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    Kinder Morgan Inc (KMI)

    Q4 2024 Earnings Summary

    Reported on Feb 7, 2025 (After Market Close)
    Pre-Earnings Price$30.78Last close (Jan 22, 2025)
    Post-Earnings Price$31.30Open (Jan 23, 2025)
    Price Change
    $0.52(+1.69%)
    • Kinder Morgan Inc. (KMI) has increased its adjusted EPS growth guidance for 2025 to 10%, up from the previously expected 8%, with potential for further upside due to higher commodity prices and favorable macro trends.
    • KMI has expanded its project backlog to $8.1 billion, the largest in recent years, indicating a strong pipeline of growth projects. The company expects to continue adding to this backlog due to significant opportunities in the natural gas market.
    • KMI is well-positioned to benefit from the projected 28 Bcf/day increase in natural gas demand by 2030, driven by factors such as increased power demand from data centers and AI infrastructure investments. Their strategically located infrastructure enables them to capitalize on these opportunities.
    • Potential cost inflation risks on large capital projects due to inflationary pressures, as the company is expanding significantly with over $5 billion in new projects. Analysts express concern that large simultaneous projects could lead to cost overruns similar to past experiences (e.g., Rockies Express in 2009). While management is taking steps to mitigate this risk, cost inflation remains a potential headwind.
    • Lower than expected Q4 2024 EBITDA, with the company reporting about $100 million below the initial quarterly budget due to commodity headwinds, lower than expected Renewable Natural Gas (RNG) sales, and delays in Renewable Identification Numbers (RINs) sales because of market illiquidity. This underperformance could indicate challenges in achieving forecasted earnings growth.
    • Continued challenges in obtaining state-level permits for pipeline expansions in the Northeast, limiting the company's ability to capitalize on growth opportunities in that region. Management acknowledges that they have not seen any changes in the permitting environment, suggesting that expansion in the Northeast remains constrained.
    MetricYoY ChangeReason

    Total Revenue

    -1% YoY

    The slight decrease is primarily driven by stable yet marginally lower commodity prices and the absence of one-time gains realized in the previous period. This was partially offset by increased volumes in certain segments and modest contributions from expansion projects.

    Cost of Goods Sold

    -8% YoY

    The decrease stems from lower commodity costs (particularly natural gas) and favorable derivative settlements. In addition, efficiency initiatives undertaken in prior periods continued to contribute to cost reductions, further reducing overall COGS.

    SG&A

    -80% YoY

    The significant drop is largely due to a one-time legal and restructuring charge incurred in the previous period that did not recur, combined with ongoing cost controls and organizational streamlining efforts. This led to a substantially lower SG&A base in the current period.

    Net Income

    +28% YoY

    The marked increase is attributable to lower overall costs (especially COGS), along with steady operating performance in core pipeline and terminals segments. These factors outweighed the slight revenue decline, resulting in a notable improvement in profitability.

    EPS

    +15% YoY

    EPS growth reflects the strong rise in Net Income (+28% YoY) and a stable share count. Despite relatively flat revenue, cost reductions and operational efficiencies led to higher earnings per share. Going forward, cost discipline and stable commodity prices may further support EPS.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    EBITDA Growth

