docFinder alert PLS PLS
Week of November 26, 2012Volume 2, No. 36

Midstream Super Cycle

North American build-out has years of running room!



Kinder Morgan

Many Ways to Win


November 7, 2012

Full Presentation



Enterprise Products

Fee Revenue Going to 80%


November 15, 2012

Full Presentation


This docFinder Alert spotlights the North American midstream super cycle underway spurred by growing U.S. and Canadian oil and gas production.  These disciplined companies are moving forward with major long- term capital projects, most with a "toll-road like" fee-based model that ultimately provides investors with visible returns years into the future.  Sanctioned projects are largely driven by regional bottlenecks and strong market economics between the wellhead and the end user, thus lowering the risk profile.

The slide above left exemplifies the "many ways to win" under a diverse set of current energy themes that underpins the existing asset footprint of Kinder Morgan.  The array of themes benefiting KMI include pipeline reversals for shale liquids to the Gulf Coast, growing natural gas demand for power generation in the Northeast and Southeast, CO2 source and transportation for growing EOR projects, oilsands expansion to new markets and LNG liquefaction supply routes.  The KMI business model is largely shielded from commodity price swings and the family of companies has grown to an enterprise value of about $100 billion - effectively representing the third largest energy company in North America.  Looking forward, there are at least $11 billion of identified growth projects scheduled over the next five years - the single largest of which is a $4.1 billion expansion of the Trans Mountain pipeline in Canada designed to more than double the current oilsands capacity to the West Coast and export to Asian markets.

The slide above right is from a recent presentation by Enterprise Products Partners LP - the largest publicly traded energy partnership with an enterprise value of $62 billion.  Like KMI, Enterprise's asset diversity provides multiple earnings streams with fee-based revenue growing from an expected 77% in 2012 to 80% in 2013.  Regarding the long-term future, this slide vividly shows the underpinning of many years of shale drilling left in inventory.  Looking to 2020 and U.S. oil security, EPD's internal forecast essentially agrees with PIRA's - U.S. imports from outside of North America will drop significantly, perhaps to zero.  Regarding continued growth, EPD has $7.7 billion of growth projects underway scheduled for completion by 2015.  EPD's commitment to financial discipline while executing growth has made the stock a top relative performer since 2010.


More HOT slides and data below. 

Additional evidence of the midstream super cycle underway is supplied courtesy of other large companies including Plains All American Pipeline LP WilliamsTransCanada and Enbridge.


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    featured.slides from docFinder

    Slide Slide Slide Slide

    Plains All American

    Units up 40% LTM


    November 14, 2012



    Guiding Higher


    September 5, 2012



    North American focus


    November 14, 2012



    Price Signals


    October 3, 2012


    Plains All American Pipeline LP has a proven business model and a track record of 43 consecutive quarters of meeting or exceeding guidance.  It is the 4th largest energy MLP by market cap, behind EPD, KMP and WPZ. Impressively, capital appreciation of its units alone has soared over 40% in the last year! The future remains bright as PAA's assets are well positioned to benefit from increasing oil production (seen in slide above) in virtually all its service areas.  PAA currently has a $5 billion plus capital project portfolio through 2015 targeting unlevered returns in the mid-teens. PAA also has significant liquidity and is actively pursuing acquisitions, having closed $3 billion since 2011. 


    Williams cites great long-term fundamentals of a low natural gas-to-crude price ratio driving an infrastructure supercycle where it is also well-positioned.  In one of its opening slides, Williams states: "Marcellus: Don't worry about rig count, worry about infrastructure."  In the Marcellus, fee-based volume growth is significant but production still awaits more infrastructure.  WMB is now on track to deliver up to $12.2 billion of new projects by 2014 - almost all fee-based.  This portfolio drives strong and clear dividend growth guidance from $1.20 per share in 2012 to $1.75 in 2014.  Furthermore, the dividend coverage ratio grows from 1.24X in 2012 to 1.48X in 2014 as cash flow surges.


    TransCanada recently held its Investor Day and disclosed its vision to be the leading North American energy infrastructure company. Key messages include a 12-year track record of a 12.9% annual return, visible growth to $19 billion of secured projects, a current 3.9% yield and a strong financial position to increase dividends. TransCanada has another $7.5 billion remaining on a $13 capital program of projects due online by by 2015.  The largest piece is $3.8 billion for the Keystone Marketlink portion.  The full Keystone system, when completed, will cost $14 billion, transport 33% of Canadian oil exports to the U.S., and generate annual EBITDA for $1.7 billion.


    Enbridge operates the longest crude oil and liquids transportation system in Canada and the U.S (15,372 miles), moving more than 2.2 MMbpd responsible for 65% of western Canada oil exports and 15% of U.S. imports.  ENB stock has performed well, having soared 40% in the last two years on the heels of 15% dividend increase annually in 2010, 2011 and 2012. ENB has $35 billion of visible growth projects through 2016 ($18 billion of which is commercially secured already).  The slide above, presented during Investor Day, shows market price signals for midstream development.  ENB's Northern Gateway Pipeline project is world class, critically important and scheduled for service in 2018.


    Full Presentation

    Full Presentation

    Full Presentation

    Full Presentation

    featured.transactions from PLS global M&A database

    11/26/12ConocoPhillips sells Kazakhstan stake to ONGC (India)$5,000 MM
    11/23/12Breitburn Energy buys 825 boe/d in California's Belridge field$94 MM
    11/21/12Pinecrest Energy agrees to merge with Spartan Oil (Canada)$407 MM
    11/19/12Atlas Resource Partners buys DTE Energy's E&P business (Barnett)$255 MM

    Source: PLS M&A Database