Kinder Morgan's Third Quarter 2026 Earnings Results - BROOKFIELD INFRASTRUCTURE PARTNERS LP

Financial Performance:

• Adjusted EPS increased 21% YoY to $0.35 (Q3 2026), and adjusted EBITDA grew 9% to $2.18 billion.
• Net income attributable to KMI was $764 million, a 22% increase YoY.
• Full-year 2026 outlook updated: Adjusted EBITDA expected to exceed budget by >6% and adjusted EPS by >13% (approx. $515 million additional EBITDA).
• Leverage ratio (Net Debt/Adj EBITDA) tightened to 3.5x at quarter-end, down from 3.8x at start of year, with an expected year-end ratio of 3.6x.
• Free cash flow available for expansion CapEx remains robust at ~$3 billion annually; Q3 operating cash flow was $5.04 billion.
• Dividend declared at $0.2975 per share (annualized $1.19), representing a 2% increase.
• Non-recurring factors contributed ~$400 million to outperformance (Winter Storm Fern, favorable weather, contract buyouts, rate true-ups, and spread widenings).

Guidance and Future Outlook:

• Project backlog surged to $14.4 billion (up from $9.6 billion), adding $5.4 billion in new projects; backlog multiple stands at 5.7x.
• Long-term growth runway extended; previously, most backlog EBITDA was expected to come online by end of 2029, now extending to 2030–2032.
• Expected annual CapEx run rate for the next few years is approximately $4 billion.
• Projected to deliver an additional $2.5 billion in EBITDA from the current backlog once projects are operational, pushing total EBITDA to $11.5–$12 billion.
• Management anticipates continued strong demand for natural gas driven by LNG exports and power generation (McKinsey projects NA gas demand up ~46 BCF/day by 2035).
• No specific 2027 guidance provided, citing non-recurring tailwinds in 2026 that will not repeat.

Business Segments and Product Lines:

• Natural Gas: Transport volumes up 3%; gathering volumes up 14% (Haynesville up 40%); high utilization with new projects focusing on LNG and power.
• Products: Refined product volumes down 3%; crude/condensate down 11% (partially due to DeH2 removal). FID reached on $300M Western Gateway project (In-service 2029).
• Terminals: Liquids lease capacity at 93%; tank utilization near 96% at key hubs. Record Q3 flow of 427,000 bpd (+39% YoY) at Houston Ship Channel due to global supply shortages.
• CO2: Net oil production up 8% (SACROC up 11%); NGL volumes up 9%; RNG volumes up 18% driven by improved operations.
• Strategic Projects: Sanctioned two major JVs: Southeast Connector ($3.1B net to KMI) and Permian Link (20-year take-or-pay with an A-rated hyperscaler).

Market and Competitive Landscape:

• Market thesis centered on a "bullish natural gas story" driven by global LNG demand growth (Shell projects +65% to 750M tons by 2050) and North American power generation demand (+225–245 GW by 2035).
• Kinder Morgan transports ~40% of US natural gas, 40% of LNG feed gas, and >50% of exports to Mexico.
• Competitive environment described as favorable with "market pull" from demand centers (Southeast, Texas Panhandle) rather than supply-push, reducing overbuilding concerns.
• Management noted strong interest in open seasons, with over 2 BCF interest in TGP 219 South, and Southeast Connector capable of scaling to 3.5 BCF/day.

Risks and Challenges:

• Regulatory risks related to permitting reform bills in Congress, though management remains confident projects can be completed under current FERC regimes.
• Construction cost inflation (steel, pipe, compression) is increasing, but management sees no customer pushback on returns.
• Potential commodity price volatility affecting CO2/EOR investment decisions; RNG business has historical operational challenges.
• Market uncertainty regarding the Jones Act waiver, though the tanker fleet remains highly contracted (100% to end of year, 80% through 2028).
• Dependence on creditworthy shippers; however, new projects feature long-term take-or-pay contracts with investment-grade utilities and hyperscalers.

Management Commentary and Tone:

• Tone was highly confident and bullish, emphasizing "substantial additions" to backlog and "record" project pipeline.
• Rich Kinder described the strategy as "not complicated," relying on cash flow to fund growth with minimal leverage.
• Management expressed pride in execution, noting the "commercial creativity" required to secure large JV deals.
• Confidence remains high that the "shadow backlog" will continue to convert into formal backlog, driven by market fundamentals.

Analyst Questions and Answers:

• TGP 219 South: Open season received >2 BCF interest; estimated CapEx ~$1.5B for brownfield phase, potentially scaling to 3 BCF/day with greenfield extensions.
• Southeast Connector: Project can scale up to 3.5 BCF/day; currently working through binding open season and credit agreements.
• Permian Link: Risk of overbuilding is mitigated by strong "demand pull" from data centers and power generation; projects are backed by 20-year contracts.
• Capital Allocation: Plan to fund JVs via a mix of JV debt, equity contributions, and potential 100% KMI funding if necessary to maintain JV ratings.
• CO2/RNG: No immediate acceleration planned for CO2 due to backwardated oil curve; RNG growth contingent on operational improvements and higher returns.
• Arizona/Future Expansions: Discussions ongoing in Western markets for utility/demand growth, but no specific announcements yet.
• Permitting: Management supports current reform bills but remains confident in current permitting capabilities (e.g., MSX and South System 4 permitted within a year).

Other Key Points:

• Two strategic JV projects (Southeast Connector and Permian Link) represent a significant portion of the $14.4B backlog ($4.7B KMI share).
• Management clarified that new projects do not require contingent supply agreements with producers; market participants must secure their own molecules.
• The "middle system power corridor" (Ohio, KY, WV, TN) is identified as a major future demand center.
• Trident pipeline project is on time and budget, with delivery expected February of next year.
• Management emphasized that 40% capture of US gas and 50% of exports to Mexico positions the company uniquely to capture infrastructure growth.