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Kinder Morgan Sells Pembina Shares to Reduce Debt Burden

Zacks Equity Research

Kinder Morgan, Inc. KMI recently announced that it has sold all Pembina Pipeline Corporation PBA shares that were received by the company following the divestment of a stake in Kinder Morgan Canada Limited. For the sale of a 70% interest in the Canadian unit, Kinder Morgan got 25 million shares of Pembina.

Divestment Rationale

The move of divesting its Canadian unit and the U.S. part of the Cochin Pipeline is in line with the midstream company’s strategy of reducing debt burden through divestments. Converting Pembina shares into cash of $764 million in after-tax proceeds will likely help Kinder Morgan to increase balance sheet flexibility.

The latest move is significant for the company as it had only $241 million in cash and cash equivalents, and a long-term debt of $30,849 million at the end of third-quarter 2019. Total debt-to-capitalization ratio was 50.6%, signifying that its balance sheet is more levered than the industry it belongs to.

Post-Divestment 2020 Estimates

The company expects distributable cash flow of $5.1 billion in 2020, despite the divestment of assets to Pembina. Moreover, it anticipates $7.6 billion in adjusted EBITDA for this year. Also, in 2020, the company’s dividend payments are expected to rise 25% year over year to $1.25 per share.

Price Performance

Headquartered in Houston, TX, Kinder Morgan has gained 24.1% in the past year compared with 2.9% rally of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, Kinder Morgan has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy sector include CNX Resources Corporation CNX and Antero Midstream AM, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CNX Resources’ earnings for the current year have witnessed four upward revisions in the past 60 days versus no movement in the opposite direction.

Antero Midstream’s fourth-quarter 2019 earnings growth is expected to be 130%.

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Antero Midstrm (AM) : Free Stock Analysis Report
 
CNX Resources Corporation. (CNX) : Free Stock Analysis Report
 
Pembina Pipeline Corp. (PBA) : Free Stock Analysis Report
 
Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report
 
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