Author Topic: KMI - Kinder Morgan  (Read 136991 times)

ItsAValueTrap

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Re: KMI - Kinder Morgan
« Reply #140 on: March 20, 2014, 10:25:12 AM »
If KMP's share price is high, it can use its "strong currency" to make accretive acquisitions of other companies.  (e.g. arbitrage the valuation of its own shares versus other companies.)
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prevalou

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Re: KMI - Kinder Morgan
« Reply #141 on: March 20, 2014, 10:31:17 AM »
I understand that but it is relevant for KMP, not KMI (except fot their LP shares of KMP). For KMI, KMP has no cost of equity, because KMP dilution does'nt impact KMI GP. Or I am mistaken ?

ItsAValueTrap

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Re: KMI - Kinder Morgan
« Reply #142 on: March 20, 2014, 10:37:20 AM »
KMI would benefit if KMP were to issue lots of lots and shares and to grow KMI's "assets under management".
« Last Edit: March 20, 2014, 10:39:26 AM by ItsAValueTrap »
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ItsAValueTrap

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Re: KMI - Kinder Morgan
« Reply #143 on: March 27, 2014, 12:17:20 PM »
I'm starting to think that KMP is secretly one of the best E&P companies around.

It seems like they are generating massive returns on capital with their CO2 business.  I think a lot of landowners don't understand the value of their land because the land hasn't produced significant oil revenue in a long time.
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T-bone1

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Re: KMI - Kinder Morgan
« Reply #144 on: March 27, 2014, 12:30:25 PM »
I'm starting to think that KMP is secretly one of the best E&P companies around.

It seems like they are generating massive returns on capital with their CO2 business.  I think a lot of landowners don't understand the value of their land because the land hasn't produced significant oil revenue in a long time.

Correct me if I'm wrong, but I believe only a small portion of KMP's business is "upstream" or E&P (if anything). 

My understanding of the recently announced CO2 project is that they are producing CO2 from a field in AZ, building pipelines to transport it to the Permian basin, and selling the CO2 to companies doing enhanced oil recovery (CO2 flooding) in old depleted fields in the Permian.

I would also caution that while the shale boom has created more than a few unwitting "landowners" in places like NE PA (where there has never been historic production), the Permian basin is and has been one of the largest oil fields in the world for decades.  The "landowners" (leaseholders/mineral owners) in that field are huge companies like Pioneer, Chevron, Conoco etc.  They have owned these massive assets for decades in many cases and they know exactly what they own and will pay not be providing KMP/KMI or anyone else with an undeserved windfall.

CorpRaider

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Re: KMI - Kinder Morgan
« Reply #145 on: March 27, 2014, 01:41:00 PM »
About 24% of KMP EBDA is attributed to CO2 transport and sales or CO2 EOR per the numerous recent investor presentations, so about $1.7 billion per annum.
« Last Edit: March 27, 2014, 01:45:54 PM by CorpRaider »

ItsAValueTrap

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Re: KMI - Kinder Morgan
« Reply #146 on: March 27, 2014, 02:09:59 PM »
I would also caution that while the shale boom has created more than a few unwitting "landowners" in places like NE PA (where there has never been historic production), the Permian basin is and has been one of the largest oil fields in the world for decades.  The "landowners" (leaseholders/mineral owners) in that field are huge companies like Pioneer, Chevron, Conoco etc.  They have owned these massive assets for decades in many cases and they know exactly what they own and will pay not be providing KMP/KMI or anyone else with an undeserved windfall.

KMP does have a few competitors in the space, one of them being Denbury (DNR).  However, they've been able to put together an impressive track record.

In the investors' presentation, the presenter for the CO2 segment essentially said that the prices that they paid for land was very low and that the land was "cow pasture".

2- I do think that it is difficult for others to do CO2 EOR by themselves.  They would need to build their own pipeline from CO2 source fields to their oil reservoir.  KMP has excellent positioning because they already have their pipeline built and paid for.

With any pipeline, the dream scenario is similar to what KMP is experiencing.  You build a pipeline with excess capacity.  It turns out that demand for your pipeline is greater than originally anticipated.  You get to sell all this excess capacity at premium prices.  (Because pipelines benefit from scale, the incremental cost is much lower than a smaller pipeline / the customer's alternative.)

And if you really want to dream the dream, there is so much excess demand that it makes sense to build a second pipeline alongside the existing one.  This is happening in the KMP Canada segment.
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rogermunibond

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Re: KMI - Kinder Morgan
« Reply #147 on: March 27, 2014, 02:26:24 PM »
Where do you think Denbury gets its CO2?  Besides DNR, Occidental, Chevron, Apache, Hess and Whiting are all big EOR producers.
« Last Edit: March 27, 2014, 02:35:11 PM by rogermunibond »

ItsAValueTrap

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Re: KMI - Kinder Morgan
« Reply #148 on: March 27, 2014, 02:30:41 PM »
Where do you think Denbury gets its CO2?  Besides DNR, Occidental, Chevron, Hess and Whiting are big EOR producers.
http://www.denbury.com/operations/gulf-coast-region/co2-sources-and-pipelines/default.aspx

Natural sources:  Jackson Dome, located near Jackson, Mississippi
Man-made sources:  Various sources
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T-bone1

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Re: KMI - Kinder Morgan
« Reply #149 on: March 27, 2014, 02:58:16 PM »
I was just trying to make the point that CO2 is a relatively low-return midstream business (building pipelines and devliering CO2).  It is not a potentially high return exploration business (the E in E&P). 

If you look at KMI's latest project, they paid $30 million for all of the CO2 reserves (already discovered by others) and they are now spending billions to build pipelines and deliver the CO2 for a set fee.  They will make an economic return for this and it is a good business, but this has nothing to do with the E&P business (other than E&Ps being their customers)