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Kinder Morgan Quarterly Earnings Rise on Copano Purchase

Kinder Morgan Energy Partners LP, the biggest U.S. pipeline company, said second-quarter earnings rose more than sevenfold as it completed its $3.2 billion purchase of Copano Energy LLC.

Net income increased to $1 billion from $132 million in the same quarter of 2012, Houston-based Kinder Morgan said in a statement today. After payments to parent company Kinder Morgan Inc., Kinder Morgan earned $1.41 per unit compared with a 53-cent loss a year ago.

Revenue grew to $3.02 billion during the quarter from $2.01 billion a year earlier as Kinder Morgan Energy Partners took over both Copano’s pipelines and conduits that its parent acquired when it bought El Paso Corp. last year. Profit in the gas pipeline division more than doubled to $566 million from $238 million, according to the statement.

“We’re very bullish on the future of natural gas,” Chairman and Chief Executive Officer Richard Kinder said in a conference call with analysts. The gas pipelines segment is expected to exceed previous estimates of 54 percent growth this year because of the acquisition, the company said.

Distributable cash flow, a measure of the company’s ability to pay distributions to its unitholders, rose 38 percent to $505 million.

Copano Acquisition

Kinder Morgan bought Copano May 1 in an all-stock deal that gave it control of 6,900 miles (11,100 kilometers) of natural gas pipeline in Texas, Oklahoma and Wyoming.

Kinder Morgan said May 13 it expects greater cost savings from combining its operations with Copano’s, and raised its projections for distributions to its unitholders.

Kinder Morgan expects to pay $5.33 per unit this year, 5 cents higher than the company previously forecast, according to a filing on May 13. Kinder Morgan Inc. will see its dividend increase to $1.60 per share for the year, from a previous forecast of $1.57.

On May 31, Kinder Morgan canceled its proposed Freedom crude oil pipeline from the Permian Basin in Texas to California. Richard Kinder said the company may revive the project if market conditions warrant.

“If the California refiners and/or the Permian producers demonstrate that they want to go forward with the project, we’re certainly there to accommodate them,” he said.

Kinder Morgan must keep growing to maintain investor payments, said Darren Horowitz, an analyst with Raymond James & Associates Inc. in Houston.

“There’s still a tremendous amount of increasing Permian production on the horizon, and a lot of that crude is going to have to find a home,” Horowitz said in an interview before the earnings were announced. He rates Kinder Morgan the equivalent of a hold and doesn’t own any of its units.

To contact the reporter on this story: Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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