Kinder Morgan delivers another boringly predictable quarter

Kinder Morgan (NYSE: KMI) may not be the most exciting undertaking. However, the energy infrastructure company offers stability. This was again the case in the fourth quarter, as it achieved relatively stable results, which allowed it to end the year on schedule with its original budget after subtracting the one-time profit increase it obtained. winter storms in February.

Here’s a closer look at the quarter and what lies ahead for the energy company.

Image source: Getty Images.

Another quarter of stable results

Metric

Q4 2021

Q4 2020

Year-over-year variation

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)

$1.804 billion

$1.837 billion

-1.8%

Distributable Cash Flow (DCF)

$1.093 billion

$1.250 billion

-12.6%

DCF per share

$0.48

$0.55

-12.7%

Data source: Kinder Morgan.

Kinder Morgan is adjusted EBITDA fell slightly in the quarter, while the DCF fell almost 13%. The main problem was the increase in expenses. General and administrative and general expenses jumped more than 25%, weighing on adjusted EBITDA, while sustaining capital expenditure jumped nearly 70%, reducing DCF.

These higher expenses masked the overall stability of its four business segments, where profits rose 1% year-over-year:

A graph showing Kinder Morgan's revenue in the fourth quarter of 2021 and 2020.

Data source: Kinder Morgan. Table by author.

Natural gas pipeline revenues increased 2% from the fourth quarter of last year. The main drivers were higher contributions from a full year of service from the Permian Highway pipeline, the acquisition of Stagecoach Gas Services, and increased volumes and favorable pricing on some of its gas gathering systems. These factors helped offset the decline in contributions from several other pipeline systems.

Product pipelines revenue jumped 9% year-over-year, driven by higher refined product volumes. An improving economy and fewer pandemic-related restrictions resulted in a 48% improvement in jet fuel volumes and a 7% increase in gas volumes. These growth drivers more than offset lower crude oil and diesel volumes.

Terminal revenues were down 5%, mainly due to lower charter rates for its tankers. This problem more than offset higher coal export volumes and improved refined product exports.

Finally, Kinder Morgan’s carbon dioxide segment saw a 5% drop in profits. Lower carbon dioxide sales, crude volumes and crude prices weighed on the segment, more than offsetting higher carbon dioxide and natural gas liquids prices.

A glimpse of what awaits Kinder Morgan

Kinder Morgan’s strong fourth quarter performance lifted its full-year adjusted EBITDA to nearly $8 billion, up 14% from 2020, while DCF jumped 19% to nearly 5 .5 billion dollars. However, this outsized growth is mainly due to the strong surge of winter storms in Texas last February, which is not expected to recur.

Because of this, Kinder Morgan sees earnings and cash flow decline in 2022. It expects to generate $7.2 billion in adjusted EBITDA and $4.7 billion in DCF. It should be noted that this forecast implies adjusted EBITDA growth of 5% and a higher DCF of 9% after adjusting for last year’s winter storm.

Kinder Morgan’s forecast is on track to generate enough cash flow to cover its 6% yield dividend – which it aims to raise by 3% this year – and its entire program $1.3 billion expansion, with about $870 million to spare. The company said it could use up to $750 million of that money for exciting opportunities, including buying back its shares. Its success in deploying that capital could further boost DCF per share this year.

It seeks new opportunities to put capital to work in its legacy and emerging energy infrastructure businesses in the low-carbon energy transition. Kinder Morgan has begun allocating more investment to the growing low-carbon sector over the past year. It bought renewable natural gas producer Kintrex Energy last year and is developing several logistics hubs for alternative fuels. The company expects to complete its initial slate of projects over the coming year, providing new sources of earnings growth.

A solid end to a solid year

Kinder Morgan continues to be a pillar of stability. This allows it to generate plenty of steady cash flow to pay an attractive dividend while investing in expanding its platform. Like the rest of the energy sector, it is in the early stages of transitioning to low-carbon energy sources, which could provide years of growth opportunities for the company. This should allow Kinder Morgan to continue to deliver predictable results and dividend income to investors for years to come.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.