Kinder Morgan Inc. KMI, a leading energy infrastructure firm, announced that its subsidiary, Hiland Partners Holdings LLC, has signed an agreement to acquire a natural gas gathering and processing system in North Dakota. The natural gas assets will be acquired from Outrigger Energy II LLC for a total price of $640 million. The deal is anticipated to conclude in the first quarter of 2025.

Key Assets Included in the Deal

The acquired assets include a natural gas processing system having a capacity of 270 million cubic feet per day (MMcf/d), along with a pipeline system spanning 104 miles. The high-pressure gas gathering pipeline having a large diameter and a significant capacity of 350 MMcf/d is a strategic addition to Kinder Morgan’s midstream assets as it links natural gas supply from the Williston Basin region to high-demand markets. Further, the gas gathering and processing system is supported by long-term contracts secured from prominent customers in the Williston Basin region.

Financial Impact of the Acquisition

Kinder Morgan anticipates several financial benefits from its recent acquisition. The company states that the deal is expected to have an Adjusted EBITDA multiple of nearly eight times on a full-year basis in 2025. This means that the deal is expected to generate substantial financial returns for the company. The Adjusted EBITDA figure, however, does not cover approximately $20 million in expected cash payments for 2025. The $20 million is identified as deferred revenues by the firm.

KMI plans to initially finance the transaction using a combination of short-term borrowings and cash on hand. Following the acquisition, the company also aims to reduce future capital expenditures related to the expansion of infrastructure in the Bakken to support the growth in production from its customers in the region.  

Acquired Assets to Complement Existing Hiland Gas Assets

Kinder Morgan mentions that the acquired gas infrastructure shall complement its existing Hiland gas assets. The natural gas gathering and processing system in North Dakota shall be integrated into the existing Hiland infrastructure, allowing it to process additional volumes coming from the Bakken region. The strategic acquisition enables the midstream energy firm to expand its presence in the region and increase its transportation and gas processing capacity to serve the growing needs of customers.

KMI’s Zacks Rank and Key Picks

KMI currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the energy sector are Sunoco LP SUN, TechnipFMC plc FTI and Cheniere Energy, Inc. LNG. Sunoco currently sports a Zacks Rank #1 (Strong Buy), while TechnipFMC and Cheniere Energy carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sunoco LP is one of the largest distributors of motor fuel in the United States. The partnership distributes fuel to independent dealers, commercial customers, convenience stores and distributors. Its current distribution yield is greater than that of the industry's composite stocks, providing unitholders with consistent returns.

TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry. The company’s total backlog witnessed a high of $14.7 million in the third quarter of 2024, indicating an 11.1% increase from the previous year’s level. This growing backlog ensures strong revenue growth for FTI.

Cheniere Energy Inc. is involved in LNG-related businesses, which include LNG terminals and natural gas marketing. The company has achieved a significant milestone with the first production of liquefied natural gas from the first LNG train of its Corpus Christi Stage 3 Liquefaction Project. The project, which includes seven midscale LNG trains, aims to expand the production capacity of the Corpus Christi Liquefaction facility. This expansion is expected to enhance Cheniere's position in the rapidly growing global LNG market, enabling the company to meet the rising demand for LNG both in the U.S. and internationally.

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