Kinder Morgan's current Chief Operating Officer, and eventual CEO, Steven Kean, recently spoke at an energy conference to update analysts and investors on the company's future outlook. There was one overriding theme that ran though his talk and it wasn't the current plunge in oil prices due to oversupply. Instead, he spent most of his time talking about the demand side of the equation and how much more important that was to the company's business. However, the demand isn't so much for an energy commodity, but for something else, which is demand for energy infrastructure. It's what is driving the investing thesis for Kinder Morgan.
Source: Kinder Morgan.
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The demand storyMr. Kean spent a good portion of his talk discussing the great need for additional energy infrastructure in North America. This demand is the key to his company's future. He drove this point home:
He went on to discuss why this demand for energy infrastructure to move and store energy was so important for the company's various businesses:
Kean noted three very important factors, here. First, his company earns a fee for transporting and storing energy. Second, that fee is earned even if customers don't use the capacity on its pipelines that they are paying to use. And finally, the fee is paid no matter what the price of the underlying commodity is at any given time. Those three factors working together provide the company with a very, very secure source of revenue.
Source: Kinder Morgan.
When push becomes pullAs Kean mentioned, Kinder Morgan currently has a very robust $18 billion project backlog. The company currentlyexpects these projects to be built over the next five years. However, because of the demand story, and the direction it's heading, the company believes there are enormous growth opportunities still ahead.
Kean specifically pointed out a notable shift in the demand for energy infrastructure:
Kean is noticing a subtle shift: Instead of producers seeking to get their gas out of shale basins, he's seeing end users seeking to gain access to this gas. This is bringing a new type of investment opportunity for the company, as it's now starting to sign up to build pipelines to supply and store gas for LNG export facilities. Further, it expects new projects to start coming from other end users, like petrochemical plants and large industrial users, which isn't a surprise considering that around $100 billion of investments are being made along the Gulf Coast to build these end-use facilities. This is why Kean noted that he's starting to see demand for push projects crest while demand for pull projects is just beginning to manifest.
Investor takeawayKinder Morgan's story is founded upon robust demand for energy infrastructure in North America. What's really interesting is that the story is about to turn the page into a new chapter as the company goes from supporting the push of supply to the pull of demand. Because this chapter is just starting, investors could enjoy this growth story for a long time to come.
The article The Kinder Morgan Inc. Story Investors Really Need to Know originally appeared on Fool.com.
Matt DiLallo has the following options: short January 2016 $32.5 puts on Kinder Morgan and long January 2016 $32.5 calls on Kinder Morgan. The Motley Fool recommends Kinder Morgan. The Motley Fool owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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