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KMI Adds to Flurry of Pipeline Activity in South Texas

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The Daley Note: July 26, 2023

Kinder Morgan Tejas Pipeline LLC recently announced a 67-mile, 42-inch pipeline that will run from a KMI compressor station near Freer, TX to the Kinder Morgan Tejas Pipeline system near Sinton, TX. This project coincides with Dos Caminos LLC’s 62-mile, 36inch pipeline, compression, treating, and dehydration facilities that will run from Howard Energy Partners’ (HEP) gathering system in Webb County, TX to the KMTP compressor station near Freer, TX.

Doc Caminos LLC is a joint venture between Eagle Ford Midstream LP and HEP. The projects will cost $251MM and $283MM respectively and they are expected to be completed in 4Q2023. The graph displays a map of the pipeline projects extending from Webb County gathering operations.    

The KMI and HEP projects offer 1.88 Bcf/d takeaway capacity from Webb County, TX. The EDA KMI Blueprint Model estimates that the Eagle Ford pipeline will add just $7.5MM to KMI’s EBITDA in 2023 but will generate ~$66MM for KMI during its first full year on the books in 2024.  

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Given that EOG Resources (EOG) recently announced its intent to construct pipes that will carry Webb County gas east to Nueces County, there is question about which producers are backing KMI and HEP’s decision to build a pipeline along a similar route.

EDA data indicates that Chesapeake, SM Energy, Silver Hill Energy, Killam Oil, and Kimmeridge Texas Gas join EOG as producers driving production in Webb County, TX. Based on current rig positioning, EDA speculates that Silver Hill Energy and Kimmeridge Texas Gas are potential drivers of the economics behind Dos Caminos and KMI’s decision to begin these pipeline projects. – Zach Krause Tickers: KMI, HEP





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