An introduction to Kinder Morgan’s natural gas pipelines assets
Kinder Morgan is on steady footing despite the oil price slump (Part 2 of 16)
Key natural gas assets and locations
Kinder Morgan owns and operates major interstate and intrastate natural gas pipelines and terminals in the US that total 48,000 miles. The company serves consumers all over the country. Kinder Morgan (KMI) also operates LNG (liquefied natural gas) storage and regasification terminals that serve Southeastern states.
Here is an account of Kinder Morgan’s natural gas pipelines assets:
In the chart above, the design capacity refers to either transmission or gathering capacity depending on the nature of the asset.
The company’s midstream group assets are as follows:
Kinder Morgan also has crude oil assets in place, described as follows:
Value drivers
Kinder Morgan has a stable, fee-based energy transportation and storage assets base that caters to the energy infrastructure of growing markets within North America. In the US, natural gas production and consumption has increased significantly over the past ten years. Dry natural gas production in the past five years has increased 32%.
Fee-based contracts and other factors
Currently, the US produces 2.3 trillion cubic feet per month of natural gas, which needs to be transported through pipelines and terminals to supply to various users. Kinder Morgan, through its vast natural gas asset base, is equipped to take advantage of this natural gas growth.
Midstream energy companies typically aim to mitigate risk of reduced volumes and prices by negotiating contracts with longer terms. In the short term then, the effect of crude oil prices falling is minimal for midstream players. If crude oil prices stay depressed for a long time, volumes will decline and contract terms will expire. As a result, revenues and profits will suffer.
Some contracts are different. Percentage-of-proceeds and keep-whole contracts may influence revenues and profits in the short term. For more on this subject, read Natural gas processing contracts and how they affect profits and valuation.
The other factors that affect natural gas infrastructure business include natural gas price changes, the level of business activity, conservation, legislation, and governmental regulations, and completion from other sources like coal and alternative energy. These types of external factors also affect other midstream energy companies like the Williams Companies (WMB), Spectra Energy (SE), and Targa Resources (TRGP). WMB, KMI, and SE make up 9.2% of the Energy Select Sector SPDR ETF (XLE).
Read the following article to find out about Kinder Morgan’s CO2 segment.
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