Author Topic: KMI - Kinder Morgan  (Read 134292 times)

Zorrofan

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Re: KMI - Kinder Morgan
« Reply #200 on: August 05, 2015, 12:46:37 PM »
What news am I missing in the MLP space today?  ETE, WMB and KMI are all getting smoked.  I'm about to pick up some WMB (you don't have to be a genius to know its in play and had an (all stock) bid of ~$64 within the last month), but spidey sense indicates there's a bus coming down the street.

It seems to me that the recent ridiculous weakness in KMI is due to (still) lower oil prices and the stronger expectation that it will stay low for the forseeable future.  My understanding is KMI is largely immuned from oil price fluctuations except for its CO2 business which it has hedged out its production for this year.  I guess the market is concerned when the hedges expire, their earnings / cashflow will take a hit.  May be they worry that the low oil price will squeeze out incremental NG demand too?  I don't know, KMI is mostly just a toll bridge operator.

Long KMI, planning to add but yes I get the spidey sense that it has further to fall.

I was long KMI but am out for the tome being......

Here are the issues I see:

1. Rising rates as the FED finally moves in September
2. Concerns over the payout ratio being too high
3. High debt level which needs to be rolled over at higher rates down the road
4. If oil stays lower for longer producers may go bankrupt and some long-term contracts may be lost as a result
5. Some 20% of KMI relates to CO and oil production

My guess is it goes lower still....my $0.02

cheers
Zorro


Picasso

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Re: KMI - Kinder Morgan
« Reply #201 on: August 05, 2015, 12:48:19 PM »
From the 10-K:

Quote
Current or future distressed financial conditions of our customers could have an adverse impact on us in the event these
customers are unable to pay us for the products or services we provide.
Some of our customers are experiencing, or may experience in the future, severe financial problems that have had or may
have a significant impact on their creditworthiness. We cannot provide assurance that one or more of our financially distressed
customers will not default on their obligations to us or that such a default or defaults will not have a material adverse effect on
our business, financial position, future results of operations or future cash flows. Furthermore, the bankruptcy of one or more
Table of Contents
33
of our customers, or some other similar proceeding or liquidity constraint, might make it unlikely that we would be able to
collect all or a significant portion of amounts owed by the distressed entity or entities. In addition, such events might force
such customers to reduce or curtail their future use of our products and services, which could have a material adverse effect on
our results of operations, financial condition, and cash flows.

When you have the energy credit markets blowing up, this is going to track that to a certain extent.

sys

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Re: KMI - Kinder Morgan
« Reply #202 on: August 05, 2015, 02:06:10 PM »
i think kmi is more vulnerable to the cost of capital increasing than to distressed oil producers.  while either could impair their leveraged vehicle for producing cash, i think they should be able to better insulate themselves against the risk of insolvent producers by choosing their projects well.  if they only build/buy assets that are necessary to deliver/process profitably produced product to a market, then regardless of if the producers' assets change hands, those assets should continue to be exploited and whoever operates them should continue to need kmi.

i think they are more defenseless against rising interest rates.

Picasso

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Re: KMI - Kinder Morgan
« Reply #203 on: August 05, 2015, 02:35:26 PM »
Jesus, look at PAA and PAGP.  No wonder KMI was down as well.  Given how much retail loves KMI, I'm going to stay away for a while.

CorpRaider

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Re: KMI - Kinder Morgan
« Reply #204 on: August 05, 2015, 04:03:53 PM »
From the 10-K:

Quote
Current or future distressed financial conditions of our customers could have an adverse impact on us in the event these
customers are unable to pay us for the products or services we provide.
Some of our customers are experiencing, or may experience in the future, severe financial problems that have had or may
have a significant impact on their creditworthiness. We cannot provide assurance that one or more of our financially distressed
customers will not default on their obligations to us or that such a default or defaults will not have a material adverse effect on
our business, financial position, future results of operations or future cash flows. Furthermore, the bankruptcy of one or more
Table of Contents
33
of our customers, or some other similar proceeding or liquidity constraint, might make it unlikely that we would be able to
collect all or a significant portion of amounts owed by the distressed entity or entities. In addition, such events might force
such customers to reduce or curtail their future use of our products and services, which could have a material adverse effect on
our results of operations, financial condition, and cash flows.

When you have the energy credit markets blowing up, this is going to track that to a certain extent.

