Kinder Morgan, DCP Midstream Ink LOI For Pipeline Development

Kinder Morgan, Inc.’s (NYSE:KMI) subsidiary, Kinder Morgan Texas Pipeline LLC (“KMTP”), recently inked a letter of intent (LOI) with DCP Midstream, LP (NYSE:DCP) enabling the latter to participate in the development of the proposed Gulf Coast Express Pipeline Project.

This will make way for growth in natural gas production from the Permian Basin to emerging markets along the Texas Gulf Coast.

The project is designed to carry around 1,700,000 dekatherms per day (Dth/d) of natural gas through approximately 430 miles of 42 inch pipeline from the Waha, TX to Agua Dulce, TX. The pipeline is anticipated to be commissioned in the second half of 2019, subject to shipper commitments. Currently, a non-binding open season for firm natural gas transportation is underway.

DCP Midstream, which is one of the largest natural gas liquids producer and natural gas processor in the U.S., is expected to be a partner and shipper on the planned pipeline. Kinder Morgan, on the other hand, will construct and operate the pipeline. DCP Midstream operates about 1.3 billion cubic feet per day (Bcf/d) of processing capacity in the targeted Permian supply area. It also operates Sand Hills, a natural gas liquids pipeline starting from the Permian area and spanning across the premier Mont Belvieu market. The capacity at Sand Hills pipeline is currently being augmented to 365,000 barrels per day (Bbls/d) from 280,000 Bbls/d.

The natural gas supply will likely be sourced into the project from numerous locations. These include the prevailing receipt points along Kinder Morgan’s KMTP and El Paso Natural Gas pipeline systems in the Permian Basin, a proposed interconnection with the Trans-Pecos Pipeline, and additional interconnections to both intrastate and interstate pipeline systems in the Waha area. Supplies of natural gas into the Agua Dulce area will comprise points into KMTP’s existing Gulf Coast network, Kinder Morgan-owned intrastate partners (KM Tejas and KM Border pipelines), the Valley Crossing pipeline, the NET Mexico header, and multiple other intrastate and interstate natural gas pipelines.

Investor confidence on Kinder Morgan’s stock is reflected in its price chart. The shares of the company appreciated 5.2% in the last six months, while the Zacks categorized Oil & Gas – Production and Pipelines industry registered an increase of 5% in the same time span.

Currently, Kinder Morgan carries a Zacks Rank #3 (Hold). Some better-ranked from the same space are Diamond Offshore Drilling Inc. (NYSE:DO) and Bellatrix Exploration Ltd. (TO:BXE) . Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Diamond Offshore Drilling posted a positive earnings surprise of 341.67% in the preceding quarter. It beat estimates in all of the four trailing quarters with an average positive earnings surprise of 353.28%.

Bellatrix Exploration posted a positive earnings surprise of 240.00% in the preceding quarter. It beat estimates in three of the four trailing quarters with an average positive earnings surprise of 58.54%.

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