Kinder Morgan, Inc. (KMI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates strong financial performance, growth in natural gas demand, and strategic partnerships, such as with Phillips 66. Despite some uncertainties in project impact and asset sales, the company's solid financial health and dividend growth, along with a promising project backlog, suggest a positive outlook. The Q&A session highlighted manageable risks, supporting the positive sentiment. However, the lack of specific guidance on certain projects and potential upsizing limits the rating to positive rather than strong positive.
Key Financial Performance
Adjusted EBITDA For the quarter, adjusted EBITDA was up 10% compared to the fourth quarter of last year. The increase was driven by the extraordinary strength of natural gas assets.
Adjusted EPS Adjusted EPS grew 22% compared to the fourth quarter of last year. This growth was attributed to the strong performance of natural gas assets.
Project Backlog The project backlog increased by approximately $650 million to $10 billion. This was due to the addition of over $900 million in new projects, offset by $265 million of projects placed in service.
Natural Gas Transport Volumes Transport volumes were up 9% in the quarter versus the fourth quarter of 2024, primarily due to increased LNG feed gas deliveries on Tennessee Gas Pipeline. For the full year, transport volumes were up 5% over 2024.
Natural Gas Gathering Volumes Gathering volumes were up 19% in the quarter from the fourth quarter of 2024, with the largest impact being from the Haynesville system. Sequentially, total gathering volumes were up 9%, and for the full year, gathering volumes were up 4% versus 2024.
Refined Products Volumes Refined products volumes were down 2% in the quarter compared to the fourth quarter of 2024. For the full year 2025, refined products volumes were about equal to 2024.
Crude and Condensate Volumes Crude and condensate volumes were down 8% in the quarter compared to the fourth quarter of 2024. This decline was primarily driven by taking HH out of service for the NGL conversion project early in the third quarter of 2025. Excluding HH volumes, crude and condensate volumes were up 6% in the quarter compared to the fourth quarter of 2024.
Dividend A quarterly dividend of $0.2925 per share was declared, which is $1.17 per share annualized, up 2% from 2024.
Net Income and EPS Net income attributable to KMI was $996 million, and EPS was $0.45, which were 49% and 50% above the fourth quarter of 2024, respectively. This growth was driven by newly placed in-service natural gas expansion projects, contributions from the Outrigger acquisition, and strong demand for natural gas transport, storage, and related services.
Adjusted Net Income and Adjusted EPS Excluding certain items, adjusted net income and adjusted EPS grew 22% above the fourth quarter of 2024. This growth was driven by natural gas expansion projects and strong demand for related services.
Full-Year Adjusted EBITDA and EPS For the full year 2025, adjusted EBITDA grew by 6% and adjusted EPS grew by 13% compared to 2024. This growth exceeded the budgeted growth of 4% for adjusted EBITDA and 10% for adjusted EPS.
Net Debt to Adjusted EBITDA Ratio The net debt to adjusted EBITDA ratio improved to 3.8x, down from 3.9x last quarter and 4.1x at the end of the first quarter of 2025. This improvement was due to disciplined capital allocation and strong cash flow generation.
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Operating Highlights
Natural Gas Expansion Projects: Newly placed in service projects and contributions from the Outrigger acquisition drove growth in natural gas transport, storage, and related services.
Western Gateway Pipeline System: KMI and Phillips 66 announced the second open season for the Western Gateway Pipeline system, connecting Midwest refinery supply to Phoenix, California, and Las Vegas.
LNG Feed Gas Demand: Projected to grow to 19.8 Bcf per day in 2026, a 19% increase from 2025, and expected to exceed 34 Bcf per day by 2030.
Natural Gas Market Growth: Wood Mac projects an incremental 20 Bcf per day of demand growth between 2030 and 2035.
Adjusted EBITDA and EPS Growth: Adjusted EBITDA grew by 10% and adjusted EPS by 22% in Q4 2025 compared to Q4 2024.
Transport and Gathering Volumes: Transport volumes increased by 9% in Q4 2025, and gathering volumes rose by 19% compared to Q4 2024.
Balance Sheet Strength: Net debt to adjusted EBITDA ratio improved to 3.8x, and S&P upgraded KMI to BBB+.
Project Backlog: Increased by $650 million to $10 billion, with $900 million in new projects added.
