(KMI) shares declined Tuesday after the oil and natural gas pipeline company last night announced a deal increasing its ownership stake in the Natural Gas Pipeline Company of America LLC to 50%, paying $136 million for the additional 30% interest in the privately held pipeline company.
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The earnings of midstream companies, including larger ones such as Kinder Morgan (KMI) and Enterprise Product Partners (EPD) and smaller ones such as Antero Midstream Partners (AM) and Crestwood Equity Partners (CEQP), do not have much direct commodity price exposure.
KMI will pay $136M and increase its ownership interest to 50% from 20%, while BIP will pay $106M and raise its stake to 50% from 27%.
The stock is down 4.75% or $1.12 after the news, hitting $22.45 per share.
Kinder Morgan, Inc. (NYSE:KMI): 11 Brokerage firm Analysts have agreed with the mean estimate for the short term price target of $36.36 in Kinder Morgan, Inc. It has underperformed by 43.82% the S&P500.
“We are delighted to be strengthening our relationship with Kinder Morgan”, said Sam Pollock, Chief Executive Officer of Brookfield Infrastructure. “We look forward to working together to execute NGPL’s growth strategy to achieve its potential”.
Out of 16 analysts covering Kinder Morgan (NYSE:KMI), 14 rate it “Buy”, 0 “Sell”, while 5 “Hold”. KMI shares were down more than 3% at $22.76 apiece, or just 3 cents above their session low. The stock has an average rating of “Buy” and an average price target of $38.52. Argus Research maintained the stock on November 10 with “Buy” rating. The rating by the firm was issued on November 18, 2015. Its down 0.15, from 1.33 in 2015Q1. Institutional Investors own 54.85% of Kinder Morgan, Inc. shares. So how will investors react when they see that the credit ratings agency Moody’s changed Kinder Morgan’s outlook to Negative from Stable? The New York-based C V Starr & Co Inc has invested 13.21% in the stock.
Kinder Morgan, Inc. (KMI) owns and manages a diversified portfolio of energy transportation and storage assets.
The ratings could be downgraded if it appears that Moody’s adjusted debt to EBITDA will not be consistently 5.8x or below, distribution coverage appears likely to fall below 1x, business risk increases or if the company undertakes an acquisition that increases leverage or does other debt financed activities where the company is highly reliant on equity markets to bring down leverage.
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Moody’s downgrade was influenced by Kinder Morgan’s announcement yesterday that it will increase its stake in struggling Natural Gas Pipeline. It has 42.92 P/E ratio.
