Kinder Morgan Inc. (KMI) said it expects to post stellar full-year earnings this year and match those results in 2023.

KMI

Boosted by natural gas demand and elevated prices through much of this year – and expectations for more of the same in 2023 — the Houston-based midstream giant said it expects earnings to swell to $1.12/share for 2022. It expects to equal that figure for full-year 2023. KMI reported earnings of 78 cents/share for 2021.

“We expect 2023 to be another very good year for Kinder Morgan, with strong market fundamentals, continued robust growth in demand for existing and expanded natural gas transportation, storage, and gathering and processing; and continued demand for refined products midstream services and investments in our Energy Transition Ventures business,” CEO Steve Kean said this week.

[Shale Daily: Including impactful news and transparent pricing for shale and unconventional plays across the U.S. and Canada, Shale Daily offers a clear snapshot of natural gas supplies for analysts, investors and global LNG buyers. Learn more.]

The outlook is fueled by the combination of steady domestic demand and mounting calls for U.S. exports of LNG. These catalysts propelled natural gas futures above $9.00/MMBtu during the summer and could renew upward pressure on prices during peak demand seasons next year and beyond. At their peak this year, prices more than doubled from 2021 and approached the highest levels since 2008.

Domestic demand is expected to continue rising as summer heat and winter blasts of cold have intensified in recent years and as the United States further retires coal plants amid an emphasis on cleaner energy.

Additionally, Europe is driving demand for U.S. exports of liquefied natural gas as it distances itself from Russian energy following the Kremlin’s invasion of Ukraine. Long term, Asian countries such as China, India and South Korea – heavily populated countries that are only beginning to pave paths away from coal – are expected to increase LNG consumption through this decade.  

Looking ahead, KMI plans to further invest $2.1 billion next year in expansions and contributions to joint ventures, or discretionary capital expenditures. The company said 80% of those investments would be made in lower carbon projects.

KMI expects to generate distributable cash flow (DCF) of $2.13/share in 2023. That would be down 1% from the forecast 2022 DCF because of projected increases in borrowing costs. Credit expenses are rising across all sectors following multiple Federal Reserve interest rate hikes this year. Policymakers have aggressively increased rates to combat inflation that reached a 40-year high this year.

“We project interest expense to be significantly higher than our 2022 forecast, representing a DCF impact of approximately 15 cents/share,” President Kimberly Dang said. “Absent that impact, expected DCF per share would be up 5% year/year.”  

The company said steady demand for oil, expected to continue next year, adds another bullish undercurrent. Demand has proven uneven this year, but it continues to grow after a sharp 2021 rebound following the depths of the pandemic.

OPEC researchers said in a November report that they expect global demand to increase by 2.5 million b/d this year and another 2.2 million b/d in 2023.   

In arriving at its expectations, KMI assumed average annual prices for West Texas Intermediate (WTI) crude and Henry Hub natural gas of $85/bbl and $5.50/MMBtu, respectively. New York Mercantile Exchange natural gas futures hovered around $6.00 intraday on Thursday. WTI prices hung near $72, though the U.S. benchmark topped $120 at its peak this year.