Wednesday, April 17, 2013 6:33:08 PM
Kinder Morgan Energy Partners Increases Quarterly Distribution to $1.30 Per Unit
Wednesday, April 17, 2013 16:06ET
http://www.knobias.com/story.htm?eid=3.1.64cf7199c8ccec9776272490331030d8fe8389adde7dacb37c3f4b133966e55e
Up 8% Over First Quarter 2012
HOUSTON--(BUSINESS WIRE)-- Kinder Morgan Energy Partners, L.P. (NYSE: KMP) today increased its quarterly cash distribution per common unit to $1.30 ($5.20 annualized) payable on May 15, 2013, to unitholders of record as of April 29, 2013. This represents an 8 percent increase over the first quarter 2012 cash distribution per unit of $1.20 ($4.80 annualized) and is up from $1.29 per unit ($5.16 annualized) for the fourth quarter of 2012. KMP has increased the distribution 47 times since current management took over in February 1997.
Chairman and CEO Richard D. Kinder said, "KMP had a strong first quarter as our stable and diversified assets continued to grow and produce incremental cash flow. Our five business segments produced approximately $1.276 billion in segment earnings before DD&A and certain items, a 24 percent increase over the first quarter of 2012. KMP also produced cash in excess of our first quarter distribution of approximately $62 million. Growth was spearheaded by contributions from the drop downs of Tennessee Gas Pipeline (TGP) and El Paso Natural Gas (EPNG), record export coal volumes in our Terminals business, strong oil and record NGL production at SACROC in our CO2 segment, and good results in our Products Pipelines business. Looking forward, we see exceptional growth opportunities across all of our business segments, as there is a need to build additional midstream infrastructure to move or store oil, gas and liquids from the prolific shale plays in the United States and the oilsands in Alberta, along with increasing demand for export coal and CO2. We currently have identified more than $11 billion in expansion and joint venture investments at KMP and we are pursuing customer commitments for many more projects. Additionally, we expect to close the Copano acquisition in early May, and we look forward to adding Copano's strategic gathering and processing assets and talented employees to the KMP team."
KMP reported first quarter distributable cash flow before certain items of $550 million, up 19 percent from $462 million for the comparable period in 2012. Distributable cash flow per unit before certain items was $1.46 compared to $1.37 for the first quarter last year. First quarter net income before certain items was $655 million compared to $534 million for the same period in 2012. Including certain items, net income was $792 million compared to $208 million for the first quarter last year. Certain items for the first quarter totaled a net gain of approximately $137 million (the majority of which pertained to a gain on the sale of the Express-Platte Pipeline) versus a net loss of $326 million for the same period last year.
Overview of Business Segments
The Natural Gas Pipelines business produced first quarter segment earnings before DD&A and certain items of $497 million, up 78 percent from $279 million for the same period last year due to dropdowns in 2012 and 2013 following the close of the El Paso Corporation acquisition in May of 2012. This segment is currently on track to meet its published annual budget of 54 percent growth.
"Growth in this segment compared to the first quarter last year was driven by KMP's purchases of Tennessee Gas Pipeline, El Paso Natural Gas pipeline and certain midstream assets," Kinder explained. "First quarter earnings in this segment also benefited from good results at our Eagle Ford assets." Natural Gas Pipelines segment's earnings were impacted in the first quarter by the November 2012 divestitures of our Rockies assets, but that impact was more than mitigated by the dropdowns, as KMP now owns 100 percent of TGP, EPNG and El Paso's former midstream assets.
Overall segment transport volumes were up 7 percent in the first quarter compared to the same period last year, reflecting higher Eagle Ford volumes and increased deliveries to Mexico on the Texas intrastate pipeline system, a new supply project at TGP and colder weather in the Northeast.
"We continue to believe that natural gas is the future play for America because it's domestic, clean, abundant and very reasonably priced," Kinder stated. "Everything points to the continued development of natural gas supplies in the United States, which drives demand for midstream infrastructure to connect the additional supplies to markets. This should create significant opportunities for KMP."
The CO2 business produced first quarter segment earnings before DD&A and certain items of $340 million, up 1 percent from $337 million for the same period in 2012, and currently is expected to be slightly above its published annual budget of 5 percent growth.
"Our CO2 business had a good first quarter led by strong oil and record NGL production at SACROC, along with increased production at the Katz Field," Kinder said. "The Snyder Gas Plant had record gross NGL production of 20.5 thousand barrels per day (MBbl/d) for the first quarter, up 15 percent from the same period in 2012. This is the first time that we have averaged over 20 MBbl/d for a full quarter and we also set a new monthly record of almost 21 MBbl/d for February. This segment continued to be impacted by lower NGL prices, however, which declined about 24 percent compared to the first quarter of 2012. It was also negatively impacted by a wide Midland-Cushing spread (which lowered our average price per barrel) during January and February, which has now corrected."
Oil production at the SACROC Unit increased to 30.7 MBbl/d in the first quarter, up 14 percent from 26.9 MBbl/d for the same period last year, and above plan. Production continued to be relatively stable at the Yates Field, which produced 20.5 MBbl/d in the first quarter, about 3 percent down from 21.2 MBbl/d for the same period last year, but relatively flat to plan. Production at the Katz Field was 2.1 MBbl/d in the first quarter, up significantly from 1.5 MBbl/d for the same period last year. While oil response is improving at Katz, production was slightly below plan for the first quarter. The average West Texas Intermediate (WTI) crude oil price for the first quarter was $94.37, compared to the $91.68 per barrel that was assumed when the company developed the 2013 budget.
In this segment KMP is exposed to commodity price risk, but that risk is partially mitigated by a long-term hedging strategy intended to generate more stable realized prices. The realized weighted average oil price per barrel for the first quarter, with all hedges allocated to oil, was $86.85 versus $90.63 for the same period in 2012. The realized weighted average NGL price per barrel for the year, allocating none of the hedges to NGLs, was $46.48 for the first quarter compared to $61.36 for the same period in 2012.
The Products Pipelines business produced first quarter segment earnings before DD&A and certain items of $200 million, up 14 percent from $176 million for the comparable period in 2012, and currently is on track to slightly exceed its published annual budget of 6 percent growth.
"The increase in earnings compared to the first quarter of 2012 was driven by higher volumes and revenues from the Cochin Pipeline, higher transmix volumes with improved margins and contributions from the Kinder Morgan Crude and Condensate Pipeline, which was completed in the second quarter of 2012," Kinder said. "NGL volumes and revenues increased approximately 32 percent and 56 percent, respectively, compared to the first quarter last year reflecting the ethane-propane mix Cochin began transporting in June of 2012. Also in the first quarter, we entered into an additional long-term contract with BP North America to construct a second phase of the condensate splitter project on the Houston Ship Channel. This approximately $360 million initiative is one of several large projects (see other news section) that will drive future earnings in this segment."
