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Kinder Morgan (KMI) Needs More Time to Build Magnolia LNG

Zacks Equity Research
·3 mins read

Kinder Morgan, Inc. KMI is looking for more time to complete the Magnolia LNG export facility and related pipelines, per Reuters. Kinder Morgan and its partner in the project, Glenfarne Group LLC, have asked the Federal Energy Regulatory Commission (“FERC”) for five additional years to complete the export facility.

The export unit construction and pipeline expansion received FERC approval in April 2016. The approval required the project to be completed by April 2021. However, several unforeseeable events in the global energy industry hampered the project’s advancement. Long-term LNG offtake contracts are required to make the final investment decisions for export facilities. The current market volatility affected Magnolia LNG’s ability to make such deals.

Moreover, coronavirus-induced lockdowns that destroyed energy demand had a significant impact on the LNG project. The U.S.-China trade war also played a major role in energy demand disruption. As such, Kinder Morgan and Glenfarne will likely decide whether to develop the Magnolia plant in Louisiana by 2021-end. The facility will likely receive natural gas through the Kinder Morgan Louisiana Pipeline.

Once the companies decide to build the facility, it can commence operations from the same by 2025. The unit will likely have a production capacity of 8.8 million tons per year of LNG and use the OSMR liquefaction technology. It is a low-cost and efficient process, which will generate low greenhouse gas emissions. Markedly, Glenfarne completed the Magnolia project’s acquisition from Australia's LNG Ltd. in early-June.

Notably, the ongoing market volatility has caused several project deferrals in North America in the past year. Also, low gas prices are playing major a role in the decision making process of long-term LNG deals.

Price Performance

The stock has risen 2.6% in the past six months compared with 23.1% rally of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, the stock carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Holly Energy Partners, L.P. HEP, Royal Dutch Shell plc RDS.A and Equinor ASA EQNR, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Holly Energy’s bottom line for 2021 is expected to rise 4.8% year over year.

Shell’s bottom line for 2021 is expected to jump 112.5% year over year.

Equinor’s bottom line for 2021 is expected to skyrocket 121.7% year over year.

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