Kinder Morgan Energy Partners L.P. (NYSE: KMP) announced this morning that it has sold its stake in the Express-Platte pipeline system to Spectra Energy Corp. (NYSE: SE) for about $380 million before taxes. Kinder Morgan’s joint venture partners in the pipeline system are also selling their stakes to Spectra, which is paying a total of $1.25 billion in cash and $240 million debt for the pipeline system.

The Express-Platte pipeline system transports crude from Alberta to refineries in Billings, Montana, and ultimately Wood River, Illinois, where ConocoPhillips (NYSE: COP) and Cenovus Energy Inc. (NYSE: CVE) jointly own the Wood River 157,000 barrel-a-day refinery. The total capacity of the pipeline is 280,000 barrels a day.

Kinder Morgan’s CEO Richard Kinder had this to say:

Spectra Energy Corp is purchasing a good pipeline system. In exchange, KMP will receive a very attractive price. Based on the structure of KMP’s investment with our Express-Platte partners, KMP receives approximately $15 million of cash flow on an annual basis from this investment, which is primarily debenture interest. We will redeploy the proceeds from this sale into various growth projects to further benefit our unitholders.

What Kinder Morgan appears to be saying is that his company is willing to give up the primary pipeline from the Canadian oil sands to the U.S. in exchange for a relatively few bucks for “various growth projects”? There’s a whiff of desperation about this deal. The sale seems to be an admission that Kinder Morgan needs cash and this is an attractive property that it can easily convert into cash.

Kinder Morgan’s common units are trading down 2.6% in the premarket this morning, at $78.45 in a 52-week range of $74.15 to $90.60.

Paul Ausick

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