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TheStreet Open House

Kinder Morgan Energy Partners Increases Quarterly Distribution To $1.20 Per Unit

Other News

Products Pipelines

  • KMP expects to complete construction of its approximately $220 million crude and condensate pipeline that will transport product from the Eagle Ford Shale in south Texas to the Houston Ship Channel this month. The pipeline, which consists of almost 70 miles of new-build construction and 113 miles of converted natural gas pipeline, will have a capacity of approximately 300,000 barrels per day (bpd) and is scheduled for commissioning in May.
  • KMP will build a petroleum condensate processing facility near its Galena Park terminal on the Houston Ship Channel which, when combined with the crude and condensate pipeline, will provide customers with unparalleled connectivity to crude oil and clean products markets on the Texas Gulf Coast. The cost of the facility is now projected to be approximately $190 million, with anticipated initial throughput capacity increasing to about 50,000 bpd. The project is being supported by a fee-based contract with a major oil customer and the plant can be expanded up to 100,000 bpd. The facility is expected to be in service in the first quarter of 2014.
  • KMP remains on schedule to begin construction of the new, approximately $220 million Parkway Pipeline in mid summer pending the issuance of all applicable permits. A joint venture with Valero, the 141-mile, 16-inch pipeline will transport gasoline and diesel from a refinery in Norco, La., to an existing petroleum transportation hub in Collins, Miss., which is owned by Plantation Pipe Line Company. The pipeline will have an initial capacity of 110,000 bpd with the ability to expand to over 200,000 bpd and is projected to be in service by mid-year 2013.
  • KMP has secured long-term leases for all seven tanks that are part of the approximately $77 million expansion project at its Carson Terminal in California to increase storage capacity by 560,000 barrels for refined petroleum products. The company continues to run ahead of the project’s construction schedule, with both the first two tanks that went into service last year and the remaining five tanks scheduled to begin service in late 2012 and early 2013.
  • Construction is now complete on the company’s $48 million expansion project which added a new pipeline connection and three new 150,000-barrel military jet fuel storage tanks at Travis Air Force Base in northern California. The third tank began service in March of this year and the first two tanks came online last December.
  • Pending the receipt of final Canadian regulatory approvals, the Cochin Pipeline will begin transporting an ethane-propane mix from Iowa City, Iowa, to the International Boundary near Detroit, Mich., in May. Cochin will then transport the mix to Windsor, Ontario, for eventual delivery to storage facilities in Sarnia, Ontario. Cochin is expected to move about 13,000 bpd of the ethane-propane mix.

Natural Gas Pipelines

  • Eagle Ford Gathering, a joint venture between KMP and Copano Energy in South Texas, commenced flow to the Formosa Point Comfort processing plant in Jackson County on March 1. The joint venture includes approximately 400 miles of pipelines (including its capacity rights on certain KMP pipelines) with capacity to gather and process over 700,000 MMBtu per day. In related news, KMP has completed interconnects of its Kinder Morgan Tejas Pipeline to both the Formosa Point Comfort and the Williams Markham processing plants, which provide access to the residue gas supplies available at the tailgates of these facilities.
  • Effective April 1, KMP assumed operations of the West Clear Lake Storage Facility in southeast Houston, which had been leased to and operated by affiliates of Royal Dutch Shell under a long-term contract. Approximately 50 billion cubic feet (Bcf) of new storage services, backstopped by the 85 Bcf of West Clear Lake working capacity, have been contracted by KMP under long-term agreements. KMP has begun a project to increase injection capacity at the facility and enhance access to natural gas markets, which is expected to be in service by the second quarter of 2013.
  • KinderHawk Field Services placed into service a new treating facility in DeSoto Parish, La., where treated gas is delivered into the new ETC Tiger Pipeline. KinderHawk also completed a 10-mile pipeline extension in Caddo County, La., which provides producers in the area with access to additional pipeline outlets at KinderHawk’s Plantation treating complex.
  • Kinder Morgan Treating reports that sales orders executed by the company’s recently acquired SouthTex construction division have already exceeded budgeted projections for the full year due to strong demand for the company’s products from producers operating in the major rich gas and oil shale plays across the country. SouthTex, which was acquired in December 2011, is a leading manufacturer, designer and fabricator of natural gas treating plants that remove CO 2 and H 2S, condensate stabilizers, dehydrators and other ancillary equipment.
  • KMP entered into a joint venture with Martin Midstream Partners to develop a multi-commodity rail terminal in Pecos, Texas. The new terminal will serve the growing oil and natural gas industries in the Permian Basin and will offer a variety of services to producers including crude oil hauling, storage, transloading and marketing. The joint venture will offer immediate NGL storage, takeaway, and fractionation services, and seek to develop natural gas and crude gathering and processing systems within the area. The first stage of the terminal is expected to be completed and available for service in May. The facility will be constructed and operated by a subsidiary of Watco Companies, in which KMP holds a preferred equity position.

