Kinder Morgan (NYSE:KMI) has returned more than 9% so far this 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.
The 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. KMP is currently trying to more than 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 long-term customer commitments to bring contracted capacity up to 700,000 barrels per day, targeting an eventual capacity of 890,000 bpd. 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. Kinder Morgan's CO2 segment includes oil and natural gas liquids production. Though operations are going well -- the partnership is setting NGL production records -- prices have plummeted over the past year and it is impacting earnings in this segment. Additionally, though Kinder Morgan doesn't take possession of its natural gas, and therefore isn't on the hook when prices drop, the low price environment means that producers have been pulling rigs out of dry gas plays in favor of producing other commodities like oil and NGLs. As a result, Kinder Morgan systems devoted to dry gas, like KinderHawk in the Haynesville Shale, have experienced lower volumes, and subsequently, lower revenue.
- Declining demand for refined products, coal, and steel could cause problems. Recently, Kinder Morgan has been able to buck the national trend of declining demand, as the partnership's refined products volumes increased slightly. But the Energy Information Administration is reporting a 1.2% decline in demand nationwide, so this is a segment that may have tough times ahead. Domestic demand for coal continues to fall, impacting the partnership's terminals segment. That business unit is also affected by soft demand for steel. If and when the economy rebounds, steel demand will likely rise as well. What will happen with domestic coal demand remains to be seen.
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.