The sickening drop in oil prices might have affected a number of stocks in the energy sector, but not Kinder Morgan Inc. (NYSE:KMI), which is closing in on its 52 week-high amidst the uncertainty in the space according to CNBC’s Jim Cramer. The ‘Mad Money’ analyst reiterates that Kinder Morgan remains a smarter and safer play for anyone wishing to acquire stakes in the energy sector.
Despite the ongoing decline in oil prices, Kinder Morgan Inc. (NYSE:KMI) has rebounded strongly in the market guaranteeing shareholder value with a magnificent dividend offer and an exciting blueprint for growth. Cramer believes potential investors should snap the stock at any point of weakness as the company’s prospects continue to look brighter at the back of consolidation of three master partnerships in the Kinder Morgan family.
“Kinder Morgan Inc. (NYSE:KMI) is almost totally isolated against falling oil prices; these pipeline companies when run properly are basically tall road operators. They collect a fee based on the volume they transport. That fee stays the same regardless of the price of oil or gas and Kinder Morgan case 82% of its Cash flow are fee based,” said Mr. Cramer
The fact that most of Kinder Morgan’s earnings come from refinery fees means that the company’s earnings will not in any way be affected by low oil prices going forward. The oil company has also reiterated its commitment of developing shareholder value by affirming plans to pay up to $2 in dividends next year with a 10% increment each year going forward
Kinder Morgan Inc. (NYSE:KMI) owns one of the largest diversified asset base in the energy sector thus reducing its reliance on oil prices. The company also runs one of the largest gas pipeline network in North America and is the largest independent transporter for Petroleum products as well as Carbon dioxide used to rejuvenate old oil fields.
“For every $10 decline in the price of oil, Kinder Morgan Inc. (NYSE:KMI)’s discounted cash flow takes an incredibly tiny hit of less than 1%. So when we see that Kinder Morgan is working on $17.9 billion worth of new projects. I don’t think we should think about cancellation because this company has been very careful to build a business that can withstand even a gigantic drop from the price of oil,” said Mr. Cramer
Cramer maintains that a decline in oil prices remains irrelevant to Kinder Morgan Inc. (NYSE:KMI) as the company looks to offset any decline with other business operations especially in natural gas.
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