Natural Gas Is Stealing the Show at Kinder Morgan Inc.

Kinder Morgan reported seeing unprecedented demand for natural gas transportation.

Apr 23, 2014 at 11:00AM


Photo credit: Kinder Morgan

The Kinder Morgan (NYSE:KMI) family of companies recently reported strong first-quarter earnings. The biggest driver for the group was the natural gas pipeline segment at Kinder Morgan Energy Partners (NYSE:KMP). Earnings for that segment were up 46% as a combination of acquisitions and organic-growth projects fueled the boost. Overall, natural gas really stole the show this quarter for the company, and is likely to fuel strong results in the future.

Keeping Americans warm
Kinder Morgan CEO Richard Kinder noted that the company transported about 33 billion cubic feet of natural gas per day during the coldest days of this past January. Those volumes represented about a third of America's total market demand. If it wasn't for Kinder Morgan's pipelines, it would have been an even colder month for many Americans.

The natural gas pipeline segment at Kinder Morgan Energy Partners operated at near capacity during much of the cold winter months. The company's employees were able to meet this operational challenge to keep gas continually flowing out of storage and through its pipelines. This segment helped fuel a lot of profit for Kinder Morgan in the quarter, and should continue to do so for decades to come.

 Kinder Morgan Tgp

Photo credit: Kinder Morgan

Unprecedented demand
While demand in the winter was high, the company is seeing "unprecedented demand" overall for natural gas transportation capacity, according to Mr. Kinder. He noted that, since the beginning of December, the company has signed up 2.8 billion cubic feet per day, or Bcf/d, of new firm transportation commitments with customers. The average contract duration for these new commitments is about 15 years. This will result in the company investing to increase its capacity in order to meet all of this demand.

On the conference call with analysts, Mr. Kinder noted that there's a lot more demand beyond this in the pipeline, so to speak. He pointed out that energy research firm Wood Mackenzie recently put out its preliminary outlook that suggested that natural gas demand in the U.S. will rise from 71.5 Bcf/d to 94.5 Bcf/d by 2024. That's another 23 Bcf/d of demand, which is truly remarkable when we consider that Kinder Morgan moved 33 Bfc/d of gas, and controls a third of the market. This demand growth is a big opportunity for Kinder Morgan to increase capacity and capture more market share.

 Kinder Morgan Pipeline Stack

Photo credit: Kinder Morgan

Demand growth is coming from multiple sources, including LNG exports, additional natural gas fueled electric generation, an increase in industrial use, and more gas exports to Mexico. The one real big driver could be the $70 billion in announced U.S. petrochemical development along the Gulf Coast, all of which will need a steady supply of natural gas.

Overall, there are tremendous investment opportunities for a company like Kinder Morgan to build and operate the infrastructure needed to fuel this growth. In fact, a recent study projected that America's energy industry needs to spend a mind-blowing $641 billion between now and 2035, or an average of $30 billion per year. That's triple the estimate of just a few years ago. Kinder Morgan stands at the forefront of an unprecedented opportunity to build the critical energy infrastructure that America will need in the decades ahead.

Investor takeaway
Kinder Morgan does a lot of things, and it does a lot of things very well. However, what it does best is move natural gas, and that has it positioned perfectly for America's natural gas fueled energy future. With $16.4 billion in projects already in the pipeline and more on the way, Kinder Morgan has a really bright future that will be fueled by natural gas.

The IRS wants you to profit from this boom
Kinder Morgan has a big secret. It knows about a small IRS "loophole" that it's using to line the pockets of its investors. If you want to learn how to profit alongside Kinder Morgan by investing in this secret strategy, then you need to check out our 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 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