Kinder Morgan (KMI) highlighted robust growth prospects in its natural gas pipeline network at the Barclays 40th Annual Energy-Power Conference, with a backlog exceeding $10 billion by year-end. The company’s $9.6 billion backlog—down from $10.1 billion at the end of Q2 2024 due to projects entering service—reflects a mix of take-or-pay contracts (90%) and gathering/processing projects (10%). Management anticipates sanctioning at least $1.4 billion of new projects by year-end, with in-service dates stretching into late 2029 and 2030, averaging the first half of 2028. These expansions are expected to generate approximately $1.7 billion in incremental EBITDA annually, using a 5.6x multiple on the take-or-pay portion of the portfolio.
Natural gas remains the backbone of Kinder Morgan’s operations, accounting for about two-thirds of its business. The company operates over 80,000 miles of pipeline, serving 40% of U.S. natural gas demand and handling 50% of exports to Mexico. Key projects include the Tennessee Gas Pipeline (TGP) expansion, which could add 500 million cubic feet per day of capacity from Pennsylvania to Tennessee, Kentucky, and West Virginia, following a non-binding open season in August. The Trident Pipeline—scheduled for completion in Q1 2027 and Q4 2028—will expand throughput, while the Western Gateway pipeline, sanctioned in August, reverses an existing route to move crude from Texas to Arizona, with a capacity of 230,000 barrels per day (expandable to 320,000).
Demand growth is underpinned by Wood Mackenzie’s forecast of a 46 BCF/day increase in U.S. natural gas demand by 2035, driven by LNG exports (23 BCF/day) and power generation (17 BCF/day). The Haynesville, Eagle Ford, and Permian basins are expected to contribute significantly, with the Haynesville and Marcellus Utica basins each adding 13 BCF/day. Georgia Power’s economic report also highlights potential demand growth of 15 BCF/day by mid-2035, reflecting infrastructure expansions. Kinder Morgan’s leverage remains disciplined, with a debt-to-EBITDA ratio of 3.6x—within its 3.5x to 4.5x target—and the ability to fund over $3 billion annually in capital spending from cash flow. Each 0.1x increase in leverage adds roughly $800 million in balance sheet flexibility.
CEO Kim Dang emphasized the natural gas segment’s growth potential, noting that 90% of the backlog is secured by take-or-pay contracts, providing financial certainty. The company’s recent acquisitions, including the Monument acquisition in 2024 and a Bakken play in 2023, further bolster its asset base, with Kinder Morgan holding a 35% stake in the Western Gateway joint venture, contributing $1.5 billion in assets and $250 million in cash equity. Hedging strategies for CO2 production remain robust, with 90% of 2026 and 75% of 2027 commitments secured at mid-60s pricing, aligning with forward crude curves in the mid-70s.
The company’s pipeline network spans critical regions, including Texas, Louisiana, and the Permian Basin, where gas-oil ratios are rising. The Haynesville and Eagle Ford basins are seeing strong volume growth, while the Trident and Western Gateway projects align with expanding export and domestic demand. With a focus on disciplined leverage and strategic expansions, Kinder Morgan positions itself to capitalize on the long-term growth in natural gas infrastructure.
