There are pipeline companies, and then there are giants. Already a giant, Kinder Morgan’s (NYSE:KMI) recently approved $21 billion bid for rival El Paso (NYSE:EP) will make it the pipeline firm for a shale boom. The buyout would create the largest pipeline owner in the country, with more than 80,000 miles of pipelines under one roof. Kinder Morgan’s network of infrastructure will cross 35 states and link the majority of all the new unconventional fields with most major markets.
At the same time, the takeover puts Kinder Morgan in a prime position to benefit from a coming wave of pipeline construction. Thousands of miles of new pipelines will be needed to serve wells in fast-growing shale fields. These new pipelines most likely will be tied into KMI trunk-ways. For example, El Paso’s 14,000-mile Tennessee Gas Pipeline cuts directly through the rich Marcellus shale, where hundreds of gas wells have been drilled but are not yet hooked up to a pipeline.
The deal ultimately will benefit Kinder Morgan and its shareholders for years to come.