KMI
Earnings call · Jun 2025 (Q2 FY25)

KINDER MORGAN Q2 FY25 earnings call KMI

Jul 16, 2025 Source

Executive summary

Kinder Morgan Q2 FY25 — Strong Growth and Expanding Project Backlog

Kinder Morgan delivered strong Q2 FY25 results, driven by robust natural gas demand and strategic project expansions. The company's project backlog grew significantly, underpinned by long-term contracts and an improved permitting environment. Management remains focused on capital discipline, shareholder returns, and maintaining a solid balance sheet, while navigating minor tariff impacts and optimizing existing assets.

Highlights

5

  • Adjusted EBITDA increased by 6% over Q2 2024.

  • Adjusted EPS increased by 12% over Q2 2024 to $0.28.

  • Project backlog increased from $8.8 billion to $9.3 billion, with $1.3 billion in new projects added.

  • Net debt to adjusted EBITDA ratio improved to 4.0x from 4.1x.

  • Dividend declared at $0.2925 per share, up 2% from 2024.

Concerns

3

  • Tariffs are estimated to impact large project costs by roughly 1%, though not significantly impacting project economics.

  • Natural gas gathering volumes were down 6% in Q2 2025 versus Q2 2024, and expected to be 3% below 2025 budget for the full year.

  • CO2 segment oil production volumes were slightly lower at 3% in Q2 2025 versus Q2 2024, and forecasted to be 4% below 2024 for the full year.

Guidance & targets

CategoryTargetConfidence
Full-year 2025 Adjusted EBITDA
Exceed original budget by at least Outrigger acquisition contribution
high materiality
High
Full-year 2025 Adjusted EBITDA growth (including Outrigger)
5%
high materiality
High
Full-year 2025 Adjusted EPS growth (including Outrigger)
10%
high materiality
High
Full-year 2025 Natural Gas gathering volumes
3% above 2024 average, 3% below 2025 budget
medium materiality
Medium
Full-year 2025 Refined products volumes
2% higher than 2024, flat to budget
medium materiality
High
Full-year 2025 CO2 segment oil volumes
4% below 2024, 1% below 2025 budget
medium materiality
Medium
Year-end 2025 Net debt to adjusted EBITDA
3.9x
high materiality
High
Material cash taxpayer status
Not a material cash taxpayer
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Natural Gas business unit
Transport volumes primarily due to LNG deliveries on Tennessee Gas Pipeline and new contracts on Texas Intrastate system. Gathering volumes impacted by lower gas prices in H2 2024.
Transport volumes: up 3% YoYGathering volumes: down 6% YoYGathering volumes: down 1% QoQ
—3%——
Products Pipeline segment
Consistent performance across refined products and crude/condensate volumes.
Refined products volumes: up 2% YoYCrude and condensate volumes: up 2% YoY
—2%——
Terminals business segment
Strong market conditions at Houston Ship Channel and New York Harbor. Jones Act tanker fleet fully leased through 2025, 100% through 2026, and 97% through 2027 (assuming options). Average firm contract commitment extended to 4 years.
Liquids lease capacity: 94%Jones Act tanker fleet leased: 100% (2025)Jones Act tanker fleet leased: 100% (2026)Jones Act tanker fleet leased: 97% (2027)
————
CO2 segment
Mixed performance across products, with NGL volumes showing strong growth.
Oil production volumes: down 3% YoYNGL volumes: up 13% YoYCO2 volumes: down 8% YoY
————

Operational metrics

Adjusted EBITDA
6% YoY increase
Q2 FY25

Strong growth over Q2 2024.

Adjusted EPS
$0.28 Up 12% YoY
Q2 FY25

Excludes certain items, still experienced nice double-digit growth.

Net income attributable to KMI
$715M Up 24% YoY
Q2 FY25

Includes benefit from favorable mark-to-market on unsettled hedges.

EPS
$0.32 Up $0.06 YoY
Q2 FY25

Includes benefit from favorable mark-to-market on unsettled hedges.

Total capital invested
$1.42B
First 2 quarters FY25

Used in net debt reconciliation.

Outrigger acquisition cost
$650M
First 2 quarters FY25

Used in net debt reconciliation.

Net debt
$32.3B Up $623M from beginning of year
Q2 FY25 end

Reconciled by CFO, dividends, capital invested, and Outrigger acquisition.

Net debt to adjusted EBITDA
4.0x Down from 4.1x (Q1 FY25)
Q2 FY25 end

Improved from Q1 after Outrigger acquisition.

Dividend per share
$0.2925 Up 2% YoY
Q2 FY25

Declared for the quarter.

Jones Act tanker average firm contract length
4 Extended
Q2 FY25

Extended by opportunistically chartering at higher market rates.

FERC prior notice limit
$61M Up 50%
Q2 FY25

Projects below this limit do not require a 7c filing, speeding up permitting.

LNG feed gas demand
3.5 Bcf/day vs. Summer 2024
Summer 2025

Expected increase in U.S. LNG feed gas demand.

LNG feed gas demand
More than double vs. current
By 2030

Expected growth in U.S. LNG feed gas demand.

Global gas demand
25% Expected increase
Next 25 years

Projection for worldwide natural gas demand.

U.S. natural gas demand
20% Expected increase
Between now and 2030

Underlying market fundamentals are strong.

LNG feed gas moved by KMI
40%
Current

Share of all feed gas for liquefaction facilities.

Project backlog multiple
5.6x Slightly improved from Q1
Q2 FY25

Projects placed in service were at a lower multiple than those added to backlog.

Project backlog serving power demand
50%
Q2 FY25

Reflects the significant portion of current backlog dedicated to power sector.

Haynesville production
Doubling
By 2034

Expected growth in the Haynesville basin, from 13 Bcf/day to 26 Bcf/day.

