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Inside Kinder Morgan Inc (KMI): Products Pipelines

The segment will also benefit from a full year of earnings from the Kinder Morgan Inc (NYSE:KMI) Crude & Condensate system, the segment’s lone Texas asset. The line stretches from the Houston Ship Channel into the Eagle Ford. Management expects to benefit from increased production volumes in the Ford, and is currently weighing a $100 million extension deeper into the shale play. Increased volumes will be supplemented by earnings from the Sweeny lateral completion, with a fourth-quarter in-service date. The Sweeny line will connect to a Phillips 66 (NYSE:PSX) refinery with a per-day commitment of 19 million barrels from the refiner.

Though one of this segment’s biggest projects won’t go into effect until 2014, it’s worth noting the Cochin line reversal and diluent conversion. The pipeline that runs from Alberta through Illinois and up into Michigan will be reversed west of Kankakee County, Ill., and begin carrying condensate to Canada’s oil sands by next summer. Bitumen from the oil sands needs to be mixed with diluent to flow through a pipeline. Reversing the Cochin allows Kinder Morgan to take advantage of increased demand for light condensate.

Finally, management has estimated the segment’s sensitivity to volume fluctuation for the year. A 1% change will impact EBITDA by roughly $4 million.

Foolish takeaway
Kinder Morgan’s products pipelines business is an important part of its energy network. The diverse liquids that the company handles, from jet fuel to biofuels, allow it to maximize growth opportunities in a variety of regulatory climates. The diversification of revenue is always important, and now that we’ve broken down exactly what this segment looks like, we can better evaluate its progress in the coming months and years.

Enterprise Products Partners is another midstream company taking advantage of the booming production in the Eagle Ford shale.  No other company has natural gas liquids processing infrastructure to rival EPD’s.  To help investors decide whether Enterprise Products Partners is a buy or a sell today, click here now to check out The Motley Fool’s brand-new premium research report on the company.

The article Inside Kinder Morgan: Products Pipelines originally appeared on Fool.com and is written by Aimee Duffy.

Fool contributor Aimee Duffy has no position in any stocks mentioned. Click here to see her holdings and a short bio. If you have the energy, follow her on Twitter, where she goes by @TMFDuffy. The Motley Fool recommends and owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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