Total refined products volumes for the first quarter were up 1.4 percent and revenues increased by 2 percent compared to the same period last year including Plantation. Overall segment gasoline volumes (including transported ethanol on the Central Florida Pipeline) were up 2.8 percent compared to the first quarter of 2012, and up 15 percent on Plantation due primarily to allocations from a competing pipeline. Overall segment diesel volumes declined 2.4 percent versus the first quarter last year, while jet fuel volumes were up 1.1 percent. Gasoline and diesel volumes continued to decline at CALNEV due to a competing pipeline, although military volumes increased nicely. Across the entire system, military jet fuel volumes were up 2.6 percent compared to the first quarter of 2012.
The Products Pipelines segment handled over 9 million barrels of biofuels (ethanol and biodiesel) in the first quarter, up 20 percent from the same period a year ago, driven in part by the August 2012 acquisition of a biofuel transload terminal in South Carolina. This segment continues to make investments in assets across its operations to accommodate more biofuels.
The Terminals business produced first quarter segment earnings before DD&A and certain items of $187 million, flat with the first quarter of 2012, and currently expects to be slightly below its published annual budget of 12 percent growth.
"Highlights for the first quarter included record demand for export coal and higher earnings from certain liquids terminals," Kinder said. "Pier IX had a record month for March with outbound coal volumes of more than 1.7 million tons. Export coal volumes increased by 12 percent for the first quarter versus the same period last year, although we continued to experience weakness in domestic coal volumes." Liquids terminals in the Northeast and the Gulf realized higher earnings due to new and restructured contracts with higher rates. This segment was impacted by a decrease in petcoke volumes compared to the first quarter of 2012 due to numerous refinery shutdowns and a decline in steel volumes.
"Also in the first quarter, KMP announced its fifth crude by rail project (see other news), which is part of KW Express, our joint venture with Watco Companies," Kinder said. "As discussed at our investor conference in January, the Terminals segment is well positioned to benefit from the growing crude by rail opportunities, and we currently have signed or are pursuing over $400 million in crude by rail projects across North America."
For the first quarter, Terminals handled 15.2 million barrels of ethanol, down compared to the same period last year. The decrease was primarily due to the conversion to crude and vegetable oil at two terminals that handled ethanol, along with a decline in volumes at the company's coastal facilities attributable to increased import barrels, which was partially offset by higher ethanol volumes at KMP's inland terminals. Combined, the terminals and products pipelines business segments handled 23.9 million barrels of ethanol, a 5 percent decline versus the first quarter of 2012. KMP continues to handle approximately 30 percent of the ethanol used in the United States.
Kinder Morgan Canada produced first quarter segment earnings before DD&A and certain items of $52 million, up 4 percent from $50 million for the same period in 2012. Kinder Morgan Canada is expected to come in below its published annual budget of 3 percent growth due to the sale of Express-Platte. However, overall at KMP, the sale is expected to be modestly accretive.
"Growth in the first quarter compared to the same period last year resulted from strong performance at the Express-Platte pipeline system and increased deliveries into Washington state on our Puget Sound pipeline system," Kinder said. A new three-year toll agreement on Trans Mountain has now been approved by the National Energy Board and goes through 2015 which will benefit this segment moving forward.
2013 Outlook
As previously announced, KMP expects to declare cash distributions of $5.28 per unit for 2013, a 6 percent increase over its 2012 distribution of $4.98 per unit. KMP's 2013 budget included the March 1 dropdown noted in the Natural Gas Pipelines section. (KMR also expects to declare distributions of $5.28 per share for 2013, and the distribution to KMR shareholders will be paid in the form of additional KMR shares.)
In 2013, KMP expects to:
-- Generate over $5.4 billion in business segment earnings before DD&A
(adding back KMP's share of joint venture DD&A), an increase of about
$0.9 billion over 2012.
-- Distribute over $2 billion to its limited partners.
-- Produce excess cash flow of more than $30 million above its distribution
target of $5.28 per unit.
-- Invest over $3 billion in expansions (including contributions to joint
ventures) and small acquisitions (excluding the dropdowns from Kinder
Morgan, Inc. (NYSE: KMI)). Over $625 million of the equity required for
this investment program is expected to be funded by KMR dividends.
KMP's expectations assume an average WTI crude oil price of approximately $91.68 per barrel in 2013, which approximated the forward curve at the time the budget was prepared. The overwhelming majority of cash generated by KMP's assets is fee based and is not sensitive to commodity prices. In its CO2 segment, the company hedges the majority of its oil production, but does have exposure to unhedged volumes, a significant portion of which are natural gas liquids. For 2013, the company expects that every $1 change in the average WTI crude oil price per barrel will impact the CO2 segment by approximately $6 million, or approximately 0.1 percent of KMP's combined business segments' anticipated segment earnings before DD&A.
Other News
Natural Gas Pipelines
-- On Jan. 29, KMP and Copano entered into a definitive agreement whereby
KMP will acquire all of Copano's outstanding units for a total purchase
price of approximately $5 billion, including the assumption of debt. The
transaction, which is expected to close in early May of 2013, is subject
to a vote of the Copano unitholders and customary closing conditions.
Copano is a midstream natural gas company with operations primarily in
Texas, Oklahoma and Wyoming, and provides comprehensive services to
natural gas producers, including gathering, processing, treating and
fractionation. Copano owns an interest in or operates about 6,900 miles
of pipelines with 2.7 billion cubic feet per day (Bcf/d) of natural gas
throughput capacity, and nine processing plants with more than 1 Bcf/d
of processing capacity and 315 million cubic feet per day (MMcf/d) of
treating capacity.
-- On March 1, KMP completed the previously announced acquisition
(dropdown) of 50 percent of El Paso Natural Gas Company, L.L.C. (EPNG)
and 50 percent of former El Paso Midstream assets in Utah and South
Texas from KMI. KMP now owns 100 percent of these assets. The
transaction had a total value of approximately $1.655 billion, including
approximately $560 million of proportional debt at EPNG. The transaction
was immediately accretive to cash available for distribution to KMP
unitholders.
-- Work continued in the first quarter at various permitted and approved
areas in Pennsylvania and New Jersey on TGP's Northeast Upgrade Project
and construction is scheduled to begin this spring on the mainline and
compression. TGP is in receipt of all Federal Energy Regulatory
Commission (FERC) notices to proceed and construct, except for a
horizontal directional drill for a river channel crossing for which
approval is expected in the second quarter. The approximately $464
million project will boost capacity on TGP's system by approximately 636
million cubic feet per day via five segment loops and system upgrades,
and provide additional take-away capacity from the Marcellus shale area.
The fully subscribed project is expected to be in service in November.
-- Tree clearing for TGP's Marcellus Pooling Point project is scheduled to
be finished in June, followed by construction of pipeline and
compression during the remainder of the summer and the fall, with
completion of the project in November. The approximately $86 million
project, which is fully subscribed, will provide about 240,000
dekatherms per day of additional firm Marcellus transportation capacity.
