Kinder Morgan Has Underperformed the Alerian MLP ETF in 2015



Kinder Morgan’s total return performance

Kinder Morgan (KMI) is expected to release its 3Q15 earnings on October 21, 2015. In this series, we’ll talk about KMI’s 3Q estimates, its exposure to commodity prices, each of its segments’ contributions to overall earnings, dividend guidance, and analyst recommendations for the midstream giant. But first, let’s analyze KMI’s recent total return performance. Total returns include both capital appreciation and dividend income.

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Kinder Morgan has generated a total return of -22.9% since the beginning of this year. KMI’s MLP peers Spectra Energy Partners (SEP), Energy Transfer Partners (ETP), and Williams Partners (WPZ) have returned -23.7%, -26.8%, and -25.9%, respectively. These returns indicate general weakness in the midstream sector. KMI is a constituent of the Energy Select Sector SPDR Fund (XLE). XLE, which comprises of 40 US energy giants, has returned -13.3% YTD (year-to-date).

The Alerian MLP ETF (AMLP) comprises of 23 midstream energy MLPs. Kinder Morgan underperformed AMLP by 6.5 percentage points. AMLP has returned -16.3% YTD. KMI’s underperformance relative to AMLP can be attributed to its higher commodity price exposure, lower dividends, and higher leverage compared to those of AMLP constituents. KMI is exposed to crude oil prices and natural gas prices through its CO2-based enhanced oil recovery and natural gas midstream business, respectively.

About Kinder Morgan

Kinder Morgan is the largest midstream energy company in the United States. As a midstream company, KMI owns and operates approximately 84,000 miles of pipelines and 165 terminals. Its pipelines transport natural gas, refined petroleum products, crude oil, and CO2 (carbon dioxide). Its terminals help store and handle a variety of products and materials such as gasoline, jet fuel, ethanol, coal, petroleum coke, and steel. Apart from this, KMI is also involved in CO2-based enhanced crude oil recovery (or EOR). KMI has five business segments:

  • Natural Gas Pipelines
  • CO2
  • Products Pipelines
  • Terminals
  • Kinder Morgan Canada

In the next article, we’ll look into KMI’s 3Q15 revenue estimates.


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