The midstream segment is not quite as immune to the commodity price downturn as Kinder Morgan Inc. (KMI) investors might have hoped. The company has retreated from an earlier pledge of 10% dividend growth as third quarter earnings missed analyst expectations.

KMI reported third quarter earnings of 8 cents/share on revenue of $3.71 billion. Analysts had been expecting 19 cents/share on revenue of $3.83 billion. For the year-ago quarter the company had earnings of 32 cents/share on revenue of $4.29 billion. Net income for the third quarter was $183 million compared with $779 million in the year-ago quarter.

KMI shares were down more than 5% in late morning trading Thursday at about $29.61, far from the 52-week high of $44.71. During a conference call Wednesday afternoon, Executive Chairman Rich Kinder and other members of management swore off raising capital in an undervalued equities market.

“We’re going to be judicious about using common equity…[W]e intend to use other means of raising equity so that we will not be required to issue common equity or access those markets through at least the middle of next year,” Kinder said.“…[W]e intend to continue covering all of our dividends with our generated free cash flow and remain investment-grade, watch our capex closely and continue within those parameters to grow our dividend.”

CEO Steve Kean said dividend growth next year will likely be on the order of 6-10%. The 2015 dividend represents a 15% increase from 2014. “…[W]e believe we could still have grown the dividend at the rate we had projected last year; however, coverage would’ve been tight over the period and could have been negative part of the time,” Kean said. “Other companies have elected to run at negative coverage, but we believe the prudent decision for KMI — and we believe the market is telling us this — is to continuing to grow the dividend but preserve coverage over the period.”

Kinder said the company will have about $300 million of excess coverage to pay dividends for the year, which is less than what was previously budgeted. That budget had assumed $70/bbl for West Texas Intermediate and $3.80/Mcf for natural gas, though, he said.

“…[W]e are insulated from the direct and indirect impacts of a very low commodity environment, but we are not immune,” Kinder said.

Nevertheless, Kinder is bullish on the natural gas story.

“…[O]ur natural gas operations produce over half of our cash flow, and we move about one-third of all the gas consumed in the United States. So to put it very simplistically as natural gas demand grows, so do we,” Kinder said. He continued to enumerate four drivers of natural gas demand growth: power generation, exports to Mexico, liquefied natural gas (LNG) exports, and petrochemical sector demand.

“If you want to look at Kinder Morgan specifically, our gas transportation volumes for electric generation are up 18% year-to-date 2015 versus the same period 2014,” he said.

Exports to Mexico are real and growing, Kinder said.

“Natural gas exports to Mexico for 2015 are expected to average 2.6 Bcf/d versus a 2014 average of 1.8 Bcf/d. That’s an increase of 44%. This summer we found that natural gas exports had at times exceeded 3 Bcf/d. Over the next four years, Mexico is expected to add 10.5 gigawatts of new natural gas capacity, and it’s expected that another 3.2 gigawatts of oil-fueled power capacity will switch to natural gas. Meanwhile, as I think most of us know, Mexico’s gas production continues to decline.”

Citing data from the American Chemistry Council, Kinder said nearly 250 chemical industry projects are on the books with a total investment of $147 billion from 2010 to 2023. Texas accounts for a large share of those projects, he said.

Additionally, the first exports of LNG from the Lower 48 are just around the corner with the startup of Cheniere Energy Inc.’s Sabine Pass terminal expected within months, Kinder said (see Daily GPI, Oct. 20).

In the company’s natural gas segment, transport volumes were up 5% compared to the third quarter last year. Factors contributing to the increase were higher volumes on Texas intrastate pipelines due to higher Eagle Ford Shale production and increased deliveries of gas into Mexico; higher throughput on Tennessee Gas Pipeline resulting from new projects entering service, incremental Utica Shale production as well as greater power generation demand; and higher volume on the El Paso Natural Gas pipeline driven by demand from Mexico as well as greater power generation demand, the company said.