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Spillover Mars Kinder Canadian Dreams
ENB KMI TRP
A leading master limited partnership,
Kinder Morgan Energy Partners L.P.’s ambitious Canadian forays through pipeline expansion might face a setback going forward in light of the recent spill. Last week, the Trans Mountain pipeline spilled crude oil, equivalent to about 6 barrels, in southwestern British Columbia near the town of Kingsvale. The partnership reacted promptly and repaired the leak.
Our apprehension however crops up not because of the spill but over the fate of the partnership’s ongoing plans for pipeline network expansion in that area. Kinder Morgan – the largest pipeline operator in the U.S. – is moving forward with its expansion plan for its Trans Mountain oil pipeline in Canada to 890,000 barrels a day (BPD) from the existing 300,000 BPD capacity. The partnership intends to begin work on the $5.4 billion project in 2015 with completion expected in 2017.
The project has already received flak from environmentalists along with Vancouver and Burnaby municipalities and the aborigines group First Nations. The risk of an oil spill has just given additional ammunition to environmentalists against the project.
The ire of environmentalists is directed towards other projects also aimed at delivering Canadian crude oil to the Pacific Rim markets. Significant among them includes Enbridge Inc.’s ( ENB - Snapshot Report) C$6 billion ($6.1 billion) Northern Gateway project and TransCanada Corp.’s ( TRP - Snapshot Report) Keystone XL project.
Kinder Morgan is a publicly traded master limited partnership (MLP) and generally serves as a benchmark for the pipeline MLP group. Like all other oil and gas majors, Kinder Morgan remains vulnerable to volatile crude oil and natural gas prices, an imbalance between supply and demand for its products and rising interest rates. Such factors can hurt the partnership’s volumes and margins.
The general partner of the partnership is owned by Kinder Morgan, Inc. ( KMI - Analyst Report) – the largest midstream and the third largest energy company in North America. It has a combined enterprise value of around $115 billion and owns interest or manages about 80,000 miles of pipelines and 180 terminals.
Kinder Morgan currently has a Zacks Rank #3 (short-term Hold rating).