Kinder Morgan's Q3 2025 Earnings Call Contradictions Emerge on Lng Demand, M&A Strategy, and Project Timelines

The above is the analysis of the conflicting points in this earnings call

Date of Call: October 22, 2025

Financials Results

• EPS: $0.28 per share, in line with Q3 2024; adjusted EPS grew 16% YOY excluding mark-to-market hedge impacts and a one-time noncash tax benefit

Guidance:

• Expect to exceed full-year 2025 budget due largely to the Outrigger acquisition; budget targeted adjusted EBITDA +4% and adjusted EPS +10% vs 2024.
• Evaluating >$10B of potential projects (mostly natural gas); expect to convert portions to backlog and bring significant projects to FID in 2026.
• Anticipate meaningful tax benefits (full expensing/AMT changes) beginning 2026 that will improve cash flow.
• Net debt/adjusted EBITDA improved to 3.9x, retaining balance-sheet capacity to fund growth without compromising leverage targets.
• Western Gateway open season through Dec 19; subject to regulatory approvals with a targeted 2029 in-service date.

Business Commentary:

• Natural Gas Demand and Infrastructure Expansion:
• Kinder Morgan's natural gas transport volumes were up 6% in Q3 2025 compared to the previous year, primarily driven by increased demand from LNG deliveries and new contracts in Texas and Mexico.

• The growth is attributed to significant demand from LNG export facilities and the need to meet growing power generation and export demands to Mexico.

• Earnings and Revenue Growth:

• EBITDA grew by 6% and adjusted EPS increased by 16% year-on-year in Q3 2025.

• This growth is driven by contributions from natural gas expansion projects, the Outrigger acquisition, and strong demand across Kinder Morgan's natural gas footprint.

• Expansion and Development Backlog:

• The company's expansion backlog remained at $9.3 billion with approximately $500 million of new projects added, offset by projects placed in service.

• The mix of new projects is split evenly between natural gas, primarily for power generation, and refined product tankage, indicating a focus on supporting growth in these segments.

• Future Growth Opportunities:

• Kinder Morgan is actively pursuing over $10 billion in potential projects, primarily in natural gas, underscoring the demand for its services.
• This opportunity set is driven by themes such as export LNG, power generation, exports to Mexico, and industrial growth, highlighting the continued resilience of the company's growth pipeline.

Sentiment Analysis:

Overall Tone: Positive

• "EBITDA up 6% and adjusted EPS growing 16% year-on-year." Management: "we expect to exceed our full year budget." CFO: net debt/adjusted EBITDA improved to 3.9x and Fitch upgraded rating to BBB+.

Q&A:

• Question from Theresa Chen (Barclays Bank PLC, Research Division): I wanted to go back to your growth outlook and specifically the over $10 billion opportunity set in unsanctioned projects under development... What has driven the seemingly improved outlook... How quickly do you think you can commercialize these growth opportunities? And where are you seeing the most interest for expansion projects amongst your customers?
  Response: Mostly natural gas opportunities across the southern U.S. (LNG, power, Mexico); most projects are < $250M with some > $1B; actively pursuing commercialization.

• Question from Theresa Chen (Barclays Bank PLC, Research Division): Following this week's announcement of your open season for Western Gateway, can you talk about your project positioning relative to 1 Oak's competing Sunbelt project? And assuming Western Gateway solicits sufficient commercial interest during the open season, can you talk about potential gating factors, regulatory or other risks before the project can be sanctioned?
  Response: Western Gateway accesses multiple markets (Phoenix, California, Las Vegas) versus competitor focused on Phoenix; open season ends Dec 19, then need regulatory approvals with target 2029 in-service.

• Question from Jeremy Tonet (JPMorgan Chase & Co, Research Division): On KMI seeing an opportunity set more robust than any time in the company's future... how do you think about the landscape given Kinder's competitive positioning, and what could be the cadence of how this capital could fall into plan over time?
  Response: Competitive market but KMI's footprint, storage, and track record give an advantage; expect significant FIDs in 2026.

• Question from Jeremy Tonet (JPMorgan Chase & Co, Research Division): It seems the language changed on how much you'll exceed guidance by Outrigger from 2Q to 3Q — what changes in the backdrop explain that?
  Response: Slight downshift driven by weaker RNG volumes and persistently low RINs prices.

• Question from Julien Dumoulin-Smith (Jefferies LLC, Research Division): Can you elaborate on how opportunities emerge for the shadow backlog regionally and on power opportunities (Texas, Southwest, El Paso system)?
  Response: Power/data-center demand plus coal retirements are driving opportunities across Texas, New Mexico, Arizona, Colorado, Arkansas and Florida; storage and Haynesville/Marcellus egress are key themes.

• Question from Julien Dumoulin-Smith (Jefferies LLC, Research Division): On the Southeast and Western Gateway, does the $10B take into account IRPs and can you clarify ultimate economics/cost for Western Gateway?
  Response: Southeast IRPs are included in the $10B opportunity set; management declined to disclose Western Gateway costs due to competitive reasons.

