December 11, 2012
Kinder Morgan Energy Partners recently announced that it's selling its one-third interest in the Express-Platte pipeline system to Spectra Energy for approximately $380 million.
In this video, Joel South and Taylor Muckerman discuss the deal and whether it will effect Kinder Morgan's distribution. Joel says it won't, and that it's a good move for both companies.
As Joel points out, the pipeline represents just $15 million of annual cash flow for Kinder Morgan. That represents just one half of 1% of the company's total operating cash flow. In return, the company is receiving fair value for the asset and can redeploy the proceeds into its higher-return growth projects. The deal makes perfect sense for Kinder Morgan, and as Taylor notes, it gives the company $380 million to take elsewhere.
As Joel and Taylor point out, Kinder Morgan is trading a minimal amount of cash flow for a large payday, and the company cash use that cash to reinvest in its business. It's easy to forget the necessity of midstream operators that seamlessly transport oil and gas throughout the United States. Kinder Morgan is one that investors should commit to memory because of its sheer size -- it's the fourth largest energy company in the U.S. -- not to mention its enormous potential for profits. In The Motley Fool's new premium research report on Kinder Morgan, our top energy analyst breaks down the company's growing opportunity, as well as the risks to watch out for, to uncover whether it's a buy or a sell. To determine whether this dividend giant is right for your portfolio, simply click here now to claim your copy of this invaluable investor's resource. As a bonus, you'll receive a full year of key updates and guidance as news develops, so don't miss out!