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Kinder Morgan Energy Partners L.P. Reports Operating Results (10-Q)

April 27, 2012 | About:
10qk

10qk

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Kinder Morgan Energy Partners L.P. (KMP) filed Quarterly Report for the period ended 2012-03-31.

Kinder Morg Eng has a market cap of $19.68 billion; its shares were traded at around $83.18 with a P/E ratio of 48.3 and P/S ratio of 2.4. The dividend yield of Kinder Morg Eng stocks is 5.5%. Kinder Morg Eng had an annual average earning growth of 7.3% over the past 10 years.

Highlight of Business Operations:

Our CO2 sales and transportation business primarily has contracts with minimum volume requirements, which as of March 31, 2012, had a remaining average contract life of approximately eight years (this remaining average contract life includes intercompany sales; when we eliminate intercompany sales, the remaining average contract life is approximately nine years). Carbon dioxide sales contracts vary from customer to customer and have evolved over time as supply and demand conditions have changed. Our recent contracts have generally provided for a delivered price tied to the price of crude oil, but with a floor price. On a volume-weighted basis, for contracts making deliveries in 2012, and utilizing the average oil price per barrel contained in our 2012 budget, approximately 70% of our contractual volumes are based on a fixed fee or floor price, and 30% fluctuate with the price of oil (these percentages include intercompany sales; when we eliminate intercompany sales, the percentages are 72% and 28%, respectively). In the long-term, our success in this business is driven by the demand for carbon dioxide. However, short-term changes in the demand for carbon dioxide typically do not have a significant impact on us due to the required minimum sales volumes under many of our contracts. In our CO2 segment s oil and gas producing activities, we monitor the amount of capital we expend in relation to the amount of production that we expect to add. In that regard, our production during any period is an important measure. In addition, the revenues we receive from our crude oil, natural gas liquids and carbon dioxide sales are affected by the prices we realize from the sale of these products. Over the long-term, we will tend to receive prices that are dictated by the demand and overall market price for these products. In the shorter term, however, market prices are likely not indicative of the revenues we will receive due to our risk management, or hedging, program, in which the prices to be realized for certain of our future sales quantities are fixed, capped or bracketed through the use of financial derivative contracts, particularly for crude oil. Our realized weighted average crude oil price per barrel, with all hedges allocated to oil, was $90.63 per barrel in the first quarter of 2012, and $68.78 per barrel in the first quarter of 2011. Had we not used energy derivative contracts to transfer commodity price risk, our crude oil sales prices would have averaged $100.62 per barrel in the first quarter of 2012, and $90.76 per barrel in the first quarter of 2011.

Net income attributable to our partners—including all of our limited partner unitholders and our general partner—totaled $206 million for the three months ended March 31, 2012, a decrease of 39% from the $338 million reported for the same period last year. Total revenues for the comparable first quarter periods were $1,848 million in 2012 and $1,917 million in 2011.

The certain item described in footnote (a) to the table above decreased our Natural Gas Pipelines business segment s earnings before depreciation, depletion and amortization expenses from discontinued operations by $322 million in the first quarter of 2012, when compared to the first quarter of 2011. Following is information related to the increases and decreases, in the comparable three month periods of 2012 and 2011 and including discontinued operations, in the segment s (i) remaining $56 million (25%) increase in earnings before depreciation, depletion and amortization; and (ii) $154 million (15%) decrease in operating revenues:

The certain items related to unrealized gains and losses on derivative contracts described in footnote (a) to the table above accounted for a $7 million decrease in both segment earnings before depreciation, depletion and amortization expenses and revenues in the first three months of 2012, when compared with the same three months of 2011. For each of the segment s two primary businesses, following is information related to the increases and decreases, in the comparable three month periods of 2012 and 2011, in the segment s remaining (i) $79 million (31%) increase in earnings before depreciation, depletion and amortization; and (ii) $83 million (25%) increase in operating revenues:

The certain items related to our Terminals business segment and described in the footnotes to the table above accounted for a $4 million decrease in earnings before depreciation, depletion and amortization expenses in the first three months of 2012, when compared with the first quarter of 2011. Following is information related to the increases and decreases, in the comparable first three month periods of 2012 and 2011, in the segment s (i) remaining $17 million (10%) increase in earnings before depreciation, depletion and amortization; and (ii) $9 million (3%) increase in operating revenues.

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