A Closer Look at Kinder Morgan Inc's First Quarter

The Kinder Morgan family of companies reported first-quarter earnings. Here’s what you need to know.

Apr 17, 2014 at 11:45AM


Source: Kinder Morgan.

The Kinder Morgan (NYSE:KMI) family of companies reported strong first-quarter results after the market closed on Wednesday. Really strong results by Kinder Morgan Energy Partners (NYSE:KMP) along with solid results by El Paso Pipeline Partners (NYSE:EPB) helped push Kinder Morgan's cash available to pay dividends up by 12% over last year's first quarter. Let's take a closer look at what drove these strong results.

A closer look at Kinder Morgan Energy Partners
Most of the heavy lifting in the quarter was done by Kinder Morgan Energy Partners. The MLP reported first-quarter net income before certain items of $788 million, which was up from the $655 million the company reported in the first quarter of 2013. That translated into bottom-line earnings growth as Kinder Morgan Partners reported distributable cash flow of $693 million, which is up 26% from the $550 million the company reported in the first quarter of last year. This equated to distributable cash flow per unit of $1.55, which is up from $1.46 per unit. This strong distributable cash flow enabled Kinder Morgan Energy Partners to raise its first-quarter distribution by 6% to $1.36 per unit.

As the following chart notes, this growth was mainly driven by the strength in the natural gas pipeline segment as well as the terminals segment.


Source: Kinder Morgan Energy Partners press release. Note: Segment earnings in millions. 

Natural gas pipeline earnings were up 46% and fueled by acquisitions as well as strong organic growth. Over the past year, Kinder Morgan Energy Partners acquired Copano as well as the remaining 50% of El Paso Natural gas and 50% of El Paso midstream, both of which were drop-down transactions with Kinder Morgan. In addition to acquisition-fueled growth, the natural gas pipeline segment saw strong performance by the Tennessee Gas Pipeline, an increase in its natural gas exports to Mexico and strong Texas intrastate deliveries.

The other big driver on the quarter was the terminals segment. About 70% of the growth in segment earnings was attributable to organic growth, with the other 30% of growth coming from the recent acquisition of American Petroleum Tankers. The organic growth came from various expansions that came online in the quarter, including the Edmonton Terminal, BP Whiting, BOSTCO, International Marine Terminal, and Galena Park. These expansions, when combined with strong performance throughout the segment, led to a 22% jump in segment earnings.


Source: Ray Bodden on Flickr.

A closer look at El Paso Pipeline Partners
While Kinder Morgan Energy Partners does most of the heavy lifting each quarter, investors can't overlook the solid contributions of El Paso Pipeline Partners. The partnership reported earnings of $319 million, which was slightly above last year's first quarter. This enabled El Paso Pipeline Partners to increase its distribution by 5% over the first quarter of last year, though it is stable from last quarter.

Looking ahead, El Paso Pipeline Partners should continue to produce stable results. The plan is to complete three drop-down transactions with Kinder Morgan this year, which will help to offset earnings declines elsewhere. Meanwhile, El Paso has about $1.5 billion in expansion projects under contract that should begin delivering earnings growth beginning in 2016. Because of this, El Paso should continue to contribute solid results for Kinder Morgan.

Investor takeaway
The Kinder Morgan family of companies is off to a strong start in 2014. The company remains on track to meet or exceed its published guidance, which should yield continued growth in dividends and distributions. 

Can Kinder Morgan cut your taxes?
You already know record oil and natural production is changing the lives of millions of Americans. It's fueling fantastic dividend growth for the Kinder Morgan family of companies. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Matt DiLallo has the following options: short January 2016 $32.5 puts on Kinder Morgan and long January 2016 $32.5 calls on Kinder Morgan. The Motley Fool recommends El Paso Pipeline Partners LP and Kinder Morgan. The Motley Fool owns shares of 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information