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Kinder Morgan's Final Investment Decision for Trans Mountain
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Kinder Morgan, Inc. (KMI - Free Report) , along with its indirect subsidiary Kinder Morgan Canada Limited (“KML”), recently announced a final investment decision for its Trans Mountain Expansion Project.
Kinder Morgan has priced its initial public offering (IPO) of 102.9 million shares of common stock at a price to the public of C$17.00 per share. It is expected to generate total gross proceeds of C$1.75 billion.
The final investment decision is subject to the successful completion of the IPO, which is anticipated to take place by not later than May 31, 2017.
The C$7.4 billion Trans Mountain Expansion Project is expected to provide western Canadian oil producers with an additional shipping capacity of about 590,000 barrels per day along with tidewater access to Western United States and global markets. The expansion is projected to take the total pipeline capacity to 890,000 barrels per day.
The project is supported by 15- and 20-year shipper commitments of 707,500 barrels per day, or about 80% of the capacity on the expanded pipeline. The other 20% is apportioned for spot volumes, as required by the National Energy Board. Construction on the project is anticipated to commence in Sep 2017, with completion scheduled for Dec 2019.
The final investment decision depended on securing financing. Despite an unfavorable political climate, the process continued because the Trans Mountain Expansion Project financing contingency period, as stated in shipper agreements, closes at the end of May.
The IPO comprised spinning off a portion of Kinder Morgan’s interest in its Canadian business. The business comprises the Trans Mountain pipeline system (including associated terminals assets), the Puget Sound pipeline, the Jet Fuel pipeline system, the Canadian portion of the Cochin pipeline system, the Vancouver Wharves Terminal and the North 40 Terminal, as well as three jointly controlled investments – the Edmonton Rail Terminal, the Alberta Crude Terminal and the Base Line Terminal.
Kinder Morgan is likely to use the proceeds to reduce its debt. The company now expects to end the year at about 5.2x debt to EBITDA compared with its estimate of 5.4x.This is in line with its strategy to return additional value to shareholders. The company is likely to announce the revised dividend guidance for 2018 in the latter part of this year. On closure of the IPO, Kinder Morgan will own about 70% interest in the business, which will be operated and administered by Kinder Morgan Canada and its affiliates.
Kinder Morgan’s price chart, however, is unimpressive. Shares of the company have lost 9.3% in the last three months, while the Zacks Oil & Gas – Production and Pipeline industry registered an increase of 0.2%.
Kinder Morgan currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space include SunCoke Energy, Inc. (SXC - Free Report) , Exterran Corp. and Canadian Natural Resources Limited Ltd. (CNQ - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SunCoke Energy posted a positive earnings surprise of 120.0% in the preceding quarter. The company beat estimates in two of the four trailing quarters with average negative earnings surprise of 35.78%.
Exterran posted a positive earnings surprise of 123.21% in the year-ago quarter.
Canadian Natural Resources posted a positive earnings surprise of 30.77% in the preceding quarter. It surpassed estimates in two of the four trailing quarters with average negative earnings surprise of 275.46%.
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Kinder Morgan's Final Investment Decision for Trans Mountain
Kinder Morgan, Inc. (KMI - Free Report) , along with its indirect subsidiary Kinder Morgan Canada Limited (“KML”), recently announced a final investment decision for its Trans Mountain Expansion Project.
Kinder Morgan has priced its initial public offering (IPO) of 102.9 million shares of common stock at a price to the public of C$17.00 per share. It is expected to generate total gross proceeds of C$1.75 billion.
The final investment decision is subject to the successful completion of the IPO, which is anticipated to take place by not later than May 31, 2017.
The C$7.4 billion Trans Mountain Expansion Project is expected to provide western Canadian oil producers with an additional shipping capacity of about 590,000 barrels per day along with tidewater access to Western United States and global markets. The expansion is projected to take the total pipeline capacity to 890,000 barrels per day.
The project is supported by 15- and 20-year shipper commitments of 707,500 barrels per day, or about 80% of the capacity on the expanded pipeline. The other 20% is apportioned for spot volumes, as required by the National Energy Board. Construction on the project is anticipated to commence in Sep 2017, with completion scheduled for Dec 2019.
The final investment decision depended on securing financing. Despite an unfavorable political climate, the process continued because the Trans Mountain Expansion Project financing contingency period, as stated in shipper agreements, closes at the end of May.
The IPO comprised spinning off a portion of Kinder Morgan’s interest in its Canadian business. The business comprises the Trans Mountain pipeline system (including associated terminals assets), the Puget Sound pipeline, the Jet Fuel pipeline system, the Canadian portion of the Cochin pipeline system, the Vancouver Wharves Terminal and the North 40 Terminal, as well as three jointly controlled investments – the Edmonton Rail Terminal, the Alberta Crude Terminal and the Base Line Terminal.
Kinder Morgan is likely to use the proceeds to reduce its debt. The company now expects to end the year at about 5.2x debt to EBITDA compared with its estimate of 5.4x.This is in line with its strategy to return additional value to shareholders. The company is likely to announce the revised dividend guidance for 2018 in the latter part of this year. On closure of the IPO, Kinder Morgan will own about 70% interest in the business, which will be operated and administered by Kinder Morgan Canada and its affiliates.
Kinder Morgan’s price chart, however, is unimpressive. Shares of the company have lost 9.3% in the last three months, while the Zacks Oil & Gas – Production and Pipeline industry registered an increase of 0.2%.
Kinder Morgan currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space include SunCoke Energy, Inc. (SXC - Free Report) , Exterran Corp. and Canadian Natural Resources Limited Ltd. (CNQ - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SunCoke Energy posted a positive earnings surprise of 120.0% in the preceding quarter. The company beat estimates in two of the four trailing quarters with average negative earnings surprise of 35.78%.
Exterran posted a positive earnings surprise of 123.21% in the year-ago quarter.
Canadian Natural Resources posted a positive earnings surprise of 30.77% in the preceding quarter. It surpassed estimates in two of the four trailing quarters with average negative earnings surprise of 275.46%.
Looking for Ideas with Even Greater Upside?
Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more. Click here for a peek at this private information >>