Future Opportunities: Working on over $10 billion in project opportunities beyond the current backlog.
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Risk or Challenges
Regulatory Approvals: The company is awaiting FERC's final certificate for key projects like MSX and South System 4, which introduces regulatory risk. Delays or unfavorable decisions could impact project timelines and financial outcomes.
Refined Products and Crude Volumes: Refined products volumes were down 2% and crude and condensate volumes were down 8% in Q4 2025 compared to Q4 2024. This decline, partly due to the NGL conversion project, could affect revenue from these segments.
CO2 Segment Performance: The CO2 segment experienced lower oil, NGL, and CO2 production volumes in Q4 2025 compared to Q4 2024, which could impact the segment's profitability.
Market Competition: The company faces competitive pressures in securing new project opportunities, as it acknowledges it won't be successful in all of them. This could limit growth potential.
Economic and Market Conditions: While the natural gas market is projected to grow, any economic downturns or shifts in market demand could adversely affect the company's performance.
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Guidance & Outlook
Natural Gas Demand Growth: The company expects natural gas demand to grow significantly, with LNG feed gas demand projected to average 19.8 Bcf per day in 2026, a 19% increase from 2025, and further increasing to over 34 Bcf per day by 2030. This growth is driven by expansions of existing export facilities and new greenfield projects.
Project Backlog and Opportunities: The project backlog has increased to $10 billion, with $900 million in new projects added. The company is also exploring over $10 billion in additional project opportunities beyond the backlog, indicating strong market potential for future growth.
Major Projects Update: Construction has started on the Trident project, and the MSX and South System 4 projects are on or ahead of schedule, with final certification expected by July 31, 2026. All three projects are on budget.
Western Gateway Pipeline System: The second open season for the Western Gateway Pipeline system concludes on March 31, 2026, offering expanded destinations and origin points. This project aims to provide an attractive supply alternative for markets in Arizona and California.
Jones Act Tanker Fleet: The fleet is 100% leased through 2026, 97% leased through 2027, and 80% leased through 2028, with firm contract commitments averaging over three years. This ensures stable revenue from the tanker fleet.
Financial Guidance for 2026: The company expects continued strong performance in 2026, driven by natural gas assets and newly placed in-service projects. The balance sheet is expected to remain strong, with additional investment capacity generated from tax reform benefits.
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Shareholder Return Plan
Quarterly Dividend: $0.2925 per share, which is $1.17 per share annualized, up 2% from 2024.
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Key Q&A
Q:Can you discuss the 70% exposure to data center opportunities and provide regional insights?
A:Kimberly Dang clarified that the 70% figure might not be accurate but highlighted that 60% of their $10 billion backlog is associated with power projects, including data centers. She provided examples of power demand growth in states like Georgia, South Carolina, Louisiana, and others, emphasizing the long-term opportunities driven by increasing power demand.
Q:What is the timing and scope of the SSE5 project?
A:Sital Mody stated that the timing and scope depend on customer demand and final subscription. The project could involve more than just compression, potentially including brownfield looping. The final announcement will depend on signed deals.
Q:What are the next steps for the Western Gateway project, and how does it compare to natural gas opportunities?
A:Kimberly Dang explained that the project is evaluated based on risk and return, with expected long-term shipper contracts from creditworthy counterparties. The company has sufficient capital to fund this project alongside other natural gas projects. A 50-50 joint venture with P66 will reduce Kinder Morgan's cash contribution.
Q:How will leverage levels be managed given multiple CapEx opportunities?
A:Kimberly Dang stated that the company plans to spend about $3 billion per year in CapEx, funded entirely from cash flow. As the $10 billion backlog comes online, debt-to-EBITDA will decline, creating more balance sheet capacity. The company does not intend to leverage up to the high end of its 3.5-4.5x range.
Q:What is the net EBITDA impact of the Western Gateway project, considering the displacement of existing SSPP EBITDA?
A:Kimberly Dang mentioned that it is too early to quantify the net EBITDA impact as the project is still in the negotiation and cost finalization phase.
Q:What is the progress and expected contribution of the HH conversion project?
A:Kimberly Dang and Sital Mody stated that Phase 1 of the project is expected to come online in late Q1 or early Q2. The initial phase is well-contracted, and discussions for future phases are ongoing. GORs are growing in the Bakken, supporting the project.
