Kinder Morgan(KMI) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Results Financial and Operational Highlights Kinder Morgan reported strong second quarter 2025 results with a 24% increase in net income and a 6% rise in Adjusted EBITDA compared to Q2 2024, driven by the Natural Gas Pipelines and Terminals segments, while increasing its project backlog by $1.3 billion, declaring a 2% higher dividend, maintaining a healthy balance sheet with a 4.0x Net Debt-to-Adjusted EBITDA ratio, and expressing a highly positive outlook citing growing natural gas demand, particularly for LNG exports Q2 2025 Key Financial Metrics vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Income Attributable to KMI | $715 million | $575 million | +24% | | Earnings Per Share (EPS) | $0.32 | $0.26 | +23% | | Adjusted EPS | $0.28 | $0.25 | +12% | | Adjusted EBITDA | $1,972 million | $1,858 million | +6% | | Dividend per share | $0.2925 | $0.2875 | +2% | - The company added $1.3 billion to its project backlog during the quarter, bringing the total to $9.3 billion, with approximately 93% consisting of natural gas projects[1][9] - Management highlights the strong outlook for natural gas, driven by a 20% projected demand growth through 2030, led by LNG exports, with contracts to move almost 8 Bcf/d to LNG facilities, expected to grow to nearly 12 Bcf/d by 2028[7][8] - The company generated $1.6 billion in cash flow from operations and $1.0 billion in free cash flow (FCF), ending the quarter with a Net Debt-to-Adjusted EBITDA ratio of 4.0 times[5] 2025 Full-Year Outlook Kinder Morgan anticipates exceeding its original 2025 budget, primarily due to contributions from the Outrigger Energy II acquisition, with the initial budget projecting an 8% increase in net income and a 10% increase in Adjusted EPS compared to 2024, and a target year-end Net Debt-to-Adjusted EBITDA ratio of 3.8 times - The company expects to exceed its 2025 budget, factoring in contributions from the Outrigger Energy II acquisition which closed in Q1 2025[12] 2025 Budgeted Financial Targets (vs. 2024) | Metric | 2025 Budget | % Change vs. 2024 | | :--- | :--- | :--- | | Net Income Attributable to KMI | $2.8 billion | +8% | | Adjusted EPS | $1.27 | +10% | | Dividends per share | $1.17 | +2% | | Adjusted EBITDA | $8.3 billion | +4% | | Year-End Net Debt-to-Adjusted EBITDA | 3.8 times | N/A | - The budget is based on assumed average annual prices of $68/barrel for WTI crude oil and $3.00/MMBtu for Henry Hub natural gas[13] Business Segment Overview In Q2 2025, financial performance improved in the Natural Gas Pipelines and Terminals segments compared to the prior year, benefiting from higher contributions from key pipeline systems and gains from the Jones Act tanker fleet, while Products Pipelines and CO2 segments experienced earnings declines due to weak commodity prices and other factors Natural Gas Pipelines The segment's financial performance improved due to higher contributions from the Texas Intrastate system and Tennessee Gas Pipeline (TGP), with overall transport volumes rising 3% year-over-year, driven by LNG deliveries, which offset a 6% decline in natural gas gathering volumes - Improved financial performance was primarily driven by the Texas Intrastate system and Tennessee Gas Pipeline (TGP)[15] Natural Gas Pipelines Volume Changes (Q2 2025 vs Q2 2024) | Volume Type | % Change | | :--- | :--- | | Transport Volumes | +3% | | Gathering Volumes | -6% | Products Pipelines Segment contributions declined compared to Q2 2024, despite a 2% increase in both refined products and crude/condensate volumes, attributed to weak commodity prices and the expiration of legacy contracts ahead of a pipeline conversion - Segment contributions were down due to weak commodity prices and the expiration of legacy contracts[17] - Total refined products volumes and crude and condensate volumes both increased by 2% compared to Q2 2024[17] Terminals Earnings in the Terminals segment increased year-over-year, led by higher rates in its fully contracted Jones Act tanker fleet, with liquids terminals also