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Earnings Preview: Kinder Morgan

By Aimee Duffy - Apr 16, 2013 at 2:44PM

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What to expect from the Kinder Morgan in Q1.

Energy behemoth Kinder Morgan (KMI 0.05%) and its master limited partnerships Kinder Morgan Energy Partners (NYSE: KMP) and El Paso Pipeline Partners (NYSE: EPB) will report earnings on Wednesday. They are the first midstream companies to release first-quarter results for 2013, here's what investors should expect.

First-quarter moves
Kinder Morgan made a bevy of announcements in the first quarter. Here are the major announcements the company made after Jan. 1:

  • KMP will buy Copano Energy (CPNO) for $5 billion, including debt. This won't impact shareholders until 2014, but expect management to discuss it on Wednesday's call. A detailed breakdown of the deal is here.
  • Expanding liquids storage and dock services on the Houston Ship Channel for $170 million. Expansion activity is ramping up at many American ports as we export more petroleum products and the completion of the Panama Canal expansion grows nearer.
  • Phase two of the Edmonton terminal expansion, with a cost of $112 million and a completion target of late 2014.
  • Transportation and storage deal with Calpine Energy Services. This deal is all about the increasing the usage of natural gas in electricity generation. Make no mistake: When American electricity generators switch from coal to gas, Kinder Morgan wins.
  • Developing a crude-by-rail facility on the Houston Ship Channel. Kinder Morgan is teaming up with Watco to build a 210,000 barrel per day rail facility -- the first of its kind in Houston.
  • Expanding throughput capacity at its Galena Park terminal by 50,000 barrels per day, as part of a fee-based deal with BP (BP 0.81%). This growth is driven primarily by increased production from the Eagle Ford Shale.

It is a lot to process, but if you've been following the recent energy trends in North America, you know that these are highly strategic deals.

Potential good news and bad news
Kinder Morgan has such varied operations that it is not unreasonable to expect one business segment to struggle, even if the others are doing well. Last quarter, the products pipeline segment was up because natural gas liquids, or NGL, and biofuel volume growth mitigated declining demand for refined petroleum products. Demand has not picked up for refined products, so the segment is relying on continued strong performance from NGLs and biofuels.

Likewise, the partnership's CO2 segment is growing, but low NGL prices are hampering revenue. The price of propane has ever so slowly started to come back, but it is still way off its 2012 high, which means this segment, too, will likely repeat its fourth-quarter performance.

Expectations
Analysts are expecting earnings per share of $0.31 and revenue of $2.92 billion for KMI, and EPS of $0.68 and revenue of $2.46 billion for KMP. KMI met EPS estimates last quarter, while KMP beat for the first time since the fourth quarter of 2011.

Foolish bottom line
Kinder Morgan reports after the market close at 4:30 p.m. EST on Wednesday, April 17, and interested investors can listen in here, or click here to add Kinder Morgan to My Watchlist.

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Stocks Mentioned

Kinder Morgan, Inc. Stock Quote
Kinder Morgan, Inc.
KMI
$19.03 (0.05%) $0.01
BP p.l.c. Stock Quote
BP p.l.c.
BP
$31.28 (0.81%) $0.25
Copano Energy, L.L.C. Stock Quote
Copano Energy, L.L.C.
CPNO

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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