Net income fell to $225.3 million, or a loss of 8 cents on a per-unit basis, from profit of $263.9 million, or 15 cents, a year earlier, Houston-based Kinder Morgan said today in a statement. Distributable cash flow before certain items, a measure of the partnership’s ability to make unit-holder payouts, rose 36 percent to $353.7 million, or $1.18 a unit.
Excluding certain items such as the rate settlement, the company earned 43 cents per unit, beating by 1 cent the average of 13 analyst estimates compiled by Bloomberg. Kinder Morgan benefited from increased natural-gas volumes and higher oil prices in its carbon dioxide division where it produces oil and natural gas liquids. “They seem to be executing their plan,” said Hinds Howard, a portfolio manager at Curbstone Group LLC in Waltham, Massachusetts. “We continue to be in a very strong market for NGLs,” he said, referring to natural-gas liquids which the company produces and which are tied to higher oil prices. The loss in per-unit net income followed a $158 million legal reserve adjustment for the rate case. A greater share of profit was also allocated to the company’s general partner. Settlement Last week, Kinder Morgan announced that it agreed to pay $205 million to settle rate challenges from 11 shippers on its SFPP unit, which has 2,500 miles (4,022 kilometers) of refined oil-product pipelines in California and other western states. Some of the cases date back to 1992 and included challenges on whether rates were too high. The company said the settlement won’t affect its distribution payments to unit holders this year. Kinder Morgan operates 180 storage terminals and 28,000 miles of pipelines, making it the largest independent transporter of fuels such as gasoline and
diesel in the U.S. As a so-called master limited partnership, Kinder Morgan relies on assets that generate stable cash flow that can be used to make payouts to its unit holders.
Midcontinent Express In the past year, Kinder Morgan completed its 506-mile Midcontinent Express Pipeline joint venture with Dallas-based Energy Transfer Partners LP that runs from Oklahoma to Alabama and its 1,679-mile Rockies Express gas pipeline project that is a joint venture of Kinder Morgan, Sempra Energy and ConocoPhillips. Profit from oil-product pipelines rose 12 percent to $163.9 million as natural-gas pipeline profit increased 8.5 percent to $219.3 million following higher pipeline volumes. Profit from the carbon-dioxide unit, which produces oil and natural-gas liquids and supplies carbon dioxide to oil drillers for injection in wells, rose 48 percent to $247.8 million because of higher oil prices. Crude-oil futures on the New York Mercantile Exchange rose 82 percent to an average $78.88 per barrel during
the quarter. Kinder Morgan is the second-largest oil producer in Texas. This year the company has announced about $1.17 billion in acquisitions. That includes an $875 million investment in part of Petrohawk Energy Corp.’s
Haynesville Shale pipeline assets in a bet on rising production from the second-largest U.S. natural- gas deposit.
Kinder Morgan declared a first-quarter distribution of $1.07 per unit, up 1.9 percent from a year earlier. The company plans to distribute $4.40 per unit this year. The statement was issued after the close of regular trading on the New York Stock Exchange. Kinder Morgan fell 5 cents to $67.95 at 4:16 p.m. New York time after closing at $68. The units, which have 6 buy recommendations from analysts, 10 holds and 1 sell, have risen 11 percent this year.