Low Natural Gas Prices a Bummer? Transporting the Stuff Still Pays Nicely, as at Kinder Morgan

There’s an energy play that’s been beating oil giants Chevron (CVX) and Exxon (XOM) this year – and added $3 billion to Richard Kinder’s now $9.4-billion fortune, according to Forbes. It’s pipelines.

Kinder Morgan has four companies with a combined 75,000 miles of oil and gas pipelines, plus 180 terminals. The largest is Kinder Morgan (KMI), which converted from an LLC to a corporation in February 2011 and in May bought El Paso Partners for $23 billion, creating the country’s largest natural gas pipeline network. That’s followed by the related companies of Kinder Morgan Management (KMR), Kinder Morgan Energy Partners (KMP), and El Paso Pipeline Partners (EPB).

KMI Market Cap Chart

KMI Market Cap data by YCharts

And here is how they’ve done.

KMI Chart

KMI data by YCharts

Kinder Morgan describes itself as a giant toll road that avoids commodity risk. It doesn’t care how much crude oil or natural gas costs, just that it moves through its pipelines. And as Richard Kinder said on the company’s second-quarter earnings call in July, “we're all about generating cash and paying out that cash to shareholders in distributions or dividends.”

KMI Dividend Chart

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KMP Dividend Chart

KMP Dividend data by YCharts

EPB Dividend Chart

EPB Dividend data by YCharts

That’s great if you’re Richard Kinder, who runs the place and has, with sponsor investors, 80% of voting power. But if you don’t already own Kinder, you’ll find it’s trading at a hefty – very hefty – premium. Transporting oil’s a good business, but not a cheap one.

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