Spotlight: Kinder Morgan, Inc.

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Kinder Morgan’s strategy pairs focused capital investment program and fiscal discipline with long-term commitment to energy transition.

America is an entrepreneurial nation, and that’s spurred a fascination with the visionary pioneers who changed the course of the U.S. economy, ranging from industrial tycoons Andrew Carnegie, John D. Rockefeller, and Henry Ford to current technology titans Bill Gates, Elon Musk, and Jeff Bezos. Although not household names, certain notable entrepreneurs have shaped today’s oil and gas industry, among them midstream pioneer Richard Kinder. After resigning his position as president and chief operating officer of Enron in 1996 when his focus on hard assets conflicted with founder Kenneth Lay’s growing fascination with financial and marketing schemes, Kinder and partner William Morgan conceived and formed a rapidly growing pipeline company, Kinder Morgan (KMI), using the master limited partnership (MLP) structure to attract funding from high yield-seeking investors, a concept that soon dominated the industry. In 2006, Kinder was a first mover in tapping massive private equity funds raised by investment banks to take the company private in a $22 billion leveraged buyout, the first of $415 billion in such deals that year. In 2011, Kinder Morgan went public again in the largest private equity-backed U.S. IPO and a year later used equity funding to acquire El Paso Corp. to become the largest American midstream firm. In 2014, Kinder Morgan became the first of many competitors to simplify its corporate structure and abandon the MLP structure to become a C-Corp to broaden its investment base and increase its access to capital. The company’s market cap soared from $20 billion at the IPO to $93 billion in early 2015. 

The key question for the future is whether the company’s current asset base can generate sufficient strong returns to allow promised dividend growth and a share repurchase program, pursue opportunistic acquisitions and joint ventures, and fund a growing slate of energy transition initiatives. 

East Daley’s exhaustive analysis of Kinder Morgan Inc. provides detailed forecasts, including the following conclusions:

  • Kinder Morgan EBDA is forecast to decline approximately 1% per year from $7,390 million in 2021 to $7,251 million in 2024 largely on modest declines in its Natural Gas Pipelines and CO2 segment results.
  • The Natural Gas Pipelines segment will fall 3% over the next four years on lower earnings from interstate pipelines serving declining gas production regions and the impact of FERC rate cases.
  • Terminal segment earnings will be stable as increased earnings from coal and bulk product terminals offset declines from certain petroleum products infrastructure.
  • Product Pipeline segment earnings will increase slightly on continued high utilization.
  • CO2 segment earnings are forecast to fall 9% as lower oil and gas output from KMI’s EOR fields and declines in CO2 pipeline revenues will be partially offset by earnings from a recently acquired RNG-focused subsidiary.
  • KMI’s move into renewable fuels, RNG production, and RSG transportation will accelerate under its newly created Energy Transition Ventures unit.

Spotlight: Kinder Morgan, Inc. is included in RBN’s Drill Down report series, a suite of reports covering many of the key issues expected to impact the markets for crude oil, natural gas and natural gas liquids. Spotlight reports are part of RBN Backstage Pass™ premium resources that also include Blog Archive Access, Spotcheck Indicators, Market Fundamentals Webcasts, Get-Togethers and more. Spotlight is a joint venture of RBN Energy and East Daley Capital. By subscribing to RBN’s Backstage Pass™ Premium Services, you plug into our network and get direct access to our premium resources.

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