KMI Reports Q3 Earnings: What Advisors Need to Know

Kinder Morgan Inc (KMI) delivered third-quarter earnings results on Wednesday, with the midstream company on track to generate more cash than expected this year. 

During the third quarter, KMI generated adjusted EBITDA of $1.773 billion, compared to $1.658 billion in the third quarter of 2021, representing a 7% increase, according to a statement from the firm.

KMI’s board of directors approved a cash dividend of $0.2775 per share for the third quarter ($1.11 annualized), payable on November 15. This dividend is a 3% increase over the third quarter of 2021.

The company has paid dividends of $1.83 billion and has repurchased $331 million of stock through the third quarter end, David Michels, VP and CFO of Kinder Morgan, said during the company’s earnings call on October 19. Year-to-date through October 18, KMI has repurchased approximately 21.7 million shares at an average price of $16.94 per share.

For 2022, KMI budgeted to generate net income attributable to KMI of $2.5 billion and adjusted EBITDA of $7.2 billion, to end the year with a net debt-to-adjusted EBITDA ratio of 4.3 times. KMI now expects net income attributable to KMI to be favorable to budget by approximately 3% and adjusted EBITDA to be favorable to budget by approximately 4%-5%, according to a statement from the company.

“The company continues to perform better than budget, well above DCF plan for the quarter,” chief executive officer Steve Kean said in a statement. “Our Natural Gas Pipelines segment continues to see strong demand for the extensive firm transport and storage services we offer, as well as favorable contract renewals on multiple assets across our network. We are also moving forward with projects to provide additional transport capacity to liquefied natural gas (LNG) facilities and remain focused on continuing to be the provider of choice for that growing market. Given the proximity of our existing assets to planned LNG expansions, we expect to maintain and potentially expand on our approximately 50% share of transport capacity to LNG export facilities.”

KMI President Kim Dang said the company took several steps to increase value for shareholders during the third quarter, including progressing expansion projects and selling a 25.5% equity interest in Elba Liquefaction Company, L.L.C. (ELC) for approximately $565 million, which implies an approximately 13 times enterprise value to EBITDA multiple. The company used those proceeds to reduce short-term debt and create additional capacity for attractive investments, including opportunistic share repurchases, Dang said. 

Executive Chairman Richard D. Kinder said in a statement the company remains steadfast in its long-standing goals: to maintain a strong investment-grade balance sheet, internally fund expansion opportunities, pay an attractive and growing dividend, and further reward shareholders by repurchasing shares on an opportunistic basis.

KMI is a top 10 holding in the Alerian Energy Infrastructure ETF (ENFR), weighted at 5.3% as of October 17, 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

72.91% of AMEI by weighting has a buyback authorization in place as of 9/30, according to ALPS. 

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