The Good and The Bad from Kinder Morgan Energy Partner’s Earnings

A closer look at what worked -- and what needs work -- for Kinder Morgan Energy Partners in 2013.

Jan 17, 2014 at 10:03AM

Kinder Morgan Energy Partners (NYSE:KMP) reported fourth quarter and full-year earnings on Wednesday. As the partnership continues to grow, so too does the information that management packs into every press release. Today we're taking a closer look at what drove earnings in each segment, and what is expected to drive growth going forward.

We'll begin our evaluation of Kinder Morgan's year looking solely at the numbers. The partnership pursued growth in 2013 with its acquisition of Copano Energy, as well as dropdowns to KMP leftover from 2012's acquisition of El Paso. That growth is evident in the natural gas pipelines segment, and you can see that quite clearly from the chart below:

Kmp Q

Source: Company release. Dollar figures in billions .

Right off the bat, the only segment in decline on an annual basis is Kinder Morgan Canada, and that is by and large because of the sale of the Express-Platte system, completed in March . Going forward, the future of this segment rides on the successful approval and execution of the TransMountain expansion. The target date for that start-up is 2017. Kinder Morgan officially submitted its application for the project to Canada's National Energy Board in December. The partnership now awaits a 15-month review process before approval can be granted.

The natural gas pipeline segment is clearly the driving force behind the partnership's success, and again, this growth was due to acquisitions. One thing to note is that transport volumes were actually down on an annual basis, both for the fourth quarter and the full year. One of the major contributors to this was record volume attributed to power generation in 2012. Natural gas used in power generation fell from their 2012 high across the country in 2013 .

Growth in the other segments looks pretty anemic on a year over year basis when compared to the natural gas segment. Let's begin with the CO2 segment. First, the segment did meet management's guidance for 5% growth on the year. Second, in the fourth quarter the segment was up 16% over 2012's number, largely because natural gas liquids prices are starting to recover. Looking ahead, Kinder Morgan has two major projects ongoing to drive growth here. The first is an expansion at the McElmo Dome to boost CO2 production, and the second is an expansion to its Wink crude oil pipeline system.

The products pipeline segment was budgeted to reach 13% growth in 2013, but only managed 12%. The miss was largely due to a tax ruling in California. The primary growth drivers for the segment were higher volumes on the Cochin system, higher transmix volumes and margins, and a full year's contribution from the Kinder Morgan Crude and Condensate pipeline. Looking ahead, there is a lot of activity in this segment. Key drivers for future earnings will have a lot to do with natural gas liquids, as the partnership pursues an NGL fractionator project with Targa Resources Partners, an NGL pipeline project with NOVA Chemicals, and several expansions of the KMCC pipeline system.

The Terminals segment fell far short of its budgeted goal of 12% growth, coming in at 6% growth on an annual basis. The problems here came at the hands of lower bulk tonnage. The good news in this segment comes from higher rates and volumes at Kinder Morgan's liquids terminals, as well as a slight increase in coal export tonnage. Looking ahead, growth in this segment will be driven by expansion on the Houston Ship Channel, as well as the partnership's hub in Edmonton, Alberta.

Bottom line
CEO Rich Kinder feels like his stock is undervalued and has pledged to be better at communicating the story to investors . The first real test for this will be the information that comes out of Kinder Morgan's analyst day is at the end of January. After the event, investors will be able to read through the partnership's detailed presentations and decide for themselves what opportunity exists at Kinder Morgan in 2014, and beyond.

3 must-have dividends
If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

Fool contributor Aimee Duffy has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers