The recent sums are so huge, the discovered resources so vast and the potential to expand seemingly so limitless in this industry that it might be easy to become blasé about major developments, even when they involve midstream royalty.
Consider the recent blockbuster, the Kinder Morgan Inc. consolidation.
The deal to combine the three elements of the Kinder empire—Kinder Morgan Energy Partners LP, Kinder Morgan Management LLC and El Paso Pipeline Partners LP—is valued at an estimated $71 billion.
How much is that?
- $10 billion more than the Eagle Ford: The economic impact of the oil and gas industry in the 20-county region was estimated to be $61 billion in 2012, according to a study by the University of Texas at San Antonio;
- $20 billion more than Uzbekistan: The United Nations estimated the GDP of the central Asian country to be $51 billion in 2012; and
- Equal to Bolivia’s output: The debt aspect of the Kinder Morgan deal, at $27 billion, is equal to the annual GDP of that South American country.
Face it: This is a Kinder-class deal, and it emphasizes the hunger for oil and gas infrastructure in the U.S.
Raymond James analysts nodded their approval after the announcement, noting that the streamlined organization will have access to a greater variety of cheaper capital and significant savings on income taxes, some $20 billion over the next 14 years.
Simmons & Co. International was less enthralled: “Plenty of significant questions are raised by this transaction, aside from the quest for growth, including expectations for interest rates and the ability to continue capturing a generous valuation arb via the MLP structure.”
And then there was Baird Equity Research: “We see this as an elegant solution to improve Kinder’s prospects and as a positive for MLPs on consolidation upside potential.”
Ah, “elegant solution.” The Kinder Morgan MLPs are dead. Long live the Kinder.
Joseph Markman can be reached at jmarkman@hartenergy.com or 713-260-5208.
