All Aboard the Fayetteville Express

Our nation's independent exploration and production companies have no problem producing natural gas these days. Getting that gas to market is a different story.

Bottlenecks in the Rockies have depressed gas prices in that region, while the hurricanes have really roughed up offshore gathering systems. In fact, more than 45% of Gulf of Mexico natural gas was still offline as of Tuesday.

But never fear: Kinder Morgan Energy Partners (NYSE: KMP  ) and Energy Transfer Partners (NYSE: ETP  ) are here. They've got a new pipeline plan that's going to plumb the Fayetteville shale for all it's worth.

OK, not all it's worth -- the Fayetteville is massive -- but at 2 billion cubic feet a day, this is one fat pipe. In comparison, REX West, owned by Kinder, Sempra Energy (NYSE: SRE  ) , and ConocoPhillips (NYSE: COP  ) , only sports capacity of a billion and a half per day.

This is a roughly $1.3 billion project, so it's important for the funders to secure shippers well in advance of the in-service date a few years hence. The pipeline is proving popular, with 10-year commitments right off the bat from the biggest producers in the play -- Southwestern Energy (NYSE: SWN  ) and fresh joint venture partners Chesapeake Energy (NYSE: CHK  ) and BP (NYSE: BP  ) . Southwestern is on board for 1.2 billion cubic feet a day, while the latter partnership is chipping in 375 million a day. If even more interest is expressed during "open season" bidding that begins next week, this pipeline could plump up quite a bit further.

This project announcement, right in the eye of a credit-market storm, is further evidence of just how solid profit machines like Kinder truly are.

Energy Transfer is a Foolish top pick, sporting a five-star rating in Motley Fool CAPS. Is this one headed for natural-gas nirvana, or pipeline purgatory? Make the call right here.

Chesapeake is an Inside Value selection. We offer a deep pipeline of newsletters, each of which offers a free 30-day trial.

Fool contributor Toby Shute has an outperform call on Energy Transfer in CAPS, but he doesn't have a position in any company mentioned. You can find him on CAPS as TMFSmashy. The Motley Fool has a disclosure policy.


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4/17/2014 4:02 PM
KMP $77.49 Down -0.83 -1.06%
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CHK $28.17 Up +0.68 +2.47%
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COP $74.77 Up +0.99 +1.34%
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SRE $97.13 Down -1.23 -1.25%
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