Sure transportation and storage doesn’t sound as sexy as exploring, extracting and refining oil and gas, but it can still make investors money. The major oil and gas transportation companies also provide solid income.
What’s more, for investors looking to avoid the confusion and increased headache related to tax filings (i.e. receiving K-1s) that comes with investing in limited partnerships, there are energy transport corporations available. The top picks in the industry include Williams Companies, Inc. (NYSE:WMB), TransCanada Corporation (USA) (NYSE:TRP), Kinder Morgan Inc (NYSE:KMI) and ONEOK, Inc. (NYSE:OKE).
The oil and gas storage and transportation industry is fundamental to energy infrastructure. Industry tailwinds include the Energy Information Administration (EIA)’s expectations that U.S. liquid fuels consumption will increase 0.4% in 2013 after having declined 2.1% in 2012. The EIA also expects natural gas consumption to rise 0.7% in 2013.
One of my favorite picks in the industry is Williams Companies, Inc. (NYSE:WMB), which pays a 4.3% dividend yield. Williams Companies, Inc. (NYSE:WMB) is a key player in the energy infrastructure space, with operations spanning from the Gulf of Mexico to the Canadian oil sands.
In a basic sense, Williams Companies, Inc. (NYSE:WMB) provides natural gas gathering, processing, storage and marketing of natural gas. Its biggest earnings contributor is its ownership interests in Williams Energy, where it owns the general-partner interest and a 70% limited-partner interest. Williams Companies, Inc. (NYSE:WMB) spunoff WPX Energy Inc (NYSE:WPX) in early 2012 and is now a pure-play mid-stream operator with assets from the Northwest U.S. to the Gulf of Mexico.
Source: Williams Partners Annual Report
Williams Companies, Inc. (NYSE:WMB) also has a $20 billion capital expenditure plan to expand its footprint through 2017. Part of the expansion plan includes its March partnership with Boardwalk Pipeline Partners, LP (NYSE:BWP) for the Bluegrass Pipeline. This pipeline would connect the Ohio, West Virginia and Pennsylvania region to the Gulf Coast with a 200,000 barrels per day of natural gas liquids capacity.
The midstream market
TransCanada Corporation (USA) (NYSE:TRP) is another North American energy infrastructure company focused on natural gas pipelines, oil pipelines and energy, while also paying a 4% dividend yield. Natural gas pipelines account for some 50% of revenues, while oil pipelines is 10% and energy 40%.
After the U.S. State Department rejected its application for Keystone, TransCanada Corporation (USA) (NYSE:TRP) began working with the state of Nebraska to reroute its pipeline to get approval. If approved during the fall of 2013, TransCanada Corporation (USA) (NYSE:TRP) expects the pipeline to be in service by mid-2015.
Sure TransCanada Corporation (USA) (NYSE:TRP) has taken a lot of heat over pollution and environmental concerns related to the pipeline, but the company is also active in promoting less-carbon intensive solutions. TransCanada Corporation (USA) (NYSE:TRP) recently completed the acquisition of the first of nine Ontario solar power facilities from Canadian Solar Inc. (NASDAQ:CSIQ). The remaining eight projects are expected to be in service by the end of 2014.
It might surprise investors to learn that the potential builder of the Keystone pipeline gets “one-third of the power [it] provides to North American consumers today comes from carbon-free energy sources,” as noted by TransCanada Corporation (USA) (NYSE:TRP) CEO. This is, in part, thanks to the $5 billion the company has invested to date in emission-less energy sources, which includes the largest wind farm in New England and its thirteen hydro power facilities in New Hampshire, Massachusetts and Vermont.
Kinder Morgan Inc (NYSE:KMI) manages a diversified portfolio of transportation and storage assets, while also paying a 4% dividend yield. Kinder is one of the largest midstream energy companies, owning the general partner interest in Kinder Morgan Energy Partners LP (NYSE:KMP) and El Paso Pipeline Partners, L.P. (NYSE:EPB). Kinder Morgan Energy Partners LP (NYSE:KMP)’s natural gas segment is expected to post a double-digit growth in earnings in 2012 thanks to its El Paso Pipeline Partners, L.P. (NYSE:EPB) acquisition.