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    KMI
    Earnings call· Mar 2025(Q1 FY25)

    KINDER MORGAN, INC. KMI

    Apr 16, 2025 Source

    Executive summary

    Kinder Morgan Q1 FY25 — Strong Natural Gas Demand and Project Backlog Growth

    Kinder Morgan delivered a solid Q1 FY25, driven by robust natural gas demand and strategic project additions to its backlog, despite some headwinds from lower gathering volumes and tariff uncertainties. The company remains bullish on natural gas growth, particularly from LNG exports and power demand, and is actively pursuing capital-efficient expansions while maintaining a strong balance sheet and shareholder returns.

    Highlights

    5

    • Added approximately $900 million to project backlog, reaching $8.8 billion, with over 70% focused on power demand.

    • Natural Gas transport volumes increased 3% YoY, setting new peak day records on 4 of 5 largest pipeline systems.

    • Adjusted net income grew 1% to $766 million, and adjusted EPS remained flat at $0.34, exceeding expectations.

    • Declared a dividend of $0.2925 per share, a 2% increase from last year, annualized to $1.17 per share.

    • Closed $640 million acquisition of Bakken gathering and processing system, performing in line with expectations.

    Concerns

    4

    • Natural Gas gathering volumes decreased 6% YoY, primarily due to lower Haynesville production, and are expected to be 2% below 2025 budget for the full year.

    • Net income attributable to KMI decreased 4% to $717 million, and GAAP EPS decreased $0.01 to $0.32, largely due to unfavorable mark-to-market on hedges.

    • Uncertainty of tariffs and commodity prices led to a more conservative outlook for the year, despite expected budget exceedance.

    • Net debt increased by just over $1 billion from the beginning of the year, partly due to a $300 million working capital use.

    Guidance & targets

    7
    CategoryTargetConfidence
    Full-year budget performance
    Exceed budget by at least Outrigger acquisition contribution
    medium materiality
    High
    Adjusted EBITDA growth
    5%
    high materiality
    High
    Adjusted EPS growth
    10%
    high materiality
    High
    Net debt to adjusted EBITDA
    3.8x
    high materiality
    High
    Full-year gathering volumes growth
    5% above 2024
    medium materiality
    Medium
    Full-year refined product volumes growth
    2% higher than 2024
    medium materiality
    Medium
    Full-year CO2 segment oil volumes
    1% below 2024
    medium materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Natural Gas
    Transport volumes increased due to prolonged cold weather and confluence of demand drivers (residential, commercial, power, LNG). Gathering volumes declined primarily due to lower Haynesville production, but expected to grow over balance of 2025.
    Transport volumes: up 3% YoYGathering volumes: down 6% YoYSequential total gathering volumes: down 2%New peak day volume records: set on 4 of 5 largest pipeline systems
    		————
    Products Pipelines
    Refined products volumes increased. Placed $17 million Florida jet fuel expansion project into service in March 2025, fully contracted with 10-year commitments.
    Refined products volumes: up 2% YoYCrude and condensate volumes: up 4% YoY
    		————
    Terminals
    High liquids lease capacity maintained. Softening refining cracks and blending margins remain supportive. Opportunistically chartered tanker fleet at higher market rates and extended contract commitments.
    Liquids lease capacity: 94%Jones Act tanker fleet leased: 100% today, 97% through 2025, 94% through 2026Average length of firm contract commitments (Jones Act fleet): 4 years
    		————
    CO2
    Experienced slightly lower oil production and CO2 volumes, but higher NGL volumes. Placed Autumn Hills RNG facility into service in March 2025.
    Oil production volumes: down 1% YoYNGL volumes: up 5% YoYCO2 volumes: down 7% YoYAutumn Hills RNG facility capacity: 0.8 Bcf annuallyTotal KMI RNG capacity: 6.9 Bcf per year
    		————

    Operational metrics

    20
    Natural Gas Demand Growth
    80%
    2005-2024

    U.S. demand for natural gas grew from approximately 60 Bcf/day in 2005 to almost 109 Bcf/day in 2024.

    Net Income attributable to KMI
    down 4%YoY
    Q1 FY25

    Net income attributable to KMI was $717 million, down 4% from Q1 last year, largely due to unfavorable mark-to-market on hedges.

    EPS
    down $0.01YoY
    Q1 FY25

    EPS was $0.32, down $0.01 from last year, largely due to unfavorable mark-to-market on hedges.

