Kinder Morgan buying 50 percent interest in natural gas venture for $300 million

HOUSTON, Texas - Kinder Morgan Energy Partners, L.P. (KMP), on April 25 announced a definitive agreement with an investment vehicle affiliated with Kohlberg Kravis Roberts & Co. L.P., whereby KMP will purchase from KKR its 50 percent interest in the joint venture that owns the Altamont gathering, processing and treating assets (Uinta Basin in Utah) and the Camino Real Gathering System (Eagle Ford Shale in Texas) for $300 million in KMP common units.

El Paso Corp. (EP) owns the other 50 percent of the joint venture.

KMP anticipates the transaction will close subsequent to the completion of Kinder Morgan, Inc.'s (KMI) acquisition of El Paso, which is expected to occur by the end of May.

"We are pleased to reach this agreement with KKR which, upon closure of both transactions noted above, will increase Kinder Morgan's ownership in this joint venture to 100 percent - 50 percent at KMP and 50 percent at KMI," said Duane Kokinda, president of Kinder Morgan's intrastate pipelines.

Upon closing, the transaction is expected to be immediately accretive to cash distributable to KMP unitholders.

Marc Lipschultz, KKR's global head of energy and infrastructure, commented, "Since forming our joint venture over a year ago, it has been a pleasure partnering with the El Paso team on building out an exciting midstream business."

With over 1,100 miles of pipeline infrastructure, the Altamont system includes over 450 well connections with producers, and it operates a processing plant with the design capacity of 60 million cubic feet per day (MMcf/d) and a 5,600 barrel per day (b/d) natural gas liquids fractionator. The Camino Real Gathering System has 150 MMcf/d of gas gathering capacity and 110,000 b/d of oil gathering capacity.

Kinder Morgan and El Paso announce tentative election deadline of May 23

HOUSTON, Texas - Kinder Morgan, Inc. (NYSE: KMI) and El Paso Corp. (NYSE: EP) on April 16 announced that the tentative deadline for El Paso shareholders and equity award holders to elect the form of consideration they wish to receive in El Paso's pending merger with Kinder Morgan is May 23.

The election deadline may be extended, in which case Kinder Morgan will issue a press release announcing the new election deadline. The closing of the merger is expected to occur by the end of May, subject to regulatory approval. El Paso shareholders who hold shares through a bank, broker, trust company or other nominee may have an earlier election deadline and should carefully review any instructions received from their bank, broker, trust company or other nominee.

As previously announced, El Paso shareholders can elect, for each El Paso share held, either cash, Kinder Morgan common stock, or a combination of cash and Kinder Morgan common stock.

El Paso equity award holders can elect either cash or a combination of cash and Kinder Morgan common stock for all of their outstanding equity awards. All elections will be subject to proration and all El Paso shareholders and equity award holders will receive warrants to purchase Kinder Morgan common stock.

Kinder Morgan purchasing El Paso for approximately $38 billion

HOUSTON, Texas - Kinder Morgan, Inc. (NYSE: KMI) and El Paso Corp. (NYSE: EP) on Oct. 16 announced a definitive agreement whereby KMI will acquire all of the outstanding shares of EP in a transaction that will create the largest midstream and the fourth largest energy company in North America with an enterprise value of approximately $94 billion and 80,000 miles of pipelines.

The total purchase price, including the assumption of debt outstanding at El Paso Corp. and including the debt outstanding at El Paso Pipeline Partners, L.P. (NYSE: EPB) is approximately $38 billion.

The combined enterprise, including the associated master limited partnerships, Kinder Morgan Energy Partners, L.P. (NYSE: KMP) and EPB, will represent the largest natural gas pipeline network in the United States, the largest independent transporter of petroleum products in the United States, the largest transporter of CO2 in the United States and the largest independent terminal owner/operator in the United States.

"This once in a lifetime transaction is a win-win opportunity for both companies," said Kinder Morgan Chairman and CEO Richard D. Kinder. "The El Paso assets are primarily regulated interstate natural gas pipelines that produce substantial, stable cash flow and have access to key supply regions and major consuming markets. The natural gas pipeline systems of the two companies are very complementary, as they primarily serve different supply sources and markets in the United States. The transaction is expected to produce immediate shareholder value (upon closing) through strong cash flow accretion and offers significant future growth opportunities."

The consideration to be received by the EP shareholders is valued at $26.87 per EP share based on KMI's closing price as of Oct. 14, 2011, representing a 47 percent premium to the 20-day average closing price of EP common shares and a 37 percent premium over the closing price of EP common shares on Oct. 14, 2011.

The offer is comprised of $14.65 in cash, 0.4187 KMI shares (valued at $11.26 per EP share) and 0.640 KMI warrants (valued at $0.96 per EP share) based on KMI's closing price on Oct. 14, 2011. The warrants will have an exercise price of $40 and a five-year term. EP shareholders will be able to elect, for each EP share held, either (i) $25.91 in cash, (ii) 0.9635 shares of KMI common stock, or (iii) $14.65 in cash plus 0.4187 shares of KMI common stock. All elections will be subject to proration and in all cases EP shareholders will receive 0.640 KMI warrants per share of EP common stock.

The receipt of shares and warrants by EP shareholders in the transaction is intended to be tax free for U.S. federal income tax purposes.

Upon closing, KMI shareholders are expected to own approximately 68 percent of the combined company and EP shareholders are expected to own the remaining 32 percent.

