Kinder Morgan (KMI) reported earnings after the bell on Wednesday. Those earnings provide details on the firm’s project backlog, full-year outlook, and expected impact from tariffs.
The midstream company offered a constructive outlook for natural gas and reaffirmed that natural gas demand growth will have a substantial positive impact on the company. Additionally, future demand for natural gas is expected to be lifted by LNG exports.
“The demand drivers behind the natural gas industry, which is over 60% of our business, are very strong,” Kinder Morgan CEO Kimberly Allen Dang said during the company’s first-quarter earnings call on April 16. “The LNG demand is expected to double, and most of that is going to be driven by projects that are FID’d or under construction.”
The midstream company reported financial results generally in line with expectations. During the first quarter, KMI generated adjusted EBITDA of $2.157 billion. That represents a 1% increase compared to the first quarter of 2024. The company also raised its dividend by 1.7% to $0.2925/share.
For the year, KMI expects to exceed its budget by at least the contributions from the Outrigger acquisition. That deal closed in February.
The company added approximately $900 million to its project backlog. That brings the total backlog to $8.8 billion after adjusting for projects placed into service, Dang said. Notably, over 70% of the $900 million project backlog is primarily focused on serving power demand for natural gas.
The largest project, Bridge, is a $430 million extension of KMI’s Elba Express pipeline supported by a 30-year contract, Dang said. It will deliver about 325 million cubic feet a day into South Carolina to primarily serve increased power demand and is easily expandable to over 1 billion cubic feet per day.
KMI on Impacts of Tariffs & Volatile Commodity Prices
Many investors have worried about the potential implications of tariffs. However, KMI expects tariffs will not have a significant impact on project economics.
“For our new large projects, Mississippi Crossing, South System Expansion 4, Trident, GCX and Bridge, that together comprise approximately two thirds of our backlog, we currently estimate the impact of tariffs to be roughly 1% of project costs,” Dang said.
KMI began efforts to mitigate the potential impact early in the quarter by preordering critical project components. It also negotiated caps on cost increases, and secured domestic steel and mill capacity for its larger projects, the firm said in its earnings release.
Furthermore, as part of tariff negotiations, other countries could increase their purchases of U.S. LNG to help solve trade deficits. Therefore, demand from other countries could offset or even exceed demand implications from the trade war with China.
Additionally, KMI highlighted the limited commodity price exposure in its business. “Almost two thirds of the EBITDA is generated from take-or-pay contracts. Roughly 30% is fee based or hedged, with only 5% of our EBITDA exposed to commodity prices,” Dang said.
How to Get Exposure
KMI is a top-10 holding in the Alerian Energy Infrastructure ETF (ENFR ), weighted 5.2% as of April 16, 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 (ALEFX), which delivers exposure in a VIT wrapper.
For more news, information, and analysis, visit the Energy Infrastructure Channel.
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