Release Date: October 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kinder Morgan Inc (KMI, Financial) announced significant expansion projects, including the $3 billion South System Expansion 4 and the GCX system expansion in Texas, which are expected to boost capacity and meet growing demand.
- The company reported a 2% growth in EBITDA for the third quarter compared to the previous year, with expectations of a 5% increase for the full year.
- Transport volumes for natural gas increased by 2% in the quarter, with gathering volumes up 5%, driven by strong performance in the Haynesville and Eagle Ford regions.
- Kinder Morgan Inc (KMI) has a robust project backlog of $5.1 billion, indicating a strong pipeline of future growth opportunities.
- The company declared a dividend of $0.2875 per share, representing a 2% increase from the previous year, reflecting confidence in its financial stability.
Negative Points
- Earnings per share remained unchanged for the third quarter, indicating potential challenges in achieving higher profitability.
- The company experienced a decline in revenue by $208 million compared to the third quarter of 2023, although this was offset by a reduction in cost of sales.
- Gathering volumes are expected to average 8% below the 2024 plan, highlighting potential challenges in meeting production targets.
- The CO2 segment reported lower oil and NGL production volumes, which could impact overall segment performance.
- Kinder Morgan Inc (KMI) faces legal challenges, such as the stay on permits for the Cumberland project, which could delay construction and impact project timelines.
Q & A Highlights
Q: Can you provide an update on the size of your shadow backlog and discuss specific projects like Mississippi Crossing and Trident?
A: Kimberly Dang, CEO: The opportunity set has increased significantly since last year. While we don't have a formal shadow backlog, if we did, it would show a substantial increase. We're seeing a range of projects, from smaller ones to potentially larger ones. For example, we're in discussions with power plants across several states and industrial projects driven by onshoring and cheap feedstock prices. Sital Mody, VP, President - Natural Gas Pipelines, added that the Mississippi Crossing and Trident projects are aimed at moving gas to where it's needed, with Mississippi Crossing potentially scaling up to 2 Bcf.
Q: Given the growing potential backlog of projects, where do you see CapEx trending over the next few years?
A: Kimberly Dang, CEO: Currently, there's no change to our roughly $2 billion per year CapEx guidance, though it could exceed that depending on project timing. We can fund approximately $2.5 billion per year in CapEx from cash flow and have balance sheet capacity for additional funding if needed.
Q: Are you seeing better returns on your projects, particularly with the South System 4 expansion?
A: Kimberly Dang, CEO: The returns on our projects are consistent with historical targets. Different projects have different returns based on development time, but South System 4 is not substantially different from past projects.
Q: With the recent court decision affecting your Cumberland project, what is the process going forward?
A: Kimberly Dang, CEO: The Sixth Circuit's decision prevents us from starting construction, but we believe the decision is flawed. We are working with the Army Corps and TDEC to determine next steps, and both agencies plan to vigorously defend the permits.
Q: How do you view the risk of court reviews on projects post the Chevron decision, and are there strategies to mitigate this risk?
A: Kimberly Dang, CEO: The Chevron Doctrine did not play a role in the Cumberland decision. We've been dealing with challenges for a while and have been successful in defending permits. We ensure permits are defensible in court and incorporate potential challenges into our strategy and capital deployment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