    FY 2024

    5% year-over-year

    no current guidance

    no current guidance

    EPS Growth

    FY 2024

    9% year-over-year

    no current guidance

    no current guidance

    Debt-to-EBITDA Ratio

    FY 2024

    End year at ~4.0x

    no current guidance

    no current guidance

    Natural Gas Gathering Volumes

    FY 2024

    8% below plan, 5% above 2023

    no current guidance

    no current guidance

    Refined Products Volumes

    FY 2024

    Slightly below plan, 2% above 2023

    no current guidance

    no current guidance

    Sustaining Capital

    FY 2024

    In line with budget

    no current guidance

    no current guidance

    Net Income Growth

    FY 2025

    no prior guidance

    8% year-over-year

    no prior guidance

    EBITDA Growth

    FY 2025

    no prior guidance

    4% year-over-year

    no prior guidance

    Adjusted EPS Growth

    FY 2025

    no prior guidance

    10% year-over-year

    no prior guidance

    Leverage Ratio

    FY 2025

    no prior guidance

    3.8x net debt-to-adjusted EBITDA

    no prior guidance

    Expansion CapEx

    FY 2025

    no prior guidance

    $2.5B per year

    no prior guidance

    Natural Gas Gathering Volumes

    FY 2025

    no prior guidance

    5% year-over-year

    no prior guidance

    Refined Products Volumes

    FY 2025

    no prior guidance

    1% year-over-year

    no prior guidance

    TopicPrevious MentionsCurrent PeriodTrend

    Project backlog growth

    Q3: Backlog reached $5.1B (+34% YoY) ; Q2: +$1.9B, driven by South System 4 and Double H ; Q1: +$300M from new gas projects.

    Grew to $8.1B, adding $3.5B from Trident and MSX; company plans ~$2.5B/year in expansion CapEx.

    Consistently mentioned; strong expansion each quarter

    Natural gas demand (AI, data)

    Q3: Emphasized AI/data center load, plus LNG and export drivers ; Q2: Predicted 3–10 Bcf/day for data centers, overall +20 Bcf/day by 2030 ; Q1: Data centers could add 7–10 Bcf/day if ~40% is served by gas.

    Expects 28 Bcf/day growth by 2030, with power demand possibly 3–10 Bcf/day tied to AI/data centers.

    Stable bullish sentiment, viewed as a critical driver of future growth

    Gathering volumes below budget

    Q3: Below budget due to pricing; expected improvement with LNG expansion ; Q2: Weakness from producers reacting to Haynesville prices ; Q1: Slightly below budget but deemed a temporary pullback.

    Gathering volumes down 7% vs. Q4 2023 and 8% below plan; Haynesville/Bakken weakness offset by Eagle Ford gains.

    Still under plan, but company expects higher production for future demand

    Regulatory challenges

    Q3: Discussed the Cumberland stay, with 6th Circuit Court issuing a legal hold. No specific mentions in Q2/Q1.

    Focused on state-level hurdles in the Northeast; emphasized defending federal permits thoroughly. No mention of the Cumberland stay.

    Cumberland not referenced in Q4; overall, permitting remains an ongoing challenge

    RNG business, RIN sales

    Q2: Acknowledged RNG operations more difficult than expected; paused large acquisitions. No mentions in Q3/Q1.

    Lower-than-expected RIN sales; some RINs pushed into next year, impacting quarterly results.

    Recent underperformance; potential operational improvements pending

    Cost inflation risks

    Not discussed in Q3, Q2, or Q1.

    Newly highlighted: Procurement already underway on big projects to mitigate inflation.

    Emergent Q4 concern

    EPS growth guidance

    No prior references in Q3/Q2/Q1.

    Raised 2025 EPS growth outlook to 10% from 8%, aided by favorable commodity prices, acquisitions, and tanker upside.

    Upward revision; signals management confidence

    Negative Waha prices

    Q1: Noted brief negative pricing in the Permian due to warm winter, with some benefit from storage. No Q2/Q3 references.

    Not mentioned in Q4.

    Topic dropped after Q1

    Refined product volumes

    Q3: Volumes up 1% YoY; minimal discussion of weakness ; Q2: Slightly below plan (~1%) but still +2% vs. prior year ; Q1: -1% vs. Q1 2023.

    Up 2% year-over-year in Q4; overall 3% below plan but improved vs. 2023 levels.

    Earlier weakness not emphasized; modest rebound noted

    Cumberland project stay

    Q3: Legal stay issued by 6th Circuit for Army Corps/Tennessee permits; Kinder Morgan disputes ruling. Q2/Q1: No details.

    No direct mention in Q4.

    Lapsed from discussion after Q3

    Large infrastructure expansions

    Q3: Total backlog $5.1B, emphasizing future expansions ; Q2: Predicted >20 Bcf/day by 2030, highlighted South System 4 ; Q1: Projected big demand from AI, data centers, LNG.

    $8.1B backlog; expansions like Trident/MSX to meet rising demand, potentially adding 28 Bcf/day by 2030.

    Significant long-term growth driver

    1. EPS Growth Outlook
      Q: Can EPS growth exceed 10% in 2025?
      A: Management indicated that with favorable commodity prices and the accretive Outrigger acquisition, there is potential for EPS growth to exceed 10% in 2025. Higher crude and natural gas prices could boost gathering and processing volumes, and they also see upside in the Jones Act tankers. While it's early in the year, they are optimistic but are not changing guidance yet.