    Adjusted Net Income
    $766 millionup 1%
    Q1 FY25

    Excludes certain items like unfavorable mark-to-market on hedges.

    Adjusted EPS
    $0.34flat
    Q1 FY25

    Excludes certain items like unfavorable mark-to-market on hedges.

    Dividend per share
    $0.2925up 2%
    Q1 FY25

    Declared for Q1 FY25.

    Net Debt
    $32.8 billion
    Q1 FY25 end

    Increased by just over $1 billion from the beginning of the year.

    Net Debt to Adjusted EBITDA
    4.1x
    Q1 FY25 end

    Includes only 1.5 months of EBITDA from Outrigger acquisition, expected to improve.

    Working Capital Use
    more than $300 million
    Q1 FY25

    Part of the $1 billion increase in net debt, made up of interest expense payments and typical Q1 payments of bonus and property tax.

    Dividends Paid
    $650 million
    Q1 FY25

    Paid during the quarter.

    Total CapEx
    $770 million
    Q1 FY25

    Expended during the quarter.

    Collateral Posted for Hedges
    $90 million
    Q1 FY25

    Posted for natural gas hedges, contributing to net debt increase.

    EBITDA Exposure to Commodity Prices
    5%
    current

    Only 5% of EBITDA is exposed to commodity prices, with almost 2/3 from take-or-pay contracts and 30% fee-based or hedged.

    Natural Gas Demand Growth
    6.8 Bcf/day
    Q1 FY25

    Record natural gas demand in Q1 FY25.

    LNG Feedgas Demand
    15.5 Bcf/daysetting records
    Q1 FY25 average

    Approaching 17 Bcf/day on several recent days, despite China not importing U.S. LNG since February.

    LNG Demand Growth
    16 Bcf/day
    2024-2030

    Estimated growth, with the great bulk coming from facilities already under construction or FID.

    Project Backlog Power-related
    50%
    current

    50% of the projects in the overall backlog are related to power demand.

    Tariff Impact on Project Costs
    1%
    current

    Estimated impact of tariffs on new large projects (Mississippi Crossing, South System Expansion 4, Trident, GCX, Bridge).

    Finished Steel Pipe Exposure to Tariffs
    less than 10%
    current

    For new large projects, KMI has locked in costs and mitigated exposure.

    Permit Timing Acceleration
    up to 5 months
    future

    Potential acceleration on permits from a FERC filing made on Monday.

    Industry KPIs

    4
    MetricValueDetails
    Pipeline throughput storage40%%
    Sanctioned expansion backlog$8.8 billionUSD
    FCF shareholder distributions$650 millionUSD
    Take or pay contract structurealmost 2/3%

    Orderbook & backlog

    1
    Project Backlog$8.8 billionQ1 FY25 end

    added approximately $900 million this quarter

    After adjusting for projects placed in service. Over 70% of new additions focused on power demand.

    Deals & partnerships

    1
    Outrigger Energy II LLCAcquisition of Bakken gathering and processing system.$640 million

    Complements existing assets in the Bakken basin.

    Capital programs

    6
    Florida Jet Fuel Expansion Projectcompleted$17 million

    Benefit: Enhanced jet fuel deliveries to Orlando, FL market; increased pipeline transportation capacity into Orlando International Airport; faster return-to-service solution following hurricane-related power outages.

    Fully contracted with 10-year commitments from the Orlando airline consortium.

    Autumn Hills RNG Facilitycompleted

    Benefit: 0.8 Bcf of RNG annually; brings KMI's total RNG capacity to 6.9 Bcf per year.

    Placed into service in March 2025.

    Bridge Projectunderway$430 million

    Benefit: Deliver about 325 MMcf/d into South Carolina, easily expandable to over 1 Bcf/d.

    Largest project added to backlog this quarter, supported by a 30-year contract, primarily serving increased power demand.

    Evangeline Pass Expansion Projectunderway

    On track to come online this summer, contributing to 2025 budgeted growth.

    South Texas and Houston Projectnearing completion

    Part of multiple projects on Texas Intrastate system, contributing to 2025 budgeted growth.

    Webb County and Central Texas Expansioncompleted

    Additional projects on Texas Intrastate system, contributing to 2025 budgeted growth. Central Texas pipeline feeds off PHP into Austin area.

    Risks & headwinds

    4
    Uncertainty of tariffs2025 (not expected to be material to operations)

    Estimated 1% impact on project costs for major projects; less than 10% exposure for finished steel pipe.

