First-quarter earnings for Kinder Morgan (NYSE: KMI) were a mix of good news and bad news, though the overall picture remains quite solid. KMI's general partner stake in Kinder Morgan Energy Partners (NYSE: KMP) can muddy the waters a bit come earnings time, so let's take a closer look at how the first quarter shaped up.

Earnings
KMI's growth is driven by KMP's growth, so if the latter has a good quarter, so does the former. Unfortunately, that wasn't the case this time around. KMP's first quarter breaks down like this:

  • Profit was down to $206 million from $338 million last year.
  • Per unit, KMP reported a loss of $0.33, compared to earnings of $0.18 last year.
  • Revenue decreased 3.6% to $1.84 billion.

As a result, KMI had a rough quarter as well:

  • Earnings dropped from $155 million last year to $21 million this year.
  • Revenue sank 70% to $1.86 billion.
  • Per share, earnings were $0.01, and came nowhere near analyst expectations of $0.31.

Much of the trouble here is derived from writedowns related to the acquisition of El Paso. Kinder Morgan was forced to sell assets before the government OK'd the merger. Though there are a few things to watch going forward, the rough quarter is largely a one-off issue.

Good news
KMP's carbon dioxide transportation business is growing by leaps and bounds, and net income from the unit was up 50% over the same time last year to $233 million. The company plans to increase capacity at its source field in Colorado by 60%, and has signed new supply contracts for 1.2 trillion cubic feet, so expect continued growth from this segment.

Bad news
Shrinking demand for diesel and gasoline hurt KMP's product-pipeline segment, and earnings from that unit declined 4% to $147 million. Long term, Kinder Morgan doesn't see this trend improving and will look to make up the difference by increasing its transportation of biofuels and condensates.

Kinder Morgan may be able to bail itself out here, as many domestic natural gas producers are clamoring to increase production of condensates, often referred to as liquids or wet gas.

Foolish takeaway
Kinder Morgan expects the close of the El Paso transaction to contribute nicely to the company's growth, and expects to increase its dividend by 12.5% annually through 2015.

Kinder Morgan Energy Partners will continue to be the growth engine for KMI. KMP recently announced an agreement for a 50% joint venture with Kohlberg Kravis Roberts worth $300 million. The deal will give KMP a share of natural gas gathering and processing assets in Altamont, Utah, and in the Eagle Ford shale in Texas.