KINDER MORGAN, INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Project Announcements: Announced FID of four major projects with over $5B CAPEX, including Trident and MSX expansions; secured contracts to upsized MSX to 1.8 Bcf/day; added $3.5B in expansion projects to backlog in Q4, $6.3B for the year, growing backlog to $8.1B.
• Acquisition: Purchased a natural gas gathering and processing system in Bakken for $640M, complementary to existing assets with long-term contracts; expected to reduce future CapEx.
• Financial Performance: 2024 saw EBITDA and EPS growth, improved leverage metrics; declared $0.2875 per share dividend, up 2% from 2023; Q4 net income up 12% to $667M, EPS $0.30, adjusted EPS $0.32.
• Growth Opportunities: See 28 Bcf/day growth in natural gas business by 2030 from LNG, Mexico exports, power, and industrial growth.

Segment Performance

• Natural Gas Business Unit: Transport volumes unchanged q-o-q. Gathering volumes down 7% q-o-q in Q4 2024, down 8% vs 2024 plan but 6% over 2023; budgeted 5% increase in 2025 gathering volumes.
• Products Pipelines Segment: Refined products volumes up 2% q-o-q, crude and condensate down 5% q-o-q; full-year refined products volumes down 3% vs plan but 1% over 2023; budgeted 1% increase in 2025 refined product volumes.
• Terminals Business Segment: Liquids lease capacity at 95%; refining cracks and blending margins softened but constructive; Jones Act tanker fleet fully leased with high long-term commitments.
• CO2 Segment: Oil, NGL, and CO2 volumes down in Q4 2024; full-year oil volumes down 6% vs 2023 but within 1% of budget.

Guidance

• 2025 Expectations: Expect net income growth 8% from 2024, EBITDA growth 4%, adjusted EPS growth 10%; balance sheet to improve to 3.8 times net debt to adjusted EBITDA; Outrigger acquisition expected to close in Q1 and be immediately accretive.
• CAPEX: Expect to spend ~$2.5B per year in expansion CAPEX for next several years, up from prior $2B estimate.

Risks

• Permitting Delays: MSX project timeline longer than similar Intrastate projects due to permitting and right-of-way; need to balance expediting permits with ensuring defendable permits.
• Commodity Price Volatility: Sensitivity to commodity price changes; RNG sales and RIN liquidity issues affected Q4 results.
• Inflationary Pressures: Potential cost inflation in construction, requiring proactive procurement measures for large projects.

Question and Answer

• Q: Theresa Chen on competitive moat for projects like Mississippi Crossing and Trident, and Outrigger acquisition strategic rationale A: Kimberly Allen Dang discussed competitive moat from infrastructure, reputation, and timely project delivery; Outrigger acquisition fits existing system with potential capital and commercial synergies.
• Q: Manav Gupta on EPS growth outlook and macro trends A: Kimberly Allen Dang mentioned sensitivity to commodity prices, Outrigger acquisition accretive, and potential upside from data center and power demand growth.
• Q: Michael Blum on Texas data center opportunity and Open Season on Kinder Morgan Louisiana project A: Sital Mody noted Texas Intrastate footprint positions Kinder Morgan to partake in growth; Open Season closed with binding commitments for Texas Header Project.
• Q: Keith Stanley on M&A strategy and Q4 EBITDA headwinds A: Kimberly Allen Dang on opportunistic M&A; David Michels on commodity headwinds, RNG sales, and RIN liquidity affecting Q4 EBITDA.
• Q: Jean Ann Salisbury on project types and Haynesville volumes A: Kimberly Allen Dang on mix of large-scale and smaller projects; Sital Mody on Haynesville activity picking up with sustained prices.
• Q: Spiro Dounis on project backlog and weather impact A: Kimberly Allen Dang on backlog visibility and no impact from California fires or cold weather on operations.
• Q: Zack Van Everen on Bakken acquisition contracts and Trident demand contracts A: Sital Mody on MBC-backed contracts in Bakken acquisition; Trident has power and industrial demand contracts with potential for expansion.
• Q: John Mackay on CAPEX spend and MSX project timeline A: Kimberly Allen Dang on $2.5B average CAPEX spend; timeline differences due to permitting for Interstate vs Intrastate projects.
• Q: Gabe Moreen on MSX project timeline and permitting wishlist A: Kimberly Allen Dang on MSX timeline differences and FERC permitting considerations.
• Q: Jeremy Tonet on Northeast permitting and inflation risks A: Kimberly Allen Dang on commercial structure hurdles in Northeast; proactive procurement to mitigate inflation risks.