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Kinder Morgan's NGPL Expansion Gets FERC Environmental Nod

Zacks Equity Research

Kinder Morgan, Inc. KMI recently received a positive environmental assessment review from the Federal Energy Regulatory Commission (FERC) for the proposed NGPL pipeline expansion project. Kinder Morgan and Brookfield Infrastructure Partners L.P. BIP jointly own the project.

The project is expected to connect the existing system of Natural Gas Pipeline Company of America to the Waha Hub, located in the Permian Basin. Per FERC’s report, the 17-mile long pipeline would not pose any significant environmental impact. Notably, the Lockridge Extension Pipeline is expected to provide around 500,000 dekatherms per day of incremental shipping capacity. The pipeline, which will transport gas from the Waha Hub to the Trans-Pecos Pipeline of NGPL, is expected to come online by fourth-quarter 2020.

The prolific Permian region has witnessed a surge in oil and gas output over the past few years. However, there’s a dearth of takeaway capacity, which has put pressure on producers in the region. Gas prices in the Permian recently turned negative due to booming output and scant shipping capacity of existing infrastructures. To mitigate the situation, several midstream companies are coming up with pipeline projects, among which Kinder Morgan is a significant one. The clearing of this regulatory hurdle is certainly a positive for the expansion project and can bring positivity among producers.

Including this expansion project, Kinder Morgan has multiple projects lined up to address the rising demand for infrastructures in the Permian Basin. The company’s Gulf Coast Express pipeline, having 2 billion cubic feet per day (Bcf/d) of shipping capacity, is expected to come online this October. Another project, 2.1 Bcf/d Permian Highway Pipeline is scheduled to come online in the second half of 2020. 

All these projects will likely enable Kinder Morgan to generate significant profit from fees charged for using its midstream properties in the long term. Notably, since inception, Kinder Morgan has spent more than $50 billion on natural gas pipelines, products pipelines and terminals. The majority of the spending has so long been allocated for natural gas pipelines that are likely to help the company to capitalize on clean energy demand.

Price Performance

Headquartered in Houston, TX, Kinder Morgan has gained 30.4% year to date compared with 15.4% collective gain of the industry it belongs to .

Zacks Rank & Stocks to Consider

Kinder Morgan currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are RGC Resources Inc. RGCO and Holly Energy Partners, L.P. HEP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.   

RGC Resources’ earnings growth is projected at 11.6% through 2019.

Holly Energy’s earnings growth is projected at 6.5% through 2019.

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Brookfield Infrastructure Partners LP (BIP) : Free Stock Analysis Report

Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report

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