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.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

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

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!