Thursday, December 3, 2015

Kinder Morgan Sets Multi-Year Low As Reality of Approaching Junk Status Sinks In (KMI) UPDATED

"Always remember: In the short run balance sheets don't move stocks, in the long run they rule."
That's me, quoting myself.
Here's the monthly chart via FinViz:
KMI Kinder Morgan, Inc. monthly Stock Chart
The roll up was done in August 2014.
After trading down 7.85% yesterday the stock is down again. Today's low: $20.03.
If that little bit of support from mid-2011 doesn't hold there's no technical reason the stock couldn't see $15 or even $10.

See also today's "Kinder Morgan: In Which Izabella Kaminska Declines To Take A Victory Lap And Instead Highlights Recent Analysis (KMI)"

From Bloomberg:

Billionaire Kinder's Pipeline Giant Drops Under Junk Threat
Billionaire Rich Kinder owned about 11 percent of Kinder Morgan Inc. valued at more than $10 billion in June when he stepped down as chief executive of the company he co-founded.
Now his stake is worth about $5 billion less, and the company that has his name on the door has become the worst-performing pipeline stock in the S&P 500.

Kinder, who remains as board chairman, thought he was giving a boost to his oil and gas shipping empire last year when he consolidated his collection of companies to form the largest pipeline operator in North America. Instead, Kinder Morgan has lost half its value this year as growth-hungry investors sour on what they see as a slow-moving, debt-laden behemoth that will have difficulty expanding during an industry downturn that’s dragging down most energy companies.

With assets stretching from Canada’s Pacific Coast to the U.S.-Mexico border, Kinder Morgan owns enough pipelines to circle the Earth three times. Its $40 billion-plus debt burden exceeds the economic output of entire nations, including Bolivia and Bahrain.

Kinder Morgan shares extended losses to a record low for a second day Wednesday after Moody’s Investors Service lowered its outlook to negative and said Kinder Morgan’s debt is flirting with junk status. The prospect intensified concerns that the company won’t be able to deliver on profit and dividend growth amid the worst energy market collapse in a generation.

Payout DisappointmentKinder Morgan shocked investors in late October when, for the first time in at least 13 years, management backed away from a promise to lift dividends. The company said its plan for a 10 percent annual increase for the next four years might be too ambitious.

Then Kinder Morgan this week agreed to more than double its stake in a junk-rated pipeline operator that Moody’s said will pile another $1.5 billion in debt on Kinder Morgan’s $40.7 billion in obligations.

“Investor anxiety” is taking its toll on Kinder Morgan, Shneur Gershuni, an analyst at UBS, said in a note to clients on Wednesday. The Moody’s announcement fueled concerns that the company “sits perilously close” to getting labeled as junk.

For years, pipeline operators such as Kinder Morgan were the darlings of yield-hungry portfolio managers because they had ample access to equity and debt markets to finance the acquisitions and new pipe construction needed to fatten dividends, said Christopher Sighinolfi, a New York-based analyst for Jefferies LLC. Kinder Morgan’s indicated gross yield is 9.9 percent.

Index CrashThose financing options have slammed shut as the collapse in crude and natural gas markets dried up cash flow and deterred lenders. As a result, so-called midstream companies -- their pipelines bridge the gaps between oilfields and refineries -- have been punished: the Alerian MLP Index of 50 pipeline and other energy infrastructure owners plunged 37 percent this year, on track for its worst annual decline since 2008.

“Kinder Morgan is arguably the bellwether for a midstream sector that has persuaded investors to value the equity solely on dividend yield and dividend growth,” Sighinolfi said. “That was a successful strategy for years." But the companies were too reliant on debt and new equity issues to finance growth, and that’s made them more vulnerable as stock prices have fallen, he said....MORE