Kinder Morgan, Inc. 2026 Q3 Earnings Call

Thank you, Michelle. Before we begin, as usual, I'd like to remind you that KMI's earnings release today and this call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934, as well as certain non-GAAP financial measures. Before making any investment decisions, we strongly encourage you to read our full disclosures on forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release, as well as review our latest filings with the SEC for important material assumptions, expectations, and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements.

Let me begin by sharing some projections from credible third parties that once again support our belief that the demand for natural gas is destined to dramatically increase both in America and the rest of the world in the coming years and even decades. Shell projects that global LNG demand will grow to nearly 750 million tons per year by 2050, and that's an increase of 65% from 2025. That's an enormous increase and one that we believe will especially benefit the U.S., given the preference of international customers for sourcing their supply here. On the domestic front, the North American Electric Reliability Corporation is predicting that peak demand for electricity in this country will grow by between 225 and 245 gigawatts by 2035, and obviously, much of that astounding growth will be met by natural gas generation.

These two estimates just reinforce and strengthen what we believe is a bullish natural gas story. Let me turn to our own story at Kinder Morgan. The third quarter was another good quarter for us, with results exceeding both the comparable period in 2025 and our budget for this year. Perhaps more importantly, we made substantial additions to our backlog of new projects. Our additions constitute one of the largest increases in any one quarter in our corporate history, and our backlog of U.S. natural gas projects now stands at an all-time record. I would add that we expect these new projects to lead to even more expansion opportunities over the coming months and years. In a broader sense, I believe the existing new projects we announced demonstrate the strength that comes from a large national midstream footprint.

That footprint, which we are constantly expanding and extending, allows us to offer more diversified connectivity to our customers as they seek alternative and expanded sources of supply. To put the size and utilization of our natural gas network in perspective, I remind you that we deliver about 40% of all the natural gas in America, including approximately 40% of all LNG feed gas and over 50% of gas exports to Mexico. Our network connects almost every producing basin with the great majority of demand locations throughout the country. I am highly confident that our assets will allow us to continue to serve the multifaceted needs of our customers, and at the same time, deliver real and sustainable value to our shareholders. As I have said before, but it certainly deserves repeating, our strategy is not complicated. We have assets that generate large amounts of recurring cash flow.

We are in a business that is in need of substantial additional infrastructure. Because of the size and reach of our system, we are in a unique position to capture a substantial portion of that need by developing projects supported by long-term take-or-pay agreements with credit-worthy entities. Our strong cash flow allows us to build that infrastructure by using primarily our own cash without undue leverage. We are able to earn good returns from these investments, thus increasing our EBITDA and EPS in the years ahead. For me, it is hard to think of a better strategy that combines consistent growth with minimal risk. Now let me turn it over to Kim.

Okay. Thanks, Rich. This was another outstanding quarter for Kinder Morgan. Adjusted EPS increased by 21%, adjusted EBITDA grew by 9%, and every one of our business segments contributed to that growth. Those results reflect both the strength of our assets and the outstanding execution of our employees. For the full year, we expect adjusted EPS growth to exceed budget by more than 13% and EBITDA to exceed budget by more than 6%. Our financial position continues to strengthen as well. We ended the quarter at approximately 3.5x debt to EBITDA, the low end of our targeted range. Combined with our roughly $3 billion of annual cash flow available to fund expansion CapEx, we have significant flexibility to fund our organic growth while maintaining a strong balance sheet. That flexibility is important because our project backlog increased from $9.6 billion to $14.4 billion this quarter.

We added $5.4 billion in new projects and placed $700 million of projects into service. The backlog multiple remains very attractive at 5.7x. In the $5.4 billion of additions are two highly strategic joint venture projects, SNG's Southeast Connector and NGPL's Permian Link. Together, Kinder Morgan's share of these projects is approximately $4.7 billion. Both projects are supported by at least 20-year take-or-pay contracts with creditworthy shippers, providing the type of long-term stable cash flow we seek to create. Importantly, Southeast Connector is contracted with strong investment-grade utilities, while Permian Link is contracted with an A-rated hyperscaler. These projects also highlight the quality of opportunities we see in front of us. Southeast Connector is a transformational project that connects diverse supply with one of the fastest-growing natural gas demand regions in the country.

Large load interconnection requests across the Southeast now exceed 200 gigawatts, which could represent roughly 8 Bcf a day of natural gas demand if it all came to fruition and if it was all served by gas-fired generation. Southeast Connector is designed to meet that need by delivering approximately 2.6 Bcf a day of natural gas into the region. In addition, we expect this project, like many of our other large projects, to drive future expansion opportunities. Permian Link captures a similar compelling opportunity by moving abundant, low-cost Permian natural gas north to meet growing power demands in the Texas Panhandle. Together, these projects demonstrate how our network is uniquely positioned to connect growing supply basins with growing demand centers. More broadly, as Rich mentioned, the long-term outlook for natural gas remains exceptionally strong.

Wood Mackenzie projects North American natural gas demand to increase by approximately 46 Bcf a day by 2035, driven primarily by LNG exports and power generation demand. Projects of this size and quality do not happen by accident. The commercial creativity, customer relationships, project management and legal expertise, and the patience and perseverance required to bring these opportunities together are remarkable, and I could not be more proud of what our team has accomplished. Finally, these projects extend our visible growth runway. Before this quarter, most of our EBITDA from our backlog was expected to be online by the end of 2025. With Permian Link and Southeast Connector entering service between 2030 and 2032, we have meaningfully extended the period of high-quality cash flow growth supported by approved projects with long-term take-or-pay contracts.

Simply put, we are delivering strong results today while continuing to build a longer runway for high-quality future growth. With that, I'll turn it over to Dax to give you details on our business performance.

Thanks, Kim. Starting with the natural gas business unit, transport volumes were up 3% in the quarter versus the third quarter of 2025. The incremental demand was primarily a result of increased LNG feed gas deliveries on Tennessee Gas Pipeline and incremental demand on our intrastate system. Natural gas gathering volumes were up 14% in the quarter from the third quarter of 2025, with most all the increase coming from our KinderHawk system in the Haynesville, which was up 40%. As we've continued to say, demand for gas on our pipes remains high and our system remains highly utilized. While we announced the sanctioning of two very important projects today, looking forward and consistent with Kim's comments, we continue to see significant incremental project opportunities across our natural gas pipeline network, driven primarily by power and LNG, and we will continue to pursue them aggressively.

In our products pipeline segment, refined product volumes were down 3% in the quarter compared to the third quarter of 2025, and crude condensate volumes were down 11%. More than half the decline in crude volumes is explained by the removal of Double H from service for the NGL conversion early in the third quarter of 2025, with the remaining decrease resulting from fewer well connects at Hiland Crude. As previously announced, we, along with our partners, were proud to reach a final investment decision on our Western Gateway project during the third quarter. The project, which will fundamentally change the way clean products are delivered to the desert Southwest and Southern California, will ensure the availability of these products to consumers for decades to come.

Kinder Morgan's $300 million total cash investment, which includes our $250 million contribution to the JV and a $50 million investment in our non-contributed assets, has been added to our project backlog and is expected to reach in-service in 2029. In our terminals business segment, our liquids lease capacity remains high at almost 93%. Market conditions continue to remain supportive of strong rates, and the utilization of tanks available for use is just under 96% at our key hubs on the Houston Ship Channel and in Carteret, New Jersey. While the temporary Jones Act waiver has added some market uncertainty, our tanker fleet remains exceptionally well contracted. Assuming likely options are exercised, our fleet is 100% leased to the rest of this year, 97% leased through 2027, and 80% leased through 2028.