Kinder Morgan (NYSE:KMI) has returned 12% over the last year, but as we all know, past performances are not indicative of future returns. That's why I created a premium report on Kinder Morgan -- to help investors examine its future and decide if the company is still right for their portfolios.
Following is an excerpt from the report, which focuses on the main risks facing the company. It's just a sample of one section, but we hope you enjoy.
- Opposition to pipeline construction and expansion may affect Kinder Morgan's growth. The company is already experiencing this with its Trans Mountain line. The 300,000 barrel per day pipeline connects Alberta's oil sands to British Columbia. Kinder Morgan Energy Partners (UNKNOWN:KMP.DL) is currently trying to double capacity on the line, which is frequently oversubscribed, but it is running into a bit of opposition from environmental groups and local citizenry. One of North Vancouver's First Nation tribes has already signed a legal declaration banning oil sands pipelines on its land. Kinder Morgan has received 20-year customer commitments to bring contracted capacity up to 508,000 barrels per day, but realistically the company will probably have to spend some time in court if the expansion is to be realized.
- Commodity risk is a concern as well. Natural gas prices are still very low and producers have been pulling rigs out of dry gas plays in favor of natural gas liquids. As a result, Kinder Morgan systems devoted to dry gas, like KinderHawk in the Haynesville Shale, experienced lower volumes, and subsequently, lower revenue. In the past, Kinder Morgan has generated quite a bit of cash flow from the high price of oil. Though the partnership has an excellent hedging strategy, a prolonged period of low oil prices could crimp cash flow growth.
- Declining demand for refined products and coal could cause problems. CEO Rich Kinder recently listed weak demand for refined products as an issue affecting his companies. CFO Kim Dang elaborated later that the lower volumes, particularly on the West Coast pipelines, are due to the weak demand Kinder mentioned, but also competition from another pipeline. Volumes did increase on its multi-product Cochin pipeline system, which stretches from Alberta down into the U.S. and up into Ontario. Still, Kinder Morgan expects its products unit to come up short of its initial expectations for 2012, and the trend could extend beyond that. The one trend that can help mitigate these losses is that worldwide coal consumption is at its highest level since 1969. If that consumption pattern continues, Kinder Morgan's coal exports should remain high.
Looking for more guidance?
That was just a sample of our new premium report on Kinder Morgan. If you're weighing whether the company is a buy or sell, the report is an essential resource for investors seeking more information on the company. Not only that, but the report also comes with updated quarterly guidance and dives into upcoming catalysts on the horizon. To get started, simply click here now.
Fool contributor Aimee Duffy has no positions in the stocks mentioned above. The Motley Fool owns shares of Kinder Morgan. Motley Fool newsletter services recommend 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.