Kinder Morgan Energy Partners LP (KMP), Markwest Energy Partners LP (MWE): Recent Deals Bring Energy Powerhouse Back to its Roots

Page 1 of 2

After a slew of announcements about expanding its terminals business and improving crude oil pipelines, midstream giant Kinder Morgan Inc (NYSE:KMI) has issued two releases over the past month that bring the focus back to the company’s bread and butter: natural gas.

The news

Kinder Morgan Inc (NYSE:KMI) kicked August off with the announcement that its master limited partnership Kinder Morgan Energy Partners LP (NYSE:KMP) would be teaming up with Markwest Energy Partners LP (NYSE:MWE) to form a joint venture in the Appalachian basin.

The new venture will serve producers operating in both the Marcellus and Utica shale with two key facilities. The first is a cryogenic processing complex comprised of two facilities with a combined capacity of 400 million cubic feet per day. The first facility is expected online by the end of 2014, with the second plant following shortly thereafter .

The second project is a natural gas liquids pipeline initially capable of transporting 200,000 bpd from the new complex in Ohio down to the Gulf Coast. Its capacity could be expanded to 400,000 bpd if need be. The new JV will split a 50/50 stake in the cryogenic complex, which will be operated by Markwest Energy Partners LP (NYSE:MWE), while Kinder Morgan Energy Partners LP (NYSE:KMP) would operate the pipeline and maintain at least a 75% stake .

The second bit of natural gas news comes from Kinder Morgan’s other MLP, El Paso Pipeline Partners, L.P. (NYSE:EPB). The partnership announced an extremely successful open season for expansion on two of its existing natural gas systems. El Paso Pipeline Partners, L.P. (NYSE:EPB) was able to fully contract close to 600 million cubic feet per day, and generated additional interest in 400 MMcf per day .

The two systems feed customers in Georgia, South Carolina, and northern Florida. The South is a big driver in American natural gas consumption, and that is only expected to increase as many power producers abandon fuel oil power plants in favor of natural gas powered facilities.

How this fits the business

For a long time Kinder Morgan Energy Partners LP (NYSE:KMP) did not operate the natural gas processing and treating facilities that many of its midstream peers did. That began to change with the Copano acquisition, and it continues to change with the Markwest Energy Partners LP (NYSE:MWE) joint venture. Regardless of the specific assets, the future of Kinder Morgan is very much about natural gas.

We can see this quite clearly when we look at the partnership’s segment earnings through the first six months of the year:

Source: Company release

The Copano acquisition is a big driver of the growth in the natural gas segment, but volumes are also up on Kinder Morgan’s Texas intrastate lines. The segment posted earnings of $1.06 billion through the first two quarters of this year. The chart helps reiterate that even though management is taking steps to grow the partnership’s other business segments, natural gas remains the focal point for growth.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!