The project includes nearly 8 miles of 30-inch diameter pipeline
looping, system modifications and upgrades to allow bi-directional flow
at four existing compressor stations in Pennsylvania.
-- The comment period closed March 14, 2013, on an environmental assessment
issued by the FERC for the proposed approximately $84 million Rose Lake
Expansion Project, which would provide long-term firm transportation
service for two shippers that have fully subscribed 230,000 dekatherms
per day (Dth/d) of firm capacity offered in TGP's Zone 4 in
Pennsylvania. TGP proposes to retire older compressor units, add new,
more efficient and cleaner burning units, and make other modifications
involving three existing compressor stations that serve its 300 Line,
all in northeastern Pennsylvania. The project contemplates receiving a
FERC certificate of public convenience and necessity and an air permit
in September and beginning construction this fall, subject to regulatory
approvals. The anticipated in service date is November 2014.
-- Sierrita Gas Pipeline successfully concluded an open season and executed
a transportation services agreement with MGI Supply, a subsidiary of
Pemex. The approximately $200 million proposed Sierrita Pipeline Project
includes construction of a 60-mile lateral pipeline from near Tucson,
Ariz., to the Mexican border at Sasabe, Ariz., where it will connect
with a new pipeline planned on the Mexican side of the border. The
36-inch Sierrita lateral pipeline will have approximately 200 MMcf/d of
capacity. A project application for a certificate of public convenience
and necessity, as well as a request for presidential permit for export
authorization to Mexico, was filed in February with the FERC. KMP will
operate the system and own 35 percent of the project.
-- KMP entered into new and extended long-term transportation and storage
agreements with Calpine Energy Services in February. KMP will provide up
to 450,000 Dth/d of firm transportation service, along with 5 billion
cubic feet (bcf) of storage capacity, to serve nine of Calpine's
electric generation facilities in Texas. These new agreements provide
for increases of 150,000 Dth/d of transport and 1 bcf of storage above
the agreements previously in place. KMP will invest approximately
$30 million to expand its Texas intrastate pipeline system in South
Texas to extend service to Calpine's generating station in Hidalgo
County.
-- KMP's Midstream group placed in service in late March its $29 million
West Clear Lake Storage Field deliverability enhancement project, south
of the Houston metropolitan area. The storage field has been enhanced
with 8,000 horsepower of additional compression, surface equipment and
well optimizations. The storage field, which has 85 bcf of working gas
capacity, now has increased injection and withdrawal capabilities.
-- On April 2, KMP began a 30-day binding open season to determine industry
interest in the development of the proposed Freedom Pipeline, which
would convert a portion of EPNG from natural gas to crude service and
transport crude oil from the Permian Basin of West Texas to serve the
refining complexes in northern and southern California. The
approximately 1,025-mile Freedom Pipeline is the only proposed westbound
crude oil pipeline from the Permian Basin and would enable the
transportation of crude from Wink, Texas, to anticipated intrastate
pipeline interconnection locations near Emidio and Pentland, Calif. As
currently conceived, the project would have an initial capacity of
277,000 barrels per day (bpd). Subject to receiving customer support and
regulatory approvals, construction could begin by June 2015 with an in
service date late in the fourth quarter of 2016.
CO2
-- Work is underway on an approximately $210 million expansion of the
Yellow Jacket Central Facility at the McElmo Dome CO2source field in
southwestern Colorado - the first of four planned projects that will
increase CO2 production from 1.1 Bcf/d to 1.23 Bcf/d for many years.
KMP, operator of the McElmo Dome Unit, will construct four new booster
compressors with a total of 47,000 horsepower as part of the expansion
in addition to modifying piping at remote facilities upstream of the
facility to loop parts of the company's gathering system. KMP expects to
begin construction in June with a planned in service date of November
2014.
-- KMP continues to make good progress on the $255 million expansion of its
Doe Canyon Unit CO2 source field in southwestern Colorado where the
company is adding primary and booster compression to increase capacity
from 105 MMcf/d to 170 MMcf/d. The primary compression is expected to be
in service in the fourth quarter of 2013 and the booster compression in
the second quarter of 2014. The project is on schedule and on budget.
-- Construction is also progressing on KMP's project to increase the
capacity on its Wink Pipeline System that moves crude from the company's
West Texas oil fields to Western Refining Company's facility in El Paso,
Texas. The company is working to expand the pipeline's capacity from
132,000 bpd to 145,000 bpd to meet expected higher future refinery
throughput requirements at Western's refinery and expects to complete
the project in the third quarter this year.
Products Pipelines
-- KMP secured a long-term, fee-based agreement with BP North America in
late March to underwrite an additional 50,000 bpd of capacity at the
petroleum condensate processing facility Kinder Morgan is building near
its Galena Park terminal on the Houston Ship Channel. With the new
agreement, KMP will invest a total of approximately $360 million in the
facility, which will have processing capacity of 100,000 bpd. The
investment also includes building an additional 700,000 barrels of
storage capacity for product being split at the facility. The company
expects the first phase of the splitter to be completed in the first
quarter of 2014 and the second unit to be in service in the second
quarter of 2015.
-- KMP continues work on a 27-mile, 12-inch diameter lateral pipeline with
associated receipt facilities connecting the Kinder Morgan Crude and
Condensate pipeline to Phillips 66's Sweeny Refinery in Brazoria County,
Texas. Through the approximately $90 million project, KMP will provide
Phillips 66 with a significant portion of the lateral pipeline's initial
30,000 bpd of capacity, which is expandable to 100,000 bpd. The project
also involves KMP constructing a five-bay truck offloading facility and
three new storage tanks with approximately 360,000 barrels of
crude/condensate capacity at stations in DeWitt and Wharton counties in
Texas. KMP is on schedule to begin initial deliveries early in the
fourth quarter of 2013, with the entire system being operational by year
end.
-- KMP is on budget and on schedule to complete the construction of the
approximately $220 million Parkway Pipeline, a joint venture with
Valero, in September 2013. The pipeline will transport gasoline and
diesel from a refinery in Norco, La., to an existing petroleum
transportation hub in Collins, Miss., which is owned by Plantation Pipe
Line Company. The company completed the Lake Pontchartrain crossing
portion of the 141-mile, 16-inch pipeline system in February.
-- KMP continues its preparations to move light condensate from Kankakee
County, Ill., to existing terminal facilities near Fort Saskatchewan,
Alberta, following the receipt of more than 100,000 bpd of binding
commitments for a minimum 10-year term during a successful open season
last year for its Cochin Pipeline Reversal Project. The company will
begin modifications to the western leg of the Cochin Pipeline to Fort
Saskatchewan pending the receipt of a final permit for the approximately
$260 million project. In addition to the pipeline modifications, Cochin
will build a tank farm with 1 million barrels of storage and associated
piping where Cochin will interconnect with Explorer Pipeline Company's
pipeline in Kankakee County. KMP expects light condensate shipments to
begin as early as July 1, 2014.
