Leading master limited partnership, Kinder Morgan Energy Partners L.P. (KMP) announced its plans to construct and operate a new 213-mile, 16-inch diameter pipeline to facilitate the transportation of carbon dioxide or CO2. The new pipeline would transport CO2 from the St. Johns source field in Apache County, AZ, to the Cortez Pipeline in Torrance County, NM.
The new Lobos pipeline will possess a capacity of 300 million standard cubic feet per day initially. The pipeline will support current and future enhanced oil recovery (EOR) projects owned by Kinder Morgan and other operators in the Permian Basin of West Texas and eastern New Mexico.
The partnership is expected to spend approximately $300 million on the pipeline. Alongside it will invest an additional $700 million to drill wells and build field gathering, treatment and compression facilities at the St. Johns field. It is expected that the project will be operational by the third quarter of 2016 and employ about 1,200 contractors during construction.
Kinder Morgan is the biggest independent owner and operator of petroleum product pipelines in the U.S. and transports natural gas, refined petroleum products, crude oil, carbon dioxide and other products. Alongside, its terminals store petroleum products and chemicals and handle bulk materials such as petroleum coke and coal. It owns or operates more than 28,000 miles of pipeline and approximately 180 terminals. The partnership is also the largest carbon dioxide marketer and transporter in the country.
Kinder Morgan expects to declare cash distributions of $5.58 per unit for 2014, a 5% increase over its 2013 distribution of $5.33 per unit. The partnership also expects to exceed its distributable cash flow per unit target primarily as a result of the positive impact of tanker acquisition of approximately $962 million in Dec 2013. It expects steady growth opportunities across all business segments, including the need for more midstream infrastructure to move and store oil, gas and liquids from the prolific shale play in the United States and the oilsands in Alberta.
Kinder Morgan carries a Zacks Rank #3 (Hold). Better-ranked stocks in the oil and gas industry include Helmerich & Payne, Inc. (HP), Clayton Williams Energy, Inc. (CWEI) and Patterson-UTI Energy Inc. (PTEN). All three stocks have a Zacks Rank #1 (Strong Buy).
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