KMI Q4 results impacted by lower commodity prices

Kinder Morgan (KMI) released its fourth quarter earnings report, which showed a decline in earnings compared to the same period in 2022. The company reported earnings per share (EPS) of $0.27 and distributable cash flow (DCF) per share of $0.52, down 10% and 4% respectively, from the fourth quarter of 2022.

KMI reported net income attributable to KMI of $594 million, compared to $670 million in the fourth quarter of 2022. This decline can be attributed to increased interest expense, which was anticipated in the company's 2023 budget guidance. The company stated that it finished the year slightly behind its budget primarily due to lower commodity prices.

Kinder Morgan generated substantial cash in 2023, with net income of $2.4 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $7.6 billion for the year. The company ended the fourth quarter with a net debt-to-adjusted EBITDA ratio of 4.2, even after the acquisition of STX Midstream assets.

Looking ahead to 2024, Kinder Morgan updated its budget to incorporate the acquisition of the STX Midstream assets. The company now forecasts an EPS of $1.22, up 15% compared to 2023, and a DCF per share of $2.26. The adjusted EBITDA is expected to reach $8.16 billion, an 8% increase compared to 2023. Despite lower commodity prices, Kinder Morgan anticipates strong growth in 2024, with EPS projected to grow at 12% and DCF per share to grow at 6%.

KMI's Chief Financial Officer, David L. Dang, stated that even with current commodity prices, the company still expects strong growth in 2024, given its relatively modest commodity exposure. For example, at a WTI crude oil price of $72 per barrel and Henry Hub natural gas price of $2.80 per MMBtu, 2024 EPS would grow by 12% versus 2023 and DCF per share would grow by 6%. 

Kinder Morgan's executive chairman, Richard D. Kinder, expressed satisfaction with the company's cash generation in 2023. Additionally, he emphasized the expectation to declare dividends of $1.15 per share for 2024, reaffirming the company's commitment to shareholder returns.

In conclusion, Kinder Morgan's fourth quarter earnings report showed a decline in earnings compared to the previous year, primarily due to increased interest expense and lower commodity prices. However, the company remains optimistic about its future prospects, with updated projections for 2024 showing expected growth in EPS and DCF per share.

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