-- KMP recently completed modifications to provide for the receipt, storage
and blending of biodiesel at its Las Vegas, Nev., and Phoenix, Ariz.,
terminals. The company plans to begin customer blending in the early
part of the second quarter.
Terminals
-- KMP finalized agreements to support the construction of an additional
1.2 million barrels of merchant storage at its Edmonton Terminal
in Strathcona County, Alberta. Construction of the new tankage is
scheduled to commence this spring following receipt of supporting
permits, with completion expected in late 2014. Phase 2 will cost
approximately $112 million. Construction of Phase 1 of the expansion,
which consists of 3.6 million barrels of new storage, is well underway
and expected to be completed in December of 2013. Total capital
investment for the combined 4.8 million barrel project is approximately
$420 million and is supported by long-term contracts with major
producers and refiners. When completed, total storage capacity at the
Edmonton facility will be 9.4 million barrels, including the existing
Trans Mountain system facility and the North 40 merchant terminal.
-- In February, KMP announced that its crude by rail partnership with Watco
Companies - KW Express - entered into a long-term agreement with
Mercuria Energy Trading Company to construct a 210,000 bpd crude by rail
project at the Greens Port Industrial Park on the Houston Ship Channel.
The project will enable Mercuria to source crude from various
origination locations including Cushing, Okla., West Texas, the Bakken
shale area and western Canada for delivery by rail into the Houston Ship
Channel for distribution to various refiners via pipeline and barges.
The facility will have the capability to load and unload up to three
unit trains per day of crude oil and condensate, and provide for up to
100,000 bpd of barge loading capacity. KW Express will own a minimum of
85 percent of the project and Mercuria will own the remaining interest.
-- Construction continues on the approximately $430 million Battleground
Oil Specialty Terminal (BOSTCO) located on the Houston Ship Channel. The
first phase of the project includes construction of 52 storage tanks
that will have a capacity of 6.5 million barrels for handling residual
fuels and other black oil terminal services. Terminal service agreements
or letters of intent have been executed with customers for all of the
capacity. Commercial operations are expected to begin in the third
quarter of 2013. Contingent on finalizing the terminal service
agreement, an approximately $55 million expansion for an additional six
tanks totaling 900,000 barrels of ultra low sulphur diesel will be added
to the project. KMP owns 55 percent of BOSTCO.
-- KMP continues to expand its chemical storage capacity. KMP has entered
into a long-term contract with Methanex Corporation to support the
construction of methanol storage capacity near Kinder Morgan's Geismar
Liquids Terminal in Louisiana. KMP will build, own and operate the
storage tanks and related infrastructure, including improvements to its
existing dock. The assets will provide critical marine, rail and truck
access in support of a 1 million tonne per year methanol production
plant being relocated by Methanex from Chile, South America. The
terminal infrastructure is expected to be in service during the second
half of 2014, coinciding with the anticipated startup of the relocated
plant. Additionally, KMP has acquired a 26-acre terminal located in
Chester, S.C., from Quality Carriers. The 19-tank facility currently
provides storage for a single customer of 35,000 barrels and receives
product by rail and distributes by truck. KMP is also expanding the
chemical storage capacity at its liquids terminal in Harvey, La. Subject
to customer agreements, the project could include up to an additional 17
storage tanks with a combined capacity of 285,000 barrels. Combined,
these three investments total more than $65 million.
-- Deeprock Development (a joint-venture between Deeprock Energy Resources
and KMP) will build three new 250,000-barrel storage tanks and one new
pipeline as part of a terminal expansion in Cushing, Okla. As previously
announced Deeprock Development initially executed a long-term terminal
lease and operating agreement with Pony Express Pipeline (now owned by
Tallgrass Energy Partners) to handle up to 240,000 bpd of crude oil from
Pony Express. Tallgrass subsequently exercised its option to have
Deeprock Development expand the project. Following completion, the
terminal will handle up to 350,000 bpd and will serve as the pipeline
staging area with connectivity to five destinations. KMP owns 51 percent
of the project and will contribute $11 million of the almost $21 million
project.
Kinder Morgan Canada
-- In March, KMP closed its previously announced sale of its one-third
interest in the Express-Platte pipeline system to Spectra Energy Corp
for approximately $400 million. Based on the structure of KMP's
investment with the Express-Platte Pipeline partners, KMP received
approximately $15 million of cash flow on an annual basis from its
investment, consisting primarily of debenture interest. KMP plans to
redeploy the proceeds from the sale into various growth projects to
further benefit its unitholders.
-- As previously announced, KMP updated the binding commercial support for
its proposed expansion of the Trans Mountain pipeline system following
completion of a supplemental open season in the first quarter. Thirteen
companies in the Canadian producing and oil marketing business signed
firm contracts bringing the total volume of committed shippers to
approximately 700,000 bpd. These additional commitments will result in
an increase in the proposed expansion capacity from 750,000 bpd to
890,000 bpd and increase the capital investment in the project from $4.1
billion to $5.4 billion. The expansion will complete the twinning of the
existing Trans Mountain pipeline system from Strathcona County, Alberta,
to Burnaby, British Columbia. Trans Mountain expects to file a
Facilities Application with the National Energy Board in late 2013, for
authorization to build and operate the necessary facilities for the
proposed expansion. The application will include the environmental,
socio-economic, Aboriginal engagement, landowner and public
consultation, and engineering components, and initiate a comprehensive
regulatory and public review process. If approvals are received as
planned, the expansion is expected to be operational in 2017.
Financings
-- KMP conducted a secondary offering in February which issued 4.6 million
shares and raised approximately $385 million. The funds were used to
repay commercial paper debt. KMP also issued $1 billion in senior notes
in February.
Kinder Morgan Management, LLC
Shareholders of KMR will also receive a $1.30 dividend ($5.20 annualized) payable on May 15, 2013, to shareholders of record as of April 29, 2013. The dividend to KMR shareholders will be paid in the form of additional KMR shares. The dividend is calculated by dividing the cash distribution to KMP unitholders by KMR's average closing price for the 10 trading days prior to KMR's ex-dividend date.
Kinder Morgan Energy Partners, L.P. (NYSE: KMP) is a leading pipeline transportation and energy storage company and one of the largest publicly traded pipeline limited partnerships in America. It owns an interest in or operates approximately 44,000 miles of pipelines and 180 terminals. The general partner of KMP is owned by Kinder Morgan, Inc. (NYSE: KMI). Kinder Morgan is the largest midstream and the third largest energy company in North America with a combined enterprise value of approximately $110 billion. It owns an interest in or operates approximately 73,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals and handle such products as ethanol, coal, petroleum coke and steel. KMI owns the general partner interest of KMP and El Paso Pipeline Partners, L.P. (NYSE: EPB), along with limited partner interests in KMP and EPB and shares in Kinder Morgan Management, LLC (NYSE: KMR). For more information please visit www.kindermorgan.com.
