From FT Alphaville:
KMI, the former MLP that just keeps giving
This is the stock performance of Kinder Morgan Inc, a diversified US energy company, primarily engaged in the movement of natural gas, crude oil, petroleum products, CO2, coal, and other commodities since it self acquired itself last year and stopped being an MLP:
For anyone who’s been watching the oil price in the same period, that is — without of a shadow of a doubt — somewhat of an amazing feat. More so, because even natural gas has been choppy:
Now, fans of KMI (and MLPs) will say something of the “you just don’t understand the valuation multiples, the monopoly nature of its core rents business, its cunning oil hedges and errr dividends!!” variety.
But Kevin Kaiser at Hedgeye, one of the few independent analysts covering the sector, puts it more bluntly in his latest note:
How much profit does KMI generate? “Distributable cash flow (DCF)” is not a profit. A dividend is not a profit when the Company is giving you your own money back.In any case, here’s Kaiser on the company’s now increasingly notable oil hedges:
• The 2015 commodity price assumptions in the KMI budget are $70 WTI crude and $3.80 gas. The current strip prices are $50 WTI crude and $3.00 gas, 29% and 21% below KMI’s assumptions, respectively. KMI did its best E&P MLP imitation by harping on a 2015 cash flow sensitivity to oil prices in an attempt to downplay its direct commodity price exposure, but its E&P volumes are 79% hedged this year. They are only ~40% hedged in 2016, ~24% in 2017, and ~10% in 2018, assuming flat production....MUCH MORE*From our Oct. 14, 2014 post "Kinder Morgan Has Given Up All the Gains From The August Roll-up (KMI)":
And created taxable events for the Limited Partners to do it.
With yesterday's 2.66% decline to $35.50 we have round-tripped to August 7, 2014...
Aug. 7:
Open 35.70 High 35.84 Low 35.20 Close 35.37
We and Izabella Kaminska at FT Alphaville seemed to be the only folks not enraptured. She was shading from bemused to highly dubious and I was thinking shortshortshort.
Aug 18
The "Kinder Morgan Is a House of Cards" Theory and the Pros and Cons of Going Short (KMI)
Companies that engage in great amounts of financial engineering are always worth looking at as potential shorts. A lot of skullduggery can occur when the razzamatazz really gets going.Aug. 19
This week both Barron's which has been skeptical for a while, and FT Alphaville which has, until today, been neutral take a look at all the moving parts.
Regarding a short on KMI, I hate paying dividends on short positions.
Hate it, hate it, hate it.
But I might be tempted in this case. And the rate of ascent on the stock is definitely rolling over....
David Cay Johnston on Kinder Morgan’s Evolving Tax Strategy (KMI)
Aug. 12
Kinder Morgan Creates Money Out of Thin Air
Aug. 12
Asking the Right Question About the Kinder Morgan Deal: Why Now? (KMI)
Aug. 11
In Other News: "Kinder Morgan to abandon MLP structure it pioneered, will become 4th biggest US energy company" (KMI)