Yeah, I could see that risk, really more of a generalized fear of the sector.  To me, at least a general proposition, they are structurally superior even to the senior secured debtors.  A debtor in possession is going to make sure they get paid if they want to bring in any revenue and keep the lights on.  I was assing around with some of the debt of the E&P companies and I thought hey I'd rather just be the creditor they need to pay even if the equity gets wiped out.  But I suppose expansion projects could be at risk.  KMI and WMB are going to my horses though, because I could see nat gas diverging as these LNG projects and power generation comes online over the next year.  Basically the inverse of what the saudi's did by running the oil price so high for so long....building a tsunami of demand rather than supply...reflexivity.

Pardon me for getting a little philosophical/grandiose...I've opened the scotch.

P.S. Thanks for flagging PAA...wow.  Looks like they'e got a specific issue with their Cal pipe, but the whole sector is getting murdered.  W/R/T KMI versus other, yeah retail may have liked it but I think Kinder cashiered a lot of the yield hounds and I do note that he is buying from motivated sellers rather than going for the ETE empire building:  Harry Hamm, divorce got you down?  In need of cash?  Call KMI.  Shell:  Bit off maybe more than you can chew with BG?   Need some cash?  KMI will take you out of Elba right as construction costs crater and you keep commitment to take output which underwrote the whole thing.
« Last Edit: August 05, 2015, 04:15:36 PM by CorpRaider »

Jurgis

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Re: KMI - Kinder Morgan
« Reply #205 on: August 05, 2015, 04:20:34 PM »
Is KMI currently an MLP with K-1 tax filing?

Sorry if it's a basic question, I seem to remember they had both and then one of them bought out the other...

What is the remaining one?
Or in other words: if I buy KMI, do I have to do K-1 tax forms? ;)
"Before you can be rich, you must be poor." - Nef Anyo

Picasso

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Re: KMI - Kinder Morgan
« Reply #206 on: August 05, 2015, 04:26:25 PM »
No doubt that Rich Kinder has created the best in breed and he does savvy deals.  I think that previous weakness in KMI after the re-IPO made me nervous because it was possible that a management led buyout was always on the table.  So you had a bit of a floor on the stock especially with the massive insider buys.

Now you have a situation post rollup of the MLP's that he can't take this private for a while.  Just too much debt on KMI.

The good news is the debt for KMI still trades pretty strong.  Less than 5% for 10 year paper which is solid for BBB-.  I also agree that KMI is probably in good bargaining position during any producer bankruptcies. 

Sometimes I'm willing to be steam rolled a little for a decent long-term return, but I just don't see the rush to buy KMI here.  I just don't see how some of these big oil and gas producers don't go belly up in the next couple years based on how their debt and stock has been trading.

globalfinancepartners

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Re: KMI - Kinder Morgan
« Reply #207 on: August 05, 2015, 06:05:24 PM »
Is KMI currently an MLP with K-1 tax filing?

Or in other words: if I buy KMI, do I have to do K-1 tax forms? ;)


No.  KMI pays qualified dividends.  About a 6.8% forward looking yield, but not a ton of excess coverage.

CorpRaider

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Re: KMI - Kinder Morgan
« Reply #208 on: August 05, 2015, 06:31:42 PM »
No doubt that Rich Kinder has created the best in breed and he does savvy deals.  I think that previous weakness in KMI after the re-IPO made me nervous because it was possible that a management led buyout was always on the table.  So you had a bit of a floor on the stock especially with the massive insider buys.

Now you have a situation post rollup of the MLP's that he can't take this private for a while.  Just too much debt on KMI.

The good news is the debt for KMI still trades pretty strong.  Less than 5% for 10 year paper which is solid for BBB-.  I also agree that KMI is probably in good bargaining position during any producer bankruptcies. 

Sometimes I'm willing to be steam rolled a little for a decent long-term return, but I just don't see the rush to buy KMI here.  I just don't see how some of these big oil and gas producers don't go belly up in the next couple years based on how their debt and stock has been trading.

Oh i agree.  Will probably get doubly smoked with irate pressures over intermediate term.

Palantir

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Re: KMI - Kinder Morgan
« Reply #209 on: August 05, 2015, 08:15:40 PM »
Is KMI currently an MLP with K-1 tax filing?

Sorry if it's a basic question, I seem to remember they had both and then one of them bought out the other...

What is the remaining one?
Or in other words: if I buy KMI, do I have to do K-1 tax forms? ;)

Nope, not anymore.
My Portfolio: AMZN, PAGP, FSLR, OKE, PYPL, RHT, MSFT