Wednesday, April 17, 2013 16:06ET
http://www.knobias.com/story.htm?eid=3.1.64cf7199c8ccec9776272490331030d8fe8389adde7dacb37c3f4b133966e55e
Up 8% Over First Quarter 2012
HOUSTON--(BUSINESS WIRE)-- Kinder Morgan Energy Partners, L.P. (NYSE: KMP) today increased its quarterly cash distribution per common unit to $1.30 ($5.20 annualized) payable on May 15, 2013, to unitholders of record as of April 29, 2013. This represents an 8 percent increase over the first quarter 2012 cash distribution per unit of $1.20 ($4.80 annualized) and is up from $1.29 per unit ($5.16 annualized) for the fourth quarter of 2012. KMP has increased the distribution 47 times since current management took over in February 1997.
Chairman and CEO Richard D. Kinder said, "KMP had a strong first quarter as our stable and diversified assets continued to grow and produce incremental cash flow. Our five business segments produced approximately $1.276 billion in segment earnings before DD&A and certain items, a 24 percent increase over the first quarter of 2012. KMP also produced cash in excess of our first quarter distribution of approximately $62 million. Growth was spearheaded by contributions from the drop downs of Tennessee Gas Pipeline (TGP) and El Paso Natural Gas (EPNG), record export coal volumes in our Terminals business, strong oil and record NGL production at SACROC in our CO2 segment, and good results in our Products Pipelines business. Looking forward, we see exceptional growth opportunities across all of our business segments, as there is a need to build additional midstream infrastructure to move or store oil, gas and liquids from the prolific shale plays in the United States and the oilsands in Alberta, along with increasing demand for export coal and CO2. We currently have identified more than $11 billion in expansion and joint venture investments at KMP and we are pursuing customer commitments for many more projects. Additionally, we expect to close the Copano acquisition in early May, and we look forward to adding Copano's strategic gathering and processing assets and talented employees to the KMP team."
KMP reported first quarter distributable cash flow before certain items of $550 million, up 19 percent from $462 million for the comparable period in 2012. Distributable cash flow per unit before certain items was $1.46 compared to $1.37 for the first quarter last year. First quarter net income before certain items was $655 million compared to $534 million for the same period in 2012. Including certain items, net income was $792 million compared to $208 million for the first quarter last year. Certain items for the first quarter totaled a net gain of approximately $137 million (the majority of which pertained to a gain on the sale of the Express-Platte Pipeline) versus a net loss of $326 million for the same period last year.
Overview of Business Segments
The Natural Gas Pipelines business produced first quarter segment earnings before DD&A and certain items of $497 million, up 78 percent from $279 million for the same period last year due to dropdowns in 2012 and 2013 following the close of the El Paso Corporation acquisition in May of 2012. This segment is currently on track to meet its published annual budget of 54 percent growth.
"Growth in this segment compared to the first quarter last year was driven by KMP's purchases of Tennessee Gas Pipeline, El Paso Natural Gas pipeline and certain midstream assets," Kinder explained. "First quarter earnings in this segment also benefited from good results at our Eagle Ford assets." Natural Gas Pipelines segment's earnings were impacted in the first quarter by the November 2012 divestitures of our Rockies assets, but that impact was more than mitigated by the dropdowns, as KMP now owns 100 percent of TGP, EPNG and El Paso's former midstream assets.
Overall segment transport volumes were up 7 percent in the first quarter compared to the same period last year, reflecting higher Eagle Ford volumes and increased deliveries to Mexico on the Texas intrastate pipeline system, a new supply project at TGP and colder weather in the Northeast.
"We continue to believe that natural gas is the future play for America because it's domestic, clean, abundant and very reasonably priced," Kinder stated. "Everything points to the continued development of natural gas supplies in the United States, which drives demand for midstream infrastructure to connect the additional supplies to markets. This should create significant opportunities for KMP."
The CO2 business produced first quarter segment earnings before DD&A and certain items of $340 million, up 1 percent from $337 million for the same period in 2012, and currently is expected to be slightly above its published annual budget of 5 percent growth.
"Our CO2 business had a good first quarter led by strong oil and record NGL production at SACROC, along with increased production at the Katz Field," Kinder said. "The Snyder Gas Plant had record gross NGL production of 20.5 thousand barrels per day (MBbl/d) for the first quarter, up 15 percent from the same period in 2012. This is the first time that we have averaged over 20 MBbl/d for a full quarter and we also set a new monthly record of almost 21 MBbl/d for February. This segment continued to be impacted by lower NGL prices, however, which declined about 24 percent compared to the first quarter of 2012. It was also negatively impacted by a wide Midland-Cushing spread (which lowered our average price per barrel) during January and February, which has now corrected."
Oil production at the SACROC Unit increased to 30.7 MBbl/d in the first quarter, up 14 percent from 26.9 MBbl/d for the same period last year, and above plan. Production continued to be relatively stable at the Yates Field, which produced 20.5 MBbl/d in the first quarter, about 3 percent down from 21.2 MBbl/d for the same period last year, but relatively flat to plan. Production at the Katz Field was 2.1 MBbl/d in the first quarter, up significantly from 1.5 MBbl/d for the same period last year. While oil response is improving at Katz, production was slightly below plan for the first quarter. The average West Texas Intermediate (WTI) crude oil price for the first quarter was $94.37, compared to the $91.68 per barrel that was assumed when the company developed the 2013 budget.
In this segment KMP is exposed to commodity price risk, but that risk is partially mitigated by a long-term hedging strategy intended to generate more stable realized prices. The realized weighted average oil price per barrel for the first quarter, with all hedges allocated to oil, was $86.85 versus $90.63 for the same period in 2012. The realized weighted average NGL price per barrel for the year, allocating none of the hedges to NGLs, was $46.48 for the first quarter compared to $61.36 for the same period in 2012.
The Products Pipelines business produced first quarter segment earnings before DD&A and certain items of $200 million, up 14 percent from $176 million for the comparable period in 2012, and currently is on track to slightly exceed its published annual budget of 6 percent growth.
"The increase in earnings compared to the first quarter of 2012 was driven by higher volumes and revenues from the Cochin Pipeline, higher transmix volumes with improved margins and contributions from the Kinder Morgan Crude and Condensate Pipeline, which was completed in the second quarter of 2012," Kinder said. "NGL volumes and revenues increased approximately 32 percent and 56 percent, respectively, compared to the first quarter last year reflecting the ethane-propane mix Cochin began transporting in June of 2012. Also in the first quarter, we entered into an additional long-term contract with BP North America to construct a second phase of the condensate splitter project on the Houston Ship Channel. This approximately $360 million initiative is one of several large projects (see other news section) that will drive future earnings in this segment."
