KMI Reports Strong Earnings, Increases Buyback Activity | ETF Trends

Kinder Morgan (KMI) reported a 20.3% rise in quarterly adjusted profit during its second quarter earnings release Wednesday.

During the second quarter, KMI generated $1.176 billion, or $0.52 per share, of distributable cash flow, compared to $1,025 million in the second quarter of 2021, according to a statement from the firm. That number is up 16% on a per-share basis due to the impact of the company’s stock-buyback program, and $545 million of excess DCF above the midstream company’s 6.4%-yielding dividend.

Year-to-date through July 20, KMI has repurchased approximately 16 million shares of its common stock at an average price of $17.09 per share.

The approximately $270 million in year-to-date buybacks is notable given that KMI did not repurchase any shares in 2021 and had very modest repurchases in the first quarter of 2022,” Stacey Morris, head of energy research at VettaFi, said. “I expect midstream companies, in general, to be active with their buyback programs given the contrast between strong fundamentals and recent weakness in equity prices.”

KMI had previously budgeted to generate $4.7 billion, or $2.07 per share, of distributable cash flow this year. KMI now expects its 2022 results to be about 5% above that number due to stronger than expected commodity prices and favorable operating results from its natural gas pipelines and CO2 business segments, partially offset by higher costs, according to the firm.

Company leadership is optimistic about the outlook for the natural gas market. KMI chief executive Steve Kean said in a statement the firm expects to maintain or grow its current 50% market share.

“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. We are also prepared to invest more in the near term to support LNG growth as we pursue a robust set of opportunities for additional LNG transport capacity,” Kean said. “We currently transport approximately 50% of the natural gas used for U.S. LNG exports and given the proximity of our assets to planned LNG expansions, we expect to maintain or grow that share as we pursue that set of opportunities.”

KMI is a top 10 holding in the Alerian Energy Infrastructure ETF (ENFR). ENFR’s underlying index, the Alerian Midstream Energy Select Index (AMEI), weights KMI at 5.1%. AMEI is a composite of North American energy infrastructure companies. 

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