Kinder Morgan is on steady footing despite the oil price slump (Part 5 of 16)
Revenues and profits increased in 2014
We have discussed Kinder Morgan’s (KMI) assets in the previous sections of this series. In this article, we’ll discuss the Natural Gas Pipelines segment’s operating performance. Read part two of this series to find out about the segment’s assets.
In 2014, Kinder Morgan’s (KMI) Natural Gas Pipelines segment saw higher revenues and profits. Revenues increased 18% to $10.16 billion in 2014 over the previous year. Earnings before depreciation and amortization (or EBDA), a measure of profit, increased 9.5% to $4.06 billion in 2014 over 2013.
EBDA margin, which is the ratio of segment EBDA to the segment revenues, decreased to 40% in 2013 from 43% a year ago. This metric takes into account earnings before the effects of one-time charges and gains.
The primary reasons revenues and profits increased in 2014 was due to a $198 million increase in revenue and earnings associated with the early termination charge of a long-term natural gas transportation contract from a certain customer on the Kinder Morgan Louisiana pipeline system.
Key factors that positively affected 2014 profit
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$163 million from full-year ownership of Copano operations, which KMI acquired on May 1, 2013, including benefits from higher gathering volumes from the Eagle Ford Shale
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$121 million from TGP primarily due to higher revenues from firm transportation and storage services, and higher weather-related demand
Key factors that negatively affected results
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$24 million lower profit from WIC (or Wyoming Interstate Company), primarily due to lower reservation revenue as a result of rate reductions
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$17 million lower profit from SNG (or Southern Natural Gas Company), driven by lower reservation and usage revenues due to rate reductions
Natural gas volumes increased
Natural gas transportation volume, the most important indicator of the segment’s performance, showed improvement in 2014. It increased ~6% in 2014 over 2013, due largely to new expansion projects placed in service, higher weather-related demand, higher storage refill in California, and increased demand in Mexico.
Other energy transporters have also benefited from higher natural gas volume in recent times. In 4Q14, Williams Companies (WMB) increased revenues by 3.5%, Spectra Energy (SE) increased revenues by 2.2%, and Energy Transfer Equity (ETE) increased revenues by ~7% over 4Q13. WMB makes up 2.9% of the Energy Select Sector SPDR ETF (XLE).
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