Kinder Morgan Energy Partners, L.P. announced that its subsidiary, Kinder Morgan Cochin LLC has signed a letter of intent with NOVA Chemicals Corporation to develop a new products pipeline from the Utica Shale. The proposed $300 million pipeline christened Kinder Morgan Utica To Ontario Pipeline Access (UTOPIA) would transport refined or fractionated natural gas liquids (NGLs), including ethane and propane.
Per the agreement, Kinder Morgan Cochin will develop, construct, own and operate the 210-mile, 10-inch diameter pipeline from multiple fractionation facilities in Harrison County, Ohio, to Kinder Morgan’s Cochin Pipeline near Riga, Michigan. The pipeline would enable the company to move product via Cochin east to Windsor, Ontario, Canada.
The pipeline is expected to have an initial capacity of 50,000 barrels per day (bpd), which is expandable to more than 75,000 bpd. The company expects the pipeline to be operational by mid 2017.
Kinder Morgan is one of the largest publicly traded master limited partnerships (MLPs) and generally serves as a benchmark for the pipeline MLP group. A focus on fee-based and diversified businesses has enabled the partnership to dilute its business risks. 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.
However, Kinder Morgan remains vulnerable to volatile crude oil and natural gas prices, imbalance between supply and demand for its products, and rising interest rates. As such, we expect the partnership to perform in line with the broader industry and rate it Neutral on a long-term basis. Kinder Morgan currently holds a Zacks #3 Rank (short-term Hold rating).
Meanwhile, there are certain other better-ranked energy pipeline operators like Enbridge Energy Management LLC (EEQ - Snapshot Report) and Magellan Midstream Partners LP (MMP - Analyst Report) that offer value and are worth buying now. Both partnerships sport a Zacks Rank #2 (Buy).