Clouds are gathering again over the stormy energy sector.

After weeks of sunshine, the sector fell victim Tuesday to the familiar rumble of problems from old and new voices alike. Calpine ( CPN) told investors that its first-quarter earnings report will be delayed, and for now, it warned them to brace for a quarterly loss. Meanwhile, two thriving energy companies -- Kinder Morgan ( KMI) and master limited partnership Kinder Morgan Energy Partners ( KMP) -- revealed that they have become the latest targets of a Securities and Exchange Commission probe.

Calpine blamed its 12-cent quarterly loss on unusual charges, stemming primarily from equipment repairs and unfavorable foreign currency rates. The company indicated that it should otherwise meet Wall Street expectations for first-quarter operating profits of 4 cents a share and full-year earnings of 41 cents a share. But the delay in financial results -- and the potential jeopardy to crucial bank deals -- took a toll on investors who were already nervously waiting for Calpine to restate three years' worth of newly audited financial statements. Calpine shares, which had rallied past $5 in recent days, tumbled 10% to $4.95 in heavy trading Tuesday.


Kinder Morgan and its MLP took noticeably smaller hits, despite clear concern that the informal SEC probe may prove serious. The two companies, founded by former Enron executive Richard Kinder, are being examined for their handling of a pipeline acquisition more than a year ago.

Kinder told investors that he received notice late Friday that the SEC wants additional information about $155 million worth of goodwill that was booked by the MLP after its $886 million acquisition of Tejas Gas from a joint venture involving Royal Dutch/Shell. Kinder said he believes the company acted properly by following the guidance provided by an independent appraiser and blessed by its own internal auditors. But he also stressed that, even if the SEC orders a change -- converting the goodwill to assets that must be depreciated -- MLP earnings would drop by less than 2 cents a share annually while cash payouts to unit holders wouldn't be hurt at all. Kinder Morgan, which takes a big cut of the MLP's free cash flow, would be affected even less, he added.

"We do not believe an examination of this issue will result in a material change to our financial statements," Kinder said in a prepared statement late Monday. "However, we feel it is important to advise investors that an informal investigation has begun because we are committed to the principles of open disclosure."

During a conference call that followed Monday's announcement, several analysts questioned why the SEC would even bother focusing on such a minor matter. One analyst called the investigation "odd," while another came right out and asked whether the SEC "is wasting our taxpayer dollars" on an issue that, at most, would change a company's earnings by only a penny or two a share.


But some analysts, including vocal critics of Kinder Morgan, feel bigger problems brewing. In a research note issued Tuesday morning, Prudential analyst Carol Coale warned that federal investigators may broaden their narrow focus on the Tejas Gas acquisition into a sweeping probe of the entire MLP industry.

"Given the seeming immateriality of the goodwill expense to KMP's income statement, it leads us to think that this investigation has potential to extend in scope and materiality," wrote Coale, who began raising concerns about MLPs last year. "If the SEC were to initiate a broad challenge on standards for goodwill accounting and energy-related acquisitions, we believe MLPs' attraction as a future investment would be seriously hindered."

Coale went on to indicate that Kinder Morgan Energy Partners, with its unusually high goodwill-to-assets ratio, could get hit particularly hard. Up to now, the partnership -- and indeed the entire MLP sector -- has flourished throughout a downturn in the overall energy market.

Kurt Wulff, a veteran energy analyst who has been particularly critical of Kinder Morgan, expressed hope that the new SEC probe would indeed expand and bring sweeping change to the MLP industry.

"I see a need for more realistic accounting," said Wulff, who began telling clients to sell both Kinder Morgan and its MLP well over a year ago. "If the SEC presses in that direction, we ought to see billion-dollar earnings restatements."

Following news of the SEC inquiry, Kinder Morgan Energy Partners tumbled 3.5% to $37.81. Shares of Kinder Morgan also suffered, falling 1.7% to $46.82.

The news hit at least one other MLP as well. El Paso Energy Partners ( EPN) slid into the red despite a strong earnings report on Tuesday. The partnership -- which will soon change its name to GulfTerra Energy in an ongoing effort to distance itself from troubled El Paso ( EP) -- more than doubled its first-quarter profits to $42.2 million, or 17 cents a share. Nevertheless, it fell 1.8% to $34.10 after the Kinder Morgan news.

El Paso -- which profits from the partnership's successes -- was also down, slipping 2.7% to $7.32 halfway through the session.