Kinder Morgan Earnings Preview

Midstream companies have grabbed investor attention recently, and for good reason. Oil and gas production volumes have increased across America, resulting in a massive build-out of midstream infrastructure and a ton of acquisitions.

Kinder Morgan (NYSE: KMI  ) and Kinder Morgan Energy Partners (NYSE: KMP  ) are the first big name American midstream companies to report earnings, coming after the market close tomorrow. Kinder Morgan has been pretty busy over the past few months and there should be plenty of material to pour over in the third-quarter releases for both the general partner and the master limited partnership.

Third-quarter moves
Things are still shaking out across the Kinder Morgan companies as KMI moves to complete dropdowns from the El Paso acquisition. In mid-August, KMI dropped down 100% of its Tennessee Gas Pipeline acquisition, and a 50% stake in the El Paso Natural Gas Pipeline, to KMP for $6.22 billion.

These dropdowns are important because they allow KMP to make up cash flows lost to divestments related to the El Paso acquisition. KMI was forced to sell assets in certain regions to avoid antitrust violations. Though these dropdowns will affect the balance sheet positively, we likely won't notice any significant difference until next year.

In more immediate news, investors will see the effect of a crude and condensate pipeline that came online in June. The KMCC pipeline started service from the Eagle Ford Shale to the Houston Ship Channel. It has a capacity of 300,000 barrels per day and is supported by long-term contracts.

Other Q3 moves of note include Kinder Morgan Energy Partners' long-term condensate processing and storage deal with BP. KMP will spend $75 million to expand an existing facility in Houston, which should be in service by 2014.

Expectations
Analysts are expecting earnings in the range of $0.14 and $0.35 per share for KMI, and $0.59 per unit for KMP. Last quarter, KMI reported a loss of $0.15 per share, and KMP reported earnings of $0.37 per unit. Both results missed estimates; however, all of the Kinder Morgan companies, including Kinder Morgan Management (NYSE: KMR  ) and El Paso Pipeline Partners (NYSE: EPB  ) increased their dividends last quarter, and it stands to reason all entities will be able to maintain their payouts.

Foolish bottom line
Kinder Morgan reports after the market close at 4:30 EST on Wednesday, and interested investors can listen in here, or click here to add Kinder Morgan to My Watchlist.

Fool contributor Aimee Duffy has no positions in the stocks mentioned above. Click here to see her holdings and a short bio. If you have the energy, check out what she's keeping an eye on by following her on Twitter, where she goes by @TMFDuffy.

The Motley Fool owns shares of Kinder Morgan. Motley Fool newsletter services recommend El Paso Pipeline Partners and Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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