Kinder Morgan Energy Partners, L.P. (KMP) has provided its initial estimates for 2012. The partnership expects to distribute cash of $4.98 per unit next year. This is an 8.3% increase over its 2011 budget target of $4.60 per unit.
Kinder Morgan Inc. (KMI) owns the general partner interest of Kinder Morgan Energy Partners, which is the main driver of its parent company’s growth. Kinder Morgan Energy accounts for about 98% of the distributions that Kinder Morgan Inc. receives. The estimations for 2012 do not include any impact from the proposed acquisition of El Paso (EP) by Kinder Morgan Inc.
Other projections made by Kinder Morgan Energy Partners for 2012 includes – generating around $4.4 billion (an excess of $560 million over the 2011 forecast) in business segment earnings before DD&A (including its share of joint venture DD&A).
The partnership expects to distribute around $1.7 billion to its limited partners and generate excess cash flow of over $50 million above the distribution target of $4.98 per unit. An amount of nearly $1.7 billion has been set aside for expansion purposes (including contributions to joint ventures) and small acquisitions.
Kinder Morgan Energy Partners’ expectations are based on the assumption of an average West Texas Intermediate crude oil price of approximately $93.75 per barrel in 2012. Importantly, a major portion of cash generated by the partnership’s assets is fee based and not sensitive to commodity prices.
The board of directors will evaluate and endorse the 2012 Kinder Morgan budgets at the January board meeting and the budgets will be discussed in detail during the annual analyst meeting on January 25, 2012.
Kinder Morgan Energy Partners holds a Zacks #3 Rank, which translates into a Hold rating for a period of one to three months. For the long term, we maintain a Neutral rating on the company.
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