    2. Project Backlog and CapEx Plans
      Q: Can you elaborate on the $8.1 billion backlog and future capital expenditure plans?
      A: The project backlog is at $8.1 billion, the largest in some time. Management plans to spend around $2.5 billion per year on capital projects over the next several years, funded internally ,. Although adding over $5 billion of projects last year is hard to repeat, they see significant opportunities due to expected natural gas demand growth of 28 Bcf/day by 2030 ,. They anticipate ongoing additions to the backlog, including both large-scale and smaller projects.

    3. Acquisition Strategy
      Q: How are you balancing acquisitions with increased organic investment opportunities?
      A: The company approaches M&A opportunistically, evaluating each opportunity individually. Their acquisition criteria remain unchanged. Currently, they can fully fund contracts with internally generated cash and have no need to issue equity. However, for a substantial acquisition that makes economic sense, they are not opposed to issuing equity.

    4. LNG Export Opportunities
      Q: Can you speak to your positioning regarding LNG exports?
      A: Kinder Morgan serves about 45% of the LNG export market. They have total contracts of approximately 10.7 Bcf/day for LNG exports, which will grow over time. With an anticipated future capacity addition of 15 Bcf/day, they see significant opportunities to capture more market share as LNG demand grows.

    5. Impact of New Administration on Natural Gas Demand
      Q: How does the new administration's emphasis on AI and data centers affect natural gas demand and Kinder Morgan?
      A: Management believes they are in the early stages of a positive trend with increasing power demand from data centers ,. The administration's support for data center development and American energy contributes to promising long-term natural gas demand growth, projected to increase by 28 Bcf/day by 2030. They see potential for power demand growth to exceed current estimates of 3 Bcf/day, possibly reaching 10 Bcf/day.

    6. Q4 EBITDA Shortfall Explanation
      Q: What factors contributed to the Q4 EBITDA being $100 million below budget?
      A: The shortfall was due to commodity headwinds, lower than expected Renewable Natural Gas (RNG) sales, and a delay in Renewable Identification Numbers (RINs) sales caused by market liquidity issues. Some RINs produced in the quarter were pushed into the next year.

    7. Shift Toward Smaller Projects
      Q: Do you foresee a shift to smaller end-user projects like laterals to power plants or data centers?
      A: Management anticipates opportunities in both large-scale projects and smaller "singles and doubles" connecting to power plants and data centers. While larger projects are more complex and less frequent, they expect more opportunities in smaller capital-efficient projects, which may offer better multiples.

    8. Haynesville Volume Outlook
      Q: How are you forecasting the return of Haynesville volumes?
      A: After a pullback due to lower prices, activity in the Haynesville is picking up, driven by expectations of increased LNG demand. If current prices are sustained, they anticipate more activity in the basin.

    9. Leverage and Funding Capacity
      Q: Is $2.5 billion per year a spending ceiling, and how do you fund it?
      A: The $2.5 billion per year is an average estimate based on current projects and likely opportunities over the next 3–4 years. They can fund this amount internally without external capital and can handle annual fluctuations due to their strong balance sheet, ending the year at 4x leverage and expecting to reach 3.8x by the end of 2025.

    10. Impact of Weather Events
      Q: How have recent weather events impacted operations?
      A: There was no significant impact from California fires or cold weather events. Operations were briefly down for two days on some pipelines in California, but volumes are expected to be made up. Their operations team managed the cold weather effectively with minimal disruptions.

    11. Procurement Strategies Amid Inflation
      Q: How are you mitigating cost inflation risks in your projects?
      A: Management is proactively engaged in procurement for all three major pipeline projects. They have agreements in place to purchase steel and compression equipment, working diligently to mitigate cost inflation risks.

    12. Northeast Expansion Challenges
      Q: Are there changes that might make Northeast pipeline expansions more feasible?
      A: The main challenges in the Northeast are state-level permits and commercial structures, not federal permitting. The inability for Independent Power Producers to pass through fixed demand charges makes it harder for them to contract on a firm basis. There have been no changes in these hurdles.