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Kinder Morgan Divests 15% Stake in GCX to Altus Midstream

Kinder Morgan, Inc. KMI recently sold 15% equity stake in the Gulf Coast Express Pipeline Project (“GCX”) to Altus Midstream Company’s subsidiary, Altus Midstream LP. The acquirer has exercised and closed its option to acquire the stake from Kinder Morgan. Following the divestment, Kinder Morgan currently has 35% stake in the pipeline.

The GCX pipeline project, worth $1,750 million, is currently under construction. The pipeline is expected to have a capacity to carry around 1.98 billion cubic feet per day (Bcf/d) of natural gas from the Permian Basin to the Texas Gulf Coast area.

Given that the Permian Basin is currently suffering from takeaway capacity constraints, the pipeline is a significant one and is much appreciated by the producers as it can provide some respite. The pipeline capacity is fully subscribed under binding transportation agreements for the long term. The GCX pipeline, which awaits regulatory consents, is likely to commence operation by October 2019.

Markedly, Kinder Morgan has operatorship of the project. Meanwhile, each of Targa Resources Corp. TRGP and DCP Midstream, LP DCP owns 25% stake in the pipeline. The divestment of 15% stake to Altus Midstream is expected to release some pressure from Kinder Morgan’s financial profile.

Notably, Altus Midstream also has an option to acquire 33% stake in the proposed $2-billion Permian Highway pipeline of Kinder Morgan. The pipeline is anticipated to come online in fourth-quarter 2020. Currently, Kinder Morgan is expected to hold 50% stake in the project, which is intended to transfer about 2 Bcf/d of natural gas from the Waha area, TX to the U.S. Gulf Coast and Mexico markets, via a 42-inch pipeline of about 430 miles.

Price Performance

Headquartered in Houston, TX, Kinder Morgan is engaged in energy transportation and storage in North America. The company has lost 14% in the past year compared with 17.6% collective decline of its industry.

 

Zacks Rank & A Stock to Consider

The company currently carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for a better-ranked stock as given below:

Alberta-based TransCanada Corp. TRP is a premier energy infrastructure provider in North America. The company has a Zacks Rank #2 (Buy) and its bottom line for 2018 is expected to grow more than 18% year over year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Targa Resources, Inc. (TRGP): Free Stock Analysis Report
 
TransCanada Corporation (TRP): Free Stock Analysis Report
 
Kinder Morgan, Inc. (KMI): Free Stock Analysis Report
 
DCP Midstream Partners, LP (DCP): Free Stock Analysis Report
 
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