    Mitigation: Preordering equipment, negotiating caps on tariff impact, securing domestic steel and mill capacity, potential permitting relief to bring projects in service earlier.

    Commodity price volatilityCurrent

    WTI dipping towards $60 and below; only 5% of KMI's EBITDA exposed to commodity prices.

    Mitigation: Resilient business model with almost 2/3 EBITDA from take-or-pay contracts and 30% fee-based/hedged; Tier 1 acreage in gathering systems; dry gas plays (Haynesville) provide offset.

    Lower Haynesville productionQ1 FY25, full year 2025

    Natural Gas gathering volumes down 6% YoY in Q1 FY25; expected to be 2% below 2025 budget for full year.

    Mitigation: Producers ramping back up due to higher gas prices, need for storage refill, and LNG demand growth; KMI approaching capacity in Haynesville and discussing incremental capacity additions.

    Unfavorable mark-to-market on hedgesQ1 FY25

    Caused 4% decline in GAAP net income and $0.01 decline in GAAP EPS in Q1 FY25.

    Mitigation: These are timing effects on hedges that have not yet settled; adjusted net income and EPS exclude these items.

    What to watch in Q2 FY25

    4

    Haynesville Gathering Volumes

    Next quarter / Summer 2025
    Currentdown 6% YoY in Q1 FY25; 2% below 2025 budget for full year
    TargetGrowth over the balance of 2025, approaching capacity across the summer

    Why it matters

    Recovery of Haynesville volumes is key to meeting full-year gathering volume targets and reflects producer activity in a key dry gas basin.

    For the full year, we expect our gathering volumes to average 5% above 2024 but 2% below our 2025 budget. We anticipate gathering volumes will grow over the balance of 2025 given the higher price environment, producer conversations and plans and the need for increased production to meet storage refill demand and LNG demand growth that is ramping up throughout the year.

    Q&A highlights

    7

    How is the activity level for new gas pipeline projects related to data centers and utilities?

    Activity is strong, especially with regulated utilities. 70% of new backlog additions are power-related, and 50% of the total backlog is power-related. KMI is well-positioned in the Southern U.S. where much of this activity is occurring.

    “I'd also say if you look at our total backlog, like 50% of the projects in our overall backlog are related to power.”

    asked by Michael Blum · answered by Kimberly Dang

    2 min read6 chapters

    Detailed Narrative

    01

    Natural Gas Demand Outlook

    Rich Kinder detailed a bullish outlook for natural gas demand, projecting growth of 20 to 28 Bcf/day between 2024 and 2030, primarily driven by LNG exports (estimated 16 Bcf/day from sanctioned projects). He addressed concerns about data center demand and tariffs, arguing that EU and Asian demand for U.S. LNG would offset any potential loss from China, which has not imported U.S. LNG since February.

    02

    Project Backlog and Capital Allocation

    The company added approximately $900 million to its project backlog, bringing the total to $8.8 billion. Over 70% of these new projects are focused on serving power demand, including the $430 million Bridge project, an extension of the Elba Express pipeline with a 30-year contract. KMI expects to fund its CapEx from existing cash flow and maintains a strong balance sheet.

    03

    Tariff Impact Mitigation

    Management estimates the impact of tariffs on major projects (Mississippi Crossing, South System Expansion 4, Trident, GCX, Bridge) to be roughly 1% of project costs. They are mitigating this through preordering equipment, negotiating caps, and securing domestic steel. Less than 10% of finished steel pipe costs are exposed to tariffs for these projects.

    04

    Operational Performance Highlights

    Natural Gas transport volumes increased 3% YoY, with new peak day records on four of five largest pipeline systems. Refined products volumes were up 2%. The Terminals segment maintained high liquids lease capacity at 94%, and the Jones Act tanker fleet is 97% leased through 2025 and 94% through 2026.

    05

    Management Succession

    Tom Martin announced his intention to retire in January 2026, transitioning to an advisory role. Dax Sanders, current President of Products business segment, will succeed him as President, with Mike Garthwaite becoming President of Products Pipeline in August. This transition is part of the company's planned succession.

    06

    Permitting Environment

    KMI sees positive movement in the permitting environment, with discussions with the administration and FERC aiming to accelerate project timelines. A recent FERC filing could reduce permit timing by up to 5 months, and other regulatory actions (e.g., Good Neighbor rule, SEC greenhouse gas reporting) are seen as favorable for the industry.

    AI-generated summary of the company’s earnings call. Not investment advice.