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I Can't Make You Love Me - Kinder Morgan Woos Investors with Financial Discipline, ESG Commitments

Market sentiment toward oil and gas companies, particularly producers and midstreamers, has been increasingly negative since the oil price crash in late 2014, driven by a mix of shorter-term concerns like price volatility and corporate debt and longer-term worries like the environment and an impending energy transition. One company that has found it especially difficult to regain investor confidence is midstream giant Kinder Morgan Inc., whose late-2015 decision to slash its dividend got an ice-cold reception from shareholders and sent the company’s stock price sharply lower. Over the past six years, KMI has been largely successful in its efforts to stabilize its balance sheet, internally fund growth, and gradually restore its dividend, but its current share price remains close to its late-2015 low and barely one-third its early-2015 high. In today’s RBN blog, we discuss highlights from our new Spotlight report, which analyzes KMI’s current portfolio and performance and discusses in detail the company’s new strategic initiatives to restore investor confidence.

For nearly a quarter century, Kinder Morgan’s management has employed a variety of industry-leading corporate structures and strategies to advance its rapid expansion into what is now one of the largest energy infrastructure companies in North America. These include a master limited partnership (MLP), a leveraged buyout, an initial public offering, and a consolidation of all its holdings into a single C-Corp.

The result has been that the company has grown into a behemoth. Kinder Morgan Inc. (NYSE: KMI) today has a market capitalization of $38 billion and an estimated 2021 EBDA of over $8.3 billion. KMI owns an interest in or operates approximately 83,000 miles of pipelines and 144 terminals. Its pipelines transport about 40% of U.S. natural gas along with refined petroleum products, crude oil, condensate, CO2, and other products. And the company’s terminals store and handle a wide variety of commodities, including gasoline, diesel fuel, chemicals, biodiesel, ethanol, metals, and petroleum coke. However, as we’ll get to, Kinder Morgan has also faced challenges regarding investor sentiment that it has been working hard to address.

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