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Kinder Morgan beats expectations and continues to grow dividend

Kinder Morgan beats expectations and continues to grow dividend

US pipeline and energy giant Kinder Morgan Energy Partners (NYSE: KMP) issued second quarter results today, reporting earnings of $0.49 per share, versus expectations of $0.57. However, the company beat on revenues, netting $3.56 billion last quarter, up 19% from the same quarter last year.

In their conference call today, the company updated investors on their project backlog which currently stands at $15.4 billion. Highlights of their Canadian projects include:

KMP Edmonton Terminal:

  • Construction continues as planned on the second phase of their Edmonton Terminal Expansion. This current phase of expansion will see an additional 4 tanks and 1.2 million barrels of storage capacity.
  • When completed, the two phase expansion will see a total of 4.6 million barrels of extra capacity for crude oil and refined petroleum products.
  • The $432 million project is expected to be completed in late 2014.

Edmonton Rail Terminal:

  • Construction continues on a crude oil loading facility in a 50/50 joint venture with Imperial Oil.
  • The newly built terminal will have a loading capacity of 1 to 3 unit trains per day, enabling rail delivery of up to 100,000 barrels per day to North American markets and refineries.
  • The loading facility will be built and operated by KMP, which is investing $194 million to the project.
  • An additional phase of expansion is already in the works which will increase crude-by-rail capacity to 210,000 barrels per day.

KMP Trans Mountain Expansion:

  • The Trans Mountain expansion project will see pipeline capacity increase from 300,000 to 800,000 barrels per day. Kinder Morgan is the owner and operator of the Trans Mountain pipeline which runs from the Edmonton Terminal to various shipping terminals in Burnaby and Washington State. 
  • KMP has secured firm contracts from 13 companies to ship 708,000 barrels per day. The new route goes through Burnaby Mountain and has met with much opposition from the city of Burnaby, who has denied KMP site access. The city's latest propaganda campaign involves convincing Canadians that exporting crude oil to Asia will increase the price of gasoline and negatively impact the Canadian economy.
  • The National Energy Board has delayed approval from July 2015 to January 2016, pushing the date past the next federal election.
  • The existing Trans Mountain pipeline has been operating, without incident, for the past 60 years. The expansion project includes twinning of the existing pipelines, addition of pumping station and storage tanks. The estimated capital cost of the project is $5.4 billion.

The company boosted their dividend to $1.39/share per quarter (or $5.56/share annually). KMP stock currently yields about 6.7% annually.

Kinder Morgan Energy Partners owns and operates 52,000 miles of pipelines and 180 terminals. Its parent company Kinder Morgan Inc. (NYSE: KMI) is the largest midstream corporation in the US and the 4th largest energy company in North America. 

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