Recently it was reported by the Energy Information Administration, or EIA, that the US’ recoverable amount of oil and gas reserves is 35% greater than in 2011. The shale revolution has unlocked the tremendous potential of the natural gas and oil industry, bringing about a huge increase in the oil and gas pipeline distribution around the U.S. and Canada.
In the AEO2013 Reference case and EVA projections, natural gas production is expected to reach 31.4 trillion cubic feet by 2035, which is a mammoth increase of 8.4 trillion cubic feet from its 2011 levels.
Kinder Morgan Energy Partners LP (NYSE:KMP) is one of the largest midstream and the third-largest energy company in the United States with approximately 80,000 miles of pipelines and 180 terminals. The company operates in a defensive industry, as its revenue model is completely dependent on the utilization of its pipelines and terminals.
The company has exhibited robust results of late, as it witnessed 44% year-over-year growth in its revenues, the largest contributor being the product pipelines segment.
Acquisitions to spur growth
Kinder Morgan Energy Partners LP (NYSE:KMP) has made several acquisitions in order to spur growth through inorganic means. The recent acquisition of Copano Energy is expected to be accretive by the end 2013. Going forward, the strategic acquisition is expected to drive growth for the company and turn accretive over the next five years beginning in 2014.
The acquisition facilitated Kinder Morgan Energy Partners LP (NYSE:KMP) in expanding its pipelines across 70,000 miles. Furthermore, with the acquisition of El Paso Natural Gas Company and its projects worth $900 million, the company is well positioned to provide a robust and reliable infrastructure in North America.
Future investments and expansions plans
The supply of shale and oil-sands crude in North America is expected to exceed the demand from 2020 to 2030. To capitalize on this new exciting opportunity, the company plans to triple the size of its Trans Mountain pipeline from Edmonton, Alberta to Vancouver by 2017.
Other expansion plans such as Crude and Condensate pipeline system in Karnes County, Texas, BOSTCO Oil Terminal on Houston Ship Channel, the $450 million expansion of coal terminals and the $58 million Geismar chemical storage capacity expansion (GLT) allow me to keep a highly bullish view on this company.
Further, in order to diversify its business the company is exploring new business opportunities in leasing and acquiring natural resource reserves within its Terminals business segment.
Growth in CO2 division
Kinder Morgan Energy Partners LP (NYSE:KMP) is the largest supplier of CO2 in the Permian basin for enhanced oil recovery from mature oil wells; therefore, the company is expected to benefit from rising oil prices in the future.
The ongoing expansion projects in Colorado is expected to release some its capacity constraints and prop up the overall output to 1.4 Bcf a day by 2014. In addition, the new gas field along the Arizona-New Mexico border is expected to add another 200 million cubic feet per day to its supply. The additional output will be sold under long-term contracts, thus, mitigating any price fluctuations.
With a market capitalizations of $30.53 billion and $34.54 billion respectively, TransCanada Corporation (USA) (NYSE:TRP) and Enbridge Inc (USA) (NYSE:ENB) are the two major players operating in the oil and gas pipeline segment in North America.