Back to top

Image: Bigstock

Kinder Morgan (KMI) Leverages Carbon Credits in Texas Oilfield

Read MoreHide Full Article

Kinder Morgan (KMI - Free Report) has strategically acquired oil and gas-producing assets in the Permian Basin for approximately $100 million, per a report by Reuters on Wednesday. This acquisition includes 265 wells located in a mature area of the Texas oilfield and 11,600 acres of land. These assets, first developed in the 1920s, currently produce around 1,100 barrels of oil per day. Kinder Morgan plans to leverage these assets to boost production using U.S. carbon capture incentives.

Focus on Carbon Capture Incentives

The acquisition is significantly influenced by the U.S. Inflation Reduction Act's $60 per metric ton tax credit for carbon sequestration. This incentive has made older oil-producing areas more attractive for deals and investments. The move demonstrates how such tax credits can drive oil and gas companies to invest in mature fields with the potential for enhanced recovery through carbon capture technologies. By tapping into these tax credits, Kinder Morgan plans to enhance oil production from these mature fields using carbon dioxide (CO2) injection, a technique known as enhanced oil recovery (EOR).

Potential Enhanced Oil Recovery

The newly acquired assets hold significant potential for enhanced oil recovery. Kinder Morgan aims to utilize the EOR technique to potentially recover an additional 100-300 million barrels of oil over time. This technique involves injecting substances such as carbon dioxide into the oil reservoir to increase pressure and stimulate oil production from the wells. Kinder Morgan, which currently produces about 50,000 barrels of oil per day through CO2 injection, sees significant potential in the newly acquired assets.

Divesting Older Conventional Oilfields

In a parallel strategy, the company plans to sell several of its older, conventional oilfields in the Permian Basin. This shift should allow it to concentrate on higher-potential properties that can benefit more from modern recovery techniques and carbon capture incentives. By focusing on these properties, Kinder Morgan aims to maximize its production capabilities and optimize its asset portfolio.


Kinder Morgan's recent acquisition highlights a strategic approach to leverage government incentives for carbon sequestration while enhancing oil recovery in the Permian Basin. By investing in these mature assets and divesting older fields, the company positions itself to capitalize on the evolving energy landscape and regulatory environment.

Zacks Rank & Key Picks

Kinder Morgan currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy sector are Marathon Petroleum Corporation (MPC - Free Report) , SM Energy Company (SM - Free Report) and Sunoco LP (SUN - Free Report) . While Marathon Petroleum sports a Zacks Rank #1 (Strong Buy), SM Energy and Sunoco carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marathon Petroleum's acquisition of Andeavor has expanded its foothold in the Permian Basin, creating an enviable retail and marketing portfolio. MPC’s emphasis on operational excellence, safety and environmental responsibility, coupled with investments in low-carbon initiatives, positions it well for sustainable growth and continued value creation for shareholders. 

The Zacks Consensus Estimate for MPC’s 2024 EPS is pegged at $19.28. The company has a Zacks Style Score of A for Value. It has witnessed downward earnings estimate revisions for 2024 in the past 30 days.

SM Energy is set to expand its oil-centered operations in the coming years with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments should create long-term value for shareholders.

The Zacks Consensus Estimate for SM’s 2024 EPS is pegged at $6.60. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing more than 10,000 convenience stores, it distributes over 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value Score of A.

The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $5.07 and $4.47, respectively. The partnership has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Published in