Kinder Morgan: first quarter 2025 financial results and project update

KMI is reporting:

• Q1 net income attributable to KMI of US$717 million, compared to US$746 million in the first quarter of 2024; and adjusted net income attributable to KMI of US$766 million, 1% higher than 1Q24.
• Adjusted EBITDA of US$2157 million, up 1% versus 1Q24.

“Obviously we are going through turbulent times, with some voicing fears of an economic downturn. History shows that our company is largely insulated against temporary volatility, due to our time-tested business model structured around long-term take-or-pay, fee-based contracts with credit-worthy customers. As has been the case in past periods of economic instability, our company can be a safe haven during the storm,” said Executive Chairman Richard D. Kinder. “Looking past this temporary turbulence, we see a bright future based on robust market fundamentals combined with regulatory relief and a commitment to expediting energy infrastructure projects at the federal level.”

“The company enjoyed a solid quarter, with very strong operational performance and increased financial contributions from our Natural Gas Pipelines, CO₂ and Terminals business segments versus the first quarter of 2024. Our Products Pipelines business segment was down mostly due to a turnaround at our condensate processing facility, which is required once every 10 years,” said Chief Executive Officer Kim Dang.

“We continued to internally fund high-quality capital projects while generating cash flow from operations of US$1.2 billion and US$0.4 billion in free cash flow (FCF) after capital expenditures. Our balance sheet remains healthy, as we ended the quarter with a Net Debt-to-Adjusted EBITDA ratio of 4.1 times,” continued Dang. “And we continued to grow our presence in the Bakken, closing on a US$640 million acquisition of Outrigger Energy II’s gathering and processing system, which is backed by long-term contracts with commitments from major customers in the basin.

“The landscape for natural gas continues to be more and more favorable. First quarter US domestic natural gas production volumes were the highest on record. For the second year in a row, the US set a first quarter demand record as demand grew by 6.8 billion ft³/d versus the first quarter of 2024. Residential/commercial natural demand and LNG feedgas demand were up 10% and 15%, respectively,” continued Dang.

“Further, our analysis indicates potential demand for US natural gas is projected to grow between 20 - 28 billion ft³/d by the end of the decade. According to Wood Mackenzie, demand for LNG feedgas is projected to more than double over the same period. We currently have long-term contracts to move approximately 7 billion ft³/d to LNG facilities and, upon completion of projects under construction, that amount is expected to grow to approximately 11 billion ft³/d by the end of 2027. We are also pursuing a substantial amount of additional LNG feedgas opportunities.

“In the natural gas power generation sector, we are actively pursuing well over 5 billion ft3/d of opportunities to serve that market. With 66 000 miles of natural gas pipelines connected to all major basins and demand centers, along with over 700 billion ft³ of working gas storage capacity, we are confident that we will secure our share of additional natural gas infrastructure supporting rising natural gas demand,” said Dang.

“Our project backlog also reflects this strong natural gas demand. At the end of the first quarter of 2025, the backlog stood at US$8.8 billion, net of approximately US$225 million in projects placed in service, a nearly 8% increase compared to US$8.1 billion at the end of the fourth quarter of 2024. Natural gas projects account for approximately 91% of the backlog,” Dang continued. “The largest project added to the backlog is Bridge, an approximately US$431 million project designed to provide 325 million ft³/d of firm transportation capacity to meet growing demand in the state of South Carolina.

“In calculating backlog Project EBITDA multiples, we exclude both the capital and EBITDA from our CO2 enhanced oil recovery projects and our gathering and processing projects, where first-full-year multiples are more favourable but the earnings are more uneven than with our other business segments. We expect the remaining US$7.5 billion of projects in the backlog, when realized, to generate an aggregate first-full-year Project EBITDA multiple of approximately 5.9 times.

“Of course there has been a lot of attention on tariffs, particularly those on steel, and how they might impact project economics. At this point, we do not believe that the tariffs will have a significant impact on project economics. We began efforts to mitigate the potential impact early in the quarter by pre-ordering critical project components, negotiating caps on cost increases, and securing domestic steel and mill capacity for our larger projects, which total two-thirds of our project backlog. For these projects, we have locked in the cost of the finished steel pipe and less than 10% is exposed to tariffs.”

2025 outlook

For 2025, KMI budgeted net income attributable to KMI of US$2.8 billion, up 8% versus 2024 and adjusted EPS of US$1.27, up 10% from 2024. KMI expects to declare dividends of US$1.17 per share for 2025, a 2% increase from the dividends declared for 2024. The company also budgeted 2025 Adjusted EBITDA of US$8.3 billion, up 4% versus 2024, and to end 2025 with a Net Debt-to-Adjusted EBITDA ratio of 3.8 times. These amounts do not include contributions from the Outrigger Energy II acquisition discussed below. We currently expect to exceed budget by at least the contributions from the Outrigger acquisition. The budget assumes average annual prices for West Texas Intermediate (WTI) crude oil and Henry Hub natural gas of US$68/bbl and US$3.00/MMBtu, respectively, consistent with the published forward curve available during the company’s annual budget process.

This press release includes Adjusted Net Income Attributable to KMI, Adjusted EPS, Adjusted Segment EBDA, Adjusted EBITDA, Net Debt, FCF and Project EBITDA, all of which are non-GAAP financial measures. For descriptions of these non-GAAP financial measures and reconciliations to the most comparable measures prepared in accordance with generally accepted accounting principles, please see “Non-GAAP Financial Measures” and the tables accompanying our preliminary financial statements.

