U.S. Markets closed

KMP Arm in Natural Gas Transport Deal

Zacks Equity Research

A unit of Kinder Morgan Energy Partners, L.P. (KMP), Tennessee Gas Pipeline Company (TGP), has inked a binding, 15-year firm transportation precedent agreement with Seneca Resources Corporation, a wholly owned exploration and production subsidiary of National Fuel Gas Company (NFG). The deal is valued at $29 billion.

The agreement entails transportation of 158,000 dekatherms per day of natural gas to the eastern markets on the Niagara Expansion Project. The project is scheduled to be commissioned in Nov 1, 2015, subject to regulatory approvals.

Seneca will remain the foundation shipper for TGP’s Niagara Expansion Project that is designed to serve the emerging markets of eastern Canada. The project also intends to provide transportation from the prolific Marcellus Shale in Pennsylvania to TGP’s interconnect with TransCanada Pipeline in Niagara County, NewYork.

Kinder Morgan’s unit also provides for the expansion of the capacity through a combination of existing capacity, pipeline looping, compressor station alterations and off-system capacity on the interstate pipeline system of National Fuel Gas Supply Corporation, also a wholly owned subsidiary of National Fuel.

TGP commissioned its Northeast Supply Diversification Project in Nov 2012. The project began exporting natural gas to Canada. These projects secure TGP’s position as a leader of pipelines in the Northeast as well as assist the company in boosting its transportation capacity between Marcellus and eastern Canada markets.

The project connects major shale supply areas from the Marcellus to serve the rising supply needs of eastern Canada. It thus places TGP at an advantageous position.

Kinder Morgan is one of the largest publicly traded master limited partnerships (MLPs) and generally serves as a benchmark for the pipeline MLP group. A focus on fee-based and diversified businesses has enabled the partnership to spread its business risks. In addition, the CO2 business is a major growth avenue for the partnership with the commodity price risk being offset by a long-term hedging strategy.

Kinder Morgan Energy Partners carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas sector include Abraxas Petroleum Corp. (AXAS) and Tesco Corp. (TESO). All these stocks hold a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on KMP
Read the Full Research Report on TESO
Read the Full Research Report on NFG
Read the Full Research Report on AXAS

Zacks Investment Research