Total refined products volumes for the first quarter were up 1.4 percent and revenues increased by 2 percent compared to the same period last year including Plantation. Overall segment gasoline volumes (including transported ethanol on the Central Florida Pipeline) were up 2.8 percent compared to the first quarter of 2012, and up 15 percent on Plantation due primarily to allocations from a competing pipeline. Overall segment diesel volumes declined 2.4 percent versus the first quarter last year, while jet fuel volumes were up 1.1 percent. Gasoline and diesel volumes continued to decline at CALNEV due to a competing pipeline, although military volumes increased nicely. Across the entire system, military jet fuel volumes were up 2.6 percent compared to the first quarter of 2012.
The Products Pipelines segment handled over 9 million barrels of biofuels (ethanol and biodiesel) in the first quarter, up 20 percent from the same period a year ago, driven in part by the August 2012 acquisition of a biofuel transload terminal in South Carolina. This segment continues to make investments in assets across its operations to accommodate more biofuels.
The Terminals business produced first quarter segment earnings before DD&A and certain items of $187 million, flat with the first quarter of 2012, and currently expects to be slightly below its published annual budget of 12 percent growth.
"Highlights for the first quarter included record demand for export coal and higher earnings from certain liquids terminals," Kinder said. "Pier IX had a record month for March with outbound coal volumes of more than 1.7 million tons. Export coal volumes increased by 12 percent for the first quarter versus the same period last year, although we continued to experience weakness in domestic coal volumes." Liquids terminals in the Northeast and the Gulf realized higher earnings due to new and restructured contracts with higher rates. This segment was impacted by a decrease in petcoke volumes compared to the first quarter of 2012 due to numerous refinery shutdowns and a decline in steel volumes.
"Also in the first quarter, KMP announced its fifth crude by rail project (see other news), which is part of KW Express, our joint venture with Watco Companies," Kinder said. "As discussed at our investor conference in January, the Terminals segment is well positioned to benefit from the growing crude by rail opportunities, and we currently have signed or are pursuing over $400 million in crude by rail projects across North America."
For the first quarter, Terminals handled 15.2 million barrels of ethanol, down compared to the same period last year. The decrease was primarily due to the conversion to crude and vegetable oil at two terminals that handled ethanol, along with a decline in volumes at the company's coastal facilities attributable to increased import barrels, which was partially offset by higher ethanol volumes at KMP's inland terminals. Combined, the terminals and products pipelines business segments handled 23.9 million barrels of ethanol, a 5 percent decline versus the first quarter of 2012. KMP continues to handle approximately 30 percent of the ethanol used in the United States.
Kinder Morgan Canada produced first quarter segment earnings before DD&A and certain items of $52 million, up 4 percent from $50 million for the same period in 2012. Kinder Morgan Canada is expected to come in below its published annual budget of 3 percent growth due to the sale of Express-Platte. However, overall at KMP, the sale is expected to be modestly accretive.
"Growth in the first quarter compared to the same period last year resulted from strong performance at the Express-Platte pipeline system and increased deliveries into Washington state on our Puget Sound pipeline system," Kinder said. A new three-year toll agreement on Trans Mountain has now been approved by the National Energy Board and goes through 2015 which will benefit this segment moving forward.
2013 Outlook
As previously announced, KMP expects to declare cash distributions of $5.28 per unit for 2013, a 6 percent increase over its 2012 distribution of $4.98 per unit. KMP's 2013 budget included the March 1 dropdown noted in the Natural Gas Pipelines section. (KMR also expects to declare distributions of $5.28 per share for 2013, and the distribution to KMR shareholders will be paid in the form of additional KMR shares.)
In 2013, KMP expects to:
-- Generate over $5.4 billion in business segment earnings before DD&A
(adding back KMP's share of joint venture DD&A), an increase of about
$0.9 billion over 2012.
-- Distribute over $2 billion to its limited partners.
-- Produce excess cash flow of more than $30 million above its distribution
target of $5.28 per unit.
-- Invest over $3 billion in expansions (including contributions to joint
ventures) and small acquisitions (excluding the dropdowns from Kinder
Morgan, Inc. (NYSE: KMI)). Over $625 million of the equity required for
this investment program is expected to be funded by KMR dividends.
KMP's expectations assume an average WTI crude oil price of approximately $91.68 per barrel in 2013, which approximated the forward curve at the time the budget was prepared. The overwhelming majority of cash generated by KMP's assets is fee based and is not sensitive to commodity prices. In its CO2 segment, the company hedges the majority of its oil production, but does have exposure to unhedged volumes, a significant portion of which are natural gas liquids. For 2013, the company expects that every $1 change in the average WTI crude oil price per barrel will impact the CO2 segment by approximately $6 million, or approximately 0.1 percent of KMP's combined business segments' anticipated segment earnings before DD&A.
Other News
Natural Gas Pipelines
-- On Jan. 29, KMP and Copano entered into a definitive agreement whereby
KMP will acquire all of Copano's outstanding units for a total purchase
price of approximately $5 billion, including the assumption of debt. The
transaction, which is expected to close in early May of 2013, is subject
to a vote of the Copano unitholders and customary closing conditions.
Copano is a midstream natural gas company with operations primarily in
Texas, Oklahoma and Wyoming, and provides comprehensive services to
natural gas producers, including gathering, processing, treating and
fractionation. Copano owns an interest in or operates about 6,900 miles
of pipelines with 2.7 billion cubic feet per day (Bcf/d) of natural gas
throughput capacity, and nine processing plants with more than 1 Bcf/d
of processing capacity and 315 million cubic feet per day (MMcf/d) of
treating capacity.
-- On March 1, KMP completed the previously announced acquisition
(dropdown) of 50 percent of El Paso Natural Gas Company, L.L.C. (EPNG)
and 50 percent of former El Paso Midstream assets in Utah and South
Texas from KMI. KMP now owns 100 percent of these assets. The
transaction had a total value of approximately $1.655 billion, including
approximately $560 million of proportional debt at EPNG. The transaction
was immediately accretive to cash available for distribution to KMP
unitholders.
-- Work continued in the first quarter at various permitted and approved
areas in Pennsylvania and New Jersey on TGP's Northeast Upgrade Project
and construction is scheduled to begin this spring on the mainline and
compression. TGP is in receipt of all Federal Energy Regulatory
Commission (FERC) notices to proceed and construct, except for a
horizontal directional drill for a river channel crossing for which
approval is expected in the second quarter. The approximately $464
million project will boost capacity on TGP's system by approximately 636
million cubic feet per day via five segment loops and system upgrades,
and provide additional take-away capacity from the Marcellus shale area.
The fully subscribed project is expected to be in service in November.
-- Tree clearing for TGP's Marcellus Pooling Point project is scheduled to
be finished in June, followed by construction of pipeline and
compression during the remainder of the summer and the fall, with
completion of the project in November. The approximately $86 million
project, which is fully subscribed, will provide about 240,000
dekatherms per day of additional firm Marcellus transportation capacity.