Industry KPIs

MetricValueDetails
Pipeline throughput storage3% %
Sanctioned expansion backlog$9.3B USD
Basin level production volumeDown 6% %
FCF shareholder distributions$1.3B USD
Take or pay contract structureLife-of-lease contract type

Orderbook & backlog

Project backlog $9.3B Q2 FY25 end

Increased from $8.8B (Q1 FY25)

Added $1.3B in new projects, placed $750M in service during the quarter.

Deals & partnerships

Outrigger Energy II Acquisition of natural gas gathering and processing assets in the Bakken $650M

Closed after Q1 FY25, contributed to Q2 results and full-year outlook.

Multiple (LNG market, power plants) New natural gas transportation and power supply contracts $1.3B (total new projects) Long-term

Includes Trident Phase 2, Louisiana Line Texas Access Project (moving gas from Katy, TX to Louisiana LNG market), and two NGPL projects serving power plants. All underpinned by long-term contracts.

Capital programs

KinderHawk expansion Approved $500M

Benefit:Significant volume ramp-up

Supported by life-of-lease contracts to accommodate customer volume ramp-up in Haynesville. Involves adding treating capacity and incremental pipe loops.

Risks & headwinds

Tariffs on project costs Current

Roughly 1% of project cost for large projects (MSX, South System 4, Trident, GCX, Bridge)

Mitigation:Do not believe tariffs will have a significant impact on project economics.

Lower natural gas gathering volumes Q2 FY25, Full-year FY25

Down 6% YoY in Q2 FY25; 3% below '25 budget for full year

Mitigation:Anticipate gathering volumes will grow over the balance of the year given the higher price environment than in 2024 and the need for increased production to meet LNG demand growth.

CO2 segment oil production decline Q2 FY25, Full-year FY25

Down 3% YoY in Q2 FY25; 4% below 2024 for full year

Mitigation:Not explicitly stated, but NGL volumes were up 13% YoY.

Permian overbuild and recontracting risk for GCX/PHP Later in the decade (2029-2030)

5 Bcf/d comes online next year

Mitigation:GCX and PHP have attractive rates; pipelines fit well into KMI's network, feeding end-use demand in Austin market; KMI's economic models conservatively assume a step down in rates when contracts roll.

What to watch in Q3 FY25

Haynesville production ramp-up

Next quarter, leading up to Q4 2026
Current KinderHawk CapEx approved, facilities to be in by end of Q4 2026
Target Volume ramping up, progress towards WoodMac's doubling projection by 2034

Why it matters

Verifies the effectiveness of the $500M KinderHawk CapEx and the underlying demand for Haynesville gas, critical for future growth.

On your first question, we plan on getting all of our facilities in by the end of the fourth quarter next year. And so we do see volume ramping up along the way.

Q&A highlights

How has the commercial landscape changed, what allows KMI to win projects, and what learnings shape future strategy?

KMI's existing asset footprint, track record of project delivery, and strong customer service are key competitive advantages. The company focuses on building off its extensive network and ensuring reliable supply for customers' significant investments.

“I think what -- part of what allows us to be competitive is the existing asset footprint that we have. We've got an outstanding footprint. And so we are very competitive where we can build off of that footprint and/or use the existing footprint to deliver volumes to customers.”

asked by Theresa Chen · answered by Kimberly Dang

2 min read 6 chapters

Detailed narrative

Natural Gas Market Outlook

Rich Kinder highlighted the international nature of the natural gas market, projecting a 25% increase in global gas demand over the next 25 years, driven by population growth in emerging markets. LNG exports from the U.S. are expected to play a critical role, with S&P Global estimating a 3.5 Bcf/day increase in LNG feed gas demand this summer compared to 2024, more than doubling by 2030. This robust demand, combined with U.S. domestic power and industrial needs, signals a long-term positive outlook for natural gas.

Improved Permitting Environment

Management noted significant improvements in the federal permitting environment, including quicker permit issuance by the U.S. Army Corps of Engineers and recent FERC actions. These include a 50% increase in the prior notice limit to $61 million and a 1-year waiver of the 5-month waiting period for construction starts. The Supreme Court ruling on NEPA is also expected to narrow review scope and reduce nuisance lawsuits, collectively streamlining project development.

Tax Benefits and Financial Strength

The recent budget reconciliation bill is anticipated to deliver substantial cash tax benefits, particularly in 2026 and 2027, with Kinder Morgan not expecting to be a material cash taxpayer until 2028. This, combined with a solid balance sheet (net debt to adjusted EBITDA of 4.0x, expected to round to 3.9x by year-end), provides financial flexibility for attractive return projects and shareholder returns.

Project Backlog Growth and Strategy

The project backlog expanded from $8.8 billion to $9.3 billion, with $1.3 billion in new projects added and $750 million placed in service. New projects include Trident Phase 2 and Louisiana Line Texas Access, serving LNG markets, and two NGPL projects for power plants. Approximately 50% of the current backlog serves power demand, reflecting a broad demand base beyond just LNG. The company maintains a disciplined capital allocation strategy, prioritizing stable fee-based assets and attractive returns.

Jones Act Tanker Fleet Performance

The Terminals segment's Jones Act tanker fleet is fully leased through 2025, 100% through 2026, and 97% through 2027, assuming options are exercised. The company has opportunistically chartered a significant portion of the fleet at higher market rates, extending the average firm contract commitment length to 4 years, contributing positively to financial results.

Haynesville Expansion

Kinder Morgan approved approximately $500 million in CapEx for KinderHawk, supported by life-of-lease contracts to accommodate significant volume ramp-up by customers in the Haynesville basin. This expansion aims to unlock hydraulics and add treating capacity, aligning with WoodMac's projection of a doubling of Haynesville production by 2034.

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