Overview of Business Segments

“The Natural Gas Pipelines business segment’s improved financial performance in the first quarter of 2025 relative to the first quarter of 2024, excluding certain items, was due primarily to continued higher contributions from both our Texas Intrastate system and Tennessee Gas Pipeline (TGP),” said KMI President Tom Martin.

“Natural gas transport volumes were up 3% compared to the first quarter of 2024 primarily due to LNG and power plant deliveries on TGP. Natural gas gathering volumes were down 6% from the first quarter of 2024, primarily due to our Haynesville gathering system.

“Contributions from the Products Pipelines business segment were down compared to the first quarter of 2024 due to a planned ten-year turnaround at our petroleum condensate processing facility in the Houston Ship Channel as well as lower commodity prices in the first quarter of 2025. Both of these impacts were partially offset by higher transport rates and volumes. Total refined products volumes were up 2%, and crude and condensate volumes were up 4%, compared to the first quarter of 2024,” Martin said.

“Terminals business segment earnings were up compared to the first quarter of 2024. The increase was led by our Jones Act tanker fleet, which benefited from higher rates and remains fully contracted under term charter agreements. This increase was partially offset by lower earnings from coal handling activities in our bulk terminals business, largely due to higher shortfall payments in the prior year period,” continued Martin.

“CO₂ business segment earnings, which include Energy Transition Ventures (ETV), were up compared to the first quarter of 2024 on higher renewable natural gas sales volumes, partially offset by lower D3 RIN prices,” said Martin.

 

Natural gas pipelines

• Elba Express Company, LLC (EEC) has executed the precedent agreement needed to proceed with a 71 mile extension of its pipeline system into South Carolina. The approximately US$431 million Bridge project is designed to provide 325 million ft³/d of firm transportation capacity for the growing needs of the state and is supported by long term contracts with credit-worthy customers. Assuming the timely receipt of all required permits and approvals, the project is expected to be placed in service in the second quarter of 2030.
• We have secured incremental long-term customer commitments on our South System Expansion 4 (SSE4) project of approximately 100 million ft3/d, resulting in an approximately US$140 million increase in capex. Preliminary survey work is nearly complete on the project, which is designed to increase SNG’s South Line capacity by approximately 1.3 billion ft³/d. The approximately US$3.4 billion project will help meet growing power generation and local distribution company demand in the Southeast. SSE4 will be completed in two phases and is almost entirely comprised of brownfield looping and horsepower compression additions on the SNG and EEC pipeline systems (KM-share approximately US$1.8 billion, including EEC). Assuming the timely receipt of all required permits and approvals, KMI expects to place the first phase of the project in service in the fourth quarter of 2028 and the second phase in the fourth quarter of 2029.
• Kinder Morgan Tejas Pipeline LLC has entered into definitive anchor agreements with power providers to support up to a 350 million ft³/d expansion near the Houston area. The approximately US$90 million project adds compression, pipeline, and ancillary facilities with a targeted in-service date of the second quarter of 2027 and further demonstrates the interest we are seeing from power markets.
• In February, Hiland Partners Holdings LLC closed on its purchase of a natural gas gathering and processing system in North Dakota from Outrigger Energy II for US$640 million. The acquisition included a 270 million ft³/d processing facility and a 104 mile, large-diameter, high-pressure rich gas gathering header pipeline with 350 million ft³/d of capacity connecting supplies from the Williston Basin area to high-demand markets. The system is backed by long-term contracts with commitments from major customers in the basin.
• Preliminary survey work is progressing on KMI’s approximately US$1.6 billion Trident Intrastate Pipeline project. The approximately 216 mile project is underpinned by long-term contracts and will provide approximately 1.5 billion ft³/d of capacity from Katy, Texas to the LNG and industrial corridor near Port Arthur, Texas. We continue to work with customers on further expansion of the project. Assuming the timely receipt of all required permits and approvals, KMI expects the project to be in service in the first quarter of 2027.
• Construction activities are underway on the fully contracted Gulf Coast Express Pipeline LLC expansion project. The US$455 million expansion project (KM-share approximately $161 million) is designed to increase by 570 million ft³/d natural gas deliveries from the Permian Basin to South Texas markets. The project is expected to be in service in mid-2026.
• Preliminary survey work is underway on TGP’s Mississippi Crossing (MSX) project. The approximately US$1.7 billion project is designed to transport up to 2.1 billion ft³/d of natural gas to Southeast markets through the construction of nearly 206 miles of 42 in. and 36 in. pipeline and three new compressor stations. MSX will originate near Greenville, Mississippi, and connect to the existing TGP system and multiple third-party pipelines to provide critical access to natural gas sourced from multiple supply basins for delivery to Southern Natural Gas (SNG) and Transco near Butler, Alabama. Assuming the timely receipt of all required permits and approvals, the project is expected to be placed in service in November 2028.
• Construction is nearly complete on the second phase of the approximately US$700 million Evangeline Pass project, which has an expected in-service date of 1 July 2025. The two-phase project involves modifications and enhancements to portions of the TGP and SNG systems in Mississippi and Louisiana, resulting in the delivery of approximately 2 billion ft³/d of natural gas to Venture Global’s Plaquemines LNG facility.

 

 

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