The project includes nearly 8 miles of 30-inch diameter pipeline
looping, system modifications and upgrades to allow bi-directional flow
at four existing compressor stations in Pennsylvania.
-- The comment period closed March 14, 2013, on an environmental assessment
issued by the FERC for the proposed approximately $84 million Rose Lake
Expansion Project, which would provide long-term firm transportation
service for two shippers that have fully subscribed 230,000 dekatherms
per day (Dth/d) of firm capacity offered in TGP's Zone 4 in
Pennsylvania. TGP proposes to retire older compressor units, add new,
more efficient and cleaner burning units, and make other modifications
involving three existing compressor stations that serve its 300 Line,
all in northeastern Pennsylvania. The project contemplates receiving a
FERC certificate of public convenience and necessity and an air permit
in September and beginning construction this fall, subject to regulatory
approvals. The anticipated in service date is November 2014.
-- Sierrita Gas Pipeline successfully concluded an open season and executed
a transportation services agreement with MGI Supply, a subsidiary of
Pemex. The approximately $200 million proposed Sierrita Pipeline Project
includes construction of a 60-mile lateral pipeline from near Tucson,
Ariz., to the Mexican border at Sasabe, Ariz., where it will connect
with a new pipeline planned on the Mexican side of the border. The
36-inch Sierrita lateral pipeline will have approximately 200 MMcf/d of
capacity. A project application for a certificate of public convenience
and necessity, as well as a request for presidential permit for export
authorization to Mexico, was filed in February with the FERC. KMP will
operate the system and own 35 percent of the project.
-- KMP entered into new and extended long-term transportation and storage
agreements with Calpine Energy Services in February. KMP will provide up
to 450,000 Dth/d of firm transportation service, along with 5 billion
cubic feet (bcf) of storage capacity, to serve nine of Calpine's
electric generation facilities in Texas. These new agreements provide
for increases of 150,000 Dth/d of transport and 1 bcf of storage above
the agreements previously in place. KMP will invest approximately
$30 million to expand its Texas intrastate pipeline system in South
Texas to extend service to Calpine's generating station in Hidalgo
County.
-- KMP's Midstream group placed in service in late March its $29 million
West Clear Lake Storage Field deliverability enhancement project, south
of the Houston metropolitan area. The storage field has been enhanced
with 8,000 horsepower of additional compression, surface equipment and
well optimizations. The storage field, which has 85 bcf of working gas
capacity, now has increased injection and withdrawal capabilities.
-- On April 2, KMP began a 30-day binding open season to determine industry
interest in the development of the proposed Freedom Pipeline, which
would convert a portion of EPNG from natural gas to crude service and
transport crude oil from the Permian Basin of West Texas to serve the
refining complexes in northern and southern California. The
approximately 1,025-mile Freedom Pipeline is the only proposed westbound
crude oil pipeline from the Permian Basin and would enable the
transportation of crude from Wink, Texas, to anticipated intrastate
pipeline interconnection locations near Emidio and Pentland, Calif. As
currently conceived, the project would have an initial capacity of
277,000 barrels per day (bpd). Subject to receiving customer support and
regulatory approvals, construction could begin by June 2015 with an in
service date late in the fourth quarter of 2016.
CO2
-- Work is underway on an approximately $210 million expansion of the
Yellow Jacket Central Facility at the McElmo Dome CO2source field in
southwestern Colorado - the first of four planned projects that will
increase CO2 production from 1.1 Bcf/d to 1.23 Bcf/d for many years.
KMP, operator of the McElmo Dome Unit, will construct four new booster
compressors with a total of 47,000 horsepower as part of the expansion
in addition to modifying piping at remote facilities upstream of the
facility to loop parts of the company's gathering system. KMP expects to
begin construction in June with a planned in service date of November
2014.
-- KMP continues to make good progress on the $255 million expansion of its
Doe Canyon Unit CO2 source field in southwestern Colorado where the
company is adding primary and booster compression to increase capacity
from 105 MMcf/d to 170 MMcf/d. The primary compression is expected to be
in service in the fourth quarter of 2013 and the booster compression in
the second quarter of 2014. The project is on schedule and on budget.
-- Construction is also progressing on KMP's project to increase the
capacity on its Wink Pipeline System that moves crude from the company's
West Texas oil fields to Western Refining Company's facility in El Paso,
Texas. The company is working to expand the pipeline's capacity from
132,000 bpd to 145,000 bpd to meet expected higher future refinery
throughput requirements at Western's refinery and expects to complete
the project in the third quarter this year.
Products Pipelines
-- KMP secured a long-term, fee-based agreement with BP North America in
late March to underwrite an additional 50,000 bpd of capacity at the
petroleum condensate processing facility Kinder Morgan is building near
its Galena Park terminal on the Houston Ship Channel. With the new
agreement, KMP will invest a total of approximately $360 million in the
facility, which will have processing capacity of 100,000 bpd. The
investment also includes building an additional 700,000 barrels of
storage capacity for product being split at the facility. The company
expects the first phase of the splitter to be completed in the first
quarter of 2014 and the second unit to be in service in the second
quarter of 2015.
-- KMP continues work on a 27-mile, 12-inch diameter lateral pipeline with
associated receipt facilities connecting the Kinder Morgan Crude and
Condensate pipeline to Phillips 66's Sweeny Refinery in Brazoria County,
Texas. Through the approximately $90 million project, KMP will provide
Phillips 66 with a significant portion of the lateral pipeline's initial
30,000 bpd of capacity, which is expandable to 100,000 bpd. The project
also involves KMP constructing a five-bay truck offloading facility and
three new storage tanks with approximately 360,000 barrels of
crude/condensate capacity at stations in DeWitt and Wharton counties in
Texas. KMP is on schedule to begin initial deliveries early in the
fourth quarter of 2013, with the entire system being operational by year
end.
-- KMP is on budget and on schedule to complete the construction of the
approximately $220 million Parkway Pipeline, a joint venture with
Valero, in September 2013. The pipeline will transport gasoline and
diesel from a refinery in Norco, La., to an existing petroleum
transportation hub in Collins, Miss., which is owned by Plantation Pipe
Line Company. The company completed the Lake Pontchartrain crossing
portion of the 141-mile, 16-inch pipeline system in February.
-- KMP continues its preparations to move light condensate from Kankakee
County, Ill., to existing terminal facilities near Fort Saskatchewan,
Alberta, following the receipt of more than 100,000 bpd of binding
commitments for a minimum 10-year term during a successful open season
last year for its Cochin Pipeline Reversal Project. The company will
begin modifications to the western leg of the Cochin Pipeline to Fort
Saskatchewan pending the receipt of a final permit for the approximately
$260 million project. In addition to the pipeline modifications, Cochin
will build a tank farm with 1 million barrels of storage and associated
piping where Cochin will interconnect with Explorer Pipeline Company's
pipeline in Kankakee County. KMP expects light condensate shipments to
begin as early as July 1, 2014.