benefiting from expansion projects and higher rates, particularly at the Houston Ship Channel facilities - The Jones Act tanker fleet led the increase with higher rates and remains fully contracted[18] - Liquids terminals benefited from expansion projects and higher rates, especially at Houston Ship Channel facilities[18] CO2 Segment The CO2 segment, which includes Energy Transition Ventures (ETV), reported lower earnings compared to Q2 2024, caused by lower prices for CO2 and D3 RINs, which was partially offset by higher D3 RIN volumes from increased renewable natural gas (RNG) sales - Earnings were down due to lower CO2 and D3 RIN prices[19] - The negative impact was partially offset by higher D3 RIN volumes generated through increased renewable natural gas sales[19] Other News and Project Updates Kinder Morgan announced positive corporate developments, including a ratings outlook change to positive from Moody's and a new debt issuance at favorable rates, detailing a multi-billion dollar slate of new and progressing capital projects, overwhelmingly focused on expanding its natural gas infrastructure to meet demand from LNG and power generation sectors Corporate Updates Moody's revised Kinder Morgan's rating outlook to positive, aligning with S&P's existing positive outlook, and the company successfully issued $1.85 billion in senior notes in May 2025 at interest rates more favorable than budgeted - On June 16, 2025, Moody's changed KMI's rating outlook to positive, citing continued earnings growth, a conservative approach to funding, and favorable leverage levels, aligning with S&P's existing positive outlook[22] - On May 1, 2025, KMI issued $1.1 billion of 5.15% senior notes due 2030 and $750 million of 5.85% senior notes due 2035 at favorable rates[22] Natural Gas Pipelines Projects The company is advancing numerous significant natural gas projects, including expanding the Trident Intrastate Pipeline to 2.0 Bcf/d, launching the $112 million Texas Access Project (TAP), and investing over $500 million in the KinderHawk gathering system, with other major projects like Mississippi Crossing (MSX) and South System Expansion 4 (SSE4) moving through regulatory processes, representing billions in future investment to serve growing demand - The Trident Intrastate Pipeline project was expanded to 2.0 Bcf/d capacity at a cost of approximately $1.8 billion, expected in service in Q1 2027[22] - The Mississippi Crossing (MSX) project, a ~$1.7 billion pipeline to transport up to 2.1 Bcf/d, has filed its certificate application with FERC and is expected to be in service in Q4 2028[24] - The South System Expansion 4 (SSE4) project, a ~$3.5 billion project to increase SNG's capacity by ~1.3 Bcf/d, has also filed its FERC application, with a phased in-service schedule for Q4 2028 and Q4 2029[24] Products Pipelines Projects On July 1, 2025, the company placed its SFPP East Line Expansion project into service, adding 2,500 barrels per day of capacity to Tucson, Arizona, fully supported by a five-year take-or-pay agreement - The SFPP East Line Expansion project to Tucson, Arizona was placed in service on July 1, 2025, adding 2,500 barrels per day of capacity[23][25] Financial Statements and Reconciliations This section presents the unaudited consolidated financial statements for the second quarter and first six months of 2025, including the income statement, balance sheet, and supplemental data, along with detailed reconciliations of GAAP metrics to the non-GAAP measures used for management analysis, such as Adjusted EBITDA and Free Cash Flow Consolidated Statements of Income (Table 1) For the second quarter of 2025, Kinder Morgan reported revenues of $4.04 billion, a 24% increase in Net Income Attributable to KMI to $715 million, and a 23% increase in basic and diluted EPS to $0.32 compared to the same period in 2024 Q2 2025 Income Statement Highlights (vs. Q2 2024) | Line Item | Q2 2025 (millions) | Q2 2024 (millions) | % Change | | :--- | :--- | :--- | :--- | | Revenues | $4,042 | $3,572 | +13.2% | | Operating Income | $1,152 | $1,038 | +11.0% | | Net Income Attributable to KMI | $715 | $575 | +24.3% | | Basic and Diluted EPS | $0.32 | $0.26 | +23.1% | Non-GAAP Reconciliations (Tables 2 & 3) These tables reconcile GAAP Net Income to key non-GAAP metrics, showing that for Q2 2025, Net Income of $715 million was adjusted to $619 million of Adjusted Net Income and $1.972 billion of Adjusted EBITDA, with the Natural Gas Pipelines segment being the largest contributor to Adjusted Segment EBDA at $1.347 billion for the quarter Q2 2025 Reconciliation of Net Income to Adjusted EBITDA | Item | Amount (millions) | | :--- | :--- | | Net income attributable to KMI | $715 | | Total Certain Items | $(96) | | DD&A | $616 | | Income tax expense | $179 | | Interest, net | $453 | | Amounts associated with joint ventures | $105 | | Adjusted EBITDA | $1,972 | Q2 2025 Adjusted Segment EBDA (millions) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Natural Gas Pipelines | $1,347 | $1,223 | | Products Pipelines | $289 | $298 | | Terminals | $300 | $281 | | CO2 | $145 | $162 | Segment Volumes and Hedges (Table 4) This table details operational volumes by segment for Q2 2025, showing Natural Gas transport volumes rose 3% YoY to 44,585 BBtu/d, while gathering volumes fell 6%, and total refined product delivery volumes increased by 2%, also disclosing the company's crude oil and NGL hedge positions through 2028 Q2 2025 vs Q2 2024 Key Volume Changes | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Natural Gas Transport (BBtu/d) | 44,585 | 43,123 | +3.4% | | Natural Gas Gathering (BBtu/d) | 3,931 | 4,203 | -6.5% | | Total Products Delivery (MBbl/d) | 2,213 | 2,169 | +2.0% | | Total Oil Production - net (MBbl/d) | 25.52 | 26.20 | -2.6% | - The company has hedged crude oil volumes at weighted average prices ranging from $64.51 to $66.98 per barrel for the remainder of 2025 through 2028[57] Consolidated Balance Sheets (Table 5) As of June 30, 2025, Kinder Morgan reported total assets of $72.4 billion and total liabilities of $40.3 billion, with Net Debt standing at $32.3 billion and the Net Debt-to-Adjusted EBITDA ratio at 4.0x, unchanged from the end of 2024 Balance Sheet Highlights (as of June 30, 2025) | Item | Amount (millions) | | :--- | :--- | | Total Assets | $72,371 | | Total Liabilities | $40,290 | | Total KMI Stockholders' Equity | $30,770 | | Net Debt | $32,348 | - The Net Debt-to-Adjusted EBITDA ratio was 4.0x as of June 30, 2025, consistent with the ratio at year-end 2024[61] Supplemental Information (Table 6) This table provides a reconciliation to Free Cash Flow (FCF), showing that for the second quarter of 2025, the company generated $1.65 billion in cash flow from operations, resulting in $1.0 billion of FCF, and after paying $654 million in dividends, FCF after dividends was $348 million Q2 2025 Free Cash Flow Calculation (millions) | Item | Amount | | :--- | :--- | | Cash flow from operations | $1,649 | | Capital expenditures (GAAP) | $(647) | | FCF | $1,002 | | Dividends paid | $(654) | | FCF after dividends | $348 | Non-GAAP Financial Measures and Forward-Looking Statements This section provides detailed definitions for the non-GAAP financial measures used in the report, such as Adjusted EBITDA, Adjusted EPS, Net Debt, and Free Cash Flow (FCF), explaining their calculation and management's rationale for their use, and contains a standard safe harbor statement, cautioning that forward-looking statements are subject to various risks and uncertainties and are not guarantees of future performance - Management evaluates performance using non-GAAP measures including Adjusted Net Income, Adjusted EPS, Adjusted Segment EBDA, Adjusted EBITDA, Net Debt, and FCF[14][27] - The report defines "Certain Items" as adjustments used to calculate non-GAAP measures, which typically do not have a cash impact or are not part of normal business operations[29] - The forward-looking statements section cautions investors about risks and uncertainties related to supply/demand, commodity prices, counterparty risk, and tariffs that could cause actual results to differ from expectations[40][41]