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EnvestorFirst (< 20)

Natural Gas Pipeline: Pop for Kinder Morgan Stock



July 11, 2011 – Comments (0) | RELATED TICKERS: KMP.DL , UNG

Kinder Morgan has their hand in many pots within the oil and gas industry. The most profitable portion of their company is their Natural Gas Pipeline. With their strong focus on these pipelines, Kinder Morgan’s stock is expected to reach close to $80. How does this pipeline create such momentum? The Trefis Team explains KMP’s strategy and how they are making this natural gas pipeline work for them.


"Natural gas pipelines division is the most valuable for the company

The Natural Gas Pipelines segment contains both interstate and intrastate pipelines. Its primary businesses consist of natural gas sales, transportation, storage, gathering, processing and treating. Within this segment, KMP owns approximately 15,500 miles of natural gas pipelines and associated storage and supply lines that are strategically located at the center of the North American pipeline grid. With more than $4.4 billion, the division contributed more than 50% to the company’s revenues in 2010. The operating profit from the division was close to $1 billion during the same period. With the natural gas demand increasing steadily, we believe that going forward this division will have a greater contribution to the company’s overall revenues and profits.

Key Business Trends

Demand and pricing

With the exception of periods of high product prices or recessionary conditions, the demand for petroleum products are relatively stable. Therefore, the company seeks to own refined products pipelines located in or near stable or growing markets. Pricing is based upon the tariffs that are adjusted annually based on changes in the U.S. Producer Price Index." 


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