Kinder Morgan Inc. (KMI) reported first-quarter earnings results on Wednesday, leaving its full-year guidance in place as the midstream company expects strong performance to offset the weaker energy pricing seen year-to-date.
During the fourth quarter, KMI generated adjusted EBITDA of $1.996 billion, compared to $1.967 billion in the first quarter of 2022, representing a 1% increase, according to a statement from the firm.
KMI ended the first quarter with a Net Debt-to-Adjusted EBITDA ratio of 4.1 times, which was below its target of approximately 4.5 times. For the full year, the company reaffirmed its budgeted adjusted EBITDA of $7.7 billion and intends to end 2023 with a Net Debt-to-Adjusted EBITDA ratio of 4.0 times.
KMI declared a cash dividend of $0.2825 per share for the first quarter ($1.13 annualized), a 2% increase over 1Q22, marking the sixth year that the company has increased its dividend.
The company returned $113 million to shareholders in share repurchases during the first quarter, as KMI repurchased approximately 6.8 million shares at an average price of $16.62 per share.
Despite year-to-date weakness in crude oil and natural gas prices, with prices below KMI’s full-year 2023 budget assumptions of $85 and $5.50, respectively, the company is leaving its 2023 budget guidance in place.
“We are facing pressure from commodity prices as prices both realized to date as well as in the forward curves are below our budgeted prices,” David Michels, Kinder Morgan’s VP and CFO, said during the company’s earnings call. “However, our forecast shows that pressure being substantially offset by better-than-expected operational performance, particularly in our natural gas and terminals business units.”
Natural gas transport volumes were up 3% during the first quarter compared to 1Q22, largely driven by increases on EPNG due to returning a pipeline to service, cooler weather, and the retirement of a coal-fired power plant, according to KMI. Natural gas gathering volumes increased 18% year-over-year, primarily from the company’s Haynesville and Eagle Ford systems.
KMI’s project backlog at the end of the first quarter was $3.7 billion, an increase of $400 million compared to the prior quarter, and has an aggregate EBITDA multiple of 3.5. Notable additions include $324 million in interstate natural gas pipeline expansion projects, including a project on the TGP system to assist a customer in retiring a coal-fired power generation facility.
The company said it is devoting roughly 86% of its project backlog to lower-carbon energy services, including natural gas as a substitute for higher-emitting fuels, producer certified natural gas, renewable natural gas (RNG), renewable diesel (RD), and feedstocks associated with RD and sustainable aviation fuel.
KMI is a top-10 holding in the Alerian Energy Infrastructure ETF (ENFR ), weighted 5.1% as of April 19, according to ALPS. ENFR tracks the Alerian Midstream Energy Select Index (AMEI), a composite of North American energy infrastructure companies. Investors can also access AMEI with the ALPS Alerian Energy Infrastructure Portfolio, which delivers exposure in a VIT wrapper.
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