Kinder Morgan (KMI) announced its third-quarter results this week. It reported in-line results as well as a robust outlook for growth. Beyond earnings results, company commentary focused on its so-called shadow backlog and the recently announced binding open season with Phillips 66 (PSX) for the Western Gateway pipeline.
The midstream company officially reported adjusted EBITDA of $1.991 billion, lining up with the consensus expectation of $1.99 billion. Digging in further, the firm maintained its dividend. It also affirmed an expected 2025 budget beat thanks to its previous $640 million Outrigger acquisition.
Helping Meet Product Demand
Perhaps most relevant for investors and analysts, is the duo of KMI’s Western Gateway announcement and its notable “shadow” backlog. The former highlight will see refined products transported from Texas to Arizona and California markets. The pipeline would help meet product demand in the west as California refineries close.
The project will include building new pipe between Borger and Phoenix, which will connect into KMI’s existing SFPP pipeline. SFPP will reverse to flow west from Phoenix into California. The new pipeline will also offer connectivity into Las Vegas via KMI’s CALNEV pipeline. Assuming a successful open season, the completed system is expected to have a 50/50 ownership split. KMI would see a smaller capital contribution compared to PSX, since KMI is contributing SFPP.
As for the latter, the project backlog for KMI held steady at $9.3 billion. But its “shadow” backlog deserves mention. The company mentioned a $10 billion opportunity set of potential investments. The vast majority of that opportunity set, KMI leaders indicated, stems from natural gas.
US Export Capacity Continues Growing
Notably, KMI has contracts to move 8 billion cubic feet per day (Bcf/d) of natural gas to liquefied natural gas (LNG) export facilities. By 2028, the company will be supplying 12 Bcf/d to LNG facilities as U.S. export capacity continues to grow: read more.
With ample free cash flow and leverage capacity, the company retains the running room to meet its potential opportunities without compromising its balance sheet. Looking ahead, investors can get exposure to KMI and other midstream firms via the Aerian Energy Infrastructure ETF (ENFR ).
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