CO 2

  • There continues to be strong demand for CO 2 for enhanced oil recovery projects in response to sustained higher oil prices. As a result of this strong demand, KMP has entered into five new CO 2 sales contracts that combined total more than 2 trillion cubic feet with aggregate daily contract quantities exceeding 440 million cubic feet per day (MMcfd) at their peak. These volumes, the great majority of which are contracted by third parties, will support new and existing CO 2 floods in the Permian Basin of West Texas and have a volume weighted average term of nearly 16 years. One of the contracts includes transporting CO 2 via the company’s 91-mile Eastern Shelf Pipeline to a project near the Katz Field. This contract will commence in 2014 and is expected to increase CO 2 transported via the pipeline to more than 130 MMcfd, which will require additional pump stations to bolster capacity.
  • To help meet increasing CO 2 demand, KMP is also working on a previously announced $255 million expansion of its Doe Canyon Unit CO 2 source field in southwestern Colorado to increase capacity from 105 MMcfd to 170 MMcfd. The expansion will include installation of both primary and booster compression with construction beginning in the second quarter this year. The primary compression is expected to be in service in the fourth quarter of 2013 and the booster compression is targeted to be complete in the second quarter of 2014. The company also plans to drill 19 more wells during the next 10 years, which will increase production from 105 MMcfd to 170 MMcfd.
  • In January, Kinder Morgan closed on a transaction to acquire the St. Johns CO 2 source field and related assets in Apache County, Ariz., and Catron County, N.M. Expected CO 2 production from St. Johns would be transported to the Permian Basin for use by customers in tertiary recovery. Well testing and predevelopment activities are underway for this potential new source field.
  • KMP activated additional patterns at its CO 2 flood at the Katz Field in the Permian Basin bringing the total number of active patterns to 20. The flood is part of an approximately $230 million project that is expected to unlock an incremental 25 million barrels of oil to be produced over the next 15 to 20 years at the Katz Field.

Terminals

KMP is experiencing strong demand for liquids storage capacity and coal exports in its terminal business. The company currently has approximately $1.2 billion of approved major projects in this segment. Approximately $700 million will be spent on two liquids projects (BOSTCO and Edmonton South noted below) and about $400 million is being invested to expand coal export facilities along the Gulf and East Coast, as there continues to be high demand for coal exports to China, India and Europe.

  • Tank construction on the BOSTCO Terminal on the Houston Ship Channel has commenced and the project is on target for initial start up in late 2013. The project includes construction of 52 storage tanks that will have a capacity of 6.6 million barrels for residual fuels and other black oil terminal services. The terminal will be able to handle ships with large drafts up to 45 feet.
  • KMP signed a 20-year contract with a major Canadian producer to support the construction of an additional 1.2 million barrels of merchant storage capacity at Trans Mountain pipeline’s Edmonton terminal in Strathcona County, Alberta. Kinder Morgan previously announced that it had signed definitive commercial agreements to support the construction of 2.4 million barrels of storage at the facility. The total value of the current expansion now totals $284 million, with all 3.6 million barrels of storage capacity expected to be in service by late 2013.
  • Arch Coal has signed a long-term throughput agreement with KMP that will help support the expansion of certain export coal facilities along the Gulf Coast and East Coast. Upon completion of the terminal upgrades, and subject to certain rail service agreements, Arch will ship coal at guaranteed minimum volume levels through KMP terminals. The expansion of KMP’s export facilities along the Gulf Coast and East Coast will provide incremental port capacity for Arch’s growing seaborne coal volumes.
  • KMP signed a five-year agreement with a major international trading company to expand crude oil storage capacity at the Deeprock Terminal in Cushing, Okla., by 750,000 barrels. Three new tanks with a capacity of 250,000 barrels each are expected to be completed and online in June. The crude oil joint venture with Deeprock Development currently has a capacity of 1.75 million barrels.
  • KMP announced the completion and startup of a dedicated ethanol pipeline connection between its Linden, N.J., unit train facility and its largest New York Harbor terminal in Carteret, N.J. The project complements a completed expansion at Carteret that added over 1 million barrels of incremental storage to the facility, which now has a capacity of almost 9 million barrels. Initially, Kinder Morgan is projecting that an additional 195,000 barrels at Carteret will be employed in ethanol service.

Kinder Morgan Canada

  • KMP recently announced it will proceed with its proposal to expand the existing Trans Mountain pipeline system. A diverse group of existing and new shippers submitted 660,000 bpd of binding commercial support during a recently completed open season. All commitments are for a 20-year term. When completed, the proposed expansion will increase capacity on Trans Mountain from the existing capacity of 300,000 bpd to 850,000 bpd. The approximately $5 billion project (which is larger than initially anticipated due to strong binding customer support) will include twinning the existing pipeline within the existing right-of-way, where possible, adding new pump stations along the route, increasing the number of storage tanks at existing facilities and expanding the Westridge Marine Terminal. Beginning this summer, Kinder Morgan Canada is committed to an 18 to 24 month inclusive, extensive and thorough engagement on all aspects of the project with local communities along the proposed route and marine corridor, including First Nations and Aboriginal groups, environmental organizations and all other interested parties. The company anticipates filing a facilities application initiating a regulatory review with the National Energy Board (NEB) in 2014. If the application is approved, construction is currently forecast to commence in 2015 or 2016 with the proposed project operating in 2017. Preceding the facilities application, the company will file a commercial tolling application to review the company’s proposed commercial structure for the expansion. This filing, which is anticipated in summer 2012, will seek NEB approval on how the company will charge its customers for transporting their product through the proposed expanded pipeline.

Financings

  • KMP sold common units valued at approximately $124.7 million under its at-the-market program during the first quarter. KMP issued $1 billion of senior notes in March and repaid $450 million that matured in March.

Kinder Morgan Management, LLC

Shareholders of Kinder Morgan Management, LLC (NYSE: KMR) will also receive a $1.20 distribution ($4.80 annualized) payable on May 15, 2012, to shareholders of record as of April 30, 2012. The distribution to KMR shareholders will be paid in the form of additional KMR shares. The distribution is calculated by dividing the cash distribution to KMP unitholders by KMR’s average closing price for the 10 trading days prior to KMR’s ex-dividend date.

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