Back to top

Analyst Blog

Kinder Morgan Energy Partners L.P. (KMP - Analyst Report) has entered into an agreement to settle civil lawsuits, associated with its earlier acquisition of Copano Energy LLC, filed in Delaware and Texas. A settlement hearing has been scheduled for Sep 9, 2013. Earlier, the the deal was challenged in court, citing loss for Copano stockholders.

Earlier in May, Kinder Morgan acquired Copano a midstream entity with operations mainly in Texas, Oklahoma and Wyoming. Prior to that, Copano unitholders approved the transaction, with more than 99% of the units casting votes in favor of the transaction.

This Copano acquisition facilitated Kinder Morgan in pursuing development activities in the prolific Eagle Ford Shale areas of South Texas and also allowed entry into the Barnett Shale Combo in north Texas as well as the Mississippi Lime and Woodford shales in Oklahoma.

The consideration received by Copano’s unitholders was valued at $40.91 per common unit based on KMP’s closing price as of Jan 29, 2013, representing a 23.5% premium over the closing price of Copano common units as of the same date. The total purchase consideration for the deal came to about $5 billion, including Copano’s debt.

Kinder Morgan is one of the largest publicly traded master limited partnerships (MLPs) and generally serves as a benchmark for the pipeline MLP group. Kinder Morgan Inc. (KMI - Analyst Report), one of the largest mid-stream energy companies in the U.S., owns the partnership’s general partner interest.

Earlier, the purchase of El Paso Corp for $38 billion positioned Kinder Morgan as the largest midstream company in North America. The acquisition expanded its portfolio further with the addition of Tennessee Gas Pipeline (TGP) and a portion of El Paso Natural Gas (EPNG). Various agreements and modifications are lined up in the coming years with these assets, which are expected to augment the partnership's revenues.

Kinder Morgan retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, there are certain other energy pipeline operators like Delek Logistics Partners, LP (DKL - Snapshot Report) and Summit Midstream Partners, LP (SMLP - Snapshot Report) that offer value and are worth buying now. Both partnerships sport a Zacks Rank #1 (Strong Buy).

 

Please login to Zacks.com or register to post a comment.