Investors Flee as Kinder Morgan Closes $350 Million Acquisition

Kinder Morgan Inc. (NYSE: KMI) saw its share price sink more than 8% Monday morning, partly due to the 5% drop in crude oil and, to some degree at least, the closing of a $350 million acquisition of 15 refined product terminals in a deal with BP PLC (NYSE: BP). The two companies formed a joint venture terminal business to own 14 of the terminals. Kinder Morgan owns 100% of the remaining terminal and will be the operator and marketer of all 15.

The deal was announced last October, and Kinder Morgan shares closed at $32.68 on the day of the announcement. Since then the share price has dropped more than 50%.

In connection with the transaction, BP has entered into commercial agreements securing long-term storage and throughput capacity from the joint venture, which will market additional capacity to third-party customers. Kinder Morgan owns a 75% interest in the joint venture and BP owns the balance.

John Schlosser, president of Kinder Morgan Terminals, said:

By combining BP’s expertise in product trading and marketing with Kinder Morgan’s strength in operations and terminal development, the [joint venture] is well suited to take advantage of growth opportunities in high-demand refined petroleum products markets.

The new venture benefits BP, Kinder Morgan and our third-party customers, principally because the terminals are key distribution facilities for refined products markets, connected by pipeline to key refining and processing centers across the United States, and offer extensive truck, vessel and barge access, and terminal service capabilities.

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The terminals have about 9.5 million barrels of storage capacity and are located in the Midwest, Northeast, Southeast and on the West Coast of the United States.

When Kinder Morgan reported fourth-quarter earnings in mid-January, the company said that its terminal segment earnings fell 7% in the quarter to $257 million. Full-year earnings from the terminals group totaled $1.055 billion, up 8%, including a $45 million negative impact from the bankruptcies of Arch Coal and Alpha Natural Resources.

In 2015, the terminal segment’s liquids utilization rate was 93.3%, down from 95.3% in 2014 and leasable capacity rose from 77.8 million barrels to 81.3 million barrels.

Kinder Morgan shares traded down about 8.5% in the noon hour Monday, at $15.05 in a 52-week range of $11.20 to $44.71.