From my perspective, and despite somewhat lower revenues, Kinder Morgan Energy Partners (NYSE: KMP) produced a solid quarter from both financial and operating perspectives.

On the financial side, I'm far more inclined to point to increased profits and a hike in the distribution than to focus on a revenue decline, which is frequently beyond the company's control and not reflective of its future prospects. Indeed, of far more importance is net income, which increased by 51% year-on-year to $340.9 million, or $0.18 per share, from $225.3 million, or $0.08 per share. As a result -- and despite a 6.4% revenue reduction -- the distribution was increased by 7% to $1.07 per unit, or $4.28 on an annualized basis.

All of the company's segments pitched in to contribute to the earnings improvement. Products pipelines raised its segment earnings (before DD&A and items) by 10% to $180.3 million, while the natural gas pipelines unit upped its earnings by 2% to $222.6 million. The latter unit's earnings were affected by lower volumes at a couple of facilities, but benefited from the start-up of the Fayetteville Express Pipeline. Importantly, CEO Richard Kinder said that, "we continue to see various opportunities in the shale plays that will help drive future growth in [the natural gas] segment."

The company's CO2 business saw earnings increased by 4%, based primarily on higher oil and natural gas liquids prices. The terminals unit contributed the biggest earnings growth at 13% above the comparable quarter a year ago. Strength at the large liquids terminals on the Houston Ship Channel allowed the group to generate about 80% organic growth. Finally, Kinder Morgan Canada raised its earnings contribution by 7%, a prelude to management's expectation that the unit will exceed its forecast of 6% growth.

As is typically the case, the company is involved in a variety of capital projects. Among the more promising of which -- given the changes exploration and production of gas and liquids are undergoing in the U.S. -- is a gathering system serving the Eagle Ford play in Texas. The project, which consists of a joint venture with Copano Energy (Nasdaq: CPNO), agreed to a pact in February to provide natural gas services to a unit of Anadarko (NYSE: APC).

At the same time, given the expected effects on the demand for coal in the terminals segment, the company has inked a pair of contracts with a subsidiary of Massey Energy (NYSE: MEE) to handle six million tons of coal annually on the lower Mississippi River.

Looking ahead, Kinder noted that Kinder Morgan likely will declare cash distribution for the year of $4.60 for the year, or about 4.5% above last year's $4.40. With the budget having been based on an average West Texas Intermediate price of $89 per barrel, management expects that each $1 change in the WTI average will affect the CO2 segment by about $5 million.

We'll benefit later from added perspectives from the likes of Enterprise Products Partners (NYSE: EPD) and El Paso (NYSE: EP), both of which are set to report in early May. In the meantime, I continue to watch Kinder Morgan closely, and suggest that you do the same. 

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