"El Paso's board and management have been highly focused on delivering value for our shareholders, and we believe that our agreement with Kinder Morgan will provide even greater value for our shareholders than we expected through the planned spin-off of our exploration and production business," said Doug Foshee, chairman, president and chief executive officer of El Paso Corp.

The transaction has been approved by each company's board of directors.

KMI has a commitment letter from Barclays Capital underwriting the full amount of cash required for the transaction. Prior to closing, the transaction will require approval of both KMI and EP shareholders. The transaction is expected to close in the second quarter of 2012 and is subject to customary regulatory approvals.

"We believe that natural gas is going to play an increasingly integral role in North America," said Kinder. "With the recent development of shale resources, there are now abundant domestic supplies of natural gas, which are being used increasingly to generate electricity and are environmentally friendly. If America is serious about reducing carbon emissions to benefit the environment, and reducing its dependence on foreign oil, natural gas is absolutely the best readily available option. We are delighted to be able to significantly expand our natural gas transportation footprint at a time when it seems likely that domestic natural gas supply and demand will grow at attractive rates for years to come."

The transaction is expected to be immediately accretive to dividends per share at KMI, distributions per unit at KMP, dividends per share at Kinder Morgan Management (NYSE: KMR) and distributions per unit at EPB. Part of these benefits will be driven by cost savings, which are expected to be approximately $350 million per year, or about five percent of the combined system's EBITDA.

Kinder Morgan intends to divest El Paso’s exploration and production assets in order to trim the high debt level that is expected to crop up from the takeover. By the end of 2015, Kinder Morgan expects its assets to exclusively comprise its MLP and El Paso Pipeline Partners L.P. (NYSE: EPB) stakes, as well as the ownership of their respective shares and of Kinder Morgan Management LLC (NYSE: KMR).

The deal will also enhance steady cash flow generation and promise growth for the company’s MLP, Kinder Morgan Energy Partners, which plans to acquire a significant portion of El Paso’s natural gas pipeline assets over the next few years at attractive prices.

For some several years to come, the average annual growth rate in KMP distributions per unit and KMR dividends per share is expected at around seven percent, up five percent annually from the prior estimate on the back of likely dropdowns from this transaction.

El Paso announces MPP project to expand Tennessee Gas PIpeline's 300 line in Pennsylvania

HOUSTON, Texas - El Paso Corp. (NYSE: EP) on Oct. 7 announced that its wholly owned subsidiary, Tennessee Gas Pipeline Co. (TGP), has executed long-term agreements for the MPP project which will expand TGP's 300 Line in Pennsylvania.

The 240,000 dekatherms per day (Dth/d) project includes approximately eight miles of 30-inch pipeline, looping and modifications to four existing compressor stations in Pennsylvania to provide natural gas transportation from the Marcellus Shale supply area to existing delivery points on the TGP system.

All of the capacity is subscribed through agreements with Chesapeake Energy Marketing, Inc., a wholly-owned subsidiary of Chesapeake Energy Corp. for 140,000 Dth/d and Southwestern Energy Services Company, a wholly-owned subsidiary of Southwestern Energy Co., for 100,000 Dth/d.

"We are pleased to announce our fourth expansion project in as many years which brings our total investment in Marcellus infrastructure to $1.3 billion and adds nearly 1.5 Bcf/d of capacity," said Norman Holmes, president of Tennessee Gas Pipeline. "This project leverages TGP's strategic location and provides significant new firm transportation capacity for two prominent Marcellus Shale producers."

Capital for the MPP project is expected to be less than $100 million.

TGP anticipates filing a certificate application for the project with the Federal Energy Regulatory Commission in late 2011. Pending regulatory approvals, construction would begin in 2013, with a Nov. 1, 2013, in-service date.

El Paso Pipeline Partners second quarter profit up 33 percent

Second-quarter earnings for El Paso Corp. (NYSE: EP) rose 67 percent on strong exploration and production profit growth. For the latest period, El Paso Corp. posted a profit of $262 million, or 34 cents a share, up from $157 million, or 21 cents a share, a year earlier. Excluding items such as derivatives impacts, earnings climbed to 25 cents from 22 cents. Analysts surveyed by Thomson Reuters expected earnings of 24 cents.

El Paso Pipeline Partners LP (NYSE: EPB) saw second quarter earnings rise 33 percent. El Paso Partners reported earnings of $116 million, or 50 cents a unit, up from $87 million, or 45 cents a unit, a year earlier. Operating revenue climbed 9.1 percent to $358 million. Analysts expected earnings of 53 cents and revenue of $354 million.

First-quarter profits decline at El Paso Corp., El Paso Partners

HOUSTON, Texas - First-quarter profit at El Paso Corp. (NYSE: EP) fell 84 percent, while the natural-gas and oil producer's El Paso Pipeline Partners LP (NYSE: EPB) reported earnings lower, but not as precipitously.

El Paso on May 4 reported a profit of $62 million, or $0.08 a share, down from $388 million, or $0.51 cents a share a year earlier. Excluding items such as derivatives impacts, earnings fell to $0.30 from $0.33. Analysts polled by Thomson Reuters expected 28 cents.

El Paso Pipeline Partners posted earnings of $115 million, or $0.57 a share, down from $116 million, or $0.53 a share a year earlier. Operating revenue rose 9.9 percent to $366 million. Analysts had projected $0.58 and $356 million, respectively.