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.
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.
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.