Transport Your Way to Profits with Kinder Morgan Energy Partners LP (KMP)

Shares of master limited partnerships, or MLPs for short, have fallen dramatically on taper talks by the Fed. However, according to Credit Suisse, when interest rates rose between 2004 and 2007, MLPs outperformed the S&P 500 and other yield-oriented asset classes like utilities and bonds . This pullback could be the buying opportunity we have all been waiting for and Kinder Morgan Energy Partners LP (NYSE:KMP) is the best of breed in the industry.

The company

Kinder Morgan Energy Partners LP (NYSE:KMP) is the leading pipeline transportation and energy storage company in America. With over 50,000 miles of pipeline, 180 terminals, and a mostly fee-based structure, Kinder Morgan Energy Partners LP (NYSE:KMP) has been a top beneficiary of the United States’ energy revolution.

Source: Kinder Morgan

Second quarter 2013

On July 17, Kinder Morgan Energy Partners LP (NYSE:KMP) reported second quarter earnings and it showed incredible growth.

  • Earnings per share of $1.41 vs. a loss of $0.53 year-over-year
  • Revenue rose 50.1% to $3.017 billion year-over-year
  • Net income rose 732% to $1.01 billion year-over-year
Management credited the Copano and El Paso acquisitions with its massive earnings growth; the gas pipeline division more than doubled its profit to $566 million from just $238 million a year ago. Management stated that all of its business segments are expected to continue growing through the conclusion of 2013 and carry over into 2014. Kinder Morgan Energy Partners LP (NYSE:KMP) has been one of the top growth names in the energy sector and I do not see this slowing up any time soon.

Acquisition, Expansion, Innovation

Kinder Morgan Energy Partners LP (NYSE:KMP) has been one of the most active acquirers in the pipeline industry. On May 1, its acquisition of the aforementioned Copano Energy was completed, just one year after the acquisition of El Paso Corporation. The El Paso deal made Kinder Morgan the largest midstream and third largest energy company in North America, and Copano added to the fact.

Kinder Morgan has also been active in forming joint ventures, the most notable being with MarkWest Energy Partners and Keyera Corporation. The deal with MarkWest is to build processing plants and pipeline to support producers in the Utica and Marcellus shales. The Keyera deal is to construct a crude oil rail loading terminal in Edmonton. Keyera is one of the largest midstream companies in Western Canada, so it was a wise choice by management. Kinder Morgan’s relationship with Copano began as a joint venture, so MarkWest and Keyera could be the next takeover targets.