At the beginning of this month, Hedgeye Risk Management senior energy analyst Kevin Kaiser sent out an emailed called "Best New Idea: Short Kinder Morgan."
Basically, Kaiser's claims focus on how Kinder Morgan allocates capital expenditures (CapEx) so they can report higher "Distributable Cash Flow" which means higher payouts for investors. He also calls into question the safety of Kinder's pipelines. It gets pretty complex. (You can get some more detail from this Sept. 10th Hedgeye report available here [.PDF])
The point is that Kaiser's comments knocked off $4 billion from the company's market cap, according to Reuters.
Following the sell-off, Kaiser, who graduated from Princeton a few years ago, was widely criticized by the
Fast-forward today and we have Kinder Morgan's CEO/chairman Richard Kinder, who is worth an estimated $10.2 billion, hosting a call.
The call happened early this morning before the opening bell. It's pretty obvious that the call is a response to Kaiser's reports. He didn't name him explicitly, but he did refer to Hedgeye once.
Those who listened in were buzzing about how angry Kinder's CEO sounded.
"It was the most ferocious I've ever heard a high profile CEO get," a source who was on the call said.
We listened to the audio, too. It was pretty intense though whether his tone is "ferocious" is debatable.
After the opening remarks, Kinder goes into a 20 minute or so discussion. That part was relatively calm.
The CEO said investors should rely on his and the company's employees' experience over an analyst.
"I would also say that experience counts as I said I have 33 years in the pipeline industry, rest of the team making the real decisions on maintaining our pipelines have as a combined total hundreds of years experience in this business. And I would suggest that investors should prefer to rely on that expertise rather than the opinion of one analyst looking at a number of financial reports. And I can't let it pass without mentioning that some of the numbers in that report, were just flat out wrong..." Kinder said during the beginning of the call.
Toward the end and during the Q&A is where he gets a little fired up. He really gets into it when comes to all the numbers.
Here's an example:
"Let me start with the first item, which is launchers and receivers. In 2011, El Paso was in the process of a long-term plan to put launchers and receivers on all their pipelines. Now after those on the pipeline industry, this is simply the mechanical factor - facts that you use to insert the pigs or other ILI devices in the pipeline and then retrieve them at the end of the run. Because El Paso was completing this project and it was finished in 2012, in 2011, they spent $41 million on launchers and receivers. Because that project was completed, we are only spending $6 million on launchers and receivers in 2013 that is a difference of $35 million. If you're keeping score put down 35."
Kaiser, who has more than 4,800 Twitter followers, seemed disappointed that he didn't get to ask questions on the call.
Props to those $kmp
- Kevin Kaiser (@HedgeyeENERGY) September 18, 2013analysts that were allowed to ask questions, and asked good ones. But I had better q's!
Still, not many 26-year-old analysts can get a billionaire CEO to host a conference call after they issue a report.