Kinder Morgan Falls Most in 4 Years Amid Cash Flow Questions

Feb 24, 2014 4:22 pm ET

(Updates prices in second paragraph.)

Feb. 24 (Bloomberg) -- Kinder Morgan Energy Partners LP, the second-biggest U.S. pipeline company, fell the most in more than four years after a Barron’s article said the partnership has overstated cash flows and is overpriced.

The operator of 82,000 miles (132,000 kilometers) of oil and natural gas pipelines declined 5.3 percent to $74.32 at the close in New York, the biggest drop since March 2009. Kinder Morgan Inc., its parent company, fell 2.8 percent and Kinder Morgan Management LLC, which manages the partnership, declined 4.6 percent.

The Feb. 22 article raised questions about whether the Houston-based partnership has been understating its spending to boost distributable cash flows for investors. Barron’s quoted Hedgeye Risk Management’s Kevin Kaiser, who issued a report in September calling Kinder Morgan a “house of cards.” Kinder Morgan said in a statement today that its spending isn’t understated and it expects to continue offering “attractive returns” to unitholders.

“The article rehashes the long-term bear story” on Kinder Morgan, Ethan Bellamy, a Robert W. Baird & Co. analyst in Denver, said in a note to clients today. “Retail investors are likely to run for the hills today.”

Chairman and Chief Executive Officer Richard Kinder purchased 199,165 shares of Kinder Morgan Inc. today at $32.09, the company said in a regulatory filing. Kinder, the largest shareholder in Kinder Morgan Inc., responded to critics last month by saying he bought more than 800,000 shares in December alone.

“My message to those who saw the story less positively was ‘You sell, I’ll buy and we see who comes out best in the long run,’” he told analysts on a Jan. 15 conference call.

Enterprise Products Partners LP, also based in Houston, is the largest pipeline company based on market capitalization.

--Editors: Tina Davis, Will Wade