-- KMP recently completed modifications to provide for the receipt, storage
and blending of biodiesel at its Las Vegas, Nev., and Phoenix, Ariz.,
terminals. The company plans to begin customer blending in the early
part of the second quarter.
Terminals
-- KMP finalized agreements to support the construction of an additional
1.2 million barrels of merchant storage at its Edmonton Terminal
in Strathcona County, Alberta. Construction of the new tankage is
scheduled to commence this spring following receipt of supporting
permits, with completion expected in late 2014. Phase 2 will cost
approximately $112 million. Construction of Phase 1 of the expansion,
which consists of 3.6 million barrels of new storage, is well underway
and expected to be completed in December of 2013. Total capital
investment for the combined 4.8 million barrel project is approximately
$420 million and is supported by long-term contracts with major
producers and refiners. When completed, total storage capacity at the
Edmonton facility will be 9.4 million barrels, including the existing
Trans Mountain system facility and the North 40 merchant terminal.
-- In February, KMP announced that its crude by rail partnership with Watco
Companies - KW Express - entered into a long-term agreement with
Mercuria Energy Trading Company to construct a 210,000 bpd crude by rail
project at the Greens Port Industrial Park on the Houston Ship Channel.
The project will enable Mercuria to source crude from various
origination locations including Cushing, Okla., West Texas, the Bakken
shale area and western Canada for delivery by rail into the Houston Ship
Channel for distribution to various refiners via pipeline and barges.
The facility will have the capability to load and unload up to three
unit trains per day of crude oil and condensate, and provide for up to
100,000 bpd of barge loading capacity. KW Express will own a minimum of
85 percent of the project and Mercuria will own the remaining interest.
-- Construction continues on the approximately $430 million Battleground
Oil Specialty Terminal (BOSTCO) located on the Houston Ship Channel. The
first phase of the project includes construction of 52 storage tanks
that will have a capacity of 6.5 million barrels for handling residual
fuels and other black oil terminal services. Terminal service agreements
or letters of intent have been executed with customers for all of the
capacity. Commercial operations are expected to begin in the third
quarter of 2013. Contingent on finalizing the terminal service
agreement, an approximately $55 million expansion for an additional six
tanks totaling 900,000 barrels of ultra low sulphur diesel will be added
to the project. KMP owns 55 percent of BOSTCO.
-- KMP continues to expand its chemical storage capacity. KMP has entered
into a long-term contract with Methanex Corporation to support the
construction of methanol storage capacity near Kinder Morgan's Geismar
Liquids Terminal in Louisiana. KMP will build, own and operate the
storage tanks and related infrastructure, including improvements to its
existing dock. The assets will provide critical marine, rail and truck
access in support of a 1 million tonne per year methanol production
plant being relocated by Methanex from Chile, South America. The
terminal infrastructure is expected to be in service during the second
half of 2014, coinciding with the anticipated startup of the relocated
plant. Additionally, KMP has acquired a 26-acre terminal located in
Chester, S.C., from Quality Carriers. The 19-tank facility currently
provides storage for a single customer of 35,000 barrels and receives
product by rail and distributes by truck. KMP is also expanding the
chemical storage capacity at its liquids terminal in Harvey, La. Subject
to customer agreements, the project could include up to an additional 17
storage tanks with a combined capacity of 285,000 barrels. Combined,
these three investments total more than $65 million.
-- Deeprock Development (a joint-venture between Deeprock Energy Resources
and KMP) will build three new 250,000-barrel storage tanks and one new
pipeline as part of a terminal expansion in Cushing, Okla. As previously
announced Deeprock Development initially executed a long-term terminal
lease and operating agreement with Pony Express Pipeline (now owned by
Tallgrass Energy Partners) to handle up to 240,000 bpd of crude oil from
Pony Express. Tallgrass subsequently exercised its option to have
Deeprock Development expand the project. Following completion, the
terminal will handle up to 350,000 bpd and will serve as the pipeline
staging area with connectivity to five destinations. KMP owns 51 percent
of the project and will contribute $11 million of the almost $21 million
project.
Kinder Morgan Canada
-- In March, KMP closed its previously announced sale of its one-third
interest in the Express-Platte pipeline system to Spectra Energy Corp
for approximately $400 million. Based on the structure of KMP's
investment with the Express-Platte Pipeline partners, KMP received
approximately $15 million of cash flow on an annual basis from its
investment, consisting primarily of debenture interest. KMP plans to
redeploy the proceeds from the sale into various growth projects to
further benefit its unitholders.
-- As previously announced, KMP updated the binding commercial support for
its proposed expansion of the Trans Mountain pipeline system following
completion of a supplemental open season in the first quarter. Thirteen
companies in the Canadian producing and oil marketing business signed
firm contracts bringing the total volume of committed shippers to
approximately 700,000 bpd. These additional commitments will result in
an increase in the proposed expansion capacity from 750,000 bpd to
890,000 bpd and increase the capital investment in the project from $4.1
billion to $5.4 billion. The expansion will complete the twinning of the
existing Trans Mountain pipeline system from Strathcona County, Alberta,
to Burnaby, British Columbia. Trans Mountain expects to file a
Facilities Application with the National Energy Board in late 2013, for
authorization to build and operate the necessary facilities for the
proposed expansion. The application will include the environmental,
socio-economic, Aboriginal engagement, landowner and public
consultation, and engineering components, and initiate a comprehensive
regulatory and public review process. If approvals are received as
planned, the expansion is expected to be operational in 2017.
Financings
-- KMP conducted a secondary offering in February which issued 4.6 million
shares and raised approximately $385 million. The funds were used to
repay commercial paper debt. KMP also issued $1 billion in senior notes
in February.
Kinder Morgan Management, LLC
Shareholders of KMR will also receive a $1.30 dividend ($5.20 annualized) payable on May 15, 2013, to shareholders of record as of April 29, 2013. The dividend to KMR shareholders will be paid in the form of additional KMR shares. The dividend is calculated by dividing the cash distribution to KMP unitholders by KMR's average closing price for the 10 trading days prior to KMR's ex-dividend date.
Kinder Morgan Energy Partners, L.P. (NYSE: KMP) is a leading pipeline transportation and energy storage company and one of the largest publicly traded pipeline limited partnerships in America. It owns an interest in or operates approximately 44,000 miles of pipelines and 180 terminals. The general partner of KMP is owned by Kinder Morgan, Inc. (NYSE: KMI). Kinder Morgan is the largest midstream and the third largest energy company in North America with a combined enterprise value of approximately $110 billion. It owns an interest in or operates approximately 73,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals and handle such products as ethanol, coal, petroleum coke and steel. KMI owns the general partner interest of KMP and El Paso Pipeline Partners, L.P. (NYSE: EPB), along with limited partner interests in KMP and EPB and shares in Kinder Morgan Management, LLC (NYSE: KMR). For more information please visit www.kindermorgan.com.
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
