Kinder Morgan Inc. (NYSE: KMI), the energy infrastructure major, has struck a deal to sell 50 percent of its stake in a pipeline project in the Utica Shale region to Riverstone Investment Group LLC, the private equity group.
The size of the deal was not disclosed, but Kinder Morgan claims that Riverstone will make an upfront cash payment, part of which will reimburse it for half of what it has already spent on the Utopia pipeline project in Ohio. Riverstone will also finance Kinder Morgan’s share of the future capex required for the completion of the pipeline project.
According to Kinder Morgan, capex so far is $500 million. By Thursday morning, Kinder Morgan stock was trading at $18.53, up 4.63 percent from the previous close, and up $1.13 from its Monday close of $17.40, or 6.49 percent.
The move seems to be part of a strategy that will see Kinder Morgan offload capex associated with some of its project by divesting parts of its stakes in them. This will provide it with more cash to pass on to shareholders and will make it easier for the company to remain in the black until the oil industry rebounds.
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Private equity firms have been very active on the energy asset market lately. Reuters notes they have at their disposal as much as US$1 trillion to spend on the tastiest morsels put up for sale by struggling E&Ps and infrastructure operators at very attractive prices.
The Utopia pipeline that will run through part of Ohio has a capacity for 50,000 barrels of crude and is set to go online in two years.
By Irina Slav of Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.