Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Kinder Morgan Energy Partners L.P. (KMP - Analyst Report) wrapped up its previously announced divestiture agreement with Tallgrass Energy Partners, LP.

The agreement includes the sale of Kinder Morgan Interstate Gas Transmission, Trailblazer Pipeline Company, the Casper-Douglas natural gas processing and West Frenchie Draw treating facilities in Wyoming and the partnership’s 50% interest in the Rockies Express Pipeline (REX).

The deal fetches Kinder Morgan $1.8 billion in cash. The total divestiture value however includes the proportionate amount of the REX debt. Including this, the deal amount comes to $3.3 billion.  

Kinder Morgan plans to use the proceeds to repay a $2.0 billion credit facility which was issued earlier in August to acquire stakes of Tennessee Gas Pipeline (TGP) as well as El Paso Natural Gas (EPNG) from its parent company Kinder Morgan Inc. (KMI - Analyst Report). During the third quarter, Kinder Morgan acquired stakes of TGP and 50% of EPNG from its parent company. This was part of Kinder Morgan Inc.’s acquisition of El Paso Corp. that entailed the divestiture of three U.S. natural gas pipelines.

Kinder Morgan Energy Partners is one of the largest publicly traded master limited partnerships and generally serves as a benchmark for the pipeline master limited partnership (MLP) group. A focus on fee-based and diversified businesses has enabled the partnership to spread its business ventures. In addition, the CO2 business is a major growth avenue for the partnership with the commodity price risk being offset by a long-term hedging strategy.

Recently, Kinder Morgan inked a deal with oil refiner Phillips 66 (PSX - Snapshot Report) for the transportation of Eagle Ford crude and condensate to the latter’s Sweeny refinery in Brazoria County, Texas.

These deals position Kinder Morgan well and ensure stable cash flow for the partnership and its unit holders going forward.

However, as inherent in all oil and gas majors, Kinder Morgan remains vulnerable to volatile crude oil and natural gas prices, imbalance between supply and demand for its products and rising interest rates. Such factors can hurt the partnership’s volumes and margins.

As such, we see the stock performing in line with the broader market and maintain our long-term Neutral recommendation, supported by a Zacks #3 Rank (short-term Hold rating).

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

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%