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Which Segment Will Drive Kinder Morgan’s 4Q15 Performance?

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Kinder Morgan’s Natural Gas Pipelines segment

Natural Gas Pipelines is Kinder Morgan’s (KMI) largest business segment in terms of EBDA (earnings before depreciation and amortization). In 3Q15, the segment alone accounted for 53% of the company’s total EBDA.

The Natural Gas Pipelines segment experienced a slight decline in 3Q15 EBDA mainly due to lower natural gas prices affecting the segment’s midstream gathering and processing business. The trend is expected to continue in 4Q15 driven by lower natural gas prices and less-than-expected natural gas demand.

Energy Transfer Partners (ETP), EnLink Midstream Partners (ENLK), and DCP Midstream Partners (DPM) are among the midstream companies that have exposure to natural gas prices through their natural gas midstream assets. KMI constitutes 0.26% of the iShares Russell 1000 Value ETF (IWD).

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Kinder Morgan’s CO2 segment

KMI’s CO2 segment is involved in CO2-based enhanced crude oil recovery, CO2 sales, and transportation. The segment’s 3Q15 EBDA fell by ~22.3% year-over-year (or YoY) over 3Q14, mainly due to lower crude oil prices. The segment’s performance was also impacted by lower CO2 volumes in 3Q15. The trend is expected to continue in 4Q15 due to lower crude oil prices.

Kinder Morgan’s Product Pipelines segment

KMI’s Products Pipelines segment’s EBDA grew by ~29.3% YoY in 3Q15 over 3Q14 driven by higher throughput volumes. The segment’s earnings might continue to grow in 4Q15 on a YoY basis driven by larger-than-expected refined products demand in 4Q15.

Kinder Morgan’s Terminals segment

Kinder Morgan’s Terminals segment’s 3Q15 EBDA grew by ~6.4% versus 3Q14, driven by strong liquids throughput volumes. The liquids business benefitted from higher renewal rates, expansion projects placed into service, and additions to its tanker fleet. Expansion projects might continue to drive the segment’s EBDA in 4Q15.

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