Company Update (NYSE:KMI): Final Investment Verdict? Kinder Morgan Inc Moves Forward on Infrastructure GCX Project with DCP Midstream and Targa


Kinder Morgan Inc (NYSE:KMI) subsidiary Kinder Morgan Texas Pipeline made the reveal today of wrapping up its investment decision on whether or not to proceed on the Gulf Coast Express Pipeline Project (GCX Project) along with DCP Midstream and an affiliate of Targa. The final vote bodes well for the infrastructure endeavor, as the companies are opting to move forward, planning to kickstart construction in the first quarter of the new year, just around the corner.

One of the United States’ biggest energy infrastructure firms, Kinder Morgan had already executed definitive joint venture deals as well as had established sufficient firm transportation alliances with shippers. Around 85% of the project capacity is subscribed and committed under transportation deals that are set both binding as well as long-term, with partners looking for remaining capacity to be subscribed in the early days of 2018.

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Shippers that have committed to the project include, but are not limited to, the following: DCP Midstream, Targa, Apache Corporation and Pioneer Natural Resources Company. KMTP also has committed volumes that are backstopped by a long-term purchase agreement that locks in the equivalent transport fee on the pipeline.

The approximately $1.7 billion GCX Project is designed to transport up to 1.92 billion cubic feet per day (Bcf/d) of natural gas. The GCX Project Mainline portion consists of approximately 82 miles of 36-inch pipeline and 365 miles of 42-inch pipeline originating at the Waha Hub near Coyanosa, Texas in the Permian Basin and terminating near Agua Dulce, Texas. Additionally, the Midland Lateral portion consists of approximately 50 miles of 36-inch pipeline and associated compression, connecting with the GCX Project Mainline.

The project is expected to be in service in October 2019, pending the receipt of necessary regulatory approvals. As previously announced, KMI will build, operate and own a 50 percent interest in the GCX Project, and DCP Midstream and Targa will each hold a 25 percent equity interest in the project. In addition to their transportation agreements, shipper Apache Corporation has an option to purchase up to a 15 percent equity stake in the project from Kinder Morgan.

“We are excited to be moving forward on this much-needed infrastructure project, with construction planned to commence in the first quarter of 2018,” said Kinder Morgan Natural Gas Midstream President Duane Kokinda. “We’re very pleased to have secured the commitments needed for all parties to proceed. The remaining available capacity continues to be marketed to interested shippers and may be offered as part of a binding open season in January 2018. With this important milestone reached, the project is now included in Kinder Morgan’s backlog.”

Shares of Kinder Morgan are currently trading at $17.77. KMI has a 1-year high of $23.01 and a 1-year low of $16.68. The stock’s 50-day moving average is $17.50 and its 200-day moving average is $18.76.

On the ratings front, Kinder Morgan has been the subject of a number of recent research reports. In a report issued on October 23, Stifel Nicolaus analyst Selman Akyol reiterated a Buy rating on KMI, with a price target of $22, which implies an upside of 24% from current levels. Separately, on October 22, BMO’s Danilo Juvane reiterated a Buy rating on the stock and has a price target of $23.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Selman Akyol and Danilo Juvane have a yearly average return of 2.2% and 6.7% respectively. Akyol has a success rate of 56% and is ranked #1612 out of 4727 analysts, while Juvane has a success rate of 65% and is ranked #1566.

Overall, 2 research analysts have assigned a Hold rating and 5 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $22.43 which is 26.3% above where the stock closed yesterday.

Kinder Morgan, Inc. owns and operates pipelines and terminals that transport natural gas, gasoline, crude oil, carbon dioxide (CO2) & other products and stores petroleum products, chemicals, and handles bulk materials like ethanol, coal, petroleum coke & steel. The company operates through the following segments: Natural Gas Pipelines, CO2, Terminals, Product Pipelines and Kinder Morgan Canada. The Natural Gas Pipelines segment engages in the ownership and operation of major interstate and intrastate natural gas pipeline & storage systems, and natural gas and crude oil gathering systems and natural gas processing & treating facilities. The CO2 segment is focused on the production, transportation and marketing of CO2 to oil fields that use CO2 as a flooding medium for recovering crude oil from mature oil fields to increase production. The Terminals segment engages in the ownership and/or operation of liquids and bulk terminal facilities located throughout the U.S. and portions of Canada that transload and store refined petroleum products, crude oil, chemicals, and ethanol and bulk products, including coal, petroleum coke, fertilizer, steel and ores. The Products Pipelines segment owns and operates refined petroleum products, NGL and crude oil and condensate pipelines that primarily deliver, among other products, gasoline, diesel and jet fuel, propane, crude oil and condensate to various markets. The Kinder Morgan Canada segment is focused on the operation of the Trans Mountain pipeline system that transports crude oil and refined petroleum products from Edmonton, Alberta, Canada to marketing terminals and refineries in British Columbia, Canada and the state of Washington.