodwill. The merger wouldn't even happen unless the seller's asking price is met. Nothing is made up by the acquirer after the fact.
Assigning fair market value to the various assets when doing a step up requires estimations, but that is a tax matter only.
There is nothing but historical costs and book depreciation shown in the "Property, Plant, and Equipment " numbers on the various pipeline and other operating company books. There'd be no reason to get a current appraised value of these individual companies unless they were being put up for sale separately.
"They are low on cash with about $170M on the balance sheet. They need cash. I suspect this asset sale was needed to cover their current liabilities."
That doesn't sound like the KMI that I've been following. An alternative reality I suppose.