Kinder Morgan reports mixed Q2; to move ahead with key pipeline project

Kinder Morgan (NYSE:KMI) -2% after-hours as Q2 earnings swing to a profit due to improved earnings from natural gas pipelines and fewer impairment charges but miss analyst expectations.

Q2 distributable cash flow rose 1% from the year-ago quarter to $1.13B while DCF/share came in flat Y/Y at $0.50, with $559M of excess DCF above the declared dividend.

KMI’s Q2 project backlog was $5.7B, $400M less than Q1, with additions of $400M in new projects offset by $800M in projects placed in service and other project capital adjustments.

For 2019, KMI’s budget contemplates declared dividends of $1.00/share, DCF of ~$5B ($2.20/share) and adjusted EBITDA of ~$7.8B.

KMI expects 2019 adjusted EBITDA to come in slightly below budget, primarily due to the delay in Elba’s in-service date, lower natural gas liquids prices affecting the CO2 segment, and the impact of 501-G settlements, partially offset by the strong performance of the West Region natural gas business unit.

CEO Steven Kean says the company will proceed with a South Texas pipeline connection to transport crude from Phillips 66’s 900K bbl/day Gray Oak pipeline in the Permian Basin to delivery points at the Houston Ship Channel.

KMI expects the connection will begin service by year-end 2019 carrying 100K bbl/day; it has contracts to start transporting 75K bbl/day for up to three years.

Kean also says the ongoing start-up of the Elba liquefaction facility may need to be suspended because of problems that have emerged in its supercooling equipment that produces LNG, but the first unit is expected to be brought into service soon.