• Question from Michael Blum (Wells Fargo Securities, LLC, Research Division): On Hiland Express (NGL conversion), where do you stand on committed initial volumes and where could that go? Also you mentioned potential takeaway out of the Powder River — expand on that.
  Response: On track for initial commitments in Q1 next year; repurposing assets to capture incremental barrels while competing with incumbents.

• Question from Michael Blum (Wells Fargo Securities, LLC, Research Division): Where do behind-the-meter opportunities stand and could they be a meaningful driver or part of the $10B?
  Response: KMI is unlikely to invest in generation behind-the-meter; will supply gas and build infrastructure with partners but not take large power-equity positions.

• Question from John Mackay (Goldman Sachs Group, Inc., Research Division): For the $10B shadow backlog, how much is waiting for demand to materialize versus projects you're actively selling to customers?
  Response: These are active customer conversations with cost/return estimates underway — projects are being actively pursued rather than purely contingent.

• Question from John Mackay (Goldman Sachs Group, Inc., Research Division): On the guide, RNG was softer — how was the rest of the business and any one-offs?
  Response: Natural gas and Terminals are strong and beating budget (even excluding Outrigger); Products roughly on budget; weakness concentrated in RNG and somewhat in CO2.

• Question from Spiro Dounis (Citigroup Inc., Research Division): At a high level, what variables could impact 2026 across segments and is there any reason 2026 growth wouldn't at least match 2025?
  Response: Too early for exact 2026 growth rates; tailwinds include full-year impact of 2025 projects, contract escalators, and lower interest rates; commodity prices remain an unknown.

• Question from Spiro Dounis (Citigroup Inc., Research Division): How should we think about the timeframe for the $10B and potential for annual CapEx > $3B or more short-cycle cash flows?
  Response: Regulated FERC projects ~3+ years to in-service; gathering/intrastate shorter; balance sheet and free cash flow provide capacity to fund increases above $2.5–3B when needed.

• Question from Keith Stanley (Wolfe Research, LLC): For Western Gateway, if Phillips builds new pipe and KMI contributes SFPP/reversal, is KMI's capital portion much smaller and is the JV roughly 50-50?
  Response: Yes, the JV is expected to be roughly 50-50 and KMI's cash capex is smaller because we're contributing existing assets.

• Question from Keith Stanley (Wolfe Research, LLC): On TGP and increasing egress out of Appalachia, what is possible?
  Response: Evaluating incremental egress north of ~0.5 Bcf, but diligence is ongoing and amounts are preliminary.

• Question from Zackery Van Everen (Tudor, Pickering, Holt & Co. Securities, LLC, Research Division): On the Haynesville, are volumes at capacity, who is adding volumes, and what is the growth outlook?
  Response: Haynesville near capacity with record daily volumes imminent; growth comes from the largest customer plus several privates; volumes up ~15% quarter-over-quarter.

• Question from Zackery Van Everen (Tudor, Pickering, Holt & Co. Securities, LLC, Research Division): On the Permian West expansion open season, can it be upsized and who are the customers (data centers vs other demand)?
  Response: Open season serves power westbound; bids will be evaluated and capacity may be adjusted if demand supports upsizing; demand includes power and data-center-related needs.

• Question from Brandon Bingham (Scotiabank Global Banking and Markets, Research Division): Thoughts on longer-term refined products market dynamics in California and upside potential for Western Gateway?
  Response: Management won't speculate on California but notes Western Gateway reversal gives flexible access into California and Las Vegas if market conditions evolve.

• Question from Jason Gabelman (TD Cowen, Research Division): On the larger shadow-backlog projects, are they similar markets to current backlog or different (e.g., Mexico)?
  Response: Large projects generally align with LNG export and power themes; many are competitive and market-focused rather than concentrated in a single market.

• Question from Jason Gabelman (TD Cowen, Research Division): On M&A, would you pursue assets if multiples diverge and opportunities arise?
  Response: M&A is opportunistic for fee-based energy infrastructure that fits strategy; will pursue if returns and leverage (3.5x–4.5x target) make sense.

• Question from David Winans (PGIM Fixed Income, Research Division): On CO2 sweeps/EOR in tight plays (Midland/Delaware), is that a Kinder Morgan opportunity (supply or participation)?
  Response: Interested in supplying CO2; investing in EOR in previously fracked fields would require more diligence and higher returns to justify the risk.

• Question from Jean Ann Salisbury (BofA Securities, Research Division): For pipelines from second-tier basins to LNG, who underwrites contracts given LNG links to Henry Hub and producers' reluctance for long-term contracts?
  Response: Expect a market-driven mix: supply pull plus producer participation; basins like Eagle Ford are well positioned and infrastructure needs will evolve as markets reveal sourcing.