Kinder Morgan Energy Partners LP (KMP), Natural Resource Partners LP (NRP): Pipeline Giant Signals It’s Time To Buy Coal

Page 1 of 2

Kinder Morgan Energy Partners LP (NYSE:KMP) is making a move into owning resource properties with the intent of leasing them to third parties to mine. The main focus appears to be coal. If Kinder sees value in coal, it might be time for investors to buy in, too.

Kinder Morgan Energy Partners LP (NYSE:KMP)

Pipelines

Kinder Morgan Energy Partners LP (NYSE:KMP) is a giant in the mid-stream oil and gas business. It owns the terminals and pipelines that get such products from where they come out of the ground to where they can be sold. It’s a great toll-taker business model that provides relatively stable revenues.

With some 46,000 miles of pipelines and around 180 terminals, the company clearly has a size benefit. However, it also a growth issue. It is much harder to grow a company that’s already large than build one that’s small. Moreover, the mid-stream sector is no longer as cheap as it once was.

Seeing Some Value

Kinder Morgan Energy Partners LP (NYSE:KMP)’s plans to build a business that owns and leases out coal mines is a new line of business that it can grow quickly from a small base. It already has $450 million worth of coal terminal expansions under way, so it clearly likes the industry. Buying the actual coal mines, however, is a bit out of line with its mid-stream focus.

That said, using the leasing model, like Natural Resource Partners LP (NYSE:NRP), removes the operating risk from the equation. Thus, Kinder Morgan Energy Partners LP (NYSE:KMP) will be just a toll taker, which is right in line with its strengths. And the lease model has worked well for Natural Resource Partners LP (NYSE:NRP), even through the current downturn in the coal market.

Although 2012 was a particularly difficult year in the industry, Natural Resource Partners LP (NYSE:NRP)’ top line was essentially flat. It was even able to increase its dividend. The shares yield nearly 10%, which should be of keen interest to income investors, though it’s worth noting that the payout has been static for the last six quarters.

With Kinder Morgan Energy Partners LP (NYSE:KMP) looking to start up a business that does exactly what Natural Resource Partners LP (NYSE:NRP) already does, this is one limited partnership that investors should key in on now.

No Love

Coal’s problems come from two different areas. First, it is considered a dirty fuel source, which is why environmentalists and the government have been working to limit its use. Second, and more importantly, natural gas prices have hit historic lows. That’s made gas a viable alternative to coal as a fuel source for key electric utility customers. As demand for gas has increased, demand and prices for coal have fallen.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!