Kinder Morgan Inc. (KMI) said it expects to post banner full-year 2021 results and drive even stronger earnings next year.
Bolstered by exceptional winter demand for natural gas earlier in the year, the Houston-based operator is projecting it would earn 76 cents/share this year. Seismic first quarter sales gains made amid surging demand and soaring gas prices last February during Winter Storm Uri have played an outsized role. Excluding the largely nonrecurring impact of Uri, 2021 earnings would come in around 39 cents/share, the company estimated.
Looking ahead, CEO Steven Kean said the midstream giant in 2022 would build on its $1 billion acquisition in July of Stagecoach Gas Services LLC’s storage and pipeline assets. KMI expects earnings/share to swell to $1.09 next year.
“We expect 2021 to be a record year for Kinder Morgan financially, attributable to our outperformance related to Winter Storm Uri in the first quarter, along with solid project execution across our business units,” Kean said in providing updated guidance this week.
“For 2022, with our market fundamentals remaining robust, a full year of earnings from our Stagecoach acquisition, and the completion of several projects in the fourth quarter of 2021, we project a very strong year,” he added.
The Stagecoach purchase deepened KMI’s net natural gas storage position by about 8%. The company said investments in storage assets enabled it to meet the unprecedented demand amid Uri, a deep winter freeze that stretched to South Texas and for several days paralyzed swaths of Houston and other major markets. The new assets give it added scale to meet demand in the winter ahead.
The Stagecoach system consists of 185 miles of pipeline with multiple interconnects to major interstate natural gas pipelines, including subsidiary Tennessee Gas Pipeline. It also includes four natural gas storage facilities with a total working gas capacity of 41 Bcf.
KMI plans to further invest $1.3 billion in expansion projects and contributions to joint ventures in 2022.
Kean also said KMI expects to generate distributable cash flow (DCF) of $2.07/share in 2022. That would be down from 13% from the forecast 2021 level but up 9% excluding the impact of Uri. He said the company anticipates it would generate DCF beyond discretionary capital expenditures and dividends of around $870 million.
KMI in October posted third quarter net income of $495 million (22 cents/share), compared with $455 million (20 cents) a year earlier. DCF was $1 billion (44 cents), down year/year from $1.1 billion (48 cents).
In reaching its expectations for 2022, KMI assumed average annual prices for West Texas Intermediate (WTI) crude of $72.50/bbl and Henry Hub natural gas of $4.25/MMBtu. Both oil and gas futures are up on the year, though prices have proven choppy, particularly in recent weeks.
Gas demand was robust over the summer and into the early fall, fueled by weather demand and calls for U.S. exports. Oil consumption, meanwhile, bounced back this year from a rough 2020 along with demand for travel fuels as the global economy rebounded from the worst of the pandemic.
Still, forecasts for mild early-winter weather have hampered Henry Hub futures in recent weeks, and oil prices have seesawed this month amid uncertainty imposed by the new Omicron variant of the coronavirus.
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