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Kinder Morgan’s Project Backlog Increased by $3.7 billion in 2Q15

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Kinder Morgan’s project backlog

Kinder Morgan’s (KMI) project backlog increased by $3.7 billion during 2Q15. The project backlog increased as a net effect of the following:

  • ~$5 billion worth of new projects, including these:
    • $3.3 billion “market path portion” of the NED (Northeast Energy Direct) project
    • incremental $630 million investment to acquire the remaining 49% of equity interest in Elba LNG Liquefaction Joint Venture from Shell (RDS.A)
    • other smaller projects

  • the service launch of $700 million worth of completed projects
  • the cancellation of $600 million worth of projects, primarily in the CO2 segment, due to lower commodity prices
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Elba Liquefaction Project

On July 15, 2015, Kinder Morgan and Shell announced that they had reached an agreement for KMI to acquire 100% of Shell’s equity interest in ELC (Elba Liquefaction Company), the owner of the Elba Liquefaction Project. KMI currently holds 51% of ELC, and the remaining 49% is with Shell.

The ELC sale is believed to be part of Shell’s strategy to retain only its high-quality assets since its BG Group acquisition announcement. KMI is expected to benefit from the project as the demand for LNG (liquified natural gas) picks up in the long term.

According to a company press release, “In 2012, the project received authorization from the Department of Energy to export to Free Trade Agreement (FTA) countries. An application to export to non-FTA countries is pending. Under full development, the Elba Liquefaction Project is expected to have a total capacity of approximately 2.5 million tonnes per year of LNG for export, which is equivalent to approximately 350,000 Mcf per day of natural gas.” One Mcf is equivalent to 1,000 cubic feet of natural gas.

Expansion capital expenditure

KMI is expected to spend $4.098 billion in 2015 on expansion opportunities. This includes both organic and inorganic opportunities. Of the $4.098 total, $1.663 billion is to be spent in the first half of 2015.

Here’s how KMI’s peers have guided in terms of 2015 growth capital expenditures:

  • Enterprise Product Partners (EPD) – $2.98 billion
  • Williams Partners (WPZ) – $3.52 billion
  • Energy Transfer Partners (ETP) – $8.53 billion
  • Spectra Energy Partners (SEP) – $2.2 billion

Together, WPZ, ETP, EPD, and SEP account for ~26.59% of the Alerian MLP ETF (AMLP). KMI alone constitutes ~4.36% of the Energy Select Sector SPDR Fund (XLE).

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