There could be some trouble ahead in at least some of the entities in the pipeline business and the practice of distributions from LP’s if you look at operating numbers and the trends in oil and energy prices versus distributions to holders of the companies. Kinder Morgan Energy Partners, L.P. (NYSE: KMP) has reported a cash distribution per common unit of $1.05 per unit and distributable cash flow of $0.97 per unit, compared with a distribution of $0.96 per unit and distributable cash flow of $1.12 per unit in the first quarter of 2008. The company reported net income of $0.15 per common unit, less than half analysts’ expectations of $0.31 per common unit. Revenue of $1.79 billion was also way off estimates of $2.87 billion.
Kinder Morgan attributed the declines to low prices for crude oil, lower transportation volumes in the refined products business, and reduced steel handling in the company’s bulk terminals business. We wanted to see how this compares to what is expected for earnings and distributions (dividends) competitors such as Enterprise Products Partners LP (NYSE: EPD) and Plains All American Pipeline LP (NYSE: PAA). Given the results for Kinder Morgan, there are still questions on the earnings versus the dividends.
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