Q:What is the impact of Continental Resources stopping drilling in the Bakken?
A:Kimberly Dang noted that Bakken contributes about 3% of Kinder Morgan's EBITDA, and the impact of Continental's decision is manageable due to stronger-than-expected volumes and the presence of multiple customers.
Q:Are there plans to sell more non-core assets?
A:Kimberly Dang explained that asset sales are opportunistic and based on economic decisions. The company is comfortable with its current asset portfolio and does not have specific plans to sell more assets.
Q:What opportunities does Waha egress present, especially during cold weather events?
A:Sital Mody and Kimberly Dang stated that Kinder Morgan leverages its footprint to capitalize on basis dislocations during supply-demand imbalances. However, the current storm is not as significant as Uri, and opportunities will depend on specific conditions.
Q:What are the data center-driven opportunities for NGPL in the Midwest?
A:Sital Mody mentioned significant discussions and interest from power customers and organic markets. Some projects have binding commitments, and the company is working to secure returns before progressing to FID.
Q:Is the faster permitting process for MSX indicative of broader trends?
A:Kimberly Dang explained that the faster permitting for MSX is due to the removal of 871 and a quicker FERC process. However, this does not necessarily translate to faster in-service dates for all projects.
Q:Is Kinder Morgan interested in taking equity stakes in U.S. LNG terminals?
A:Kimberly Dang stated that the company prefers to focus on its core business of serving LNG demand through pipelines. The risk-return profile of LNG terminal investments has not been attractive enough to pursue.
Q:What is the basis for the updated CapEx guidance of at least $3 billion per year?
A:Kimberly Dang explained that the guidance is based on the $10 billion approved project backlog and some expected additions from the opportunity set. The company continues to see growth in natural gas demand.
Q:Will early project completions lead to immediate financial contributions?
A:Kimberly Dang stated that financial contributions depend on project-specific customer contracts. For MSX, customers are not obligated to take capacity early, but the company can use the capacity in secondary markets.
Q:What are the details of the Florida Gas Transmission projects?
A:Sital Mody mentioned that the projects are backed by long-term contracts with creditworthy counterparties. An open season is ongoing, and there is potential for upsizing based on demand.
Q:What drove the earnings upside in Q4, and are these tailwinds persistent?
A:Kimberly Dang attributed the upside to strong performance across the gas business, including Texas intrastate markets, Eagle Ford, Haynesville, and Northeast interstate markets. These conditions could persist, creating future opportunities.
Q:How much of the project backlog is tied to LNG projects?
A:Kimberly Dang stated that 12% of the $10 billion approved project backlog and 12% of the shadow backlog are associated with LNG. Incremental projects often involve existing facilities seeking more competitive supply.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the net EBITDA impact of the Western Gateway project, citing the early stage of negotiations and cost finalization. Additionally, they did not provide specific details on the potential upsizing of the Florida Gas Transmission projects, as the open season is still ongoing.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Angeles market
BBB Fitch
BBB balance
BBB summer
Bcf day
CALNEV season
CEO Dang
California Terminals
California addition
Carteret New
Channel Carteret
Coast location
Colton California
Conference Instructions
Dang outlook
Gas
Gateway
LNG feed
MSX South
South System
Trident
day demand
demand Bcf
feed gas
future
gas expansion
midstream
rating
sale item
schedule
sector
throughput
transport volume
week SP
KMI Transcript
Kinder Morgan, Inc. (KMI) Q4 2025 Earnings Call Transcript
Positive1-21
The earnings call indicates strong financial performance, growth in natural gas demand, and strategic partnerships, such as with Phillips 66. Despite some uncertainties in project impact and asset sales, the company's solid financial health and dividend growth, along with a promising project backlog, suggest a positive outlook. The Q&A session highlighted manageable risks, supporting the positive sentiment. However, the lack of specific guidance on certain projects and potential upsizing limits the rating to positive rather than strong positive.
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Positive10-22
The earnings call indicates strong demand projections, particularly in global gas and U.S. LNG exports, alongside a robust project backlog and investment opportunities. The Q&A section highlights strategic regional opportunities and investment plans, with management addressing competitive concerns. Despite minor guidance changes due to RNG volumes, the overall sentiment is optimistic, supported by expected EPS growth and significant cash tax benefits. These factors contribute to a positive stock price outlook, assuming a moderate market cap reaction.
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